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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
Commission File No. 000-24615
LANDAIR CORPORATION
(Exact name of registrant as specified in its charter)
TENNESSEE 62-1743549
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
430 AIRPORT ROAD
GREENEVILLE, TENNESSEE 37745
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (423) 636-7000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES NO X
----- -----
The number of shares outstanding of the registrant's common stock, $.01 par
value, as of November 6, 1998 was 6,293,542.
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TABLE OF CONTENTS
LANDAIR CORPORATION
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Page
Number
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
September 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Income -
Three and nine months ended September 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows -
Nine months ended September 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements -
September 30, 1998 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 15
ITEM 2. Changes in Securities 15
ITEM 3. Defaults Upon Senior Securities 15
ITEM 4. Submission of Matters to a Vote of Security Holders 15
ITEM 5. Other Information 15
ITEM 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
EXHIBIT INDEX 17
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Landair Corporation
Condensed Consolidated Balance Sheets
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September 30, December 31,
1998 1997
---------------------------------
(Unaudited) (Note)
(In thousands, except share data)
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ASSETS
Current assets:
Cash and cash equivalents $ 6,032 $ 614
Accounts receivable, less allowance of $309 in 1998 and $175 in 1997 11,597 11,100
Other current assets 5,192 4,620
Receivable from Forward Air Corporation -- 17,447
------------------------
Total current assets 22,821 33,781
Property and equipment 94,308 95,590
Less accumulated depreciation and amortization 32,064 32,178
------------------------
62,244 63,412
Other assets 39 15
------------------------
Total assets $85,104 $97,208
========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,001 $ 5,877
Accrued expenses 9,834 12,039
Current portion of long-term debt 3,428 10,495
Current portion of capital lease obligations 1,746 2,950
------------------------
Total current liabilities 21,009 31,361
Long-term debt, less current portion 7,972 12,839
Capital lease obligations, less current portion -- 1,312
Deferred income taxes 11,802 12,138
Shareholders' equity:
Preferred stock -- --
Common stock, $.01 par value:
Authorized shares - 45,000,000
Issued and outstanding shares - 6,293,542 in 1998 and -- in 1997 63 --
Additional paid-in capital 44,191 --
Retained earnings 67 --
Shareholder's investment -- 39,558
------------------------
Total shareholders' equity 44,321 39,558
------------------------
Total liabilities and shareholders' equity $85,104 $97,208
========================
</TABLE>
Note: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date, but does not include all of the financial
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See notes to condensed consolidated financial statements.
3
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Landair Corporation
Condensed Consolidated Statements of Income
(Unaudited)
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Three months ended Nine months ended
-------------------------------- --------------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
-------------------------------- --------------------------------
(In thousands, except per share data)
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Operating revenue
Forward Air, Inc. $ 1,339 $ 1,811 $ 4,268 $ 4,386
Other 26,306 21,556 74,920 61,607
--------------------------- ---------------------------
27,645 23,367 79,188 65,993
Operating expenses:
Salaries, wages and employee benefits 9,228 7,887 26,177 21,793
Purchased transportation 6,893 5,336 19,388 15,605
Fuel and fuel taxes 3,010 2,723 8,969 8,049
Depreciation and amortization 2,349 2,069 6,965 6,165
Insurance and claims 1,213 1,410 4,170 4,953
Operating leases 252 166 681 422
Other operating expenses 2,982 2,522 8,027 6,783
--------------------------- ---------------------------
25,927 22,113 74,377 63,770
--------------------------- ---------------------------
Income from operations 1,718 1,254 4,811 2,223
Other income (expense):
Interest expense (458) (453) (1,382) (1,386)
Other, net 18 34 44 (36)
--------------------------- ---------------------------
(440) (419) (1,338) (1,422)
Income before income taxes 1,278 835 3,473 801
Income taxes 481 269 1,331 258
--------------------------- ---------------------------
Net income $ 797 $ 566 $ 2,142 $ 543
=========================== ===========================
Pro forma income per share:
Basic $ .13 $ .09 $ .34 $ .09
=========================== ===========================
Diluted $ .13 $ .09 $ .34 $ .09
=========================== ===========================
</TABLE>
See notes to condensed consolidated financial statements.
4
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Landair Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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Nine months ended
--------------------------------
September 30, September 30,
1998 1997
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(In thousands)
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Cash provided by operations $ 23,968 $ 12,433
Investing activities:
Proceeds from disposal of property and equipment 2,637 980
Purchases of property and equipment (15,582) (8,188)
Other (24) 7
-------- --------
(12,969) (7,201)
Financing activities:
Proceeds from long-term debt 11,529 653
Payments of long-term debt (20,825) (5,216)
Payments of capital lease obligations (1,285) (637)
Contribution of capital by Forward Air Corporation 5,000 --
-------- --------
(5,581) (5,200)
Increase in cash and cash equivalents $ 5,418 $ 32
======== ========
Non-cash transaction -
Contribution of net assets to Forward Air Corporation $ (2,379) $ --
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
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Landair Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited condensed combined financial statements for periods
subsequent to September 23, 1998 include the accounts of Landair Corporation and
its subsidiaries ("the Company"). The accompanying unaudited condensed
consolidated financial statements for periods through September 23, 1998 include
the accounts comprising the truckload operations of Forward Air Corporation
("Forward Air" formerly known as Landair Services, Inc.), and are based on
historical amounts included in the consolidated financial statements of Forward
Air. The Company is an irregular route, high-service truckload carrier that
transports a wide range of commodities in both intrastate and interstate
commerce. The Company provides dry van common carrier and dedicated contract
carriage for shippers of a variety of products in the medium- and short-haul
markets. All significant intercompany transactions and accounts have been
eliminated in consolidation.
On July 9, 1998, the Board of Directors of Forward Air authorized the separation
of Forward Air into two publicly-held corporations, one owning and operating the
deferred air freight operations and the other owning and operating the truckload
operations (the "Spin-off"). The Spin-off was effected on September 23, 1998
through the distribution to shareholders of Forward Air of all the outstanding
stock of a new truckload holding company, Landair Corporation. Pursuant to the
Spin-off, the common stock of Landair Corporation was distributed on a pro rata
basis of one share of Landair Corporation common stock for every one share of
Forward Air common stock held. Effective with the Spin-off, Landair Corporation
is the legal entity that owns and operates the truckload operations through its
operating subsidiaries, and Forward Air is the legal entity that will continue
to own and operate the deferred air freight operations through its operating
subsidiaries.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Landair Corporation Form 10/A as filed with the Securities and Exchange
Commission on September 2, 1998.
6
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Landair Corporation
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)
2. ACCOUNTING PRONOUNCEMENT
As of January 1, 1998, the Company adopted Statement No. 130, Reporting
Comprehensive Income. Statement No. 130 establishes standards for the reporting
and display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or shareholders'
equity. The Company has no items of other comprehensive income to be reported
under the provisions of Statement No. 130.
3. PRO FORMA EARNINGS PER SHARE
The following table sets forth the computation of pro forma basic and diluted
earnings per share. Earnings per share are presented on a pro forma basis to
reflect the 6,293,542 share issuance of common stock as a result of the Spin-off
of Landair Corporation (see Note 1) as if the Spin-off had occurred on January
1, 1997:
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------------- -------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1998 1997 1998 1997
--------- --------- --------- ---------
(in thousands, except per share data)
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Numerator:
Numerator for pro forma basic and
diluted earnings per share - net
income $ 797 $ 566 $2,142 $ 543
Denominator:
Denominator for pro forma basic
earnings per share - weighted-average
shares 6,294 6,294 6,294 6,294
Effect of dilutive stock options 2 -- 1 --
------ ------ ------ ------
Denominator for pro forma diluted
earnings per share - adjusted
weighted-average shares 6,296 6,294 6,295 6,294
====== ====== ====== ======
Pro forma basic earnings per share $ .13 $ .09 $ .34 $ .09
====== ====== ====== ======
Pro forma diluted earnings per share $ .13 $ .09 $ .34 $ .09
====== ====== ====== ======
Securities that could potentially dilute basic
income per share in the future that
were not included in the computation of
diluted income per share because to do
so would have been antidilutive for the
periods presented 8 -- 8 --
====== ====== ====== ======
</TABLE>
7
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Landair Corporation
Notes to Consolidated Financial Statements (continued)
(Unaudited)
4. LONG-TERM DEBT
Effective with the Spin-off of Landair Corporation from Forward Air Corporation
on September 23, 1998, the Company entered into a $15.0 million working capital
line of credit facility and a $10.0 million equipment financing facility with a
Tennessee bank which expires in August 2000. Interest rates for advances under
the facilities vary from LIBOR plus 1.0% to 1.6% based on covenants related to
total indebtedness, cash flows, results of operations and other ratios. Accounts
receivable and certain revenue equipment secure the facilities. Outstanding
letters of credit reduce availability under the working capital line of credit
facility. As of September 30, 1998, the Company had no borrowings and $6.4
million of letters of credit outstanding under the working capital line of
credit facility and no borrowings outstanding under the equipment financing
facility.
The agreements contain, among other things, restrictions that require the
Company to maintain certain levels of net worth and other financial ratios. The
Company was in compliance with these covenants at September 30, 1998.
5. SHAREHOLDERS' EQUITY
Prior to the Spin-off, Forward Air Corporation made a $5.0 million contribution
of capital in the form of cash to Landair Corporation. In addition, the Company
contributed to Forward Air Corporation approximately $2.4 million of net assets
related to the Forward Air operations.
6. INCOME TAXES
For the three and nine months ended September 30, 1998 and 1997, the effective
income tax rate varied from the statutory federal income tax rate of 34%
primarily as a result of the effect of state income taxes, net of the federal
benefit, and permanent differences.
7. CONTINGENCIES
The Company is, from time to time, a party to litigation arising in the normal
course of its business, most of which involve claims for personal injury and
property damage incurred in connection with the transportation of freight.
Management believes none of these actions, individually or in the aggregate,
will have a material adverse effect on the financial condition or results of
operations of the Company.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table sets forth the percentage relationship of expense items to
operating revenue for the periods indicated.
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Three months ended Nine months ended
------------------------------ ------------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
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Operating revenue:
Forward Air, Inc. 4.8% 7.8% 5.4% 6.7%
Other 95.2 92.2 94.6 93.3
---------------------- ----------------------
100.0 100.0 100.0 100.0
Operating expenses:
Salaries, wages and employee
benefits 33.4 33.8 33.1 33.0
Purchased transportation 24.9 22.8 24.4 23.7
Fuel and fuel taxes 10.9 11.6 11.3 12.2
Depreciation and amortization 8.5 8.9 8.8 9.3
Insurance and claims 4.4 6.0 5.3 7.5
Operating leases 0.9 0.7 0.9 0.6
Other operating expenses 10.8 10.8 10.1 10.3
---------------------- ----------------------
93.8 94.6 93.9 96.6
Income from operations 6.2 5.4 6.1 3.4
Other income (expense):
Interest expense (1.7) (1.9) (1.8) (2.1)
Other, net 0.1 0.1 0.1 (0.1)
---------------------- ----------------------
(1.6) (1.8) (1.7) (2.2)
---------------------- ----------------------
Income before income taxes 4.6 3.6 4.4 1.2
Income taxes 1.7 1.2 1.7 0.4
---------------------- ----------------------
Net income 2.9% 2.4% 2.7% 0.8%
====================== ======================
</TABLE>
Results of Operations
Three Months Ended September 30, 1998 Compared to Three Months Ended September
30, 1997
Operating revenue increased by $4.3 million, or 18.4%, to $27.6 million in the
third quarter of 1998 from $23.4 million in 1997. The increase in the operating
revenue resulted primarily from a 21.2% increase in tractors in service in the
third quarter of 1998. During the 1997 period, the Company benefited from the
disruption to the national transportation system brought about by the United
Parcel Service strike which resulted in additional business for the Company and
contributed approximately $500,000 of additional revenue during the third
quarter of 1997. During the third quarter of 1998 and 1997, the average tractors
in service, including owner-operators, were 841 and 694, respectively.
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The operating ratio (operating expenses as a percentage of operating revenue)
was 93.8% for the third quarter of 1998 compared to 94.6% for 1997.
Salaries, wages and employee benefits were 33.4% of operating revenue in the
third quarter of 1998 compared to 33.8% in 1997. The decrease as a percentage of
operating revenue in the third quarter of 1998 was due primarily to a decrease
in the ratio of Company-operated to owner-operator equipment. During the third
quarter of 1998, average Company-operated tractors in service were 583 compared
to 507 in 1997.
Purchased transportation was 24.9% of operating revenue in the third quarter of
1998 compared to 22.8% in 1997. The increase in purchased transportation as a
percentage of operating revenue between periods was primarily attributable to an
increase in the ratio of owner-operator to Company-operated equipment in the
third quarter of 1998. During the third quarter of 1998 and 1997, approximately
258 and 187 of the Company's average tractors in service were contracted through
owner-operators.
Fuel and fuel taxes were 10.9% of operating revenue in the third quarter of 1998
compared to 11.6% in 1997. The decrease in fuel and fuel taxes as a percentage
of operating revenue during the third quarter of 1998 resulted from a 4.8%
decrease in the average fuel price per gallon coupled with a 3.9% increase in
the average miles per gallon. The decrease in fuel and fuel taxes was also
partially attributed to a decrease in the ratio of Company drivers to
owner-operators in the third quarter of 1998.
Depreciation and amortization expense as a percentage of operating revenue was
8.5% in the third quarter of 1998 compared to 8.9% in 1997. The decrease in
depreciation and amortization as a percentage of operating revenue is
attributable to a decrease in the ratio of Company drivers to owner-operators in
the third quarter of 1998.
Insurance and claims were 4.4% operating revenue in the third quarter of 1998
compared to 6.0% in 1997. The improvement in insurance and claims expense is due
primarily to a decrease in the frequency and severity of accidents and lower
premium costs during the third quarter of 1998 compared with 1997.
Operating leases were 0.9% of operating revenue in the third quarter of 1998
compared to 0.7% in 1997. The increase in operating leases as a percentage of
operating revenue is attributed to an increase in rent expense for computer
hardware and software during the period.
Other operating expenses, a large component of which relates to equipment
maintenance, were 10.8% of operating revenue in the third quarter of 1998 and
1997.
Interest expense was $458,000, or 1.7%, of operating revenue in the third
quarter of 1998 compared to $453,000, or 1.9%, in 1997.
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The combined federal and state effective tax rate for the third quarter of 1998
was 37.6% compared to 32.2% for 1997.
As a result of the foregoing factors, net income increased by $231,000, or
40.8%, to $797,000 for the third quarter of 1998 from $566,000 in 1997.
Nine Months Ended September 30, 1998 Compared to Nine Months Ended September 30,
1997
Operating revenue increased by $13.2 million, or 20.0%, to $79.2 million in the
first nine months of 1998 from $66.0 million in 1997. The increase in the
operating revenue resulted primarily from a 17.0% increase in tractors in
service and a 3.0% increase in equipment utilization during the first nine
months of 1998 compared to 1997. During the first nine months of 1998 and 1997,
the average tractors in service, including owner-operators, were 806 and 689,
respectively.
The operating ratio (operating expenses as a percentage of operating revenue)
was 93.9% for the first nine months of 1998 compared to 96.6% for 1997. The
improved operating ratio was due primarily to a lower operating cost structure
resulting from an increase in equipment utilization and additional tractors in
service during the period.
Salaries, wages and employee benefits were 33.1% of operating revenue in the
first nine months of 1998 compared to 33.0% in 1997. The increase as a
percentage of operating revenue in 1998 was due primarily to an increase in
employee benefit costs during the first nine months of 1998 compared to 1997,
partially offset by a decrease in the ratio of Company-operated to
owner-operator equipment. During the first nine months of 1998, average
Company-operated tractors in service were 571 compared to 495 in 1997.
Purchased transportation was 24.4% of operating revenue in the first nine months
of 1998 compared to 23.7% in 1997. The increase in purchased transportation as a
percentage of operating revenue between periods was primarily attributable to an
increase in the ratio of owner-operator to Company-operated equipment in 1998.
During the first nine months of 1998 and 1997, approximately 235 and 194 of the
Company's average tractors in service were contracted through owner-operators.
Fuel and fuel taxes were 11.3% of operating revenue in the first nine months of
1998 compared to 12.2% in 1997. The decrease in fuel and fuel taxes as a
percentage of operating revenue during 1998 resulted from a 9.4% decrease in the
average fuel price per gallon coupled with a 2.1% increase in the average miles
per gallon. The decrease in fuel and fuel taxes as a percentage of operating
revenue was also partially attributed to a decrease in the ratio of Company
drivers to owner-operators during the first nine months of 1998.
Depreciation and amortization expense as a percentage of operating revenue was
8.8% in the first nine months of 1998 compared to 9.3% in 1997. The decrease in
depreciation and amortization as a percentage of operating revenue is primarily
attributable to increased utilization of operating
11
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assets coupled with a lower ratio of Company-operated equipment to
owner-operator equipment during the first nine months of 1998 compared to 1997.
Insurance and claims were 5.3% operating revenue in the first nine months of
1998 compared to 7.5% in 1997. The decrease in insurance and claims as a
percentage of operating revenue is due primarily to a decrease in the frequency
and severity of accidents and lower premium costs during the first nine months
of 1998 compared to 1997.
Operating leases were 0.9% of operating revenue in the first nine months of 1998
compared to 0.6% in 1997. The increase in operating leases as a percentage of
operating revenue is attributed to an increase in rent expense for revenue
equipment and computer hardware and software during the period.
Other operating expenses, a large component of which relates to equipment
maintenance, were 10.1% of operating revenue in 1998 compared to 10.3% in 1997.
The decrease in other operating expenses as a percentage of operating revenue is
attributed to a decrease in the ratio of Company-operated to owner-operator
equipment during the first nine months of 1998 compared to 1997.
Interest expense was $1.3 million, or 1.8%, of operating revenue in the first
nine months of 1998 compared to $1.4 million, or 2.1%, in 1997.
The combined federal and state effective tax rate for 1998 was 38.3% compared to
32.2% for 1997.
As a result of the foregoing factors, net income increased by $1.6 million to
$2.1 million for the first nine months of 1998 compared with $543,000 in 1997.
Liquidity and Sources of Capital
The continued growth of the Company, and the nature of its operations, have
required significant investment in new equipment. The Company has historically
financed revenue equipment purchases with cash flows from operations, and
through borrowing under credit agreements with financial institutions. Working
capital needs have generally been met with cash flows from operations and
borrowings under the Forward Air Corporation line of credit. Net cash provided
by operating activities of the Company was $24.0 for the first nine months of
1998 compared with $12.4 million in the same period of 1997.
Net cash used in investing activities was approximately $13.0 million in the
first nine months of 1998 compared with $7.2 million in the same period of 1997.
Investing activities consisted primarily of the acquisition of additional
revenue equipment and enhanced management information systems during first nine
months of 1998 and 1997.
12
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Net cash provided by financing activities was $5.6 million in the first nine
months of 1998 compared with $5.2 million in the same period of 1997. These
financing activities for the first nine months of 1998 and 1997 included the
continued financing of revenue equipment coupled with repayment of long-term
debt and capital leases. Net cash provided from financing activities for the
first nine months of 1998 also included a $5.0 million capital contribution by
Forward Air to the Company prior to the Spin-off of the Company on September 23,
1998. In addition, prior to the Spin-off, the Company made a non-cash
contribution of net assets totaling $2.4 million to Forward Air. The contributed
net assets were comprised of property and equipment and certain assets used in
the Forward Air operations along with the related debt.
Effective with the Spin-off from Forward Air Corporation on September 23, 1998,
the Company entered into a $15.0 million working capital line of credit facility
and a $10.0 million equipment financing facility with a Tennessee bank which
expires in August 2000. Interest rates for advances under the facilities vary
from LIBOR plus 1.0% to 1.6% based on covenants related to total indebtedness,
cash flows, results of operations and other ratios. Accounts receivable and
certain revenue equipment secure the facilities. Outstanding letters of credit
reduce availability under the working capital line of credit facility. As of
September 30, 1998, the Company had no borrowings and $6.4 million of letters of
credit outstanding under the working capital line of credit facility and no
borrowings outstanding under the equipment financing facility.
Management believes available borrowing under existing lines of credit, future
borrowings under installment notes for revenue equipment, and cash generated by
operations will be sufficient to fund the Company's cash needs and anticipated
capital expenditures through at least the next twelve months.
Impact of Year 2000
Some of the Company's older computer programs and systems were written using two
digits rather than four to define the applicable year. As a result, those
computer programs have time-sensitive software that recognize a date using "00"
as the year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
The Company is in the process of replacing the majority of its key financial and
operational systems as a part of upgrading its systems in the normal course of
business. Management believes that this program will substantially meet or
address its Year 2000 issues. In addition to its replacement program, the
Company will require modifying someof its software and hardware so that its
computer systems will function properly with respect to dates in the Year 2000
and thereafter. The estimated cost of the Company's completed and remaining
replacement and modification for the Year 2000 issue is expected to be less than
$250,000.
The Company also plans to initiate a formal communication process with all its
significant suppliers and large customers to determine the extent to which the
Company's interface systems are vulnerable to the failure of any third party to
remediate its own Year 2000 issues, and expects
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to complete such process during the first quarter of 1999. Once the Company has
completed the process mentioned above and has determined the extent to which the
Company's interface systems are vulnerable to the failure of any third party to
remediate its own Year 2000 issues, the Company expects to develop its plans
(including contingency plans) and budgets to perform any necessary remediation
actions. There is no guarantee that the systems of such other companies will be
timely converted and would not have an adverse effect on the Company.
The system replacements and upgrades are estimated to be completed not later
than June 30, 1999, which is prior to any anticipated impact of Year 2000 issues
on the Company's operating systems. The Company believes that with the
completion of such replacements and upgrades, the Year 2000 issue will not pose
significant operational problems for its computer systems. However, if such
replacements and upgrades are not made, or are not completed timely, or if third
parties with which the Company's systems interface are not replaced or upgraded,
the Year 2000 issue could have a material impact on the operations of the
Company.
Forward-Looking Statements
The Company, or its executive officers and directors on behalf of the Company,
may from time to time make written or oral "forward-looking statements." Written
forward-looking statements may appear in documents filed with the Securities and
Exchange Commission, in press releases and in reports to shareholders. Oral
forward-looking statements may be made by the Company's executive officers and
directors on behalf of the Company to the press, potential investors, securities
analysts and others. The Private Securities Litigation Reform Act of 1995
contains a safe harbor for forward-looking statements. The Company relies on
this safe harbor in making such disclosures. In connection with this safe harbor
provision, the Company is hereby identifying important factors that could cause
actual results to differ materially from those contained in any forward-looking
statement made by or on behalf of the Company. Without limitation, factors that
might cause such a difference include economic factors such as recessions,
inflation, higher interest rates, downturns in customer business cycles,
competition, surplus inventories, loss of a major customer, fuel price
increases, the Company's lack of prior operating history as an independent
entity, the ability of the Company's information systems to handle increased
volume of freight, and the availability and compensation of qualified drivers
and independent owner-operators. The Company disclaims any intent or obligation
to update these forward-looking statements.
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Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is, from time to time, a party to litigation arising in the normal
course of its business, most of which involve claims for personal injury and
property damage incurred in connection with the transportation of freight.
Management believes that none of these actions, individually or in the
aggregate, will have a material adverse effect on the financial condition or
results of operations of the Company.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are included herein:
(a) Exhibits - The response to this portion of Item 6 is submitted as a
separate section of this report.
(b) Reports on Form 8-K - The Company did not file any reports on Form 8-K
during the three months ended September 30, 1998.
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<PAGE> 16
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.
Landair Corporation
Date: November 13, 1998 By: /s/ Edward W. Cook
----------------------------------------
Edward W. Cook
Chief Financial Officer
and Senior Vice President
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Under
Item 601 of
Regulation S-K
- -----------------
<S> <C>
2.1 Distribution Agreement between the
registrant and Forward Air Corporation
3.1 Bylaws of the registrant
10.1 Transition Services Agreement between the
registrant and Forward Air Corporation
10.2 Employee Benefit Matters Agreement between
the registrant and Forward Air Corporation
10.3 Tax Sharing Agreement between the registrant
and Forward Air Corporation
10.4 First Amendment to the Non-Employee
Director Stock Option Plan
10.5 Loan and Security Agreement, dated as of
September 10, 1998, between First
Tennessee Bank National Association and
the registrant
10.6 $15.0 million Master Secured Promissory Note
(Line of Credit), dated as of September 10,
1998, to First Tennessee Bank National
Association
10.7 $10.0 million Secured Promissory Note
(Equipment Loan), dated as of September 10,
1998, to First Tennessee Bank National
Association
27.1 Financial Data Schedule - Period Ended
September 30, 1998 (Electronic Filing Only)
Filing Only)
</TABLE>
17
<PAGE> 1
EXHIBIT 2.1
DISTRIBUTION AGREEMENT
BETWEEN
FORWARD AIR CORPORATION
F/K/A LANDAIR SERVICES, INC.
AND
LANDAIR CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
I. DEFINITIONS........................................................ 1
1.1 General..................................................... 1
II. THE DISTRIBUTION.................................................. 3
2.1 Cooperation Prior to the Distribution....................... 3
2.2 Conditions to Distribution.................................. 3
2.3 The Distribution............................................ 4
III. TRANSACTIONS RELATING TO THE DISTRIBUTION........................ 4
3.1 The Reorganization.......................................... 4
3.2 Company Charter and Bylaws.................................. 5
3.3 Other Agreements............................................ 5
3.4 Operation in the Ordinary Course of Business................ 5
3.5 Collections and Payments after the Distribution Date........ 5
IV. INDEMNIFICATION................................................... 5
4.1 Indemnification by FAF...................................... 5
4.2 Indemnification by the Company.............................. 5
4.3 Limitations on Indemnification Obligations.................. 5
4.4 Procedures for Indemnification.............................. 6
4.5 Releases.................................................... 7
4.6 Environmental Liabilities................................... 7
V. ACCESS TO INFORMATION; SERVICES.................................... 7
5.1 Access to Information....................................... 7
5.2 Production of Witnesses..................................... 8
5.3 Provision of Services....................................... 8
5.4 Reimbursement............................................... 8
5.5 Retention of Records........................................ 8
5.6 Confidentiality............................................. 8
5.7 Provision of Corporate Records.............................. 9
5.8 Privileged Matters.......................................... 9
VI. SHARED CLAIMS..................................................... 9
6.1 Acknowledgment.............................................. 9
6.2 Notification................................................ 9
6.3 Cooperation................................................. 9
6.4 Liability................................................... 9
VII. MISCELLANEOUS.................................................... 10
7.1 Complete Agreement; Construction............................ 10
7.2 Expenses.................................................... 10
7.3 Governing Law............................................... 10
7.4 Notices..................................................... 10
7.5 Amendments and Waivers...................................... 10
7.6 Counterparts................................................ 10
7.7 Successors and Assigns...................................... 10
7.8 Termination................................................. 10
7.9 No Third-Party Beneficiaries................................ 10
7.10 Titles and Headings......................................... 10
7.11 Legal Enforceability........................................ 10
7.12 Further Assurances.......................................... 11
7.13 No Solicitation of Employees................................ 11
</TABLE>
<PAGE> 3
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (this "Agreement") is made as of this
18th day of September, 1998 by and between FORWARD AIR CORPORATION, a
Tennessee corporation f/k/a Landair Services, Inc. ("FAF"), and LANDAIR
CORPORATION, a Tennessee corporation (the "Company").
RECITALS
WHEREAS, FAF is the holder of all of the issued and outstanding shares of
$.01 par value per share common stock of the Company (the "Company Common
Stock");
WHEREAS, the Board of Directors of FAF (the "FAF Board") has determined
that it is advisable and in the best interests of FAF, its shareholders and the
Company to distribute (the "Distribution") all of the issued and outstanding
shares of Company Common Stock to the holders of the $.01 par value per share
common stock of FAF (the "FAF Common Stock"); and
WHEREAS, FAF and the Company have determined that it is necessary and
desirable to set forth the principal corporate transactions required to effect
the Distribution and certain other agreements that will govern certain matters
relating to the Distribution and the relationships thereafter between FAF and
the Company and their respective subsidiaries following the Distribution;
NOW, THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth and other good and valuable consideration, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 General. As used in this Agreement, the following terms shall have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
ACTION: any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory
or administrative agency or commission or any arbitration tribunal.
AFFILIATE: as defined in Rule 12b-2 under the Exchange Act.
FAF GROUP: at any time following the Distribution, FAF and all
entities which are Affiliates of FAF at such time.
CODE: the Internal Revenue Code of 1986, as amended.
COMMISSION: the United States Securities and Exchange Commission.
COMPANY GROUP: at any time following the Distribution, the Company
and all entities which are Affiliates of the Company at such time.
DISTRIBUTION AGENT: SunTrust Bank, Atlanta.
DISTRIBUTION DATE: the date (as determined by the FAF Board or a
committee thereof) as of which the Distribution shall be effected.
DISTRIBUTION RATIO: the ratio of FAF Common Stock to Company Common
Stock to be distributed in the Distribution.
EMPLOYEE BENEFIT MATTERS AGREEMENT: the Employee Benefit Matters
Agreement to be entered into by FAF and the Company as of the Distribution
Date, the form of which is attached hereto as Annex A.
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<PAGE> 4
ENVIRONMENTAL LIABILITIES: any Liabilities arising from, under or
relating to any environmental, health or safety law, rule, regulation,
Action, threatened Action, order or consent decree.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
FORM 10: the Registration Statement on Form 10 filed by the Company
with the Commission to effect the registration of the Company Common Stock
under the Exchange Act.
FORWARD AIR: Forward Air, Inc., a Tennessee corporation.
FORWARD AIR BUSINESS: the business of providing the
less-than-truckload movement of deferred air freight as conducted by FAF
prior to the Distribution primarily through the FAF Group.
INFORMATION STATEMENT: the Information Statement on Form 14C filed by
the Company with the Commission and included in the Form 10 at the time of
its effectiveness.
INSURANCE PROCEEDS: those monies (i) received by an insured from an
insurance carrier on an insurance claim or (ii) paid by an insurance
carrier on behalf of an insured on an insurance claim, in either case net
of any applicable deductibles, retentions or costs paid by such insured,
but such term does not refer to proceeds received from an insurer on an
employee benefits group insurance policy.
IRS: the United States Internal Revenue Service.
INTERNATIONAL: Forward Air International Airlines, Inc., a Tennessee
corporation.
LIABILITIES: any and all debts, liabilities, obligations, absolute or
contingent, asserted or unasserted, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, direct or indirect,
whenever arising, including all costs and expenses relating thereto, and
including, without limitation, those debts, liabilities and obligations
arising under any law, rule, regulation, Action, threatened Action, order
or consent decree of any governmental entity or any award of any arbitrator
of any kind, and those arising under any contract, commitment or
undertaking including those arising under this Agreement.
LICENSING: Forward Air Licensing Company, a Delaware corporation.
LOSSES: any and all debts, losses, Liabilities, claims, damages,
obligations, payments or costs and expenses, absolute or contingent,
matured or unmatured, liquidated or unliquidated, accrued or unaccrued,
known or unknown, direct or indirect (including, without limitation, the
costs and expenses of any and all Actions, threatened Actions, demands,
assessments, judgments, settlements and compromises relating thereto and
attorneys' fees and any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any such Actions or
threatened Actions).
OTHER AGREEMENTS: the Employee Benefit Matters Agreement, the
Services Agreement, the Tax Sharing Agreement and such other agreements and
understandings as are required to carry out the transactions authorized by
this Agreement.
RECORD DATE: the close of business on the date to be determined by
the FAF Board or a committee thereof as the record date for the
determination of shareholders of record of FAF entitled to receive the
Distribution.
REORGANIZATION: shall have the meaning set forth in SECTION 3.1
hereof.
ROYALTY: Forward Air Royalty Company, a Delaware corporation.
SECURITIES ACT: the Securities Act of 1933, as amended.
SERVICES AGREEMENT: the Transition Services Agreement to be entered
into by FAF and the Company as of the Distribution Date, the form of which
is attached hereto as Annex B.
SUBSIDIARIES: with respect to any entity, unless otherwise indicated,
shall be deemed to refer to both direct and indirect subsidiaries of such
entity.
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<PAGE> 5
TAX SHARING AGREEMENT: the Tax Sharing Agreement to be entered into
by FAF and the Company as of the Distribution Date, the form of which is
attached hereto as Annex C.
TRANSPORT: Landair Transport, Inc., a Tennessee corporation.
