Form 10-Q CELADON GROUP INC For: Sep 30

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Recent Results of Operations

Our results of operations for the quarter ended September 30, 2015, compared to the same period in 2014 are:

	·	Total revenue increased 37.6% to $266.1 million from $193.4 million;
	·	Net income increased 41.2% to $11.4 million from $8.0 million; and
	·	Net income per diluted share increased 20.9% to $0.41 from $0.34, on a 16.8% increase in weighted average diluted shares resulting primarily from our public follow-on offering of 3.5 million shares of common stock in May 2015.

In the quarter ended September 30, 2015, average revenue per loaded mile increased 14.6% from the quarter ended September 30, 2014. Average revenue per tractor per week decreased 3.0%, which was primarily attributable to the decrease in average miles per seated tractor per week from the quarter ended September 30, 2014, which resulted primarily from a lackluster freight environment, coupled with significant growth in seated tractor count. We continue to increase our customer freight to better align with our increased fleet size.

Our average seated line haul tractors increased to 4,985 tractors in the quarter ended September 30, 2015, compared to 3,255 tractors for the same period a year ago. The net change of 1,730 units is comprised of a 594-unit increase in company tractors and a 1,136-unit increase in independent contractor tractors. The number of tractors operated by independent contractors represented 34.7% of our total fleet as of September 30, 2015.

At September 30, 2015, our total balance sheet debt was $614.8 million and our total stockholders' equity was $368.0 million, for a total debt to capitalization ratio of 62.6%. At September 30, 2015 we had $135.8 million of available borrowing capacity under our revolving credit facility.

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Revenue and Expenses

We primarily generate revenue by transporting freight for our customers, by arranging for transportation of their freight, and through equipment sales, leasing, and related ancillary services through our Quality division. Generally, we are paid by the mile or by the load for our freight transportation services. We also derive revenue from fuel surcharges, loading and unloading activities, equipment detention, other trucking related services, and warehousing services. The main factors that affect our revenue are the revenue per mile we receive from our customers, the percentage of miles for which we are compensated, the number of tractors operating, the number of miles we generate with our equipment, and the price of used equipment we sell through our Quality division, which we book on a net basis. These factors relate to, among other things, economic activity and conditions in the United States, Canada, and Mexico, shipper inventory levels, the level of truck capacity in our markets, specific customer demand, the percentage of team-driven tractors in our fleet, driver and independent contractor availability, our average length of haul, and conditions in the used tractor and trailer markets.

We remove fuel surcharges from revenue to obtain what we refer to as "freight revenue" when calculating operating ratios and some of our operating data. We believe that evaluating our operations without considering the impact of fuel surcharges, which are sometimes a volatile source of revenue, affords a more consistent basis for comparing our results of operations from period to period. Freight revenue is a financial measure that is not in accordance with GAAP. This measure is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, and lenders. While we believe such measure is useful for investors, it should not be used as a replacement for financial measures that are in accordance with GAAP.

The main expenses impacting our profitability are attributable to the variable costs of transporting freight for our customers. These costs include fuel expense, driver-related expenses, such as wages, benefits, training, and recruitment, and independent contractor costs, which we record as purchased transportation. Expenses that have both fixed and variable components include maintenance and tire expense and our total cost of insurance and claims. These expenses generally vary with the miles we travel, but also have a controllable component based on safety, fleet age, efficiency, and other factors. Our main fixed cost is the acquisition and financing of long-term assets, primarily revenue equipment. We have other mostly fixed costs, such as our non-driver personnel and facilities expenses. In discussing our expenses as a percentage of revenue, we sometimes discuss changes as a percentage of revenue before fuel surcharges, in addition to absolute dollar changes, because we believe that evaluation of our operating performance can be done more accurately by excluding the highly variable impact of fuel surcharges on our revenue.

The trucking industry has experienced significant increases in expenses over the past several years, in particular those relating to equipment costs, driver compensation, insurance, and, until relatively recently, fuel. As the economy continues to grow and capacity in the trucking industry begins to tighten, we believe that rates will continue to increase. Over the long-term, we expect the limited pool of qualified drivers and intense competition to recruit and retain those drivers will constrain overall industry capacity, although we expect our recent efforts related to our driving school and average fleet age will improve our driver recruiting and retention. Assuming continued economic growth occurs in U.S. manufacturing, retail, and other high volume shipping industries, we expect to be able to raise freight rates in line with or faster than expenses.

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Results of Operations

The following table sets forth the percentage relationship of expense items to freight revenue for the periods indicated:

	For the three months ended
	September 30,
	2015			2014
Operating Revenue		100.0	%		100.0	%

Operating expenses:
Salaries, wages, and employee benefits		30.6	%		29.6	%
Fuel		10.4	%		20.7	%
Purchased transportation		33.5	%		22.6	%
Revenue equipment rentals		0.8	%		1.3	%
Operations and maintenance		6.6	%		5.8	%
Insurance and claims		2.6	%		2.9	%
Depreciation and amortization		8.1	%		8.0	%
Communications and utilities		0.9	%		1.0	%
Operating taxes and licenses		1.9	%		1.7	%
General and other operating		1.6	%		1.8	%
Gain on disposition of equipment		(5.0	)%		(2.4	)%
Total operating expenses		92.0	%		93.0	%

Operating income		8.0	%		7.0	%

Other expense:
Interest expense		1.2	%		0.6	%
Other income, net		0.0	%		0.0	%

Income before income taxes		6.8	%		6.4	%
Provision for income taxes		2.5	%		2.2	%

Net income		4.3	%		4.2	%

Freight revenue(1)	100.0	%	100.0	%

Operating expenses:
Salaries, wages, and employee benefits	34.3	%	36.3	%
Fuel(1)	(0.3	)%	2.7	%
Purchased transportation	37.4	%	27.7	%
Revenue equipment rentals	0.9	%	1.6	%
Operations and maintenance	7.4	%	7.1	%
Insurance and claims	2.9	%	3.6	%
Depreciation and amortization	9.1	%	9.9	%
Communications and utilities	1.0	%	1.2	%
Operating taxes and licenses	2.1	%	2.1	%
General and other operating	1.8	%	2.2	%
Gain on disposition of equipment	(5.6	)%	(2.9	)%
Total operating expenses	91.0	%	91.5	%

Operating income	9.0	%	8.5	%

Other expense:
Interest expense	1.3	%	0.7	%
Other income, net	0.0	%	0.0	%

Income before income taxes	7.6	%	7.8	%
Provision for income taxes	2.8	%	2.7	%

Net income	4.8	%	5.1	%

(1)

Freight revenue is total revenue less fuel surcharges. In this table, fuel surcharges are eliminated from revenue and subtracted from fuel expense. Fuel surcharges were $28.3 million and $35.7 million for the first quarter of fiscal 2016 and 2015, respectively. Freight revenue is not a recognized measure under GAAP and should not be considered an alternative to or superior to other measures derived in accordance with GAAP. We believe our presentation of freight revenue and our discussion of various expenses as a percentage of freight revenue is a useful way to evaluate our core operating performance.

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Comparison of Three Months Ended September 30, 2015 to Three Months Ended September 30, 2014

Total revenue increased by $72.7 million, or 37.6%, to $266.1 million for the first quarter of fiscal 2016, from $193.4 million for the first quarter of fiscal 2015. Freight revenue increased by $80.1 million, or 50.8%, to $237.8 million for the first quarter of fiscal 2016, from $157.7 million for the first quarter of fiscal 2015. These increases were attributable to an increase in loaded miles to 100.0 million for the first quarter of fiscal 2016 from 77.1 million in the first quarter of fiscal 2015, in addition to an increase in average revenue per loaded mile to $1.872 for the first quarter of fiscal 2016 from $1.633 for the first quarter of fiscal 2015. The increase in loaded miles was also the result of an increase in average seated line-haul tractors to 4,985 in the first quarter of fiscal 2016, from 3,255 in the first quarter of 2015, due to improved driver recruiting efforts, including our driving school, and the increase in drivers resulting from the integration of acquired fleets. Slightly offsetting these increases was a decrease in miles per seated truck of 13.3% versus the first quarter of fiscal 2015, which resulted primarily from acquired fleets having a shorter existing average length-of-hauls.

Revenue for our asset-light segment increased to $30.6 million in the first quarter of fiscal 2016 from $16.5 million in the first quarter of fiscal 2015, primarily based on increases in our warehousing and LTL revenues. Revenue from our asset-light businesses was aided in part by acquisitions of asset-light businesses and growing demand for brokerage and other specialized services we offer. Through our acquisitions, the services we are able to offer customers through our asset-light business have expanded, and we expect revenue derived from our asset-light operations to increase moderately throughout the remainder of fiscal 2016.

Revenue from our equipment leasing and services segment increased $4.8 million in the first quarter of fiscal 2016 compared to the first quarter of fiscal 2015, primarily based on the growth of service offerings provided by the segment. Our equipment leasing and services segment consists of tractor and trailer sales and leasing. This segment also includes revenues from insurance, maintenance, and other ancillary services that we provide for independent contractors. We anticipate revenue related to these service offerings to see some growth in the future as we continue to expand.

Fuel surcharge revenue decreased to $28.3 million in the first quarter of fiscal 2016 from $35.7 million for the first quarter of fiscal 2015, which was attributable to a decrease in the price of diesel fuel and related decrease in our fuel surcharge rates.

Salaries, wages, and employee benefits were $81.5 million, or 30.6% of total revenue and 34.3% of freight revenue, for the first quarter of fiscal 2016, compared to $57.2 million, or 29.6% of total revenue and 36.3% of freight revenue, for the first quarter of fiscal 2015. These changes are the result of an increase in driver payroll, administrative payroll, and increased recruiting expense attributable to our driving school and other recruitment efforts. Driver payroll increased due to an increase in the number of Company drivers and higher recruiting costs resulting from a competitive driver market. Administrative payroll has increased in connection with the integration of acquired operations. We have continued investing in expanding our driving school, which has produced a significant number of drivers for our fleet. We expect the market for drivers to remain competitive and place ongoing pressure on these expenses.

Fuel expenses, without reduction for fuel surcharge revenue, decreased to $27.7 million, or 10.4% of total revenue, for the first quarter of fiscal 2016, compared to $40.0 million, or 20.7% of total revenue, for the first quarter of fiscal 2015. Fuel surcharge revenue, net of fuel expense, was $0.6 million, or 0.3% of revenue, for the first quarter of fiscal 2016, compared to fuel expense, net of fuel surcharge revenue (or "net fuel expense"), of $4.3 million, or 2.7% of revenue, for the first quarter of fiscal 2015. The decreases in fuel expense and net fuel expense were attributable to a decrease in the average weekly on-highway diesel prices of $1.219 per gallon, from $3.835 to $2.616 in the 2015 and 2016 quarters, respectively, partially offset by an increase in total miles in the fiscal 2016 quarter compared to the 2015 quarter. We expect that our continued efforts to reduce idling and operate more fuel-efficient tractors and aerodynamic trailers will continue to have a positive impact on our miles per gallon. However, we expect this positive impact to be partially offset by increasing fuel costs per gallon and the use of more costly ultra-low sulfur diesel fuel.

Purchased transportation increased to $89.0 million, or 33.5% of total revenues and 37.4% of freight revenue, for the first quarter of fiscal 2016, from $43.6 million, or 22.6% of total revenue and 27.7% of freight revenue, for the first quarter of fiscal 2015. These increases are primarily related to increases in intermodal transportation expense and LTL/brokerage expenses. We believe our increased focus on these areas of our business has led to increased revenue as well as the costs associated with generating that revenue. We expect purchased transportation to increase as we continue our efforts to increase our LTL/brokerage and intermodal transportation businesses. We have seen an increase in the average number of independent contractors when compared to the first quarter of fiscal 2015, and we will continue to actively recruit them. If successful in the recruitment efforts, we would expect purchased transportation to increase accordingly.

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Operations and maintenance increased to $17.6 million, or 6.6% of total revenue and 7.4% of freight revenue, for the first quarter of fiscal 2016, from $11.2 million, or 5.8% of total revenue and 7.1% of freight revenue, for the first quarter of fiscal 2015. Operations and maintenance consist of direct operating expense, maintenance, and tire expense. These increases in the first quarter of fiscal 2016 are primarily related to the increase in tractor and trailer counts that were acquired through recent acquisitions. We believe that maintenance costs will decrease as we replace a portion of the older equipment obtained through acquisitions with newer units, for which maintenance costs are lower on a per-unit basis. Additionally, newer equipment repairs are more likely to be covered by warranty, creating further reductions to our maintenance expense.

Insurance and claims expense increased to $6.9 million, or 2.6% of total revenue and 2.9% of freight revenue, for the first quarter of fiscal 2016, from $5.7 million, or 2.9% of total revenue and 3.6% of freight revenue, for the first quarter of fiscal 2015. Insurance consists of premiums for liability, physical damage, cargo damage, and workers' compensation insurance, in addition to claims expense. The increased cost is attributable to an increase in liability claims and workers' compensation claims due to an increase in the number of claims reported, including loss development. Our insurance program involves self-insurance at various risk retention levels. Claims in excess of these risk levels are covered by insurance in amounts we consider to be adequate. We accrue for the uninsured portion of claims based on known claims and historical experience. We periodically review and adjust our insurance program to maintain a balance between premium expense and the risk retention we are willing to assume. We expect our insurance and claims expense to be consistent with historical average amounts going forward. However, this category will vary based upon the frequency and severity of claims, the level of self-insurance, and premium expense.

Depreciation and amortization, consisting primarily of depreciation of revenue equipment, increased to $21.6 million, or 8.1% of total revenue and 9.1% of freight revenue, for the first quarter of fiscal 2016, compared to $15.6 million, or 8.0% of total revenue and 9.9% of freight revenue, for the first quarter of fiscal 2015. The increased cost is primarily related to the increased number of tractors and trailers owned during the fiscal 2016 quarter compared to the same quarter in fiscal 2015. Revenue equipment held under operating leases is not reflected on our condensed consolidated balance sheet and the expenses related to such equipment are reflected on our consolidated statements of operations in revenue equipment rentals, rather than in depreciation and amortization and interest expense, as is the case for revenue equipment that is financed with borrowings or capital leases. As we refresh older units in our fleet, we expect depreciation to increase in connection with increased equipment costs.

Gains on the disposition of equipment increased from $4.6 million in the first quarter of fiscal 2015, to $13.2 million in the first quarter of fiscal 2016. The increase is due primarily to the equipment that we sold to Element. We expect gain on sale to decrease over the next few months related to the holiday season and then continue to grow subsequently, although gain on sale can vary significantly due to a variety of factors, including our ability to grow Quality, availability of replacement equipment and conditions in the new and used equipment markets.

All of our other operating expenses are relatively minor in amount, and there were no significant changes in such expenses. Accordingly, we have not provided a detailed discussion of such expenses.

Our pre-tax margin, which we believe is a useful measure of our operating performance because it is neutral with regard to the method of revenue equipment financing that a company uses, increased to 6.8% of operating revenue and decreased to 7.6% of freight revenue for first quarter of fiscal 2016, from 6.4% of operating revenue and 7.8% of freight revenue for the first quarter of fiscal 2015.

Income taxes increased to $6.6 million, with an effective tax rate of 36.6%, for the first quarter of fiscal 2016, from $4.3 million, with an effective tax rate of 35.0%, for the first quarter of fiscal 2015. Going forward, we expect our effective tax rate will be approximately 35% to 38%. As pre-tax net income increases, our non-deductible expenses, such as per diem expense, have a lesser impact on our effective rate. Furthermore, the effective rate in foreign countries is lower than that in the United States. Therefore, as our percentage of income attributable to foreign income changes, our total income tax effective rate will also change.

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Liquidity and Capital Resources

Trucking is a capital-intensive business. We require cash to fund our operating expenses (other than depreciation and amortization), to make capital expenditures and acquisitions, and to repay lease obligations and debt, including principal and interest payments. Other than ordinary operating expenses, we anticipate that capital expenditures for the acquisition of revenue equipment will constitute our primary cash requirement over the next twelve months. We have recently completed several acquisitions, and we frequently consider additional potential acquisitions. If we were to engage in additional acquisitions, our cash requirements would increase and we may have to modify our expected financing sources for the purchase of equipment. Subject to any required lender approval, we may make acquisitions in the future. Our principal sources of liquidity are cash generated from operations, bank borrowings, capital and operating lease financing of revenue equipment, and proceeds from the sale of used revenue equipment. At September 30, 2015, our total balance sheet debt, including capital lease obligations and current maturities, was $614.8 million, compared to $564.5 million at June 30, 2015.

As of September 30, 2015, we had purchase commitments for revenue equipment of $23.3 million for delivery through fiscal 2016. These commitment amounts were calculated before considering the proceeds from the disposition of equipment that is being replaced. In fiscal 2016, we expect to purchase our new tractors and trailers with primarily a combination of cash generated from operations and capital leases. However, given that we recently completed our equipment refresh cycle, we expect capital expenditures on tractors in trailers in fiscal 2016 to be less than fiscal 2015.

At September 30, 2015, we were authorized to borrow up to $300.0 million under our primary credit facility, which expires May 2018. The applicable interest rate under this agreement is based on either a base rate equal to Bank of America, N.A.'s prime rate or LIBOR plus an applicable margin between 0.825% and 1.45% that is adjusted quarterly based on our lease adjusted total debt to EBITDAR ratio. At September 30, 2015, we had $162.0 million in outstanding borrowings related to our credit facility and $2.2 million utilized for letters of credit, leaving availability of $135.8 million. The agreement is collateralized by substantially all of the assets of our U.S. and Canadian subsidiaries, with the notable exception of revenue equipment subject to third party financing or capital leases. We are obligated to comply with certain financial covenants under our credit facility and we were in compliance with these covenants at September 30, 2015.

We believe we will be able to fund our operating expenses, as well as our current commitments for the acquisition of revenue equipment over the next twelve months, with a combination of cash generated from operations, borrowings available under our primary credit facility, and lease financing arrangements. We believe that the current availability under our credit facility will allow us flexibility to evaluate other potential acquisition targets. We will continue to have significant capital requirements over the long term, and the availability of the needed capital will depend upon our financial condition, operating results, and numerous other factors over which we have limited or no control, including prevailing market conditions and the market price of our common stock. However, based on our operating results, anticipated future cash flows, current availability under our credit facility, expected capital expenditures, and sources of equipment lease financing that we expect will be available to us, we do not expect to experience significant liquidity constraints in the foreseeable future.

Cash Flows

Net cash used in operations for the three months ended September 30, 2015 was $22.8 million, compared to net cash provided by operations of $9.0 million for the three months ended September 30, 2014. Cash provided by operations decreased primarily due to a decrease in change in equipment held for resale. This fluctuation was partially offset by an increase in our accounts payable and accrued expenses balance.

Net cash provided by investing activities was $33.4 million for the three months ended September 30, 2015, compared to net cash used in investing activities of $17.1 million for the three months ended September 30, 2014. Cash provided by/used in investing activities includes the net cash effect of acquisitions and dispositions of property and revenue equipment during each period. Capital expenditures for property and equipment totaled $67.4 million for the three months ended September 30, 2015, and $78.8 million for the three months ended September 30, 2014. We generated proceeds from the sale of property and equipment of $115.5 million and $71.3 million for the three months ended September 30, 2015, and September 30, 2014, respectively.

Net cash used in financing activities was $11.0 million for the three months ended September 30, 2015, compared to net cash provided by financing activities of $2.7 million for the three months ended September 30, 2014. The decrease in cash provided by financing activities was due primarily to an increase in principal payment of capital leases offset by an increase in net borrowings on our credit facility.

Cash dividends paid for the three months ended September 30, 2015, were approximately $0.5 million, or $0.02 per share. We currently expect to continue to pay quarterly cash dividends in the future. Future payment of cash dividends, and the amount of any such dividends, will depend upon our financial condition, results of operations, cash requirements, tax treatment, and certain corporate law requirements, as well as other factors deemed relevant by our Board of Directors.

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Contractual Obligations

During the three months ended September 30, 2015, there were no material changes in our commitments or contractual liabilities.

Off-Balance Sheet Arrangements

Operating leases have been an important source of financing for our revenue equipment. Our operating leases include some under which we do not guarantee the value of the asset at the end of the lease term ("walk-away leases") and some under which we do guarantee the value of the asset at the end of the lease term ("residual value guarantees"). Therefore, we are subject to the risk that equipment values may decline, in which case we would suffer a loss upon disposition and be required to make cash payments because of the residual value guarantees. At September 30, 2015, we were obligated for residual value guarantees related to operating leases of $6.0 million, compared to $19.0 million at September 30, 2014. We believe that any residual payment obligations will be satisfied by the value of the related equipment at the end of the lease. To the extent the expected value at the lease termination date is lower than the residual value guarantee, we would accrue for the difference over the remaining lease term. We anticipate that going forward we will primarily use a combination of cash generated from operations and capital leases to finance tractor and trailer purchases.

Critical Accounting Policies

The preparation of financial statements in accordance with GAAP requires that management make a number of assumptions and estimates that affect the reported amounts of assets, liabilities, revenue, and expenses in our consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. These estimates are based on management's best knowledge of current events and actions that affect, or could affect, our financial statements materially and involve a significant level of judgment by management. The accounting policies we deem most critical to use include revenue recognition, allowance for doubtful accounts, depreciation, claims accrual, and accounting for income taxes. There have been no significant changes to our critical accounting policies and estimates during the three months ended September 30, 2015, compared to those disclosed in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operation," included in our 2015 Annual Report on Form 10-K.

Seasonality

In the trucking industry, revenue generally increases during the holiday season and decreases as customers reduce shipments during the post-holiday winter season and as inclement weather impedes operations. At the same time, operating expenses generally increase, with fuel efficiency declining because of engine idling and inclement weather. We have substantial operations in the Midwestern and Eastern United States and Canada. For the reasons stated, in those geographic regions in particular, third fiscal quarter net income historically has been lower than net income in each of the other three quarters of the year, excluding one time or other extraordinary charges. Our equipment utilization typically improves substantially between May and October of each year because of seasonal increased shipping and better weather. Also, during September, October, and November business generally increases as a result of increased retail merchandise shipped in anticipation of the holidays.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We experience various market risks, including fluctuations in interest rates, variability in currency exchange rates, and fuel prices. We have established policies, procedures and internal processes governing our management of market risks and the use of financial instruments to manage our exposure to such risks. We do not enter into derivatives or other financial instruments for trading or speculative purposes, or when there are no underlying related exposures.

Interest Rate Risk. We are exposed to interest rate risk principally from our credit facility. The credit facility carries a maximum variable interest rate based on either a base rate equal to the greater of Bank of America, N.A.'s prime rate or LIBOR plus an applicable margin between 0.825% and 1.45% that is adjusted quarterly based on our lease adjusted total debt to EBITDAR ratio. At September 30, 2015, the interest rate for revolving borrowings under our credit facility was 1.02%. At September 30, 2015, we had an outstanding balance of $162.0 million related to our credit facility and $2.2 million utilized for letters of credit. A hypothetical 0.25% increase in the bank's base rate and LIBOR would be immaterial to our net income.

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Foreign Currency Exchange Rate Risk. We are subject to foreign currency exchange rate risk, specifically in connection with our Canadian and Mexican operations. While virtually all of the expenses associated with our Canadian operations, such as independent contractor costs, company driver compensation, and administrative costs, are paid in Canadian dollars, a significant portion of our revenue generated from those operations is billed in U.S. dollars because many of our customers are U.S. shippers transporting goods to or from Canada. As a result, increases in the value of the Canadian dollar relative to the U.S. dollar could adversely affect the profitability of our Canadian operations. Assuming revenue and expenses for our Canadian operations identical to the quarter ended September 30, 2015 (both in terms of amount and currency mix), we estimate that a $0.01 increase in the value of the Canadian dollar, relative to the U.S. dollar, would reduce our annual net income by approximately $65,000. At September 30, 2015, we had no outstanding foreign exchange derivative contracts relating to the Canadian dollar. Previously derivative gains/(losses) were initially reported as a component of other comprehensive income and were reclassified to earnings in the period when the contracts were closed out.

While virtually all of the expenses associated with our Mexican operations, such as independent contractor costs, company driver compensation, and administrative costs, are paid in Mexican pesos, a significant portion of our revenue generated from those operations is billed in U.S. dollars because many of our customers are U.S. shippers transporting goods to or from Mexico. As a result, an increase in the value of the Mexican peso, relative to the U.S. dollar, could adversely affect our consolidated results of operations. Assuming revenue and expenses for our Mexican operations identical to the quarter ended September 30, 2015 (both in terms of amount and currency mix), we estimate that a $0.01 increase in the value of the Mexican peso, relative to the U.S. dollar, would reduce our annual net income by approximately $188,000. At September 30, 2015, we had no outstanding foreign exchange derivative contracts relating to the Mexican peso. Previously derivative gains/(losses) were initially reported as a component of other comprehensive income and were reclassified to earnings in the period when the contracts were closed out.

Commodity Price Risk. Shortages of fuel, increases in prices, or rationing of petroleum products can have a materially adverse effect on our operations and profitability. Fuel is subject to economic, political, and market factors that are outside of our control. Historically, we have sought to recover a portion of short-term increases in fuel prices from customers through the collection of fuel surcharges. However, fuel surcharges do not always fully offset increases in fuel prices. In fiscal 2016, we entered into contracts to hedge up to 0.3 million gallons per month ending on February 28, 2017. This represents approximately 10.0% of our monthly projected fuel requirements through February 2017. At September 30, 2015, we had outstanding contracts in place for a notional amount of $9.0 million with the fair value of these contracts, approximately $0.8 million less than the original contract value. Derivative gains or losses, initially reported as a component of other comprehensive income, are reclassified to earnings in the period when the forecasted transaction affects earnings. Based on our expected fuel consumption for fiscal 2016, a 10.0% change in the related price of heating oil or diesel per gallon would not have a material financial impact, assuming no further changes to our fuel hedging program or our fuel surcharge recovery.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted to the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to management, including the principal executive and financial officers (referred to in this report as the "Certifying Officers"), as appropriate, to allow timely decisions regarding required disclosure based on the definition of "disclosure controls and procedures" in Rule 13a-15(b) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply judgment in evaluating our controls and procedures.

We have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report, as required by Rule 13a-15 and 15d-15 under the Exchange Act. This evaluation was carried out under the supervision and with the participation of our management, including the Certifying Officers. Based upon that evaluation, our Certifying Officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected or that are reasonably likely to materially affect our internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

We are party to certain lawsuits in the ordinary course of business. We are currently not party to any proceedings which we expect to have a material adverse effect or which we otherwise consider material. See discussion under Note 6 to our condensed consolidated financial statements, "Commitments and Contingencies."

Item 1A. Risk Factors

While we attempt to identify, manage, and mitigate risks and uncertainties associated with our business, some level of risk and uncertainty will always be present. Our Annual Report on Form 10-K for the year ended June 30, 2015, in the section entitled Item 1A. Risk Factors, describes some of the risks and uncertainties associated with our business. These risks and uncertainties have the potential to materially affect our business, financial condition, results of operations, cash flows, projected results, and future prospects. We are updating the risk factor entitled “The rapid growth of our Quality Companies business unit and our reliance on the financing arrangement with Element Financial Corporation pose unique risks.” with the following:

The rapid growth of Quality Companies and our reliance on financing arrangements with Element Financial Corporation and 19th Capital Group, LLC pose unique risks.

Quality Companies offer "tractors under management" to independent contractors, motor carrier fleets, and financing sources. Quality’s services include tractor leasing, purchasing, and sales, driver recruiting, lease payment remittance, insurance, maintenance, and other services. A portion of the tractors under management are contracted to Celadon independent contractors. The remaining tractors are contracted to other fleets and their drivers. Quality’s business has grown rapidly, from 750 tractors under management at June 30, 2013, to approximately 7,200 tractors under management at September 30, 2015. Additionally, Quality has placed initial orders for 13,000 tractors scheduled for delivery over the next several years, at an aggregate estimated purchase price in excess of $1.5 billion.

Since March of 2014, Quality has placed the majority of its tractors under management through a Program Agreement and Service Agreement with Element. In September 2015 we entered into a similar arrangement with 19th Capital (together with Element, the "Quality Financing Parties"). The 19th Capital arrangement differs from the Element arrangement in that we hold a minority equity interest in 19th Capital and, as a result, indirectly participate in the economics of 19th Capital's operations, whereas with Element we do not.

Pursuant to these agreements, we use our volume purchasing power to purchase tractors, which we then sell to the Quality Financing Parties. Quality then refers independent contractor drivers or fleets to the Quality Financing Parties, who lease tractors to such independent contractors or fleets or finance the drivers’ purchase of tractors. Each Quality Financing Party has credit profile, customer concentration, and other business goals and restrictions, and may not grow, be able to obtain financing on acceptable terms, or even continue to finance tractors. If either Quality Financing Party curtails its participation in this arrangement, Quality’s business and our results would be adversely affected. In addition, Quality’s operations pose several unique risks, including the following:

·	In general, Quality’s tractor purchase orders do not become "firm commitment" orders for which we are irrevocably obligated until shortly before purchase. However, failure to consummate these orders could have a material adverse effect on Quality’s growth prospects. Quality may be unsuccessful in locating or reaching agreeable terms with third parties to purchase tractors from us in a volume that is adequate to meet Quality’s current or anticipated operations.

·	The Quality Financing Parties or other third parties may be unable to obtain sufficient financing to acquire from us the volume of tractors that we plan to purchase and resell or obtain financing on acceptable terms. This may require us to finance the acquisition of such tractors with our own indebtedness, which could substantially increase our indebtedness, require dilutive issuance of securities, or both. Alternatively, we could be forced to inhibit Quality’s growth. Further, there can be no assurance that we will be able to obtain such direct financing on favorable terms or at all.

·	Historically the markets for new and used tractors have been volatile. A change in these markets could negatively impact the price at which Quality is able to acquire and sell tractors, negatively impact Quality’s ability to resell tractors at a profit, and negatively impact the interests of the Quality Financing Parties and other financing sources in purchasing the tractors and providing financing.

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·	If a change in accounting rules or other unforeseen circumstances prevents us from using our intended accounting treatment for the Quality Financing Party arrangements or similar arrangements we may be required to include the related equipment debt in our consolidated results of operations even though we are not primarily obligated on and do not guarantee such debt. This could materially and adversely affect our results of operations and stock price.

·	We are not obligated to make payments in respect of the leases or financing provided by the Quality Financing Parties to the independent contractors or fleets. However, under certain circumstances we may be required to take certain actions to recover the vehicle, find a new driver, repair the vehicle, or prepare it for service. We also may be required to repurchase certain leases or financings from the Quality Financing Parties upon Quality’s uncured material breach of the respective agreements. We expect that it would be difficult to recoup the costs associated with these actions, especially if there were a decline in the used equipment market.

·	We may experience reputational or commercial pressure from financing sources and suppliers to protect them against or reimburse them for losses relating to our arrangement with the Quality Financing Parties or similar arrangements, even if we are not legally obligated to do so.

·	We may experience commercial pressure from the Quality Financing Parties or other third parties with whom we enter into similar arrangements to add additional driver recruiting, truck maintenance and repossession, or other services, any of which could increase our costs.

In addition to the risk factors set forth above and in our Form 10-K, we believe that the following additional issues, uncertainties, and risks should be considered in evaluating our business and growth outlook:

19th Capital faces certain additional risks particular to its operations, any one of which could adversely affect our operating results.

In the first quarter of fiscal 2016, we acquired a minority interest in 19th Capital, a newly formed used equipment leasing company and reseller. We account for our investment in 19th Capital using the equity method of accounting. 19th Capital faces several risks similar to those we face and additional risks particular to its business and operations. The ability to secure financing and market fluctuations in interest rates could impact 19th Capital's ability to grow its leasing and financing business and its margins on leases and financing. Adverse economic activity may restrict the number of used equipment buyers, their ability to pay prices for used equipment that we find acceptable, and create financing defaults, bankruptcies, and difficulties recovering equipment. In addition, 19th Capital's customers are typically small trucking companies or independent contractors without substantial financial resources, and 19th Capital is subject to risk of loss should those customers be unable to make their lease payments. Further, we believe the used equipment market will significantly impact 19th Capital's results of operations and such market has been volatile in the past. There can be no assurance that 19th Capital will experience gains on sale similar to those it has experienced in the past and it may incur losses on sale. If a lessee or other counterparty fails to maintain the equipment in accordance with the terms of the financing agreements, 19th Capital may have unanticipated repair expenditures. As regulations change, the market for used equipment may be impacted as such regulatory changes may make used equipment costly to upgrade to comply with such regulations or 19th Capital may be forced to scrap equipment if such regulations eliminate the market for particular used equipment. Further, there is an overlap in providers of equipment financing to 19th Capital and our wholly owned operations and those providers may consider the combined exposure and limit the amount of credit available to us. Any of the foregoing risks could materially and adversely impact the value of and our return on our investment in 19th Capital, which could negatively impact our financial condition, results of operations, and cash flow.

In addition, while certain of our executive officers serve as two of the managers of 19th Capital, we do not control 19th Capital's ownership or management. Our investment in 19th Capital is subject to the risk that 19th Capital's management and controlling members may make business, financial, or management decisions with which we do not agree or that the management or controlling members may take risks or otherwise act in a manner that does not serve our interests. If any of the foregoing were to occur, the value of our investment in 19th Capital could decrease, and our financial condition, results of operations, and cash flow could suffer as a result.

Finally, we expect that, for federal income tax purposes, 19th Capital will be treated as the owner and lessor of the equipment that it leases to third parties. However, the IRS could instead assert that they are sales or financings. If it were determined that 19th Capital is not the owner of the leased equipment, 19th Capital would not be entitled to cost recovery, depreciation or amortization deductions, and its leasing income might be deemed to be portfolio income instead of passive activity income. The denial of such cost recovery or amortization deductions could cause its tax liabilities to increase, and therefore the amount of cash available for distribution to us to decrease, in certain periods.

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19th Capital's grant of profits interests to certain of our officers and employees may cause conflicts of interest.

