--------------------------------------------------------------------------------

Exhibit 10.4
 

December 29, 2015

Eric Meek
Quality Companies
9702 East 30th Street
Indianapolis, IN 46229

Re:  Letter Agreement Regarding Additional Reserve Account Contributions (the
“Letter Agreement”)

Dear Eric:

Element Financial Corp., Delaware corporation (“Element”) and Celadon Group,
Inc., a Delaware corporation and Quality Equipment Leasing, LLC, a Delaware
limited liability company (together, “Celadon/Quality,” or “Servicer”) are
parties to an Amended and Restated Reserve Account Agreement dated as of
September 28, 2015 (the “Reserve Account Agreement”), pursuant to which a
“Reserve Account” for Element’s benefit has been established. The Reserve
Account is being held to collateralize and provide recourse for credit and asset
losses experienced under certain transactions originated by Servicer and
transferred to Element or transactions originated by Servicer on behalf of
Element (the “Transactions”).  Servicer also serves as billing and collecting
agent with respect to the Transactions for the benefit of Purchaser an pursuant
to the Amended and Restated Service Account Agreement dated as of September 28,
2015, to which Servicer and Element are parties (the “Service
Agreement”).   Element and Servicer, in consideration of the mutual covenants
and amended agreements herein contained, and of other valuable considerations,
including consideration under the Reserve Account and Service Agreements,
receipt of which is hereby acknowledged, hereby agree as follows:

1. Reserve Account Contributions: Celadon/Quality shall contribute additional
funds to the existing Reserve Account to be used as otherwise generally provided
in the Reserve Account Agreement in order to bolster the reserves available with
respect to the 2014-2015 Vintage (as defined in the Reserve Account Agreement)
as follows:
 
(a)           Prior to December 31, 2015 Celadon/Quality will contribute an
additional Two Million Five Hundred Thousand Dollars ($2,500,000) to the Reserve
Account with respect to the 2014-2015 Vintage, which additional funds will be
treated and reconciled in the same manner as all other deposits to the Reserve
Account; and
 
(b)           Once the entire 2014-2015 Vintage has expired or has been
terminated, and any payment obligations from Celadon/Quality to Element under
the Reserve Account have been satisfied, then the amounts remaining in the
Reserve Account with respect to the 2014-2015 Vintage will be distributed to
Celadon/Quality, with the exception that all contributed 2014-2015 Vintage Gains
(as defined below) will be distributed as outlined in paragraph (2) of this
Letter Agreement.
 
 
 

--------------------------------------------------------------------------------

 
 
2.           Directing all Gains on the sale of Vehicles into the Reserve
Account:  Notwithstanding the terms of the Service Agreement, Celadon/Quality
and Element agree that, from the date of this Letter Agreement forward, all
gains (as described in paragraph (D) in the Distribution Waterfall (as defined
in the Service Agreement)) with respect to sales of Vehicles in Positive Value
Transactions (each as defined in the Service Agreement) from the 2014-2015
Vintage (the “2014-2015 Vintage Gains”) will be contributed to the Reserve
Account.  The 2014-2015 Vintage Gains contributions will be segregated from an
accounting standpoint from other contributions to the Reserve Account and shall
otherwise be treated as follows:
 
(a)           The 2014-2015 Vintage Gains that are contributed to the Reserve
Account will treated and reconciled in the same manner as all other
contributions to the Reserve Account, except that the 2014-2015 Vintage Gains
will be the last funds utilized from the Reserve Account.
 
(b)           The fifty percent (50%) portion of the 2014-2015 Vintage Gains
contributed by Celadon/Quality will be held in the Reserve Account on a notional
accounting basis in the same manner as any other contributions thereto are
currently being held.  Conversely, the fifty percent (50%) portion of 2014-2015
Vintage Gains (following distribution of such gains by Servicer under the terms
of the Service Agreement) shall be deemed contributed by Element to the Reserve
Fund, but shall be held in cash by Element (the “Element Cash Sales
Contribution”).  If Servicer requires the use of any portion of the Element Cash
Sales Contribution to pay Covered Expenses and Perfect Pay obligations with
respect to 2014-2015 Vintage (subject to the provisions hereof), then
Celadon/Quality shall request a distribution of such funds from Element from the
Element Cash Sales Contribution, and Element shall distribute such funds to
Servicer on a monthly basis.
 
(c)           Once all the transaction comprising the 2014-2015 Vintage have
expired or have been terminated, and all payment obligations from Servicer to
Element under the Reserve Account have been satisfied, then the amounts
remaining in the Reserve Account will be distributed to Celadon/Quality, with
the exception that the 2014-2015 Vintage Gains will be split on a 50%/50% basis
between Element and Quality/Celadon.

3.           Effect on Reserve Account and Service Agreements.  Except as
explicitly set forth herein, this Letter Agreement shall not amend or otherwise
effect the operation of the Reserve Account Agreement or the Service Agreement,
each of which remains in full force and effect.
 
 
 

--------------------------------------------------------------------------------

 

If Servicer agrees to be bound by the terms of this Letter Agreement, please
execute this Letter Agreement below.  This Letter Agreement shall only become
effective upon Servicer’s execution hereof.
 
 

     
Sincerely,
               
ELEMENT FINANCIAL CORP.
                         
By:
/s/ Rene Paradis
       
[Name, Title] Rene Paradis
       
EVP, CFO-CAO
                   
The terms of this Letter Agreement are hereby agreed to.
           
CELADON GROUP, INC.
                         
By:
/s/ Eric Meek
     
Name:
Eric Meek
     
Title:
President
                                   
QUALITY EQUIPMENT LEASING, LLC
                         
By:
/s/ Eric Meek
     
Name:
Eric Meek
     
Title:
President
     

Back to Form 10-Q [form10q.htm]