TRANSPORTATION PROPERTIES: Transportation Properties, Inc., a
Tennessee corporation.
TRANSPORTATION PROPERTIES (TEXAS): Transportation Properties (Texas),
Inc., a Tennessee corporation.
TRUCKLOAD BUSINESS: the business of providing short- to medium-haul
delivery to the high-service segment of the general commodities truckload
market as conducted by FAF prior to the Distribution primarily through the
Company Group.
VOLUNTEER: Volunteer Adjustment, Inc., a Tennessee corporation.
ARTICLE II
THE DISTRIBUTION
2.1 Cooperation Prior to the Distribution. Prior to the Distribution:
(a) FAF and the Company shall prepare, and the Company shall file with
the Commission, the Form 10. FAF and the Company shall prepare, and FAF
shall mail, prior to the Distribution Date, to the holders of FAF Common
Stock, the Information Statement, which shall set forth appropriate
disclosure concerning the Company, the Distribution and other matters. The
Company shall use reasonable efforts to cause the Form 10 to become
effective under the Exchange Act.
(b) FAF and the Company shall cooperate in preparing, filing with the
Commission and causing to become effective any registration statements or
amendments thereto that are appropriate to reflect the establishment of or
amendments to any employee benefit and other plans contemplated by the
Employee Benefit Matters Agreement.
(c) Prior to the Distribution, FAF will change the symbol under which
it is listed on The Nasdaq Stock Market to "FWRD" (or such other symbol as
FAF deems appropriate) and the Company shall prepare, file and pursue an
application to permit listing of the Company Common Stock on The Nasdaq
Stock Market (and/or such other exchange as the Company deems appropriate),
under the symbol "LAND" (or such other symbol as the Company deems
appropriate).
2.2 Conditions to Distribution. The FAF Board shall in its discretion
establish the Record Date and the Distribution Date and all appropriate
procedures in connection with the Distribution. The Distribution shall be
subject to satisfaction of each of the following conditions, among other things:
(a) the consummation of the Reorganization in accordance with SECTION 3.1 hereof
and certain internal corporate reorganizations; (b) the renegotiation of certain
FAF credit facilities and debt instruments, including the execution of certain
consents, waivers and amendments thereto by lenders, all on terms satisfactory
to the Board of Directors of FAF; (c) the establishment of separate credit
facilities for the Company and FAF on terms satisfactory to the Board of
Directors of the Company and FAF; (d) the receipt of certain third-party
consents relating to certain contracts, licenses and the Other Agreements; (e)
receipt by FAF of a private letter ruling from the IRS to the effect that, among
other things, the Distribution will qualify as a tax-free distribution for
Federal income tax purposes under Section 355 of the Code, or at the option of
the FAF Board, an opinion of special tax counsel to FAF, in form and substance
satisfactory to the FAF Board, to the effect that, among other things, the
Distribution will constitute such a tax-free distribution under Section 355 of
the Code; (f) the Form 10 having become effective and no stop order being in
effect; (g) there not being in effect any statute, rule, regulation or order of
any court, governmental or regulatory body that prohibits or makes illegal the
transactions contemplated by the Distribution; and (h) approval for listing of
the Company Common Stock on The Nasdaq Stock Market. The FAF Board reserves the
right in its discretion, other than with respect to those set forth in clauses
(a), (e), (f) and (g), to waive the satisfaction of any condition to the
Distribution;
3
<PAGE> 6
provided, however, that the FAF Board may abandon, defer or modify the
Distribution and the related transactions at any time prior to the Distribution
Date.
2.3 The Distribution. On the Distribution Date, subject to the conditions
set forth in this Agreement, FAF shall deliver to the Distribution Agent a
certificate or certificates representing the number of then outstanding shares
of Company Common Stock to be distributed in the Distribution, endorsed in
blank, and shall instruct the Distribution Agent to distribute to each holder of
record of FAF Common Stock on the Record Date a certificate or certificates
representing one share of Company Common Stock for one share of FAF Common Stock
so held. The Company agrees to provide all certificates for shares of Company
Common Stock that the Distribution Agent shall require in order to effect the
Distribution.
ARTICLE III
TRANSACTIONS RELATING TO THE DISTRIBUTION
3.1 The Reorganization. Prior to the Distribution Date, FAF and the Company
shall cause, or have caused, the following transactions to occur (the
"Reorganization"):
(a) FAF shall take all steps necessary to cause Transport, its wholly
owned subsidiary, to incorporate FAF, Inc. ("FAF, Inc.") and Landair
Transportation Properties, Inc. ("LTP") as wholly owned Tennessee
corporations;
(b) FAF shall cause Transport to transfer such of its assets
associated with the Forward Air Business (including all goodwill and other
intangibles associated with such Forward Air Business) to FAF, Inc. in
exchange for all of the issued and outstanding stock of FAF, Inc. plus the
assumption by FAF, Inc. of liabilities associated with the transferred
assets.
(c) FAF shall cause Transport to distribute all of the issued and
outstanding stock of FAF, Inc. to its sole shareholder, FAF.
(d) FAF shall cause Transportation Properties to transfer the real
estate on which a Greene County, Tennessee maintenance facility is being
constructed to LTP in exchange for cash and/or LTP's assumption of the debt
associated with such real estate.
(e) FAF shall borrow approximately $12.1 million from an unrelated
third party, and use the proceeds of any such borrowing to pay any
intercompany debt owed by Forward Air to Transport. In addition, FAF will
transfer to the Company in the form of a capital contribution $5 million.
(f) FAF shall incorporate, or have incorporated, the Company as a
wholly owned Tennessee corporation for the purpose of facilitating the
Distribution and the Reorganization.
(g) FAF shall transfer all of the issued and outstanding stock of each
of Transport and Volunteer and other assets directly held by FAF (including
trademarks, tradenames, goodwill and any other intangibles associated with
the Truckload Business) that are associated with the Truckload Business to
the Company in exchange for all of the issued and outstanding stock of the
Company. Immediately thereafter, the Company will transfer to Transport all
of the assets that the Company received from FAF, except for all of the
issued and outstanding stock of Transport and Volunteer and the trademarks
and tradenames associated with the Truckload Business (including any
goodwill associated with such trademarks and tradenames).
(h) Immediately prior to the Distribution Date, FAF and the Company
shall take all steps necessary to increase the outstanding shares of
Company Common Stock so that, immediately prior to the Distribution, FAF
will hold a number of shares of Company Common Stock sufficient to enable
it to complete the Distribution based on the Distribution Ratio. FAF and
the Company shall take all steps necessary to elect as directors of the
Company, on or prior to the Distribution Date, the persons named in the
Form 10 to constitute the board of directors of the Company on the
Distribution Date.
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<PAGE> 7
3.2 Company Charter and Bylaws. On or prior to the Distribution Date, (a)
FAF shall approve and cause the Charter of the Company substantially in the form
of Annex D hereto to be filed with the Secretary of State of Tennessee and to be
in effect on the Distribution Date and (b) FAF shall adopt the Bylaws of the
Company substantially in the form of Annex E hereto to be in effect on the
Distribution Date.
3.3 Other Agreements. On or prior to the Distribution Date, FAF and the
Company shall enter into, and (if applicable) shall cause their respective
Subsidiaries to enter into, the Other Agreements and any other agreements
necessary or appropriate in connection with the transactions contemplated hereby
and thereby. In the event of a conflict between the terms of this Agreement and
the terms of any of the Other Agreements or any such other agreements, the terms
of this Agreement shall govern.
3.4 Operation in the Ordinary Course of Business. Prior to the
Distribution Date, the Company shall, and shall cause each of its Subsidiaries
to, conduct its business and operations in the ordinary course of business,
consistent with past practice, and shall, and shall cause each of its
Subsidiaries to, continue to provide services, pay accounts payable and
invoices, deposit and accept payments, and make capital expenditures in the
ordinary course of business, all consistent with past practice. The Company
shall not, and shall cause each of its Subsidiaries not to, undertake any
arrangement with the intent to delay receipt of any funds by the Company or its
Subsidiaries until on or after the Distribution Date or to accelerate any
payment to be made by the Company or its Subsidiaries prior to the Distribution
Date, except in each case in the ordinary course of business consistent with
past practice.
3.5 Collections and Payments after the Distribution Date. Except as may
be explicitly provided in this Agreement and the Other Agreements, any cash
receipts arising out of or relating to the assets, Liabilities or operations of
the Company or its past or present Subsidiaries received on or after the
Distribution Date shall be retained by the Company and such Subsidiaries, and
any Liabilities or obligations, arising out of, relating to or asserted on the
basis of the assets, Liabilities or operations of the Company or its past or
present Subsidiaries due and unpaid on and after the Distribution Date, or
incurred on and after the Distribution Date, shall be payable by the Company and
such Subsidiaries. The Company and FAF shall settle all payments received from
account debtors of either of them to the effect that amounts properly owing to
the Company are received by the Company and amounts properly owing to FAF are
received by FAF, with such settlements to occur by wire transfer (a) daily, for
the three-month period beginning on the Distribution Date and (b) weekly,
thereafter.
ARTICLE IV
INDEMNIFICATION
4.1 Indemnification by FAF. Except as otherwise provided by any of the
Other Agreements or as contemplated by Section 4.5 or Article VI hereof,
effective as of the Distribution Date, FAF and each other member of the FAF
Group agree to indemnify, defend and hold harmless the Company, each other
member of the Company Group, and their present or former officers, directors,
shareholders, agents, employees, representatives, successors-in-interest,
parents, Affiliates, insurers, attorneys and assigns (the "Company Indemnitees")
from and against any and all Losses of the Company Indemnitees arising out of or
related in any manner to any item set forth on Schedule 4.1 hereto.
4.2 Indemnification by the Company. Except as otherwise provided by any
of the Other Agreements or as contemplated by Section 4.5 or Article VI hereof,
effective as of the Distribution Date, the Company and each other member of the
Company Group agree to indemnify, defend and hold harmless FAF, each other
member of the FAF Group, and their present or former officers, directors,
shareholders, agents, employees, representatives, successors-in-interest,
parents, Affiliates, insurers, attorneys and assigns (the "FAF Indemnitees")
from and against any and all Losses of the FAF Indemnitees arising out of or
related in any manner to any item set forth on Schedule 4.2 hereto.
4.3 Limitations on Indemnification Obligations. The amount that either
FAF or the Company (an "Indemnifying Party") is or may be required to pay to an
indemnified party ("Indemnitee") pursuant to Section 4.1 or 4.2, or any other
section of this Agreement providing for indemnification, shall be reduced by
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<PAGE> 8
any Insurance Proceeds or other amounts actually recovered by or on behalf of
such Indemnitee, in reduction of the related Loss. If an Indemnitee shall have
received the payment required by this Agreement from an Indemnifying Party in
respect of any Loss and shall subsequently actually receive Insurance Proceeds
or other amounts in respect of such Loss, then such Indemnitee shall pay to such
Indemnifying Party a sum equal to the amount of such Insurance Proceeds or other
amounts actually received (up to but not in excess of the amount of any
indemnity payment made hereunder). No insurer or other third party shall: (a) be
relieved of the responsibility to pay any claims which it would otherwise be
obligated to pay in the absence of the foregoing indemnification provisions; (b)
solely by virtue of the indemnification provisions hereof have any subrogation
rights with respect to any claims which it would otherwise be obligated to pay;
or (c) be entitled to a benefit it would not be entitled to receive in the
absence of the foregoing indemnification provisions. Any Indemnifying Party
shall succeed to the rights of any Indemnitee with respect to any matter
contemplated by this SECTION 4.3.
4.4 Procedures for Indemnification. (a) If an Indemnitee shall receive
notice or otherwise learn of the assertion of any claim or commencement of any
proceeding (including any governmental investigation) by a person who is not a
party to this Agreement (or any Affiliate of either party) (a "Third-Party
Claim") with respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to this Agreement, such Indemnitee shall give such
Indemnifying Party written notice thereof promptly after becoming aware of such
Third-Party Claim setting forth the particulars as to such claim or proceeding
in reasonable detail; provided that the failure of any Indemnitee to give notice
as provided in this SECTION 4.4(A) shall not relieve the related Indemnifying
Party of its obligations under this ARTICLE IV, unless such Indemnifying Party
is actually prejudiced by such failure to give notice, and then only to the
extent of such actual prejudice.
(b) An Indemnifying Party may, to the extent it wishes within 30 days of
receipt of notice of a Third-Party Claim and at its cost and expense, elect to
defend or to seek to settle or compromise any Third-Party Claim; provided that
the Indemnitee may participate in such settlement or defense through its chosen
counsel at its sole cost and expense. After notice from an Indemnifying Party to
an Indemnitee of its election to assume the defense of a Third-Party Claim, such
Indemnifying Party shall not be liable to such Indemnitee under this ARTICLE IV
for any legal or other expenses (except expenses approved in advance by the
Indemnifying Party) subsequently incurred by such Indemnitee in connection with
the defense thereof; provided that if the defendants in any such Third-Party
Claim include both the Indemnifying Party and one or more Indemnitees, and in
any Indemnitee's reasonable judgment a conflict of interest between one or more
of such Indemnitees and such Indemnifying Party exists in respect of such claim,
such Indemnitees shall have the right to employ separate counsel to represent
such Indemnitees. In that event, the reasonable fees and expenses of such
separate counsel (but not more than one separate counsel reasonably satisfactory
to the Indemnifying Party) shall be paid by such Indemnifying Party; provided
further if and to the extent that there is a conflict of defenses or positions
among the Indemnitees, the Indemnitees shall have the right to retain such
number of additional separate counsel, reasonably satisfactory to the
Indemnifying Party, as is reasonably necessary to avoid such conflicts, and the
Indemnifying Party shall be responsible for the reasonable fees and expenses of
such additional separate counsel; provided further that the Indemnitee may
participate in the settlement or defense of a Third-Party Claim through counsel
chosen by such Indemnitee if the fees and expenses of such counsel shall be
borne by such Indemnitee. If an Indemnifying Party elects not to assume
responsibility for defending a Third-Party Claim, such Indemnitee may defend or
seek to compromise or settle such Third-Party Claim, but shall not thereby waive
any right to indemnity therefor pursuant to this Agreement. Notwithstanding the
foregoing, the Indemnifying Party shall not be liable for any settlement of any
Third-Party Claim effected without its written consent. The Indemnifying Party
shall not, except with the consent of the Indemnitee, (i) enter into any such
settlement that does not include as an unconditional term thereof the giving by
the person or persons asserting such Third-Party Claim to all Indemnitees an
unconditional release from all Liability with respect to such Third-Party Claim,
or (ii) consent to entry of any judgment.
(c) Any claim on account of a Loss that does not result from a Third-Party
Claim shall be asserted by written notice given by the Indemnitee to the
Indemnifying Party. Such Indemnifying Party shall have a
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<PAGE> 9
period of 30 days after the receipt of such notice within which to respond
thereto. If such Indemnifying Party does not respond within such 30-day period,
such Indemnifying Party shall be deemed to have refused to accept responsibility
to make payment. If such Indemnifying Party does not respond within such 30-day
period or rejects such claim in whole or in part, such Indemnitee shall be free
to pursue such remedies as may be available to such party under this Agreement
or under applicable law.
(d) In addition to any adjustments required pursuant to SECTION 4.3, if the
amount of any Loss shall, at any time subsequent to the payment required by this
Agreement, be reduced by recovery, settlement or otherwise, the amount of such
reduction that has been received by the Indemnitee, less any expenses properly
incurred in connection therewith, shall promptly be repaid by the Indemnitee to
the Indemnifying Party.
(e) In the event of payment by an Indemnifying Party to any Indemnitee in
connection with any Third-Party Claim, such Indemnifying Party shall have all
rights of subrogation and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third-Party Claim or against any other person. Such
Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner,
and at the cost and expense of such Indemnifying Party, in prosecuting any
subrogated right or claim.
(f) Notwithstanding anything to the contrary herein or in the Other
Agreements, the foregoing indemnification provisions and procedures shall apply
to any other indemnification agreements herein or in the Other Agreements.
4.5 Releases. (a) Subject to ARTICLE VI and effective on the Distribution
Date, the Company and each other member of the Company Group releases and
forever discharges FAF, each other member of the FAF Group, and their present or
former officers, directors, shareholders, agents, employees, representatives,
successors-in-interest, parents, Affiliates, insurers, attorneys and assigns of
and from any and all Liabilities (other than those for which indemnification is
available under this ARTICLE IV and any of the Other Agreements (subject to the
provisions of SECTION 4.3)).
(b) Subject to ARTICLE VI and effective on the Distribution Date, FAF and
each other member of the FAF Group releases and forever discharges the Company,
each other member of the Company Group and their present or former officers,
directors, shareholders, agents, employees, representatives, successors-in-
interest, parents, Affiliates, insurers, attorneys and assigns of and from any
and all Liabilities (other than those for which indemnification is available
under (i) this ARTICLE IV and (ii) any of the Other Agreements (subject to the
provisions of SECTION 4.3)).
4.6 Environmental Liabilities. Notwithstanding anything contained herein
or in any of the Other Agreements to the contrary, neither party shall have any
obligation to indemnify the other party with respect to any Environmental
Liabilities.
ARTICLE V
ACCESS TO INFORMATION; SERVICES
5.1 Access to Information. From and after the Distribution Date, FAF
shall, and shall cause its Subsidiaries to, afford to the Company and its
authorized accountants, counsel and other designated representatives
(collectively, "Representatives") reasonable access (including using reasonable
efforts to give access to the person or firms possessing information) and
duplicating rights during normal business hours to all administrative records,
books, contracts and instruments, and all Company-owned computer software and
computer data and other Company-owned data and information (collectively, but
excluding all software not owned by the Company, "Information") within FAF's or
any such Subsidiary's possession or control relating to the Company or any
Company Subsidiary and to any property owned by FAF that was leased or operated
by the Company or any Company Subsidiary, insofar as such access is reasonably
required by the Company or any Company Subsidiary. Similarly, the Company shall,
and shall cause its Subsidiaries to, afford to FAF and its Representatives
reasonable access (including using reasonable efforts to give access to persons
or firms possessing Information) and duplicating rights during normal business
hours to Information within the
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<PAGE> 10
Company's or any such Subsidiary's possession or control relating to FAF or any
FAF Subsidiary or relating to the Company prior to the Distribution Date and to
any property owned by the Company that was leased or operated by FAF or any FAF
Subsidiary (other than the Company and its Subsidiaries), insofar as such access
is reasonably required by FAF or any FAF Subsidiary. Information may be
requested under this ARTICLE V for, without limitation, audit, accounting,
claim, litigation and tax purposes, as well as for purposes of fulfilling
disclosure and reporting obligations and for performing this Agreement and the
transactions contemplated hereby.
5.2 Production of Witnesses. After the Distribution Date, each of FAF and
the Company shall, and shall cause its respective Subsidiaries to, use
reasonable efforts to make available to the other party and its Subsidiaries,
upon written request, its directors, officers, employees and agents as witnesses
to the extent that any such person may reasonably be required in connection with
any legal, administrative or other proceedings in which the requesting party may
from time to time be involved.
5.3 Provision of Services. In addition to any services contemplated to be
provided following the Distribution Date by any of the Other Agreements, each
party, upon written request, shall make available to the other party, during
normal business hours and in a manner that will not interfere unreasonably with
such party's business, its financial, tax, accounting, legal, employee benefits
and similar staff services (collectively, "Services") whenever and to the extent
that they may be reasonably required in connection with the preparation of tax
returns, audits, claims, litigation or administration of employee benefit plans,
and otherwise to assist in effecting an orderly transition following the
Distribution.
5.4 Reimbursement. Except to the extent otherwise provided in any of the
Other Agreements, each party providing Information, witnesses or Services under
SECTION 5.1, 5.2 or 5.3 to the other party shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payment for all
out-of-pocket costs and expenses as may be reasonably incurred in providing such
Information, witnesses or Services. For purposes of this SECTION 5.4, salaries
and other compensation payable to employees of either party shall be deemed to
be an out-of-pocket cost or expense reimbursable hereunder.
5.5 Retention of Records. Except as otherwise required by law or agreed
to in writing, each of FAF and the Company shall retain, and shall cause its
respective Subsidiaries to retain following the Distribution Date, all
significant information ("Information") relating to the business of the other
and the other's subsidiaries, for a period (a "Retention Period") consistent
with the document retention policies in effect at FAF and the Company,
respectively. In addition, such Information shall not be destroyed or otherwise
disposed of if during such period a party shall request in writing that any of
the Information be retained for additional specific and reasonable periods of
time at the expense of the party so requesting. After the applicable Retention
Period, any party may destroy or otherwise dispose of any Information at any
time, provided that, prior to such destruction or disposal, (a) such party shall
provide no less than ninety (90) days' prior written notice to the other party,
identifying the Information proposed to be destroyed or disposed of, and (b) if
the recipient of such notice shall request in writing prior to the scheduled
date for such destruction or disposal that any of the Information proposed to be
destroyed or disposed of be delivered to such requesting party, the party
proposing the destruction or disposal shall promptly arrange for the delivery of
such of the Information as was requested at the expense of the requesting party.
5.6 Confidentiality. FAF and each other member of the FAF Group on the
one hand, and the Company and each other member of the Company Group on the
other hand, shall use commercially reasonable efforts to hold, and cause their
Representatives to hold, in strict confidence, all Information concerning the
other in their possession or furnished by the other or the other's
Representatives pursuant to this Agreement or any of the Other Agreements
(except to the extent that such Information is (a) in the public domain through
no fault of such party or (b) later lawfully acquired by such party on a
non-confidential basis from other sources which are not subject to any
confidentiality litigation with the subject party or subsequently developed by
such party), and neither party shall release or disclose such Information to any
other person, except to its auditors, attorneys, financial advisors, bankers and
other consultants and advisors, and on terms and conditions substantially the
same as the terms and conditions on which such party releases
8
<PAGE> 11
its own Information, unless compelled to disclose by judicial or administrative
process or, as advised by its counsel, by other requirements of law.
5.7 Provision of Corporate Records. (a) Except as may otherwise be
provided in any of the Other Agreements, FAF shall arrange as soon as
practicable following the Distribution Date, to the extent not previously
delivered, for the delivery to the Company of the Company's books and records in
its possession, except to the extent such items are already in the possession of
the Company. Such books and records shall be the property of the Company, but
shall be available to FAF for review and duplication until FAF shall notify the
Company in writing that such records are no longer of use to FAF.
(b) Except as otherwise provided in any of the Other Agreements, the
Company shall arrange as soon as practicable following the Distribution Date, to
the extent not previously delivered, for the delivery to FAF of FAF's and its
Subsidiaries' books and records in its possession, except to the extent such
items are already in the possession of FAF or a Subsidiary of FAF. Such books
and records shall be the property of FAF, but shall be available to the Company
for review and duplication until the Company shall notify FAF in writing that
such records are no longer of use to the Company.
5.8 Privileged Matters. The Company and FAF recognize that legal and
other professional services that have been and will be provided prior to the
Distribution Date have been and will be rendered for the benefit of both FAF and
the Company and that both FAF and the Company should be deemed to be the client
for the purposes of asserting all privileges related thereto. No party may waive
any privilege which could be asserted under any applicable law, and in
connection with which the other party has a material interest, without the
consent of the other party, except to the extent reasonably required in
connection with any litigation with third parties.
ARTICLE VI
SHARED CLAIMS
6.1 Acknowledgment. Each party acknowledges that, from and after the
Distribution Date, there may be claims and proceedings against such party and
its Subsidiaries that relate (in whole or in part) to activities alleged to have
transpired prior to the Distribution Date and with respect to which it would be
fair and appropriate to apportion Liability therefor between the parties
("Shared Claims").
6.2 Notification. If any party shall receive notice or otherwise learn of
the assertion of any claim or the commencement of any proceeding which such
party believes may constitute a Shared Claim (including, without limitation, any
such claim or proceeding that names or identifies the other party or any of its
Subsidiaries as a responsible party), such party shall (a) immediately assume
the defense thereof and shall in all respects respond thereto in a timely manner
and (b) promptly provide written notice thereof to the other party, setting
forth the particulars as to such claim or proceeding in reasonable detail;
provided that the failure of such party to give such notice shall not relieve
the other party of any obligation to accept Liability unless it is actually
prejudiced by such failure, and then only to the extent of such actual
prejudice.
6.3 Cooperation. The parties shall cooperate with each other in the
defense or settlement of Shared Claims to the effect that (a) subject to the
provisions of SECTION 6.2, the party bearing the greater Liability shall be
responsible for the control and administration of any Shared Claim and (b) the
other party shall cooperate with such party with respect to such control and
administration.
6.4 Liability. The parties shall seek to apportion Liability between them
with respect to any Shared Claim, and in so doing shall take cognizance of all
relevant factors, including but not limited to, the time and duration of any
alleged activity giving rise thereto, the benefit sought to be achieved by the
activity giving rise to the Shared Claim, and the employees involved in the
activity giving rise to the Shared Claim.
9
<PAGE> 12
ARTICLE VII
MISCELLANEOUS
7.1 Complete Agreement; Construction. This Agreement and the Other
Agreements, including any schedules and exhibits hereto or thereto, shall
constitute the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter.
7.2 Expenses. Except as otherwise set forth in this Agreement and the
Other Agreements, each party shall bear its own costs and expenses that are
necessary to effect the Distribution and that arise after the Distribution and
are related to the Distribution.
7.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee without regard to the
principles of conflicts of laws thereof.
7.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be delivered by hand,
mailed by registered or certified mail (return receipt requested), or sent by
cable, telegram, telecopy (confirmed by regular, first-class mail), to the
parties at the following addresses (or at such other addresses for a party as
shall be specified by like notice) and shall be deemed given on the date on
which such notice is received:
<TABLE>
<S> <C>
if to FAF: if to the Company:
Forward Air Corporation Landair Corporation
430 Airport Road 430 Airport Road
P.O. Box 1058 P.O. Box 1058
Greeneville, Tennessee 37745 Greeneville, Tennessee 37745
Attn: General Counsel Attn: General Counsel
</TABLE>
7.5 Amendments and Waivers. This Agreement may not be altered or amended,
nor may rights hereunder be waived, except by an instrument in writing executed
by the party or parties to be charged with such amendment or waiver. No waiver
of any term, provision or condition of or failure to exercise or delay in
exercising any rights or remedies under this Agreement, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, provision, condition, right or remedy or as a waiver of
any other term, provision or condition of this Agreement.
7.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same Agreement.
7.7 Successors and Assigns. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns.
7.8 Termination. This Agreement may be terminated and the Distribution
abandoned at any time prior to the Distribution Date by and in the sole
discretion of the FAF Board without the approval of the Company or the
shareholders of FAF. In the event of such termination, no party shall have any
Liability of any kind to any other party on account of such termination except
that expenses incurred in connection with the transactions contemplated hereby
shall be paid as provided in Section 7.2.
7.9 No Third-Party Beneficiaries. Except for the provisions of ARTICLE IV
relating to Indemnitees, this Agreement is solely for the benefit of the parties
hereto and their respective Affiliates and should not be deemed to confer upon
third parties (including any employee of the FAF Group or the Company Group) any
remedy, claim, reimbursement, cause of action or other right other than those
existing without reference to this Agreement.
7.10 Titles and Headings. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
7.11 Legal Enforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability
10
<PAGE> 13
without invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to any
rights or remedies otherwise available to any party hereto, each party hereto
acknowledges that damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
7.12 Further Assurances. In addition to the actions specifically provided
for elsewhere in this Agreement, each of the parties hereto will use its
reasonable efforts to (a) execute and deliver such further documents and take
such other actions as any other party may reasonably request in order to
effectuate the purposes of this Agreement and to carry out the terms hereof, and
(b) take, or cause to be taken, all actions, and to do, or cause to be done, all
things, reasonably necessary, proper or advisable under applicable laws,
regulations and agreements or otherwise to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
using its reasonable efforts to obtain any consents and approvals and make any
filings and applications necessary or desirable in order to consummate the
transactions contemplated by this Agreement.
7.13 No Solicitation of Employees. For a period of three years after the
Distribution Date, neither FAF nor the Company, nor any of their Subsidiaries,
will directly solicit the employment of any employee of the other company, or
any of its Subsidiaries, without the prior written consent of such other
company.
11
<PAGE> 14
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
FORWARD AIR CORPORATION
By: /s/ Bruce A. Campbell
--------------------------------------
Its: President
--------------------------------------
LANDAIR CORPORATION
By: E. R. Brown
--------------------------------------
Its: President
--------------------------------------
Acknowledged and Agreed by the following entities with respect to the indicated
Sections of this Agreement:
Landair Transport, Inc.
(with respect to Sections 4.1, 4.5 and
5.6)
By: /s/ E. R. Brown
- --------------------------------------
Its: President
- --------------------------------------
Transportation Properties (Texas), Inc.
(with respect to Sections 4.1, 4.5 and
5.6)
By: /s/ Bruce A. Campbell
- --------------------------------------
Its: President
- --------------------------------------
Volunteer Adjustment, Inc.
(with respect to Sections 4.1, 4.5 and
5.6)
By: /s/ Jeffrey S. Kleiber
- --------------------------------------
Its: President
- --------------------------------------
Landair Transportation Properties, Inc.
(with respect to Sections 4.1, 4.5 and
5.6)
By: /s/ Richard H. Roberts
- --------------------------------------
Its: President
- --------------------------------------
Forward Air, Inc.
(with respect to Sections 3.5, 4.2,
4.5 and 5.6)
By: /s/ Bruce A. Campbell
- --------------------------------------
Its: President
- --------------------------------------
FAF, Inc.
(with respect to Sections 3.5, 4.2,
4.5 and 5.6)
By: /s/ Bruce A. Campbell
- --------------------------------------
Its: President
- --------------------------------------
12
<PAGE> 15
SCHEDULE 4.1
Items with respect to which FAF shall indemnify the Company Indemnitees
pursuant to SECTION 4.1 in accordance with the provisions of ARTICLE IV of this
Agreement:
1. All Losses arising out of the business conducted or to be conducted
by FAF or any member of the FAF Group, whether such Losses relate to events
occurring, or whether such Losses are asserted, before or after the
Distribution Date, excluding the business conducted or to be conducted by
the Company (either directly or through a Subsidiary or Affiliate of the
Company) or the Subsidiaries and Affiliates of the Company;
2. All of FAF's and any member of the FAF Group's Losses arising out
of this Agreement or any of the Other Agreements, except as otherwise
provided in such Other Agreements;
3. All Losses arising out of or based upon any untrue statement or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, with respect to all information set
forth in the Information Statement or the Form 10 or any amendment thereto,
other than the information having been provided by the Company; and
4. All Losses arising out of Environmental Liabilities with respect to
the presence, use, storage, treatment, disposal (whether on-site or
off-site), escape, release or threatened release of any substance at, near
or from any property owned or leased by any Company Indemnitee to the
extent such presence, use, storage, treatment, disposal, escape, release or
threatened release is related to the operation of the businesses conducted
or to be conducted by FAF or any member of the FAF Group other than the
Company or its Subsidiaries. With respect to such substances, the Company's
right of indemnity hereunder shall be in addition to any rights of
indemnity owed to the Company by reason of the Real Property Leases, but
shall exclude any right of indemnity, right of contribution or other
recovery under any statutory law.
<PAGE> 16
SCHEDULE 4.2
Items with respect to which the Company will indemnify the FAF Indemnitees
in accordance with SECTION 4.2 of this Agreement:
1. All Losses arising out of the businesses conducted or to be
conducted by the Company or any member of the Company Group, whether such
Losses relate to events occurring, or whether such Losses are asserted,
before or after the Distribution Date, excluding the businesses conducted
or to be conducted by FAF (either directly or through a Subsidiary or
Affiliate of FAF) or the Subsidiaries of FAF;
2. All of the Company's and any member of the Company Group's
Liabilities arising out of this Agreement or any of the Other Agreements,
except as otherwise provided in such Other Agreements;
3. All Losses arising out of or based upon any untrue statement or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, with respect to the information set
forth in the Information Statement or the Form 10 or any amendment thereto,
other than the information having been provided by FAF; and
4. All Losses arising out of Environmental Liabilities with respect to
the presence, use, storage, treatment, disposal (whether on-site or
off-site), escape, release or threatened release of any substance at, near
or from any property owned or leased by any FAF Indemnitee to the extent
such threatened release is related to the operation of the businesses
conduced or to be conducted by the Company or any member of the Company
Group. With respect to such substances, FAF's rights of indemnity hereunder
shall be in addition to any rights of indemnity owed to the Company by
reason of the Real Estate Leases, but shall exclude any right of indemnity,
right of contribution or right of recovery under any statutory law.