As part of our formation and minority investment in 19th Capital, certain of our officers and employees were granted profits interests in 19th Capital. These individuals may receive cash distributions in respect of their profits interests as a result of 19th Capital's operations. These individuals' economic interests as holders of 19th Capital's profits interests may not always align with the interests of our stockholders. In particular, the profits interests may create economic incentives to devote time, energy, and resources to 19th Capital that may not necessarily benefit us or our stockholders to the same extent as efforts devoted directly to us, or at all. These conflicts of interest, or even the perception that they exist, may have an adverse effect on the trading price of our common stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

We are obligated to comply with certain financial covenants under our credit facility. Our credit facility also places certain limitations on our ability to pay dividends, including a $5.0 million cap on cash dividend payments during any fiscal year and a requirement that we be in pro forma compliance with our financial covenants after giving effect to any such payments.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

3.1	Amended and Restated Certificate of Incorporation of the Company. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ending December 31, 2005, filed with the SEC on January 30, 2006.)
3.2	Certificate of Designation for Series A Junior Participating Preferred Stock. (Incorporated by reference to Exhibit 3.3 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000, filed with the SEC on September 28, 2000.)
3.3	Amended and Restated By-laws of the Company. (Incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q filed with the SEC on January 31, 2008.)
4.1	Amended and Restated Certificate of Incorporation of the Company, effective January 12, 2006. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ending December 31, 2005, filed with the SEC on January 30, 2006.)
4.2	Certificate of Designation for Series A Junior Participating Preferred Stock. (Incorporated by reference to Exhibit 3.3 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000, filed with the SEC on September 28, 2000.)
4.3	Amended and Restated By-laws of the Company. (Incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q filed with the SEC on January 31, 2008.)
10.1*	Portfolio Purchase and Sale Agreement, dated as of September 28, 2015, by and among Quality Companies, LLC, Quality Equipment Leasing, LLC, and 19th Capital Group, LLC.
10.2*	Fleet Program Agreement, dated as of September 28, 2015, by and among Quality Companies, LLC, Quality Equipment Leasing, LLC, and 19th Capital Group, LLC.
10.3*	Service Agreement, dated as of September 28, 2015, by and among Quality Companies, LLC, Quality Equipment Leasing, LLC, and 19th Capital Group, LLC.
10.4*	Program Agreement, dated as of September 28, 2015, by and among Quality Companies, LLC, Quality Equipment Leasing, LLC, and 19th Capital Group, LLC.
10.5*#	Limited Liability Company Agreement of 19th Capital Group, LLC, dated as of August 27, 2015.
31.1	Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Paul A. Will, the Company's Principal Executive Officer.*
31.2	Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Bobby L. Peavler, the Company's Principal Financial Officer.*
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002, by Paul A. Will, the Company's Chief Executive Officer.*
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Bobby L. Peavler, the Company's Principal Financial Officer.*
101.INS**	XBRL Instance Document.*
101.SCH**	XBRL Taxonomy Extension Schema Document.*
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document.*
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document.*
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document.*

*	Filed herewith
**	In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 shall be deemed to be "furnished" and not "filed."
#	Management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Celadon Group, Inc. (Registrant)

	/s/Paul A. Will
	Paul A. Will
	Chief Executive Officer and Chairman of the Board (Principal Executive Officer)



	/s/Bobby L. Peavler
	Bobby L. Peavler
Date: November 9, 2015	Executive Vice President, Chief Financial Officer, and Treasurer (Principal Financial Officer and Principal Accounting Officer)

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EXHIBIT INDEX
Exhibit Number	Description
3.1	Amended and Restated Certificate of Incorporation of the Company. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ending December 31, 2005, filed with the SEC on January 30, 2006.)
3.2	Certificate of Designation for Series A Junior Participating Preferred Stock. (Incorporated by reference to Exhibit 3.3 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000, filed with the SEC on September 28, 2000.)
3.3	Amended and Restated By-laws of the Company. (Incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q filed with the SEC on January 31, 2008.)
4.1	Amended and Restated Certificate of Incorporation of the Company, effective January 12, 2006. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ending December 31, 2005, filed with the SEC on January 30, 2006.)
4.2	Certificate of Designation for Series A Junior Participating Preferred Stock. (Incorporated by reference to Exhibit 3.3 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000, filed with the SEC on September 28, 2000.)
4.3	Amended and Restated By-laws of the Company. (Incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q filed with the SEC on January 31, 2008.)
10.1*	Portfolio Purchase and Sale Agreement, dated as of September 28, 2015, by and among Quality Companies, LLC, Quality Equipment Leasing, LLC, and 19th Capital Group, LLC.
10.2*	Fleet Program Agreement, dated as of September 28, 2015, by and among Quality Companies, LLC, Quality Equipment Leasing, LLC, and 19th Capital Group, LLC.
10.3*	Service Agreement, dated as of September 28, 2015, by and among Quality Companies, LLC, Quality Equipment Leasing, LLC, and 19th Capital Group, LLC.
10.4*	Program Agreement, dated as of September 28, 2015, by and among Quality Companies, LLC, Quality Equipment Leasing, LLC, and 19th Capital Group, LLC.
10.5*#	Limited Liability Company Agreement of 19th Capital Group, LLC, dated as of August 27, 2015.
31.1	Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Paul A. Will, the Company's Principal Executive Officer.*
31.2	Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Bobby L. Peavler, the Company's Principal Financial Officer.*
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002, by Paul A. Will, the Company's Chief Executive Officer.*
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Bobby L. Peavler, the Company's Principal Financial Officer.*
101.INS**	XBRL Instance Document.*
101.SCH**	XBRL Taxonomy Extension Schema Document.*
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document.*
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document.*
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document.*

*	Filed herewith
**	In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 shall be deemed to be "furnished" and not "filed."
#	Management contract or compensatory plan or arrangement.

Exhibit 10.1

PORTFOLIO PURCHASE AND SALE AGREEMENT

THIS PORTFOLIO PURCHASE AND SALE AGREEMENT, dated as of September 28, 2015 (this “Agreement”), is entered into by and between Quality Companies, LLC, formerly dba Quality Equipment Sales, an Indiana limited liability company, and Quality Equipment Leasing, LLC, dba Quality Equipment Sales, a Delaware limited liability company, with a principal office at 9702 E. 30th Street, Indianapolis, IN 46229 (collectively “Seller”), and 19th Capital Group, LLC, a Delaware limited liability company, with its principal office at 9702 E. 30th Street, Indianapolis, IN 46229 (“Purchaser”).

W I T N E S S E T H:

WHEREAS, Seller is a provider of transportation and logistics services and, in the ordinary course of Seller’s business, Seller, as lessor or lender, enters into lease and finance agreements with independent owners-operators, as lessees or borrowers (together, collectively, “Independent Operators”), for the lease or finance of delivery vehicles (“Vehicles”) which meet defined specifications for the delivery of certain products;

WHEREAS, Seller has agreed to sell and assign to Purchaser and Purchaser has agreed to purchase and accept the assignment of Seller's right, title and interest in, to and under certain of Seller’s lease agreements and finance agreements and the Vehicles subject to the lease agreements and finance agreements identified on Attachment 1 to Exhibit A hereto (each, a “Transaction” and, collectively, the “Transactions”), including without limitation the lease agreements, schedules, maintenance funds, right to insurance, and Titles (“Titles”) to the leased Vehicles (each a “Transaction Document” and collectively, the “Transaction Documents”), and

NOW, THEREFORE, in consideration of the agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

ARTICLE I

PURCHASE AND SALE

Section 1.1 Agreement to Purchase and Sell. In reliance upon the representations and warranties set forth herein and the Assignment (as defined in Section 1.4 hereof), and subject to the fulfillment of any conditions precedent to this Agreement and the Assignment respectively, Seller shall sell, assign, transfer and set over to Purchaser, and Purchaser shall purchase from Seller, all right, title and interest (but not obligations) of Seller in and to: (i) all Transactions identified on Attachment 1 to Exhibit A hereto (collectively, the “Portfolio of Transactions”), (ii) all Transaction Documents related to the Portfolio of Transactions, (iii) the Vehicles subject to the Portfolio of Transactions, (iv) all rights and remedies of the lessor, lender, secured party, payee, beneficiary, seller or creditor under and in the Portfolio of Transactions, however, designated, (v) all payments due and to become due on and after September 1, 2015 (the “Cut-Off Date”) under the Portfolio of Transactions, together with all end of term rights, residual values of the Vehicles, and payments options (collectively, the “Payments”), and (vi) all proceeds of all of the foregoing, including insurance proceeds. The property interests and rights described in the preceding clauses (i) through (vi) are with respect to the Transactions collectively referred to as the “Assigned Property.” THE ASSIGNMENT UNDER THIS AGREEMENT IS INTENDED TO BE (AND SHALL BE TREATED) AS A TRUE SALE OF THE ASSIGNED PROPERTY CONVEYED HEREIN AND SHALL NOT BE CONSTRUED AS AN EXTENSION OF CREDIT BY PURCHASER TO SELLER.

Section 1.2 Purchase Price.

(a) The purchase price (the “Purchase Price”) shall be calculated at closing per each Transaction based upon the present value of all remaining lease payments, including residual amounts, discounted using a discount rate of twelve percent (12%) for fleet transactions and ten percent (10%) for owner/operator transactions (the “Discount Rate”). At the time of closing, Seller shall produce a chart to be attached to the Assignment as Attachment 1, which will reflect for each Transaction the payment history, remaining lease payments, and residual amounts, if any. For purposes of this calculation with respect to the variable rate lease finance agreements contained in the Portfolio of Transactions, if any, Seller and Purchaser shall agree upon a minimum fixed base lease payment amount and residual value for purposes of discounting a minimum guaranteed payment stream and calculating a purchase price and the mileage on each vehicle. The total Purchase Price shall be set forth in the Assignment to be executed by the parties on or prior to the applicable Closing Date.

The Purchase Price assumes that the Payments set forth on Attachment 1 to the Assignment are true and correct as of the applicable Closing Date and pursuant to Section 2.1 below, Seller represents and warrants that all of the information set forth on Attachment 1 to the Assignment is true, complete and correct, and if such information proves to be inaccurate or incorrect Seller shall upon demand pay to Purchaser the amount by which the actual Payments are less than the amounts set forth on Attachment 1.

(b) At the closing of the sale of the Transactions pursuant hereto (“Closing”, and the date of such Closing, the “Closing Date”), Purchaser shall pay the Purchase Price to Seller or its agent, as directed by Seller in writing, in readily available funds. At Closing, Seller shall produce applications to transfer the Titles to Purchaser or its designated agent, evidence of transfer of insurance in the Vehicles to Purchaser, and the original Transaction Documents relating thereto in accord with Section 2.1 below. For all Transactions for which Titles are not readily available for the subject Vehicles at Closing, Seller is allotted thirty (30) days to satisfy the covenants of Seller set forth in Sections 2.1(c)v, xvii, and xxv below, including transfer of the Titles to all Vehicles which are subject of the Transactions to Purchaser or its designated agent, transfer of all rights to insurance on said Vehicles and the transfer of the original lease or finance documents for the Transactions to Purchaser. If Seller fails to satisfy the covenants set forth above for all Transactions in which Title is not readily available within thirty (30) days, Seller shall immediately upon demand from Purchaser (at Purchaser’s option) repurchase such Transactions at the Repurchase Price as defined in Section 5.2 below.

Section 1.3 No Assumption of Obligations or Liabilities. EXCEPT AS EXPRESSLY PROVIDED FOR IN THIS AGREEMENT OR IN ANY OTHER WRITTEN AGREEMENT BETWEEN THE PURCHASER AND SELLER, ALL OBLIGATIONS, DUTIES, RESPONSIBILITIES AND LIABILITIES OF SELLER UNDER THE TRANSACTION DOCUMENTS OR ANY OTHER AGREEMENTS BETWEEN SELLER AND ANY OBLIGOR, WHETHER TO BE PERFORMED PRIOR TO OR AFTER THE APPLICABLE CLOSING DATE, SHALL REMAIN WITH SELLER AND CONTINUE TO BE SELLER’S OBLIGATIONS.

Section 1.4 Acquisition of Transactions. At closing, Seller shall execute and deliver to Purchaser an Assignment identifying the Portfolio of Transactions which shall be subject to and incorporate all of the terms and conditions of this Agreement (except as otherwise expressly set forth therein) and shall be in form of Exhibit A attached hereto and incorporated reference herein (the “Assignment”). All terms, conditions, representations, warranties, covenants and recourse obligations of Seller and Purchaser set forth in this Agreement shall govern the acquisition by Purchaser from Seller of all Transactions and the related Assigned Property that is the subject of the Assignment.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

Section 2.1 Representations and Warranties of Seller. Seller hereby makes, as of the date of this Agreement and as of the Closing Date, and on the later of (i) the date that each Transaction File is delivered to Purchaser or (ii) the date on which the Purchase Price is released to Seller in accordance with Section 1.2(b) above, the following representations, warranties and covenants to Purchaser:

(a) Organization, Power and Qualification.

(i) Seller is a Delaware limited liability company, duly organized, validly existing and in good standing under the laws of the State of Delaware, and is duly licensed and qualified to engage in its regular course of business in each jurisdiction in which the character of its properties or the nature of its activities requires such qualifications, except where the failure to be so qualified, licensed or in good standing would not affect the enforceability of any Transaction or Transaction Document or any rights and remedies related to the other Assigned Property.

(ii) Seller has full power and authority to enter into this Agreement and the Assignment and to take any action and execute any documents required by the terms hereof and thereof. The execution, delivery and performance of this Agreement and the transactions contemplated hereby have been properly approved by Seller (including approval by the Board of Directors (or a duly authorized committee of the Board of Directors) of Celadon Group, Inc.) following disclosure of all material facts and information (including the fact that certain officers and/or directors of Seller and/or Celadon Group, Inc. are also owners, managers and/or officers of Purchaser). This Agreement and the transactions contemplated hereby have been properly disclosed in accordance with all applicable laws, including any public disclosure required by applicable securities laws to which Celadon Group, Inc. and/or its affiliates may be subject.

(iii) Each of this Agreement and the Assignment has been duly authorized by all necessary corporate proceedings of Seller, has been duly and validly executed and delivered by Seller, and are legal, valid and binding obligations of Seller, enforceable against Seller in accordance with the terms hereof and thereof.

(iv) No consent, approval, authorization, order, registration or qualification of, or with, any person, or of, or with, or notice to, including, without limitation, a notification under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, any court or regulatory authority or other governmental body having jurisdiction over Seller (collectively, “Governmental Authorities”), the absence of which would adversely affect the legal and valid execution, delivery and performance by Seller of this Agreement, the Assignment, or the documents and instruments contemplated hereby or thereby, or the taking by Seller of any actions contemplated herein or therein, is required. The sale of Transactions contemplated in this Agreement and the Assignment complies with all applicable bulk sale laws. Notwithstanding the foregoing, Seller shall be solely responsible for the procurement, to the extent necessary, of all approvals and consents with respect to the transactions contemplated herein from Governmental Authorities and shall bear all responsibility and/or liability resulting from any failure to procure any said approvals and/or consent and/or any failure to comply with any applicable bulk sales laws.

(v) Seller has not violated the Workers Adjustment and Retaining Act (the “WARN Act”). Notwithstanding the generality of the foregoing, Seller shall be solely responsible for complying with and shall bear all responsibility and/or liability resulting from any failure to provide required notice or any other violation of any term or requirement of the WARN Act, as amended, as a result of the transactions contemplated herein and in the Assignments.

(vi) Neither the execution and delivery of this Agreement, the Assignment, the consummation of the transactions contemplated hereby or thereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement or the Assignment by Seller, conflict with or result in a breach of or a default under any of the terms, conditions or provisions of any legal restriction (including, without limitation, any judgment, order, injunction, decree or ruling of any court or governmental authority, or any federal, state, local or other law, statute, rule or regulation) or any material covenant or agreement or instrument to which Seller is now a party, or by which Seller or any of Sellers’ property is bound, nor does such execution, delivery, consummation or compliance violate or result in the violation of the Articles of Incorporation, By-laws or any other organizational document or agreement of Seller.

(vii) The sales and purchases contemplated by this Agreement and any Assignment will each be made in the ordinary course of the business of Seller and shall not constitute a sale of all or substantially all of the assets of Seller.

(viii) The principal executive office of Seller is the address stated with respect to Seller in the recitals above.

(ix) No action, arbitration, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) is pending or threatened challenging the lawfulness of the transactions contemplated herein and/or seeking to prevent or delay the transactions contemplated herein.

(b) Accuracy of Information. All information, in whatever form provided by Seller to Purchaser concerning the Lessees, the Transactions and the Assigned Property related thereto, including, without limitation: (i) the legal names and addresses of Lessees, (ii) the amount, due dates and monthly payment stream of payments due under Transaction Documents, as applicable (iii) variable payment rates and fixed price purchase options due under the Transaction Documents, as applicable, (iv) descriptions of Transaction Documents, (v) stated residual values, (vi) cash flows, (vii) delinquencies, and (viii) the amount of any security deposits, advance payments or other collateral (collectively “Collateral”) held by Seller as security for Transaction obligations, have been provided with the knowledge that Purchaser has been induced to enter into this Agreement and to execute any Assignment and to purchase each Transaction on the terms agreed upon in reliance on such information, and Seller warrants that all such information is accurate and correct in all material respects and that Seller has not withheld any material adverse information.

(c) Transaction Representations. Each Transaction sold, transferred and assigned to Purchaser hereunder meets each and every of the following criteria (and such Transactions are referred to, collectively, as “Eligible Transactions” and each, individually, as an “Eligible Transaction”):

(i) Each Transaction and Transaction Document is genuine and represents a valid absolute and unconditional obligation of each lessee, borrower, guarantor, pledgor and/or each other party named therein or which is obligated to make all Payments on any Transaction or Transaction Document (each, an “Obligor”) under such Transaction (except for Payments that are identified on the applicable Schedule A as being booked residuals that are payable at the option of the Obligor), and each such Transaction Document is and shall continue to be valid, binding and enforceable against each Obligor in accordance with the terms thereof, except as such enforcement may be limited by (A) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws, now or hereafter in effect, relating to or affecting the rights, powers, privileges, remedies or interests of creditors generally, (B) rules or principles of equity affecting enforcement of obligations generally, whether at law, in equity or otherwise, or (C) the exercise of the discretionary powers of any court or other authority before which a proceeding may be brought seeking equitable remedies, including, without limitation, specific performance and injunctive relief (each, a “Bankruptcy Exception”). As of the date of each Assignment, Seller has no knowledge that the enforcement of any right or remedy with respect to any Obligor, Transaction, Vehicle, Collateral or other Assigned Property is limited or otherwise affected by (or threatened to be limited or affected by) any Bankruptcy Exception.

(ii) Each Transaction Document contains an unconditional obligation of each Obligor to pay all amounts set forth therein, and is and shall continue for the full term thereof to be, in all respects, free from dispute, set off, defense, counterclaim or recoupment of any kind, and is and shall continue to be non-cancelable for the duration of its term.

(iii) Each Transaction was originated by Seller in the ordinary course of Seller’s business in connection with the lease and/or financing of one or more new or used Vehicles intended for commercial or other business use, and the cost of all Vehicles and all costs, fees and expenses incurred by Seller in connection with each such Transaction and any Transaction Document have been paid.

(iv) Seller was, at the time such Transaction was originated, duly licensed, if necessary, and qualified and in good standing to engage in its regular course of business in each jurisdiction in which the character of its properties or the nature of its activities then required such qualification, except where the failure to have been so qualified, licensed or in good standing would not affect the enforceability of any Transaction or of any Transaction Document, and Seller had full and legal power and authority to enter into such Transaction.

(v) Seller has delivered to Purchaser at Closing the sole and exclusive original or sole original counterpart of each Transaction Document; to the extent, if any, that the “original” counterpart of a Transaction Document delivered by Seller is a fax, then in accordance with applicable law and the terms of such Transaction Document, such fax constitutes the only record of such Transaction Document and constitutes the original record thereof admissible in evidence pursuant to the best evidence rule in any jurisdiction where Purchaser may seek to enforce such Transaction Document.

(vi) The Transaction Documents are in the forms previously provided to Purchaser, and there are no modifications to such forms except as disclosed to Purchaser in a marked copy of such form showing any changes made to the approved form or in a separate amendment or rider.

(vii) The terms and conditions contained in the Transaction Documents correctly reflect the entire agreement between the parties thereto and there are no other written agreements or representations, nor any oral agreements by Seller, in connection therewith.

(viii) As of the Closing Date, each Obligor who has a payment owing has made at least one (1) timely monthly payment, exclusive of advance payments, and no Transaction is delinquent for more than forty-five (45) days in the payment of any amount due thereunder.

(ix) Except as set forth on Attachment 1 to the Assignment, Seller has not, directly or indirectly, in any way extended or otherwise restructured the payment terms or any other term or condition of any Transaction Document or made any extension or other accommodation to any Obligor for purposes of changing or beneficially affecting the delinquency status of any Transaction.

(x) Attachment 1 to the Assignment correctly reflects, as of the applicable Closing Date, for each Transaction, the name of each Obligor, the dollar amount of the periodic installments (whether denominated as rent, principal, interest or otherwise), the number of periodic installments remaining to be paid on such Transactions, the due date of each Payment, the total Payments payable, the age of the Vehicle, the mileage of the Vehicle, the end of term purchase option and/or estimated residual value, if any, of the Vehicle with respect to each Transaction, and whether the Transaction is the original or replacement lease with respect to the Vehicle and, in the case of a replacement lease, the total number, including the present Independent Operator, of Independent Operators that have leased and operated the Vehicle, and any other material information reasonably required by Purchaser.

(xi) Except as set forth on Attachment 1 to the Assignment, as of the applicable Closing Date, no Payment or other amount due on a Transaction after the applicable Cut-off Date has been prepaid.

(xii) Each Transaction Document complies with all applicable state, federal, local and other laws, rules, regulations and requirements in effect as of the applicable Closing Date with respect to the creation of such obligations, the billing or collection of discounts, fees or similar charges, the amount of interest or other charges which may be collected and the disclosure of discounts, fees, interest or other charges, except where the failure to so comply would not have a material adverse effect on the enforceability of the Transaction Documents.

(xiii) Each Transaction Document is in full force and effect, and there are no claims, suits, actions, arbitrations or other proceedings or governmental investigations, including, without limitation, any counterclaims or claims by any Obligor, pending, or, to the best of Seller’s knowledge, threatened, against Seller relating to any Transaction or the acquisition, collection or administration of any Transaction. Seller has not received any notice of, nor to the best of Seller’s knowledge, is there any valid basis for any claim against, or assertion of liability against, Seller relating to any Transaction, or the acquisition, collection or administration thereof. Seller has not been the subject of any proceeding, nor, to the best of Seller’s knowledge, has there been any investigation by or before any regulatory authority in connection with Seller’s business practices with respect to any Transaction, or the acquisition, collection or administration thereof.

(xiv) All amounts payable to any broker, vendor or supplier with respect to each Transaction have been paid in full.

(xv) All Vehicles leased or financed to the Obligors have been delivered to, and unconditionally accepted by, the Obligors and all vendors have been paid in full.

(xvi) Seller owns the sole legal, record, and beneficial ownership interest in and title to, and has not previously assigned, sold or hypothecated any interest that it may have in or under, any Transaction, the Vehicle subject to each Transaction (or, in the event a Transaction is structured as a financing agreement, Seller has a valid security interest in the Vehicle subject to such Transaction), and/or other Assigned Property, and upon the consummation of the transactions contemplated hereby and the Assignment, Purchaser shall be vested with all right, title and interest of Seller in and under each Transaction and Transaction Document and the Vehicle subject to each Transaction free and clear of any Lien thereon and shall be entitled to all of the benefits due and owing to Seller (but, except as provided herein, none of the obligations) under the Transaction Documents. As used herein, “Lien” means any mortgage, pledge, charge, disposition of title, encumbrance, lease, right of others, or security interest of any kind, including any of the foregoing arising under any conditional sales or other title retention agreement.

(xvii) The Vehicle(s) relating to each Transaction is properly insured as required by the terms of the Transaction Documents either (a) by insurance obtained by the Obligor, self-insurance (if self-insurance is identified on the applicable Schedule A) (b) through a master policy of insurance, naming Seller and Seller’s assigns as loss payee and additional insured, or (c) by Seller causing such insurance to be in full force and effect for which Seller has made arrangements for Obligor to pay a property damage surcharge fee in the event that any Obligor fails to provide proof of insurance. Seller shall transfer and assign all rights with respect to insurance coverage for the Vehicles at Closing.

(xviii) As of the applicable Closing Date, all taxes, levies, imposts, duties, fees, or other charges or assessments levied, imposed or assessed against each Transaction, Payment, and/or Vehicle(s) that is the subject of such Transaction at any time prior to the applicable Closing Date, including any interest, additions or penalties applicable thereto (collectively, “Taxes”) have been fully paid by Seller or by the Obligor, as the case may be, except to the extent that such Taxes are being contested in good faith and by appropriate and lawful proceedings diligently contested and for which adequate reserves or other appropriate provisions shall have been made, provided, however, that Seller shall indemnify Purchaser from any loss resulting from any such contest undertaken by Seller or any other party, and all Taxes levied, imposed or assessed with respect to the period prior to the applicable Closing Date but which are not billed or payable prior to the Closing Date shall be paid by Seller or Seller shall cause the Obligor to pay same as and when due, except to the extent contested in good faith as described above.

(xix) There are no oral or written agreements of any kind between Seller and any other person, company or entity (including, without limitation, brokers, vendors, Obligors and governmental bodies) which will or may adversely affect Purchaser’s rights, title, remedies and/or interests in or to any of the Transactions or any Assigned Property.

(xx) All vehicles have been registered in accordance with the International Registration Plan (IRP) and International Fuel Tax Agreement (IFTA) programs. Any sales tax triggered from this sale will be the responsibility of Seller.

(xxi) Except to the extent required by bona fide “private label” leasing arrangements, Seller has not conducted business under any trade name, fictitious name or any other legal name.

(xxii) No Obligor has a right under any Transaction Document or any other agreement to buy out or terminate a Transaction prior to the date that the final Payment is due as set forth on Attachment 1 to the Assignment with respect to the applicable Transaction.

(xxiii) Seller has not received actual written notice from any Obligor of a bulk sale (or pending bulk sale) of such Obligor’s assets, or notice of any Obligor’s attempt to assign its rights under its Transaction Documents or sublease the Vehicles.

(xxiv) Seller has made no warranties to Obligors under the Transactions or otherwise with respect to any Vehicle.

(xxv) At and on the Closing Date, Seller will have the absolute right to sell and transfer all of the Assigned Property that is the subject of the Assignment in compliance with the representations and warranties set forth herein, and none of the applicable Transaction Documents or any agreement between Seller and any creditor or other third party contains a prohibition against such sale and assignment.

(xxvi) Each Transaction is a lease or finance agreement for a motor vehicle, and Seller is the registered owner and holder of the applicable Title pending maturation of the Transaction. An application to transfer title to and reflect Purchaser or its designated agent as owner will be filed and copies thereof delivered to Purchaser at Closing for all Transactions with Vehicles for which Seller has readily available Title, together with the existing titles in Seller’s name. Seller shall deliver new Titles for these Vehicles to Purchaser naming Purchaser or its designated agent as owner and holder of title within sixty (60) days of Closing or, for those Transaction for which Title is not readily available, within ninety (90) days of Closing.

(xxvii) Seller represents and warrants that it has performed an inquiry on the name(s) of all Obligors (fictitious and otherwise), principals and guarantors as to their identification as a “specially designated national” as defined by the United States Treasury’s Office of Foreign Assets Control (OFAC) for the Transactions being sold to Purchaser hereunder, utilizing the most recently published OFAC list of Specially Designated Nationals and has determined that none of the Obligors are on that list.

(xxviii) Each Independent Operator that is the lessee with respect a Transaction meets Seller’s Risk Acceptance Criteria attached hereto and incorporated by reference herein as Exhibit B.

(d) Agents. Seller has engaged as its agent CTS Exchange, Inc. as Qualified Intermediary and has assigned its rights to equipment in this transaction to them under IRC Sec. 1031 exchange.

(e) Brokers. No person acting on behalf of Seller is or will be entitled to any brokers’ or finders’ fee or any other commission or similar fee, directly or indirectly, for the transactions hereunder or pursuant to any Assignment.

(f) Knowledge. For the purpose hereof, the term “to the best of Seller’s knowledge” means the actual knowledge, after reasonable inquiry and investigation, of the officers of Seller.

Section 2.2 Representations and Warranties of Purchaser. Purchaser hereby represents and warrants to Seller as follows:

(a) Organization, Power and Qualification.

(i) Purchaser is a Delaware limited liability company in good standing in the State of Delaware and is duly licensed and qualified to engage in the regular course of business in each jurisdiction in which the character of its properties or the nature of its activities requires such qualification, and has full power and authority to enter into this Agreement and to take any action and execute any documents required by the terms hereof and thereof.

(ii) This Agreement has been duly authorized by all necessary proceedings of Purchaser, has been duly and validly executed and delivered by Purchaser, and sets forth legal, valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with the terms hereof and thereof.

ARTICLE III

CONDITIONS TO PURCHASE

Section 3.1 Conditions Precedent to Purchase. Purchaser’s obligation to purchase the Transactions on the Closing Date is subject to the fulfillment or prior written waiver of each of the following conditions precedent, each in form and substance satisfactory to Purchaser (it being acknowledged that the parties contemplate signing this Agreement and closing the transactions contemplated hereby simultaneously):

(a) Seller shall have duly executed and delivered to Purchaser an Assignment or Assignments for the Transactions being purchased at Closing, substantially in the form of Exhibit A attached hereto and the Service Agreement (as defined below) between the parties.

(b) To the extent requested by Purchaser, Seller shall have made available to Purchaser for review the original Transaction Documents for each purchased Transaction, which shall consist of the following documents (collectively, the “Transaction File”):

(i) the original lease agreement or lease finance agreement evidencing the Transaction, together with all original amendments, riders and supplements thereto identified on Attachment 1 to the Assignment;

(ii) evidence of insurance with respect to each of the Vehicles which are the subject of the Transactions;

(iii) copies of the Title for each of the Vehicles which are the subject of the Transactions showing Seller as the sole registered owner free and clear of any Liens;

(iv) copies of documentation relating to the purchase of the Vehicles (and the related contract, if applicable) and invoices evidencing Seller ‘s title to the Vehicles; and

(v) any other documents relating to any of the foregoing or otherwise evidencing a payment obligation under, providing security for, or otherwise relating to the Transaction.

(c) At Closing, a final Excel based file is to be delivered by Seller to Purchaser with the following information included:

List of Fields required:
	VIN#
	Start Date
	Security Deposit
	Equip Cost / Amount Financed
	Residual Amount
	End of Term Option (FMV, $1 Out, PUT, etc.)
	End of Term Amount ($1, $100)
	Term (months)
	# of Payments Remaining at time of Sale
	Next Payment Due Date
	Last Payment Due Date
	Payment Frequency (Weekly, Monthly, Quarterly,
	Annual, Various (Requires Payment Schedule)
	Monthly Rent Amount

	Renewals - Provide only if Transaction may go into Renewal
	Renewal Start Date
	Renewal Term
	Renewal Payment Amount

	Equipment - Please include 1 record for each asset
	Equipment Description
	Manufacturer
	Model
	New / Used
	Equipment Cost

A template of the required file will be provided in advance of Closing by the Purchaser to the Seller.

(d) To the extent requested by Purchaser, Seller shall have delivered to Purchaser, in computer readable form by Purchaser (together with original documents), all payment histories, collection data, monthly payment streams and other records in Seller’s data base or possession relating to each assigned Transaction, or shall provide Purchaser with electronic access to such information, including, without limitation, the following reports:

	(i)	Cash Collected by Lease Internal
	(ii)	Cash Collected by Lease External
	(iii)	Delinquency Reports
	(iv)	Settlement Deduct Reporting
	(v)	Sale of Assets Reports – Monthly and Annually

(e) Seller shall have delivered to Purchaser a copy of appropriate resolutions, certified by an authorized officer of Seller, as being true, correct and complete, and in form and substance satisfactory to Purchaser, authorizing the execution, delivery and performance of this Agreement and the Assignment(s) by Seller.

(f) Seller shall not have suffered any material adverse change, nor shall any material adverse change be threatened, in the financial condition, business or operations of Seller since the date of Seller’s most recent financial statement delivered to Purchaser.

(g) Seller shall have delivered to Purchaser and/or caused to be performed such other items that may be reasonably requested by Purchaser.

(h) Seller shall have delivered to Purchaser, the Program Agreement, the Fleet Program Agreement, the Service Agreement, and the Reserve Account Agreement (in the forms attached hereto as Exhibits C-F, respectively) duly executed by Seller.

(i) Seller shall have delivered to Purchaser evidence of payment by Seller of all Taxes (including transfer Taxes) that are owed as a result of the transactions contemplated herein and that Seller is obligated to collect from Independent Operators and/or valid sales/use/excise/transfer tax exemption certificates for any such Taxes.

(j) Seller shall have delivered to Purchaser all consents and/or approvals required in connection with the transactions contemplated herein.

Section 3.2 Delivery of Original Transaction Files. Seller covenants and agrees that it shall deliver all original Transaction Files containing all of the original Transaction Documents (which may include faxes that comply with Section 2.1(c)(v) above) to Purchaser at Closing.

ARTICLE IV

COVENANTS OF SELLER

Section 4.1 Seller shall comply with the following.

(a) Seller shall, from time to time, do and perform any and all acts and execute any and all documents (including, without limitation, the execution, amendment or supplementation of any instrument of transfer, and the making of notations on the records of Seller and on certificates and other documents of title) as may be reasonably requested by Purchaser in order to effect the purposes of this Agreement and the Assignment and the sale contemplated hereunder and thereunder and to perfect and protect the interest of Purchaser in the Transactions that are the subject of the Assignment and the proceeds thereof against all persons whomsoever to the reasonable extent necessary to protect Purchaser’s interest.

(b) Seller shall give Purchaser at least thirty (30) days’ prior written notice of any relocation of its state of formation or its chief executive office or change of name, and Seller shall at all times maintain its place of formation and its chief executive office within the United States.