<PAGE> 1
EXHIBIT 3.1
BYLAWS
OF
LANDAIR CORPORATION
ARTICLE I
SHAREHOLDERS
Section 1.1 Annual Meeting. The annual meeting of the shareholders of
Landair Corporation (the "Corporation") shall be held at the principal office of
the Corporation in the State of Tennessee or at such other place within or
without the State of Tennessee as may be determined by the board of directors of
the Corporation (the "Board of Directors" or the "Board") and as shall be
designated in the notice of said meeting, on such date and at such time as may
be determined by the Board of Directors. The purpose of said annual meeting
shall be to elect directors and transact such other business as may properly be
brought before the meeting.
Section 1.2 Special Meetings. Special meetings of the shareholders shall
be held at the principal office of the Corporation in the State of Tennessee or
at such other place within or without the State of Tennessee as may be
designated from time to time by the Board of Directors. Whenever the Board of
Directors shall fail to fix such place, or, whenever shareholders entitled to
call a special meeting shall call the same, the meeting shall be held at the
principal office of the Corporation in the State of Tennessee. Special meetings
of the shareholders shall be held upon call of a majority of the Board of
Directors, or, unless the Charter of the Corporation (the "Charter") otherwise
provides, upon written demand(s), signed, dated and delivered to the Secretary
of the Corporation describing the purpose or purposes for which it is to be
held, by shareholders holding at least ten percent (10%) of the shares of
capital stock of the Corporation issued and outstanding and entitled to vote on
any issue proposed to be considered at such special meeting, at such time as may
be fixed by the Secretary, and as shall be stated in the call and notice of said
meeting, except when the Tennessee Business Corporation Act, as amended (the
"Business Corporation Act"), confers upon the shareholders the right to demand
the call of such meeting and fix the date thereof. Business transacted at any
special meeting shall be confined to the purposes stated in the notice of
meeting and matters germane thereto.
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<PAGE> 2
Section 1.3 Notice of Meetings. The notice of all meetings of
shareholders shall be in writing, shall state the date, time and place of the
meeting, and, unless it is the annual meeting, shall indicate that it is being
issued by or at the direction of the person or persons calling the meeting. The
notice of an annual meeting should state that the meeting is called for the
election of directors and for the transaction of such other business as may
properly come before the meeting and shall state the purpose or purposes of the
meeting if any other action is to be taken at such annual meeting which could be
taken at a special meeting. The notice of a special meeting shall, in all
instances, indicate that it is being issued by or at the direction of the person
or persons calling the meeting and state the purpose or purposes for which the
meeting is called. If the Board of Directors shall adopt, amend or repeal a
bylaw regulating an impending election of directors, the notice of the next
meeting fo the election of directors shall contain the bylaw so adopted, amended
or repealed, together with a concise statement of the changes made. A copy of
the notice of any meeting shall be served either personally or by mail, not less
than ten (10) days nor more than two (2) months before the date of the meeting,
to each shareholder at such shareholder's record address or at such other
address which such shareholder may have furnished in writing to the Secretary of
the Corporation. If a meeting is adjourned t another time or place and if any
announcement of the adjourned time or place is made at the meeting, it shall not
be necessary to give notice of the adjourned meeting unless the Board of
Directors, after adjournment, fixes a new record date for the adjourned meeting,
which it must do if the meeting is adjourned to a date more than four (4) months
after the date fixed for the original meeting. At the adjourned meeting any
business may be transacted that might have been transacted on the original date
of the meeting. Notice of a meeting need not e given to any shareholder who
submits to the Corporation for inclusion in the minutes or filing with the
corporate records a signed waiver of notice, in person or by proxy, before or
after the meeting. The attendance of a shareholder at a meeting without
objection at the beginning of the meeting (or promptly upon his arrival) to the
lack of notice or defective notice of such meeting shall constitute a waiver of
notice by such shareholder.
Section 1.4 Quorum. The holders of record of a majority of the
outstanding shares of the Corporation entitled to vote at the meeting, present
in person or by proxy, shall, except as otherwise provided by law or the
Charter, constitute a quorum at a meeting of shareholders, provided that when a
specified item of business is required to be voted on by a class or series,
voting as a class, the holders of a majority of the shares of such class or
series shall constitute a quorum for the transaction of such specified item of
business. When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any shareholder or for adjournment of the
meeting unless a new record date is or must be set for the meeting.
2
<PAGE> 3
Section 1.5 Conduct of Meetings. Meetings of the shareholders shall be
presided over by the Chairman of the Board, if any, or, if the Chairman of the
Board is not present, by the President, or, if the President is not present, by
a Vice President, or, if neither the Chairman of the Board, the President nor a
Vice President is present, by a chairman to be chosen at the meeting. The
Secretary of the Corporation, or in the Secretary's absence, an Assistant
Secretary, shall act as secretary of ever meeting, but if neither the Secretary
nor an Assistant Secretary is present, the meeting shall choose any person
present to act as secretary of the meeting.
Section 1.6 Voting. For each share of the capital stock of the
Corporation registered in his name on the books of the Corporation the holder
thereof shall have the number of votes per share specified in the Charter.
Whenever under the provisions of the Charter any shareholder is entitled to more
or less than one (1) vote for any share of capital stock of the Corporation held
by such shareholder, every reference in these Bylaws to a plurality or other
proportion of stock shall refer to such plurality or other proportion of the
votes of such stock. At each meeting of the shareholders, each shareholder
having the right to vote shall be entitled to vote in person or by proxy
appointed by an instrument in writing subscribed by such shareholder, or by his
duly authorized attorney, and bearing a date not more than eleven (11) months
prior to said meeting, unless said instrument provides for a longer period.
Every shareholder entitled to vote at any meeting may so vote by proxy and shall
be entitled to one (1) vote for each share entitled to vote and held by such
shareholder. At all elections of directors the voting may, but need not, be by
ballot and a plurality of the votes cast thereat shall elect, except as
otherwise required by law or the Charter. Except as otherwise required by law,
or the Charter, any other action shall be authorized by a majority of the votes
cast.
Section 1.7 Record Date. For the purpose of determining the shareholders
entitled to notice of, to demand a special meeting, to vote or take any other
action at any meeting of shareholders or any adjournment thereof, or to express
consent
3
<PAGE> 4
to or dissent from any proposal without a meeting, or for the purpose of
determining the shareholders entitled to receive payment of any dividend or the
allotment of any rights, or for the purpose of any other action, the Board of
Directors may fix, in advance, a date as the record date for any such
determination of shareholders. Such date shall not be more than seventy (70)
days nor less than ten (10) days before the date of such meeting, nor more than
seventy (70) days prior to any other action. If no record date is fixed, the
record date for the determination of shareholders entitled to notice of, to
demand a special meeting, to vote or take any other action at a meeting of
shareholders shall be at the close of business on the day next preceding the day
on which notice is given or, if no notice is given, the day on which the meeting
is held.
The record date for determining shareholders for any purpose other than
that specified in the preceding clause shall be at the close of business on the
day on which the resolution of the Board of Directors relating thereto is
adopted. When a determination of shareholders of record entitled to notice of,
to demand a special meeting, to vote or take any other action at any meeting of
shareholders has been made as provided in this Section 1.7, such determination
shall apply to any adjournment thereof, unless the Board of Directors fixes a
new record date under this Section 1.7 for the adjourned meeting; provided,
however, if the meeting is adjourned to a date more than four (4) months after
the date fixed for the original meeting, the Board of Directors shall fix a new
record date.
Section 1.8 Shareholder Lists. An alphabetical list by voting group, and
within each voting group by class or series of shares, of each shareholder's
name, address and share ownership entitled to notice of a shareholders' meeting
as of the record date, certified by the Secretary or other officer responsible
for its preparation, or by the transfer agent, if any, shall be available for
inspection by any shareholder, beginning two (2) business days after notice of
the meeting is given for which the list was prepared and continuing through the
meeting upon the request thereat or prior thereto of any shareholder. If the
right to vote at any meeting is challenged, the inspectors of election, if any,
or the person presiding thereat, shall require such list of shareholders to be
produced as evidence of the right of the persons challenged to vote at such
meeting, and all persons who appear from such list to be shareholders entitled
to vote thereat may vote at such meeting.
Section 1.9 Proxy Representation. Every shareholder may authorize
another person or persons to act for such
4
<PAGE> 5
shareholder by proxy in all matters in which a shareholder is entitled to
participate, whether by waiving notice of any meeting, voting or participating
at a meeting, or expressing consent or dissent without a meeting. Every proxy
must be signed by the shareholder or such shareholder's attorney-in-fact. No
proxy shall be valid after the expiration of eleven (11) months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the shareholder executing it, except as otherwise provided by
the Business Corporation Act.
Section 1.10 Inspectors. At all meetings of shareholders, the proxies
and ballots shall be received, taken in charge and examined, and all questions
concerning the qualification of voters, the validity of proxies and the
acceptance or rejection of proxies and of votes shall be decided by two (2)
inspectors of election. Such inspectors of election together with one alternate
to serve in the event of death, inability or refusal by any of said inspectors
of election to serve at the meeting, shall be appointed by the Board of
Directors, or, if no such appointment or appointments shall have been made, then
by the presiding officer at the meeting. If for any reason the inspectors of
election so appointed shall fail to attend, or refuse or be unable to serve, a
substitute or substitutes shall be appointed to serve as inspector or inspectors
of election, in their place or stead, by the presiding officer at the meeting.
No director or candidate for the office of director shall be appointed as an
inspector. Each inspector shall take and subscribe an oath or affirmation
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a quorum, the validity
and effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arisin in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all shareholders. On request of the person presiding at the meeting or any
shareholder, the inspectors shall make a report in writing of any challenge,
question or matter determined by them and execute a certificate as to any fact
found by them. Each inspector shall be entitled to reasonable compensation for
such inspector's services, to be paid by the Corporation.
Section 1.11 Actions Without Meetings. Whenever shareholders are
required or permitted to take any action by vote, such action may be taken
without a meeting on written
5
<PAGE> 6
consent, setting forth the action so taken, signed by the holders of all
outstanding shares entitled to vote thereon; unless some number less than all of
the holders of all of the outstanding shares is required by applicable law or
the Charter. This section shall not be construed to alter or modify any
provision of law or of the Charter under which the written consent of the
holders of less than all outstanding shares is sufficient for corporate action.
Section 1.12 Meaning of Certain Terms. As used herein in respect of the
right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shareholder" or "shareholders"
refers to an outstanding share or shares and to a holder or holders of record of
outstanding shares, when the Corporation is authorized to issue only one (1)
class of shares, and said reference is also intended to include any outstanding
share or shares and any holder or holders of record of outstanding shares of any
class upon which or upon whom the Charter confers such rights, where there are
two (2) or more classes or series of shares, or upon which or upon whom the
Business Corporation Act confers such rights, notwithstanding that the Charter
may provide for more than one (1) class or series of shares, one (1) or more of
which are limited or denied such rights thereunder.
ARTICLE II
DIRECTORS
Section 2.1 Functions and Definition. The business of the Corporation
shall be managed under the direction of its Board of Directors. The use of the
phrase "entire Board of Directors" herein refers to the total number of
directors which the Corporation would have if there were no vacancies.
Section 2.2 Qualification and Number. Each director shall be at least
eighteen (18) years of age. A director need not be a shareholder, a citizen of
the United States, nor a resident of the State of Tennessee. The number of
directors constituting the entire Board of Directors shall be not less than the
number required by law; such number may be fixed from time to time by action of
the Board of Directors or of the shareholders. The number of directors may be
increased or decreased by action of the Board of Directors or shareholders,
provided that any action of the Board of Directors to effect such increase or
decrease shall require the vote of a majority of the entire Board of Directors.
No decrease in the number of directors shall shorten the term of any incumbent
director.
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Section 2.3 Election and Term. Directors who are elected at an annual
meeting of shareholders, and directors who are elected in the interim to fill
vacancies and newly created directorships, shall hold office until the next
annual meeting of shareholders or until their respective successors have been
elected and qualified. In the interim between annual meetings of shareholders or
special meetings of shareholders called for the election of directors, the
creation of newly created directorships and to fill any vacancies in the Board
of Directors, including vacancies resulting from the removal of directors for
cause or without cause, may be filled by the vote of a majority of the directors
then in office, although less than a quorum exists.
Section 2.4 Quorum. A majority of the entire Board of Directors shall
constitute a quorum for the transaction of business. A majority of the directors
present, whether or not a quorum is present, may adjourn a meeting to another
time and place. Except as herein otherwise provided, the vote of a majority of
the directors present at the time of the vote, at a meeting duly assembled, a
quorum being present at such time, shall be the act of the Board of Directors.
Section 2.5 Meetings; Notice. Meetings of the Board of Directors shall
be held at such place within or without the State of Tennessee as may from time
to time be fixed by resolution of the Board of Directors, or as may be specified
in the notice of the meeting. Regular meetings of the Board of Directors shall
be held at such times as may from time to time be fixed by resolution of the
Board of Directors. Special meetings of the Board may be held at any time upon
the call of the Chairman of the Board, if any, the President, the Secretary or
any two (2) directors by oral, telegraphic or written notice duly served upon,
sent or mailed to each director not less than two (2) days before such meeting.
A meeting of the Board of Directors may be held without notice immediately after
the annual meeting of shareholders at the same place at which such meeting is
held. Notice need not be given of regular meetings of the Board of Directors
held at times fixed by resolution of the Board of Directors. Any requirement of
furnishing a notice shall be waived by any director who signs and delivers to
the Corporation a waiver of notice before or after the meeting, or who attends
the meeting without protesting, prior thereto or at its commencement, the lack
of notice to him. The notice of any meeting need not specify the purpose of the
meeting, and any and all business may be transacted at such meeting.
Section 2.6 Conduct of Meetings. The Chairman of the Board of Directors,
if any, shall preside at all meetings of
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the Board of Directors, and in the Chairman's absence or inability to act, the
President shall preside, and in the President's absence or inability to act,
such person as may be chosen by a majority of the directors present shall
preside.
Section 2.7 Committees. By resolution adopted by a majority of the
entire Board of Directors, the directors may designate from their number two (2)
or more directors to constitute an Executive Committee and other committees,
each of which, to the extent provided in the resolution designating it, shall
have the authority of the Board of Directors with the exception of any authority
the delegation of which is prohibited by law. A majority of any such committee
may determine its action and fix the time and place of its meetings, unless the
Board of Directors shall otherwise provide. The Board of Directors shall have
power at any time to fill vacancies in, to change the membership of, to
designate alternate members of, or to discharge any such committee. All actions
of the Executive Committee shall be recorded in the minutes of the Committee and
reported to the Board of Directors at its meeting next succeeding such action.
All actions of other committees shall be recorded in the minutes of each such
committee and reported to the Board of Directors (or in the case of committees
appointed by the Executive Committee, to the Executive Committee) at its meeting
next succeeding such action. The Board of Directors may allow members of the
Executive Committee or any other committee designated by the Board of Directors
or the Executive Committee a fixed fee and expenses of attendance for attendance
at meetings of such committee. Members of such committees may also receive
stated fees for their services as committee members as determined by the Board
of Directors. Nothing herein contained shall be construed to preclude any
committee member from serving the Corporation in any other capacity as officer,
agent or otherwise, and receiving compensation therefor.
Section 2.8 Compensation of Directors. The Board of Directors may, by
resolution, provide for payment to directors of a fixed fee for their services
as directors, without regard for attendance at meetings of the Board, and for
payment of expenses for attendance at such meetings. Nothing herein contained
shall be construed as precluding any director from serving the Corporation in
any other capacity as member of a committee, officer, agent or otherwise and
receiving compensation therefor.
Section 2.9 Honorary Directors. The Board of Directors may from time to
time name, in its discretion, any director who shall have resigned or shall have
declined nomination for
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a further term, an Honorary Director for such term as the Board of Directors by
resolution shall establish. An Honorary Director may, at the invitation of the
Chairman of the Board, attend meetings of the Board of Directors. Honorary
Directors shall not be entitled to vote on any business coming before the Board
of Directors nor shall any Honorary Director be counted for the purpose of
determining the number necessary to constitute a quorum, for the purpose of
determining whether a quorum is present or for any other purpose whatsoever. The
termination of any person's relationship with the Corporation as Honorary
Director shall not be deemed to create a vacancy in the position of Honorary
Director. By resolution of the Board of Directors a fixed annual fee may be
allowed to an Honorary Director. Honorary Directors shall not be directors of
the Corporation and shall not have rights, privileges or powers other than those
specifically provided in this Section 2.9 or as may be specifically given or
assigned by the Board of Directors.
Section 2.10 Dividends. Subject always to the provisions of law and the
Charter, the Board of Directors shall have full power to determine whether any,
and if any, what part of any, funds legally available for the payment of
dividends shall be declared as dividends and paid to shareholders; the division
of the whole or any part of such funds of the Corporation shall rest wholly
within the lawful discretion of the Board of Directors, and it shall not be
required at any time, against such discretion, to divide or pay any part of such
funds among or to the shareholders as dividends or otherwise; and before payment
of any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the Board of Directors
shall deem conducive to the interest of the Corporation, and the Board of
Directors may modify or abolish any such reserve in the manner in which it was
created.
Section 2.11 Resignation; Removal of Directors. A director may resign at
any time upon delivery of written notice to the Board of Directors, Chairman of
the Board, President or the Corporation. Such resignation shall be effective
upon delivery unless the notice specifies a later effective date. At any special
meeting of the shareholders, duly called as provided in these Bylaws, any
director or directors may be removed from office by the shareholders, with or
without cause, and such director's successor or directors' successors may be
elected at such meeting. One (1) or more
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directors may be removed for cause by a majority of the entire Board of
Directors.
Section 2.12 Actions Without Meetings. Any action required or permitted
to be taken by the Board of Directors or by any committee thereof may be taken
without a meeting if a majority of all members of the Board of Directors or of
any such committee consent in writing to the adoption of a resolution
authorizing the action. The resolution and the written consents thereto by the
members of the Board of Directors or of any such committee shall be filed with
the minutes of the proceedings of the Board of Directors or of any such
committee.
Section 2.13 Electronic Communication. Any one or more members of the
Board of Directors or any committee thereof may participate in a meeting of the
Board of Directors or any such committee by means of a conference telephone or
similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such means shall
constitute presence in person at a meeting.
ARTICLE III
OFFICERS
Section 3.1 Election. The Board of Directors promptly after the election
thereof held in each year, shall elect the officers of the Corporation, which
shall include a President and a Secretary, and which may include a Chairman of
the Board, one (1) or more Vice Presidents, a Treasurer, and a Controller, and
may also include Assistant Secretaries, Assistant Treasurers, Assistant
Controllers and such other officers, agents and employees as the Board may from
time to time deem proper, who shall hol their offices for such term and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board of Directors. The Board of Directors shall fix the salaries of
the Chairman of the Board, the President, and Vice Presidents, the Treasurer,
the Controller and the Secretary. Unless fixed by the Board of Directors or a
committee thereof, the salaries of all other officers, agents and employees
shall be fixed by the Chief Executive Officer. Any two (2) or more offices may
be held by the same person except the offices of President and Secretary. The
Chairman of the Board shall be a member of the Board of Directors.
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Section 3.2 Term. The term of office of all officers shall be until
their respective successors have been elected and qualified, but any officer may
be removed from office, either with or without cause, at any time by the
affirmative vote of a majority of the whole Board of Directors. Any vacancy in
any office arising from any cause may be filled for the unexpired portion of the
term by the Board of Directors.
Section 3.3 Duties. The officers of the Corporation shall each have such
powers and duties as are set forth in these Bylaws and such additional powers
and duties as from time to time may be conferred upon them by the Board of
Directors, and, subject thereto, such powers and duties as generally pertain to
their respective offices, and the Board of Directors may from time to time
impose and confer any or all of the powers and duties hereinafter specifically
prescribed for any officer upon any other officer or officers.
Section 3.4 Resignation; Removal of Officers. An officer may resign at
any time upon delivery of notice to the Corporation. Such resignation shall be
effective upon delivery unless the notice specifies a later effective date. In
the event that an officer specifies in his notice a later effective date, and
the Corporation accepts the future effective date, the Board may fill the
pending vacancy prior to the effective date; provided, however, that the Board
designates that the successor officer does not take office until such effective
date. Any officer may be removed from office, either with or without cause, at
any time by the affirmative vote of a majority of the whole Board of Directors.
Further, any officer or assistant officer, if appointed by another officer, may
likewise be removed by such officer.
Section 3.5 Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the shareholders and the Board of Directors at which
he shall be present and shall furnish advice and counsel to the Board of
Directors. In the absence of a Chief Executive Officer, the Chairman of the
Board shall be the Chief Executive Officer of the Corporation. The Chairman of
the Board shall exercise the powers and perform the duties usual to a chairman
of the board of a corporation, and shall hav such other powers and duties as may
be assigned to him by the Board of Directors.
Section 3.6 Chief Executive Officer. The Chief Executive Officer shall
be the chief executive officer of the Corporation and direct the business,
affairs and property of the Corporation. The Chief Executive Officer shall
exercise the powers and perform the duties usual to a chief executive
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officer and shall have such other powers and duties as may be assigned to him
from time to time by the Board of Directors. In the absence of a Chairman of the
Board, the Chief Executive Officer shall preside at all meetings of the
shareholders and the Board of Directors.
Section 3.7 President. The President, in the absence of a Chairman of
the Board or a Chief Executive Officer, shall preside at all meetings of the
shareholders and the Board of Directors at which he shall be present. The
President shall be the Chief Operating Officer and shall direct the operations
of the business of the Corporation, and report to the Chief Executive Officer.
In the absence of a Chief Executive Officer or a Chairman of the Board, the
President shall report directly to the Boar of Directors. In the absence of a
Chief Executive Officer, and in the event the Board of Directors has not vested
such powers in a Chairman of the Board, the President shall be the Chief
Executive Officer. He shall have such other powers and duties as may be assigned
to him from time to time by the Board of Directors.
Section 3.8 Vice Presidents. The Vice Presidents shall be of such number
and shall have such titles of designation as may be determined from time to time
by the Board of Directors. They shall perform such duties as may be assigned to
them, respectively, from time to time by the Board of Directors.
Section 3.9 Secretary. The Secretary shall give, or cause to be given,
notice of all meetings of shareholders and directors, and all other notices
required by law or by these Bylaws, and in the case of his absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the Chairman of the Board, or by the directors or shareholders upon whose
request the meeting is called as provided in these Bylaws. He shall record all
the proceedings of the meetings of shareholders, the Board of Directors and
Executive Committee in a book to be kept for that purpose, and shall perform
such other duties as may be assigned to him by the Board of Directors or the
Chief Executive Officer. The Secretary shall have the custody of the records and
the seal, if any, of the Corporation. He shall affix the seal, if any, to any
instrument requiring it, when signed by a duly authorized officer or when
specifically authorized by the Board of Directors or the Chairman of the Board,
and attest the same. In the absence or incapacity of the Secretary, any
Assistant Secretary may affix the seal, if any, to any such instrument and
attest the same.
Section 3.10 Assistant Secretaries. The Assistant Secretaries shall have
such powers and shall perform such
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duties as may be assigned to them from time to time by the Board of Directors,
the Chief Executive Officer or the Secretary.
Section 3.11 Treasurer. The Treasurer shall be responsible for
establishing and executing programs providing for long and short term financing
needs of the Corporation. He shall establish policies for the receipt, custody
and disbursement of the Corporation's monies and securities, and for investment
of the Corporation's funds. He shall perform such other duties as may be
assigned to him from time to time by the Board of Directors or the Chief
Executive Officer.
Section 3.12 Assistant Treasurers. The Assistant Treasurers shall have
such powers and shall perform such duties as may be assigned to them from time
to time by the Board of Directors, the Chief Executive Officer or the Treasurer.
Section 3.13 Controller. The Controller shall be responsible for the
development and maintenance of accounting policies and systems properly to
record, report and interpret the financial position and the results of
operations of the Corporation. He shall be responsible for development and
maintenance of adequate plans for the financial control of operations and the
protection of the assets of the Corporation. He shall perform such other duties
as may be assigned to him from time to time by the Board of Directors or the
Chief Executive Officer.
Section 3.14 Assistant Controllers. The Assistant Controllers shall have
such powers and shall perform such duties as may be assigned to them from time
to time by the Board of Directors, the Chief Executive Officer or the
Controller.
Section 3.15 Presiding Officer at Meetings of the Shareholders and Board
of Directors. The presiding officer at any meeting of the shareholders or the
Board of Directors at which the Chairman of the Board and the Chief Executive
Officer are absent shall be the President, or such other officer designated to
so preside by the Chairman of the Board. If the Chairman of the Board, for any
reason, shall not have designated any officer to preside at any such meeting,
then the Chief Executive Officer o President shall preside. In the event that
both the Chief Executive Officer and President shall be absent, then the
Executive Vice President-Finance, if there be such an officer, and he is a
member of the Board, shall preside. If the Executive Vice President-Finance
shall also be absent or if there be no such
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officer, then the most senior (in terms of time served in the office of
Executive Vice President) of the other Executive Vice Presidents, if there be
such an officer, and he is a member of the Board, shall preside.
Section 3.16 Corporation as Security Holder. Unless otherwise ordered by
the Board of Directors, the President, or, in the event of the President's
inability to act, the Vice President designated by the Board of Directors to act
in the absence of the President or, in the absence of such designation, in the
order of such Vice President's seniority, shall have full power and authority on
behalf of the Corporation to attend and to act and to vote at any meetings of
security holders of corporations in which the Corporation may hold securities,
and at such meetings shall possess and may exercise any and all rights and
powers incident to the ownership of such securities, and which as the owner
thereof the Corporation might have possessed and exercised, if present. The
Board of Directors by resolution from time to time may confer like powers upon
any other person or persons.
ARTICLE IV
CERTIFICATES REPRESENTING SHARES
Section 4.1 Certificates; Signatures. The interest of each shareholder
of the Corporation shall be evidenced by certificates representing shares in
such form not inconsistent with the Charter as the Board of Directors may from
time to time prescribe. Certificates representing shares shall have set forth
thereon the statements prescribed by law and shall be signed by the Chairman,
President or a Vice President and by the Secretary or an Assistant Secretary or
Treasurer or an Assistant Treasurer and may be sealed with the corporate seal or
a facsimile thereof. The signatures of the officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent or registered
by a registrar other than the Corporation itself or its employee. In case any
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Corporation with the same effect as if such
officer were an officer at the date of its issue.
Section 4.2 Transfer of Shares. Upon compliance with provisions
restricting the transferability of shares, if any, transfers of shares of the
Corporation shall be made only on the share record of the Corporation by the
registered holder thereof, or by such holder's attorney thereunto authorized by
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power of attorney duly executed and filed with the Secretary of the Corporation
or with a transfer agent or a registrar, if any, and upon the surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes due thereon. A certificate representing shares shall not be issued
until the full amount of consideration therefor has been paid, except as the
Business Corporation Act may otherwise permit.
Section 4.3 Fractional Shares. The Corporation may issue certificates
for fractions of a share where necessary to effect transactions authorized by
the Business Corporation Act which shall entitle the holder, in proportion to
such holder's fractional holdings, to exercise voting rights, receive dividends
and participate in liquidating distributions; or the Corporation may pay in cash
the value of fractions of a share as of the time when those entitled to receive
such fractions is determined; or it may issue scrip in registered or bearer form
over the manual or facsimile signature of an officer of the Corporation or of
its agent, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a shareholder except as therein
provided. The Board of Directors shall have power and authority to make all such
rules and regulations as it may deem expedient concerning the issue, transfer
and registration of certificates representing shares of the Corporation.
Section 4.4 Replacement Certificates. No certificates representing
shares shall be issued in place of any certificate alleged to have been lost,
destroyed or stolen, except on production of such evidence of such loss,
destruction or theft as the Board of Directors may require, and on delivery to
the Corporation, if the Board of Directors shall so require, of a bond of
indemnity in such amount, upon such terms and secured by such surety as the
Board of Directors may in its discretion require.
Section 4.5 Registered Shareholders. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to, or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of the State of Tennessee.
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ARTICLE V
FISCAL YEAR
The fiscal year of the Corporation shall be fixed from time to time by
resolution of the Board of Directors.
ARTICLE VI
CORPORATE SEAL
The Corporation may, but shall not be required to, adopt a corporate
seal. The corporate seal shall have inscribed thereon the name of the
Corporation and the year of its incorporation, and shall be in such form and
contain such other words and/or figures as the Board of Directors shall
determine. The corporate seal may be used by printing, engraving, lithographing,
stamping or otherwise making, placing or affixing, or causing to be printed,
engraved, lithographed, stamped or otherwise made, placed or affixed upon any
paper or document, by any process whatsoever, an impression, facsimile or other
reproduction of said corporate seal.
ARTICLE VII
INDEMNIFICATION
The Corporation shall indemnify to the full extent permitted by law any
person made or threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person or such person's testator or intestate is or was a director,
officer or employee of the Corporation or serves or served at the request of the
Corporation any other enterprise as a director, officer or employee. Expenses
incurred by any such person in defending any such action, suit or proceeding
shall be paid or reimbursed by the Corporation promptly upon receipt by it of an
undertaking of such person to repay such expenses if it shall ultimately be
determined that such person is not entitled to be indemnified by the
Corporation. The rights provided to any person by this bylaw shall be
enforceable against the Corporation by such person who shall be presumed to have
relied upon it in serving or continuing to serve as a director, officer or
employee as provided above. No amendment of this bylaw shall impair the rights
of any person arising at any time with respect to events occurring prior to such
amendment. For purposes of
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this article, the term "Corporation" shall include any predecessor of the
Corporation and any constituent corporation (including any constituent of a
constituent) absorbed by the Corporation in a consolidation or merger; the term
"other enterprise" shall include any corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise; service "at the request of the
Corporation" shall include service as a director, officer or employee of the
Corporation which imposes duties on, or involves services by, such director,
officer or employee with respect to an employee benefit plan, its participants
or beneficiaries; any excise taxes assessed on a person with respect to an
employee benefit plan shall be deemed to be indemnifiable expenses; and action
taken or omitted by a person with respect to an employee benefit plan which such
person reasonably believes to be in the interest of the participants and
beneficiaries of such plan shall be deemed to be action not opposed to the best
interests of the Corporation.
ARTICLE VIII
GENERAL
Section 8.1 Financial Reports. The directors may appoint the Treasurer
or other fiscal officer and/or the Secretary or any other officer to cause to be
prepared and furnished to shareholders entitled thereto any special financial
notice and/or financial statement, as the case may be, which may be required by
any provision of law.
Section 8.2 Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of the shareholders, of the Board of Directors, and/or any committee which the
directors may appoint, and shall keep at the office of the Corporation in the
State of Tennessee or at the office of the transfer agent or registrar, if any,
in said state, a record containing the names and addresses of all shareholders,
the number and class of shares held by each, and the dates when such
shareholders respectively became the owners of record thereof. Any of the
foregoing books, minutes or records may be in written form or in any other form
capable of being converted into written form within a reasonable time.
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ARTICLE IX
AMENDMENTS
An affirmative vote of a majority of the shareholders entitled to vote
in the election of directors may make, alter, amend or repeal the Bylaws and may
adopt new Bylaws. Except as otherwise required by law, the Charter or by the
provisions of these Bylaws, the Board of Directors may also make, alter, amend
or repeal the Bylaws and adopt new Bylaws, but Bylaws adopted by the Board of
Directors may be altered, amended or repealed by the said shareholders.
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<PAGE> 1
EXHIBIT 10.1
TRANSITION SERVICES AGREEMENT
between
FORWARD AIR CORPORATION f/k/a
Landair Services, Inc.
and
LANDAIR CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
SERVICES TO BE PROVIDED..................................................................................1
1.1 Provision of Services...........................................................................1
1.2 Performance Levels..............................................................................2
1.3 Instructions....................................................................................2
1.4 Consents; Indemnification; Assets...............................................................2
1.5 Systems Availability and Data Integrity.........................................................4
1.6 Systems Users...................................................................................4
ARTICLE II
PAYMENT FOR SERVICES.....................................................................................4
2.1 Costs...........................................................................................4
2.2 Invoices; Payment Procedures....................................................................5
2.3 Disputed Fees...................................................................................5
ARTICLE III
TERM; TERMINATION OF SERVICES............................................................................6
3.1 Term............................................................................................6
3.2 Termination of Services.........................................................................6
ARTICLE IV
COOPERATION..............................................................................................7
4.1 Cooperation.....................................................................................7
4.2 Provider Administrative Records.................................................................7
4.3 Periodic Review of Services.....................................................................7
ARTICLE V
FORCE MAJEURE............................................................................................7
5.1 Force Majeure...................................................................................7
ARTICLE VI
CONFIDENTIALITY..........................................................................................8
6.1 Confidentiality.................................................................................8
ARTICLE VII
MISCELLANEOUS............................................................................................9
7.1 Notices.........................................................................................9
7.2 Severability...................................................................................10
7.3 Binding Effect; Assignment.....................................................................10
7.4 No Third Party Beneficiaries...................................................................10
7.5 Interpretation.................................................................................10
7.6 Jurisdiction and Consent to Service............................................................10
7.7 Entire Agreement...............................................................................11
7.8 Governing Law..................................................................................11
7.9 Counterparts...................................................................................11
7.10 Relationship of the Parties....................................................................11
7.11 Waiver.........................................................................................11
7.12 Sole Remedy; No Damages........................................................................12
7.13 Indemnification................................................................................12
</TABLE>
<PAGE> 3
TRANSITION SERVICES AGREEMENT
This TRANSITION SERVICES AGREEMENT (this "Agreement") is made as of
this 18th day of September, 1998, by and between Forward Air Corporation, a
corporation organized under the laws of the State of Tennessee f/k/a Landair
Services, Inc. (together with its wholly owned subsidiaries, "FAF"), and Landair
Corporation, a corporation organized under the laws of the State of Tennessee
(together with its wholly owned subsidiaries, "Landair Corporation").
W I T N E S S E T H:
WHEREAS, FAF is the holder of all of the issued and outstanding shares
of $.01 par value per share common stock of Landair Corporation (the "Landair
Corporation Common Stock");
WHEREAS, the Board of Directors of FAF has determined that it is
advisable and in the best interests of FAF, its shareholders and Landair
Corporation to distribute (the "Distribution") all of the outstanding shares of
Landair Corporation Common Stock on a pro rata basis to the holders of the $.01
par value per share common stock of FAF pursuant to the terms of the
Distribution Agreement, dated as of September 18, 1998, entered into by FAF and
Landair Corporation (the "Distribution Agreement") so that after such
Distribution, Landair Corporation will be an independent public company (all
capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed thereto in the Distribution Agreement); and
WHEREAS, FAF and Landair Corporation have agreed to enter into this
Agreement in order for FAF or Landair Corporation, as the case may be, to
provide the other with certain services and support during a transition period
following the Distribution;
NOW THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth and other good and valuable consideration, the parties
hereto hereby agree as follows:
ARTICLE I
SERVICES TO BE PROVIDED
1.1 Provision of Services. Subject to all of the terms and conditions
hereof, FAF and Landair Corporation hereby agree that FAF shall offer and
provide to Landair Corporation and its subsidiaries those services described on
SCHEDULE A-1 hereto, and Landair Corporation shall offer and provide to FAF and
its subsidiaries the services described on SCHEDULE A-2 hereto (collectively,
the "Services"); provided, however, that each of the parties hereto acknowledges
and agrees that Services may be added to, or deleted from, SCHEDULE A-1 or
SCHEDULE A-2 by mutual consent of the parties at any time (and the Services Fees
(as defined herein) shall be adjusted appropriately). As used herein, (a) the
term "Recipient" means, with respect to any given Service, the recipient of such
Service and for purposes of enforcing this Agreement, FAF or Landair
Corporation, as the case may be, shall be treated as the recipient of all
Services provided to such recipient and its affiliates, and (b) the term
"Provider" means, with respect to any given Service, the provider of such
Service and
<PAGE> 4
for purposes of such definition, FAF or Landair Corporation, as the case may be,
shall be treated as the provider of all Services provided by them or any of
their affiliates.
1.2 Performance Levels. In providing the Services, each party shall
perform according to the performance levels maintained in the past. Each Service
shall be provided priority no less favorably than in the past, consistent with
past practices and without discrimination against the party receiving such
Service. Any Services to be provided hereunder that were not heretofore provided
by FAF or Landair Corporation, as the case may be, shall be provided on a
reasonably timely basis.
1.3 Instructions. The parties agree that the Services provided by
Provider shall be essentially ministerial in nature so that Provider shall, in
all matters requiring the exercise of discretion, follow Recipient's
instructions, which shall be promptly provided to Provider by Recipient to the
extent requested by Provider and which must be provided in writing if so
requested. Notwithstanding the foregoing, Provider shall not be required to
follow any such instructions that, in Provider's reasonable judgment, are
inconsistent with the proper performance of its responsibilities, or that
require the exercise of discretion, including without limitation the making of
decisions regarding the hiring or firing of employees. The parties agree that it
is their intent that Provider not be deemed a fiduciary with respect to plans
subject to the Employee Retirement Income Securities Act of 1974, as amended.
1.4 Consents; Indemnification; Assets. If the provision of any of the
Services by Provider to Recipient would place Provider or any other subsidiary
of Provider in violation or breach of any contract or license between any such
entity and any third party, then Recipient and Provider shall use their
respective commercially reasonable efforts, with all costs thereof to be borne
by Recipient, to obtain forthwith any consent required for Provider to provide
such Services to Recipient, and Recipient shall indemnify and hold harmless
Provider against all Losses and Liabilities relating to any claims arising from
any such alleged violation or breach, such indemnification to be provided in a
like manner to the provision of indemnification under the Distribution
Agreement. If, after the exercise of such efforts, such consent cannot be
obtained, Provider shall use commercially reasonable efforts to provide
Recipient with functionally equivalent Services with any additional costs
required in providing such Services to be borne by Recipient. Recipient shall
indemnify and hold harmless Provider against all Losses and Liabilities which
arise from or in any way relate to (i) the use of any software or hardware
provided by Recipient or (ii) the use of any software or hardware in connection
with the performance of the Services hereunder provided to Recipient, such
indemnification to be provided in a like manner to the provision of
indemnification under the Distribution Agreement.
(a) The Service Fees (as defined herein) to be paid by
Recipient hereunder shall subsume all costs incurred by Provider in
connection with the performance of its obligations hereunder and in
respect of which separate payment or indemnification by Recipient is
not otherwise contemplated hereby, including, but not limited to,
personnel (including fringe benefits and management fees relating
thereto), computer hardware, computer time, printers, voice and data
telecommunications equipment, file cabinets, paper files,
administrative
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<PAGE> 5
records, photocopies, incidentals and all other assets owned by
Provider after the Distribution which are needed in connection with the
provision of such Services on a routine and non-routine basis and
during peak and non-peak periods; and any such equipment may be
replaced from time to time by Provider with functionally equivalent or
upgraded equipment.
(b) All data, software or other property or assets owned or
created by Recipient shall remain the sole and exclusive property and
responsibility (including, without limitation, with respect to
maintenance, modification and upgrade) of Recipient. Provider shall not
acquire any rights to any such data, software or other property or
assets, including any derivative works of Recipient-owned software or
data created by Provider, pursuant to this Agreement or Provider's
performance hereunder.
All data, software or other property or assets which are owned
by Provider, including without limitation derivative works thereof and
new data or software created by Provider at Provider's sole expense
pursuant to the provision of Services ("Provider Software") shall be
the sole and exclusive property and responsibility (including, without
limitation, with respect to maintenance, modification and upgrade) of
Provider and any interest of Recipient therein shall be limited to
licensed materials, if any. Recipient shall not acquire any other
rights to any such data, software or other property or assets pursuant
to this Agreement or Recipient's performance hereunder.
(c) If as a result of unanticipated events or conditions
Recipient reasonably determines that it requires modification of any of
the Services or software used in connection therewith upon Recipient's
request, Provider shall so modify the Services or software used in
connection therewith upon Recipient's request (i) to the extent
commercially reasonable, (ii) to the extent such modifications do not
adversely affect Provider's ability to maintain its computer systems in
connection with its continuing business, and (iii) at Recipient's sole
cost and expense subject to Recipient's approval of Provider's
estimate. Moreover, Provider may suggest modification of software and
may, in its sole discretion, offer to share in the cost thereof if it
determines that any such modifications may be beneficial to Provider.
Recipient shall have exclusive ownership rights to any software
modifications it pays for solely, and shared rights to such
modifications with respect to which, and only to the extent that, it
shares in the payment therefor.
(d) Provider shall provide all support and assistance
reasonably requested by Recipient at an arm's-length, negotiated price,
in connection with the transfer of any and all Services from Provider
to Recipient or any of its affiliates or an alternative third-party
service provider selected by Recipient. Specifically, during the term
of this Agreement, Provider shall deliver to Recipient (or as directed
by Recipient), at the Recipient's request and with minimal interruption
to the operations of Provider or its affiliates, all data and programs
owned by Recipient or licensed by Recipient from third party vendors,
and all backup or archival copies thereof (or any part thereof as
specified by Recipient), in hard copy, electronic, magnetic or any
other form which is then in Provider's possession or
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<PAGE> 6
control, as requested by Recipient, and (in the event that this
Agreement is terminated) copies of all material licensed by Recipient
from Provider (with reasonable instructions for the installation and
use thereof).
1.5 Systems Availability and Data Integrity. Provider shall maintain,
consistent with past practices, operational recovery procedures to ensure the
availability of systems and the integrity of data relating to the Services at
all times. In the event of the unavailability of any such systems or the loss or
destruction of any such data, Provider shall use commercially reasonable efforts
consistent with past practices to restore such systems and recover or replace
such data as quickly and completely as possible.
1.6 Systems Users. In each case as it relates to Recipient's employees,
consultants, affiliates or authorized customers during the term of this
Agreement the addition or deletion of authorized users ("Users"), including
persons authorized at the application level or system level, in regard to any
computer system, the modification of computer system authority or access granted
to any person, and the control generally of access to and use of computer
systems, is to be at the direction of Recipient, and Provider shall permit no
changes in such access or use without prior written notice to and consent from
Recipient. No User will be allowed system authority or access greater than the
application level without the prior written consent of Provider. Each party
shall indemnify and hold harmless the other against all degradations in
performance levels caused by users authorized for system level access on behalf
of, or at the request of, such first party, such indemnification to be provided
in a like manner to the provision of indemnification under the Distribution
Agreement.
ARTICLE II
PAYMENT FOR SERVICES
2.1 Costs. The prices charged for the Services shall initially be those
set forth on SCHEDULES A-1 AND A-2, which have been negotiated on an
arm's-length basis (the "Service Fees"). The Service Fees shall be adjusted on
an arm's-length basis every six months, except that the Service Fees for the
period from the Distribution Date through December 31, 1998 shall be as
indicated on SCHEDULES A-1 AND A-2 and Provider shall, not less than three
months before any proposed adjustment to Service Fees, provide Recipient with
details of any proposed adjustment and justification therefor. The Parties shall
negotiate in good faith to reach an agreement within 30 days. Recipient shall
not be charged a fee for any improvements or upgrades to facilities or equipment
without its prior written consent; provided, however, that Recipient
acknowledges and agrees that its failure to timely provide any such consent may
adversely affect its abilities to receive Services hereunder, and Provider shall
not be liable for any harm to Recipient resulting therefrom. Notwithstanding the
immediately preceding sentence, all maintenance fees relating to software used
in connection with the provision of Services hereunder shall be billed
separately from the Service Fees and shall be paid by Recipient together
therewith.
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<PAGE> 7
2.2 Invoices; Payment Procedures.
(a) Not later than 30 days after the end of each calendar
month, Provider shall send Recipient an invoice that includes a
detailed breakdown of all Service Fees for such month. All invoices
shall be sent as follows:
from FAF to Landair Corporation: from Landair Corporation to FAF :
Landair Corporation Forward Air Corporation
Attention: Controller Attention: Controller
430 Airport Road 430 Airport Road
Greeneville, Tennessee 37745 Greeneville, Tennessee 37745
All payments of such invoices shall be made by wire transfer or interbank
transfer in immediately available funds to Provider's account at such banks as
Provider shall designate to Recipient in writing and shall be made within 15
days after the date of any invoice.
(b) Landair Corporation or one of its subsidiaries shall
establish and maintain an account ("Payroll Account") from which FAF or
one of its subsidiaries shall be authorized to draw in order to meet
Landair Corporation's or one of its subsidiaries' gross payroll
obligations, and Landair Corporation or one of its subsidiaries shall
ensure that such Payroll Account is sufficiently funded at all times.
Notwithstanding any other provision hereof,
(i) Landair Corporation or one of its subsidiaries
shall reimburse FAF or one of its subsidiaries for each
payroll paid by FAF or one of its subsidiaries to the
employees of Landair Corporation or one of its subsidiaries
for the period contemplated above, to the extent that FAF or
one of its subsidiaries elects to provide funds despite a
deficiency in the Payroll Account, and
(ii) Landair Corporation or one of its subsidiaries
shall provide each such reimbursement by wire transfer of
immediately available funds on the day of the issuance of that
payroll to such employees.
2.3 Disputed Fees. In the event that Recipient and Provider have
a good faith dispute with respect to the amount of payment for Services
actually rendered (other than with respect to the underlying schedule of fees
for Services generally), Recipient shall withhold payment only of any unpaid
amount in dispute, and shall deliver to Provider promptly (and within 15 days
following receipt of any invoice from Provider that is the basis of such
dispute) a written statement describing the dispute, which statement shall
provide a reasonably detailed breakdown of the disputed payment amounts. The
parties agree to use their best efforts to resolve any such dispute hereunder
within 15 days following Provider's receipt of Recipient's statement describing
the dispute. In the event the parties cannot resolve the dispute within such
time period, each discrepancy or disagreement which
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<PAGE> 8
cannot be so resolved shall be submitted to a firm of nationally recognized
independent certified public accountants (agreed upon by Provider and
Recipient), who shall promptly deliver a report setting forth their calculation
of each item that was the subject of discrepancy or disagreement, which report
shall be final and binding on the parties. The fees and expenses of such firm
shall be borne one-half by Provider and one-half by Recipient, and each party
shall bear its own other expenses in connection therewith.
ARTICLE III
TERM; TERMINATION OF SERVICES
3.1 Term.
(a) Subject to Section 3.2 hereof, FAF or one of its
subsidiaries shall be obligated to provide the Services set forth on
SCHEDULE A-1 hereto, and Landair Corporation or one of its subsidiaries
shall be obligated to provide the Services set forth on SCHEDULE A-2
hereto until the earlier of (i) 18 months following the Distribution
Date or (ii) termination of all Services (as defined herein) pursuant
to Section 3.2 hereof; provided, however, that FAF or one of its
subsidiaries shall be obligated to provide the information technology
services described on SCHEDULE A-1 hereto until the third anniversary
of the Distribution Date, unless such Service is terminated by Landair
Corporation prior to such anniversary in accordance with Section 3.2
hereof.
(b) Notwithstanding anything to the contrary in this
Agreement, the provisions of Articles 5 and 6 and Sections 1.4 (solely
as relates to indemnification), 1.6 (solely as relates to
indemnification), 4.2, 7.6, 7.7, 7.8, 7.11, 7.12 and 7.13 shall survive
any termination of this Agreement or the provision of Services
hereunder.
3.2 Termination of Services. Any Recipient may at any time, upon
thirty days irrevocable written notice to Provider, terminate all the Services
or any Service (or any portion thereof) on a Service-by-Service basis. Any
Provider may, at any time after the first anniversary of the date hereof,
terminate any or all of the Services on three months irrevocable written notice
to Recipient; provided, however, Recipient shall be entitled to continue
receiving the information technology services set forth on Schedule A-1 hereto
through the third anniversary date in its sole discretion. The provision of all
Services pursuant hereto shall in any event terminate on or prior to the third
anniversary of the date hereof. Upon termination of any Service, all
administrative records relating to that Service as such records relate solely to
Recipient which have not already been transferred to the sole possession of
Recipient shall be so transferred, it being understood that Provider may retain
copies of such records.
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<PAGE> 9
ARTICLE IV
COOPERATION
4.1 Cooperation. Each of the parties shall cooperate with and provide
assistance to the other consistent with the terms and conditions hereof
(including, without limitation, any limitations relating to software) to enable
(i) the full performance of all obligations hereunder, (ii) the review and audit
of books and administrative records as they relate to the provision of Services,
and (iii) Recipient, or any of its affiliates or third party service providers,
to assume the performance of any and all Services upon termination or prior
thereto; such cooperation and assistance to include without limitation providing
the other party, its representatives and its agents (including, without
limitation, its outside auditors) with reasonable access, during normal business
hours and upon reasonable advance notice, to its employees, representatives and
agents and its books, administrative records, offices and properties relating to
the Services. Nothing in this Section 4.1 shall operate to grant any right to
Recipient of Provider-owned software, data or other intellectual property.
4.2 Provider Administrative Records. Each party providing Services
hereunder shall keep administrative records regarding the provision of Services
for itself regarding such Services prior to the Distribution, and for each
Service shall retain such records for a period of twelve months following the
cessation of Provider's provision of that Service to the Recipient. Recipient,
its agents and representatives shall have reasonable access to such records
(which term is not to be construed to include Provider Software) during normal
business hours and upon reasonable advance notice from the date hereof through
the end of the period for retaining such records pursuant to this Section 4.2.
4.3 Periodic Review of Services. From time to time during the term of
this Agreement, but not less frequently than once each quarter, the parties
shall meet and discuss the nature, quality, and level of Services covered by
this Agreement, any concerns either party may have in regard to such matters,
and any amendments either party may wish to make to the Services specified on
SCHEDULE A-1 OR A-2 hereto.
ARTICLE V
FORCE MAJEURE
5.1 Force Majeure. Each party shall be relieved of its obligations
hereunder if and to the extent that any of the following events or conditions
directly or indirectly hinder, limit or make impracticable the performance by
that party of any of its obligations hereunder: Act of God, war, riot, fire,
earthquake, explosion, flood, sabotage, national defense requirement, strike,
lockout, job action, injunction, act or order of a governmental agency or
instrumentality thereof (whether of fact or law), act of a public enemy, embargo
or other concerted act of workers, telecommunications failures or electrical
failures; provided, that each party obligated to provide Services hereunder
shall continue to have in place at all times disaster recovery procedures
consistent with past practices to enable rapid recovery from any such event or
condition. Such procedures may be subject to revision by each party obligated to
provide Services hereunder from time to time as may be required in the
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<PAGE> 10
ordinary course of business, provided, that such revisions do not adversely
affect the levels of protection afforded by such procedures. Prior to being
relieved of any obligations hereunder, each party obligated to provide Services
hereunder shall have used commercially reasonable efforts (consistent with past
practice) to remove or otherwise address the effects of any such event or
condition as soon as practicable. Any Recipient hereunder shall be liable for
all costs incurred by the applicable Provider hereunder in connection with any
Service that such Provider fails to complete and provide as a result of any such
event or condition.
ARTICLE VI
CONFIDENTIALITY
6.1 Confidentiality. The parties acknowledge that in connection with
the provision of Services hereunder, each may gain access to confidential and
proprietary information regarding the other's financial and business affairs
(hereinafter "Confidential Information" or "Information"). Each party hereby
agrees to use commercially reasonable efforts to:
(a) confine its access to and examination of Confidential
Information to the minimum Information necessary to enable any Provider
hereunder to provide the Services hereunder and any Recipient hereunder
to operate its business;
(b) limit access to such Information only to those individuals
who reasonably need to receive such access to enable any Provider
hereunder to provide the Services hereunder and any Recipient hereunder
to operate its business;
(c) inform such individuals of the confidential nature of such
Information and take all reasonable steps to secure the compliance of
such individuals with the terms of this Article 6;
(d) use such Information solely to enable any Provider
hereunder to provide the Services hereunder and any Recipient hereunder
to operate its business;
(e) keep such Information confidential and not disclose it to
any third party in any manner except as may be required by law or court
order; and
(f) provide the other party with reasonable access to that
party's employees, representatives and agents and its books and
administrative records relating to the relevant business (including,
without limitation, any and all computer access reports and security
access reports) in order for the other party to monitor compliance with
this Article 6. Notwithstanding the foregoing, disclosures of
Information may be made to third parties:
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<PAGE> 11
(i) with the prior written consent of the party whose
Information it is;
(ii) if the Information is in the public domain and has
entered the public domain through no fault of the
party seeking to make such disclosure or its
affiliates or representatives;
(iii) if the Information is lawfully acquired by the party
seeking to make such disclosure or its affiliates or
representatives from sources other than the party
whose Information it is or its affiliates or
representatives and the party seeking to make such
disclosure, its affiliates or its representatives is
not aware that such source was under any obligation
(whether contractual, legal or fiduciary) to the
party whose Information it is or any of its
affiliates or representatives to keep such
Information confidential; or
(iv) to the extent disclosure is compelled by law or court
order.
Each party shall be responsible for any breach of this Article 6 caused by
itself or any of its employees, agents or representatives. Anything contained
herein to the contrary notwithstanding, the parties acknowledge and agree that
irreparable damage would occur in the event that any provision of this Article 6
was not performed in accordance with its terms, and that the parties shall be
entitled to specific performance as the sole remedy.
ARTICLE VII
MISCELLANEOUS
7.1 Notices. All notices, requests, demands, consents, waivers and
other communications required or permitted to be given under this Agreement
(excluding invoices as described in Section 2.2 above) shall be in writing and
may be given by any of the following methods: (a) personal delivery; (b)
facsimile transmission; (c) registered or certified mail, postage prepaid,
return receipt requested; or (d) overnight delivery service. Notices shall be
sent to the appropriate party at its address or facsimile number given below (or
at such other address or facsimile number for such party or other person as
shall be specified by notice given hereunder):
If to Provider to: If to Recipient to:
Forward Air Corporation Landair Corporation
Attention: General Counsel Attention: General Counsel
430 Airport Road 430 Airport Road
P.O. Box 1058 P.O. Box 1058
Greeneville, Tennessee 37745 Greeneville, Tennessee 37745
Fax No.: (423) 636-7274 Fax No.: (423) 636-7274
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<PAGE> 12
All such notices, requests, demands, waivers and communications shall
be deemed received upon actual receipt thereof by the addressee or actual
delivery thereof to the appropriate address.
7.2 Severability. Should any provision of this Agreement for any reason
be declared invalid or unenforceable, such declaration shall not affect the
validity or enforceability of any of the other provisions of this Agreement,
which other provisions shall remain in full force and effect. The application of
such invalid or unenforceable provision to persons or circumstances other than
those as to which it has been held invalid or unenforceable shall be valid and
enforced to the fullest extent permitted by law.
7.3 Binding Effect; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned, directly or indirectly, including, without limitation, by operation
of law, by any party hereto without the prior written consent of the other party
hereto; provided, (a) that either of the parties hereto may without such prior
written consent transfer or assign its rights hereunder to one or more of its
affiliates, but no such transfer arrangement shall release the transferring
party of its obligations hereunder and (b) that any Provider hereunder may
subcontract to any party so long as such Provider remains liable for the
performance of Services provided by any such subcontractor.
7.4 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties and their respective successors and permitted assigns,
and shall not be deemed to confer upon or give to any other party any remedy,
claim, liability, reimbursement, cause of action or other right.
7.5 Interpretation. The section headings contained in this Agreement
are solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement.
7.6 Jurisdiction and Consent to Service. In accordance with the laws of
the State of Tennessee, and without limiting the jurisdiction or venue of any
other court, the parties
(a) agree that any suit, action or proceeding arising out of
or relating to this Agreement (other than proceedings arising under
Section 2.3 above with respect to the amount of payment for Services)
shall be brought solely in the state or federal courts of Tennessee;
(b) consent to the exclusive jurisdiction of each such court
in any suit, action or proceeding relating to or arising out of this
Agreement;
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(c) waive any objection which any of them may have to the
laying of venue in any such suit, action or proceeding in any such
court; and
(d) agree that service of any court paper may be made in any
manner as may be provided under the applicable laws or court rules
governing service of process in such court.
7.7 Entire Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof, and supersedes all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof. Any conflicts between the
language herein and the language used in the Distribution Agreement shall be
resolved in favor of the language used herein.
7.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TENNESSEE (REGARDLESS OF THE LAWS
THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS
THEREOF) AS TO ALL MATTERS, INCLUDING BUT NOT LIMITED TO MATTERS OF VALIDITY,
CONSTRUCTION, EFFECT, PERFORMANCE AND REMEDIES.
7.9 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
7.10 Relationship of the Parties. In carrying out the provisions of
this Agreement, FAF and Landair Corporation are and shall be deemed to be for
all purposes, separate and independent entities. FAF and Landair Corporation
shall select their employees and agents, and such employees and agents shall be
under the exclusive and complete supervision and control of FAF or Landair
Corporation, as the case may be. It is the express intent of this Agreement that
the relationship of FAF to Landair Corporation and Landair Corporation to FAF
shall be solely that of separate and independent companies and not that of a
joint venture, partnership or any other joint relationship.
Neither party shall transact or commit the other party in any manner.
7.11 Waiver. Any failure by either party to comply with any obligation,
covenant or agreement herein or to fulfill any condition herein may be waived
only by a written notice from the party entitled to the benefits thereof. No
failure by either party hereto to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right hereunder preclude any other or future exercise of
that right or any other right hereunder by that party.
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7.12 Sole Remedy; No Damages. If either party becomes dissatisfied with
the quality or level of Services provided hereunder, claims any breach of this
Agreement by the other party or otherwise becomes dissatisfied with any matter
relating hereto or arising herefrom, its sole remedy shall be termination of all
or a part of the Services without right to seek actual, compensatory or
consequential damages. EACH PARTY HEREBY ACKNOWLEDGES AND AGREES THAT IT IS
HEREBY WAIVING CERTAIN LEGAL RIGHTS AND REMEDIES, AND THAT THIS WAIVER IS A
FUNDAMENTAL ELEMENT OF THE BARGAIN BETWEEN THE PARTIES HERETO, WITHOUT WHICH
PROVIDER WOULD NOT HAVE ENTERED INTO THIS AGREEMENT. EACH PARTY HEREBY
ACKNOWLEDGES AND AGREES FURTHER THAT, NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED HEREIN, THE OTHER PARTY MAY, BUT SHALL IN NO EVENT BE OBLIGATED TO,
ADVANCE FUNDS OR INCUR COSTS IN CONNECTION WITH ITS PERFORMANCE HEREUNDER.
7.13 Indemnification. Each Recipient hereunder, at its own expense,
shall indemnify, defend and hold each Provider hereunder, its subsidiaries and
their present or former officers, directors, shareholders, agents, employees,
representatives, successors-in-interest, parents, affiliates, insurers,
attorneys and assigns (collectively, the "Indemnified Parties") harmless from
and against any claims, judgments, losses, deficiencies, damages, punitive or
exemplary damages, fines or penalties, liabilities, costs and expenses
(including reasonable attorneys' fees, charges and disbursements) whether
required to be paid to a third party or otherwise incurred in connection with or
arising from any claim, suit, action or proceeding ("Claim") against the
Indemnified Party to the extent the basis of such Claim is that: (a) such
Recipient has failed to pay any amounts owed to third parties in connection with
the Services provided by such Provider under this Agreement; (b) a third party
has been or may be injured or damaged in any way by any breach of such Recipient
of any of its duties, representations or warranties under this Agreement; (c)
such Recipient or any of its employees, agents, or servants acted improperly in
connection with the notification, investigation, adjustment or settlement of
claims and losses arising out of the Services described on SCHEDULES A-1 OR A-2
hereto, and (d) there is no other liability or obligation arising out of such
Provider's administration or operation of the Services or functions described on
SCHEDULES A-1 OR A-2 hereto, except to the extent that same arises from the
gross negligence or willful misconduct of such Provider.
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IN WITNESS WHEREOF, the parties have each caused this Agreement to be
executed by its duly authorized representative as of the day and year first
above written.
FORWARD AIR CORPORATION
f/k/a Landair Services, Inc., on behalf of itself
and its wholly owned subsidiaries
By: /s/ Bruce A. Campbell
-----------------------------------------------
Its: President
-----------------------------------------------
LANDAIR CORPORATION, on behalf of itself and
its wholly owned subsidiaries
By: /s/ E. R. Brown
-----------------------------------------------
Its: President
-----------------------------------------------
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SCHEDULE A-1
SERVICES PROVIDED BY FAF TO LANDAIR CORPORATION
FAF will provide, or cause to be provided, the following Services to
Landair Corporation or its subsidiaries:
<TABLE>
<CAPTION>
SERVICE COST
<S> <C> <C>
I Accounts payable...................................................... To be charged on a per check processed basis
II Payroll............................................................... To be charged based on the number of employees
III Human resources services and benefit
plan administration................................................... To be charged based on the number of employees
IV Settlement services.................................................... To be charged based on the number of owner-
operators
V Central purchasing services............................................ Items ordered from Central Purchasing to be charged
based on cost plus reasonable mark-up on such costs
VI Accounting and legal services.......................................... To be charged cost of such services prorated 50% to
Landair Corporation and 50% to FAF.
VII General administrative services
(Chairman's salary and support staff,
mail room functions, receptionists,
corporate office maintenance staff, etc.).............................. To be charged cost of such services prorated 50%
to Landair Corporation and 50% to FAF.
VIII Information technology services,
including providing general computing
services. This will include the following:
(a) maintaining connection to the two
FAF Local Area Networks;
(b) maintaining e-mail connection;
(c) AS 400; (d) maintain and support
FAF computer applications and provide
Landair Corporation personnel with
access to same......................................................... To be charged cost of such services prorated 50%
to Landair Corporation and 50%
to FAF.
</TABLE>
In connection with the information technology services described above,
such services will be reviewed and adjusted by FAF and Landair Corporation every
six months as needed. Access to FAF's applications and data provided to Landair
Corporation's personnel will be reviewed and approved by the FAF security
administrator.
<PAGE> 17
SCHEDULE A-2
SERVICES PROVIDED BY LANDAIR CORPORATION TO FAF
Landair Corporation will provide, or cause to be provided, the
following Services to FAF or its subsidiaries:
<TABLE>
<CAPTION>
SERVICE COST
<S> <C> <C>
I Safety services............................................................ To be charged based on the number of trucks
II Licensing/permitting/fuel tax.............................................. To be charged based upon number of trucks
III Insurance/claims services (including
maintaining relationships with brokers,
coordination of claims processing and
allocation between parties and assistance
with reserve computations)................................................. To be charged as follows: (i) 50% of the costs of
such services shall be allocated 50%/50% to each of
Landair Corporation and FAF and (ii) 50% of the
costs of such services shall be allocated based on
the number of claims processed.
IV Recruiting/retention services.............................................. To be charged based on the number of drivers hired
V Training center services................................................... To be charged based upon the number of drivers
completing the training and orientation program in
Columbus
</TABLE>
<PAGE> 1
EXHIBIT 10.2
EMPLOYEE BENEFIT MATTERS AGREEMENT
THIS EMPLOYEE BENEFIT MATTERS AGREEMENT (this "Agreement") is made as
of this 18th day of September, 1998 by and between FORWARD AIR CORPORATION,
a Tennessee corporation f/k/a Landair Services, Inc. ("FAF"), and LANDAIR
CORPORATION, a Tennessee corporation ("LAC").
RECITALS
WHEREAS, FAF is the holder of all of the issued and outstanding shares
of common stock, $.01 par value per share, of LAC (the "LAC Common Stock");
WHEREAS, the employees of LAC and its Subsidiaries are covered by
various employee benefit plans sponsored by FAF which are limited to employees
of FAF and its Subsidiaries;
WHEREAS, the Board of Directors of FAF has determined that it is
advisable and in the best interests of FAF, its shareholders and LAC to
distribute (the "Distribution") all of the outstanding shares of LAC Common
Stock on a pro rata basis to the holders of the common stock, $.01 par value per
share, of FAF (the "FAF Common Stock"), so that after such Distribution, LAC
will be an independent public company; and
WHEREAS, FAF and LAC have agreed to enter into this Agreement to
provide for the allocation of certain assets and liabilities and certain other
matters relating to employees, employee benefit plans and compensation
arrangements;
NOW THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth and other good and valuable consideration, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used but not otherwise defined herein shall have the
meanings set forth in the Distribution Agreement. As used in this Agreement, the
following terms shall have the following meanings, such meanings to be equally
applicable to both the singular and plural forms of the terms defined:
CURRENT PLAN YEAR - The plan year or fiscal year, to the extent
applicable with respect to any Plan, during which the Distribution occurs.
CUT-OFF DATE - The date immediately preceding the Distribution Date.