(c) To the extent not payable by an Obligor under any of the Transaction Documents, Seller agrees that it shall, if required by applicable law, pay and discharge or cause to be paid and discharged, all Taxes and fees (excluding any Taxes on Purchaser’s net income) which arise or accrue for any period prior to the applicable Closing Date in connection with the sale, lease, use or ownership of the Vehicles covered by an assigned Transaction, including filing any required personal property Tax rendition, and Seller further indemnifies and holds Purchaser harmless from and against all claims, losses and damages arising as a result of a breach by Seller of the foregoing agreement.

(d) Seller shall only permit the return or repossession of any Vehicle or the modification of any Transaction Document after the applicable Closing Date, to the extent authorized by Purchaser or the Service Agreement (as defined below), and agrees to assist Purchaser, upon Purchaser’s request, in the enforcement of any of Purchaser’s rights and remedies under any Transaction Document.

(e) Seller shall reasonably cooperate with Purchaser in causing all insurance procured by Seller and maintained on the Vehicle(s) which is the subject of any Transaction to be amended to name “Seller or its assigns” as loss payee and additional insured as their interest may appear or Seller shall charge a property damage surcharge to any Obligor that fails to provide proof of insurance.

(f) Seller shall remit to Purchaser all Payments or other amounts owed to Purchaser pursuant to the Transaction Documents on a monthly basis in accord with the Service Agreement between the parties and notwithstanding the amounts actually paid by the Obligors. Adjustments, if necessary, of the amount owed to Purchaser shall be made on a quarterly basis pursuant to the Service Agreement.

(g) Seller, in its capacity as Servicer and pursuant to the terms of the Service Agreement, shall continue to hold and administer the maintenance fund which each Obligor pays into on a monthly basis, and arrange for the repair and maintenance of the Vehicles which are the subject of each Transaction.

(h) Seller, in its capacity as Servicer and pursuant to the terms of the Service Agreement, shall repossess any Vehicle where the Obligor has ceased operation of the Vehicle for commercial delivery purposes, and, for no additional consideration, shall arrange for a new Obligor to enter into a new lease with respect to the Vehicle, which lease shall be in the name of Purchaser as lessor and shall be in form and substance acceptable to Purchaser in its discretion. Placement of a new driver in a Vehicle subject to a Transaction assigned to and owned by Purchaser shall take priority on the part of Seller over placement of drivers in vehicles which are owned and operated by Seller.

(i) Where Seller determines in accord with the provisions of the Service Agreement that the residual value of a Vehicle which is the subject of an expired or terminated Transaction is in excess of the net book value of the Vehicle subject to the expired or terminated Transaction, Seller may sell the Vehicle in question in accord with its normal business practices or, with the authorization of the Purchaser, re-lease the Vehicle. One-half of any received sales proceeds in excess of the net book value shall be paid to Purchaser, and one-half of such proceeds shall be retained by Seller.

Section 4.2 After the Closing Date, Seller, at Seller’s cost and for Purchaser’s benefit and account, shall bill, administer and service the Transactions, all in accordance with the terms and conditions set forth in the Service Agreement (the “Service Agreement”) being executed concurrently herewith by the Seller and the Purchaser. For so long as the Service Agreement or Section 5.1 below remains in effect: (a) Seller shall deliver to Purchaser within one hundred and twenty (120) days after the end of each fiscal year, such certified financial information as Purchaser shall reasonably request with respect to the administration of the Transactions and Vehicles which are the subject of the Transactions. Seller also shall deliver to Purchaser such interim financial and business information as Purchaser may from time to time reasonably request; and (b) Seller shall not (i) change (A) its name or the address of its principal place of business, (B) the jurisdiction under whose laws it is organized as of the date hereof, or (C) the type of organization under which it exists as of the date hereof unless it shall have given Purchaser not less than sixty (60) days’ prior written notice of any such proposed change; (ii) permit the sale or transfer of any shares of its capital stock or of any ownership interest of the Seller to any person, persons, entity or entities (whether in one single transaction or in multiple transactions) which results in a transfer of a majority interest in the ownership and/or the control of the Seller from the person, persons, entity or entities who hold ownership and/or control of the Seller (“Change in Control”) as of the date of this Agreement without the prior written consent of Purchaser, which consent shall not unreasonably be withheld; or (iii) consolidate with or merge into or with any other entity if such event would have a material adverse effect on the financial or business condition of Seller, or (iv) sell, transfer or otherwise dispose of all or substantially all of its assets.

ARTICLE V

LIMITED RECOURSE; REPURCHASE; INDEMNIFICATION OBLIGATIONS.

Section 5.1 Repurchase of Transactions; Limited Recourse

(a) In the event of a breach of any of the representations, warranties, and/or covenants of Seller set forth in this Agreement which, if curable, is not cured within ten (10) business days after receipt of notice from Purchaser, Seller shall (upon demand from Purchaser, at Purchaser’s option), without first requiring Purchaser to proceed against any Obligor of any other person or the Vehicle(s) or any other Assigned Property or security, repurchase the Transaction(s) affected thereby and pay Purchaser in cash an amount equal to the Repurchase Price (as defined in Section 5.2 below) plus any expense incurred by Purchaser in attempting to enforce such Transaction.

(b) In the event of a Change of Control, as defined in Section 4.2 of this Agreement, and the occurrence of any one of the Financial Triggers, as outlined in Section 1.4 of the Reserve Agreement (as defined below), at the option of the Purchaser, the Seller will repurchase the Portfolio of Transactions at the Repurchase Price (as defined in Section 5.2 below) plus any expenses incurred by Purchaser in attempting to enforce such Transaction.

(i) As of the Closing Date, a Reserve Account (the “Reserve Account”) in the amount of ten percent (10%) of the Purchase Price shall be established by Seller on Seller’s balance sheet in accordance with the Reserve Account Agreement executed between the parties on even date herewith (“Reserve Agreement”) in the form of Exhibit D attached hereto. The amount of the Reserve Account outstanding at any time is part of the calculation of Seller’s recourse liability for potential payments that may become due to Purchaser pursuant to the Reserve Agreement and is not intended to be a pre-funded cash reserve. Except as expressly set forth herein and/or the Reserve Agreement, Seller is not required to set aside or segregate any funds or other assets, including, without limitation any portion of the Purchase Price, to pre-fund or otherwise secure Seller’s Reserve Account obligations unless the conditions outlined in Section 5.1(d) occur.

(ii) The rights and benefits of Purchaser under this Section 5.1(c) shall be cumulative and in addition to all other rights to receive payment of any other amounts due to Purchaser, including, without limitation Seller’s repurchase obligations under Section 5.1(a). Repurchase Prices paid by Seller to Purchaser under Section 5.1(a) or amounts paid as a result of any breach of a representation, warranty or agreement by Seller, shall not be applied in reduction of the Reserve Account.

(d) The Reserve Account obligation will be established as a prefunded pool at a bank of the Purchaser’s request with the Purchaser’s agents with exclusive rights to withdraw funds if the conditions enumerated in Section 1.4 of the Reserve Agreement are triggered.

Section 5.2 Repurchase Price.

(a) “Repurchase Price” shall be the sum of (i) all unpaid Payments due on or before the date the Repurchase Price is due (the “Repurchase Date”), plus interest thereon at the highest Discount Rate set forth in Section 1.2 from the date of the last payment until the Repurchase Price is paid in full, plus (ii) all Payments due and to become due after the Repurchase Date under the applicable Transaction (including the amount of any purchase option or booked residual for the Vehicle(s) if included in the computation of the Purchase Price), discounted to present value on the date when due at the highest Discount Rate set forth in Section 1.2 used to determine the Purchase Price of such Transaction, plus (iii) all collection costs (including reasonable attorneys’ fees and expenses) incurred by Purchaser.

(b) Upon receipt of the Repurchase Price, Purchaser shall promptly re-assign the repurchased Transaction(s) and the related Vehicle(s) to Seller, “AS IS” and “WHERE IS”, without recourse to, or representation or warranty express or implied by, Purchaser, but free and clear of all liens and encumbrances created by Purchaser.

Section 5.3 Interest After Default. If Seller fails to pay any amount that may become due to Purchaser hereunder or under the Assignment and/or the Service Agreement on any applicable payment date, then (a) interest shall accrue thereon from and after the applicable payment date, until paid in full at the lesser of the rate of fifteen percent (15%) per annum or the maximum rate permitted by law, and (b) Seller shall reimburse Purchaser upon demand for all collection costs (including reasonable attorneys’ fees and expenses) incurred in enforcing Purchaser’s rights against Seller hereunder and under the Service Agreement.

Section 5.4 General Indemnification. Seller hereby agrees to indemnify, defend and hold harmless Purchaser, its successors and assigns, from and against any and all suits, claims, liabilities, counterclaims, actions, damages, penalties, losses, costs or expenses (including, without limitation, reasonable attorneys’ fees, expenses and court costs) of any kind which Purchaser shall suffer as a result of or arising out of (a) any breach by Seller of any warranty, representation, covenant or agreement contained herein, in the Assignment and/or other document executed by Seller in connection herewith, or contained in any Transaction Document, (b) any misrepresentation in, or omission from, any statement, certificate, Exhibit, Schedule or other agreement, instrument or document prepared and delivered or to be delivered by Seller pursuant to this Agreement or any Assignment, (c) any negligence of Seller or of any agent or employee of Seller or any warranty given by Seller in respect of the purchase, installation, delivery, maintenance and condition of any Vehicle or other Collateral, (d) any Taxes and any governmental charges, fees, fines or penalties whatsoever, levied against any Transaction and/or any Vehicle for any periods prior to the applicable Closing Date and not paid by Seller in the event Seller is liable for such Taxes, (e) any Transaction or Transaction Document being unenforceable by reason of the failure of Seller (or any predecessor-in-interest to Seller) to have qualified to do business or to have any license or permit required by any state or other governmental entity, or (f) the failure of Seller to obtain required insurance coverage on any Vehicle. Seller further agrees to indemnify and hold harmless Purchaser and its successors and assigns from and against any and all liabilities (including interest and penalties) with respect to any Taxes required to be collected, in respect of any Transaction or any Vehicle, after the Closing Date if such Taxes had not been collected by Seller prior to the Closing Date on reliance of any exemption being available or otherwise applicable and it is subsequently determined by Purchaser, and Purchaser shall deliver to Seller a letter explaining the basis for such determination, that either (i) no exemption certificate is available in the Transaction Files provided by Seller to Purchaser upon consummation of the transactions contemplated hereunder and under the applicable Assignment, and no exemption certificate is obtainable from an Obligor, following Purchaser’s reasonable commercial efforts to obtain same from such Obligor; or (ii) in Purchaser’s reasonable judgment, such exemption is either not available or is otherwise improper or fraudulent under the circumstances.

Section 5.5 Survival. The obligations of Seller under this Section 5 shall survive the execution of this Agreement and any Assignment, the closing and consummation of the purchases and sales contemplated hereunder and thereunder, and any payment of any amount owing under, or any repurchase by Seller of, any Transaction.

ARTICLE VI

MISCELLANEOUS

Section 6.1 Remarketing Obligations. Seller hereby assigns and transfers unto Purchaser all of its rights and interests in, to and under all remarketing and recourse arrangements with any vendor, dealer or supplier relating to any Transaction. Notwithstanding such assignment, Seller shall exert its best efforts on a non-discriminatory basis to remarket any Vehicle that is the subject of any Defaulted Transaction or which is not purchased by the Obligor under a true lease Transaction at the end of the term thereof, and shall be responsible for all efforts, cost and expenses in connection with the remarketing of any Vehicle sold to Purchaser hereunder. As used herein, a “Defaulted Transaction” is a Transaction where the Independent Operator and/or any other Obligor fails to comply with any of its/his/hers obligations, undertakings, or other covenants set forth herein, as a result of which the lessor or lender party to such Transaction is entitled to re-possess and dispose of the Vehicle subject to such Transaction.

Section 6.2 Costs, Recording and Other Fees. Seller shall pay all recording fees, assessments or other statutory fees necessary to perfect Purchaser’s interests in the Transactions purchased hereunder and under or in connection with the Assignments and in consummating the transactions contemplated hereby and thereby and shall pay all Taxes, if any, payable upon or in connection with the conveyance and transfer contemplated hereunder and thereunder.

Section 6.3 Successor and Assigns. Purchaser shall have the absolute right, without requiring Seller’s consent, to assign all or any of its rights or delegate all or any of its duties hereunder and under the Assignment, provided, however, that such Assignee shall agree to retain Seller as Servicer to the extent Seller has the right to continue as Servicer under the terms of the Service Agreement, unless Purchaser has already removed Seller from that capacity. Seller may not assign all or any or its rights or delegate all or any of its duties hereunder and thereunder without the prior written consent of Purchaser, which consent shall not be unreasonably withheld or delayed, provided that Seller shall remain responsible for all duties so delegated and no such assignment or delegation by Seller shall relieve Seller of any of its obligations or liabilities hereunder.

Section 6.4 Payments In Immediately Available Funds. Each payment to be made hereunder and under the Assignment shall be made on the required payment date in lawful money of the United States and in immediately available funds.

Section 6.5 Rights Cumulative. All rights, remedies and powers granted to Purchaser hereunder, under the Assignment and under any other agreement executed by the parties in connection herewith are irrevocable and cumulative, and not alternative or exclusive, and shall be in addition to all other rights, remedies and powers given hereunder and thereunder, or in or by any other instrument, or available in law or equity.

Section 6.6 Waivers. No failure or delay on the part of Seller or Purchaser in exercising any power, right or remedy under this Agreement or, in the case of Purchaser, the Assignment, shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other or further exercise thereof or the exercise of any other power, right or remedy.

Section 6.7 Notices. All notices, reports, requests or other communications desired or required to be given under this Agreement shall be in writing and shall be sent to the parties to the addresses set forth above by (a) certified mail, return receipt requested, postage prepaid, (b) national prepaid overnight delivery service, (c) telecopy or other facsimile transmission to the addresses set forth above. All notices and demands shall be deemed to have been given either at the time of the delivery thereof to any officer of the person entitled to receive such notices and demands at the address of such person for notices hereunder, or on the third day after the mailing thereof to such address, as the case may be.

Section 6.8 Deliveries to Purchaser. All items and amounts to be delivered, remitted or otherwise furnished by Seller to Purchaser pursuant hereto and any Assignment or in connection herewith and therewith shall, except as otherwise provided for herein and therein, be delivered, remitted or furnished to Purchaser at its office at the address set forth herein and therein or at such other place as the Purchaser may direct.

Section 6.9 Merger and Integration; Amendments, Etc. This Agreement, the Assignment and the other agreements executed by the parties in connection herewith set forth the entire understanding of the parties relating to the subject matter hereof and thereof, and all other and/or prior understandings, written or oral, are hereby superseded, unless referenced and/or incorporated herein. This Agreement and the Assignment may not be modified, amended, waived, or terminated, except in accordance with its express terms and in a writing executed by Seller and Purchaser, or by supplement hereto as agreed to by the parties.

Section 6.10 Headings and Cross-References. The various headings in this Agreement and in any Assignment are included for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement or any Assignment. References to any Section are to such Section of this Agreement and, if expressly provided for in any Assignment.

Section 6.11 Governing Law. This Agreement and any Assignment shall be governed by the internal substantive laws of the State of Delaware, without regard to principles of conflicts of law or choice of law.

Section 6.12 Counterparts. This Agreement and any Assignment may be signed in one or more counterparts (and by different parties on separate counterparts), each of which shall be an original and all of which shall be taken together as one and the same agreement.

Section 6.13 Severability. If any provision hereof is void or unenforceable in any jurisdiction, such voidness or unenforceability shall not affect the validity or enforceability of (a) such provision in any other jurisdiction or (b) any other provision herein in such or any other jurisdiction.

Section 6.14 Survival of Duties, Warranties and Representations. Each party hereto covenants that its respective duties, warranties and representations set forth in this Agreement and in the Assignment, and in any document delivered or to be delivered in connection herewith or therewith, shall survive the execution of this Agreement and the Assignment and the closing of the transactions contemplated hereunder and thereunder, including but not limited to their applicability in the Program Agreement, the Fleet Program Agreement, the Service Agreement, and the Reserve Account Agreement.

Section 6.15 Jurisdiction, Forum Selection Venue; Jury Trial Waivers. SELLER AND PURCHASER (a) AGREE TO SUBMIT FOR THEMSELVES, IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND ANY SCHEDULE OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT HEREOF OR THEREOF, TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS (AS APPLICABLE) OF THE STATE OF DELAWARE, AND APPELLATE COURTS FROM ANY THEREOF, (b) CONSENT THAT ANY ACTION OR PROCEEDING SHALL BE BROUGHT IN SUCH COURTS, AND WAIVE ANY OBJECTION THAT EACH MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT, (c) AGREE THAT SERVICE OF PROCESS OF ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE APPROPRIATE PARTY AT ITS ADDRESS AS SET FORTH HEREIN, AND SERVICE MADE SHALL BE DEEMED TO BE COMPLETED UPON RECEIPT, AND (d) AGREE THAT NOTHING HEREIN OR IN ANY EXHIBIT OR SCHEDULE SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. SELLER AND PURCHASER EACH HEREBY UNCONDITIONALLY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, ANY SCHEDULE AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN THE PARTIES HERETO RELATING TO THE SUBJECT MATTER HEREOF OR THEREOF, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN SELLER AND PURCHASER.

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IN WITNESS WHEREOF, the parties hereto have caused this Portfolio Purchase and Sale Agreement to be executed by their respective duly authorized officers as of the day and year first above written.

	SELLER:

	Quality Companies LLC, formerly dba Quality Equipment Sales and Quality Equipment Leasing, LLC, dba Quality Equipment Sales


	By:	/s/ Leslie Tarble
	Name:	Leslie Tarble
	Title:	Chief Financial Officer

	PURCHASER:

	19TH Capital Group, LLC


	By:	/s/ George Chasteen
	Name:	George Chasteen
	Title:	President

EXHIBIT A

ASSIGNMENT

In consideration of the Purchase Price as set forth on Attachment 1 Quality Companies, LLC formerly dba Quality Equipment Sales and Quality Equipment Leasing, LLC dba Quality Equipment Sales (collectively referred to as “Seller”), hereby sells, assigns and transfers to 19th Capital Group, LLC (referred to as “Purchaser”), its successors and assigns, without recourse except as hereinafter provided, all of Seller’s right, title and interest in and to (a) the Transactions described on Attachment 1 hereto, (b) all Payments due and to become due thereunder on and after the Cut-Off Date, (c) all right, title, and interest of the Seller in and to each guaranty therefor, (d) any security for the Obligor’s obligations thereunder, (e) title to all Vehicles owned by Seller described in the Transactions, (g) all of Seller’s rights and remedies under the Transactions, and the right either in Purchaser’s own behalf or in Seller’s name to take all such proceedings, legal, equitable, or otherwise, that Seller might take, save for this assignment (hereinafter, the “Assignment”), (h) all residual values in the Vehicles subject to such Transactions in the respective amounts set forth on Attachment 1 hereto, subject to the provisions of Purchase Agreement, and (i) all proceeds (as such term is defined in the UCC) of any of the foregoing.

This Assignment is delivered pursuant to the terms of that certain Portfolio Purchase and Sale Agreement dated as of September 28, 2015 (“Purchase Agreement”) between Seller and the Purchaser, and is subject to the terms, conditions, promises and warranties contained therein. Capitalized terms not defined herein shall have the meanings given to such terms in the Purchase Agreement.

Seller warrants that as of the date of this Assignment the information contained in Attachment 1 hereto is true and correct, the descriptions of agreements, equipment and parties are accurate, and Seller shall comply with all of its warranties and other obligations in connection therewith, if any.

Seller warrants and represents that each Transaction is in full force and effect, is subject to no default and that it has not assigned or pledged, and hereby covenants that it shall not assign or pledge, the whole or any part of the rights hereby assigned to anyone other than Purchaser, its successors or assigns.

All of Seller’s right, title and interest herein assigned may be reassigned by Purchaser and any subsequent Purchaser.

The Purchase Price shall be remitted by wire transfer to Seller or Seller’s agent at Closing upon satisfaction of the terms of the Purchase Agreement, as they pertain thereto.

IN WITNESS WHEREOF, the undersigned have executed this Assignment by their duly authorized representatives as of the 28th day of September, 2015.

	SELLER:

	Quality Companies LLC, formerly dba Quality Equipment Sales and Quality Equipment Leasing, LLC, dba Quality Equipment Sales


	By:
	Name:	Leslie Tarble
	Title:	Chief Financial Officer

EXHIBIT B

RISK ACCEPTANCE CRITERIA

See attached.

Risk Acceptance Criteria

·	Must be 22 years of age or older at the time the application is submitted

·	Must have one year of verifiable over-the-road tractor trailer experience within the past 36 months

·	Cannot have more than 12 months of unverifiable work history or unemployment (while not receiving unemployment benefits) within the past 36 months

·	Must be a U.S. citizen

·	Must hold a valid CDL A issued by the applicant’s current state of residence

·	Must be able to physically inspect equipment for safety/mechanical defects

·	Must be able to load and unload cargo

·	Must be able to hook and unhook tractors and trailers

·	Must be able to complete required paperwork

·	Must be able to communicate via telephone

·	Must be able to complete physical and cognitive functions such as: sit for an extended period of time, steer, shift gears, operate the clutch, brake and climb in and out of the tractor

·	Must be able to pass a DOT regulated physical

·	Applicant must be within Quality’s outlined hiring area

Disqualifying Conditions:

·	DUI, DWI, any felony, careless or reckless driving, leaving the scene of an accident, fleeing or eluding the police or assault with a vehicle within the past 10 years

·	Sale of a controlled substance, possession of a controlled substance with the intent to distribute, the possession of a controlled substance or the transportation of a controlled substance in a commercial vehicle or failure or refusal to take a drug or alcohol test ever

·	Two or more DUIs or DWIs in a lifetime

·	One or more preventable incident within the past six months

·	One or more preventable accident (not including incidents on private property unless damage is more than $5000 and/or includes police involvement) in the past 12 months of driving

·	Any combination of three tickets/preventable accidents or incidents in the last three years, including no more than one major violation (DOT recordable accident, major accident or major moving violation)

·	Any combination of “serious” infractions as outlined by FMCSR Subpart 383.51 during the prescribed period of disqualification or DOT mandated suspensions for excessive violations within the past five years

·	Applicants currently on parole, probation or with a pending charge

9702 East 30th Street | Indianapolis, IN 46229 | QualityCo.com | P: (866) 472-1120

EXHIBIT C

PROGRAM AGREEMENT

See attached.

PROGRAM AGREEMENT

This Program Agreement (this “Agreement”) is entered into as of September 28, 2015, by and between 19th Capital Group, LLC, a Delaware limited liability company with a principal place of business at 353 West Lancaster Avenue, Suite 300, Wayne, Pennsylvania 19087 (“Financing Party”), and Quality Companies, LLC, formerly dba Quality Equipment Sales, an Indiana limited liability company, and Quality Equipment Leasing, LLC, dba Quality Equipment Sales, a Delaware limited liability company, with a principal place of business located at 9702 E. 30th Street, Indianapolis, IN 46229 (hereinafter collectively “Company”).

BACKGROUND

WHEREAS, Company is engaged in a commercial business that requires truck drivers as independent contractors (collectively, “Independent Contractors”) to utilize one or more trucks and or trailers (“Delivery Vehicles”) meeting Company's requirements and specifications for delivery of certain products for customers;

WHEREAS, Financing Party is in the business of leasing equipment to and financing of equipment for commercial business entities, including Delivery Vehicles similar to the vehicles required by Independent Contractors that deliver products for the Company;

WHEREAS, Company desires to offer Independent Contractors the opportunity to finance acquisitions of and/or lease Delivery Vehicles and has requested that from time to time Financing Party consider entering into financing agreements and/or leases for the acquisition of and/or lease of Delivery Vehicles with Independent Contractors;

WHEREAS, Financing Party has agreed, from time to time and at its sole discretion and in accordance with the terms and conditions of this Agreement, to consider providing such leases and/or financing to Independent Contractors; and

WHEREAS, Financing Party has strategically aligned itself to provide Company and Company's Independent Contractors with a combination of high level of service and a comprehensive financing solution.

NOW THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, Company and Financing Party hereby agree as follows:

SECTION ONE - DEFINITIONS

1.1. “Application” shall have the meaning ascribed to such term in Section 3.1(a) hereof.

1.2. “Independent Contractor(s)” has the meaning given to such term in the Background section hereof.

1.3. “Lessee/Borrower” shall have the meaning ascribed to such term in Section 2.1 hereof.

1.4. “Payments” means all payments due and to become due with respect to any Transaction and any related Transaction Documents, together with all end of term rights, residual values of the Vehicles, and payments options.

1.5. “Reserve Account” shall have the meaning ascribed to such term in Section 8.2(a) hereof.

1.6. “Transaction” means each financing agreement and/or lease for the acquisition or lease of a Delivery Vehicle between Financing Party, as lender or lessor, and an Independent Contractor, as lessee or borrower.

1.7. “Transaction Documents” means, with respect to any Transaction, a lease agreement and/or financing agreement for the financing of, acquisition, or lease of Delivery Vehicle(s), as the case may be, by and between Financing Party, as lessor or lender, and Independent Contractors, as lessees or borrowers, together with any financing statements, schedules, insurance certificates, and any and all agreements, titles, instruments and other documents entered into and executed in connection therewith.

SECTION TWO - CUSTOMER REFERRALS

2.1. Company may from time to time refer certain of its current or future Independent Contractors who have an interest in procuring lease and/or financing of Delivery Vehicles to Financing Party for consideration of such Independent Contractors as prospective lessees and/or borrowers (such Independent Contractors are hereinafter referred to, collectively, as “Lessees/Borrowers” and each, individually, a “Lessee/Borrower”). Financing Party reserves the right to accept or decline any prospective Lessee/Borrower as determined by Financing Party in its sole discretion.

SECTION THREE - TRANSACTION APPLICATION ORIGINATION

3.1. Credit Review.

(a) Financing Party requires a complete driving record and background check to be conducted on each prospective Lessee/Borrower in accordance with all State and Federal Regulations for over the road delivery for each prospective Lessee/Borrower in order to complete its credit review. For each proposed Transaction application, Company shall provide Financing Party with or otherwise assist Financing Party in obtaining the following: (i) a full and complete description of the Delivery Vehicle subject to the proposed Transaction, including age and mileage of the Vehicle; (ii) the economic terms of the proposed Transaction; (iii) a complete and legible copy of the Transaction application (“Application”); and (iv) all pertinent details and other such credit and financial data as Financing Party may require in an exercise of its sole and absolute discretion, including, without limitation, any background check, driving history, safety records, or criminal record investigation which Company may have obtained.

(b) All Lessees/Borrowers shall be required to (i) meet Financing Party’s risk acceptance criteria (“RAC”) as established by Financing Party from time to time, and (ii) execute Financing Party’s form of lease or finance agreement, as the case may be, and all other Transaction Documents required by Financing Party in connection therewith (collectively the “Lease Documents” or “Transaction Documents”). Financing Party may from time to time modify the requirements for credit approval of prospective Lessees/Borrowers on such terms as may be determined by Financing Party in its sole discretion.

3.2. Rate. Financing Party shall offer a lease or finance agreement for each approved Application reflecting its current lease and/or finance interest rate of 12%. Financing Party reserves the right to change the applicable interest rate as the market may dictate upon reasonable notice to the Company.

3.3. Transaction Documentation. Financing Party shall provide the Company with standard lease/finance documents to be used for all Transactions, including amendments and supplements memorializing or otherwise relating to each Transaction. If a Lessee/Borrower requires any deviation from the standard, all such adjustments must be approved in writing by Financing Party. Documents will be signed by the Financing Party in accordance with agreed upon service levels.

3.4. Payments/Billing. The Company shall make monthly payments to the Financing Party for each Transaction in accordance with the Service Agreement by and between Company, as servicer, and Financing Party, as financing party and/or purchaser, of even date herewith (the “Service Agreement”).

SECTION FOUR - ACCEPTANCE OF TRANSACTIONS

4.1. Conditions Precedent to Accept a Transaction. The agreement of Financing Party to accept any Transaction hereunder shall be subject to the satisfaction of the following conditions precedent, which conditions may change from time to time in Financing Party’s sole discretion:

(a) Financing Party’s receipt of all required credit information and all Transaction Documents, duly executed by the Lessee/Borrower as may be deemed necessary by Financing Party in its sole and absolute discretion;

(b) Financing Party’s confirmation that the Lessee/Borrower has accepted the Delivery Vehicle subject to the requested Transaction;

(d) Financing Party’s receipt of a bill of sale based upon agreed upon pricing for the Delivery Vehicle (as described in Section 4.3 below), which bill of sale shall sufficiently describe the Delivery Vehicle (including, without limitation, the make, model, and vehicle identification number and overall price for the Delivery Vehicle), and will also include details on any warranty costs or accessories and additional items of equipment (“Add-Ons”) related to the Delivery Vehicle. The form of such bill of sale shall be determined by Financing Party in the exercise of its sole and absolute discretion; and

(e) Financing Party’s receipt of such other information and documentation as may be reasonably required by Financing Party.

4.2. Funding. Funding for one or more Transactions by Financing Party (including the purchase of one or more Transactions by Financing Party from the Company) shall take place from time to time, as determined by Financing Party and the Company. Upon funding of a Transaction, the Company shall title the applicable Delivery Vehicle(s) in the name of Financing Party or its designated agent. As part of its responsibilities as Servicer under the Service Agreement, the Company shall assist in the delivery of the Delivery Vehicle to the Independent Contractor concurrent with the Independent Contractor entering into the Transaction. The Financing Party shall provide a Limited Power of Attorney for the purposes of titling the Delivery Vehicles.

4.3. Pricing. The pricing for each Delivery Vehicle shall be determined by Financing Party and the Company from time to time.

SECTION FIVE - REPRESENTATIONS, WARRANTIES AND COVENANTS

5.1. Mutual Representations and Warranties. Financing Party and Company each represents and warrants to the other as follows:

(a) The execution and delivery of this Agreement and the performance by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action, and this Agreement constitutes a legal, valid and binding obligation enforceable in accordance with its terms; and

(b) It has all governmental approvals, permits, certificates, inspections, consents and franchises necessary to conduct its respective business, substantially as now conducted and to own or finance and operate its properties as now owned, financed or operated by it, except where the failure to obtain any of the foregoing does not materially and adversely impair the ability of each to operate its business or to perform its obligations under this Agreement.

5.2. Representations and Warranties of Company. Company represents and warrants to Financing Party that as of the date each Transaction is submitted for approval to Financing Party as follows:

(a) Company is a duly organized and validly existing corporation and/or limited liability company, as the case may be, and has full power to enter into this Agreement and to carry out the transactions contemplated hereby and is in good standing in the state of its organization, as set forth in the Preamble of this Agreement.

(b) There are no other agreements between Company and the Lessee/Borrower or any guarantor, which will modify, amend or waive any terms or conditions of any Transaction. There are no express or implied warranties or representations made by Company or its employees, affiliates, subsidiaries, directors, officers, members, shareholders, and/or contractors (collectively, “Representatives”) to the Lessee/Borrower. Lessee/Borrower enters into the Transaction in reliance on the manufacturer’s standard warranty only, to the extent, where the Delivery Vehicle may be a used vehicle, the warranty is still in force and effect.

(c) Company and its representatives have not committed any fraudulent act or participated in any fraudulent act or activity in connection with the execution, delivery of the Transaction Documents or the performance of this Agreement.

(d) Ownership of the Delivery Vehicle shall be vested in Financing Party or its affiliate upon its purchase of the vehicle, free and clear of any and all liens and encumbrances whatsoever and such sale shall vest Financing Party or its affiliate with full, complete and unencumbered title to the Vehicle. If the leased/financed Delivery Vehicle is not a new vehicle, the Company shall assist the Financing Party in transferring title to the Delivery Vehicle to Financing Party or its agent and specify, for purposes of the Transaction documents, the age and mileage of the Delivery Vehicle in question.

(e) To the best of Company’s knowledge, all credit information concerning the Lessee/Borrower given to Company and relative to Financing Party’s evaluation of such Application, has been disclosed to Financing Party (including information of any fact or circumstance which would constitute a default under a Transaction), and Company has not altered or withheld any credit information concerning the Lessee/Borrower given to Company and relative to Financing Party’s evaluation of such Application.

(f) Independent Contractors referred to Financing Party by Company will be seeking to lease/finance Class VIII tractors from major manufacturers.

(g) To the best of Company’s knowledge, Company’s conduct in soliciting or arranging any Transaction has not violated in any material respect any federal or state law, rule, or regulation, which will result in the rescission of any Transaction.

(h) Company will not take any action or omit to take any action, which will cause the Transaction or any related document to become invalid, cancelable, or unenforceable, excepting the remarketing of the associated Delivery Vehicle pursuant to the terms of the Service Agreement, where warranted.

(i) Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement by the Company, conflict with or result in a breach of or a default under any of the terms, conditions or provisions of any legal restriction (including, without limitation, any judgment, order, injunction, decree or ruling of any court or governmental authority, or any federal, state, local or other law, statute, rule or regulation) or any covenant, agreement or instrument to which the Company is a party, or by which the Company or any of the Company’s property is bound (including, without limitation, any agreement or other financing arrangement between the Company and Element Financial Corp.).

(j) Each Transaction Document is in full force and effect, and there are no claims, suits, actions, arbitrations or other proceedings or governmental investigations, including, without limitation, any counterclaims or claims by any Lessee/Borrower, pending, or, to the best of the Company’s knowledge, threatened, against the Company relating to any Transaction or the acquisition, collection or administration of any Transaction. The Company has not received any notice of, nor to the best of the Company’s knowledge, is there any valid basis for any claim against, or assertion of liability against, the Company relating to any Transaction, or the acquisition, collection or administration thereof. At the time of the purchase and/or funding of each Transaction by Financing Party, there are no claims, suits, actions, arbitrations or other proceedings or governmental investigations pending, or, to the best of the Company’s knowledge, threatened, against the applicable Lessee/Borrower or any related Delivery Vehicle.