DISTRIBUTION AGREEMENT - The Distribution Agreement entered into
between FAF and LAC dated the same date as this Agreement and governing the
terms and conditions of the Distribution.
<PAGE> 2
ERISA - The Employee Retirement Income Security Act of 1974, as
amended, or any successor legislation thereto, and the rules and regulations
thereunder.
FAF EMPLOYEE - Any person employed by FAF or a Subsidiary of FAF
immediately prior to the Distribution (including, without limitation, those who
are actively employed or on lay-off, leave, short-term or long-term disability
or other permitted absence from employment) who is not an LAC Employee.
FAF OPTION - An option to purchase shares of FAF Common Stock granted
pursuant to the Amended and Restated Stock Option and Incentive Plan of FAF,
the Non-Employee Director Option Plan of FAF or the Non-Employee Director Award
of FAF.
LAC EMPLOYEE - Any person employed by LAC or a Subsidiary of LAC
immediately prior to the Distribution (including, without limitation, those who
are actively employed or on lay-off, leave, short-term or long-term disability
or other permitted absence from employment), and any person who is employed by
FAF or any of its Subsidiaries (other than by LAC or a Subsidiary of LAC)
immediately prior to the Distribution and who is identified on the attached
SCHEDULE 1 hereto.
LAC INDIVIDUALS - Any individual who (a) is an LAC Employee, or (b) is
a beneficiary of any individual specified in clause (a).
LAC PARTICIPANT - LAC Employees and their respective beneficiaries.
PLAN - Any plan, policy, arrangement, contract or agreement providing
compensation benefits for any group of Employees or former employees, or any
individual Employee or former employee, or the dependents or beneficiaries of
any such Employee or former employee, whether formal or informal or written or
unwritten, and including, without limitation, any means, whether or not
required, pursuant to which any benefit is provided by an employer to any
Employee or former employee or the beneficiaries of any such Employee or former
employee. The term "Plan" as used in this Agreement does not include any
contract, agreement or understanding entered into by FAF prior to the
Distribution Date or by FAF or LAC after the Distribution Date relating to
settlement of actual or potential employee related litigation claims.
SERVICE CREDIT - The period taken into account under any Plan for
purposes of determining length of service to satisfy eligibility, vesting,
benefit accrual and similar requirements under such Plan.
SUBSIDIARY - A corporation that is a member of a controlled group of
corporations, within the meaning of Internal Revenue Code Section 1563, with FAF
or with LAC, except that LAC and its Subsidiaries shall not be treated as
Subsidiaries of FAF.
2
<PAGE> 3
TERMINEES - Any individual formerly employed by FAF or any Subsidiary
of FAF who terminated such employment prior to the Distribution Date, including
but not limited to any FAF employee who has retired prior to the Distribution
Date.
WELFARE PLAN - An employee welfare benefit plan as defined in Section
3(1) of ERISA, including, without limitation, medical, vision, dental and other
health plans, retiree health plans, life insurance plans, retiree life insurance
plans, accidental death and dismemberment plans, long-term disability plans and
severance pay plans.
ARTICLE II
SEPARATION OF BENEFIT PLANS
2.1 EMPLOYMENT OF LAC EMPLOYEES. LAC shall employ or continue to
employ, effective as of the Distribution Date, all LAC Employees. Subject to the
terms and conditions of, except as otherwise provided in, this Agreement,
effective as of the Distribution Date, LAC shall provide LAC Employees with
terms and conditions of employment, including without limitation, employee
benefits and other perquisites, that are substantially similar to those provided
to LAC Employees immediately prior to the Distribution Date. However, nothing
contained in this Agreement shall impair LAC's ability to make such reasonable
changes in such terms and conditions of employment following the Distribution as
LAC may deem to be necessary or appropriate for the operation of LAC.
2.2 SEPARATE RESPONSIBILITIES. FAF and LAC agree that FAF shall have
sole responsibility for its employee benefit plans, arrangements and policies
for employees of FAF and its Subsidiaries and that LAC shall have sole
responsibility for its employee benefit plans, arrangements and policies for LAC
Employees. FAF and LAC intend that, to the extent possible, LAC Employees shall
look solely to LAC and its Plans, arrangements and policies for the provision of
employee benefits, and that employees of FAF and its Subsidiaries shall look
solely to FAF and its Plans, arrangements and policies for the provision of
employee benefits.
ARTICLE III
RETIREMENT SAVINGS PLANS
3.1 FAF RETIREMENT SAVINGS PLAN.
(a) Effective as of the Distribution Date, FAF shall continue
sponsorship of the FAF Retirement Savings and Investment Plan (the "FAF 401(k)
Plan") for all FAF Employees and Terminees.
(b) On or before the Distribution, LAC shall take, or cause to be
taken, all action necessary and appropriate to establish and administer a new
plan named the Landair Corporation Retirement Savings and Investment Plan (the
"LAC 401(k) Plan") and to provide benefits thereunder after the date of the
establishment of such plan for all participants in or otherwise entitled to
benefits
3
<PAGE> 4
under the FAF 401(k) Plan. The LAC 401(k) Plan shall provide for the same
employer contribution formula for LAC Employees as the FAF 401(k) Plan provides
as of the Distribution Date. The LAC 401(k) Plan shall be intended to qualify
for tax-favored treatment under Sections 401(a) and 401(k) of the Code and to be
in compliance with the requirements of ERISA.
(c) As soon as practicable after the date of the establishment of LAC
401(k) Plan, FAF shall cause the trustees of the FAF 401(k) Plan to transfer to
the trustee or other funding agent of the LAC 401(k) Plan the amounts (in cash,
securities, other property or a combination thereof) representing the account
balances of all LAC Individuals, said amounts to be established as account
balances or accrued benefits of such individuals under the LAC 401(k) Plan. Each
such transfer shall comply with Section 414(l) of the Code and the requirements
of ERISA and the regulations promulgated thereunder. LAC agrees to cause the
trustees or other funding agent of the LAC 401(k) Plan to accept the
plan-to-plan transfer from the FAF 401(k) Plan trustees, and to credit the
accounts of such LAC Individuals under the LAC 401(k) Plan with amounts
transferred on their behalf. Notwithstanding the foregoing, FAF and LAC agree
that if, subsequent to such transfer of account balances to the LAC 401(k) Plan,
a subsequent audit or other review establishes that additional funds should be
transferred to the LAC 401(k) Plan from the FAF 401(k) Plan, or that funds
should be returned from the LAC 401(k) Plan to the FAF 401(k) Plan, both parties
shall take all appropriate steps to effectuate the required transfer between the
trusts maintained for such plans.
(d) FAF shall provide LAC, as soon as practicable after the date of the
establishment of the LAC 401(k) Plan (with the cooperation of LAC to the extent
that relevant information is in the possession of LAC or an LAC Subsidiary) with
a list of LAC Individuals who, to the best knowledge of FAF, were participants
in or otherwise entitled to benefits under the FAF 401(k) Plan on the Cut-off
Date, together with a listing of each participant's Service Credits under such
FAF 401(k) Plan and a listing of each account balance thereunder. FAF shall, as
soon as practicable after the Distribution Date and in accordance with SECTION
7.1 hereof, provide LAC with such additional information in the possession of
FAF or any of its Subsidiaries (and not already in the possession of LAC or any
of its Subsidiaries) as may be reasonably requested by LAC and necessary for LAC
or any of its Subsidiaries to establish and administer the LAC 401(k) Plan
effectively.
(e) LAC and FAF shall, in connection with the plan-to-plan transfer
described in this SECTION 3.1, cooperate in making any and all appropriate
filings required by the Commission or the IRS, or required under the Code or
ERISA or any applicable securities laws and the regulations thereunder, and take
all such action as may be necessary and appropriate to cause such plan-to-plan
transfer to take place as soon as practicable after the date of the
establishment of the LAC 401(k) Plan or otherwise when required by law. Further,
LAC shall seek a favorable IRS determination letter that the LAC 401(k) Plan, as
organized, satisfies all qualification requirements under Section 401(a) of the
Code, and the transfers described in SECTION 3.1(C) shall take place as soon as
practicable after the receipt of such favorable IRS determination letter.
Notwithstanding the foregoing, such transfers may take place pending issuance of
such favorable determination letter, upon receipt of an opinion of counsel for
LAC reasonably satisfactory to FAF that the aforesaid Plan so qualifies, or that
it can be made to so qualify by retroactive amendment, and that any such
4
<PAGE> 5
retroactive amendment shall not decrease the accrued benefit of any participant
in such Plan. FAF agrees to provide to LAC's counsel such information in the
possession of FAF or any of its Subsidiaries as may reasonably be requested by
LAC's counsel in connection with the issuance of such opinion. FAF and LAC shall
each make any necessary amendments on a retroactive basis to the FAF 401(k)
Plan, or the LAC 401(k) Plan, respectively, as required by the IRS to issue the
favorable determination letter described above.
ARTICLE IV
EMPLOYEE STOCK PURCHASE PLANS
4.1 EMPLOYEE STOCK PURCHASE PLANS.
(a) After the date of June 30, 1998, FAF shall suspend all regular
payroll deductions from the compensation of Participants (as defined in the LSI
Stock Purchase Plan) under the FAF Stock Purchase Plan until such time as the
Distribution is consummated. After consummation of the Distribution, FAF may, at
its option, resume such deductions under the FAF Stock Purchase Plan with
respect to FAF Employees.
(b) Effective as of the Distribution Date, LAC shall take, or cause to
be taken, all action necessary and appropriate to establish and administer a new
stock purchase plan named the Landair Corporation Employee Stock Purchase Plan,
which plan shall be substantially similar to the FAF Stock Purchase Plan and
shall provide benefits thereunder after the Distribution Date for all eligible
LAC Employees.
ARTICLE V
STOCK OPTION PLANS
5.1 INCENTIVE AND NON-QUALIFIED OPTIONS. FAF and LAC shall cooperate
and take all action necessary to amend, if necessary, or otherwise provide for
adjustments of outstanding awards under the FAF Stock Option and Incentive Plan,
the FAF Non-Employee Director Option Plan and the FAF Non-Employee Director
Award, and to adopt the LAC Stock Option and Incentive Plan and the LAC
Non-Employee Director Option Plan, so that each LAC Individual and each
non-employee director of FAF who will be a non-employee director of LAC and not
of FAF after the Distribution shall exercise or forfeit all exercisable FAF
Options held by such LAC Individual or director prior to the Distribution.
(a) Effective immediately after the Distribution Date, the
number of shares of FAF Common Stock subject to, and the exercise price
of, each FAF Option which immediately prior to the Record Date is
outstanding and not exercised and is held by an FAF Individual shall be
adjusted by FAF so that the number of shares of FAF Common Stock
subject to such FAF Option shall be multiplied by the FAF Conversion
Ratio and the
5
<PAGE> 6
exercise price of such FAF Option shall be divided by the FAF
Conversion Ratio. The "FAF Conversion Ratio" shall be equal to the
amount obtained by dividing (i) the average of the daily closing sales
prices for a share of FAF Common Stock on the NASDAQ-NMS for the five
trading days prior to the record date for the Distribution by (ii) the
average of the daily closing sales prices for a share of FAF Common
Stock on the NASDAQ-NMS for the five trading days immediately following
the Distribution Date.
(b) As of the Distribution Date, each FAF Option which
immediately prior to the Distribution Date is outstanding and not then
exercisable and is held by an LAC Individual (a "Converted Option")
shall, without any action on the part of the holder thereof, be
converted (the "Option Conversion") into an option to purchase shares
of LAC Common Stock. As a result of the Option Conversion, each
Converted Option shall provide for the purchase of a number of shares
of LAC Common Stock equal to the number of shares of FAF Common Stock
subject to the Converted Option prior to the Option Conversion
multiplied by the LAC Conversion Ratio. In addition, the per share
exercise price of such Converted Option as a result of the Option
Conversion shall be equal to the per share exercise price of the
Converted Option prior to the Option Conversion divided by the LAC
Conversion Ratio. The "LAC Conversion Ratio" shall be equal to the
amount obtained by dividing (i) the average of the daily closing sales
prices for a share of FAF Common Stock on the NASDAQ-NMS for the five
trading days prior to the record date for the Distribution by (ii) the
average of the daily closing sales prices for a share of LAC Common
Stock on the NASDAQ-NMS for the five trading days immediately following
the Distribution Date.
ARTICLE VI
WELFARE BENEFIT PLANS AND OTHER MATTERS
6.1 WELFARE PLANS. As of the Distribution, LAC will have established,
and will cover LAC Participants under, Welfare Plans and other employee welfare
benefit and fringe benefit arrangements (collectively, "LAC Welfare Plans") that
are substantially similar in all material respects to the Welfare Plans and
other employee welfare benefit and fringe benefit arrangements maintained by FAF
and its Subsidiaries (including members of the FAF Group) immediately prior to
the Distribution for the benefit of LAC Participants ("FAF Welfare Plans"). The
LAC Welfare Plans will be maintained in such form for a period of at least one
year following the Distribution.
(a) The LAC Welfare Plans will provide for the immediate participation
of those LAC Participants who participated in the FAF Welfare Plans immediately
prior to the Distribution. The LAC Welfare Plans will credit each LAC
Participant for all LAC Welfare Plan purposes with all service and any other
item which had been credited to or otherwise accumulated for the benefit of such
LAC Participant under the FAF Welfare Benefit Plans immediately prior to the
Distribution. The transition from the FAF Welfare Plans to the LAC Welfare Plans
will not, in and of itself, adversely affect the LAC Participants. Without
limiting the generality of the foregoing, each LAC Welfare Plan, to the extent
applicable: (i) will recognize all amounts applied to deductibles,
6
<PAGE> 7
co-payments, out-of-pocket maximums and lifetime maximum benefits with respect
to LAC Participants under the corresponding FAF Welfare Plan for the plan year
that includes the Distribution and for prior periods (if applicable); (ii) will
recognize all service credited to waiting periods with respect to LAC
Participants under the corresponding FAF Welfare Plan; (iii) will not impose
any limitations on coverage of pre-existing conditions of LAC Participants
except to the extent such limitations applied to such LAC Participants under the
corresponding FAF Welfare Plan immediately before such LAC Welfare Plan became
effective; and (iv) will not impose any other conditions (such as proof of good
health, evidence of insurability or a requirement of a physical examination)
upon the participation by LAC Participants who were participating in the
corresponding FAF Welfare Plan immediately before such LAC Welfare Plan became
effective.
(b) LAC and the LAC Subsidiaries will credit each LAC Employee with the
unused vacation days and personal and sickness days accrued in accordance with
the vacation and personnel policies and labor agreements of FAF and its
Subsidiaries (including members of the LAC Group) applicable to such employees
in effect immediately prior to the Distribution.
(c) From and after the Distribution, except as specifically set forth
in this Agreement, LAC and the LAC Subsidiaries will be solely responsible for
and will fully perform, pay and discharge, all Liabilities in respect of LAC
Participants (and claims by or relating to LAC Participants) with respect to
employee welfare and fringe benefits (including, without limitation, medical,
dental, life, travel, accident, short-term and long-term disability,
hospitalization, workers' compensation and other insurance benefits) and retiree
health benefits and retiree life insurance benefit, whether under the FAF
Welfare Plans, the LAC Welfare Plans or otherwise.
(d) LAC and FAF will cooperate in making all appropriate filings
required by law, implementing all appropriate communications with participants,
exchanging and sharing appropriate records and taking such other actions as may
be necessary or appropriate to implement the provisions of this SECTION 6.1.
6.2 SEVERANCE PAY.
(a) FAF and LAC acknowledge and agree that the transactions
contemplated by the Distribution Agreement, this Agreement, any other Agreement
or any agreement relating to the transactions contemplated by the Distribution
will not constitute a severance of employment of any LAC Employee prior to or as
a result of the transactions contemplated thereby, and that individuals who, in
connection with the Distribution, cease to be FAF Employees and, pursuant to
this
7
<PAGE> 8
Agreement, become LAC Employees will not be deemed to have experienced a
termination, layoff or severance of employment from FAF and its Subsidiaries, in
each case for purposes of any policy, plan, program or agreement of FAF or any
of its Subsidiaries (including members of the LAC Group) that provides for the
payment of severance, salary continuation or similar benefits.
(b) LAC and the LAC Subsidiaries will be solely responsible for, and
will fully perform, pay and discharge, all Liabilities in connection with claims
by or on behalf of LAC Participants in respect of severance pay, salary
continuation and similar obligations relating to the termination or alleged
termination (whether voluntary or involuntary) of any such person's employment
after the Distribution (whether or not such claim is based on any severance
policy, agreement, arrangement or program which may exist or arise under any
contract, employment agreement or collective bargaining agreement or under any
federal, state, local, provincial or foreign law).
ARTICLE VII
MISCELLANEOUS
7.1 ACCESS TO INFORMATION, COOPERATION. FAF and LAC and their
authorized agents will be given reasonable access to and may take copies of all
information relating to the subjects of this Agreement (to the extent permitted
by federal and state confidentiality laws) in the custody of the other party,
including any agent, contractor, subcontractor, agent or any other person or
entity under the contract of such party. The parties will provide one another
with such information necessary to administer each party's Plans. The parties
will cooperate with each other to minimize the disruption caused by any such
access and providing of information.
7.2 RIGHTS OF EMPLOYEES. This Agreement is not intended to give any
individual employee or former employee of FAF or LAC or any of their
Subsidiaries any personal right or interest. No employee, shall have any right
under this Agreement to maintain employment with FAF, LAC or any Subsidiary,
become employed by FAF, LAC or any Subsidiary or accrue any benefit with respect
to employment. No employee, former employee, beneficiary or dependent shall have
any right to be designated as an LAC Employee or to be retained as the
responsibility of FAF.
7.3 ENTIRE AGREEMENT. This Agreement, together with the Distribution
Agreement, embodies the entire Agreement and understanding of the parties with
respect to the matters provided for herein and shall supersede any and all prior
agreements, arrangements and understanding relating to such matters. No
amendment, waiver of compliance with any provision or condition hereof or
consent pursuant to this Agreement shall be effective unless evidenced by an
instrument in writing signed by the parties.
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<PAGE> 9
7.4 GOVERNING LAW. The interpretation and performance of this Agreement
shall be governed by the laws of the State of Tennessee without regard for the
choice of law provisions thereof.
7.5 NOTICES. All notices or other communications required or permitted
under this Agreement shall be delivered by hand, mailed by certified or
registered mail, postage prepaid and return receipt requested, or sent by cable,
telegram, telex or telecopy (confirmed by regular, first-class mail), to the
parties at the following addresses (or at such other addresses for a party as
shall be specified by like notice) and shall be deemed given on the date on
which such notice is received:
In the case of FAF, to In the case of LAC, to
Forward Air Corporation Landair Corporation
430 Airport Road 430 Airport Road
Greeneville, Tennessee 37745 Greeneville, Tennessee 37745
Attention: General Counsel Attention: General Counsel
7.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
7.7 TERMINATION. This Agreement shall be terminated if the Distribution
Agreement is terminated or if the Distribution fails to occur. If the Agreement
terminates under this Section 7.7, no party shall have any liability to any
person under this Agreement.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all on the day and year first
above written.
FORWARD AIR CORPORATION
f/k/a Landair Services, Inc.
By: /s/ Bruce A. Campbell
---------------------------------
Title: President
------------------------------
LANDAIR CORPORATION
By: /s/ E. R. Brown
---------------------------------
Title: President
------------------------------
10
<PAGE> 1
EXHIBIT 10.3
TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT (this "Agreement") is made as of September
18, 1998 by and between FORWARD AIR CORPORATION, a Tennessee corporation f/k/a
Landair Services, Inc. ("FAF"), and LANDAIR CORPORATION, a Tennessee corporation
("LAC").
WHEREAS, FAF and LAC have entered into a Distribution Agreement dated
as of the date hereof (the "Distribution Agreement");
WHEREAS, pursuant to the Distribution Agreement all the issued and
outstanding common stock of LAC will be distributed by FAF (pro rata) to the
holders of FAF's common stock (the "Distribution"); and
WHEREAS, the parties hereto desire to provide for the payment of tax
liabilities and entitlement to tax refunds for the taxable periods ending
before, on or after the date of the Distribution, to allocate responsibility and
provide for cooperation in the preparation and filing of tax returns with
respect to such taxable periods, and to provide for certain other related
matters.
NOW, THEREFORE, FAF, on behalf of itself and the FAF Group (as
hereinafter defined), and LAC, on behalf of itself and the LAC Group (as
hereinafter defined), in consideration of the mutual covenants contained herein,
agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and the
plural forms of the terms defined):
"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor thereto and the regulations promulgated thereunder.
"DISTRIBUTION DATE" means the date of the Distribution. For all
purposes of this Agreement, the Distribution shall be deemed effective as of the
close of business on the Distribution Date.
"ESTIMATED TAX OR TAXES" means the periodic (quarterly or monthly)
payment of income or franchise taxes (federal, state or local) required to be
made for 1998 including any payment required to be made with an extension to
file any Tax Return.
"FAF BUSINESSES" means the present, former and future subsidiaries,
divisions and businesses of any member of the FAF Group, other than the LAC
Businesses.
"FAF GROUP" means FAF and its present and future subsidiaries, other
than members of the LAC Group.
<PAGE> 2
"FINAL DETERMINATION" shall mean the final resolution of liability for
any Tax for a taxable period, (i) by IRS Form 870-AD (or any successor forms
thereto), on the date of acceptance by or on behalf of the IRS, or by a
comparable form under the laws of other jurisdictions; except that a Form 870-AD
or comparable form that reserves (whether by its terms or by operation of law)
the right of the taxpayer to file a claim for refund and/or the right of the
taxing authority to assert a further deficiency shall not constitute a Final
Determination with respect to the subject matter reserved; (ii) by a decision,
judgment, decree, or other order by a court of competent jurisdiction, which has
become final and unappealable; (iii) by closing agreement or accepted offer in
compromise under Section 7121 or 7122 of the Code, or comparable agreements
under the laws of other jurisdictions; (iv) by any allowance of a refund or
credit in respect of an overpayment of Tax, but only after the expiration of all
periods during which such refund may be recovered (including by way of offset)
by the Tax-imposing jurisdiction; or (v) by any other final disposition,
including by reason of the expiration of the applicable statute of limitations
or by mutual agreement of the parties.
"IRS" means the Internal Revenue Service.
"LAC BUSINESSES" means the present, former and future subsidiaries,
divisions and businesses of any member of the LAC Group which are not, or are
not contemplated by the Distribution Agreement to be, part of the FAF Group
immediately after the Distribution.
"LAC GROUP" means LAC and all former, present and future subsidiaries
of LAC and shall include any business, division or subsidiary which carried on a
LAC Business on or before the Distribution Date.
"RESTRUCTURING TAXES" means any Taxes resulting from or related to the
Distribution, including, without limitation, any Taxes imposed pursuant to or as
a result of Code Section 311.
"TAX" means any of the Taxes.
"TAXES" means all forms of taxation, whenever created or imposed, and
whether of the United States of America or elsewhere, and whether imposed by a
local, municipal, governmental, state, federation or other body, and without
limiting the generality of the foregoing, shall include income, alternative
minimum, superfund, sales, use, ad valorem, gross receipts, value added,
franchise, transfer, recording, withholding, payroll, employment, excise,
occupation, premium or property taxes, together with any related interest,
penalties and additions to tax, or additional amounts imposed by any taxing or
other governmental authority (domestic or foreign) upon the LAC Group, the FAF
Group or any of their respective members or subsidiaries or divisions or
branches or any combination thereof.
"TAX ATTRIBUTE" shall mean any net operating loss, capital loss, or tax
credit allowed by the Internal Revenue Code or equivalent state statute or local
ordinance; including without limitation, alternative minimum tax credits,
foreign tax credits and general business tax credits.
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<PAGE> 3
"TAX BENEFIT" means the amount of the decrease in the liability for
Taxes resulting from any increase or decrease in any item, including, but not
limited to, any item of income or deduction, gain or loss or tax credit.
"TAX DETRIMENT" means the amount of the increase in the liability for
Taxes resulting from any increase or decrease in any item, including, but not
limited to, any item of income or deduction, gain or loss, or tax credit.
"TAX RETURN" means any return, filing, questionnaire or other document
filed or required to be filed, including amended returns that may be filed, for
any period with any taxing or governmental authority (whether domestic or
foreign) in connection with any Tax or Taxes (whether or not a payment is
required to be made with respect to such filing).
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
2.1 MANNER OF PREPARATION; ELECTIONS. All Tax Returns filed after the
Distribution Date shall be prepared on a basis which does not have an adverse
effect on the elections, accounting methods, conventions, closing agreements and
principles of taxation used in any Tax Return filed for any taxable period
ending on or before the Distribution Date, and shall be filed on a timely basis
by the party responsible for such filing under this Agreement. Subject to the
provisions of this Agreement, all decisions relating to the preparation and
filing of Tax Returns and any audit or other review of such Tax Returns shall be
made in the sole discretion of the party responsible under this Agreement for
such filing. Anything herein to the contrary notwithstanding, without the prior
written consent of FAF, which consent shall not be unreasonably withheld, no
member of the LAC Group shall carry back to any taxable period beginning before
the Distribution Date any Tax Attribute arising in any taxable period beginning
on or after the Distribution Date. To the extent any such carryback is not so
consented to by FAF, then FAF shall be entitled to retain for itself any refund
or other benefit obtained from such carryback filed by LAC. LAC shall promptly
reimburse FAF for the amount, if any, by which any Tax Detriment incurred by the
FAF Group or any member thereof as a result of such carryback exceeds the Tax
Benefit(s) to the FAF Group or any member thereof as a result of such carryback,
upon receipt of documentation detailing such Tax Detriment(s) within fifteen
(15) days of receipt of documentation, after which any unpaid amount will accrue
interest at the rate for income tax deficiencies specified in Section 3.1. All
Tax Attributes of the FAF Group and LAC Group will be allocated among the FAF
Group and LAC Group in accordance with the regulations promulgated pursuant to
Section 1502 of the Code (the "Consolidated Return Regulations") and, to the
extent applicable, other provisions of the Code and the regulations promulgated
thereunder (and analogous provisions of state, local or foreign law).
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<PAGE> 4
2.2 PREPARATION AND FILING OF AND ELECTIONS WITH RESPECT TO
PRE-DISTRIBUTION TAX RETURNS.
(a) Consolidated Federal Income Tax Returns. All consolidated federal
income Tax Returns which include a member of the FAF Group and the LAC Group
that are required to be filed for periods beginning before the Distribution Date
shall be prepared and filed by FAF. LAC shall, for each of such aforesaid
taxable periods for which it or any member of the LAC Group is includible in the
consolidated federal income Tax Return of the FAF Group, provide FAF with a
true, complete, and correct (i) separate federal income Tax Returns for LAC and
each member of the LAC Group together with accompanying computations of the
separate federal income Tax liabilities of LAC and each member of the LAC Group
and (ii) a reconciliation of book income to federal taxable income for LAC and
each member of the LAC Group. LAC shall use its best efforts to provide FAF with
such Returns and computations on or before the first day of the sixth month
following the end of the period to which such Returns and computations relate,
but in any event LAC shall provide such Returns and computations no later than
the fifteenth day of the sixth month following the end of the period to which
such Returns and computations relate. FAF shall notify LAC of the intended
filing date of its then due consolidated federal income Tax Return and LAC shall
pay FAF at least seven (7) days prior to such filing date the amount of total
federal income Tax liability, including without limitation, any alternative
minimum tax liability, shown on the above-referenced deemed consolidated federal
income Tax Returns for the members of the LAC Group includible in FAF's
consolidated federal income Tax Return, reduced by all Estimated Tax payments
theretofore made by LAC or any LAC Group member to FAF on account of such Tax
liability, or if such Estimated Tax payments in the aggregate exceed the federal
income Tax liability of LAC and each member of the LAC Group, FAF shall pay such
excess to LAC within thirty (30) days of the filing by FAF of the consolidated
federal income Tax Return with respect to which such overpayment relates.
Anything herein to the contrary notwithstanding, LAC for itself and each member
of the LAC Group shall calculate and shall remit to FAF at least seven (7) days
prior to the due date of each FAF Estimated Tax payment for 1998 the Estimated
Tax liability, attributable to LAC and each member of the LAC Group on a
consolidated basis for the short period beginning on January 1, 1998 and ending
on the Distribution Date. FAF agrees to permit LAC Group to review and comment
on each Tax Return prior to filing and shall make such revisions to such Tax
Returns as reasonably requested by LAC.
(b) Combined or Consolidated State or Local Income or Franchise Tax.
The provisions of Section 2.2(a) shall apply to the applicable filings of all
combined or consolidated state or local income or franchise Tax Returns which
include a member of the FAF Group and a member of the LAC Group that are
required to be filed for periods beginning before the Distribution Date. The Tax
savings, if any, resulting from filing combined or consolidated returns for 1998
will be allocated to LAC in a manner consistent with the most recent period. If
there should be adjustments to any combined or consolidated returns, or to prior
years federal returns as a result of an audit, any tax savings that were
previously credited for the period will be recalculated and the difference
between the tax savings that were previously credited and the recomputed tax
savings will be charged back
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<PAGE> 5
to LAC on the same basis as the savings have been allocated. No tax savings will
be allocated to LAC for the year 1998 or thereafter.
(c) Other Tax Returns. All Tax Returns (other than Tax Returns
described in Sections 2.2(a) and (b)) which include or are filed with respect to
a member of the FAF Group or the LAC Group that are required to be filed for
periods beginning before the Distribution Date shall be filed by the member of
the FAF Group or the LAC Group, as the case may be, which filed the
corresponding Tax Return for the most recent period for which such Tax Return
has been filed, or, if no such corresponding Tax Return has been filed, by the
appropriate member in accordance with applicable law or custom. In the case of
such Tax Returns filed by a member of the FAF Group, LAC shall be liable for and
pay to FAF the portion of the Tax liability on such Tax Returns attributable to
LAC Group members, at the time and in the amount determined in accordance with
past practice. In the case of such Returns filed by a member of the LAC Group,
FAF shall be liable for and pay to LAC the portion of the Tax liability on such
Returns attributable to FAF Group members, at the time and in the amount
determined in accordance with past practice.
(d) Apportionment of Tax Attributes. If all or a portion of any Tax
Attribute arising in any taxable period beginning before the Distribution Date,
is apportioned to a separate return year of LAC pursuant to any Code section (or
equivalent state or local law or regulations), then LAC shall pay to FAF the Tax
Benefit related to the Tax Attribute so apportioned.
(e) Certain Costs and Expenses. LAC or the LAC Group shall reimburse
FAF and the FAF Group for the LAC Group's portion of the costs associated with
the preparation and filing of Tax Returns by FAF pursuant to this Section 2.2.
2.3 FILING OF POST-DISTRIBUTION TAX RETURNS. All Tax Returns and Taxes
for periods beginning on or after the Distribution Date shall be the
responsibility of the FAF Group if such Tax Returns or Taxes relate to FAF
Businesses, and shall be the responsibility of the LAC Group if such Tax Returns
or Taxes relate to LAC Businesses.
2.4 CERTIFICATION. Each Tax Return and computation of tax liability
required to be provided to FAF by LAC and each member of the LAC Group pursuant
to Section 2.2 hereof shall be accompanied by a statement signed by the Chief
Financial Officer of LAC to the effect that such officer has reviewed for
completeness and accuracy the Tax Return and computation of the Tax liability
and the documentation in support thereof and has determined that such Tax Return
and computation properly reflect the taxable income (or loss), Tax liability and
credits of the entity or entities, as the case may be, to which such Tax Return
and computation relate for the period covered thereby.
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<PAGE> 6
ARTICLE III
DEFICIENCIES AND REFUNDS OF TAXES
3.1 PAYMENT OF DEFICIENCIES BY LAC. If any adjustments are made by any
taxing authority with respect to any Tax Return of FAF (or any member of the FAF
Group) in which any member of the LAC Group is included for taxable periods
beginning before the Distribution Date, then to the extent that such adjustments
either increase the net taxable income, reduce the net taxable loss or decrease
the tax credits of any member of the LAC Group and result in a greater Tax (net
of any future tax benefit resulting from such Tax or Tax liability) for such LAC
Group member or any FAF Group member (in either case without regard to any
offsetting adjustments to other members of the FAF Group, other than a member of
the LAC Group), LAC and each other member of the LAC Group shall be liable for
such increases in Taxes (net of any future tax benefit resulting from such Taxes
or Tax liabilities). If any member of the LAC Group shall have any liability as
a result of this Section 3.1, LAC shall pay to FAF, hold FAF harmless and
indemnify FAF for any such Tax liability, costs and attorneys fees, and the
amount thereof shall be paid by LAC to FAF within ten (10) days of the receipt
by LAC of written notice of such liability, together with a computation of the
amount due and supporting documentation in such detail as LAC may reasonably
request to verify the computation of the amount due. Any such required payment
not made within such ten (10) day period shall thereafter bear interest until
paid at the then most recently published rate of interest charged by the IRS on
income tax deficiencies of large corporations pursuant to Code Sections
6621(a)(2) and (c) (1).
3.2 PAYMENT OF REFUNDS TO LAC. If any adjustments are made by any
taxing authority with respect to any Tax Return of FAF (or any member of the FAF
Group) in which any member of the LAC Group is included for any taxable period
beginning before the Distribution Date, then to the extent that such adjustments
either (a) decrease the Tax liability attributable to any member of the LAC
Group and result in a Tax Benefit to FAF or any member of the FAF Group, or (b)
are attributable to a member of the LAC Group and result in a reduced Tax
liability for FAF or any member of the FAF Group (in either case without regard
to any offsetting adjustments to other members of the FAF Group, other than a
member of the LAC Group), then FAF shall remit to LAC any refunds of Taxes
received by or credited to it as a result of the adjustments attributable to a
member of the LAC Group. FAF shall pay any amounts due from it to LAC as a
result of this Section 3.2 within ten (10) days of its receipt of the relevant
refund or credit with respect thereto from the IRS or any state or other
governmental unit, as the case may be. Any such required payment not made within
such ten (10) day period shall thereafter, bear interest until paid at the then
most recently published rate at which the IRS pays interest on tax refunds of
large corporations pursuant to Code Section 6621(a)(1). Such payments shall be
accompanied by a computation of the amount due and supporting documentation in
such detail as LAC may reasonably request to verify the computation of the
amount due. Anything herein to the contrary notwithstanding, except as provided
in this Section 3.2, no member of the LAC Group shall be entitled to any payment
or benefit as a result of the receipt of any Tax refund received by any member
of the FAF Group except to the
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<PAGE> 7
extent such refund is attributable to the overpayment of Estimated Taxes by the
LAC Group or any member thereof.
3.3 RESTRUCTURING TAXES. If as a result of any transaction, act or
omission occurring after the Distribution Date and involving the LAC Businesses,
or the stock, assets or liabilities (or any combination thereof) of any member
of the LAC Group, including, without limitation, a breach by any member of the
LAC Group of any representation made to the IRS in any request for rulings or
act or omission of any member of the LAC Group that causes any condition or
assumption upon which such a ruling is based to fail to be met or be correct, as
the case may be, either (a) the Distribution does not qualify as a
reorganization pursuant to Code Section 368(a)(1)(D) or a tax free distribution
pursuant to Code Section 355 or (b) any Restructuring Taxes are imposed upon or
paid by FAF or any other member of the FAF Group, then LAC shall pay to FAF and
shall indemnify and hold harmless each member of the FAF Group from and against
all Restructuring Taxes. Such payment and indemnification shall be made by LAC
promptly, but in any event within fifteen (15) days after written notice from
FAF, which notice shall be accompanied by a computation of the amounts due. Any
such required payment not made within such fifteen (15) day period shall
thereafter bear interest until paid at the then most recently published rate at
which the IRS charges interest on income tax deficiencies of large corporations
pursuant to Code Sections 6621(a)(2) and (c) (1).
ARTICLE IV
TAX AUDITS, TRANSACTIONS AND OTHER MATTERS
4.1 TAX AUDITS AND CONTROVERSIES.
(a) Federal, State, or Local Income or Franchise Taxes. Except as
otherwise provided in this Section 4.1, FAF shall have the exclusive authority
and obligation to represent each member of the LAC Group before the IRS or any
other governmental agency or authority or before any court with respect to any
matter affecting the federal, state or local income or franchise Tax liability
of any member of either the FAF Group or the LAC Group for any Tax period
beginning before the Distribution Date, in each such case (i) allowing
representatives of the LAC Group, including, without limitation, outside counsel
and consultants, to participate in good faith in all respects in all such Tax
proceedings affecting any member of the LAC Group, and (ii) acting in the best
interests of both the FAF Group and the LAC Group. Such representation shall
include, but shall not be limited to exclusive control over (i) any response to
any examination of federal, state or local income or franchise Tax Returns and
(ii) any contest or litigation through a Final Determination of any issue
included in any Tax Return that includes a member of the FAF Group, including,
but not limited to (A) whether and in what forum to conduct such contest, and
(B) whether and on what basis to settle such contest; except that FAF shall not
settle any claim, suit, action or proceeding in respect of which any member of
the LAC Group may incur any then known (by FAF) future Tax liability, or in
respect of which indemnity for federal, state or local income or franchise Taxes
may be sought hereunder against LAC or any member of the LAC Group without LAC's
consent, which consent
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<PAGE> 8
shall not be unreasonably withheld. FAF shall give timely notice to LAC of any
inquiry, the assertion of any claim or the commencement of any suit, action or
proceeding in respect of which any member of the LAC Group may incur any then
known (by FAF) future Tax liability or in respect of which indemnity for
federal, state or local income or franchise Taxes may be sought under this
Agreement against LAC or any member of the LAC Group and will give LAC such
information with respect thereto as LAC may reasonably request. Anything in this
Section 4.1 or elsewhere in this Agreement to the contrary notwithstanding, if
LAC contests or litigates any federal, state or local income or franchise tax
issue in any forum, LAC shall pay and shall indemnify and hold harmless each
member of the FAF Group from any and all costs, expenses and/or liabilities of
any type or nature, including, without limitation, any federal income tax
liability (including interest and penalties thereon), that are incurred by or
imposed upon FAF or any member of the FAF Group which FAF or such FAF Group
member would not otherwise have incurred.
(b) Other Taxes. Except as otherwise provided in this Section 4.1, the
party responsible for filing any Tax Return (other than federal, state or local
income or franchise Tax Returns) pursuant to Section 2.2(c) hereof shall, at its
own expense, have the exclusive authority to represent each member of the FAF
Group and of the LAC Group before any governmental agency or authority or before
any court with respect to any matter affecting the Tax liability of any member
of either the FAF Group or the LAC Group for any Tax period beginning before the
Distribution Date in each case (i) allowing representatives of the other group
to participate in good faith in all respects in all such Tax proceedings
affecting any member of the other group, and (ii) acting in the best interests
of both the FAF Group and the LAC Group. Such representation shall include, but
shall not be limited to exclusive control over (i) any response to any
examination by the governmental authority of such Tax Returns and (ii) any
contest through a Final Determination of any issue included in any Tax Return
that includes a member of the LAC Group or the FAF Group, including, but not
limited to (A) whether and in what forum to conduct such contest, and (B)
whether and on what basis to settle such contest; except that FAF or any member
of the FAF Group shall not settle any claim, suit, action or proceeding in
respect of which indemnity for such Taxes may be sought hereunder against LAC or
any member of the LAC Group without LAC's consent, which consent shall not be
unreasonably withheld; and except that LAC or any member of the LAC Group shall
not settle any claim, suit, action or proceeding in respect of which indemnity
for such Taxes may be sought hereunder against FAF or any member of the FAF
Group without FAF's consent, which consent shall not be unreasonably withheld.
4.2 RETENTION OF BOOKS AND RECORDS. LAC and FAF each agrees to retain
and preserve in accessible and reproducible form all Tax Returns, related
schedules and work papers, and all accounting and computer records (in whatever
media) and other documents relating thereto (collectively, the "Tax Documents")
existing on the date hereof or created through or with respect to taxable
periods ending on or before the Distribution Date, until the later of (a) the
expiration of the statute of limitations (including extensions), of the taxable
years to which such Tax Returns and Tax documents relate, or (b) DECEMBER 31,
2005. No Tax Documents shall be destroyed or otherwise disposed of by either FAF
or LAC (or any member of their respective Groups) until the party intending to
make such disposition has given the other party at least thirty (30) days
advance
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<PAGE> 9
notice thereof, whereupon the party receiving such notice shall have the right,
at its own expense, to take possession of such Tax Documents.
4.3 COOPERATION REGARDING RETURN FILINGS, EXAMINATIONS AND
CONTROVERSIES.
(a) LAC's Obligations. In addition to any obligations imposed pursuant
to the Distribution Agreement, LAC and each other member of the LAC Group shall
fully cooperate with FAF and its representatives, in a prompt and timely manner,
in connection with the preparation and filing of, and any inquiry, audit,
examination, investigation, dispute, or litigation involving, any Tax Return
filed or required to be filed by or for any member of the FAF Group for any
taxable period beginning before the Distribution Date and relating to Taxes.
Such cooperation shall include, but not be limited to, (i) making available to
FAF, during normal business hours, and within thirty (30) days of any request
therefor, all Tax Documents, books, records and information, and the assistance
of all officers and employees, necessary or useful in connection with any Tax
inquiry, audit, examination, investigation, dispute, litigation or any other
matter, and (ii) agreeing to make any election in connection with any such Tax
Return that will not adversely affect LAC or any member of the LAC Group.
LAC agrees on behalf of itself and each member of the LAC Group to
execute and deliver to FAF, when so requested by FAF, any power of attorney
required to allow FAF and its counsel to represent LAC or such other LAC Group
member in any controversy which FAF shall have the right to control pursuant to
the terms of Section 4.1 of this Agreement.
(b) FAF's Obligations. Except as otherwise provided in this Article IV,
FAF shall fully cooperate with LAC and its representatives, in a prompt and
timely manner, in connection with (i) the preparation and filing of and (ii) any
inquiry, audit, examination, investigation, dispute, or litigation involving,
any Tax Return filed or required to be filed pursuant to Section 2.2(c) by or
for any member of the LAC Group and relating to Taxes. Such cooperation shall
include, but not be limited to, (i) making available to LAC, during normal
business hours, and within thirty (30) days of any request therefor, all books,
records and information, and the assistance of all officers and employees,
necessary or useful in connection with any tax inquiry, audit, examination,
investigation, dispute, litigation or any other matter, and (ii) agreeing to
make any election in connection with any such Tax Return that will not adversely
affect FAF or any member of the FAF Group.
FAF agrees on behalf of itself and each member of the FAF Group to
execute and deliver to LAC, when so requested by LAC, any power of attorney
required to allow LAC and its counsel to represent FAF or such other FAF Group
member in any controversy which LAC shall have the right to control pursuant to
the terms of Section 4.1(b) of this Agreement.
LAC Group's items of income and expense for the period ending on or
before the Distribution Date will be allocated based on a closing of the books
as of the Distribution Date.
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(c) Remedy for Failure to Comply. If FAF reasonably determines that LAC
is not for any reason fulfilling its obligations under Section 4.3(a), or if LAC
reasonably determines that FAF is not for any reason fulfilling its obligations
under Section 4.3(b), then FAF or LAC, as the case may be, shall have the right
to appoint, at the expense of the other, an independent entity such as a
nationally recognized public accounting firm to assist the other in meeting its
obligations under this Section 4.3. Such entity shall have complete access to
all books, records and information, and the complete cooperation of all officers
and employees, of LAC or FAF, as the case may be.
4.4 CERTAIN POST-DISTRIBUTION TRANSACTIONS. Each of FAF and LAC hereby
acknowledges that each of the parties hereto intends that the Distribution
qualify as a reorganization pursuant to Code Section 368(a)(1)(D) (a "Tax-Free
Reorganization") and a tax-free distribution pursuant to Section 355 of the Code
(a "Tax-Free Distribution"), and that such qualification is subject to certain
terms and conditions of the Code. Accordingly, each of FAF and LAC hereby agrees
not to engage in any transaction or commit or fail to take any action that would
cause the Distribution to fail to qualify as a Tax-Free Reorganization or
Tax-Free Distribution.
4.5 SURVIVAL OF AGREEMENT. This Agreement and all covenants contained
herein shall survive for the applicable statute of limitations and any
extensions thereof and any Final Determination applicable to periods beginning
before the Distribution Date.
ARTICLE V
MISCELLANEOUS
5.1 SEVERABILITY. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable, the
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
5.2 MODIFICATION OF AGREEMENT. No modification, amendment or waiver of
any provision of this Agreement shall be effective unless the same shall be in
writing and signed by each of the parties hereto and then such modification,
amendment or waiver shall be effective only in the specific instance and for the
purpose for which given.
5.3 CONFLICT WITH THE DISTRIBUTION AGREEMENT. Anything in this
Agreement or the Distribution Agreement to the contrary notwithstanding, in the
event and to the extent that there shall be a conflict between the provisions of
this Agreement and the Distribution Agreement, the provisions of this Agreement
shall control.
5.4 NOTICES. All notices or other communications required or permitted
under this Agreement shall be delivered by hand, mailed by certified or
registered mail, postage prepaid and return receipt requested, or sent by cable,
telegram, telex or telecopy (confirmed by regular, first-class mail), to the
parties at the following addresses (or at such other addresses for a party as
shall be specified by like notice) and shall be deemed given on the date on
which such notice is received:
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In the case of FAF, to In the case of LAC, to
Forward Air Corporation Landair Corporation
430 Airport Road 430 Airport Road
Greeneville, Tennessee 37745 Greeneville, Tennessee 37745
Attention: General Counsel Attention: General Counsel
5.5 APPLICATION TO PRESENT AND FUTURE SUBSIDIARIES. This Agreement is
being entered into by FAF and LAC on behalf of themselves and each member of the
FAF Group and the LAC Group, respectively. This Agreement shall constitute a
direct obligation of each such member and shall be deemed to have been readopted
and affirmed on behalf of any corporation which becomes a member of the FAF
Group or the LAC Group in the future. FAF and LAC hereby guarantee the
performance of all actions, agreements and obligations provided for under this
Agreement of each member of the FAF Group and the LAC Group, respectively. FAF
and LAC shall, upon the written request of the other, cause any of their
respective group members formally to execute this Agreement. This Agreement
shall be binding upon, and shall inure to the benefit of, the successors,
assigns and persons controlling any of the corporations bound hereby.
5.6 TERM. This Agreement shall commence on the date of execution
indicated above and shall continue in effect until otherwise agreed to in
writing by FAF and LAC, or their successors.
5.7 TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
or to affect the meaning or interpretation of this Agreement.
5.8 SINGULAR AND PLURAL. As used herein, the singular shall include
the plural and vice versa.
5.9 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Tennessee without regard to the principles of conflicts of laws
thereof.
5.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become a binding agreement when one or more counterparts have been signed
by each party and delivered to the other parties.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all on the day and year first
above written.
FORWARD AIR CORPORATION f/k/a
Landair Services, Inc.
By: /s/ Bruce A. Campbell
--------------------------------------
Title: President
-----------------------------------
LANDAIR CORPORATION
By: /s/ E. R. Brown
--------------------------------------
Title: President
-----------------------------------
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<PAGE> 1
EXHIBIT 10.4
FIRST AMENDMENT TO THE NON-EMPLOYEE DIRECTOR STOCK
OPTION PLAN OF LANDAIR CORPORATION
Landair Corporation, a Tennessee corporation (the "Company"), hereby amends its
Non-Employee Director Stock Option Plan (the "Plan"), subject to shareholder
approval as provided below:
1. The first two sentences of Section 4 of the Plan are hereby
amended to read as follows in their entirety:
"Each eligible participant serving as a director on the
effective date of the Plan shall automatically be granted, on
such effective date, Options to purchase fifteen thousand
(15,000) shares of Common Stock. Each individual who serves as
a director of the Company and is an eligible participant shall
automatically be granted options to purchase seven thousand
five hundred (7,500) shares of Common Stock on the first
business day after each Annual Meeting of Shareholders of the
Company occurring after the effective date of the Plan."
2. The first sentence of subparagraph (d) of Section 5 of the
Plan is hereby amended to read as follows in its entirety:
"The initial Options to purchase fifteen thousand (15,000)
shares of Common Stock granted to directors on the effective
date of the Plan shall become exercisable in two (2) equal
installments on the first and second anniversaries of their
respective dates of grant."
3. The first sentence of Section 8 of the Plan is hereby amended
to read as follows in its entirety:
"The Plan shall become effective as of October 5, 1998,
subject to the approval of a majority of the shareholders of
the Company."
4. This Amendment shall be effective upon its approval by the
Company's shareholders.
<PAGE> 1
EXHIBIT 10.5
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement"), dated as of September
10, 1998, is made and entered into on the terms and conditions hereinafter set
forth, by and between FIRST TENNESSEE BANK NATIONAL ASSOCIATION, a national
banking association with offices in Greeneville, Tennessee ("Lender"), and
LANDAIR CORPORATION, a Tennessee corporation with principal offices in
Greeneville, Tennessee that was formerly known as Landair Services, Inc.
("Borrower").
RECITALS:
A. Borrower is a newly created corporation which will succeed to a
portion of the business of Forward Air Corporation (formerly known as Landair
Services, Inc.; herein "Forward Air") as a result of the distribution by Forward
Air of certain of its assets.
B. Borrower has requested that Lender make available to Borrower an
equipment loan facility in the original principal amount not exceeding
$10,000,000 (the "Equipment Loan") and make available to Borrowers a line of
credit in the original principal amount not exceeding $15,000,000 (the "Line of
Credit"; the Equipment Loan and the Line of Credit are sometimes hereinafter
referred to individually as a "Loan" and individually and collectively as the
"Loans")(the "Line of Credit"; the Term Loan and the Line of Credit are
sometimes hereinafter referred to as the "Loans") on the terms and conditions
hereinafter set forth, and for the purposes hereinafter set forth; and
C. In order to induce Lender to make the Loans to Borrower, Borrower
has made certain representations to Lender; and
D. Lender, in reliance upon the representations and inducements of
Borrower, has agreed to make the Loans upon the terms and conditions hereinafter
set forth;
AGREEMENTS:
NOW, THEREFORE, in consideration of the agreement of Lender to make the
Loans and the mutual covenants and agreements hereinafter set forth, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Lender and Borrower hereby agree as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
1.1. Defined Terms. As used in this Agreement, in addition to other
terms defined herein, the following terms shall have the indicated meanings:
"Account Debtor" shall mean any person which is now or
hereafter obligated or indebted to Borrower or any Guarantor on any Account
Receivable.
"Accounts Receivable", "Receivable" or "Account" shall mean
all amounts owed to Borrower on account of sales, leases or rentals of goods or
services rendered in the ordinary course of Borrower's or any Guarantor's trade
or business.
"Applicable Margin" shall mean, with respect to any Borrowing,
the percentage from Column A below, if the Cash Flow Coverage Ratio is equal to
or greater than 2.5:1.0, or from Column B below, if the Cash Flow Coverage Ratio
is less than 2.5:1.0, which corresponds to the Debt to Worth Ratio of the
Borrower and Guarantors set forth below:
<TABLE>
<CAPTION>
Column A Column B
-------- --------
Debt to Worth Applicable Applicable
Ratio Margin Margin
----- ------ ------
<S> <C> <C>
Equal to or less than 1.25:1.0 1.00% 1.10%
From 1.25 up to and including 1.6:1.0 1.25% 1.35%
From 1.6 up to and including 2.25:1.0 1.50% 1.60%
</TABLE>
In the event the Cash Flow Coverage Ratio is greater than 2.25:1.0 all
Borrowings shall accrue interest at the Default Rate set forth in the applicable
Note. For purposes of this definition, the Cash Flow Coverage Ratio and Debt to
Worth Ratio shall be determined by the quarterly financial statements delivered
pursuant to Section 8.4 hereof, which determination shall be effective as of the
date of the delivery of such financial statements with respect to all Borrowings
outstanding hereunder.
"Borrowing" shall mean an Equipment Borrowing or a Line of
Credit Borrowing.
"Borrowing Base" means an aggregate amount equal to eighty
percent (80%) of Eligible Receivables.
"Business Day" shall mean any day on which commercial banks in
Greeneville, Tennessee are neither authorized nor required by law or executive
order to close.
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<PAGE> 3
"Cash Flow" shall mean, in any fiscal period, the net income
of Borrower, Guarantors and Other Subsidiaries plus depreciation plus
amortization of intangible assets plus the interest portion of scheduled debt
service plus taxes plus payments made under operating leases less dividends paid
to shareholders, all on a consolidated basis and as determined in accordance
with generally accepted accounting principles.
"Cash Flow Coverage Ratio" shall mean the ratio of Cash Flow
to (a) current maturities of long-term indebtedness and interest payments
relating thereto (including payments made pursuant to capitalized leases) plus
(b) payments made under operating leases, all as determined with regard to
Borrower, Guarantors and Other Subsidiaries on a consolidated basis in
accordance with generally accepted accounting principles.
"Debt to Worth Ratio" shall mean the ratio of consolidated
total liabilities of Borrower, Guarantors and Other Subsidiaries to consolidated
Net Worth of Borrower, Guarantors and Other Subsidiaries, all as determined on a
consolidated basis and in accordance with generally accepted accounting
principles.
"Eligible Receivables" shall mean Accounts Receivable (a) in
which Lender holds a valid, perfected first security interest; (b) which arise
from goods theretofore sold and delivered or services theretofore rendered to
the Account Debtor; (c) with respect to which no setoffs, counterclaims or
defenses are claimed by the Account Debtor; (d) which constitute the binding
obligation of an Account Debtor which at the time a Line of Credit advance or
extension of credit is requested based upon such Account, and at all times
thereafter while a Line of Credit advance or extension of credit remains
outstanding, is solvent, is financially able to pay its debts and obligations as
they become due and is paying its debts and obligations as they become due; (e)
which do not remain unpaid more than ninety (90) days after the date of the
invoice relating to the Accounts Receivable; and (f) with respect to which the
Account Debtor is not a Related Person.
"Equipment Loan Borrowing" shall mean a borrowing against the
Equipment Loan by Borrower pursuant to Article 2 hereof.
"Interest Payment Date" shall mean the first Business Day of
each month and the maturity date of the Loan with respect to which such
Borrowing relates.
"Interest Period" shall mean a period of one month, provided
that:
(1) the first Interest Period shall begin on the
effective date of this Agreement and shall end on the first Business Day of the
succeeding month;
(2) if any Interest Period would otherwise not end on
the first Business Day of a month, the Interest Period shall be automatically
shortened so that such Interest Period ends
3
<PAGE> 4
on the first Business Day of the month next succeeding the month in which such
Interest Period began;
(3) if any Interest Period otherwise would expire on
a day that is not a Business Day, then such Interest Period shall be extended to
expire on the next succeeding Business Day;
(4) in the case of immediately successive Interest
Periods, each successive Interest Period shall commence on the day on which the
next preceding Interest Period expires; and
(5) no Interest Period for any Loan shall extend
beyond the maturity date of such Loan.
"Interest Rate Determination Date" shall mean each date for
calculating LIBOR for purposes of determining the interest rate in respect of an
Interest Period, which in each case shall be the second (2nd) Business Day prior
to the first (1st) day of such Interest Period.
"LIBOR" shall mean the London Interbank Offered Rate for U.S.
Dollar-denominated interbank obligations in the London, England, market. The
LIBOR applicable to a Borrowing for an Interest Period is the LIBOR for
obligations with term of one month selected as of 11:00 a.m. London time (a) two
(2) Business Days prior to the first day of the Interest Period, or (b) if
Lender elects, the first day of such Interest Period or the Business Day prior
thereto, and rounded up to the nearest .01% per annum. Lender may determine
LIBOR from TELERATE or any other generally recognized financial reporting
service.
"Line of Credit Borrowing" shall mean a borrowing against the
Line of Credit by Borrower pursuant to Article 3 hereof.
"Net Worth" means the excess of the combined book value of the
assets of Borrower, Guarantors and Other Subsidiaries over their combined
liabilities, calculated in accordance with generally accepted accounting
principles; provided, however, that in performing such calculation there shall
be (a) excluded from the assets (i) any amounts owed to Borrower, any Guarantor
or any Other Subsidiary by a Related Person, and (ii) any amounts owed to
Borrower, any Guarantor or any Other Subsidiary by an employee of Borrower, of a
subsidiary or of any Related Person, and (b) included, as equity, any
indebtedness owed by Borrower, any Guarantor or any Other Subsidiary to any
person which indebtedness has, by formal binding agreement (in form and
substance satisfactory to Lender) been deferred and subordinated in priority of
payment to the indebtednesses and obligations of Borrower and the Guarantors to
Lender.
"Notes" shall mean the Equipment Loan Note and the Line of
Credit Note, individually and collectively, together with any and all
extensions, modifications, renewals and/or replacements thereof.
4
<PAGE> 5
"Other Subsidiary" means any subsidiary of Borrower whose
stock is now or hereafter pledged to Lender in a manner satisfactory to Lender
(unless such pledge is waived in writing by Lender) and whose financial
statements are consolidated with Borrower's financial statements under generally
accepted accounting principles.
"Related Person" shall mean any person (a) which now or
hereafter directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, Borrower or any Guarantor, or
(b) which now or hereafter beneficially owns or holds five percent (5%) or more
of the capital stock of Borrower or any Guarantor (or such greater percentage as
may be approved in advance, in writing by Lender, such approval not to be
unreasonably withheld or delayed), or (c) five percent (5%) or more of the
capital stock of which is beneficially owned or held by Borrower or any
Guarantor (or such greater percentage as may be approved in advance, in writing
by Lender, such approval not to be unreasonably withheld or delayed). For the
purposes hereof, "control" shall mean possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting stock, by contract or otherwise.
"Uniform Commercial Code" means the Uniform Commercial Code as
in effect in the State of Tennessee from time to time.
ARTICLE II
THE EQUIPMENT LOAN
2.1. Evidence of Equipment Loan Indebtedness; Advances; Repayment.
(a) The Equipment Loan shall be evidenced by a Secured
Promissory Note (Equipment Loan) of even date herewith, in the original
principal amount of Ten Million and No/100 Dollars ($10,000,000), made
and executed by Borrower, payable to the order of Lender, in
substantially the form attached hereto as Exhibit A-1 (together with
any extensions, modifications, renewals and/or replacements thereof,
herein referred to as the "Equipment Loan Note").
(b) Subject to and upon compliance with all applicable terms
and conditions of this Agreement, and so long as no Event of Default
(or event that with the giving of notice or the passage of time or both
would constitute an Event of Default) has occurred and is continuing
hereunder, Lender shall advance the proceeds of the Equipment Loan to
or as directed by Borrower in one or more advance upon not less than
two (2) Business Day's notice from Borrower to Lender in an aggregate
amount outstanding not to exceed at any time $10,000,000 provided,
however, that (i) no advance under the Equipment Loan after the date of
this Agreement shall be in an amount in excess of the cost of the
equipment being purchased with the proceeds of such advance, (ii) in no
event shall the aggregate amount of all advances under the Equipment
Loan to purchase equipment subsequent to
5
<PAGE> 6
the date of this Agreement exceed 100% of the book value of such
purchased equipment, and (iii) Lender shall not be required to make any
advances under the Equipment Loan on or after the date that is two
years from the date hereof unless Lender and Borrower mutually agree to
extend such date on terms mutually satisfactory to both parties.
.
(c) The indebtedness of Borrower to Lender in connection with
the Equipment Loan shall be payable in accordance with the terms of the
Equipment Loan Note and as provided in this subsection. The principal
outstanding on the Equipment Loan Note as of the date hereof, together
with interest thereon, shall be payable as provided in the Equipment
Loan Note. Any principal amount drawn on the Equipment Loan Note after
the date hereof, together with interest thereon, shall be payable by
Borrower making monthly payments as of the first day of each month,
beginning the first day of the first month after such drawing, or such
other day of the month as the parties may agree upon, in an amount
sufficient to amortize the principal amount so drawn (a) with respect
to equipment being acquired by Borrower or any Guarantor, in level
payments over a period of seven years (five years in the case of draws
to purchase equipment other than transportation trailers) at an assumed
interest rate equal to LIBOR (as of such draw) plus the Applicable
Margin plus two percent (2.0%) (with any assumed interest in excess of
the interest being actually accrued being applied to amortize
principal) and (b) with respect to equipment already owned by Borrower
or any Guarantor as of the date of this Agreement and approved by
Lender, in level payments sufficient to amortize the principal amount
so drawn over a period approved by Lender at an assumed interest rate
equal to LIBOR (as of such draw) plus the Applicable Margin plus two
percent (2.0%) (with any assumed interest in excess of the interest
being actually accrued being applied to amortize principal). In the
event that LIBOR plus the Applicable Margin exceeds at any time such
assumed rate of interest, the monthly payments with respect to any such
draws or with respect to the amount outstanding under the Equipment
Loan Note as of the date hereof may be recalculated by Lender, from
time to time, utilizing the most recent actual interest rate on the
Equipment Loan Note. Upon any such recalculation, Lender shall give
Borrower notice of the adjusted payments to be made by Borrower
hereunder.
2.2. Notice of Equipment Loan Borrowing.
(1) Delivery of Notice. Whenever Borrower desires to make a
Equipment Loan Borrowing, it shall deliver to Lender written notice (a "Notice
of Equipment Loan Borrowing") no later than 12:00 noon (Eastern time) at least
two (2) Business Days in advance of the date on which the funding of the
Equipment Loan Borrowing is to occur (an "Equipment Loan Funding Date"), which
notice shall be accompanied by a Certificate of Draw Against Equipment Loan in
the form contained in Exhibit A-1 attached hereto. The Notice of Equipment Loan
Borrowing shall specify (i) the proposed Equipment Loan Funding Date (which
shall be a Business Day), and (ii) the amount of the proposed Equipment Loan
Borrowing. The execution and delivery of each Notice of Equipment Loan Borrowing
shall be deemed a representation and warranty by Borrower
6
<PAGE> 7
that the requested Equipment Loan Borrowing may be made in accordance with, and
will not violate the requirements of, this Agreement.
(2) Notice Irrevocable. A Notice of Equipment Loan Borrowing
for a Line of Credit Borrowing shall be irrevocable on and after the related
Interest Rate Determination Date, and Borrower shall be bound to make a
Equipment Loan Borrowing in accordance therewith.
2.3. Disbursement of Funds. Promptly after receipt of a Notice of
Equipment Loan Borrowing and provided all conditions to such Borrowing contained
herein have been met, Lender shall make the amount of the Equipment Loan
Borrowing available to Borrower on the Equipment Loan Funding Date by causing an
amount of immediately available (same day) funds equal to the amount of such
Borrowing to be credited to or for the benefit of the account of Borrower at the
office of the Lender.
2.4. Interest; Interest Payments.
(a) The unpaid principal balance of the Equipment Loan, or any
portion thereof, shall bear interest at a rate equal to LIBOR plus the
Applicable Margin, as LIBOR and the Applicable Margin change from time to time.
(b) The interest accrued on each Equipment Loan Borrowing
shall be payable on each Interest Payment Date applicable to such Borrowing,
upon any prepayment of any Borrowing (to the extent accrued on the amount being
prepaid) and at maturity.
2.5. Purpose of Equipment Loan and Use of Proceeds. The purpose of the
Equipment Loan shall be to finance the acquisition of transport equipment and
other equipment and property for use by Borrower in the conduct of its business.
The proceeds of the Equipment Loan shall not be used for any other purposes.
ARTICLE III
THE LINE OF CREDIT
AND LETTERS OF CREDIT
3.1. Evidence of Line of Credit Indebtedness; Advances; Repayment.
(a) The Line of Credit shall be evidenced by that certain
Master Secured Promissory Note (Line of Credit Loan) of even date
herewith, in the original principal amount not exceeding Fifteen
Million and No/100 Dollars ($15,000,000), made and executed by
Borrower, payable to the order of Lender, in substantially the form
attached hereto as Exhibit A-2 (together with any extensions,
modifications, renewals and/or replacements thereof, herein referred to
as the "Line of Credit Note").
7
<PAGE> 8
(b) Subject to and upon compliance with all applicable terms
and conditions of this Agreement, and so long as no Event of Default
(or event that with the giving of notice or the passage of time or both
would constitute an Event of Default) has occurred and is continuing
hereunder, Lender shall advance proceeds of the Line of Credit to
Borrower upon Borrower's request in an aggregate amount outstanding at
any one time not to exceed the lesser of (1) the Borrowing Base in
effect from time to time, or (2) $15,000,000.
(c) The indebtedness of Borrower to Lender in connection with
the Line of Credit shall be evidenced by, and payable in accordance
with the terms of, the Line of Credit Note. In addition, Borrower
covenants and agrees to maintain its Eligible Receivables in an
aggregate amount sufficient to keep the aggregate outstanding principal
balance of the advances made in respect of the Line of Credit within
the limits herein specified. If at any time the limits herein specified
are exceeded, Borrower shall immediately pay to Lender an amount
sufficient to reduce the aggregate outstanding principal balance of the
Line of Credit to an amount that is within the limits herein specified.