(k) All information, in whatever form provided by Company to Financing Party concerning the Lessees/Borrowers, the Transactions and the Delivery Vehicles related thereto, including, without limitation: (i) the legal names and addresses of Lessees/Borrowers, (ii) the amount, due dates and monthly payment stream of payments due under Transaction Documents, as applicable (iii) variable payment rates and fixed price purchase options due under the Transaction Documents, as applicable, (iv) descriptions of Transaction Documents, (v) stated residual values, (vi) cash flows, (vii) delinquencies, and (viii) the amount of any security deposits, advance payments or other collateral held by Company as security for Transaction obligations, has been provided with the knowledge that Financing Party has been induced to enter into this Agreement on the terms agreed upon in reliance on such information, and Company warrants that all such information is accurate and correct in all material respects and that Company has not withheld any material adverse information.

5.3. Representations and Warranties of Financing Party. Financing Party represents and warrants to Company that as of the date each Transaction is accepted by Financing Party and thereafter as follows:

(a) Financing Party is a duly organized and validly existing limited liability company and has full power to enter into this Agreement and to carry out the transactions contemplated hereby, and is in good standing in the state of its organization, as set forth in the Preamble to this Agreement.

(b) Financing Party and its agents and employees have not committed and will not commit to any fraudulent act or have not participated and will not participate in any fraudulent act or activity in connection with the execution of the Transactions or this Agreement.

(c) The conduct of Financing Party in processing any Application, including the granting or denial of credit, whether in Financing Party’s name or the name of Company, has not violated and will not violate in any material respect any federal or state law, rule or regulation.

5.4. Affirmative Covenants of Company.

(a) From the date hereof until the date on which all obligations of Lessees/Borrowers under all Transactions have been fully paid and otherwise discharged or this Agreement terminated, the Company shall provide such financial information and reports as Financing Party may reasonably request from time to time.

(b) Company will promptly fulfill and perform all obligations, covenants, liabilities, warranties and duties, if any, on its part to be fulfilled and performed in connection with a Transaction and any other agreements or instruments executed by Company with respect to the maintenance or servicing by Company of the Delivery Vehicle subject to a Transaction. Financing Party and/or any subsequent assignee of Financing Party shall have no obligation or liability with respect to the maintenance or servicing of the Delivery Vehicle subject to a Transaction and shall not be obligated to perform any of Company’s obligations thereunder. Company’s obligations under a Transaction may be performed by Financing Party or any subsequent assignee, however, without releasing Company therefrom.

(c) Company shall maintain the Delivery Vehicles that are the subject of the Transactions through use of a maintenance fund paid into by each Lessee/Borrower and, where necessary, through use of its own funds, in accord with the Service Agreement.

(d) Company will obtain and provide to Financing Party proof of insurance from each new Lessee/Borrower with respect to the Delivery Vehicle subject to each Transaction, and make certain that Financing Party is the beneficiary of the insurance as owner pursuant to the terms of the Service Agreement.

(e) If a Transaction goes into default due to the loss of an Independent Contractor/driver, Company shall repossess and recondition the Delivery Vehicle subject to the Transaction utilizing any maintenance funds obtained from the prior driver and its own funds, if necessary, and place a new Independent Contractor/driver in the Delivery Vehicle subject to a new Transaction in accordance with the Service Agreement. Placement of an Independent Contractor in a Delivery Vehicle which has been repossessed due to default shall be a priority for Company in accord with the provisions of the Service Agreement.

(f) The Company may from time to time enter into Sponsorship Agreements with certain delivery companies by which the Company provides certain Independent Contractors of such delivery companies with lease/finance options for Delivery Vehicles. The Company shall use commercially reasonable efforts to pursue and enforce its rights and benefits under such Sponsorship Agreements, and upon request of Financing Party, the Company shall assign the Sponsorship Agreements to the attention of and for the benefit of Financing Party.

(g) For the term of any Transaction, Company shall make all reasonable efforts to advise Financing Party of any matter of which Company has knowledge that may be materially detrimental to a Lessee/Borrower’s financial condition.

(h) So long as this Agreement is in effect, Company will notify Financing Party of any change in the persons authorized to represent Company in the transactions contemplated hereby and in the event of any such change will provide Financing Party with updated evidence of authority and specimen signatures for each individual.

SECTION SIX - TRANSACTION SERVICING

6.1. Servicing of Transactions. Company shall, pursuant to the Service Agreement, provide general administrative services, including billing and collecting all Payments, fulfilling the obligations as lender, lessor and/or owner, as the case may be, under the Transactions, the enforcement of Financing Party’s rights under the Transaction Documents and/or this Agreement and the taking of such other actions that may be necessary to protect Financing Party’s rights and interest in and to the Transactions and/or the Delivery Vehicles in accord with the Service Agreement.

SECTION SEVEN - REPURCHASE OF TRANSACTIONS

7.1. Breach of Transaction.

(a) If Company has committed a material breach of any of its representations, warranties and/or covenants contained in this Agreement and, as a result of such breach, a Transaction becomes in default, provided that the breach is curable, then Company shall have ten (10) days (the “Cure Period”) after receipt of Notice to Cure from Financing Party (a “Notice to Cure”) to cure such breach. If Company fails to cure such breach in accordance with the terms of this Section 7.1, or if the breach is not curable, then Company shall repurchase from Financing Party such Transaction, within five (5) business days of the receipt of a request to repurchase such Transaction from Financing Party for an amount determined as follows:

(i) An amount equal to the sum of (i) the aggregate amount of all amounts presently due with respect to the applicable Transaction, plus (ii) all future unpaid Payments to be made under the Transaction until the expiration of the initial term of the Transaction, plus (iii) the purchase option or booked residual value for the Delivery Vehicle at the end of the initial term of the Transaction with all accelerated Payments and the purchase option or booked residual for the Delivery Vehicle discounted at the interest rate for such Transaction.

(ii) The amounts set forth in subparagraph (a) above shall be referred to as “Unrecovered Investment.” Upon receipt of the Unrecovered Investment, Financing Party or, if applicable, its assignee, shall assign to Company all of its rights, title and interest of Financing Party in and to such Transaction, any related documents, the Delivery Vehicle and the Payments, free of all liens, encumbrances or interest arising through Financing Party.

(b) The parties acknowledge and that Company’s repurchase obligations pursuant to this Section 7.1 are not subject to the recourse obligations (and the limitations thereon) of Company pursuant to Section 8.2 and 8.3 below.

SECTION EIGHT - INDEMNIFICATION, RESERVE ACCOUNT, REMARKETING

8.1. Indemnification.

(a) Company agrees to indemnify and hold harmless Financing Party and its affiliates, subsidiaries, employees, directors, officers, members, shareholders, and agents, and any participant from any and all losses, claims, liabilities, demands and expenses (“Losses”) whatsoever (including without limitation reasonable attorneys’ fees) arising in connection with or in any way related to (i) the breach of any of Company’s covenants, warranties and representations in this Agreement, (ii) delivery by Company of any inaccurate or misleading credit information concerning any Lessee/Borrower and/or in connection with any Application to Financing Party, regardless of whether such inaccurate or misleading information was deliberately submitted to Company or was a result of an inadvertent error in the submission and/or processing of any Application, and/or (iii) any claim, losses or liabilities related to any Transaction or any Delivery Vehicle(s) related thereto.

(b) Financing Party agrees to indemnify and hold harmless Company, including any attorneys’ fees incurred, and their respective current and future successors, assigns (where permitted), affiliates, subsidiaries, employees, directors, officers, members, shareholders, and agents, and any participants from any Losses sustained by Company in connection with or in any way related to any breach by Financing Party of its representations or warranties in this Agreement.

(c) All obligations under this Section 8.1 shall survive any expiration or termination of this Agreement and the termination of any Transaction, but in no event longer than the applicable statute of limitations.

8.2. Reserve Account.

(b) Company shall keep a complete and accurate accounting with respect to the Reserve Account. The Company shall furnish to the Financing Party written monthly reports setting forth information concerning amounts accrued to and paid out of the Reserve Account and the balance of the Reserve Account, together with such additional information as may be requested by Financing Party in its reasonable discretion.

(c) The obligations of the parties with respect to the Reserve Account and the recovery and remarketing of Delivery Vehicles pursuant to this Agreement, the Reserve Account Agreement, and/or the Service Agreement, shall survive the termination of this Agreement until such time as any Transactions entered into and financed by Financing Party pursuant to this Agreement have fully matured and been paid in full and satisfied.

8.3. Recovery and Remarketing.

(a) Upon the occurrence of a default or an event of default pursuant to the terms of any Transaction Documents (“Event of Default”) applicable to a Transaction (each such Transaction is hereafter referred to as a “Defaulted Transaction”), Company will, in good faith, pursue the recovery of the Delivery Vehicle subject to a Defaulted Transaction pursuant to the terms of the Service Agreement.

(b) In the event the Delivery Vehicle subject to a Defaulted Transaction is successfully remarketed following a voluntary surrender to or successful repossession by Company, the proceeds of the sale of the Delivery Vehicle shall be distributed in accord with the terms of the Service Agreement.

SECTION NINE - GENERAL PROVISIONS

9.1. Independent Parties. Financing Party and Company are separate entities, which have entered into this Agreement for independent business reasons. Neither Financing Party nor Company has acted, act, or shall be deemed to have acted or act, as an agent for the other, except with respect to those acts of Financing Party specifically permitted to be taken and actually taken pursuant to and in accordance with the terms hereunder.

9.2. Term and Termination. The initial term of this Agreement is three (3) years from the date of this Agreement (the “Initial Term”). Upon the expiration of the Initial Term, this Agreement shall automatically renew for successive one (1) year terms, unless terminated in accordance with the terms hereof. Notwithstanding the generality of the foregoing, Financing Party may, at its election, immediately terminate the Agreement in the event Company fails to comply with any of the representations, warranties and/or covenants set forth herein. Upon expiration of the Initial Term, Financing Party and/or Company may terminate this Agreement at any time by giving the other at least ninety (90) days written notice of such termination, whereupon the obligations of the parties with respect to Transactions not accepted prior to the expiration of such period shall terminate to the extent the same have not been performed or are not required to have been performed prior to such termination.

9.3. Accounting. Financing Party and Company shall cooperate with each other by furnishing, subject to each party’s then-current internal policies, such records and supporting material relating to Payments under this Agreement or Payments under the Transactions as may be reasonably requested in the event either party is audited by any taxing authority and as is required by the Service Agreement.

9.4. Assignability. Company may not assign, sell, or otherwise transfer any of its rights or obligations under this Agreement without Financing Party’s prior written consent. Financing Party may not assign this Agreement prospectively without notice to Company and prior written consent, which will not be unreasonably withheld. Notwithstanding the foregoing, Company acknowledges and agrees that the Financing Party may however: (a) assign any and all of its rights and obligations, including, without limitations, any Transactions entered into pursuant hereto, under this Agreement to a third party (hereinafter the “Assignee”), and (b) release any and all information received by Financing Party pursuant to this Agreement, including without limitation, any confidential documents or information that may have been received by Financing Party from Company, to such Assignee.

9.5. Notices. Notices under this Agreement shall be deemed to have been given if mailed, postage prepared by U.S. First Class mail or by facsimile or email to the other party at the address stated below or such other address as such party may have provided by written notice.

If to Company:

Quality Equipment Leasing, LLC

Attn: Danny Williams, COO

9702 East 30th Street

Indianapolis, IN 46229

Email: [email protected]

If to Financing Party:

19th Capital Group, LLC

353 West Lancaster Avenue, Suite 300

Wayne, Pennsylvania 19087

Attn: Jeffrey R. Larsen

Email: [email protected]

9.6. Miscellaneous.

(a) Paragraph headings appearing in this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof. The parties agree that this Agreement has been executed and delivered in, and shall be construed in accordance with the laws of the State of Delaware.

(b) If, at any time, any provisions of this Agreement shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability of such provision shall have no effect upon and shall not impair the enforceability of any provision of this Agreement.

(c) This Agreement constitutes the entire agreement between the parties concerning the subject matter hereof and incorporates all representations made in connection with negotiation of the same. The terms hereof may not be amended or modified orally, but only by written agreement duly executed by each of the parties, or by supplements hereto as agreed to by the parties.

(d) This Agreement and any amendments hereto shall be binding on and inure to the benefit of the parties hereto and their respective permitted successors and assigns.

(e) This Agreement may be executed by one or more parties on any number of separate counterparts each of which counterparts shall be an original, but all of which when together shall be deemed to constitute one and the same instrument. The parties hereto may deliver executed signature pages to this Agreement by facsimile or electronic mail transmission, such signatures shall be treated as, and have the effect of, an original document.

9.7. Jurisdiction and Venue. The parties hereto agree to the exclusive jurisdiction of the United States District Court for the State of Delaware or, if the jurisdictional minimum amount, if any, is not met, the state courts of the State of Delaware in any and all disputes, actions, or proceedings arising hereunder.

9.8. Waiver of Jury Trial. The parties hereto (by acceptance of this Agreement) mutually hereby knowingly, voluntarily, and intentionally waive the right to a trial by jury in respect to any claim based hereon, arising out of, under or in connection with this Agreement or any other agreements or documents executed or contemplated to be executed in connection herewith, or any course of conduct, course of dealings, statements (whether verbal or written) or actions of any party, including, without limitation, any course of conduct, course of dealings, statements or actions of Financing Party, or any of its successors and assigns, relating to the administration or enforcement of the Transactions (collectively, “Actions” and singularly, an “Action”). Further, the parties hereto agree that in the event either party commences an Action, the losing party shall pay the costs and expenses, including, but not limited to, attorneys’ fees, incurred the prevailing party in prosecuting or defending, as the case may be, such Action.

[Signature Page Follows]

IN WITNESS HEREOF, intending to be legally bound, the parties hereto have caused their duly authorized representatives to execute this Program Agreement on the date first set forth above.

		19TH CAPITAL GROUP, LLC


		BY:
		PRINT NAME: George Chasteen
		TITLE: President

		QUALITY COMPANIES LLC, formerly dba QUALITY EQUIPMENT SALES and QUALITY EQUIPMENT LEASING, LLC, dba QUALITY EQUIPMENT SALES


		BY:
		PRINT NAME: Leslie Tarble
		TITLE: Chief Financial Officer

EXHIBIT D

FLEET PROGRAM AGREEMENT

See attached.

FLEET PROGRAM AGREEMENT

This Fleet Program Agreement (this “Agreement”) is entered into as of September 28, 2015, by and between 19th Capital Group, LLC, a Delaware limited liability company with a principal place of business at 353 West Lancaster Avenue, Suite 300, Wayne, Pennsylvania 19087 (“Financing Party”), and Quality Companies, LLC, formerly dba Quality Equipment Sales, an Indiana limited liability company, and Quality Equipment Leasing, LLC, dba Quality Equipment Sales, a Delaware limited liability company, with a principal place of business located at 9702 E. 30th Street, Indianapolis, IN 46229 (hereinafter collectively “Company”).

BACKGROUND

WHEREAS, Company is engaged in a commercial business that sells trucks and or trailers (“Vehicles”) to trucking companies (“Fleets”);

WHEREAS, Financing Party is in the business of leasing equipment to and financing of equipment for commercial business entities, including vehicles similar to the Vehicles required by Fleets;

WHEREAS, Company desires to offer Fleets the opportunity to finance acquisitions of and/or lease Vehicles and has requested that from time to time Financing Party consider entering into financing agreements and/or leases for the acquisition of and/or lease of Vehicles with Fleets;

WHEREAS, Financing Party has strategically aligned itself to provide Company and Fleets with a combination of high level of service and a comprehensive financing solution.

SECTION ONE – DEFINITIONS

1.1 “Application” shall have the meaning ascribed to such term in Section 3.1(a) hereof.

1.2 “Fleets” means companies that own or lease trucks and/or trailers to deliver goods to customers.

1.3 “Lessee/Borrower” shall have the meaning ascribed to such term in Section 2.1 hereof.

1.4 “Payments” means all payments due and to become due with respect to any Transaction and any related Transaction Documents, together with all end of term rights, residual values of the Vehicles, and payments options.

1.5 “Reserve Account” shall have the meaning ascribed to such term in Section 8.2(a) hereof.

1.6 “Transaction” means each financing agreement and/or lease for the acquisition or lease of Vehicles between Financing Party, as lender or lessor, and a Fleet, as lessee or borrower.

1.7 “Transaction Documents” means, with respect to any Transaction, a lease agreement and/or financing agreement for the financing of, acquisition, or lease of Vehicles, as the case may be, by and between Financing Party, as lessor or lender, and Fleets, as lessees or borrowers, together with any financing statements, schedules, insurance certificates, and any and all agreements, titles, instruments and other documents entered into and executed in connection therewith.

SECTION TWO – CUSTOMER REFERRALS

2.1 Company may from time to time refer certain current or future Fleets that have an interest in procuring lease and/or financing of Vehicles to Financing Party for consideration of such Fleets as prospective lessees and/or borrowers (such Fleets are hereinafter referred to, collectively, as “Lessees/Borrowers” and each, individually, a “Lessee/Borrower”). Financing Party reserves the right to accept or decline any prospective Lessee/Borrower as determined by Financing Party in its sole discretion.

SECTION THREE – TRANSACTION APPLICATION ORIGINATION

3.1 Credit Review.

(a) For each proposed Transaction application, Company shall provide Financing Party with or otherwise assist Financing Party in obtaining the following: (i) a full and complete description of the Vehicle subject to the proposed Transaction, including age and mileage of the Vehicle; (ii) the economic terms of the proposed Transaction; (iii) a complete and legible copy of the Transaction application (“Application”); and (iv) all pertinent details and other such credit and financial data as Financing Party may require in an exercise of its sole and absolute discretion.

3.2 Rate. Financing Party shall offer a lease or finance agreement for each approved Application reflecting its current lease and/or finance interest rate of 10%. Financing Party reserves the right to change the applicable interest rate as the market may dictate upon reasonable notice to the Company.

3.3 Transaction Documentation. Financing Party shall provide the Company with standard lease/finance documents to be used for all Transactions, including amendments and supplements memorializing or otherwise relating to each Transaction. If a Lessee/Borrower requires any deviation from the standard, all such adjustments must be approved in writing by Financing Party. Documents will be signed by the Financing Party in accordance with agreed upon service levels.

3.4 Payments/Billing. The Company shall make monthly payments to the Financing Party for each Transaction in accordance with that certain Service Agreement by and between Company, as servicer, and Financing Party, as financing party and/or purchaser, of even date herewith (the “Service Agreement”).

SECTION FOUR – ACCEPTANCE OF TRANSACTIONS

4.1 Conditions Precedent to Accept a Transaction. The agreement of Financing Party to accept any Transaction hereunder shall be subject to the satisfaction of the following conditions precedent, which conditions may change from time to time in Financing Party’s sole discretion:

(b) Financing Party’s confirmation that the Lessee/Borrower has accepted the Vehicles subject to the requested Transaction;

(d) Financing Party’s receipt of a bill of sale for the Vehicles, which bill of sale shall sufficiently describe the Vehicles (including, without limitation, the make, model, and vehicle identification number and overall price for the Vehicle), and will also include details on any warranty costs or accessories and additional items of equipment (“Add-Ons”) related to the Vehicle. The form of such bill of sale shall be determined by Financing Party in the exercise of its sole and absolute discretion; and

(e) Financing Party’s receipt of such other information and documentation as may be reasonably required by Financing Party.

4.2 Funding. Funding for one or more Transactions by Financing Party (including the purchase of one or more Transactions by Financing Party from the Company) shall take place from time to time, as determined by Financing Party and the Company. Upon funding of a Transaction, the Company shall title the applicable Vehicle(s) in the name of Financing Party or its designated agent. As part of its responsibilities as Servicer under the Service Agreement, the Company shall assist in the delivery of the Vehicles to the Fleet concurrent with the Fleet entering into the Transaction. The Financing Party shall provide a Limited Power of Attorney for the purposes of titling the Vehicles.

4.3 Pricing. The pricing for each Vehicle shall be determined by Financing Party and the Company from time to time.

SECTION FIVE – REPRESENTATIONS, WARRANTIES AND COVENANTS

5.1 Mutual Representations and Warranties. Financing Party and Company each represents and warrants to the other as follows:

5.2 Representations and Warranties of Company. Company represents and warrants to Financing Party that as of the date each Transaction is submitted for approval to Financing Party as follows:

(b) There are no other agreements between Company and the Lessee/Borrower or any guarantor, which will modify, amend or waive any terms or conditions of any Transaction. There are no express or implied warranties or representations made by Company or its employees, affiliates, subsidiaries, directors, officers, members, shareholders, and/or contractors (collectively, “Representatives”) to the Lessee/Borrower. Lessee/Borrower enters into the Transaction in reliance on the manufacturer’s standard warranty only, to the extent, where the Vehicle may be a used vehicle, the warranty is still in force and effect.

(d) Ownership of the Vehicles shall be vested in Financing Party or its affiliate upon its purchase of the Vehicle, free and clear of any and all liens and encumbrances whatsoever and such sale shall vest Financing Party or its affiliate with full, complete and unencumbered title to the Vehicles. If the leased/financed Vehicles are not new Vehicles, the Company shall assist the Financing Party in transferring title to the Vehicles to Financing Party or its agent and specify, for purposes of the Transaction documents, the age and mileage of the Vehicles in question.

(f) Fleets referred to Financing Party by Company will be seeking to lease/finance Class VIII tractors from major manufacturers.

(h) Company will not take any action or omit to take any action, which will cause the Transaction or any related document to become invalid, cancelable, or unenforceable, excepting the remarketing of the associated Vehicles pursuant to the terms of the Service Agreement, where warranted.

(i) Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement by the Company, conflict with or result in a breach of or a default under any of the terms, conditions or provisions of any legal restriction (including, without limitation, any judgment, order, injunction, decree or ruling of any court or governmental authority, or any federal, state, local or other law, statute, rule or regulation) or any covenant, agreement or instrument to which the Company is a party, or by the Company or any of the Company’s property is bound (including, without limitation, any agreement or other financing arrangement between the Company and Element Financial Corp.).

(k) All information, in whatever form provided by Company to Financing Party concerning the Lessees/Borrowers, the Transactions and the Vehicles related thereto, including, without limitation: (i) the legal names and addresses of Lessees/Borrowers, (ii) the amount, due dates and monthly payment stream of payments due under Transaction Documents, as applicable (iii) variable payment rates and fixed price purchase options due under the Transaction Documents, as applicable, (iv) descriptions of Transaction Documents, (v) stated residual values, (vi) cash flows, (vii) delinquencies, and (viii) the amount of any security deposits, advance payments or other collateral held by Company as security for Transaction obligations, has been provided with the knowledge that Financing Party has been induced to enter into this Agreement on the terms agreed upon in reliance on such information, and Company warrants that all such information is accurate and correct in all material respects and that Company has not withheld any material adverse information.

5.3 Representations and Warranties of Financing Party. Financing Party represents and warrants to Company that as of the date each Transaction is accepted by Financing Party and thereafter as follows:

5.4 Affirmative Covenants of Company.

(b) Company will promptly fulfill and perform all obligations, covenants, liabilities, warranties and duties, if any, on its part to be fulfilled and performed in connection with a Transaction and any other agreements or instruments executed by Company with respect to the maintenance or servicing by Company of the Vehicles subject to a Transaction. Financing Party and/or any subsequent assignee of Financing Party shall have no obligation or liability with respect to the maintenance or servicing of the Vehicles subject to a Transaction and shall not be obligated to perform any of Company’s obligations thereunder; Company’s obligations under a Transaction may be performed by Financing Party or any subsequent assignee, however, without releasing Company therefrom.

(c) Company will obtain and provide to Financing Party proof of insurance from each new Lessee/Borrower with respect to the Vehicles subject to each Transaction, and make certain that Financing Party is the beneficiary of the insurance as owner pursuant to the terms of the Service Agreement.

(d) If a Transaction goes into default, Company shall repossess and recondition the Vehicles subject to the Transaction.

(e) For the term of any Transaction, Company shall make all reasonable efforts to advise Financing Party of any matter of which Company has knowledge that may be materially detrimental to a Lessee’s/Borrower’s financial condition.

(f) So long as this Agreement is in effect, Company will notify Financing Party of any change in the persons authorized to represent Company in the transactions contemplated hereby and in the event of any such change will provide Financing Party with updated evidence of authority and specimen signatures for each individual.

SECTION SIX – TRANSACTION SERVICING

6.1 Servicing of Transactions. Company shall, pursuant to the Service Agreement, provide general administrative services, including billing and collecting all Payments, fulfilling the obligations as lender, lessor and/or owner, as the case may be, under the Transactions, the enforcement of Financing Party’s rights under the Transaction Documents and/or this Agreement and the taking of such other actions that may be necessary to protect Financing Party’s rights and interest in and to the Transactions and/or the Vehicles in accord with the Service Agreement.

SECTION SEVEN – REPURCHASE OF TRANSACTIONS

7.1 Breach of Transaction.

(i) An amount equal to the sum of (i) the aggregate amount of all amounts presently due with respect to the applicable Transaction, plus (ii) all future unpaid Payments to be made under the Transaction until the expiration of the initial term of the Transaction, plus (iii) the purchase option or booked residual value for the Vehicles at the end of the initial term of the Transaction with all accelerated Payments and the purchase option or booked residual for the Vehicle discounted at the interest rate for such Transaction.

(ii) The amounts set forth in subparagraph (a) above shall be referred to as “Unrecovered Investment.” Upon receipt of the Unrecovered Investment, Financing Party or, if applicable, its assignee, shall assign to Company all of its rights, title and interest of Financing Party in and to such Transaction, any related documents, the Vehicles and the Payments, free of all liens, encumbrances or interest arising through Financing Party.

SECTION EIGHT – INDEMNIFICATION, RESERVE ACCOUNT, REMARKETING

8.1 Indemnification.

8.2 Reserve Account.

(a) To provide recourse to Financing Party for losses that Financing Party may incur in connection with the Transactions, Company shall allocate for each Transaction approved and funded pursuant to this Agreement 5% of the overall cost of the associated Vehicles into that certain reserve account (“ Reserve Account”) established pursuant to that certain Program Agreement (“Program Agreement”) executed by and between the parties of even date herewith and pursuant to the terms of that certain Reserve Account Agreement executed by and between the parties on even date herewith (the “ Reserve Account Agreement”). The Reserve Account will cover Transactions subject to this Agreement and Transactions covered by the Portfolio Purchase Agreement and the Program Agreement. Company shall maintain the Reserve Account pursuant to the terms of the Reserve Account Agreement until such time as it shall be terminated or end by its own terms.

(b) Company shall keep a complete and accurate accounting with respect to the Transactions subject to this Agreement, the Transactions subject to the Portfolio Purchase Agreement and the Program Agreement included in the Reserve Account. The Company shall furnish to the Financing Party written monthly reports setting forth information concerning amounts accrued to and paid out of the Reserve Account and the balance of the Reserve Account, together with such additional information as may be requested by Financing Party in its reasonable discretion.

(c) The obligations of the parties with respect to the Reserve Account and the recovery and remarketing of Vehicles pursuant to this Agreement, the Reserve Account Agreement, and/or the Service Agreement, shall survive the termination of this Agreement until such time as any Transactions entered into and financed by Financing Party pursuant to this Agreement have fully matured and been paid in full and satisfied.

8.3 Recovery and Remarketing.

(a) Upon the occurrence of a default or an event of default pursuant to the terms of any Transaction Documents (“Event of Default”) applicable to a Transaction (each such Transaction is hereafter referred to as a “Defaulted Transaction”), Company will, in good faith, pursue the recovery of the Vehicles subject to a Defaulted Transaction pursuant to the terms of the Service Agreement.

(b) In the event the Vehicles subject to a Defaulted Transaction is successfully remarketed following a voluntary surrender to or successful repossession by Company, the proceeds of the sale of the Vehicles shall be distributed in accord with the terms of the Service Agreement.

SECTION NINE – GENERAL PROVISIONS

9.1 Independent Parties. Financing Party and Company are separate entities, which have entered into this Agreement for independent business reasons. Neither Financing Party nor Company has acted, act, or shall be deemed to have acted or act, as an agent for the other, except with respect to those acts of Financing Party specifically permitted to be taken and actually taken pursuant to and in accordance with the terms hereunder.

9.2 Term and Termination. The initial term of this Agreement is three (3) years from the date of this Agreement (the “Initial Term”). Upon the expiration of the Initial Term, this Agreement shall automatically renew for successive one (1) year terms, unless terminated in accordance with the terms hereof. Notwithstanding the generality of the foregoing, Financing Party may, at its election, immediately terminate the Agreement in the event Company fails to comply with any of the representations, warranties and/or covenants set forth herein. Upon expiration of the Initial Term, Financing Party and/or Company may terminate this Agreement at any time by giving the other at least ninety (90) days written notice of such termination, whereupon the obligations of the parties with respect to Transactions not accepted prior to the expiration of such period shall terminate to the extent the same have not been performed or are not required to have been performed prior to such termination.

9.3 Accounting. Financing Party and Company shall cooperate with each other by furnishing, subject to each party’s then-current internal policies, such records and supporting material relating to Payments under this Agreement or Payments under the Transactions as may be reasonably requested in the event either party is audited by any taxing authority and as is required by the Service Agreement.

9.4 Assignability. Company may not assign, sell, or otherwise transfer any of its rights or obligations under this Agreement without Financing Party’s prior written consent. Financing Party may not assign this Agreement prospectively without notice to Company and prior written consent, which will not be unreasonably withheld. Notwithstanding the foregoing, Company acknowledges and agrees that the Financing Party may however: (a) assign any and all of its rights and obligations, including, without limitations, any Transactions entered into pursuant hereto, under this Agreement to a third party (hereinafter the “Assignee”), and (b) release any and all information received by Financing Party pursuant to this Agreement, including without limitation, any confidential documents or information that may have been received by Financing Party from Company, to such Assignee.

9.5 Notices. Notices under this Agreement shall be deemed to have been given if mailed, postage prepared by U.S. First Class mail or by facsimile or email to the other party at the address stated below or such other address as such party may have provided by written notice.

If to Company:

Quality Equipment Leasing, LLC

Attn: Danny Williams, COO

9702 East 30th Street

Indianapolis, IN 46229

Email: [email protected]

If to Financing Party:

19th Capital Group, LLC

353 West Lancaster Avenue, Suite 300

Wayne, Pennsylvania 19087

Attn: Jeffrey R. Larsen

Email: [email protected]

9.6 Miscellaneous.

(b) If, at any time, any provisions of this Agreement shall be held by any court of competent jurisdiction to be illegal , void or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability of such provision shall have no effect upon and shall not impair the enforceability of any provision of this Agreement.

(d) This Agreement and any amendments hereto shall be binding on and inure to the benefit of the parties hereto and their respective permitted successors and assigns.

9.7 Jurisdiction and Venue. The parties hereto agree to the exclusive jurisdiction of the United States District Court for the State of Delaware or, if the jurisdictional minimum amount, if any, is not met, the state courts of the State of Delaware in any and all disputes, actions, or proceedings arising hereunder.

9.8 Waiver of Jury Trial. The parties hereto (by acceptance of this Agreement) mutually hereby knowingly, voluntarily, and intentionally waive the right to a trial by jury in respect to any claim based hereon, arising out of, under or in connection with this Agreement or any other agreements or documents executed or contemplated to be executed in connection herewith, or any course of conduct, course of dealings, statements (whether verbal or written) or actions of any party, including, without limitation, any course of conduct, course of dealings, statements or actions of Financing Party, or any of its successors and assigns, relating to the administration or enforcement of the Transactions (collectively, “Actions” and singularly, an “Action”). Further, the parties hereto agree that in the event either party commences an Action, the losing party shall pay the costs and expenses, including, but not limited to, attorneys’ fees, incurred the prevailing party in prosecuting or defending, as the case may be, such Action.

[Signature Page Follows]

IN WITNESS HEREOF, intending to be legally bound, the parties hereto have caused their duly authorized representatives to execute this Fleet Program Agreement on the date first set forth above.

	19th CAPITAL GROUP, LLC


	BY:
	PRINT NAME: George Chasteen
	TITLE: President



	QUALITY COMPANIES LLC, formerly dba QUALITY EQUIPMENT SALES and QUALITY EQUIPMENT LEASING, LLC, dba QUALITY EQUIPMENT SALES
	BY:
	PRINT NAME: Leslie Tarble
	TITLE: Chief Financial Officer

EXHIBIT E

SERVICE AGREEMENT

See attached.

SERVICE AGREEMENT

THIS SERVICE AGREEMENT (this “Agreement”) is dated as of September 28, 2015, by and between Quality Companies, LLC, formerly dba Quality Equipment Sales, an Indiana limited liability company, and Quality Equipment Leasing, LLC, dba Quality Equipment Sales, a Delaware limited liability company, (collectively “Servicer”), and 19th Capital Group, LLC, a Delaware limited liability company (“Purchaser”).