(d) The Lender has issued, as listed on Exhibit B, and shall
from time to time hereafter issue, letters of credit for the account of
Borrower pursuant to applications submitted to Lender by Borrower. It
is understood and agreed that:
(1) the credit availability under the Line of Credit
shall be reduced by the aggregate undrawn amount from time to
time available under outstanding letters of credit, and
(2) any amounts paid by Lender under any such letters
of credit shall be deemed to be advances against the Line of
Credit Note, and the indebtedness of Borrower to Lender in
connection therewith shall constitute a part of the
Obligations (as hereinafter defined) and shall be secured as
hereinafter set forth in the same manner as all other advances
made by Lender against the Line of Credit Note.
Borrower acknowledges and agrees that Lender's issuance of additional
letters of credit is subject to additional conditions and restrictions
which Lender may impose in its sole discretion from time to time,
including the execution by Borrower of a letter of credit application
and reimbursement agreement with respect to the letter of credit.
3.2. Notice of Line of Credit Borrowing.
(1) Delivery of Notice. Whenever Borrower desires to make a
Line of Credit Borrowing, it shall deliver to Lender written notice (a "Notice
of Line of Credit Borrowing") no later than 12:00 noon (Eastern time) of the day
on which the funding of the Line of Credit Borrowing is to occur, which date
must be a Business Day (a "Line of Credit Funding Date").
8
<PAGE> 9
The Notice of Line of Credit Borrowing shall specify (i) the proposed Line of
Credit Funding Date (which shall be a Business Day), and (ii) the amount of the
proposed Line of Credit Borrowing. The execution and delivery of each Line of
Credit Notice of Borrowing shall be deemed a representation and warranty by
Borrower that the requested Line of Credit Borrowing may be made in accordance
with, and will not violate the requirements of, this Agreement.
(2) Notice Irrevocable. A Notice of Line of Credit Borrowing
for a Line of Credit Borrowing shall be irrevocable on and after the related
Interest Rate Determination Date, and Borrower shall be bound to make a Line of
Credit Borrowing in accordance therewith.
3.3. Disbursement of Funds. Promptly after receipt of a Notice of Line
of Credit Borrowing, and provided all conditions to such Borrowing contained
herein have been met, Lender shall make the amount of the Borrowing available to
Borrower on the Line of Credit Funding Date by causing an amount of immediately
available (same day) funds equal to the amount of such Borrowing to be credited
to the account of Borrower at the office of the Lender.
3.4. Interest; Interest Payments.
(a) The unpaid principal balance of the Line of Credit Loan,
or any portion thereof, shall bear interest at a rate equal to LIBOR plus the
Applicable Margin, as LIBOR and the Applicable Margin change from time to time.
(b) The interest accrued on each Borrowing shall be payable on
each Interest Payment Date applicable to such Borrowing, upon any prepayment of
any Borrowing (to the extent accrued on the amount being prepaid) and at
maturity.
3.5. Purposes of Loan and Use of Proceeds. The purpose of the Line of
Credit shall be to provide working capital to Borrower and Guarantors on a
revolving basis. The proceeds of the Line of Credit shall not be used for any
other purposes.
3.6. Unused Commitment Fee. In addition to the fee payable under
Section 10.1 herein, a fee equal to the percentage per annum, as determined in
accordance with the chart set forth below and calculated on the basis of a year
of 360 days and payable for the actual number of days elapsed on the average
daily balance, of the unused portion of the Line of Credit shall be payable by
Borrower quarterly in arrears, commencing on December 31, 1998 (for the period
from the date hereof through such date) and continuing thereafter on the last
day of each succeeding calender quarter and on the maturity date of the Line of
Credit:
<TABLE>
<CAPTION>
Debt to Worth Unused Commitment
Ratio Fee Percentage
----- --------------
<S> <C>
Less than 1.6:1.0 .100%
1.6:1.0 or greater .125%
</TABLE>
9
<PAGE> 10
For purposes of the above chart, the Debt to Worth Ratio shall be determined by
reference to the most recent financial statements delivered pursuant to Section
8.4 hereof.
3.7. Letter of Credit Fees. Borrower agrees to pay to Lender a letter
of credit fee on the date of issuance of each letter of credit issued by Lender
equal to the stated amount of such letter of credit multiplied by the percentage
determined in accordance with the chart set forth below and the fraction of a
year such letter of credit is to be outstanding based upon a 360-day year and
the actual number of days to elapse:
<TABLE>
<CAPTION>
Debt to Worth Letter of Credit
Ratio Fee Percentage
----- --------------
<S> <C>
Less than or equal to 1.25:1.0 .25%
From 1.25 up to and including 1.6:1.0 .50%
1.6:1.0 or greater .75%
</TABLE>
For purposes of the above chart, the Debt to Worth Ratio shall be determined by
reference to the most recent financial statements delivered pursuant to Section
8.4 hereof.
ARTICLE IV
PAYMENTS AND COMPUTATIONS
4.1. Prepayments. Borrower may prepay a Borrowing only upon the
delivery to Lender of written notice or telephonic notice confirmed in writing
not less than two (2) Business Days' prior to the date of prepayment provided
that, in connection with any prepayment of a Borrowing, Borrower shall pay to
the Lender the accrued interest on such Borrowing.
4.2. Computations. To the extent permitted by applicable law, all
computations of fees and interest under this Agreement payable in respect of any
period shall be made by the Lender on the basis of a 360-day year, in each case
for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such interest is payable. In computing
interest on any advance, the date of the making of such advance or the first day
of an Interest Period, as the case may be, shall be included and the date of
payment or the expiration date of an Interest Period, as the case may be, shall
be excluded; provided, however, that if an advance is repaid on the same day on
which it is made, one day's interest shall be paid on that advance.
4.3. Special Provisions Governing Borrowings. Notwithstanding other
provisions of this Agreement, the following provisions shall govern with respect
to Borrowings as to the matters covered:
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<PAGE> 11
(a) Determination of Interest Rate. As soon as is practicable
after 11:00 a.m. (Eastern time) on the Interest Rate Determination Date, the
Lender shall determine the interest rate that shall apply to the Borrowings for
which an interest rate is then being determined for the applicable Interest
Period and shall give notice thereof to Borrower.
(b) Inability to Determine Rate. In the event the Lender shall
have determined (which determination shall be conclusive and binding absent
manifest error) that by reason of circumstances affecting the London interbank
Eurodollar market, adequate and reasonable means do not exist for ascertaining
LIBOR, the Lender forthwith shall give telephonic notice of such determination
and of the comparable source by which the rate of interest for Borrowings shall
be determined, which notice shall be confirmed in writing to Borrower.
(c) Illegality; Termination of Commitment to Make Borrowings.
Notwithstanding any other provisions of this Agreement, if any law, treaty, rule
or regulation or determination of a court or other governmental authority, or
any change therein or in the interpretation or application thereof, shall make
it unlawful for Lender to make or maintain Borrowings, as contemplated by this
Agreement, then, and in any such event, Lender shall promptly give notice to
Borrower of such determination, and the obligation of the Lender to make
Borrowings shall be terminated and any Borrowings of the Lender then outstanding
shall thereafter bear interest at Lender's Base Rate, as announced from time to
time, minus one percent (1%).
(d) Borrowing During Interest Period. If Borrower makes a
drawing under the Equipment Loan or the Line of Credit while an amount is
already outstanding under the Equipment Loan or the Line of Credit, such drawing
shall bear interest at the same rate as the other amounts outstanding under the
Equipment Loan or the Line of Credit until the end of the then current Interest
Period, and thereafter such drawing shall have the same Interest Period as the
other amounts that are outstanding under the Equipment Loan or the Line of
Credit.
4.4. Increased Costs, Reserve Requirements and Taxes.
(a) Increased Costs. Except to the extent reimbursed pursuant
to other provisions of this Section 4.4, in the event that either (i) the
introduction of, or any change in, or in the interpretation of, any law or
regulation or (ii) compliance with any guideline or request from any central
bank or other governmental authority (regardless of whether having the force of
law):
(1) does or shall subject Lender to any additional
income, preference, minimum or excise tax or to any additional tax of any kind
whatsoever with respect to Borrowings or change the basis of taxation of
payments to such Lender of principal, commitment fees, interest or any other
amount payable in regard to Borrowings (except for changes in the rate of tax on
the overall gross or net income of that Lender or its foreign branch, agency or
subsidiary); or
(2) does or shall impose, modify or hold applicable
any reserve, special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or
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<PAGE> 12
deposits or other liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by, any office of
such Lender; or
(3) does or shall impose on that Lender any other
condition with respect to Borrowings;
and the result of any of the foregoing is to increase the cost to Lender of
making, renewing or maintaining the Borrowing or to reduce any amount receivable
hereunder; then, in any such case, Borrower shall promptly pay to Lender, within
thirty (30) days of written demand therefor which notice shall describe
reasonable detail the amount, nature and manner of calculating the increased
cost, such additional amounts as are sufficient to compensate Lender for any
such additional cost or reduced amount received.
(b) Capital Requirements - General. If either (i) the
introduction of, or any change in, or in the interpretation by any governmental
agency or court of applicable jurisdiction of, any law or regulation or (ii)
compliance with any guideline, demand or order from any central bank or other
governmental authority (regardless of whether having the force of law), affects
or would affect in any way the amount of capital required or expected to be
maintained with respect to Borrowings by Lender or any corporation controlling
such Lender with the effect of reducing the rate of return on such capital to a
level below the rate that Lender or such other corporation could have achieved
but for such introduction, change or compliance, and Lender reasonably
determines that such reduction is based on the existence of Lender's commitments
as to Borrowings hereunder and other commitments of this type, then upon written
demand by Lender, Borrower shall further pay to Lender from time to time as
specified by Lender such additional amounts as are sufficient to reasonably
compensate Lender or other corporation for such reduction.
ARTICLE V
SECURITY
5.1. Security. The Obligations (as hereinafter defined) shall be
secured by the following:
(a) Personal Property. Borrower hereby grants to Lender a
security interest in the following described property and interests in
property, together with all proceeds and products thereof and all
accessions thereto, as applicable:
(1) Equipment. All equipment or other property of
Borrower purchased with the proceeds of the Equipment Note,
together with all parts, accessories and attachments and all
replacements thereof and additions thereto; and
(2) Accounts, Chattel Paper, Instruments and General
Intangibles. All of Borrower's present and future accounts,
accounts receivable, chattel paper,
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<PAGE> 13
instruments, and other obligations of every kind, whether now
or hereafter existing, arising out of or in connection with
the sale or lease of goods or the rendering of services or
otherwise, claims for a tax refund, contract rights, general
intangibles, customer lists, original books and records,
ledgers and account cards, computer tapes, disks and
printouts, and other similar collateral whether now existing
or hereafter created, acquired, or arising, and the proceeds
thereof, including, but not limited, to:
(A) All of the Borrower's accounts, accounts
receivable, chattel paper, instruments and other
obligations of any kind, whether or not evidenced by
an instrument or chattel paper, and whether or not
earned by performance, whether now or hereafter
existing, arising out of or in connection with the
sale or lease of goods or the rendering of services
or otherwise relating to any such Accounts
Receivable; and
(B) All claims for tax refunds, whether now
existing or hereafter arising, of Borrower against
any city, county, state or federal government or any
agency or authority or other subdivision thereof, and
the proceeds thereof; and
(C) All of Borrower's contract rights and
general intangibles ("General Intangibles") of every
kind, character and description, both now owned and
hereafter acquired, including, without limitation,
goodwill, trademarks, trade styles, trade names,
patents, patent applications, and deposit accounts;
and
(D) All of Borrower's customer lists,
original books and records, ledger and account cards,
computer tapes, discs and printouts, whether now in
existence or hereafter created; and
(E) All proceeds ("Proceeds") of any and all
of the foregoing collateral and, to the extent not
otherwise included, all payments under insurance
(whether or not the Lender is the loss payee
thereunder), any indemnity, warranty, or guaranty,
payable by reason of loss or damage to or otherwise
with respect to any of the foregoing collateral, and
including, without limitation, all monies due or to
become due in connection with any of the collateral,
guaranties and security for the payment of such
monies, the right of stoppage in transit, and all
returned or repossessed goods arising from the sale
or lease thereof;
in each case, whether now owned or hereafter acquired by the Borrower
and howsoever its interest therein may arise or appear whether by
ownership, lease, security interest, claim or otherwise.
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<PAGE> 14
(b) Guaranty. The Guaranty Agreement of even date herewith,
executed by Landair Transport, Inc., Volunteer Adjustment, Inc. and
Landair Transportation Properties, Inc., jointly and severally (each
individually a "Guarantor" and collectively the "Guarantors"),
guaranteeing to Lender, among other things, the payment of the
indebtednesses evidenced by the Notes and the performance of the
obligations of Borrower to Lender in connection therewith (the
"Guaranty").
(c) Security Agreement. The Security Agreement of even date
herewith, executed by the Guarantors, granting Lender a security
interest in the assets described therein to secure, among other things,
the payment of the indebtednesses evidenced by the Notes and the
performance of the obligations of Borrower to Lender in connection
therewith (the "Guarantor Security Agreement").
(d) Pledge and Security Agreement. The Pledge and Security
Agreement of even date herewith, executed by Borrower, pledging to
Lender all promissory notes from any of the Guarantors to Borrower, to
secure, among other things, the payment of the indebtednesses evidenced
by the Notes and the performance of the obligations of Borrower to
Lender in connection therewith (the "Pledge Agreement").
This Agreement, the Guaranty, the Guarantor Security Agreement and the
Pledge Agreement and any other instruments, documents or agreements now
or hereafter securing the Obligations are herein referred to
individually as a "Security Instrument" and individually and
collectively as the "Security Instruments". The Security Instruments,
together with the Notes and any other instruments and documents now or
hereafter evidencing, securing or in any way related to the
indebtednesses evidenced by the Notes are herein referred to
individually as a "Loan Document" and individually and collectively as
the "Loan Documents".
5.2. Obligations. Without limiting any of the provisions thereof, the
Security Instruments shall secure:
(a) The full and timely payment of the indebtednesses
evidenced by the Notes, together with interest thereon, and any
extensions, modifications and/or renewals thereof and any notes given
in payment thereof,
(b) The full and prompt performance of all of the obligations
of Borrower to Lender under the Loan Documents to which Borrower is a
party,
(c) The full and prompt payment of all court costs, expenses
and costs of whatever kind incident to the collection of the
indebtednesses evidenced by the Notes, the enforcement or protection of
the security interests of the Security Instruments and/or the exercise
by Lender of any rights or remedies of Lender with respect to the
indebtednesses
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evidenced by the Notes, including but not limited to attorney's fees
and expenses incurred by Lender, all of which Borrower agrees to pay to
Lender upon demand, and
(d) The full and prompt payment and performance of any and all
other indebtednesses and other obligations of Borrower to Lender,
direct or contingent (including but not limited to obligations incurred
as indorser, guarantor or surety), or the obligation to reimburse
Lender with respect to any draws on letters of credit issued by the
Lender on Borrower's behalf, however evidenced or denominated, and
however and whenever incurred, including but not limited to
indebtednesses incurred pursuant to any present or future commitment of
Lender to Borrower.
All of the foregoing indebtedness and other obligations are herein collectively
referred to as the "Obligations".
ARTICLE VI
CONDITIONS PRECEDENT
6.1. Condition Precedent to Loans. The obligation of Lender to advance
the proceeds of either Loan to or for the account of Borrower is subject to the
condition precedent that Lender shall have received each of the following, in
form and substance satisfactory to the Lender and its counsel:
(a) Notes. The Notes, duly executed by Borrower, which Notes
shall be deemed delivered as of the date all of the other conditions
precedent set forth in this Section 6.1 have been met;
(b) Security Instruments. The Security Instruments, duly
executed by the parties thereto, together with: (1) acknowledgment
copies of the Financing Statements (UCC-1) duly filed under the Uniform
Commercial Code of all jurisdictions necessary or, in the opinion of
Lender, desirable to perfect the security interests created by this
Agreement and the other Security Instruments or such other documents,
such as certificates of title with Lender's lien noted thereon, that
are necessary to perfect Lender's security interest; and (2) evidence
of the public recording or filing of such of the Security Instruments
as Lender deems it necessary or desirable to record or file publicly,
in such offices as Lender shall require, together with evidence
satisfactory to Lender of the priority of the liens, security titles
and/or security interests of such Security Instruments;
(c) Title to Assets. Evidence satisfactory to Lender
demonstrating that Borrower or a Guarantor is the owner of the
collateral security described in the Security Instruments, free and
clear of defects therein or claims thereto by persons other than
Borrower, Guarantor and Lender;
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(d) Guaranty. The Guaranty, duly executed by the Guarantors;
(e) Insurance. Evidence satisfactory to Lender of the
existence of the policies of insurance required by the provisions of
Article V of this Agreement;
(f) Evidence of Corporate Action by Borrower and Guarantors.
Certified (as of the date of this Agreement) copies of all corporate
action taken by Borrower and the Guarantors, including resolutions of
their board of directors, authorizing the execution, delivery and
performance of the Loan Documents to which each is a party and each
other document to be delivered by Borrower or any Guarantor pursuant to
this Agreement;
(g) Incumbency and Signature Certificates. A certificate
(dated as of the date of this Agreement) of the Secretary or an
Assistant Secretary of Borrower and each Guarantor certifying the names
and true signatures of the officers of Borrower and each Guarantor
authorized to sign the Loan Documents to which it is a party and the
other documents to be delivered by Borrower or any Guarantor under this
Agreement;
(h) Organizational Documents. Copies of the corporate charter
and other publicly filed organizational documents of Borrower and each
Guarantor, certified by the Secretary of State or other appropriate
public official in the jurisdiction in which Borrower or any Guarantor
is incorporated;
(i) Evidence of Legal Existence/Good Standing. A certificate
as to the legal existence and good standing of Borrower and each
Guarantor, issued by the Secretary of State or other appropriate public
official in the jurisdiction in which Borrower or such Guarantor is
incorporated;
(j) Evidence of Foreign Qualifications. Certificates of the
Secretaries of State or other appropriate public officials as to
Borrower's and each Guarantor's qualification to do business and good
standing in each jurisdiction in which a failure to be so qualified
would have a material adverse effect on Borrower's financial position
or its ability to conduct its business in the manner now conducted and
as hereafter intended to be conducted;
(k) Commitment Fee. Borrower shall have paid to Lender a
commitment fee in the amount of $10,000.
(l) Distribution. Forward Air Corporation shall have effected
a distribution of the common stock of Borrower as approved by the Board
of Directors of Forward Air Corporation on July 9, 1998 and shall have
completed the transfer of certain assets to Borrower as described in
that certain August, 1998 letter from the Internal Revenue Service to
Forward Air Corporation (the "Distribution").
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6.2. Additional Condition(s) Precedent to Loans. The obligation of
Lender to make each advance of Loan proceeds to or for the account of Borrower
(including the initial advance or advances) is subject to the further
condition(s) precedent that on and as of the date of such advance:
(a) Representations and Warranties True; Absence of Default.
The following statements shall be true, and Borrower's request for such
advance shall constitute an affirmation by Borrower that:
(1) The representations and warranties contained in
Article VII of this Agreement are correct on and as of the
date of such advance as though made on and as of such date;
and
(2) Neither an Event of Default (as hereinafter
defined), nor any event that with the giving of notice or the
passage of time or both would constitute an Event of Default,
has occurred and is continuing, or would result from such
advance; and
(b) Additional Documentation. Lender shall have received such
other approvals, opinions and documents as Lender reasonably may
request.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows:
7.1. Corporate Status. Borrower and each Guarantor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Tennessee; and each has the corporate power to own and operate its
properties, to carry on its business as now conducted and to enter into and to
perform its obligations under this Agreement and the other Loan Documents to
which it is a party. Borrower and each Guarantor is duly qualified to do
business and in good standing in the State of Tennessee and in each state in
which a failure to be so qualified would have a material adverse effect on
Borrower's or such Guarantor's financial position or its ability to conduct its
business in the manner now conducted.
7.2. Authorization. Borrower and each Guarantor has full legal right,
power and authority to conduct its business and affairs in the manner
contemplated by the Loan Documents, and to enter into and perform its
obligations thereunder, without the consent or approval of any other person,
firm, governmental agency or other legal entity. The execution and delivery of
this Agreement, the borrowing hereunder, the execution and delivery of each Loan
Document to which Borrower or any Guarantor is a party and the performance by
Borrower and each Guarantor of its obligations thereunder are within the
corporate powers of Borrower and such Guarantor, have
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been duly authorized by all necessary corporate action properly taken, have
received all necessary governmental approvals, if any were required, and do not
and will not contravene or conflict with any provision of law, any applicable
judgment, ordinance, regulation or order of any court or governmental agency,
the charter or by-laws of Borrower or any agreement binding upon Borrower or its
properties. The officer(s) executing this Agreement, the Notes and all of the
other Loan Documents to which Borrower or any Guarantor is a party are duly
authorized to act on behalf of Borrower or such Guarantor.
7.3. Validity and Binding Effect. This Agreement and the other Loan
Documents are the legal, valid and binding obligations of the parties thereto,
enforceable in accordance with their respective terms subject to applicable
bankruptcy and other creditor rights laws and subject to principles of equity.
7.4. Other Transactions. There are no prior loans, liens, security
interests, agreements or other financings upon which Borrower or any Guarantor
is obligated or by which Borrower or any Guarantor is bound that will in any way
permit any third person to have or obtain priority over Lender as to any of the
collateral security granted to Lender pursuant to this Agreement and the other
Security Instruments. Consummation of the transactions hereby contemplated and
the performance of the obligations of Borrower and the Guarantors under and by
virtue of the Loan Documents to which Borrower or any Guarantor is a party will
not result in any breach of, or constitute a default under, any loan or credit
agreement, indenture, mortgage, deed of trust, security deed or agreement,
lease, corporate charter or by-laws, agreement or certificate of limited
partnership, partnership agreement, license, franchise or other instrument or
agreement to which Borrower or any Guarantor is a party or by which Borrower or
any Guarantor or any of their properties may be bound or affected.
7.5. Places of Business. The records with respect to all intangible
personal property constituting a part of the collateral security for the
Obligations are maintained at Borrower's chief place of business and chief
executive office, which has the address of 430 Airport Road, Greeneville,
Tennessee 37745. All tangible personal property constituting a part of the
collateral security for the Obligations, except for transportation equipment
subject to a certificate of title, is or will be located at Borrower's chief
place of business and chief executive office and/or at any specific locations
set forth on attached Exhibit C.
7.6. Litigation. There are no actions, suits or proceedings pending,
or, to the knowledge of Borrower, threatened, against or affecting Borrower or
any Guarantor or involving the validity or enforceability of any of the Loan
Documents or the priority of the liens thereof, at law or in equity, or before
any governmental or administrative agency, except actions, suits and proceedings
that are covered by insurance or for which the Company has created reserves
which in the opinion of the Borrower's management are reasonably calculated to
cover claimed exposures, or which, if adversely determined, would not materially
impair the ability of Borrower or any Guarantor to perform each and every one of
its obligations under and by virtue of the Loan Documents; and to Borrower's
knowledge, neither Borrower nor any Guarantor is in default with respect to any
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order, writ, injunction, decree or demand of any court or any governmental
authority that would materially affect Borrower's or any Guarantor's business.
7.7. Financial Statements. The financial statement(s) of Borrower and
the Guarantors heretofore delivered to Lender are true and correct in all
respects, have been prepared in accordance with generally accepted accounting
principles consistently applied, and fairly present the financial conditions of
the subjects thereof as of the date(s) thereof. Except for the transactions
contemplated as a part of the Distribution, no material adverse change has
occurred in the financial condition of Borrower or any Guarantor since the
date(s) thereof, and no additional borrowings have been made or liabilities
incurred by Borrower or any Guarantor since the date(s) thereof.
7.8. No Defaults. With the exception of defaults or Events of Default
which would not have a material adverse effect on the properties, business,
results of operations, management or financial or other condition of Borrower or
a Guarantor or on the ability of Borrower to perform its obligations under the
Loan Documents to which it is a party, no default or event of default by
Borrower or any Guarantor exists under any of the Loan Documents to which it is
a party, or under any other instrument or agreement to which Borrower or any
Guarantor is a party or by which Borrower, any Guarantor or any of their
properties may be bound or affected, and no event has occurred and is continuing
that with notice or the passage of time or both would constitute a default or
event of default under any Loan Document to which it is a party.
7.9. Compliance With Law. Borrower and each Guarantor have obtained all
material licenses, permits and governmental approvals and authorizations
necessary or proper in order to conduct their businesses and affairs as
heretofore conducted and as hereafter intended to be conducted, including, but
not limited to, any licenses, permits and governmental approvals and
authorizations relating to the generation, recycling, use, reuse, sale, storage,
handling, transport, treatment or disposal of hazardous materials. Borrower and
each Guarantor is in compliance with all laws, regulations, decrees and orders
applicable to it (including but not limited to laws, regulations, decrees and
orders relating to environmental, occupational and health standards and
controls, antitrust, monopoly, restraint of trade or unfair competition), except
to the extent that noncompliance, in the aggregate, cannot reasonably be
expected to have a material adverse effect on its business, operations, property
or financial condition and will not materially adversely affect its ability to
perform its obligations under the Loan Documents to which it is a party. Neither
Borrower nor any Guarantor has received, and does not expect to receive, any
order or notice of any violation or claim of violation of any law, regulation,
decree, rule, judgment or order of any governmental authority or agency relating
to the ownership and/or operation of its properties, as to which the cost of
compliance is or might be material and the consequences of noncompliance would
or might be materially adverse to its business, operations, property or
financial condition, or which would or might materially impair its ability to
perform its obligations under the Loan Documents to which it is a party.
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7.10. No Burdensome Restrictions. No instrument, document or agreement
to which Borrower or any Guarantor is a party or by which it or its properties
may be bound or affected materially adversely affects, or may reasonably be
expected so to affect, the business, operations, property or financial condition
thereof.
7.11. Taxes. Borrower and each Guarantor has filed or caused to be
filed all tax returns that to Borrower's knowledge are required to be filed
(except for returns that have been appropriately extended), and each has paid
all taxes shown to be due and payable on said returns and all other taxes,
impositions, assessments, fees or other charges imposed on it by any
governmental authority, agency or instrumentality, prior to any delinquency with
respect thereto (other than taxes, impositions, assessments, fees and charges
currently being contested in good faith by appropriate proceedings, for which
appropriate amounts have been reserved) except to the extent that the failure to
file such returns or pay such amounts would not have a material adverse effect
on such Borrower or Guarantor. No tax liens have been filed against Borrower,
any Guarantor or any of the property thereof.
7.12. Equipment. The equipment constituting a part of the collateral
for the Obligations is owned solely by Borrower or a Guarantor, and Borrower and
each Guarantor has full right, power and authority to grant to Lender a valid
and enforceable security interest therein. Lender's security interest in such
equipment constitutes a first and prior lien upon and security interest in such
equipment, and no other person or entity has any right, title, interest,
security interest, claim or lien with respect thereto.
7.13. Receivables, Etc. With respect to Receivables resulting from the
rendition of services to Borrower's or any Guarantor's customers, (a) each such
Receivable is a valid and bona fide existing obligation created by or arising
out of the rendition of services to Borrower's or a Guarantor's customers in the
ordinary course of business, (b) such Receivables are owned solely by Borrower
or a Guarantor and Borrower or such Guarantor has all necessary right, power and
authority to grant to Lender a valid and enforceable security interest therein,
(c) Lender's security interest in such Receivables constitutes a first and prior
lien upon and security interest in such Receivables, and no other person or
entity has any right, title, interest, security interest, claim or lien with
respect thereto, (d) each such Receivable will at all times be unconditionally
owed to Borrower or a Guarantor and enforceable against the obligor(s) with
respect thereto without dispute of any kind, and (e) each such Receivable
constituting an Eligible Receivable is an "account", "contract right" or
"chattel paper" within the meaning of the Tennessee Uniform Commercial Code and
is not evidenced by any other instrument or document (except as specifically
disclosed to Lender and accepted by Lender as an Eligible Receivable) that would
in any way change or alter its character as an account, contract right or
chattel paper.
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ARTICLE VIII
COVENANTS AND AGREEMENTS
Borrower covenants and agrees that during the term of this Agreement:
8.1. Payment of Obligations. Borrower will pay the indebtednesses
evidenced by the Notes according to the tenor thereof, and will timely pay or
perform, as the case may be, all of the other Obligations.
8.2. Sales of Assets. Neither Borrower nor any Guarantor will sell,
exchange, lease, transfer or dispose (other than in the normal course of
business) of all or substantially all of its assets.
8.3. Further Assurances. Borrower and each Guarantor will take all
reasonable actions requested by Lender to create and maintain in Lender's favor
valid liens upon, security titles to and/or perfected security interests in the
collateral security described in the Security Instruments and all other security
for the Obligations now or hereafter held by or for Lender. Without limiting the
foregoing, Borrower and each Guarantor shall execute such further instruments
(including financing statements and continuation statements) as may be required
or permitted by any law relating to notices of, or affidavits in connection
with, the perfection of Lender's security interests, and to cooperate with
Lender in the filing or recording and renewal thereof.
8.4. Financial Statements. Borrower will furnish to Lender:
(a) As soon as practicable and in any event within one hundred
and twenty (120) days after the end of each fiscal year of Borrower, a
consolidated balance sheet of Borrower and the Guarantors as of the
close of such fiscal year, the related statements of income, cash flow
and shareholders' equity for such fiscal year and all notes to such
financial statements, in such form as is required of publicly traded
companies by the United States Securities Exchange Commission ("SEC"),
audited by independent certified public accountants satisfactory to
Lender, and accompanied by the opinion of such accountants.
(b) As soon as practicable and in any event within forty-five
(45) days after the end of each quarter-annual period of Borrower's
fiscal year, a consolidated balance sheet of Borrower and the
Guarantors as of the close of such quarterly period, and the related
statements of income, cash flow and shareholders' equity for such
quarterly period, in such form as is required of publicly traded
companies by the SEC.
(c) Upon each drawing by Borrower under the Line of Credit and
at such other times as Lender may reasonably request, a Borrowing Base
Certificate in the form attached hereto as Exhibit D or such other form
as is reasonably requested by Lender.
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(d) With reasonable promptness, such other financial data as
Lender reasonably may request and all filings made by the Borrower with
the SEC.
Notwithstanding the foregoing, until four complete fiscal quarters have
occurred after the Distribution, Borrower shall also provide to Lender on the
same date the financial statements described in (b) above are delivered,
financial statements of the Borrower, Guarantors and Other Subsidiaries for the
prior fiscal quarters that reflect, in the best judgment of Borrower and in a
manner reasonably acceptable to Lender, the assets, liabilities, income and
losses which such entities would otherwise have had if the Distribution had
taken place prior to the beginning of the periods covered by such financial
statements. Such financial statements shall be used to determine compliance with
the covenants in Section 8.17 hereof and for purposes of determining the
Applicable Margin
8.5. Maintenance of Books and Records; Inspection. Borrower and each
Guarantor will maintain its books, accounts and records in accordance with
generally accepted accounting principles consistently applied, and permit any
person designated by Lender in writing to visit and inspect any of its
properties (including but not limited to the collateral security described in
the Security Instruments), corporate books and financial records, and to discuss
its accounts, affairs and finances with Borrower, Guarantor or the principal
officers of Borrower or any Guarantor during reasonable business hours, all at
such times as Lender reasonably may request.
8.6. Insurance. Without limiting any of the requirements of any of the
other Loan Documents, Borrower will maintain or cause to be maintained for
Guarantors, in amounts satisfactory to Lender:
(a) comprehensive public liability insurance;
(b) worker's compensation insurance (or maintain a legally
sufficient amount of self insurance against worker's compensation
liabilities, with adequate reserves, under a plan approved by Lender);
and
(c) "all-risk" property/casualty insurance on its properties
(including but not limited to the collateral security now or hereafter
securing payment and performance of the Obligations), against such
hazards and in at least such amounts as is customary in Borrower's
business and with such deductible and/or self-insurance provisions as
are acceptable to Lender.
Lender agrees that the insurance coverages and self-insurance retention
that Borrower presently maintains are acceptable to Lender, and Borrower agrees
to obtain Lender's consent to any material changes in such insurance coverages
and/or self-insurance retention.