WHEREAS, Servicer (as Seller) and Purchaser have entered into a Portfolio Purchase and Sale Agreement of even date herewith (the “Purchase Agreement”), whereby Servicer agreed to sell and assign to Purchaser certain Transactions and the Assigned Property related thereto, including its rights in and to the Payments due under the Transaction Documents (collectively, the “Existing Transactions”);

WHEREAS, Servicer and Purchaser have entered into a Program Agreement (the “Program Agreement”) and a Fleet Program Agreement (the “Fleet Program Agreement”) (together the “Program Agreements”) under which Servicer may refer certain Independent Contractors and Fleets (together the “Obligors”) to Purchaser on an ongoing basis for the purpose of the Obligors entering into Transactions with Purchaser in which such Obligors would lease or finance Delivery Vehicles for use in delivering goods and Vehicles used by Fleets as set forth in the Program Agreements (individually a “Delivery Vehicle” or “Fleet Vehicle” or a “Vehicle” and together “Vehicles”), and in the future Servicer (as Seller) and Purchaser may enter into additional Portfolio Purchase and Sale Agreements, in which Servicer will to sell and assign to Purchaser certain Transactions and Assigned Property related thereto, including its rights in and to the Payments due under the Transaction Documents (the transactions contemplated by the Program Agreements and any future Portfolio Purchase and Sale Agreements are referred to collectively as the “Future Transactions”);

WHEREAS, Purchaser and Servicer have agreed that, unless and until Servicer is terminated as billing and collecting agent under this Agreement, Servicer shall serve as billing and collecting agent for the benefit of Purchaser to perform certain administrative duties in connection with the Existing Transactions and Future Transactions and Payments, to the extent set forth herein, including, without limitation, the obligation to collect and receive the Payments on behalf of Purchaser and to remit same to Purchaser, and to ensure that insurance remains in place and that all sales, use, personal property, privilege, license and other taxes arising under or in connection with the Assigned Interests are paid (“Tax Payments”) and that all tax returns, reports and filings (“Tax Filings”) are properly made; and

WHEREAS, Servicer and Purchaser desire to set forth the terms and conditions under which Servicer will be responsible for the servicing and administration of the Existing Transactions and Future Transactions and Payments in connection therewith, including collection, receipt and remittance of the Payments on behalf of Purchaser.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and of other valuable consideration, receipt of which is hereby acknowledged, the parties hereby agree as follows:

1.	Capitalized terms used herein but not otherwise defined herein shall have the meanings assigned to such terms in the Purchase Agreement and the Program Agreements, as applicable. The following terms used herein shall have the meanings indicated:

“Distribution Date” means the tenth day of each calendar month.

“Event of Bankruptcy” means either of the following:

(a)

Servicer shall become insolvent or bankrupt or shall admit in writing its inability to pay any portion of its debts as they mature or make an assignment for the benefit of creditors, or a receiver or trustee shall have been appointed with respect to it or to any of its estate; or

(b)

any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other proceedings for relief under Title 11 of the United States Code or any federal or state bankruptcy or insolvency law or similar law now or hereafter in force for the relief of debtors shall be instituted by or against Servicer, shall be consented to by Servicer or shall not be dismissed within sixty (60) days of such institution or Servicer shall take any action in the furtherance of the institution of any such proceeding.

“Reporting Period” means each calendar month.

2.	Collection of Payments.

(a)

Servicer agrees at its sole cost and expense to act as billing and collecting agent for the benefit of Purchaser as follows:

(1)

All Transaction payment amounts shall be automatically deducted from the earnings of the Independent Operator and paid to Servicer for the benefit of, and shall be held in trust for, Purchaser (the “Actual Payment”).

(2)

For Transactions that have variable lease payments, Servicer and Purchaser shall agree upon an expected monthly lease payment for each Transaction (the “Expected Payment”).

(3)

Servicer shall pay to the Purchaser the Expected Payment and the contractual amount for Transactions with fixed payments for each outstanding Transaction by the 10th day of each month, in arrears. Accompanying the payment will be an Excel file which will include the following fields (and such other information as may be reasonably requested by Purchaser):

(4)

A template of the above file will be provided to the Servicer at or before Closing of the Purchase Agreement between the parties.

(5)

Each month, by the 5th business day following the end of the preceding month, Servicer shall provide a copy of the “Lock Box File” to the Purchaser. The Lock Box File is a file the form of which will be prepared by Servicer approved by Purchaser and reflects, by Transaction, the actual cash collected during the month from Obligors.

(6)

Servicer shall maintain the Reserve Account in accordance with the Reserve Account Agreement entered into between the Servicer and Purchaser of even date herewith.

(7)

With respect to Transactions that are terminated for reasons other than a default by an Obligor, including but not limited to, the early termination of the Transaction by the Obligor, loss due to accident, or the mutual agreement of the Servicer and Purchaser to sell a Delivery Vehicle or Vehicle to third parties in the market place, the proceeds from such event necessary to satisfy Purchaser’s Net Book Value (as defined in Section 2(c)(2) herein) for the Transaction will be paid to the Purchaser within forty-eight (48) hours of such receipt and Purchaser shall return the title associated with such Delivery Vehicle or Vehicle to Servicer within ten (10) business days of Purchaser’s receipt of its Net Book Value for the Transaction. To the extent the proceeds received by Servicer exceed Purchaser’s Net Book Value for the Transaction, such excess proceeds shall be divided between Servicer and Purchaser after Servicer has been reimbursed for actual cost of reseating the Delivery Vehicle as approved by Purchaser and any shortfall the Servicer experienced in making the Expected Payments and the contractual payments.

(b)

Maintenance of Delivery Vehicles. Servicer shall manage the regular maintenance of the Delivery Vehicles which are the subject of the Transactions as follows:

(1)

Each of the Existing Transactions and Future Transactions call for payment by Independent Operators into a maintenance fund created with respect to each Delivery Vehicle subject to a Transaction and based on the total number of miles the Delivery Vehicle is driven per month by the Obligor (each said fund is referred to a “Maintenance Fund” and the aforesaid payment contributions are referred to, collectively, as “Maintenance Contributions”).

(2)

All Maintenance Contributions shall be automatically deducted from the earnings of Independent Operators and paid to Servicer for Servicer’s benefit to be used to fund the repairs of the Delivery Vehicles.

(3)

Servicer shall keep an accounting of the Maintenance Fund for each Transaction.

(4)

If maintenance or repair of a Delivery Vehicle is necessary, Servicer shall use the Maintenance Fund for the applicable Transaction to pay for the necessary maintenance or repair.

(5)

If the Maintenance Fund is insufficient to cover the expense of maintenance or repair, Servicer shall make arrangements with the Independent Operator for credit with respect to the deficient amount to be paid over time by future Maintenance Fund payments.

(6)

Purchaser shall have no obligation with respect to any Maintenance Fund or any maintenance or repair of Delivery Vehicles which are the subject of the Transactions unless Purchaser should elect to terminate this Agreement and Servicer’s rights and obligations, as servicer, hereunder.

(c)

Remarketing and Sale of Vehicles. Servicer shall be responsible for the remarketing and eventual sale of Vehicles as follows:

(1)

In the event that an Obligor obligated on a Transaction shall default on the Transaction prior to its maturity, Servicer shall promptly notify Purchaser of such default and Servicer’s planned course of conduct in accord with this section of this Agreement.

(2)

When a default occurs, Servicer shall first determine whether the present residual value of the Vehicle is in excess of the Net Book Value of the Vehicle (the “Net Book Value” being calculated by adding the Transaction payments remaining until maturity to the expected eventual residual value). Purchaser may waive this requirement for payment of the Net Book Value at its discretion. Servicer shall inform Purchaser of the potential sale price of a Vehicle when a default occurs.

(3)

If the present residual value of the Vehicle is in excess of the current Net Book Value of such Vehicle, Servicer may sell such Vehicle or, with the authorization of the Purchaser, enter into a lease for such Vehicle.

(4)

If the Vehicle is sold, the proceeds from the sale of the Vehicle shall be distributed within 48 hours of Servicer’s receipt of such proceeds as follows: (a) the Net Book Value of such Vehicle shall be remitted to the Purchaser; (b) any excess cost beyond the maintenance balance retained from Independent Operator for the reconditioning of the Vehicle for sale shall be returned to the Reserve Account held with the Servicer pursuant to the Reserve Account Agreement between the parties of even date herewith (the “Reserve Account Agreement”); and (c) any excess funds remaining after the disbursements under (a) and (b) above shall be divided 50% to Servicer and 50% to Purchaser.

(5)

If the present residual value of the Vehicle is not in excess of the current Net Book Value of such Vehicle, then (i) if such Vehicle is a Delivery Vehicle, Servicer shall be responsible for obtaining a new Independent Operator to enter into a Transaction for the Delivery Vehicle in question, or funds will be paid to Purchaser from the Reserve Account, or (ii) if such Vehicle is not a Delivery Vehicle, funds will be paid to Purchaser from the Reserve Account.

(6)

While remarketing the Vehicles, Servicer shall continue to make Expected Payments and the contractual amount for Transactions with fixed payments on the terminated Transaction.

(7)

When remarketing a Delivery Vehicle, Servicer shall give priority to placing an Independent Operator with the remarketed Vehicle ahead of all other opportunities.

(8)

When a new Independent Operator is found with respect to a remarketed Vehicle, the Independent Operator shall enter into a new Transaction with Purchaser, as lessor or lender thereunder, for no additional consideration, and Servicer shall deliver all original Transaction Documents evidencing said new Transaction to Purchaser.

(d)

Servicer agrees to indemnify Purchaser against any damages, claims, costs or expenses (including but not limited to reasonable attorneys’ fees) which may be incurred by Purchaser to the extent they arise out of the negligence or willful misconduct of, or any violations of law by, Servicer in performing any of its duties under this Agreement.

3.	Reporting Requirements. Servicer shall provide to Purchaser the following reports on each Distribution Date (each to be in form and substance reasonably acceptable to Purchaser):

(a)

Pursuant to Section 2(a)(6), the Lock Box File or similar acceptable report to Purchaser;

(b)

Delinquency Report sorted by Obligor, for the most recent Reporting Period;

(c)

All gains and losses on sales of Vehicles for the most recent Reporting Period;

(d)

Outstanding Advance Report listing by Transaction what portions of the most recent Aggregate Monthly Payment constituted Advances and the total outstanding Advances with respect to each Transaction;

(e)

A Reserve Account report, indicating the amount of the Reserve Account and all additions and subtractions thereto since the prior report;

(f)

On or before the 5th business day of each month, a data file in electronic form reflecting all gross balances due at the Transaction level in the same format as outlined in Section 3.1(c) of the Portfolio Purchase Agreement;

(g)

An Idle Truck Report which reflects the Vehicles which are idle at the end of each month and the activity related to idle trucks in such month;

(h)

A Preventative Maintenance Compliance Report at each month end;

(i)

Quarterly compliance certificate from the Chief Finance Officer of Servicer certifying as to (i) the continuing accuracy and completeness of the representations and warranties of Servicer under this Agreement, the Program Agreements, the Reserve Account Agreement and the Purchase Agreement, and (ii) the compliance by Servicer with all of its covenants, duties and obligations under such agreements; and

(j)

Other reports as may be reasonably requested by Purchaser from time to time.

4.	Servicer covenants to:

(a)

comply with all applicable laws with respect to its activities under this Agreement, including any of its obligations with respect to the Transactions and enforcing any of Purchaser’s rights thereunder;

(b)

preserve its existence as a corporation and/or limited liability company, as the case may be, duly organized, validly existing and in good standing, under the laws of the State of Delaware;

(c)

permit inspection/audit by Purchaser or its designees of Servicer’s books and records relating to the Transactions, Payments and other Assigned Property upon reasonable notice during normal business hours at Servicer’s address set forth above, and shall assist Purchaser in connection with such inspections/audits;

(d)

comply with its obligations under the Transaction Documents;

(e)

not agree to any amendments or modifications of the Transaction Documents (without the prior written consent of Purchaser) that would (i) change the amount, due date, interest rate or rental rate or prepayment fee, defer or forgive the payment of any principal or interest or rent (including changing the maturity date of a Transaction), (ii) waive any provision of a Transaction (including any change in any time period) prohibiting prepayment in whole or in part, or reduce the outstanding principal amount or imputed principal balance (except for reductions contemplated by the Transaction Documents), (ii) release, or agree to the substitution or exchange of any Collateral for, any portion of the Transaction or Collateral or release the liability of any person or entity liable for any payment on any Transaction, (iii) grant any concession with respect to the compliance with any material obligations imposed by the Transaction Documents, (iv) release the Obligor from any of its obligations to make any payment with respect to any Transaction, or (v) accelerate or extend the maturity date of any Payment, commence any action, terminate any Transaction or repossess and resell any Collateral, or (vi) take any action or fail to take any action which would materially adversely affect the value of any Existing Transactions or Future Transactions, reduce the likelihood of recovery of any Payment or the security of the Transaction.

(f)

not impair the rights or breach the quiet enjoyment of any Obligor under the Transaction Documents,

(g)

not create any lien, security interest or other encumbrance against any Assigned Property except in favor of Purchaser as may be permitted by Purchaser in writing;

(h)

comply with its credit and collection policies with respect to the Payments, which policies shall be commercially reasonable and in accordance with applicable laws and with normal policies of similar companies in the equipment finance and leasing industries;

(i)

pursue the interests of Purchaser in the same manner as it would pursue its own interests in the exercise any remedies available under the Transaction Documents, without discrimination;

(j)

promptly provide to Purchaser copies of any notices and material information received by Servicer in connection with any Transaction;

(k)

notify Purchaser monthly of the existence of any default or event of default, or the occurrence of any event which, with notice or lapse of time, or both, would constitute a default or event of default under any Transaction Document of which Servicer has knowledge;

(l)

provide evidence of insurance for each Transaction pursuant to the Transaction Documents to Purchaser and make claims against any insurance policy relating to the Vehicles in the same manner as it would pursue its own interests, and to promptly remit to Purchaser any insurance proceeds received as a result of such claim; and

(m)

provide to Purchaser copies of its audited yearly financial statements within 120 days after the end of each fiscal year, and such other financial statements and reports as may be reasonably requested by Purchaser from time to time.

Servicer further agrees to pay Purchaser interest (after as well as before judgment) on any amounts required to be paid by Servicer to Purchaser hereunder and not paid by Servicer when due hereunder at the rate equal to the highest Discount Rate plus four percent.

Termination of Servicing. Purchaser may, upon written notice to Servicer, terminate the rights and obligations of Servicer set forth in this Agreement, or any portion thereof, and notify the applicable Obligor(s) to make all subsequent Payments directly to Purchaser upon the occurrence of any one of the following:

(a)

if Servicer shall fail to make any required payment due hereunder and such failure shall continue unremedied for ten (10) business days after notice, or if Servicer shall fail to perform any of its other agreements hereunder in any material respect and such failure shall continue unremedied for thirty (30) days after notice;

(b)

any material representation or warranty made by Servicer in the Purchase Agreement, any future Portfolio Purchase and Sale Agreements, Program Agreements, the Reserve Account Agreement, or by Servicer in this Agreement shall prove to be false or inaccurate in any material respect if such inaccuracy would have a material adverse effect and such inaccuracy has not been remedied in all material respects within thirty (30) days after written notice;

(c)

Servicer shall fail to perform any covenant contained in the Purchase Agreement, any future Portfolio Purchase and Sale Agreements, the Reserve Account Agreement or Program Agreements and such failure shall continue unremedied for thirty (30) days (or in the case of a failure to pay money, ten (10) business days) after written notice;

(d)

Servicer shall suffer a change of ownership of a controlling position of the capital stock, or a sale of all or substantially all of the assets of Servicer to any entity or individual which is not now an affiliate of Servicer;

(e)

an Event of Bankruptcy shall have occurred with respect to Servicer or any parent company of Servicer; or

(f)

if Servicer fails to repurchase any Transaction pursuant to Article V of the Purchase Agreement or any future Portfolio Purchase and Sale Agreements, provided however, that in such event, any termination of Servicer as Servicer shall only be with respect to the Transaction related to such Transaction Document and only if Purchaser elects to take over servicing, as opposed to proceeding with the remarketing of the Delivery Vehicle, as referenced above.

Upon any termination, as provided, herein, Servicer shall deliver to Purchaser all requested and available information concerning the billing and payment by Servicer hereunder so that Purchaser or Purchaser’s designee may assume such duties and shall otherwise cooperate with Purchaser to accomplish the prompt, effective and smooth transition of servicing to Purchaser or Purchaser’s designee. This will include transfer of automatic deductions generated by Obligors to Purchaser, including lease Payments and Maintenance Fund payments. Servicer shall transfer all funds in its possession in maintenance accounts with respect to Obligors and the Transactions to Purchaser.

In the event that this Agreement is terminated, the triggers for funding the Reserve Account will commence (as described in the Reserve Account Agreement) and available funds will be provided to the Purchaser immediately. The Reserve Account will be held until full payout of all Transactions. The replacement servicer, which may include the Purchaser will earn a reasonable fee to be paid from the Reserve Account.

Except as otherwise provided herein or in the Purchase Agreement, any future Portfolio Purchase and Sale Agreements, the Reserve Account Agreement or the Program Agreements, upon such termination of Servicer, Servicer shall be relieved of any further servicing obligations with regard to the Transaction Document for which servicing was terminated. Upon any termination, as provided, herein, Servicer does hereby irrevocably constitute and appoint Purchaser or a new billing and collection agent designated by Purchaser, as its true and lawful attorney with full power of substitution, for it and in its name, place and stead, to enforce, ask, demand, collect, receive, receipt for, sue for, compound and give acquittance for any and all Payments and other obligations with respect to the Transaction(s) for which servicing has been terminated, and to endorse the name of Servicer on all checks, collections, receipts, instruments or notices in connection with any Payments or other obligations.

7.	All notices, requests and demands to or upon the parties hereto shall be deemed to have been given or made when received by the parties at the following addresses, or to such other addresses as may hereafter be designated in writing:

If to Servicer:

Quality Equipment Leasing, LLC

Attn: Danny Williams, COO

9702 East 30th Street

Indianapolis, IN 46229

Email: [email protected]

If to Purchaser:

19th Capital Group, LLC

353 West Lancaster Avenue, Suite 300

Wayne, Pennsylvania 19087

Attn: Jeffrey R. Larsen

Email: [email protected]

8.	This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

9.	This Agreement shall be binding upon the parties hereto and their respective successors and permitted assigns.

10.

Servicer may not assign, sell, or otherwise transfer any of its rights or obligations under this Agreement without Purchaser’s prior written consent. Notwithstanding the foregoing, Servicer acknowledges and agrees that Purchaser may, without prior notice to Servicer, assign any and all of its rights and obligations under this Agreement, including to one or more parties providing financing to Purchaser.

11.

This Agreement may be executed in any number of counterparts, and by different parties hereto on separate counterparts, each of which, when so executed and delivered shall be an original but all such counterparts shall together constitute one and the same instrument. The parties hereto may deliver executed signature pages to this Agreement by facsimile or electronic mail transmission, such signatures shall be treated as, and have the effect of, an original document.

12.	This Agreement supersedes all previous arrangements and agreements, whether written or oral, and comprises the entire agreement, between the parties hereto in respect of the subject matter hereof.

13.	This Agreement may be amended or varied only by writing, of even or subsequent date hereof, executed by Purchaser and Servicer, or by supplements, as agreed hereto to by the parties.

14.	No course of dealing between Purchaser and Servicer, nor any delay in exercising any rights or remedies hereunder or otherwise shall operate as a waiver of any of the rights and remedies of Purchaser or Servicer.

15.	The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision.

16.	Each of Purchaser and Servicer agrees to execute and deliver promptly to the other all such further instruments and documents as may reasonably be requested by the other in order to carry out fully the intent, and to accomplish the purposes, of the transactions referred to herein.

17.	SERVICER AND PURCHASER WAIVE THEIR RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY MATTER ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT.

18.

The parties hereto agree to the exclusive jurisdiction and venue for any disputes, actions, or proceedings arising hereunder of the United States District Court for the State of Delaware or, if the jurisdictional minimum amount, if any, is not met, then any applicable State Court in the State of Delaware.

[Signature Page Follows]

IN WITNESS WHEREOF, SERVICER and PURCHASER have caused their names to be signed to this Service Agreement by their respective officers hereto duly authorized as of the day and year first above written.

		SERVICER:

		QUALITY COMPANIES LLC, formerly dba QUALITY EQUIPMENT SALES and QUALITY EQUIPMENT LEASING, LLC dba QUALITY EQUIPMENT SALES


		By:
		Name:	Leslie Tarble
		Title:	Chief Financial Officer

		PURCHASER:

		19TH CAPITAL GROUP, LLC


		By:
		Name:	George Chasteen
		Title:	President

EXHIBIT F

RESERVE ACCOUNT AGREEMENT

See attached.

RESERVE ACCOUNT AGREEMENT

This Reserve Account Agreement (this “Agreement”) is dated as of September 28, 2015, by and between Quality Companies, LLC, formerly dba Quality Equipment Sales, an Indiana limited liability company, and Quality Equipment Leasing, LLC, dba Quality Equipment Sales, a Delaware limited liability company, with a principal place of business located at 9702 E. 30th Street, Indianapolis, IN 46229 (hereinafter collectively “Seller”), and 19th Capital Group, LLC, a Delaware limited liability company with a principal place of business at 353 West Lancaster Avenue, Suite 300, Wayne, Pennsylvania 19087 (“Purchaser”).

WITNESSETH:

WHEREAS, Seller is a provider of transportation and logistics services and, in the ordinary course of Seller’s business, Seller, as lessor lender, enters into lease and finance agreements (each such agreement, a “Vehicle Lease” and together, collectively, “Vehicle Leases”) with independent owners-operators and fleets, as lessees or borrowers (collectively, “Independent Operators” or “Fleets”, and each, individually, an “Independent Operator” or “Fleet” or “Lessees” and each, individually, a “Lessee”) for the lease and/or financing and operation of delivery vehicles (“Delivery Vehicles”) used to provide distribution services to third-party corporate sponsors (collectively, “Corporate Sponsors”) and vehicles used by Fleets (“Fleet Vehicles”) (Delivery Vehicles and Fleet Vehicles may be referred to individually as a “Vehicle” and together as “Vehicles”);

WHEREAS, Seller and Purchaser have entered into a certain Portfolio Purchase and Sale Agreement of even date herewith (the “Purchase Agreement”), pursuant to which Seller has sold and conveyed to Purchaser all of Seller’s right, title, and interest in and to certain unexpired Vehicle Leases for Delivery Vehicles entered into by Seller and Independent Operators prior to the date hereof (each such Lease a “Current Lease” and together, collectively, “Current Leases”), as more fully described in the Purchase Agreement;

WHEREAS, contemporaneously herewith, Seller and Purchaser are entering into a certain Program Agreement (the “Program Agreement”) and a Fleet Program Agreement (the “Fleet Program Agreement”) (together referred to as the “Program Agreements”), pursuant to which Seller will refer to Purchaser certain Independent Contractors and Fleets requiring financing or leasing of Vehicles and, subject to the terms and conditions of the Program Agreements, Purchaser will enter into Vehicle Leases with such Independent Contractors and Fleets for Vehicles; and in the future Seller and Purchaser may enter into additional Portfolio Purchase and Sale Agreements, pursuant to which Seller will sell and convey to Purchaser all of Seller’s right, title, and interest in and to certain Vehicle Leases for Delivery Vehicles entered into by Seller and Independent Operators (each such lease related to the Program Agreements or any future Portfolio Purchase and Sale Agreement, a “Future Lease” and, together with the Current Leases, collectively, “Leases” and each, individually, a “Lease”);

WHEREAS, also contemporaneously herewith, in connection with the Purchase Agreement and the Program Agreements, Seller and Purchaser are entering into a Service Agreement (the “Service Agreement”) pursuant to which Seller will service the Leases upon the terms and conditions set forth therein; and

WHEREAS, Seller and Purchaser desire to establish a Reserve Account (as defined below) for Purchaser’s benefit, which Reserve Account will be held to collateralize and provide recourse for potential future credit and asset losses experienced under the Current Leases contemplated by the Purchase Agreement (the “Initial Transaction”) and under Future Leases contemplated by the Program Agreements and any future Portfolio Purchase and Sale Agreement, upon the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises herein provided, and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, the parties to this Agreement hereby agree as follows:

AGREEMENT:

ARTICLE I. Creation and Funding of Reserve Account

1.1

(a) As set forth in the Purchase Agreement, immediately upon the consummation of the transactions contemplated in the Purchase Agreement, Seller shall establish a reserve account on Seller’s Balance Sheet (such reserve account is hereinafter is hereinafter defined as the “Reserve Account”) in the initial amount of (i) ten percent (10%) for transactions originated pursuant to the Program Agreement, and (ii) 5% for transactions originated pursuant to the Fleet Program Agreement, (or such other percentage as may be agreed to by the parties) of the Purchase Price paid to Seller by Purchaser under the Purchase Agreement (the “Initial Reserve Deposit”).

(b) Pursuant to the Program Agreements, upon the execution and delivery of any Future Lease, an amount equal to (i) 10% for transactions originated pursuant to the Program Agreement, and (ii) 5% for transactions originated pursuant to the Fleet Program Agreement, (or such other percentage as may be agreed to by the parties) of the lessor’s capitalized cost under such Future Lease, as reasonably determined by Purchaser (without regard to any discounts in connection with the purchase of the Vehicle) (each such amount, a “Future Reserve Deposit”), shall be added to the Reserve Account. Seller acknowledges and agrees that no payment shall be made to and no funds shall be deposited with Seller with respect to any Future Reserve Deposit. As used herein, the “Reserve Balance” at any time shall be the sum of the Initial Reserve Deposit, plus each Future Reserve Deposit, minus any disbursements made in accordance with the terms of this Agreement or the Service Agreement.

1.2 Seller shall administer the Reserve Account upon the terms and conditions set forth in this Agreement. The parties acknowledge that the Reserve Account is established pursuant to this Agreement to establish and determine Seller’s recourse liability to Purchaser for Purchaser’s credit and asset losses under the Purchase Agreement and reserves for credit and asset losses with respect to the Future Leases, as more fully described herein. Seller shall keep a detailed accounting of all debits and credits to the Reserve Account and shall make available to Purchaser an accounting of such Reserve Balance on a monthly basis, or as otherwise agreed to by the parties. The total amount of the Reserve Balance credited to the Reserve Account at any time is part of the calculation of Seller’s recourse liability for potential payments that may become due to Purchaser pursuant to the Purchase Agreement, any future Portfolio Purchase and Sale Agreements, and the Program Agreements and is not intended to be a pre-funded cash reserve. Except as expressly provided herein, Seller is not required to set aside or segregate any funds or other assets, including, without limitation any portion of the Purchase Price, to pre-fund or otherwise secure the Reserve Account.

1.3 The Reserve Account shall be established by Seller on the terms and subject to the provisions set forth herein for the benefit of the Transactions acquired through the Purchase Agreement and originated pursuant to any future Portfolio Purchase and Sale Agreements and the Program Agreements. The parties agree that any losses experienced by Purchaser exceeding the Reserve Account shall be Purchaser’s sole responsibility, as set forth in the Purchase Agreement, any future Portfolio Purchase and Sale Agreements and the Program Agreements.

1.4 In the event any one or more of the following defaults occurs and continues ten (10) days after receipt of notice of the occurrence of said default from Purchaser, then Seller shall, without any further notice or demand from Purchaser fund the full amount of the Reserve Balance into an escrow account for the benefit of Purchaser and shall execute and deliver to Purchaser any agreements, documents, and/or instruments required by Purchaser to perfect Purchaser’s lien on and security interest in such escrow account:

(a)

a change in control of the Seller; and

(b)

upon the occurrence of any events described in Section 5 (Termination of Servicing) of the Service Agreement.

ARTICLE II. Maintenance and Distribution of Reserve Account

2.1 Seller’s responsibility to establish and keep an accounting of the funds comprising the Reserve Account shall commence upon the receipt by Seller of the Initial Reserve Deposit. Except as expressly provided herein, Seller shall not be required to hold the Reserve Account in any segregated account, or in an interest bearing account. This Agreement shall continue in full force and effect until (i) the termination of all Leases, (ii) the disposition of all Vehicles subject to such Leases, (iii) the payment of all recourse amounts as outlined in the Service Agreement, and (iv) the satisfaction of all duties and obligations of Seller under the Purchase Agreement, the Service Agreement, this Agreement, any future Portfolio Purchase and Sale Agreements and the Program Agreements, at which time this Agreement shall terminate.

2.2 Debit or “draws” from the Reserve Account shall be made by Seller for the following reasons:

(a)

The difference between (i) the unamortized lease balance (in the case of any Lease providing for a nominal purchase option at expiration of the Lease), plus the anticipated residual value of the Vehicle, to the extent applicable (in the case of any Lease providing for the ability of the lessee thereunder to purchase such Vehicle at a price which is not nominal or return the Vehicle upon expiration of the Lease), in each case, as reasonably determined by the Purchaser, and (ii) the net sale proceeds of the Vehicle, upon expiration or earlier termination of a Lease shall be paid to Purchaser; provided, however, that, if a Vehicle has not been sold within forty-five (45) days after such expiration or early termination of the applicable Lease, then the net sales proceeds of such Vehicle shall be deemed to be zero ($0.00); and

(b)

All expenses incurred by Seller in connection with the sale or disposition of a Vehicle subject to a Lease (“Covered Expenses”) shall be paid to Seller; and

(c)

Such other reasons, as mutually agreed to by the parties.

Examples of the above waterfall for cash from the sale/disposal of a Vehicle

2.3 Upon submission by Purchaser of a demand based upon the payments to be made under the Service Agreement, with reasonable evidence of the losses, costs or expenses incurred or deemed to have been incurred by Purchaser, Seller shall promptly, and, in any event, within five business days, remit to Purchaser by wire transfer of immediately available funds to an account specified by Purchaser, the full amount of such payment under the Service Agreement.

2.4 Other than to rely upon Seller as servicer to make commercially reasonable efforts to obtain possession of any Vehicle subject to a Lease following a default thereunder or the expiration thereof, Purchaser shall not be required to pursue any remedies or rights available to Purchaser under such Lease or applicable law, including without limitation, instituting any law suit or other legal claim against any Lessee prior to making a demand.

2.5 If a Vehicle is sold upon the maturation or termination of a Lease for an amount in excess of the Seller’s then Net Book Value of the Vehicle and all expenses incurred in connection with the sale or disposition of the Delivery Vehicle, the excess amount shall be equally shared between Seller and Purchaser in accord with the Purchase Agreement, the Program Agreements, and the Service Agreement, as may be applicable, and shall not result in the replenishment of the Reserve Account.

ARTICLE III. General Provisions

3.1 All notices, demands and other communications authorized or required by this Agreement shall be in writing, shall be delivered by personal delivery, by facsimile, by email or by overnight delivery service and shall be delivered to each party at the following addresses (or at such other address as any party may designate in writing to the other parties):

If to Seller:

Quality Equipment Leasing, LLC

Attn: Danny Williams, COO

9702 East 30th Street

Indianapolis, IN 46229

Email: [email protected]

If to Purchaser:

19th Capital Group, LLC

353 West Lancaster Avenue, Suite 300

Wayne, Pennsylvania 19087

Attn: Jeffrey R. Larsen

Email: [email protected]

3.2 This Agreement, including all referenced documents and appendices, constitutes the entire agreement of the parties with reference to the subject matter hereof. It supplements but does not supersede the Purchase Agreement, any future Portfolio Purchase and Sale Agreements, the Service and the Program Agreements and accompanying documents. The terms of this Agreement may not be changed, waived or modified except by written agreement signed by both parties specifically stating that such writing is an amendment to this Agreement, or by supplements hereto as agreed to by the parties.

3.3 Failure by either party to insist upon the other party’s performance under this Amended Agreement or to exercise any rights or privilege herein shall not be a waiver of any of the rights or privileges provided for in this Amended Agreement.

3.4 There shall be no assignment or transfer, in whole or in part, of any right, duty, responsibility or obligation contained in this Agreement, unless such assignment or transfer is agreed to by both parties in writing; provided, however, that Purchaser may, without notice to Seller, assign any and all of its rights and obligations under this Agreement, including, without limitation, to a trust established by Purchaser to hold any Leases and/or titles to Vehicles subject thereto, and to one or more parties providing financing for the purchase of the Current Leases or the origination of the Future Leases.

3.5 Seller and Purchaser acknowledge that Seller will act as servicer with respect to the Current Leases and the Future Leases pursuant to the Service Agreement, and any Covered Expenses incurred by Seller in such capacity as servicer with respect to any such Lease shall constitute Covered Expenses for all purposes of this Agreement. In addition to the foregoing, Seller and Purchaser agree that, in the event Purchaser terminates Seller as servicer with respect to any or all Leases pursuant to Section 5 of the Service Agreement, any and all fees and expenses incurred by the replacement servicer in connection with any such Lease(s) shall constitute Covered Expenses for all purposes of this Agreement.

3.6 This Agreement shall be interpreted under the laws of the State of Delaware, without giving effect to its conflict of laws provision. Any legal actions regarding the interpretation or the subject matter herein shall be brought in the State Court sitting in State of Delaware or in the United States District Court for the State of Delaware.

3.7 The terms of this Agreement and its conditions, provisions and all information herein shall not be disclosed by either party to persons other than its directors, officers, employees, agents, attorneys, accountants and auditors. The provisions of this paragraph shall survive termination, expiration or cancellation of this Agreement. Nothing herein shall restrict a party from disclosing any portion of such information on a restricted basis pursuant to a judicial or other lawful governmental order and Purchaser may disclose the terms and conditions of this Agreement to any party in connection with arranging financing for the purchase of the Current Leases or the origination of the Future Leases.

3.8 If any of the provisions of this Agreement is held to be unenforceable or invalid by any arbitrator or court or tribunal of competent jurisdiction, the validity and enforceability of the remaining provisions shall not be affected thereby and the rights and obligations of the parties under this Agreement shall be reduced only so much as necessary to remove the illegality.

3.9 This Agreement may be executed in any number of counterparts with the same effect as if all such parties executed the same document. The parties hereto may deliver executed signature pages to this Agreement by facsimile or electronic mail transmission, such signatures shall be treated as, and have the effect of, an original document. Each person signing below verifies that they have the authority to bind their respective party.

[Signature Page Follows]

IN WITNESS WHEREOF, Seller and Purchaser, by and through their duly authorized representatives, have executed this Reserve Account Agreement in duplicate, each copy for all purposes to be deemed an original, as of the date first above written.

		QUALITY COMPANIES LLC, formerly dba QUALITY EQUIPMENT SALES and QUALITY EQUIPMENT LEASING, LLC dba QUALITY EQUIPMENT SALES


		By:
		Name:	Leslie Tarble
		Title:	Chief Financial Officer

		19TH CAPITAL GROUP, LLC


		By:
		Name:	George Chasteen
		Title:	President

Back to Form 10-Q

Exhibit 10.2

FLEET PROGRAM AGREEMENT

BACKGROUND

WHEREAS, Company is engaged in a commercial business that sells trucks and or trailers (“Vehicles”) to trucking companies (“Fleets”);

WHEREAS, Financing Party is in the business of leasing equipment to and financing of equipment for commercial business entities, including vehicles similar to the Vehicles required by Fleets;

WHEREAS, Financing Party has strategically aligned itself to provide Company and Fleets with a combination of high level of service and a comprehensive financing solution.

SECTION ONE – DEFINITIONS

1.1 “Application” shall have the meaning ascribed to such term in Section 3.1(a) hereof.

1.2 “Fleets” means companies that own or lease trucks and/or trailers to deliver goods to customers.

1.3 “Lessee/Borrower” shall have the meaning ascribed to such term in Section 2.1 hereof.

1.5 “Reserve Account” shall have the meaning ascribed to such term in Section 8.2(a) hereof.

1.6 “Transaction” means each financing agreement and/or lease for the acquisition or lease of Vehicles between Financing Party, as lender or lessor, and a Fleet, as lessee or borrower.

SECTION TWO – CUSTOMER REFERRALS

SECTION THREE – TRANSACTION APPLICATION ORIGINATION

3.1 Credit Review.

SECTION FOUR – ACCEPTANCE OF TRANSACTIONS

(b) Financing Party’s confirmation that the Lessee/Borrower has accepted the Vehicles subject to the requested Transaction;

(e) Financing Party’s receipt of such other information and documentation as may be reasonably required by Financing Party.

4.3 Pricing. The pricing for each Vehicle shall be determined by Financing Party and the Company from time to time.

SECTION FIVE – REPRESENTATIONS, WARRANTIES AND COVENANTS

5.1 Mutual Representations and Warranties. Financing Party and Company each represents and warrants to the other as follows:

5.2 Representations and Warranties of Company. Company represents and warrants to Financing Party that as of the date each Transaction is submitted for approval to Financing Party as follows:

(b) There are no other agreements between Company and the Lessee/Borrower or any guarantor, which will modify, amend or waive any terms or conditions of any Transaction. There are no express or implied warranties or representations made by Company or its employees, affiliates, subsidiaries, directors, officers, members, shareholders, and/or contractors (collectively, “Representatives”) to the Lessee/Borrower. Lessee/Borrower enters into the Transaction in reliance on the manufacturer’s standard warranty only, to the extent, where the Vehicle may be a used vehicle, the warranty is still in force and effect.

(f) Fleets referred to Financing Party by Company will be seeking to lease/finance Class VIII tractors from major manufacturers.

(h) Company will not take any action or omit to take any action, which will cause the Transaction or any related document to become invalid, cancelable, or unenforceable, excepting the remarketing of the associated Vehicles pursuant to the terms of the Service Agreement, where warranted.

(i) Neither the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement by the Company, conflict with or result in a breach of or a default under any of the terms, conditions or provisions of any legal restriction (including, without limitation, any judgment, order, injunction, decree or ruling of any court or governmental authority, or any federal, state, local or other law, statute, rule or regulation) or any covenant, agreement or instrument to which the Company is a party, or by the Company or any of the Company’s property is bound (including, without limitation, any agreement or other financing arrangement between the Company and Element Financial Corp.).

5.4 Affirmative Covenants of Company.

(b) Company will promptly fulfill and perform all obligations, covenants, liabilities, warranties and duties, if any, on its part to be fulfilled and performed in connection with a Transaction and any other agreements or instruments executed by Company with respect to the maintenance or servicing by Company of the Vehicles subject to a Transaction. Financing Party and/or any subsequent assignee of Financing Party shall have no obligation or liability with respect to the maintenance or servicing of the Vehicles subject to a Transaction and shall not be obligated to perform any of Company’s obligations thereunder; Company’s obligations under a Transaction may be performed by Financing Party or any subsequent assignee, however, without releasing Company therefrom.

(d) If a Transaction goes into default, Company shall repossess and recondition the Vehicles subject to the Transaction.

SECTION SIX – TRANSACTION SERVICING

SECTION SEVEN – REPURCHASE OF TRANSACTIONS

7.1 Breach of Transaction.

(i) An amount equal to the sum of (i) the aggregate amount of all amounts presently due with respect to the applicable Transaction, plus (ii) all future unpaid Payments to be made under the Transaction until the expiration of the initial term of the Transaction, plus (iii) the purchase option or booked residual value for the Vehicles at the end of the initial term of the Transaction with all accelerated Payments and the purchase option or booked residual for the Vehicle discounted at the interest rate for such Transaction.

(ii) The amounts set forth in subparagraph (a) above shall be referred to as “Unrecovered Investment.” Upon receipt of the Unrecovered Investment, Financing Party or, if applicable, its assignee, shall assign to Company all of its rights, title and interest of Financing Party in and to such Transaction, any related documents, the Vehicles and the Payments, free of all liens, encumbrances or interest arising through Financing Party.

SECTION EIGHT – INDEMNIFICATION, RESERVE ACCOUNT, REMARKETING

8.1 Indemnification.

8.2 Reserve Account.

8.3 Recovery and Remarketing.

(a) Upon the occurrence of a default or an event of default pursuant to the terms of any Transaction Documents (“Event of Default”) applicable to a Transaction (each such Transaction is hereafter referred to as a “Defaulted Transaction”), Company will, in good faith, pursue the recovery of the Vehicles subject to a Defaulted Transaction pursuant to the terms of the Service Agreement.

SECTION NINE – GENERAL PROVISIONS

If to Company:

Quality Equipment Leasing, LLC

Attn: Danny Williams, COO

9702 East 30th Street

Indianapolis, IN 46229

Email: [email protected]

If to Financing Party:

19th Capital Group, LLC

353 West Lancaster Avenue, Suite 300

Wayne, Pennsylvania 19087

Attn: Jeffrey R. Larsen

Email: [email protected]

9.6 Miscellaneous.

(b) If, at any time, any provisions of this Agreement shall be held by any court of competent jurisdiction to be illegal , void or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability of such provision shall have no effect upon and shall not impair the enforceability of any provision of this Agreement.

(d) This Agreement and any amendments hereto shall be binding on and inure to the benefit of the parties hereto and their respective permitted successors and assigns.

[Signature Page Follows]

IN WITNESS HEREOF, intending to be legally bound, the parties hereto have caused their duly authorized representatives to execute this Fleet Program Agreement on the date first set forth above.

	19th CAPITAL GROUP, LLC


	BY:	/s/ George Chasteen
	PRINT NAME: George Chasteen
	TITLE: President



	QUALITY COMPANIES LLC, formerly dba QUALITY EQUIPMENT SALES and QUALITY EQUIPMENT LEASING, LLC, dba QUALITY EQUIPMENT SALES


	BY:	/s/ Leslie Tarble
	PRINT NAME: Leslie Tarble
	TITLE: Chief Financial Officer

Back to Form 10-Q

Exhibit 10.3

SERVICE AGREEMENT

1.	Capitalized terms used herein but not otherwise defined herein shall have the meanings assigned to such terms in the Purchase Agreement and the Program Agreements, as applicable. The following terms used herein shall have the meanings indicated:

“Distribution Date” means the tenth day of each calendar month.

“Event of Bankruptcy” means either of the following:

(a)

(b)

“Reporting Period” means each calendar month.

2.	Collection of Payments.

(a)

Servicer agrees at its sole cost and expense to act as billing and collecting agent for the benefit of Purchaser as follows:

(1)

(2)

For Transactions that have variable lease payments, Servicer and Purchaser shall agree upon an expected monthly lease payment for each Transaction (the “Expected Payment”).

(3)

(4)

A template of the above file will be provided to the Servicer at or before Closing of the Purchase Agreement between the parties.

(5)

(6)

Servicer shall maintain the Reserve Account in accordance with the Reserve Account Agreement entered into between the Servicer and Purchaser of even date herewith.

(7)

(b)

Maintenance of Delivery Vehicles. Servicer shall manage the regular maintenance of the Delivery Vehicles which are the subject of the Transactions as follows:

(1)

(2)

(3)

Servicer shall keep an accounting of the Maintenance Fund for each Transaction.

(4)

If maintenance or repair of a Delivery Vehicle is necessary, Servicer shall use the Maintenance Fund for the applicable Transaction to pay for the necessary maintenance or repair.

(5)

(6)

(c)

Remarketing and Sale of Vehicles. Servicer shall be responsible for the remarketing and eventual sale of Vehicles as follows:

(1)

(2)

(3)

(4)

(5)

(6)

While remarketing the Vehicles, Servicer shall continue to make Expected Payments and the contractual amount for Transactions with fixed payments on the terminated Transaction.

(7)

When remarketing a Delivery Vehicle, Servicer shall give priority to placing an Independent Operator with the remarketed Vehicle ahead of all other opportunities.

(8)

(d)

3.	Reporting Requirements. Servicer shall provide to Purchaser the following reports on each Distribution Date (each to be in form and substance reasonably acceptable to Purchaser):

(a)

Pursuant to Section 2(a)(6), the Lock Box File or similar acceptable report to Purchaser;

(b)

Delinquency Report sorted by Obligor, for the most recent Reporting Period;

(c)

All gains and losses on sales of Vehicles for the most recent Reporting Period;

(d)

Outstanding Advance Report listing by Transaction what portions of the most recent Aggregate Monthly Payment constituted Advances and the total outstanding Advances with respect to each Transaction;

(e)

A Reserve Account report, indicating the amount of the Reserve Account and all additions and subtractions thereto since the prior report;

(f)

(g)

An Idle Truck Report which reflects the Vehicles which are idle at the end of each month and the activity related to idle trucks in such month;

(h)

A Preventative Maintenance Compliance Report at each month end;

(i)

(j)

Other reports as may be reasonably requested by Purchaser from time to time.

4.	Servicer covenants to:

(a)

(b)

preserve its existence as a corporation and/or limited liability company, as the case may be, duly organized, validly existing and in good standing, under the laws of the State of Delaware;

(c)

(d)

comply with its obligations under the Transaction Documents;

(e)

(f)

not impair the rights or breach the quiet enjoyment of any Obligor under the Transaction Documents,

(g)

not create any lien, security interest or other encumbrance against any Assigned Property except in favor of Purchaser as may be permitted by Purchaser in writing;

(h)

(i)

pursue the interests of Purchaser in the same manner as it would pursue its own interests in the exercise any remedies available under the Transaction Documents, without discrimination;

(j)

promptly provide to Purchaser copies of any notices and material information received by Servicer in connection with any Transaction;

(k)

(l)

(m)

(a)

(b)

(c)

(d)

(e)

an Event of Bankruptcy shall have occurred with respect to Servicer or any parent company of Servicer; or

(f)

7.	All notices, requests and demands to or upon the parties hereto shall be deemed to have been given or made when received by the parties at the following addresses, or to such other addresses as may hereafter be designated in writing:

If to Servicer:

Quality Equipment Leasing, LLC

Attn: Danny Williams, COO

9702 East 30th Street

Indianapolis, IN 46229

Email: [email protected]

If to Purchaser:

19th Capital Group, LLC

353 West Lancaster Avenue, Suite 300

Wayne, Pennsylvania 19087

Attn: Jeffrey R. Larsen

Email: [email protected]

8.	This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

9.	This Agreement shall be binding upon the parties hereto and their respective successors and permitted assigns.

10.

11.

12.	This Agreement supersedes all previous arrangements and agreements, whether written or oral, and comprises the entire agreement, between the parties hereto in respect of the subject matter hereof.

13.	This Agreement may be amended or varied only by writing, of even or subsequent date hereof, executed by Purchaser and Servicer, or by supplements, as agreed hereto to by the parties.

14.	No course of dealing between Purchaser and Servicer, nor any delay in exercising any rights or remedies hereunder or otherwise shall operate as a waiver of any of the rights and remedies of Purchaser or Servicer.

15.	The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision.

16.	Each of Purchaser and Servicer agrees to execute and deliver promptly to the other all such further instruments and documents as may reasonably be requested by the other in order to carry out fully the intent, and to accomplish the purposes, of the transactions referred to herein.

17.	SERVICER AND PURCHASER WAIVE THEIR RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY MATTER ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT.

18.

[Signature Page Follows]

		SERVICER:

		QUALITY COMPANIES LLC, formerly dba QUALITY EQUIPMENT SALES and QUALITY EQUIPMENT LEASING, LLC dba QUALITY EQUIPMENT SALES


		By:	/s/ Leslie Tarble
		Name:	Leslie Tarble
		Title:	Chief Financial Officer

		PURCHASER:

		19TH CAPITAL GROUP, LLC


		By:	/s/ George Chasteen
		Name:	George Chasteen
		Title:	President

Back to Form 10-Q

Exhibit 10.4

PROGRAM AGREEMENT

BACKGROUND

WHEREAS, Financing Party has strategically aligned itself to provide Company and Company's Independent Contractors with a combination of high level of service and a comprehensive financing solution.

SECTION ONE - DEFINITIONS

1.1. “Application” shall have the meaning ascribed to such term in Section 3.1(a) hereof.

1.2. “Independent Contractor(s)” has the meaning given to such term in the Background section hereof.

1.3. “Lessee/Borrower” shall have the meaning ascribed to such term in Section 2.1 hereof.

1.5. “Reserve Account” shall have the meaning ascribed to such term in Section 8.2(a) hereof.

SECTION TWO - CUSTOMER REFERRALS

SECTION THREE - TRANSACTION APPLICATION ORIGINATION

3.1. Credit Review.

SECTION FOUR - ACCEPTANCE OF TRANSACTIONS

(b) Financing Party’s confirmation that the Lessee/Borrower has accepted the Delivery Vehicle subject to the requested Transaction;

(e) Financing Party’s receipt of such other information and documentation as may be reasonably required by Financing Party.

4.3. Pricing. The pricing for each Delivery Vehicle shall be determined by Financing Party and the Company from time to time.

SECTION FIVE - REPRESENTATIONS, WARRANTIES AND COVENANTS

5.1. Mutual Representations and Warranties. Financing Party and Company each represents and warrants to the other as follows:

5.2. Representations and Warranties of Company. Company represents and warrants to Financing Party that as of the date each Transaction is submitted for approval to Financing Party as follows:

(f) Independent Contractors referred to Financing Party by Company will be seeking to lease/finance Class VIII tractors from major manufacturers.

5.4. Affirmative Covenants of Company.

SECTION SIX - TRANSACTION SERVICING

SECTION SEVEN - REPURCHASE OF TRANSACTIONS

7.1. Breach of Transaction.

SECTION EIGHT - INDEMNIFICATION, RESERVE ACCOUNT, REMARKETING

8.1. Indemnification.

8.2. Reserve Account.

8.3. Recovery and Remarketing.

SECTION NINE - GENERAL PROVISIONS

If to Company:

Quality Equipment Leasing, LLC

Attn: Danny Williams, COO

9702 East 30th Street

Indianapolis, IN 46229

Email: [email protected]

If to Financing Party:

19th Capital Group, LLC

353 West Lancaster Avenue, Suite 300

Wayne, Pennsylvania 19087

Attn: Jeffrey R. Larsen

Email: [email protected]

9.6. Miscellaneous.

(d) This Agreement and any amendments hereto shall be binding on and inure to the benefit of the parties hereto and their respective permitted successors and assigns.

[Signature Page Follows]

IN WITNESS HEREOF, intending to be legally bound, the parties hereto have caused their duly authorized representatives to execute this Program Agreement on the date first set forth above.

		19TH CAPITAL GROUP, LLC


		BY:	/s/ George Chasteen
		PRINT NAME: George Chasteen
		TITLE: President

		QUALITY COMPANIES LLC, formerly dba QUALITY EQUIPMENT SALES and QUALITY EQUIPMENT LEASING, LLC, dba QUALITY EQUIPMENT SALES


		BY:	/s/ Leslie Tarble
		PRINT NAME: Leslie Tarble
		TITLE: Chief Financial Officer

Back to Form 10-Q

Exhibit 10.5

LIMITED LIABILITY COMPANY AGREEMENT

19th CAPITAL GROUP, LLC

A Delaware Limited Liability Company

Dated August 27, 2015

LIMITED LIABILITY COMPANY AGREEMENT

19th CAPITAL GROUP, LLC

THIS LIMITED LIABILITY COMPANY AGREEMENT is made and entered into as of the 27th day of August, 2015, by, between and among each Person named as a Member on Exhibit A attached hereto and all other Persons who may hereafter become Members (as defined below).

ARTICLE I

DEFINITIONS

The following terms used in this Agreement shall have the following meanings (unless otherwise expressly provided herein):

(a) "Act" means the Delaware Limited Liability Company Act, as amended from time to time (6 Del. 18.101 et. seq.).

(b) "Adjusted Capital Account Deficit" means, with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:

(i) Credit to such Capital Account any amounts that such Member is obligated to restore or is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

(ii) Debit to such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations.

(c) "Adjusted Class A Capital Contribution" means, as of any day, a Class A Member's Capital Contribution, minus any distributions made to such Class A Member pursuant to Section 8.1(a). In the event any Class A Member transfers all or any portion of its Membership Interest in accordance with the terms of this Agreement, its transferee shall succeed to the Adjusted Class A Capital Contribution of the transferor to the extent it relates to the transferred Membership Interest.

(d) "Affiliate" means, with respect to any Person, (i) in the case of an individual, any spouse, mother, father, sister, brother, or lineal descendant (including an adopted child) of such Person or such Person’s spouse, (ii) any executive officer, director, trustee, partner, member, manager, employee or holder of ten percent (10%) or more of any class of the voting securities of or equity interest in such Person; (iii) any corporation, partnership, limited liability company, trust or other entity controlling, controlled by or under common control with such Person; or (iv) any executive officer, director, trustee, partner, member, manager, employee or holder of ten percent (10%) or more of the outstanding voting securities of any corporation, partnership, limited liability company, trust or other entity controlling, controlled by or under common control with such Person. For purposes of this definition, “control” when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting interests, by contract or otherwise, and the terms “controlling” and “controlled” shall have meanings correlative to the foregoing.

(e) "Agreement" means this Limited Liability Company Agreement, as originally executed and as amended from time to time.

(f) [Reserved].

(g) "Board of Managers" means the Board of Managers of the Company as described in Article IX.

(h) "Capital Account" means, as of any given date, the Capital Contribution to the Company by a Member as adjusted up to the date in question pursuant to Article VI of this Agreement.

(i) "Capital Contribution" means, with respect to any Member, the amount of money and the initial Gross Asset Value of any property (other than money) contributed to the Company with respect to the Membership Interests held by such Member.

(j) "Certificate of Formation" or "Certificate" means the Certificate of Formation of the Company, as filed with the Secretary of State of Delaware, as the same may be amended from time to time.

(k) "Class A Member" means each Person who or that executes a counterpart of this Agreement, acquires Class A Membership Interests, and is admitted to the Company as a Class A Member in accordance with the terms of this Agreement. The initial Class A Members shall be the holders of Class A Membership Interests as set forth on Exhibit A.

(l) "Class A Membership Interest" shall have the meaning set forth in Section 4.1.

(m) "Class A Preferred Return" means an amount calculated like interest at a rate equal to twelve percent (12%) per annum, compounded annually, on the Class A Member’s Adjusted Class A Capital Contribution.

(n) "Class B Member" means each Person who or that executes a counterpart of this Agreement, acquires Class B Membership Interests, and is admitted to the Company as a Class B Member in accordance with the terms of this Agreement. The initial Class B Members shall be the holders of Class B Membership Interests as set forth on Exhibit A.

(o) "Class B Membership Interest," shall have the meaning set forth in Section 4.1.

(p) "Code" means the Internal Revenue Code of 1986, as amended, or corresponding provisions of subsequent superseding federal revenue laws.

(q) "Company" means 19th Capital Group, LLC, the limited liability company formed pursuant to the Act and governed by this Agreement.

(r) "Company Minimum Gain" has the same meaning as "partnership minimum gain" as set forth in Treasury Regulations Sections 1.704-2(b)(2) and 1.704-2(d).

(s) "Depreciation" means, for each Fiscal Year, an amount equal to the depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such Fiscal Year, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Fiscal Year, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such Fiscal Year bears to such beginning adjusted tax basis; provided, however, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Board of Managers.

(t) "Fiscal Year" means (i) the calendar year, or (ii) any portion of the period described in clause (i) for which the Company is required to allocate Net Profits, Net Losses, and other items of Company income, gain, loss or deduction pursuant to Article VII.

(u) "Gross Asset Value" means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows:

(i) The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as determined by the contributing Member and the Board of Managers;

(ii) The Gross Asset Values of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Board of Managers, as of the following times: (A) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution; (B) the distribution by the Company to a Member of more than a de minimis amount of Company property as consideration for an interest in the Company; and (C) the liquidation of the Company within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that the adjustments pursuant to clauses (A) and (B) above shall be made only if the Board of Managers reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company;

(iii) The Gross Asset Value of any Company asset distributed to any Member shall be adjusted to equal the gross fair market value of such asset on the date of distribution as determined by the distributee and the Board of Managers; and

(iv) The Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m) and Sections 1(gg)(vi) and 7.2(b); provided, however, that Gross Asset Values shall not be adjusted pursuant to this Section 1(u)(iv) to the extent the Board of Managers determines that an adjustment pursuant to Section 1(u)(ii) is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this Section 1(u)(iv).

If the Gross Asset Value of an asset has been determined or adjusted pursuant to Section 1(u)(i), 1(u)(ii) or 1(u)(iv), such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Net Profits and Net Losses.

(v) [Reserved].

(w) "Indemnification Obligations" shall have the meaning set forth in Section 11.3(a).

(x) "Indemnified Party" shall have the meaning set forth in Section 11.3(a).

(y) "Majority Interest" means, with respect to any specific class of Membership Interests, Members holding a majority of the outstanding Percentage Interests held by all Members in such class.

(z) "Manager" shall have the meaning set forth in Section 9.2(a).

(aa) "Member" means each of the Persons who executes a counterpart of this Agreement as a Member and each of the Persons who may hereafter become Members, including the Class A Members and the Class B Members, but only so long as any such Person holds a Membership Interest in the Company.

(bb) "Member Nonrecourse Debt" has the meaning of "partner nonrecourse debt" as set forth in Section 1.704-2(b)(4) of the Treasury Regulations.

(cc) "Member Nonrecourse Debt Minimum Gain" means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of the Treasury Regulations.

(dd) "Member Nonrecourse Deductions" has the meaning of "partner nonrecourse deductions" as set forth in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Treasury Regulations.

(ee) "Membership Interest" means a Member's entire interest in the Company, including such Member's share of Net Profits, Net Losses and distributions of the Company's assets pursuant to this Agreement and the Act, a Member's rights to participate in the management or affairs of the Company, including, rights to vote on, consent to or otherwise participate in any decision of the Members, and such other rights and privileges that the Member may enjoy by being a Member, whether under this Agreement or the Act.

(ff) "Net Cash Flow" means, at any time, that portion of the Company’s cash on hand which the Board of Managers, in good faith, deems available for distribution to the Members, taking into account (i) the Company’s working capital requirements, (ii) the amount of cash required for the payment of all current expenses, liabilities and obligations of the Company (whether for expense items, capital expenditures, improvements, retirement of indebtedness or otherwise), (iii) the amount of cash which the Board of Managers deems in good faith necessary to establish prudent reserves for the payment of future contingencies, known or unknown, liquidated or unliquidated, including liabilities which may be incurred in litigation or with respect to obligations of indemnification, (iv) any limitations on distribution of the Company’s cash to its Members which may be contained in any documents evidencing indebtedness of the Company, or otherwise, (v) the Company's future capital expenditure requirements, and (vi) the amount of capital remaining after the distribution so that the Company would not reasonably be expected to have unreasonably small capital for carrying on its business.

(gg) "Net Profits" and "Net Losses" means for each Fiscal Year, an amount equal to the Company's taxable income or loss for such year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

(i) Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Profits and Net Losses pursuant to this Section 1(gg) shall be added to such taxable income or loss;

(ii) Any expenditures of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Profits or Net Losses pursuant to this Section 1(gg) shall be subtracted from such taxable income or loss;

(iii) In the event the Gross Asset Value of any Company asset is adjusted pursuant to Section 1(u)(ii) or Section 1(u)(iii), the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Profits and Net Losses;

(iv) Gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value;

(v) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such fiscal year or other period, computed in accordance with Section 1(s);

(vi) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Member's interest in the Company, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Net Profits or Net Losses;

(vii) Notwithstanding any other provision of this Section 1(gg), any items which are specially allocated pursuant to Section 7.2 or Section 7.3 shall not be taken into account in computing Net Profits or Net Losses.

The amounts of the items of Company income, gain, loss, or deduction available to be specially allocated pursuant to Sections 7.2 and 7.3 shall be determined by applying rules analogous to those set forth in Sections 1(gg)(i) through 1(gg)(vi) above.

(hh) "Nonrecourse Deductions" has the meaning set forth in Section 1.704-2(b)(1) of the Treasury Regulations.

(ii) "Nonrecourse Liability" has the meaning set forth in Section 1.704-2(b)(3) of the Treasury Regulations.

(jj) "Offered Interest" shall have the meaning set forth in Section 12.2(b).

(kk) "Offeree" shall have the meaning set forth in Section 12.2(a).

(ll) "Officer(s)" means the Officer(s) of the Company, as described in Article X.

(mm) "Percentage Interest" means, with respect to any specific class of Membership Interests, the percentage of the Membership Interests in such class held by the Member(s), as specifically set forth on Exhibit A hereto.

(nn) "Person" means any individual, partnership (both general and limited), limited liability company, corporation, trust, estate, association, custodian, nominee or other entity, whether domestic or foreign.

(oo) "Purchase Notice" shall have the meaning set forth in Section 12.2(b).

(pp) "Recognized Transfer" has the meaning set forth in Section 12.5.

(qq) "Regulatory Allocations" has the meaning set forth in Section 7.3.

(rr) "Required Transaction" shall have the meaning set forth in Section 12.7(a).

(ss) "Required Transaction Notice" shall have the meaning set forth in Section 12.7(a).

(tt) "Sale Transaction" shall have the meaning set forth in Section 12.7(c).

(uu) "Tax Matters Member" shall have the meaning set forth in Section 5.5(a).

(vv) "Transfer" shall have the meaning set forth in Section 12.1.

(ww) "Transfer Notice" shall have the meaning set forth in Section 12.2(b).

(xx) "Transferring Member" shall have the meaning set forth in Section 12.2(a).

(yy) "Treasury Regulations" means proposed, temporary and final income tax regulations promulgated under the Code, as in effect as of the date of filing the Certificate of Formation and the corresponding sections of any regulations subsequently issued that amend or supersede such regulations.

ARTICLE II

FORMATION

2.1 Certificate of Formation. Effective on July 9, 2015, the Company was organized as a limited liability company by delivery of the executed Certificate of Formation to the Secretary of State of Delaware for filing in accordance with and pursuant to the Act.

2.2 Name. The name of the Company is 19th Capital Group, LLC. All business of the Company shall be conducted under the name 19th Capital Group, LLC or under any other name adopted by the Board of Managers in accordance with the Act.

2.3 Principal Place of Business. The principal place of business of the Company shall initially be 353 West Lancaster Avenue, Suite 300, Wayne, Pennsylvania 19087. The Company may locate its places of business and registered office at any other place or places as the Board of Managers may from time to time deem advisable.

2.4 Term. The period of duration for the Company shall be perpetual, unless the Company is earlier dissolved in accordance with the provisions of this Agreement or the Act.

ARTICLE III

BUSINESS OF COMPANY

The business of the Company shall be to (i) engage in the business of purchasing, leasing, financing, and disposing of tractors and trailers and related equipment, and other related activities, (ii) exercise all powers necessary to or reasonably connected with the Company’s business which may be legally exercised by limited liability companies under the Act; and (iii) engage in all activities necessary, customary, convenient, or incident to such purposes, as determined by the Board of Managers.

ARTICLE IV

MEMBERS; MEMBERSHIP INTERESTS

4.1 Classes; Member Information. The Membership Interests shall initially be divided into two (2) classes, designated Class A Membership Interests (the “Class A Membership Interests”) and Class B Membership Interests (the “Class B Membership Interests”). The identity of all of the Members, the class and Percentage Interest of the Membership Interests held by each Member and the Capital Contributions, if any, contributed by each Member are reflected on Exhibit A attached hereto. The Board of Managers shall update Exhibit A from time to time, as necessary, in order to reflect the admission of Members and the Transfer or issuance of Membership Interests, in accordance with the terms of this Agreement. Any amendment or revision of Exhibit A made in accordance with this Section 4.1 shall not be deemed to be an amendment to this Agreement requiring the consent or approval set forth in Section 15.4. Any reference in this Agreement to Exhibit A shall be deemed a reference to Exhibit A as amended and in effect from time to time.

4.2 [Reserved].

4.3 Rights and Obligations. The holders of record of the different classes of Membership Interests shall have such rights and obligations associated with such Membership Interests as are provided herein.

4.4 No Certification of Membership Interests. The Membership Interests need not be evidenced by any certificate or other written instrument, but shall only be evidenced by this Agreement and the holders of record of the Membership Interests shall be as is reflected on the books of the Company.

4.5 Personal Liability; Other Rights. To the maximum extent permitted by law, no Member shall be personally liable for any of the debts or obligations of the Company, whether arising in contract, tort or otherwise. No Member shall be entitled to the return of such Member's Capital Contribution to the Company except (i) to the extent, if any, that distributions made pursuant to this Agreement may be considered as a return of its Capital Contribution by law, or (ii) upon dissolution of the Company, and then only to the extent provided for in this Agreement. No Member shall have the right to demand assets other than cash through distributions from the Company, although the Board of Managers, in its sole discretion, may distribute property other than cash. No Member may withdraw from the Company except upon (i) the dissolution and winding up of the Company; or (ii) the transfer of such Member’s Membership Interest in compliance with Article XII. The failure of the Company to observe any formalities or requirements relating to the exercise of its powers or the management of its business or affairs under this Agreement or the Act shall not be grounds for making its Members, Managers, or Officers responsible for any liability or obligation of the Company.

4.6 Meetings of Members.

(a) Meetings. No regular meetings of the Members are required, but if such meetings are held, they shall be noticed, held and conducted pursuant to this Agreement and the Act; provided, that the Company shall hold a meeting of the Members at least once per year. Meetings of the Members, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Board of Managers, or any Class B Member(s) holding at least twenty percent (20%) of the outstanding Class B Percentage Interests.

(b) Place of Meetings. The Board of Managers or the Class B Members may designate any place as the place of meeting for any meeting of the Members.

(c) Notice of Meetings. Except as provided in subsection (d) below, written notice stating the place, day and hour of the meeting and the purpose or purposes for which the meeting is called shall be delivered not less than two (2) business days before the date of the meeting, by or at the direction of the Board of Managers or Person calling the meeting, to each Member entitled to vote at such meeting.

(d) Meeting of all Members. If all of the Members shall meet at any time and place, and consent to the holding of a meeting at such time and place, such meeting shall be valid without call or notice, and at such meeting lawful action may be taken.

(e) Record Date. For the purpose of determining Members entitled to notice of or to vote at any meeting of Members or any adjournment thereof, or Members entitled to receive payment of any distribution, or in order to make a determination of Members for any other purpose, the date on which notice of the meeting is sent or the date on which the resolution declaring such distribution is adopted, as the case may be, shall be the record date for such determination of Members. When a determination of Members entitled to vote at any meeting of Members has been made as provided in this Section, such determination shall apply to any adjournment thereof.

(f) Quorum. Members holding at least a Majority Interest of each class of Membership Interests entitled to vote at such meeting, represented in person or by proxy, shall constitute a quorum at any meeting of Members. In the absence of a quorum at any such meeting, a majority of the Membership Interests so represented may adjourn the meeting from time to time for a period not to exceed sixty (60) days without further notice. However, if the adjournment is for more than sixty (60) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Member of record entitled to vote at the meeting. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The Members present at a meeting at which a quorum was initially present may continue to transact business until adjournment, notwithstanding the withdrawal during such meeting of any Member or Members whose absence would cause there to be less than a quorum.

(g) Participation by Electronic Communication. The Members may participate in or conduct the meeting through the use of any means of communication by which all Members participating may simultaneously hear each other during the meeting.

(h) Manner of Acting. If a quorum is present, the affirmative vote of Members holding a Majority Interest of each class of Membership Interests entitled to vote on the applicable matter shall be the act of the Members, unless the vote of a greater or lesser proportion or number, or a specific class, is otherwise required by the Act, by the Certificate of Formation, or by this Agreement. Unless otherwise expressly provided herein or required under applicable law, Members who are entitled to vote on a particular matter may vote or consent upon any such matter and their Percentage Interest, vote or consent, as the case may be, shall be counted in the determination of whether the requisite matter was approved by the Members, even if such Member has an interest (economic or otherwise) in the outcome of any particular matter upon which the Members vote or consent.

(i) Proxies. At all meetings of Members, a Member may vote in person or by proxy executed in writing by the Member or by a duly authorized attorney-in-fact. Such proxy shall be filed with the Company before or at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy.

(j) Action by Members Without a Meeting. Any action which may be taken at a meeting of the Members, the Class A Members, or the Class B Members, as the case may be, may be taken without a meeting if the action is evidenced by one or more written consents describing the action taken and is signed by Members holding Membership Interests sufficient to approve such action if it were taken at a meeting. Not less than two (2) business days prior to any proposed action by written consent, the Company shall provide notice of such proposed action and the form of the written consent to all Members entitled to vote on such matter. Following any such action by written consent, the Company shall provide notice of such action to all Members and retain a copy of the written consent for inclusion in the minutes or for filing with the Company records.

4.7 Waiver of Notice. When any notice is required to be given to any Member, a waiver thereof in writing signed by the Person entitled to such notice, whether before, at, or after the time stated therein, shall be equivalent to the giving of such notice.

4.8 Rights of Members. Except as otherwise set forth herein or required by a non-waivable provision of the Act, no Member (in such Member’s capacity as a Member of the Company) shall:

(a) take part in the management or control of Company business or transact any business for the Company;

(b) have the power or authority to act, sign for or to bind the Company; or

4.9 Voting. The Members shall be entitled to vote only on the following, unless otherwise required by a non-waivable provision of the Act:

(a) the election of the Board of Managers, as provided in Section 9.2;

(b) the amendment of this Agreement requiring approval of the Members as provided in Section 15.4; and

ARTICLE V

RECORDS, INFORMATION AND REPORTS; TAX MATTERS MEMBER

5.1 Books and Records. The Company will keep complete and accurate books and records in accordance with the Company’s accounting policies consistently applied relating to transactions with respect to the Company. The Company will also keep the following books and records at the Company’s principal office: (a) a current list of the full name and last known business, residence or mailing address of each Member, Manager and Officer, (b) a copy of the Certificate of Formation and of this Agreement; (c) a copy of the Company’s federal, state and local income tax returns and reports, and annual financial statements of the Company, for all Fiscal Years as to which the applicable statute of limitations have not run; and (d) minutes of every meeting and action by written consent without a meeting of the Board of Managers and the Members.

5.2 Tax Returns. The Company, at its expense, will cause the preparation and timely filing (including extensions) of all tax returns required to be filed by the Company pursuant to the Code as well as all other required state and local tax returns in each jurisdiction in which the Company is required to file tax returns, and shall promptly provide copies of such returns to the Members.

5.3 Tax Elections. The Company will not elect to be taxed other than as a partnership without the consent of all Class A Members. Otherwise, the Company shall make and revoke such tax elections as the Board of Managers shall approve from time to time. In addition, if, during the taxable year, any Member transfers all or any portion of its Membership Interest by sale or exchange, then, upon the timely written request of the transferee, the Board of Managers may elect, pursuant to Section 754 of the Code, to adjust the basis of the Company property as permitted by Sections 734 and 743 of the Code. The election shall be filed with the Company’s income tax return for the first Fiscal Year to which the election applies.

5.4 Company Expenses. The Company shall pay all direct and indirect expenses incurred in the conduct of the Company’s business, including, without limitation, bank fees, tax preparation fees and expenses, legal and accounting fees and expenses and such other expenses deemed by the Board of Managers to be expenses of the Company.

5.5 Tax Matters Member.

(a) Tiger ELS, LLC shall be the initial tax matters partner (the “Tax Matters Member”) within the meaning of Section 6231(a)(7) of the Code. Each of the Members hereby consents to such designation and agrees to take any such further action as may be required by the Treasury Regulations or otherwise to effectuate such designation. The Board of Managers may from time to time direct the actions of, or replace, the Tax Matters Member.

(b) The Tax Matters Member shall represent the Company in connection with all examinations of the Company’s affairs by any tax authorities, including resulting judicial and administrative proceedings, at the Company’s expense. Each Member agrees that it will furnish the Tax Matters Member with such information as the Tax Matters Member may reasonably request in order to allow the Tax Matters Member to provide the Internal Revenue Service or other taxing authority with sufficient information with respect to any such proceedings. The decisions of the Tax Matters Member shall be final and binding as to all Members except to the extent that any Member files a statement not to be bound by a settlement pursuant to Code Section 6224(c)(3). The Tax Matters Member shall furnish promptly to the Members a copy of all notices or other written communications received by the Tax Matters Member from the Internal Revenue Service or any state or local taxing authority (except such notices or communications as are sent directly to the Members) and shall keep all Members fully informed of the progress of any audits, examinations or other tax proceedings.

5.6 Partnership for Tax Purposes. The classification of the Company as a partnership will apply only for federal (and, as appropriate, state and local) tax purposes, and the Company will not make an election to be treated as other than a partnership for income tax purposes under Section 301.7701-3(c) of the Treasury Regulations. No Member, Manager, Officer or agent of the Company shall take or permit any action that could cause the Company to be treated as other than a partnership for federal or state tax purposes. This characterization, solely for tax purposes, does not create or imply a general partnership, limited partnership or joint venture among the Members for state law or any other purpose. Instead, the Members acknowledge the status of the Company as a limited liability company formed under the Act.

5.7 Accounting Compliance. The Company shall maintain, and cause each of its subsidiaries, if any, to maintain, internal accounting controls sufficient to provide reasonable assurances that (a) transactions are executed in accordance with management’s general or specific authorization, (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets, (c) access to assets is permitted only in accordance with management’s general or specific authorization, and (d) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company shall permit, and cause each of its subsidiaries, if any, to permit each Member (and such Member’s designated accountants or other professional advisors), at such Member’s expense, to have full and free access to the Company’s personnel, properties, accounting systems, contracts, books and records, and other documents and data for purposes of such Member’s compliance with applicable laws (including Sarbanes-Oxley and other SEC rules and regulations), including, without limitation, compliance with the requirements of Section 404 of Sarbanes-Oxley, all at reasonable times and upon reasonable notice during normal business hours.

ARTICLE VI

CONTRIBUTIONS AND CAPITAL ACCOUNTS

6.1 Capital Contributions. As of the date hereof, each Member has made the Capital Contributions with respect to its Membership Interests as set forth on Exhibit A.

6.2 Additional Capital Contributions. No Member shall be required to make any additional Capital Contributions or lend any funds to the Company.

6.3 Capital Accounts.

(a) A separate Capital Account will be maintained for each Member. Each Member's Capital Account will be increased by: (1) the amount of money contributed by such Member to the Company; (2) the fair market value of property contributed by such Member to the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under Section 752 of the Code); (3) allocations to such Member of Net Profits; (4) any items in the nature of income and gain that are specially allocated to the Member pursuant to Sections 7.2 or 7.3; (5) allocations to such Member of income described in Section 705(a)(1)(B) of the Code; and (6) the amount of any Company liabilities assumed by such Member or which are secured by property distributed to such Member. Each Member's Capital Account will be decreased by: (1) the amount of money distributed to such Member by the Company; (2) the fair market value of property distributed to such Member by the Company (net of liabilities secured by such distributed property that such Member is considered to assume or take subject to under Section 752 of the Code); (3) allocations to such Member of expenditures described in Section 705(a)(2)(B) of the Code; (4) any items in the nature of deduction and loss that are specially allocated to the Member pursuant to Sections 7.2 or 7.3; (5) allocations to the account of such Member of Net Losses; and (6) the amount of any liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member to the Company.

(b) In the event of a permitted sale or exchange of Membership Interests, the Capital Account of the transferor shall become the Capital Account of the transferee to the extent it relates to the transferred Membership Interests in accordance with Section 1.704-l(b)(2)(iv) of the Treasury Regulations.

(c) The manner in which Capital Accounts are to be maintained pursuant to this Section 6.3 is intended to comply with the requirements of Section 704(b) of the Code and the Treasury Regulations promulgated thereunder. If in the opinion of the Company's legal counsel the manner in which Capital Accounts are to be maintained pursuant to the preceding provisions of this Section 6.3 should be modified in order to comply with Section 704(b) of the Code and the Treasury Regulations thereunder, then notwithstanding anything to the contrary contained in the preceding provisions of this Section 6.3, the method in which Capital Accounts are maintained shall be so modified; provided, however, that any change in the manner of maintaining Capital Accounts shall not materially alter the economic agreement between or among the Members.

(d) Except as otherwise agreed in writing or required by the Act, no Member shall have any liability to restore all or any portion of a deficit balance in such Member's Capital Account.

ARTICLE VII

ALLOCATIONS

7.1 Net Profits and Net Losses.

(a) After giving effect to the special allocations set forth in Sections 7.2 and 7.3, the Net Profits of the Company for each Fiscal Year shall be allocated to the Class B Members in accordance with the Class B Percentage Interest held by each Class B Member.

(b) After giving effect to the special allocations set forth in Section 7.2 and 7.3, the Net Losses of the Company for each Fiscal Year shall be allocated to the Class B Members in accordance with the Class B Percentage Interest held by each Class B Member.

(c) The Net Losses allocated pursuant to Section 7.1(b) hereof shall not exceed the maximum amount of Net Losses that can be so allocated without causing any Member to have an Adjusted Capital Account Deficit at the end of any Fiscal Year. In the event some but not all of the Members would have Adjusted Capital Account Deficits as a consequence of an allocation of Net Losses pursuant to Section 7.1(b), the limitation set forth in this Section 7.1(c) shall be applied on a Member-by-Member basis so as to allocate the maximum permissible Net Losses to each Member under Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations.

7.2 Special Allocations. The following special allocations shall be made in the following order:

(a) Minimum Gain Chargeback. Except as otherwise provided in Section 1.704-2(f) of the Treasury Regulations, notwithstanding any other provision of this Article VII, if there is a net decrease in Company Minimum Gain during any Company Fiscal Year, each Member shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member's share of the net decrease in Company Minimum Gain, determined in accordance with Treasury Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Treasury Regulations. This Section 7.2(a) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(f) of the Treasury Regulations and shall be interpreted consistently therewith.

(b) Member Minimum Gain Chargeback. Except as otherwise provided in Section 1.704-2(i)(4) of the Treasury Regulations, notwithstanding any other provision of this Article VII, if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any Company Fiscal Year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the Treasury Regulations, shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Treasury Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury Regulations. This Section 7.2(b) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the Treasury Regulations and shall be interpreted consistently therewith.

(c) Qualified Income Offset. In the event any Member unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulations Section 1.704- 1(b)(2)(ii)(d)(4), Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(5), or Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be specially allocated to each such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible, provided that an allocation pursuant to this Section 7.2(c) shall be made if and only to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Article VII have been tentatively made as if this Section 7.2(c) were not in the Agreement.

(d) Gross Income Allocation. In the event any Member has a deficit Capital Account at the end of any Company Fiscal Year which is in excess of the sum of (i) the amount such Member is obligated to restore (pursuant to the terms of such Member's promissory note or otherwise, if any), and (ii) the amount such Member is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Section 7.2(d) shall be made if and only to the extent that such Member would have a deficit Capital Account in excess of such sum after all other allocations provided for in this Article VII have been tentatively made as if this Section 7.2(d) and Section 7.2(c) hereof were not in the Agreement.

(e) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Class B Members in accordance with their Class B Percentage Interests.

(f) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Treasury Regulations Section 1.704-2(i)(1).

(g) Section 754 Adjustment. To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of his interest in the Company, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with Section 7.1 hereof in the event that Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Members to whom such distribution was made in the event that Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

(h) Class A Preferred Return Allocations. All or a portion of the remaining items of Company income or gain, if any, shall be specially allocated to the Class A Members in proportion to and to the extent of the excess, if any, of (i) the cumulative Class A Preferred Return distributions each such Class A Member has received pursuant to Sections 8.1(b) and 14.3(b)(iii) from the commencement of the Company to a date thirty (30) days after the end of such Fiscal Year, over (ii) the cumulative items of income and gain allocated to such Class A Member pursuant to this Section 7.2(h) for all prior Fiscal Years.

(i) Allocations Relating to Taxable Issuance of Membership Interests. Any income, gain, loss, or deduction realized as a direct or indirect result of the issuance of an interest in the Company by the Company to a Member (the "Issuance Items") shall be allocated among the Members so that, to the extent possible, the net amount of such Issuance Items, together with all other allocations under this Agreement to each Member, shall be equal to the net amount that would have been allocated to each such Member if the Issuance Items had not been realized.

7.3 Curative Allocations. The allocations set forth in Sections 7.1(c), 7.2(a), 7.2(b), 7.2(c), 7.2(d), 7.2(e), 7.2(f) and 7.2(g) hereof (the "Regulatory Allocations") are intended to comply with certain requirements of the Treasury Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss, or deduction pursuant to this Section 7.3. Therefore, notwithstanding any other provision of this Article VII (other than the Regulatory Allocations), the Board of Managers shall make such offsetting special allocations of Company income, gain, loss, or deduction in whatever manner they determine appropriate so that, after such offsetting allocations are made, each Member's Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of the Agreement and all Company items were allocated pursuant to Section 7.1. In exercising its discretion under this Section 7.3, the Board of Managers shall take into account future Regulatory Allocations under Sections 7.2(a) and 7.2(b) that, although not yet made, are likely to offset other Regulatory Allocations previously made under Sections 7.2(e) and 7.2(f).

7.4 Other Allocation Rules.

(a) (a) Subject to the provisions set forth herein, all Net Profits and Net Losses (and, if necessary, individual items of income, gain, loss or deduction) allocated to the Members shall be allocated among them as determined in good faith by the Board of Managers and based upon such financial and accounting procedures and determinations as may deemed necessary by the Board of Managers. In the event additional Members are admitted to the Company pursuant to Article XIII on different dates during any Fiscal Year, the Net Profits (or Net Losses) allocated to the Members for each such Fiscal Year shall be allocated among the Members in each applicable class in accordance with their Percentage Interests in each applicable class from time to time during such Fiscal Year in accordance with Code Section 706, using any convention permitted by law and selected by the Board of Managers. In such event, subsequent allocations of Net Losses (or Net Profits) pursuant to Section 7.1 hereof shall be allocated (i) first, so as to offset the Net Profits (or Net Losses) allocated for such Fiscal Year or Fiscal Years, and (ii) the balance, if any, to the Members in each applicable class in accordance with their Percentage Interests in each applicable class.

(b) For purposes of determining the Net Profits, Net Losses or any other items allocable to any period, Net Profits, Net Losses, and any such other items shall be determined on a daily, monthly, or other basis, as determined by the Board of Managers using any permissible method under Code Section 706 and the Treasury Regulations thereunder.

(c) The Members are aware of the income tax consequences of the allocations made by this Article VII and hereby agree to be bound by the provisions of this Article VII in reporting their shares of Company income and loss for income tax purposes.

(d) Solely for purposes of determining a Member's proportionate share of the "excess nonrecourse liabilities" of the Company within the meaning of Treasury Regulations Section 1.752-3(a)(3), the Members' interests in Company profits are equal to their Percentage Interest.

(e) To the extent permitted by Sections 1.704-2(h)(3) of the Treasury Regulations, the Company shall endeavor to treat distributions of Net Cash Flow as having been made from the proceeds of a Nonrecourse Liability or a Member Nonrecourse Debt only to the extent that such distributions would cause or increase an Adjusted Capital Account Deficit for any Member.

7.5 Tax Allocations: Code Section 704(c).

(a) In accordance with Code Section 704(c) and the Treasury Regulations thereunder, income, gain, loss, and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Gross Asset Value (computed in accordance with Section 1(v)(i) hereof).

(b) In the event the Gross Asset Value of any Company asset is adjusted pursuant to Section 1(v)(ii) hereof, subsequent allocations of income, gain, loss, and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c) and the Treasury Regulations thereunder.

(c) Any elections or other decisions relating to such allocations shall be made by the Board of Managers in any manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section 7.5 are solely for purposes of federal, state, and local taxes and shall not affect, or in any way be taken into account in computing, any Person's Capital Account or share of Net Profits, Net Losses, other items, or distributions pursuant to any provision of this Agreement.

ARTICLE VIII

DISTRIBUTIONS

8.1 Net Cash Flow. Whether in connection with a liquidating distribution under Section 14.3 or otherwise, Net Cash Flow may be distributed at such times and in such amounts as the Board of Managers may determine to the Members as follows:

(a) First, to the Class A Members, in accordance with their Class A Percentage Interests, an amount necessary to reduce the Adjusted Class A Capital Contribution of each Class A Member to zero;

(b) Second, to the Class A Members, in accordance with their Class A Percentage Interests, an amount necessary to allow each Class A Member to receive its Class A Preferred Return, minus any amounts previously distributed to such Class A Member pursuant to this Section 8.1(b); and

8.2 Tax Distributions. Anything to the contrary notwithstanding, the Company shall (subject to the availability of Net Cash Flow as determined in the reasonable discretion of the Board of Managers) make distributions to the Members on a quarterly basis and annually prior to April 15 following the close of each Fiscal Year in order to fund the federal and state income taxes, if any, that will be owed by the Members with respect to such Fiscal Year (computed at the highest marginal rate for ordinary income taxes or the maximum rate on capital gains for individuals, plus 5%) on the estimated or final Net Profits (or items of income or gain) of the Company allocated to such Member pursuant to this Agreement to date for the Fiscal Year to the extent such taxes are greater than the cumulative amount of distributions made to such Member pursuant to Section 8.1 or this Section 8.2 to date during the Fiscal Year. Distributions under this Section 8.2 shall not be treated as advances of distributions to be made under Section 8.1 and, accordingly, a distribution made to a Member pursuant to this Section 8.2 shall not reduce amounts that otherwise would be distributed to such Member pursuant to Section 8.1.

8.3 Amounts Withheld. All amounts withheld pursuant to the Code or any provision of any state or local tax law with respect to any payment, distribution, or allocation to the Company or the Members shall be treated as amounts distributed to the Members pursuant to this Article VIII for all purposes under this Agreement. The Company is authorized to withhold from distributions, or with respect to allocations, to the Members and to pay over to federal, state, or local government any amounts required to be so withheld pursuant to the Code or any provisions of any other federal, state, or local law and shall allocate such amounts to the Members with respect to which such amount was withheld.

8.4 Limitation Upon Distributions. Notwithstanding the provisions of this Article VIII, no distribution shall be declared and paid in violation of the Act or applicable law.

ARTICLE IX

BOARD OF MANAGERS

9.1 Management and Control. The business, property and affairs of the Company shall be operated and managed by a Board of Managers (the “Board of Managers”). The Board of Managers, and any Officer acting pursuant to authority granted by the Board of Managers, is authorized to take any actions, to make any determinations and to provide any consents permitted to be taken, made or provided by the Company under this Agreement or in furtherance of the Company’s business. No Member or Manager, acting individually, and except as expressly provided for herein, no Officer, shall have the power to sign or bind the Company unless duly authorized to do so by the Board of Managers.

9.2 Board of Managers.

(a) Number of Managers. The Company’s Board of Managers shall initially be comprised of five (5) individuals in accordance with this Section 9.2 (each, a “Manager”).

(b) Designation of Managers. The Managers shall be designated as follows: three (3) Managers shall be designated by Tiger ELS, LLC, and two (2) Managers shall be designated by the holders of a Majority Interest of the Class B Members, excluding Tiger ELS, LLC. Each Member and Manager shall take all actions necessary or appropriate to cause the election, removal or replacement of the Managers designated under this Section 9.2(b) in accordance with this Section 9.2.

9.3 Resignation. A Manager may resign at any time by giving a written resignation to the Board of Managers, the President or the Secretary of the Company. The resignation shall be effective without acceptance when such resignation is actually received, unless the resignation specifies a later effective time.

9.4 Removal of Managers. The party who or which is entitled to designate a Manager or Managers may remove one (1) or more Managers designated by such party with or without cause at any time.

9.5 Vacancies. If a vacancy occurs on the Board of Managers, the party who or which is entitled to designate such Manager or Managers shall fill the vacancy.

9.6 Meetings of the Board, Etc.

(a) Regular Meetings. Regular meetings of the Board of Managers shall be held from time to time at the discretion of the Board of Managers.

(b) Special Meetings of the Board. Special meetings of the Board of Managers may be called by any Manager or the President.

(c) Notice of Meetings. Meetings of the Board of Managers shall be preceded by at least two (2) business days’ notice of the date, time and place of the meeting. The notice need not describe the purpose of the meeting. Notice shall be in writing and shall be delivered to each of the Managers. A Manager may waive any notice required by this Agreement, the Certificate of Formation, or the Act, before or after the date and time stated in the notice. The waiver must be in writing, signed by the Manager entitled to the notice, and filed with the minutes or other records of the Company. A Manager’s attendance at or participation in a meeting waives any required notice to the Manager of the meeting, unless the Manager at the beginning of the meeting (or promptly upon arrival) objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to any action taken at the meeting.

(d) Location of Meetings. Meetings of the Board of Managers may be held at any place as designated in the applicable meeting notice or agreed to by the Board of Managers.

(e) Participation by Electronic Communication. The Board of Managers shall permit any or all Managers to participate in or conduct the meeting through the use of any means of communication by which all Managers participating may simultaneously hear and be heard by each other during the meeting.

(f) Action Without Meeting. Any action required or permitted to be taken at a Board of Managers’ meeting may be taken without a meeting if Managers holding votes sufficient to approve such action consent thereto in writing. Not less than two (2) business days prior to any proposed action by written consent, the Company shall provide notice of such proposed action and the form of the written consent to all Managers. Following any such action by written consent, the Company shall provide notice of such action to all other Managers and deliver a copy of such consent to the Secretary for inclusion in the minutes of the Board of Managers of the Company. Action taken under this Section is effective when Managers holding votes sufficient to approve such action have signed the consent, unless the consent specifies a different effective date.

(g) Quorum and Voting. A quorum of the Board of Managers shall consist of a majority of the fixed number of Managers from time to time. The affirmative vote of a majority of the number of Managers required to be in office under Section 9.2(a), or such greater vote required under this Agreement, shall be the act of the Board of Managers. Unless otherwise expressly provided herein or required under applicable law, Managers who have an interest (economic or otherwise) in the outcome of any particular matter upon which the Managers vote or consent may vote or consent upon any such matter and their vote or consent, as the case may be, shall be counted in the determination of whether the requisite matter was approved by the Managers.

9.7 Committees. The Board of Managers may create one or more committees in accordance with the provisions of the Act.

ARTICLE X

OFFICERS

10.1 Powers. Subject to the authority of the Board of Managers, the day-to-day management and control of the Company, and its business and affairs, shall be conducted or exercised by, or under the direction and authority of, the Officers.

10.2 Election and Term. The Board of Managers shall elect a President and a Secretary, and may elect such other Officers as the Board of Managers may determine from time to time, who may include a one or more vice presidents, a chief financial officer, a controller and one or more assistant treasurers and assistant secretaries. The Board of Managers may elect Officers at such times as it deems advisable. Each Officer shall serve until his successor is elected and qualified or until his earlier resignation or removal. Any number of offices may be held by the same Person. Unless otherwise provided in a written agreement, no Officer shall have any contractual rights by reason of appointment as an Officer. Any Officer who is a Member shall have the same rights, as a Member, as any other Member.

10.3 Duties. The duties and powers of the Officers shall be as follows:

(a) President. The President shall be the chief executive officer of the Company, and, as such, shall be primarily responsible for the general management of the business of the Company and for implementing the policies and directives of the Board of Managers. The President shall have authority to make contracts on behalf of the Company in the ordinary course of the Company’s business, shall be responsible to effect all orders and resolutions of the Board of Managers, shall sign and deliver in the name of the Company any deeds, mortgages, bonds, contracts, or other instruments pertaining to the business of the Company except as otherwise delegated or provided by law, shall preside at all meetings of the Members, and the Board of Managers, and shall perform such other duties as from time to time may be assigned by the Board of Managers.

(b) Vice Presidents. The Vice President (or, if more than one, in the order designated by the Board of Managers) shall exercise the functions of the President during the absence or disability of the President and shall perform such other duties as may be assigned by the President or the Board of Managers.

(c) Chief Financial Officer. The Chief Financial Officer shall have general supervision over the funds of the Company and the investment or deposit thereof, shall advise the Board of Managers and the President regarding the financial condition of the Company, and perform such other duties as may be assigned by the President or the Board of Managers.

(d) Secretary. The Secretary shall attend all meetings of the Members, the Board of Managers, and any committees of the Board of Managers, and shall prepare and maintain minutes or records of proceedings of all such meetings in a book to be kept for that purpose. The Secretary shall give, or cause to be given, such notice as may be required of all meetings of the Members, the Board, and any committees of the Board of Managers, shall authenticate and certify records and proceedings of the Company, shall keep accurate membership records for the Company, and shall perform such other duties as may be assigned by the President or the Board of Managers.

10.4 Compensation. Unless otherwise provided by contract, if any, the salaries and other compensation of the Officers, if any, shall be as determined by the Board of Managers from time to time.

10.5 Removal. The Board of Managers may remove any Officer at any time, with or without cause, but no such removal shall affect the contract rights, if any, of the Person so removed.

10.6 Resignation. An Officer may resign at any time by delivering written notice to the Company. A resignation is effective without acceptance when the notice is delivered to the Company, unless the notice specifies a later effective date. An Officer’s resignation does not affect the Company’s contract rights, if any, with the Officer

ARTICLE XI

OTHER BUSINESS INTERESTS; CONFLICTS OF INTEREST; INDEMNIFICATION

11.1 Other Business Interests. Except as otherwise provided in this Agreement or by contract, (i) the Managers shall not be required to manage the Company as their sole and exclusive function, and (ii) the Members and the Managers may engage in or possess an interest in other business ventures of any nature or description, independently or with others. Neither the Company nor the Members shall have any rights by virtue of this Agreement in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture shall not be deemed wrongful or improper.

11.2 Conflicts of Interest. The fact that a Member, Manager, Officer or any Affiliate of the foregoing is directly or indirectly interested in or connected with any Person with whom the Company has dealings (collectively, the “Interested Transactions”) shall not preclude such dealings or make them void or voidable, and neither the Company nor the Members shall have any rights in or to such dealings or any profits derived therefrom; provided, however, that any Interested Transactions shall be on terms that are fair and reasonable to the Company under the circumstances, as determined in the good faith and reasonable discretion of the Board of Managers.

11.3 Indemnification.

(a) Any Person who was or is a Member, Manager, Officer, employee, or other agent of the Company, or was or is serving at the request of the Company as a manager, officer, employee, or other agent of another limited liability company, corporation, partnership, joint venture, trust, or other enterprise (collectively, the “Indemnified Party”) shall, in accordance with this Section 11.3, be indemnified and held harmless by the Company from and against any and all losses, claims, damages, liabilities, expenses (including reasonable legal and other professional fees and disbursements), judgments, fines, settlements, and other amounts incurred (collectively, the “Indemnification Obligations”) in connection with any and all claims, demands, actions, suits or proceedings (civil, criminal, administrative or investigative), actual or threatened, in which such Indemnified Party may be involved, as a party or otherwise, by reason of such Indemnified Party’s service to, or on behalf of, or management of the affairs of, the Company or, at the request of the Company, with respect to another limited liability company, corporation, partnership, joint venture, trust or other enterprise, or rendering of advice or consultation with respect thereto, whether or not the Indemnified Party continues to be serving in the above-described capacity at the time any such Indemnification Obligation is paid or incurred. Notwithstanding the foregoing, no indemnification shall be provided by the Company with respect to any Indemnification Obligation that resulted from action or inaction of such Indemnified Party, in each case, (i) that was beyond the scope of his employment or engagement or authority as an officer or agent of the Company, (ii) from which such Indemnified Party derived an improper personal benefit, (iii) that was not in good faith (including fraud or material misrepresentation), or (iv) with respect to any criminal action or proceeding, that involved a knowing violation of law, in each case as ultimately determined by a court of competent jurisdiction, which determination is no longer appealable. The termination of a proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that such Indemnification Obligation resulted from the willful misconduct of, breach by or failure to properly act of such Indemnified Party. Expenses (including reasonable legal and other professional fees and disbursements) incurred in any proceeding will be paid by the Company, as incurred, in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf of such Indemnified Party to repay such amount if it shall ultimately be determined that such Indemnified Party is not entitled to be indemnified by the Company as authorized in this Section 11.3; provided, however, that the Company may decline to pay such expenses to any Person in advance of the final disposition of such action, suit or proceeding, or may cease to make such payments if, at any relevant time, (i) such Person has refused to cooperate with any investigation conducted by or on behalf of the Company or the Board of Managers or (ii) the Company has credible evidence on the basis of which it believes in good faith that such Person is not entitled to indemnity under this Section 11.3.

(b) The indemnification provided by this Section 11.3 shall not be deemed to be exclusive of any other rights to which each Indemnified Party may be entitled under any agreement, or as a matter of law, or otherwise, both as to action in such Indemnified Party’s official capacity and to action in another capacity, and shall continue as to such Indemnified Party who has ceased to have an official capacity for acts or omissions during such official capacity or otherwise when acting at the request of the Company, or any Person granted authority thereby, and shall inure to the benefit of the heirs, successors and administrators of such Indemnified Party. Any repeal or amendment of this Section 11.3 shall be prospective only and shall not adversely affect rights under this Section 11.3 existing at the time of such repeal or amendment.

(c) The Members shall not be required to indemnify any Indemnified Party for which indemnification is authorized under Section 11.3(a). Any right of an Indemnified Party to indemnification pursuant to this Agreement shall be satisfied solely from Company property and the proceeds of insurance, if any.

11.4 Transactions with Related Persons of Celadon Group, Inc. Other than the issuance of Class B Membership Interests as set forth on Exhibit A on the date hereof and the transactions contemplated by that certain Portfolio Purchase and Sale Agreement (and related documents) between the Company and Quality Equipment Leasing, LLC dated on or about the date hereof, the Company will not, without the prior consent of the Board of Directors of Celadon Group, Inc. (or any duly authorized committee thereof), knowingly engage in any hiring, compensation, equity grant, loan, or purchase or sale of assets, transaction, or any other material transaction, with any employee or director of Celadon Group, Inc. or any subsidiary thereof, (ii) any immediate family member of any of such Persons, or (iii) any Affiliate of such Persons.

ARTICLE XII

TRANSFER OF MEMBERSHIP INTERESTS; RIGHT OF FIRST REFUSAL; DRAG-ALONG RIGHTS; ETC.

12.1 Transfer. No Member may sell, assign, pledge, hypothecate, gift, bequeath or otherwise transfer or dispose of (the foregoing are hereinafter collectively referred to as a “Transfer”) all or a portion of its Membership Interest without first complying with the applicable provisions of this Article XII prior to consummating any such Transfer of its Membership Interest. Notwithstanding the foregoing, subject to Section 12.4 hereof, (a) any Member may Transfer all or any portion of its Membership Interest (i) to an entity that, directly or indirectly, controls, or is controlled by, or is under common control with, such Member, or (ii) to another Member, or an entity that, directly or indirectly, controls, or is controlled by, or is under common control with, such other Member, and (b) any Class A Member may pledge any or all of its Membership Interests in accordance with such Member’s credit agreements in effect from time to time or transfer such Membership Interests to the lender thereunder as required by the applicable credit documents or applicable law (and any lender thereunder becoming a transferee of all or any portion of such Member’s Membership Interest will be entitled to become a substitute Member upon compliance with the requirements of becoming a substitute Member).

12.2 Right of First Refusal.

(a) If a Member (a “Transferring Member”) desires to Transfer all or any portion of its Membership Interests to another Person (the “Offeree”) other than as permitted by Section 12.1 (whether voluntarily, by operation of law or otherwise), then such Transferring Member shall be required to comply with the provisions of this Section 12.2.

(b) In the event the Transferring Member proposes to Transfer any of its Membership Interests, then, with respect to each such Transfer, the Transferring Member shall deliver written notice (the “Transfer Notice”) to the Company and the Class B Members of its intention, describing the price and the terms and conditions upon which the Transferring Member proposes to make such Transfer. The Class B Members shall have a right to purchase their pro rata portion of the Membership Interests being offered by the Transferring Member (the “Offered Interest”) at the price and on the terms and conditions set forth in the Transfer Notice. The Class B Members shall have thirty (30) days from the date the Transfer Notice is given to agree to agree to purchase all or any portion of the Offered Interest, by giving written notice to the Transferring Member and the Company stating the Offered Interest to be purchased (the “Purchase Notice”).

(c) If the Class B Members fail to deliver a Purchase Notice within the time period set forth in Section 12.2(b) or elect to purchase less than all of the Offered Interest of the Transferring Member, the Transferring Member shall deliver a Transfer Notice to the Company and the Company shall have a right to purchase and redeem the remaining portion of the Offered Interest of the Transferring Member at the price and on the terms and conditions set forth in the Transfer Notice. The Company shall have thirty (30) days from the date the Transfer Notice is given to agree to purchase all or any portion of the remaining Offered Interest, by giving written notice to the Transferring Member stating the Offered Interest to be purchased.

(d) To the extent not purchased by the Class B Members or the Company pursuant to this Section 12.2, the Transferring Member may Transfer the remaining Offered Interest described in the Transfer Notice to the Offeree upon the terms and conditions contained in the Transfer Notice, for a period of up to sixty (60) days after expiration of the Company’s right under Section 12.2(c). If such Transfer to the Offeree is not effected within said 60-day period, or the Transferring Member does not comply with the conditions set forth in Section 12.3 hereof, or if the provisions of the proposed Transfer as described in the Transfer Notice are changed in any material respect, then such Transfer shall be null, void and of no effect, and the Transfer of the Offered Interest described in the Transfer Notice shall continue to be subject to the Transfer restrictions contained in this Agreement and may not be Transferred without again first complying with the provisions of this Section 12.2.

12.3 Closing. Any purchase and sale to be consummated pursuant to Section 12.2 hereof shall be closed in accordance with the following procedures:

(a) The date of closing shall be a regular banking business day (i) not less than ten (10) nor more than thirty (30) days after the giving of the last Purchase Notice, in the case of a sale pursuant to Sections 12.2(b) and/or (c), and (ii) falling within the 60-day period set forth in Section 12.2(d), in the case of a sale pursuant to Section 12.2(d), and the place of closing shall be the offices of the Company, unless the applicable purchasing parties and the Transferring Member shall mutually agree to another place of closing.

(b) On the date of closing, (i) the Transferring Member shall deliver to the purchasing parties such documents as may reasonably be deemed necessary by the purchasing parties to Transfer the Offered Interest being Transferred, (ii) the purchasing parties shall, as agreed upon by the parties to the sale, deliver payment to the Transferring Member by means of cash, cashier's check, promissory note or wire transfer of immediately available funds.

12.4 Admission of Permitted Transferee as Substitute Member. In the event of the permitted Transfer of a Member's Membership Interest in the Company to a third party purchaser (i.e., non-Member) in accordance with Sections 12.1, 12.2 and/or 12.3, and as a condition to the effectiveness of such Transfer and the admission of such transferee as a substitute Member, the proposed transferee shall (i) accept, assume and agree to be subject to and bound by all of the terms, obligations and conditions of this Agreement, as the same may have been further amended, by executing and delivering to the Company a counterpart signature page to this Agreement, and (ii) execute, acknowledge and deliver to the Company such instruments of transfer, assignment and assumption and such other certificates, representations and documents, provide such additional information, and perform all such other acts which the Board of Managers may reasonably deem necessary or desirable to:

(i) constitute such proposed transferee as a Member;

(ii) preserve the Company after the completion of such Transfer, or substitution under the laws of each jurisdiction in which the Company is qualified, organized or does business;

(iii) maintain the status of the Company as a partnership for federal tax purposes; and

(iv) assure compliance with any applicable state and federal laws, including, without limitation, securities laws and regulations.

Furthermore, the Transferring Member agrees, upon request of the Board of Managers, to execute such certificates or other documents and perform such other acts as may be reasonably requested by the Board of Managers from time to time in connection with such Transfer.

12.5 Status of Transferees in Recognized Transfers. Any purported Transfer of an interest in the Company that is not permitted under Section 12.1 or which does not comply with Sections 12.2, 12.3 and 12.4 shall be null and void, of no force or effect whatsoever, and shall be disregarded by the Company, and the Transferring Member shall continue to be treated as a Member by the Company with respect to the Membership Interest proposed to be Transferred; provided that, if the Company (a) is required to recognize or (b) in its sole discretion elects to recognize a purported Transfer that is not permitted under Section 12.1 or which does not comply with Sections 12.2, 12.3 and 12.4 (each, a “Recognized Transfer”), the interest Transferred shall be strictly limited to the transferor's rights to allocations and distributions as provided by this Agreement with respect to the Transferred interest in the Company, which allocations and distributions may be applied (without limiting any other legal or equitable rights of the Company) to satisfy the debts, obligations, or liabilities for damages that the transferor or transferee of such interest may have to the Company. In a Recognized Transfer, the Transferring Member shall cease to be a Member of the Company for all purposes, and the transferee shall not be admitted to the Company as a substitute Member unless and until (i) the Board of Managers consents (in its absolute and sole discretion) to the admission of such transferee as a substitute Member, and (ii) such transferee complies with the terms and conditions set forth in Section 12.4. For clarity, until admitted as a substitute Member in accordance with this Section 12.5, the assignee of all or any portion of a Membership Interest has no right to participate in the management and affairs of the Company.

12.6 Other Matters Relating to the Transfer of Membership Interests.

(a) Any Transfer of an interest in the Company, whether in a permitted Transfer or a Recognized Transfer, and related admission of a substitute Member, if any, shall be deemed effective as of (i) the date on which conditions of such Transfer (including those set forth in Section 12.4) have been satisfied, or (ii) the date a Transfer is recognized by the Board of Managers as a Recognized Transfer, or (iii) on such other date as the parties (including the Company) may agree.

(b) Effective upon the Transfer of an interest in the Company, the Transferring Member shall, for all purposes, cease to be a Member of the Company with respect to such transferred interest, regardless of whether the transferee is admitted to the Company as a substitute Member or is merely an assignee of the transferring Member’s economic rights. Notwithstanding the foregoing, the Transfer of an interest in the Company, without more, shall not release the Member originally transferring the interest from any liability to the Company that may have existed prior to the Transfer.

(c) In the case of a Transfer or attempted Transfer of an interest in the Company that does not comply with the requirements of this Article XII, the parties engaging or attempting to engage in such Transfer shall indemnify and hold harmless the Company and the non-Transferring Members from all cost, liability, and damage that any of such indemnified Persons may incur (including, without limitation, incremental tax liability and attorneys' fees and expenses) as a result of such Transfer or attempted Transfer and efforts to enforce the indemnity granted hereby.

(d) The transferee of any interest in the Company shall succeed to the Capital Account of the Transferring Member to the extent of the interest Transferred. Upon any Transfer, income, gain, loss, deduction and credit and all other items attributable to the Transferred interest for the Fiscal Year shall be allocated between the Transferring Member and the transferee by taking into account their varying interests during the Fiscal Year in accordance with Code Section 706(d), utilizing any conventions permitted by law as specified by the Board of Managers. In the event of any Transfer, the Board of Managers may cause the Company to elect pursuant to Code Section 754 to adjust the basis of the assets of the Company.

12.7 Required Transactions.

(a) If at any time the Board of Managers shall approve a proposed Sale Transaction, then the Company shall deliver a written notice (a “Required Transaction Notice”) with respect to such proposed Sale Transaction (a “Required Transaction”) to the Members stating that the Board of Managers have approved and propose to consummate such Required Transaction and the terms thereof and providing the identity of the Person(s) involved in such Required Transaction. The Members, upon receipt of the Required Transaction Notice, shall be obligated to (i) vote their Membership Interests in favor of the proposed Required Transaction (to the extent required), and waive any applicable dissenters’ rights with respect thereto (if any), (ii) sell or merge their Membership Interests, (iii) participate in the Required Transaction to the extent requested by the Board of Managers, and (iv) otherwise take all action reasonably necessary to consummate such Required Transaction. Any Required Transaction Notice may be rescinded by the Board of Managers by delivering written notice thereof to the Members.

(b) In any Required Transaction consummated under this Section 12.7, the net proceeds of such transaction shall be allocated among and distributed to the Members as if such proceeds were Net Cash to be distributed to the Members in accordance with Section 8.1 hereof. Furthermore, in connection with any Required Transaction, each Member agrees to (i) make individual representations, warranties, covenants and other agreements as to the unencumbered title to its Membership Interests and the power, authority and legal right to Transfer such Membership Interests, as applicable, and (ii) be liable (whether by purchase price adjustment, indemnity payments or otherwise) in respect of representations, warranties, covenants and agreements in respect of the Company and its subsidiaries on a pro rata basis with the other Members.

(c) For purposes of this Agreement, the term "Sale Transaction" means (i) the sale, transfer or other disposition of greater than fifty percent (50%) of the Class B Membership Interests in the Company; (ii) a merger, consolidation, reorganization or similar transaction or series of transactions involving the Company, which results in the then-current Class B Members holding in the aggregate less than fifty percent (50%) of the Class B Membership Interests in the Company; or (iii) the sale of all or substantially all of the assets of the Company to any Person in one transaction or in a series of related transactions.

(d) In the event of a conflict between this Section 12.7 and any other provision of this Agreement, this Section 12.7 shall control. For the avoidance of doubt, the Members shall not be required to comply with the provisions of Section 12.2 prior to effecting a Sale Transaction under this Section 12.7.

12.8 Right of First Offer. In the event Board of Managers decides to commence a sale process with respect to a Sale Transaction or to pursue the liquidation and dissolution of the Company, then the Company shall give notice of such possible sale or liquidation process to Celadon Group, Inc. and Celadon Group, Inc. shall have a right of first offer to discuss and negotiate terms for such possible sale or liquidation process with the Company for a period of thirty (30) days (the “Exclusivity Period”). If the parties have not mutually agreed on substantive terms for a Sale Transaction within the Exclusivity Period, then the Company (at the direction of the Board of Managers) shall be free to pursue a possible sale or liquidation process with any other party or parties on terms acceptable to the Board of Managers in its sole discretion. For clarification, this Section 12.8 shall not be construed as providing Celadon Group, Inc. a veto right, a right of first refusal or other similar rights with respect to any sale or liquidation process. This Section 12.8 shall terminate and be of no further force and effect if Celadon Group, Inc. no longer holds a Membership Interest in the Company.

ARTICLE XIII

PREEMPTIVE RIGHTS; ADDITIONAL MEMBERS

13.1 Preemptive Rights.

(a) In the event the Company proposes to issue Membership Interests (or rights or options to acquire Membership Interests), or accept any additional Capital Contributions by the Members, or engage in any other equity financing to which the Company may be a party (a “New Equity Issuance”), such New Equity Issuance shall be upon such terms and conditions (including valuation and pricing) as may be determined by the Board of Managers, subject to the remaining provisions of this Section 13.1. In the event the Company proposes a New Equity Issuance, the Company will give written notice (each, an “Equity Sale Notice”) to each Class A Member at least twenty (20) days prior to the closing of such transaction, describing the transaction to be entered into by the Company, including (i) the percentage and class (and the rights, powers and preferences, if different from the then outstanding Membership Interests) of the New Equity Issuance that the Company proposes to issue (the “Proposed Equity”), (ii) the price and terms upon which the Company proposes to issue the Proposed Equity, and (iii) the amount of Proposed Equity that such Member is entitled to purchase, and the aggregate purchase price therefore. Each Class A Member shall have the right, but not the obligation, to purchase Proposed Equity, at the price and on the other terms set forth in the Equity Sale Notice, in an amount not to exceed such Class A Member’s pro rata share of such Proposed Equity. Each Class A Member will have ten (10) days after the date of receipt of any Equity Sale Notice to (i) agree to purchase all or any portion of such Proposed Equity pursuant to its preemptive rights, for the price and upon the terms specified in the Equity Sale Notice by giving written notice to the Company and stating therein its decision and the quantity of Proposed Equity to be purchased; or (ii) decline to exercise its preemptive rights with respect to such issuance of Proposed Equity. If a Class A Member does not exercise its preemptive rights within such ten (10) day period, then such Class A Member shall be deemed to have waived its preemptive rights with respect to such New Equity Issuance. If a Class A Member exercises its preemptive rights, it shall promptly take all steps described in the Sale Notice to effectuate its purchase of the Proposed Equity covered thereby. Any remaining Proposed Equity not elected to be purchased by the end of such ten (10) day period shall be reoffered for a ten (10) day period to the Class A Members who have elected to purchase the Proposed Equity. Such electing Class A Members shall have the right to purchase such additional portion of the remaining Proposed Equity in an amount up to such electing Class A Member’s pro rata share (based on the Class A Percentage Interests of such electing Class A Members) of the remaining Proposed Equity.

(b) The Company will have sixty (60) days following expiration of the periods provided in subsection (a) above to sell the Proposed Equity as to which the Class A Members’ preemptive rights were not exercised, at a price and upon such other terms as are specified in the Equity Sale Notice. In the event the Company has not sold such Proposed Equity within said 60-day period or desires to sell such Proposed Equity on terms that materially differ from those described in the Equity Sale Notice, the Company will not thereafter issue or sell the Proposed Equity without again complying with this Section 13.1.

(i) Membership Interests offered in connection with a public offering;

(ii) Membership Interests issued to the seller or its equity holders in connection with any acquisition, merger, joint venture, or similar transaction, the terms of which are approved by the Board of Managers;

(iii) Membership Interests (or rights or options to acquire Membership Interests) issued to financial institutions or similar Persons in connection with credit arrangements, debt financings or similar debt transactions, the terms of which are approved by the Board of Managers; or

(iv) Class B Membership Interests issued to certain employees, directors, managers, officers or agents of the Company or its Affiliates, as determined by the Board of Managers from time to time, in an amount not to exceed ten percent (10%) of the aggregate Class B Percentage Interests.

(d) For clarification purposes, (i) the preemptive rights will not apply to debt securities issued by the Company in any loan transaction or other debt financing of the Company, and (ii) the Class B Members shall not have any preemptive rights in their capacities as Class B Members.

13.2 Admission of Additional Members. A Person may only be admitted as an additional Member, upon the approval of the Board of Managers (and subject to the Preemptive Rights set forth in Section 13.1 above, if applicable under the circumstances). In the event additional Members are admitted to the Company, the Membership Interest (and corresponding Percentage Interest) and Capital Contributions of any new Members shall be determined by the Board of Managers, and the Board of Managers may amend this Agreement to provide for the admission of such additional Members, the issuance of such additional Membership Interests and/or the corresponding dilution of the existing Members without the consent or approval of the Members. Notwithstanding the foregoing, a Person shall not become an additional Member unless and until such Person becomes a party to this Agreement as a Member by signing a counterpart signature page to this Agreement and executing such documents and instruments as the Board of Managers reasonably may request to confirm such Person as a Member in the Company.

13.3 Accounting. No additional Member shall be entitled to any retroactive allocation of losses, income or expense deductions incurred by the Company. The Company may at the time an additional Member is admitted close the Company books (as though the Company’s tax year had ended) or make pro rata allocations of loss, income and expense deductions to an additional Member for that portion of the Company’s tax year in which such Member was admitted in accordance with the provisions of Code Section 706(d) and the Treasury Regulations promulgated thereunder.

ARTICLE XIV

DISSOLUTION AND TERMINATION

14.1 Dissolution.

(a) The Company shall be dissolved upon the occurrence of any of the following events:

(i) upon the approval of the Board of Managers; or

(ii) as otherwise required by a non-waivable provision of the Act.

(b) Except as expressly permitted in this Agreement or otherwise approved by the Board of Managers, no Member shall voluntarily take any action that directly causes a dissolution of the Company.

14.2 Effect of Event of Dissolution. Upon the occurrence of the event of dissolution, the Company shall cease to carry on its business, except insofar as may be necessary for the winding up of its business, but its separate existence shall continue until its certificate of cancellation has been filed with the Delaware Secretary of State or until a decree dissolving the Company has been entered by a court of competent jurisdiction.

14.3 Winding Up, Liquidation and Distribution of Assets.

(a) Upon dissolution, an accounting shall be made by the Company's independent accountants of the accounts of the Company and of the Company's assets, liabilities and operations, from the date of the last previous accounting until the date of dissolution. The Board of Managers shall immediately proceed to wind up the affairs of the Company.

(b) If the Company is dissolved and its affairs are to be wound up, the Company’s assets shall be distributed in the following order and priority:

(i) first, to creditors of the Company, including the Members who are creditors, to the extent and in the order permitted by law, in satisfaction of the Company's liabilities;

(ii) second, to the establishment of any reserves deemed necessary by the Board of Managers for any contingent liabilities or obligations of the Company (but subject to the distribution to the Members in accordance with this Section 14.3(b) of the amount of any excess reserves, if any, when and if the Board of Managers determines such reserves are no longer necessary);

(iii) third, to the Class A Members until the Class A Members have received an amount equal to their accrued but unpaid Class A Preferred Return as of the date of dissolution of the Company; provided, however, that no distribution shall be made pursuant to this Section 14.3(b)(iii) that creates or increases a Capital Account deficit for a Class A Member which exceeds such Class A Member’s obligation (deemed and actual) to restore such deficit, determined as follows: distributions shall first be determined tentatively pursuant to this Section 14.3(b)(iii) without regard to each Class A Member’s Capital Account, and then the allocation provisions of Article VII shall be applied tentatively as if such tentative distributions had been made. If a Class A Member shall thereby have a deficit Capital Account which exceeds its obligation (deemed and actual) to restore such deficit, the actual distribution to such Class A Member pursuant to this Section 14.3(b)(iii) shall be equal to the tentative distribution to such Class A Member less the amount of the excess to such Class A Member; and

(iv) finally, to Members in accordance with positive Capital Account balances, taking into account all Capital Account adjustments for the Company’s taxable year in which the liquidation occurs. Any such distributions to the Members in respect of their Capital Accounts shall be made in accordance with the time requirements set forth in Section 1.704-1(b)(2)(ii)(b)(2) of the Treasury Regulations.

(c) Notwithstanding anything to the contrary in this Agreement, upon a liquidation within the meaning of Section 1.704-l(b)(2)(ii)(g) of the Treasury Regulations, if any Member has a deficit Capital Account (after giving effect to all contributions, distributions, allocations and other Capital Account adjustments for all taxable years, including the year during which such liquidation occurs), such Member shall have no obligation to make any Capital Contribution, and the negative balance of such Member's Capital Account shall not be considered a debt owed by such Member to the Company or to any other Person for any purpose whatsoever.

(d) It is understood and agreed that amounts payable to the Members in connection with a Sale Transaction that does not involve a dissolution of the Company pursuant this Article XIV (including, by way of example and not as a limitation, amounts payable in connection with a merger or Membership Interest purchase) (i) shall be paid to the Members in accordance with the preferences and priorities set forth in this Section 14.3; (ii) will be deemed to have been distributed among the Members as if the distributions set forth in this Section 14.3 were applied to such payments, and (iii) any agreement executed by the Company or the Members in connection with a Sale Transaction shall be consistent with this provision.

14.4 Certificate of Cancellation. Upon completion of the winding up, liquidation and distribution of the assets, the Company shall be deemed terminated. The Managers shall comply with any applicable requirements of applicable law pertaining to the winding up of the affairs of the Company and the final distribution of its assets. When all debts, liabilities and obligations have been paid and discharged or adequate provisions have been made therefor and all of the remaining property and assets have been distributed to the Members, a certificate of cancellation shall be executed and filed in accordance with the Act. Upon the filing of the certificate of cancellation, the existence of the Company shall cease.

14.5 Return of Contribution Nonrecourse to Other Members. Except as provided by law or as expressly provided in this Agreement, upon dissolution, each Member shall look solely to the assets of the Company for the return of its Capital Contribution. If the Company property remaining after the payment or discharge of the debts and liabilities of the Company is insufficient to return the cash contribution of one or more Members, such Member or Members shall have no recourse against any other Member.

ARTICLE XV

MISCELLANEOUS PROVISIONS

15.1 Notices. All notices, requests, demands and other communications hereunder shall be deemed to have been duly given if in writing and (i) delivered personally, (ii) sent by confirmed facsimile transmission, (iii) sent by confirmed email transmission, (iv) sent by nationally recognized overnight delivery service, or (v) mailed by postage prepaid registered or certified U.S. mail, return receipt requested, to the address, facsimile number or email address designated in Exhibit A to this Agreement or such other address, facsimile number or email address as may be designated in writing by notice given hereunder, and shall be effective upon personal delivery or receipt of confirmed facsimile or email transmission thereof on a business day or upon delivery by registered or certified U.S. mail or two (2) business days following deposit with a nationally recognized overnight delivery service for overnight delivery.

15.2 Application of Delaware Law; Priority. This Agreement and the application or interpretation hereof, shall be governed exclusively by its terms and by the laws of the State of Delaware, and specifically the Act, without reference to Delaware’s conflict of laws rules. In the event of any inconsistency or conflict between any terms of this Agreement and the Act, the terms of this Agreement shall govern to the maximum extent permitted by law.

15.3 Waiver of Action for Partition. Each Member irrevocably waives during the term of the Company any right that it may have to maintain any action for partition with respect to the property of the Company.

15.4 Amendments.

(a) Except as set forth in Section 15.4(b) below, this Agreement may not be amended except (i) by the written agreement of the Board of Managers and the Class B Members holding at least 66⅔% of the Class B Percentage Interests, and (ii) in the case of an amendment that would adversely affect any Class A Member, the written consent of such Class A Member.

(b) The Board of Managers, without the consent or approval at any time of any Member, may amend any provision of this Agreement or the Certificate of Formation, and may execute, swear to, acknowledge, deliver, file and record all documents required or desirable in connection therewith, to reflect:

(i) a change in the name of the Company, the location of the principal place of business of the Company or the registered agent of the Company;

(ii) the admission, dilution, substitution, termination or withdrawal of any Member in accordance with the provisions of this Agreement; or

(iii) a change that is: (A) of an inconsequential nature and does not adversely affect any Member in any material respect; (B) required by this Agreement, including an amendment of Exhibit A of this Agreement in connection with the Transfer of a Membership Interest, the issuance of any new Membership Interests or the admission of new Members; or (C) necessary to reflect the current Capital Contributions and Membership Interest held by each Member, following any change to such items in accordance with the provisions of this Agreement.

15.5 Construction. Whenever the singular number is used in this Agreement and when required by the context, the same shall include the plural and vice versa, and the masculine gender shall include the feminine and neuter genders and vice versa. The Members identified on Exhibit A have participated jointly in the negotiation and drafting of this Agreement. If an ambiguity or question of intent arises, this Agreement shall be construed as if drafted jointly by such Members and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

15.6 Headings. The headings in this Agreement are inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Agreement or any provision hereof.

15.7 Time. Time is of the essence with respect to this Agreement.

15.8 Waivers. The failure of any party to seek redress for violation of or to insist upon the strict performance of any covenant or condition of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation.

15.9 Successors and Assigns. Each and all of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Agreement, their respective legal representatives, successors and permitted assigns.

15.10 Creditors. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of the Company.

15.11 Counterparts; Delivery. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. The exchange of copies of this Agreement and of signature pages electronically or by facsimile shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement. Signatures of the parties transmitted electronically or by facsimile shall be deemed to be their original signatures for all purposes.

15.12 Assurances. Each Member shall execute all such certificates and other documents and shall do all other acts as the Board of Managers reasonably deem appropriate to comply with the requirements of law for the formation and operation of the Company and to comply with any laws, rules, and regulations applicable to the acquisition, operation, or holding of the property of the Company.

15.13 Specific Performance. The parties recognize that irreparable injury will result from a breach of any provision of this Agreement and that money damages will be inadequate to fully remedy the injury. Accordingly, in the event of a breach or threatened breach of one or more of the provisions of this Agreement, any party who may be injured (in addition to any other remedies which may be available to that party) shall be entitled to one or more preliminary or permanent orders (a) restraining and enjoining any act which would constitute a breach or (b) compelling the performance of any obligation which, if not performed, would constitute a breach.

15.14 Complete Agreement. This Agreement constitutes the complete and exclusive statement of the agreement among the Members and the Company concerning the affairs of the Company and the conduct of its business. This Agreement supersedes all prior written and oral statements concerning the affairs of the Company and the conduct of its business, including any prior representation, statement, condition, or warranty.

15.15 Separability of Provisions. Each provision of this Agreement shall be considered separable; and if, for any reason, any provision or provisions herein are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or affect those portions of this Agreement which are valid.

15.16 Separate Counsel. EACH MEMBER ACKNOWLEDGES THAT HE, SHE OR IT HAS HAD AN OPPORTUNITY TO CONSULT WITH HIS, HER OR ITS OWN COUNSEL WITH REGARD TO THE MATTERS CONTAINED IN THIS AGREEMENT.

[Signature Page Follows]

19th CAPITAL GROUP, LLC

LIMITED LIABILITY COMPANY AGREEMENT

MEMBERS SIGNATURE PAGE

Each of the undersigned agrees to become a Member in 19th Capital Group, LLC, a Delaware limited liability company, and by execution of this signature page adopts, accepts and shall be bound by all of the terms and provisions of this Limited Liability Company Agreement.

	CLASS A MEMBER:

	TIGER ELS, LLC


	By:	/s/ Jeffrey R. Larsen
		Jeffrey R. Larsen, Manager

	By:	/s/ Timothy B. MacColl
		Timothy B. MacColl, Manager

	CELADON GROUP, INC.


	By:	/s/ Kenneth L. Core
	Name:	Kenneth L. Core
	Title:	Vice President & Secretary


	CLASS B MEMBERS:

	TIGER ELS, LLC


	By:	/s/ Jeffrey R. Larsen
		Jeffrey R. Larsen, Manager

	By:	/s/ Timothy B. MacColl
		Timothy B. MacColl, Manager

	CELADON GROUP, INC.


	By:	/s/ Kenneth L. Core
	Name:	Kenneth L. Core
	Title:	Vice President & Secretary


	CLASS B MEMBERS (continued):


	/s/ George Chasteen
	George Chasteen

	/s/ Beau Zoeller
	Beau Zoeller

	/s/ Danny Williams
	Danny Williams

	/s/ Leslie Tarble
	Leslie Tarble

	/s/ Eric Meek
	Eric Meek

	/s/ Paul Will
	Paul Will

	/s/ Bobby Peavler
	Bobby Peavler

	/s/ Lauren Howard
	Lauren Howard

	/s/ Nathan Roberts
	Nathan Roberts

	/s/ Chad Hoffman
	Chad Hoffman

	/s/ Mike Gabbei
	Mike Gabbei

EXHIBIT A

19th Capital Group, LLC

]Limited Liability Company Agreement

as of August 27, 2015

Class A Member	Class of Membership Interests	Percentage Interest of Class	Capital Contribution
Tiger ELS, LLC 353 West Lancaster Avenue Suite 300 Wayne, Pennsylvania 19087 Attn: Mr. Jeffrey R. Larsen Email: [email protected] Fax: (610) 545-0855	Class A	66.67% of Class A	$4,000,000
Celadon Group, Inc. 9503 E. 33rd St. Indianapolis, IN 46235 Attn: Kenneth L. Core, General Counsel Ph: (317) 972-7000 Fax: (317) 829-6390 Email: [email protected]	Class A	33.33% of Class A	$2,000,000

Class B Members	Class of Membership Interests	Percentage Interest of Class	Capital Contribution
Tiger ELS, LLC 353 West Lancaster Avenue Suite 300 Wayne, Pennsylvania 19087 Attn: Mr. Jeffrey R. Larsen Email: [email protected] Fax: (610) 545-0855	Class B	48% of Class B	$0
Celadon Group, Inc. 9503 E. 33rd St. Indianapolis, IN 46235 Attn: Kenneth L. Core, General Counsel Ph: (317) 972-7000 Fax: (317) 829-6390 Email: [email protected]	Class B	25% of Class B	$0

George Chasteen 931 Spur Lane Indianapolis, IN 46220 Phone: (317) 628-5440	Class B	2.5% of Class B	$0
Beau Zoeller 7910 Islay Road Indianapolis, IN 46217 Phone: (812) 697-0903	Class B	1.5% of Class B	$0
Danny Williams 7483 W. Rex Ridge Rd. New Palestine, IN 46163 Phone: (317) 514-2731	Class B	4.5% of Class B	$0
Leslie Tarble 5706 Haverford Avenue Indianapolis, IN 46220 Phone: (920) 265-8233	Class B	4.5% of Class B	$0
Eric Meek 7494 West Rex Ridge Road New Palestine, IN 46163 Phone: (317) 258-6517	Class B	4.5% of Class B	$0
Paul Will 10809 Club Point Fishers, IN 46037 Phone: (317) 577-0612	Class B	4.5% of Class B	$0
Bobby Peavler 7050 S 50 West Pendleton, IN 46064 Phone: (317) 833-2119	Class B	1.0% of Class B	$0
Lauren Howard 10120 Sycamore Ln. Indianapolis, IN 46239 Phone: (317) 418-6365	Class B	1.0% of Class B	$0
Nathan Roberts 8598 S Riser Drive Nineveh, IN 46164 Phone: (317) 418-6923	Class B	1.0% of Class B	$0
Chad Hoffman 11048 Windermere Blvd Fishers, IN 46037 Phone: (317) 200-7872	Class B	1.0% of Class B	$0
Mike Gabbei 430 SouthCreek Drive South Indianapolis, IN 46217 Phone: (317) 887-2910	Class B	1.0% of Class B	$0

Back to Form 10-Q

Exhibit 31.1

I, Paul A. Will, certify that:

1.	I have reviewed this Form 10-Q of Celadon Group, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

	/s/Paul A. Will
Date: November 9, 2015	Paul A. Will
	Chief Executive Officer (Principal Executive Officer)

Back to Form 10-Q

Exhibit 31.2

I, Bobby L. Peavler, certify that:

1.	I have reviewed this Form 10-Q of Celadon Group, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(a)

(b)

(c)

(d)

5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

	/s/Bobby L. Peavler
Date: November 9, 2015	Bobby L. Peavler
	Chief Financial Officer (Principal Financial Officer)

Back to Form 10-Q

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Celadon Group, Inc., a Delaware corporation (the "Company"), on Form 10-Q for the period ending September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Paul A. Will, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/Paul A. Will
Date: November 9, 2015	Paul A. Will
	Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to Celadon Group, Inc. and will be retained by Celadon Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Back to Form 10-Q

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Celadon Group, Inc., a Delaware corporation (the "Company"), on Form 10-Q for the period ending September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Bobby L. Peavler, Executive Vice President, Chief Financial Officer, and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/Bobby L. Peavler
Date: November 9, 2015	Bobby L. Peavler
	Chief Financial Officer

Back to Form 10-Q

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Delaware	13-3361050
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

9503 East 33rd Street
One Celadon Drive
Indianapolis, IN	46235-4207
(Address of principal executive offices)	(Zip Code)
(317) 972-7000 (Registrant's telephone number, including area code)

PART I.	FINANCIAL INFORMATION

Item I.	Financial Statements

	For the three months ended
	September 30,
	2015			2014
OPERATING REVENUE:
Freight revenue	$	237,812		$	157,704
Fuel surcharge revenue		28,309			35,712
Total revenue		266,121			193,416

OPERATING EXPENSES:
Salaries, wages, and employee benefits		81,478			57,222
Fuel		27,728			39,985
Purchased transportation		89,031			43,637
Revenue equipment rentals		2,222			2,590
Operations and maintenance		17,606			11,240
Insurance and claims		6,928			5,676
Depreciation and amortization		21,601			15,556
Communications and utilities		2,344			1,830
Operating taxes and licenses		4,971			3,315
General and other operating		4,282			3,455
Gain on disposition of equipment		(13,242	)		(4,558	)
Total operating expenses		244,949			179,948

Operating income		21,172			13,468

Interest expense		3,152			1,169
Other (income) expense		100			(78	)
Income before income taxes		17,920			12,377
Income tax expense		6,553			4,329
Net income	$	11,367		$	8,048

Income per common share:
Diluted	$	0.41		$	0.34
Basic	$	0.41		$	0.35

Diluted weighted average shares outstanding		27,966			23,934
Basic weighted average shares outstanding		27,453			23,240

	For the three months ended
	September 30,
	2015			2014

Net income	$	11,367		$	8,048
Other comprehensive income (loss):
Unrealized gain (loss) on fuel derivative instruments, net of tax		(476	)		---
Unrealized gain (loss) on currency derivative instruments, net of tax		---			(35	)
Foreign currency translation adjustments, net of tax		(9,431	)		(3,852	)
Total other comprehensive income (loss)		(9,907	)		(3,887	)
Comprehensive income	$	1,460		$	4,161

	(unaudited)
	September 30,			June 30,
ASSETS	2015			2015

Current assets:
Cash and cash equivalents	$	24,844		$	24,699
Trade receivables, net of allowance for doubtful accounts of $1,385 and $1,002 at September 30, 2015 and June 30, 2015, respectively		134,916			130,892
Prepaid expenses and other current assets		44,664			33,267
Tires in service		2,174			1,857
Equipment held for resale		175,125			102,447
Income tax receivable		10,440			17,926
Deferred income taxes		6,553			7,083
Total current assets		398,716			318,171
Property and equipment		932,867			935,976
Less accumulated depreciation and amortization		142,400			147,446
Net property and equipment		790,467			788,530
Tires in service		2,587			2,173
Goodwill		57,130			55,357
Investment in unconsolidated companies		2,000			---
Other assets		11,321			11,458
Total assets	$	1,262,221		$	1,175,689

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable	$	17,042		$	13,699
Accrued salaries and benefits		15,147			16,329
Accrued insurance and claims		16,486			14,808
Accrued fuel expense		10,345			10,979
Accrued purchased transportation		20,795			16,259
Accrued equipment purchases		21,307			775
Deferred leasing revenue		40,696			31,872
Other accrued expenses		25,657			31,835
Current maturities of long term debt		781			948
Current maturities of capital lease obligations		65,390			62,992
Total current liabilities		233,646			200,496
Capital lease obligations, net of current maturities		385,998			366,452
Long term debt		162,635			133,199
Other long term liabilities		500			953
Deferred income taxes		111,433			108,246
Stockholders' equity:
Common stock, $0.033 par value, authorized 40,000 shares; issued and outstanding 28,352 and 28,342 shares at September 30, 2015 and June 30, 2015, respectively		936			935
Treasury stock at cost; 500 shares at September 30, 2015 and June 30, 2015, respectively		(3,453	)		(3,453	)
Additional paid-in capital		196,436			195,682
Retained earnings		206,230			195,412
Accumulated other comprehensive loss		(32,140	)		(22,233	)
Total stockholders' equity		368,009			366,343
Total liabilities and stockholders' equity	$	1,262,221		$	1,175,689

Form 10-Q CELADON GROUP INC For: Sep 30

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Part I.	Financial Information

	Item 1.		Financial Statements

			Condensed Consolidated Statements of Income for the three months ended September 30, 2015 and 2014 (Unaudited)	3

			Condensed Consolidated Statements of Comprehensive Income for the three months ended September 30, 2015 and 2014 (Unaudited)	4

			Condensed Consolidated Balance Sheets at September 30, 2015 (Unaudited) and June 30, 2015	5

			Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2015 and 2014 (Unaudited)	6

			Notes to Condensed Consolidated Financial Statements (Unaudited)	7

	Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations	13

	Item 3.		Quantitative and Qualitative Disclosures about Market Risk	20

	Item 4.		Controls and Procedures	21

Part II.	Other Information

	Item 1.	Legal Proceedings		22

	Item 1A.	Risk Factors		22

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		24

	Item 3.	Defaults Upon Senior Securities		24

	Item 4.	Mine Safety Disclosures		24

	Item 5.	Other Information		24

	Item 6.	Exhibits		25

Options	Options Totals		Weighted-Average Exercise Price per Share
Outstanding at July 1, 2015		295,789	$	9.47
Granted		---		---
Vested and Issued		9,950	$	12.61
Forfeited		---		---
Outstanding at September 30, 2015		285,839	$	9.36
Exercisable at September 30, 2015		285,839	$	9.36

	Number of Restricted Stock Awards		Weighted-Average Grant Date Fair Value
Unvested at July 1, 2015		396,366	$	21.13
Granted		---		---
Vested and Issued		3,000	$	14.36
Forfeited		420	$	22.00
Outstanding at September 30, 2015		392,946	$	21.18

	Capital Leases		Operating Leases
2016	$	74,935	$	4,888
2017		92,959		1,548
2018		187,005		5,855
2019		46,051		1,559
2020		24,853		---
Thereafter		54,882		---
Total minimum lease payments	$	480,685	$	13,850
Less amounts representing interest		29,297
Present value of minimum lease payments		451,388
Less current maturities		65,390
Non-current portion	$	385,998

						Level 1				Level 2					Level 3
	Balance			Balance		Balance		Balance		Balance			Balance		Balance		Balance
	at			at		at		at		at			at		at		at
	September			June		September		June		September			June		September		June
	30,			30,		30,		30,		30,			30,		30,		30,
	2015			2015		2015		2015		2015			2015		2015		2015
Foreign currency derivatives	$	---		$	---	$	---	$	---	$	---		$	---	$	---	$	---
Fuel derivatives		(760	)		---		---		---		(760	)		---		---		---

	Intangibles
	June 30, 2015		Current Year Additions		September 30, 2015
Gross carrying amount	$	8,096		---	$	8,096
Accumulated amortization		1,048	$	41		1,089
	$	7,048	$	41	$	7,007