At the request of Lender from time to time, Borrower will deliver to
Lender certificates issued by the insurer(s), specifying the details of such
insurance in effect. To the extent that
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proceeds are payable under Borrower's or any Guarantor's policies of
property/casualty insurance with respect to any damage or loss of equipment that
is collateral for the Loans, such policies shall provide that such proceeds
shall be payable to Borrower or the appropriate Guarantor and Lender as their
respective interests may appear, and that at least thirty (30) days' prior
written notice of cancellation or modification of the policy shall be given to
Lender by the insurer. Borrower agrees that there shall be no recourse against
Lender for the payment of premiums, commissions, assessments or advances in
respect of any such policy, and at Lender's request will provide Lender with the
agreement of the insurer(s) to this effect. Lender may, at its option upon an
Event of Default, act as attorney for Borrower or any Guarantor in obtaining,
adjusting, settling and canceling any such insurance that relates to the
collateral that secures the Loans and endorsing any drafts with respect thereto,
and this power, being coupled with an interest, shall be irrevocable prior to
payment in full of the Loans and performance of all of the obligations of
Borrower to Lender in connection therewith.
8.7. Taxes and Assessments; Tax Indemnity. Borrower and each Guarantor
will (a) file all tax returns and appropriate schedules thereto that are
required to be filed under applicable law, prior to the date of delinquency, (b)
pay and discharge all taxes, assessments and governmental charges or levies
imposed upon Borrower or any Guarantor, upon their income and profits or upon
any properties belonging to any of them, prior to the date on which penalties
attach thereto, and (c) pay all taxes, assessments and governmental charges or
levies that, if unpaid, might become a lien or charge upon any of any of their
properties; provided, however, that Borrower or any Guarantor in good faith may
contest any such tax, assessment, governmental charge or levy so long as
appropriate reserves are maintained with respect thereto. If any tax is or may
be imposed by any governmental entity in respect of any transaction of Borrower
or any Guarantor, which tax Lender is or may be required to withhold or pay,
Borrower agrees to indemnify Lender and hold Lender harmless in connection with
such taxes, and Borrower will immediately reimburse Lender for any such taxes
paid by Lender and added to the Obligations pursuant to the terms hereof.
8.8. Corporate Existence. Borrower and each Guarantor will maintain its
corporate existence and good standing in the state of its incorporation, and its
qualification and good standing as a foreign corporation in each jurisdiction in
which such qualification is necessary pursuant to applicable law. Borrower and
each Guarantor may from time to time change its name provided that Borrower or
such Guarantor has given Lender advance notice of such change and has taken such
actions as Lender deems necessary to insure that such change of name does not
impair Lender's security interest in the Collateral or its perfection therein.
8.9. Compliance with Law and Other Agreements. Borrower and each
Guarantor will maintain its business operations and property owned or used in
connection therewith in material compliance with (a) all applicable federal,
state and local laws, regulations and ordinances governing such business
operations and the use and ownership of such property, including, but not
limited to, any laws, regulations or ordinances relating to the generation,
recycling, use, reuse, sale, storage, handling, transport, treatment or disposal
of hazardous materials and (b) all agreements, licenses, franchises, indentures
and mortgages to which Borrower or any Guarantor
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is a party or by which Borrower, any Guarantor or any of their properties is
bound. Without limiting the foregoing, Borrower and each Guarantor will pay all
of its indebtedness promptly in accordance with the terms thereof.
8.10. Notice of Default. Borrower will give written notice to Lender of
the occurrence of any default, event of default or Event of Default under this
Agreement or any other Loan Document promptly upon the occurrence thereof.
8.11. Notice of Litigation. Upon request, Borrower shall give Lender a
list of all pending actions, suits, proceedings and disputes instituted by any
persons whomsoever against Borrower or any Guarantor, or affecting any of
Borrower's or any Guarantor's assets in connection with any applicable federal,
state or local laws or regulations, or any dispute between Borrower or any
Guarantor on the one hand and any governmental regulatory body on the other
hand.
8.12. ERISA Plan. If Borrower or any Guarantor has in effect, or
hereafter institutes (with Lender's consent, as hereinafter provided), a pension
plan that is subject to the requirements of Title IV of the Employee Retirement
Income Security Act of 1974, Pub. L. No. 93-406, September 2, 1974, 88 Stat.
829, 29 U.S.C.A. ss. 1001 et seq. (1975), as amended from time to time
("ERISA"), then the following warranty and covenants shall be applicable during
such period as any such plan (the "Plan") shall be in effect: (a) Borrower
hereby warrants that no fact that might constitute grounds for the involuntary
termination of the Plan, or for the appointment by the appropriate United States
District Court of a trustee to administer the Plan, exists at the time of
execution of this Agreement, (b) Borrower hereby covenants that throughout the
existence of the Plan, Borrower's contributions under the Plan will meet the
minimum funding standards required by ERISA and Borrower will not institute a
distress termination of the Plan, (c) Borrower hereby covenants that the Plan's
annual financial and actuarial statements and the Plan's annual Form 5500
information return will be timely filed with the Internal Revenue Service and a
copy delivered to Lender within thirty (30) days of the preparation thereof, and
(d) Borrower covenants that it will send to Lender a copy of any notice of a
reportable event (as defined in ERISA) required by ERISA to be filed with the
Labor Department or the Pension Benefit Guaranty Corporation, at the time that
such notice is so filed. Notwithstanding anything herein to the contrary,
Borrower shall not be deemed to be in breach of this Agreement with regard to
any breach of a warranty or covenant contained in this Section 8.12 which would
not have a material adverse effect on the business operations or financial
condition of such Borrower or Guarantor.
No new Plan shall be instituted by Borrower or any Guarantor unless
Lender shall have given its written consent thereto.
8.13. Places of Business; Mobile Goods. The location of the chief place
of business, chief executive office and all other places of business of Borrower
and each Guarantor are set forth on Exhibit C. Upon Lender's request, Borrower
shall update Exhibit C from time to time. Borrower agrees not to change the
location of its places of business in Greeneville, Tennessee, Atlanta, Georgia
or Columbus, Ohio or the location at which it maintains its records concerning
the
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intangible collateral security for the Obligations, without thirty (30) days'
prior written notice to Lender in each instance.
8.14. Maintenance of Collateral. Borrower will maintain all tangible
personal property constituting any part of the collateral security described in
the Security Instruments in good condition and repair, will pay all costs and
expenses incurred in the maintenance of same, and will not permit any act or
occurrence that may impair the value thereof. Prior to the occurrence of an
Event of Default (as hereinafter defined), Borrower or the applicable Guarantor
will be entitled to possession of such tangible collateral and to use same in
any lawful manner permitted hereunder, provided that such use does not cause
excessive wear and tear to such collateral, nor cause it to decline in value at
an excessive rate, nor violate the terms of any policy of insurance, if any,
thereon.
8.15. Special Agreements With Respect to Receivables.
(a) By the execution of this Agreement, Lender shall not be
obligated to do or perform any of the acts or things provided in any
contracts covered hereby to be done or performed by Borrower or any
Guarantor, but upon the occurrence of an Event of Default, Lender may,
at its election, perform some or all of the obligations provided in
said contracts to be performed by Borrower or any Guarantor, and if
Lender incurs any liability or expenses by reason thereof, same shall
be payable by Borrower upon demand and same shall also be secured by
this Agreement and the other Loan Documents. Upon an Event of Default,
Borrower will, on request from Lender, submit to Lender duplicate
copies of all invoices on outstanding Receivables subject to Lender's
security interest.
(b) Upon an Event of Default, if requested by Lender, (i)
Borrower and each Guarantor will forthwith on receipt of all checks,
drafts, cash and other remittances in payment of inventory sold, or in
payment on account of Borrower's or any Guarantor's Receivables,
deposit the same in a special bank account maintained with Lender over
which Lender alone has power of withdrawal, and/or (ii) Borrower will
immediately notify all account debtors to direct payments to a lockbox
in accordance with a Lockbox Service Agreement entered into or to be
entered into between Borrower and Lender. Said proceeds shall be
deposited in precisely the form received, except for the indorsement of
Borrower or the Guarantor where necessary to permit collection of
items, which indorsement Borrower agrees to make or obtain, and which
Lender is also hereby authorized to make on Borrower's or the
Guarantor's behalf. Pending such deposit, Borrower agrees that it will
not commingle any such checks, drafts, cash or other remittances with
any of Borrower's other funds or property, but will hold them separate
and apart therefrom and in trust for Lender until deposit thereof is
made in the special account. The funds in said account and any funds
collected by Lender under a Lockbox Service Agreement shall be held by
Lender as additional security for the Obligations. Lender will, usually
on a daily basis but in any event at least once a week, apply the whole
or any part of the collected funds on deposit in the special account
and from the lockbox
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against the Obligations; the amount, order and method of such
application to be in the discretion of Lender. Any portion of said
funds on deposit in the special account and from the lockbox that
Lender elects not to so apply may be paid over by Lender to Borrower.
(c) Without limiting the provisions of subsection 8.15(b),
Borrower acknowledges and agrees that upon the occurrence of an Event
of Default (or an event that with the giving of notice or the passage
of time or both would constitute an Event of Default), Lender will have
the right to notify the account debtors obligated on any or all of
Borrower's or any Guarantor's Receivables to make payment thereof
direct to Lender, and to take control of all proceeds of any such
Receivables. Until such time as Lender elects to exercise such right,
Borrower and each Guarantor is authorized, as agent of Lender, to
collect and enforce said Receivables.
(d) Lender shall be privileged to enjoy all the rights and
remedies of Borrower and each Guarantor as to the Receivables and shall
be and become subrogated to all guaranties and securities possessed by
Borrower or any Guarantor or due to come into Borrower's or any
Guarantor's hands, but Lender shall not be liable in any manner for
exercising or refusing to exercise any rights thereby bestowed.
(e) Upon an Event of Default, Borrower will notify Lender
promptly of all returns and recoveries of merchandise and of all
disputes and claims, and Borrower will settle or adjust disputes and
claims directly with customers for amounts and upon terms it considers
advisable and dispose of merchandise returns as it sees fit, unless
Lender directs Borrower to make such settlements, adjustments and
disposals subject to Lender's approval. In all cases Lender will credit
Borrower's loan account with only the net amounts received by Borrower
in payment of Receivables.
(f) Borrower hereby appoints the officers of Lender and/or any
other person whom Lender may designate as Borrower's
attorney(s)-in-fact with full power to endorse Borrower's name on any
checks, notes, acceptances, money orders, drafts or other forms of
payment or security that may come in Lender's possession; to sign
Borrower's name on any invoice or bill of lading relating to any
Receivable, on drafts against customers, on schedules of assignments of
Receivables, on notices of assignment, on financing statements,
applications for noting of liens on certificates of title and other
public records or documents of any kind as necessary or desirable to
insure perfection or enforceability of Lender's security interests in
or liens on property of Borrower granted hereunder or otherwise, on
verification of accounts and on notices to customers; to notify the
post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender; to receive, open
and dispose of all mail addressed to Borrower; to send requests for
verifications of accounts to customers; and to do all other things
Lender deems necessary to carry out this Agreement. Borrower hereby
ratifies and approves all acts of the attorney(s) and neither Lender
nor the attorney(s) for Lender will be liable for any acts of
commission or omission, nor for any error of judgment or mistake of
fact or law. This
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power, being coupled with an interest, is irrevocable so long as any
money remains owing to Lender from Borrower; provided, however, that
Lender shall not exercise such power unless an Event of Default has
occurred and is continuing hereunder.
8.16. Debt to Worth Ratio. Borrower shall maintain as of the end of
each fiscal quarter a Debt to Worth Ratio of not more than 2.25 to 1.00
thereafter.
8.17. Cash Flow Coverage. Borrower shall maintain as of the end of each
fiscal quarter for the four prior fiscal quarters a Cash Flow Coverage Ratio of
not less than 1.25 to 1.00.
8.18. Relationship with Lender. Borrower shall maintain their material
operating accounts and investment accounts with Lender and utilize Lender as
their "primary depository" until the Loans have been paid in full.
8.19. Net Worth. Borrower, Guarantors and the Other Subsidiaries shall
maintain on a consolidated basis as of the end of each fiscal quarter a Net
Worth of not less than an amount equal to ninety percent (90%) of their
consolidated Net Worth as of the date hereof plus fifty percent (50%) of
cumulative net income (provided that any net loss arising from any fiscal
quarter or other accounting period shall be counted as zero in calculating
cumulative net income) from the date hereof through such fiscal quarter end.
8.20. Capital Expenditures and Acquisitions. Without the prior written
consent of Lender, Borrower, Guarantors and the Other Subsidiaries shall not
individually or collectively make aggregate capital expenditures in any fiscal
year in excess of $25,000,000 or make acquisitions of stock or assets in any
fiscal year where the aggregate purchase price for such stock or assets is in
excess of $20,000,000.
8.21. Indebtedness. Neither Borrower nor any Guarantor shall incur,
create, assume or permit to exist any indebtedness or liability for borrowed
money, or on account of deposit, advance or progress payments under contracts,
or any other indebtedness or liability, including, but not limited to,
indebtedness evidenced by notes, bonds, debentures or similar obligations,
except:
(a) Indebtedness(es) to Lender evidenced by the Notes;
(b) Indebtedness for borrowed money under notes and lease obligations
secured by newly acquired equipment;
(c) Trade accounts payable, taxes payable, deferred sales, accrued
employees' bonuses and withheld amounts, accrued liabilities with respect to
contributions to pension plans and other similar short-term obligations incurred
by Borrower or a Guarantor in the normal course of operating its business,
provided that (i) the amount of such obligations shall not be unduly large, in
the reasonable judgment of Lender, considering the size and nature of Borrower's
and
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Guarantors' businesses, and (ii) the Borrower and Guarantors shall not be in
default with respect to any of such obligations.
(d) Other indebtedness incurred for any purpose which is not secured,
in whole or in part, by any lien or security interest upon the collateral for
the Loans (unless such indebtedness is secured by a purchase money security
interest in equipment acquired after the date hereof), provided that the
incurring of any such indebtedness does not create or result in a violation of
any other provision hereof.
8.22. Mortgages, Liens, Etc. Neither Borrower nor any Guarantor shall
create, assume or suffer to exist any mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets, now or hereafter
owned, except for:
(a) Liens securing payment of the Loans;
(b) Existing liens securing indebtednesses permitted under Section
8.20(b) above; and
(c) Permitted Encumbrances described on Exhibit E hereto.
8.23. Guaranties. Neither Borrower nor any Guarantor shall guarantee or
otherwise in any way become or be responsible for the indebtedness or
obligations of any other person, by any means whatsoever, whether by agreement
to purchase the indebtedness of any other person or agreement for the furnishing
of funds to any other person through the purchase of goods, supplies or
services, or by way of stock purchase, or discharging the indebtedness of any
other person, or otherwise, except for (i) guaranties in favor of Lender, (ii)
the endorsement of negotiable instruments by Borrower or any Guarantor in the
ordinary course of business for collection, and (iii) guaranties of indebtedness
which are not in the aggregate in excess of twenty-five percent (25%) of the
consolidated Net Worth of Borrower and Guarantors.
8.24. Consolidation or Merger. Without the prior written consent of
Lender, neither Borrower nor any Guarantor shall enter into any transaction,
acquisition, merger or consolidation which would result in an acquisition by
Borrower or any Guarantor of the assets of stock or other equity interests of
another entity or a merger or consolidation of Borrower or any Guarantor with an
entity unless (i) the merging or acquired entity is in the same line of business
of Borrower or such Guarantor, (ii) the acquired assets, or the assets possessed
by the merging or acquired entity, do not have a fair market value that is more
than forty-nine percent (49%) of the fair market value of Borrower or such
Guarantor, and (iii) the surviving entity of such merger or consolidation, if
any, is the Borrower or such Guarantor. In addition to the foregoing
limitations, Borrower shall not acquire, without prior written consent of
Lender, the assets or stock or other equity interests of any entity if the
portion of the acquisition price that is attributable to intangible assets
exceeds 20% of the consideration paid or assumed by Borrower in connection with
such acquisition.
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8.25. Loans and Investments. Neither Borrower nor any Guarantor shall
make any loans to or investments in, or, purchase any stock, other securities or
evidence of indebtedness of any person, except as follows: (i) direct
obligations of the United States of America or obligations for which the full
faith and credit of the United States is pledged to provide for the payment of
principal and interest, (ii) marketable securities issued by an agency of the
United States government, (iii) commercial paper rated A-1 by Standard and Poors
Corporation, or P-1 by Moody's Investors Services, Inc., (iv) certificates of
deposit of or bankers' acceptances accepted by domestic commercial banks in the
United States of America having a combined capital and surplus of at least
Ninety Million Dollars ($90,000,000.00), (v) repurchase agreements with respect
to any of the foregoing, (vi) loans permitted by the provisions of Section 8.26
hereof or (vii) loans by Borrower to any Guarantor of the proceeds of the Loans
for the purposes permitted hereunder pursuant to promissory notes properly
pledged to Lender. This negative covenant shall be inapplicable to loans other
than to Guarantors except where the transaction which is prohibited would either
create or result in a violation of Section 8.16, Section 8.17, or Section 8.19
hereof, or impair, directly or indirectly, the value of the collateral for the
Loans.
8.26. Dividends, Redemptions and Other Payments. Neither Borrower nor
any Guarantor shall (a) declare or pay, or set aside any sum for the payment of,
any dividends or make any other distribution upon any shares of its capital
stock of any class, or (b) purchase, redeem or otherwise acquire for value any
shares of its capital stock of any class, or commit to do any of same, or set
aside any sum therefor, or permit any subsidiary to purchase or acquire for
value any shares of its capital stock of any class, or commit do to any of the
same, or set aside any sum therefor, or (c) make any payment to a profit sharing
plan or to any other retirement or pension plan to or for the benefit of
management shareholders which exceeds (based on a percentage of compensation)
similar payments made for the benefit of all employees of Borrower or the
Guarantors, in such a manner which violates applicable law and/or any filings of
Borrower with applicable securities agencies and stock exchanges and related
restrictions and regulations. This negative covenant shall be inapplicable
except where the transaction which is prohibited would either create or result
in a violation of Section 8.16, Section 8.17 or Section 8.19 hereof.
8.27. Loans to Officers and Employees. Without the prior written
consent of Lender, neither Borrower nor any Guarantor shall permit or allow
loans to officers and employees of Borrower or any Guarantor, in the aggregate,
to exceed at any one time outstanding the sum of One Hundred Fifty Thousand
Dollars ($150,000.00).
8.28. Creation of Subsidiaries. Borrower may create additional
subsidiaries, without the prior written consent of Lender, only if the following
conditions are met:
(a) each such subsidiary is engaged in a business directly
related to the Borrower's business, and
(b) (i) each such subsidiary guaranties the obligations of
Lender hereunder and under the Notes by the execution of a Guaranty
Agreement in the same form as executed
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by Guarantors, joins with the other Guarantors in the Security
Agreement, and delivers to Borrower a promissory note in the form of
the promissory notes delivered by the other Guarantors and pledged to
the Lender under the Pledge Agreement, and Borrower enters into an
amendment to the Pledge Agreement whereby it pledges such promissory
note to the Lender; or (ii) Borrower pledges to the Lender all of the
stock of such subsidiary and such subsidiary becomes an Other
Subsidiary under this Agreement; and
(c) each such subsidiary delivers to the Lender:
(i) a copy of its charter or certificate of
incorporation, certified by the appropriate official in its
jurisdiction of organization, in form and substance
satisfactory to the Lender, and a copy of its bylaws, and all
amendments thereto, together with a certificate of its
Secretary stating that such copy is complete and correct;
(ii) a certificate of the appropriate governmental
officials stating that such subsidiary exists, is in good
standing with respect to the payment of franchise and similar
taxes and is duly qualified to transact business in the state;
(iii) a certificate of the secretary of the
subsidiary as to the incumbency and signature of all officers
of such subsidiary authorized to execute or attest to the Loan
Documents to which such subsidiary is a party, together with
evidence of the incumbency of each such secretary or other
officer;
(iv) with respect to such subsidiary (A) copies of
the resolution authorizing, approving and ratifying the Loan
Documents to which such subsidiary is a party, duly adopted by
the board of directors of such subsidiary, together with (B) a
certificate of the secretary or other appropriate officer of
such subsidiary stating that each such copy is a true and
correct copy of resolutions duly adopted at a meeting, or by
action taken on written consent, of the board of directors of
such subsidiary and that such resolutions have not been
modified, amended, rescinded or revoked in any respect and are
in full force and effect as of the date hereof; and
(v) all other documents, instruments, agreements,
opinions, certificates, insurance policies, consents and
evidences of other legal matters, in form and substance
satisfactory to the Lender and its counsel, as the Lender
reasonably may request.
8.29. Amount of Equipment Loan. In the event that the total outstanding
indebtedness under the Equipment Loan is at any time in excess of ninety percent
(90%) of the book value of the Borrower's equipment in which the Lender has a
perfected security interest hereunder (the "Equipment Collateral"), then
Borrower shall not pay any dividends or prepay any loans from
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other creditors until the outstanding amount of the Equipment Loan is reduced to
an amount which is not in excess of ninety percent (90%) of the book value of
the Equipment Collateral.
8.30. Operations of Other Subsidiaries. Without the prior written
permission of Lender, Borrower shall not permit the Other Subsidiaries, if any,
to conduct such business which would cause the net income of the Other
Subsidiaries would exceed five percent (5%) of the combined net income of the
Borrower, Guarantors and Other Subsidiaries or cause the assets of the Other
Subsidiaries to exceed five percent (5%) of the combined assets of the Borrower,
Guarantors and Other Subsidiaries.
ARTICLE IX
DEFAULT AND REMEDIES
9.1. Events of Default. The occurrence of any of the following shall
constitute an Event of Default hereunder:
(a) Borrower shall fail to pay the principal of, or interest
on, the indebtedness evidenced by any of the Notes, or any other fee or
charge payable by Borrower hereunder, as and within ten (10) days of
when due and payable (provided that Borrower shall only be entitled to
such ten-day grace period twice within any twelve-month period);
(b) Any representation or warranty made or deemed made by
Borrower or any Guarantor in this Agreement or any of the other Loan
Documents, or that is contained in any certificate, document, opinion
or financial or other statement furnished at any time under or in
connection with any Loan Document, shall prove to have been incorrect
in any material respect on or as of the date made or deemed made, and,
to the extent any such misrepresentation or breach of warranty is
capable of being cured, the same continues thirty (30) days after
notice from the Lender; provided, however, that if such
misrepresentation or breach of warranty (which is capable of being
cured) cannot be reasonably be cured within such thirty (30) day
period, but can reasonably be cured within a sixty (60) day period, the
Borrower shall have an additional period of time not to exceed sixty
(60) days after the original notice of default, provided that the
Borrower proceeds promptly, diligently and in good faith to cure such
misrepresentation or breach;
(c) Borrower or any Guarantor shall fail to perform or observe
any term, covenant or agreement on its part to be performed or observed
under this Agreement or any other Loan Document to which it is a party,
and such default continues thirty (30) days after notice from the
Lender; provided, however, that if such default cannot reasonably be
cured within such thirty (30) day period, but can reasonably be cured
in a sixty (60) day period, Borrower shall have an additional period of
time not to exceed sixty (60) days after the original notice of
default, provided that the Borrower proceeds promptly, diligently and
in good faith to cure such default;
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(d) Borrower or any Guarantor (1) shall generally not pay or
shall be unable to pay its debts as such debts become due; or (2) shall
make an assignment for the benefit of creditors or petition or apply to
any tribunal for the appointment of a custodian, receiver or trustee
for it or a substantial part of its assets; or (3) shall commence any
proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or (4) shall have had
any such petition or application filed or any such proceeding commenced
against it in which an order for relief is entered or an adjudication
or appointment is made; or (5) shall indicate, by any act or omission,
its consent to, approval of or acquiescence in any such petition,
application, proceeding or order for relief or the appointment of a
custodian, receiver or trustee for it or a substantial part of its
assets; or (6) shall suffer any such custodianship, receivership or
trusteeship to continue undischarged for a period of thirty (30) days
or more;
(e) Borrower or any Guarantor shall be liquidated, dissolved,
partitioned or terminated, or the charter or certificate of authority
thereof shall expire or be revoked;
(f) A default or event of default shall occur under any of the
other Loan Documents, subject to applicable cure periods; or
(g) Borrower or any Guarantor shall (1) fail to pay any
indebtedness for borrowed money in the amount of $50,000 or greater
(other than the indebtednesses evidenced by the Notes), or any interest
or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), subject to applicable
cure periods, including but not limited to any such indebtedness or
obligation now or hereafter owed to Lender, or (2) fail to perform or
observe any term, covenant or condition on its part to be performed or
observed under any agreement or instrument relating to any such
indebtedness, when required to be performed or observed, if the effect
of such failure to perform or observe is to accelerate, or to permit
the acceleration after the giving of notice or the passage of time or
both, of the maturity of such indebtedness, regardless of whether such
failure to perform or observe shall be waived by the holder of such
indebtedness; or any such indebtedness shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof.
9.2. Acceleration of Maturity; Remedies. Upon the occurrence of any
Event of Default described in subsection 6.1(d) as it relates to Borrower, the
indebtednesses evidenced by the Notes as well as any and all other indebtedness
and obligations of Borrower to Lender shall be immediately due and payable in
full; and upon the occurrence of any other Event of Default described above
(including but not limited to subsection 6.1(d) as it relates to any Guarantor),
Lender at any time thereafter may at its option accelerate the maturity of the
indebtednesses evidenced by the Notes as well as any and all other indebtedness
and obligations of Borrower to
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Lender; all without notice of any kind. Upon the occurrence of any such Event of
Default and the acceleration of the maturity of the indebtednesses evidenced by
the Notes:
(a) any obligation of Lender to advance any theretofore
undisbursed proceeds of the Loans shall immediately cease and be of no
further force nor effect, and Lender shall be immediately entitled to
exercise any and all rights, powers, privileges, options and remedies
possessed by Lender pursuant to the terms of the Security Instruments
and all of the other Loan Documents;
(b) Lender shall have and may exercise all of the rights and
remedies of a secured party under the Uniform Commercial Code as
adopted in the State of Tennessee; and
(c) Lender shall have and may exercise any and all other
rights, powers, privileges, options and remedies that Lender may now or
hereafter possess at law, in equity or by statute.
9.3. Right of Setoff. Without limitation of the foregoing, upon the
occurrence and during the continuance of any Event of Default, Lender is hereby
authorized at any time and from time to time, without notice to Borrower (any
such notice being expressly waived by Borrower), to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held by Lender or any of its affiliates, and any other indebtedness at any
time owing by Lender or its affiliates to or for the credit or the account of
Borrower or any Guarantor, against any and all of the Obligations, irrespective
of whether Lender shall have made any demand under this Agreement or the Notes
or any other Loan Document and although such obligations may be unmatured.
Lender agrees to notify Borrower within a reasonable time after any such setoff
and application; provided that the failure to give such notice shall not affect
the validity of such setoff and application. The rights of Lender under this
Section 9.3 are in addition to any other rights and remedies (including, without
limitation, other rights of setoff) that Lender may have.
9.4. Remedies Cumulative; No Waiver. No right, power or remedy
conferred upon or reserved to Lender by this Agreement or any of the other Loan
Documents is intended to be exclusive of any other right, power or remedy, but
each and every such right, power and remedy shall be cumulative and concurrent
and shall be in addition to any other right, power and remedy given hereunder,
under any of the other Loan Documents or now or hereafter existing at law, in
equity or by statute. No delay or omission by Lender to exercise any right,
power or remedy accruing upon the occurrence of any Event of Default shall
exhaust or impair any such right, power or remedy or shall be construed to be a
waiver of any such Event of Default or an acquiescence therein, and every right,
power and remedy given by this Agreement and the other Loan Documents to Lender
may be exercised from time to time and as often as may be deemed expedient by
Lender.
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9.5. Proceeds of Remedies. Any or all proceeds resulting from the
exercise of any or all of the foregoing remedies shall be applied as set forth
in the Loan Document(s) providing the remedy or remedies exercised; if none is
specified, or if the remedy is provided by this Agreement, then as follows:
First, to the costs and expenses, including reasonable
attorney's fees, incurred by Lender in connection with the exercise of
its remedies;
Second, to the expenses of curing the default that has
occurred, in the event that Lender elects, in its sole discretion, to
cure the default that has occurred;
Third, to the payment of the Obligations, including but not
limited to the payment of the principal of and interest on the
indebtednesses evidenced by the Notes, in such order of priority as
Lender shall determine in its sole discretion; and
Fourth, the remainder, if any, to Borrower or to any other
person lawfully thereunto entitled.
ARTICLE X
MISCELLANEOUS
10.1. Commitment Fee. In consideration of Lender's agreement to make
the Loan, Borrower shall pay to the Lender a non-refundable per annum commitment
fee in the amount of $10,000. This fee shall be payable on the date hereof for
the period ending on the first anniversary date hereof, and the same amount
shall thereafter be due and payable on each anniversary hereof for the
succeeding twelve month period.
10.2. Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or otherwise would be within the limitations of, another covenant shall not
avoid the occurrence of an Event of Default if such action is taken or condition
exists.
10.3. Integration. This Agreement and the Loan Documents contain the
entire agreement among the parties relating to the subject matter hereof and
supersede all oral statements and prior writings with respect thereto. The
execution and delivery of this Agreement and the other Loan Documents by
Borrower were not based upon any facts or materials provided by Lender, nor was
Borrower induced or influenced to execute and deliver this Agreement or any
other Loan Document by any representation, statement, analysis or promise made
by Lender.
10.4. Amendments, Etc. No amendment, modification, termination or
waiver of any provision of any Loan Document to which Borrower is a party, nor
consent to any departure by
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Borrower from compliance with the terms of any Loan Document to which it is a
party, shall be effective unless the same shall be in writing and signed on
behalf of Lender by a duly authorized officer of Lender, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. Upon their mutual agreement, Lender, Borrower and the
Guarantors may amend this Agreement to extend the maturity date of either of the
Loans by executing the Modification Agreement in the form of Exhibit F attached
hereto.
10.5. Performance By Lender.
(a) Lender may file one or more financing statements
disclosing Lender's security interests under this Agreement and the
other Loan Documents without the signature of Borrower appearing
thereon if permitted by law, and Borrower shall pay the costs of, or
incidental to, any recording or filing of any financing statements
concerning the collateral security described in the Security
Instruments. Borrower agrees that a carbon, photographic, photostatic
or other reproduction of this Agreement or any other Security
Instrument or of a financing statement is sufficient as a financing
statement.
(b) If Borrower shall default in the payment, performance or
observance of any covenant, term or condition of this Agreement, Lender
may, at its option, pay, perform or observe the same, and all payments
made or costs or expenses incurred by Lender in connection therewith
(including but not limited to reasonable attorney's fees), with
interest thereon at the greatest default rate provided in the Notes (if
none, then at the maximum rate from time to time allowed by applicable
law), shall be immediately repaid to Lender by Borrower and shall
constitute a part of the Obligations and be secured hereby until fully
repaid. Lender shall be the sole judge of the necessity for any such
actions and of the amounts to be paid.
10.6. Costs and Expenses. Lender shall not bear any cost or expense
whatsoever in connection with the making, administration, servicing or
collection of the Loans. Borrower agrees to pay on demand all costs and expenses
in connection with the preparation, execution, delivery, filing, recording
and/or administration of any of the Loan Documents, including but not limited to
the fees and expenses of counsel for Lender, and local counsel who may be
retained by Lender or said counsel, with respect thereto and with respect to
advising Lender as to its rights and responsibilities under any of the Loan
Documents, and all costs and expenses, if any, in connection with the
enforcement of any of the Loan Documents. In addition, Borrower shall pay any
and all recording, indebtedness, stamp and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing and
recording of any of the Loan Documents and any other documents to be delivered
under any such Loan Documents, and agrees to indemnify Lender and hold Lender
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and fees.
The provisions of this Section shall be effective regardless of whether
Borrower shall be entitled to any advances hereunder and shall survive any
termination of this Agreement.
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10.7. Assignment. The Notes, this Agreement and the other Loan
Documents may be endorsed, assigned and/or transferred in whole or in part by
Lender, and any such holder and/or assignee of the same shall succeed to and be
possessed of the rights and powers of Lender under all of the same to the extent
transferred and assigned. Lender may grant participations in all or any portion
of its interest in the indebtednesses evidenced by the Notes. Borrower shall not
assign any of its rights nor delegate any of its duties hereunder or under any
of the other Loan Documents without the prior express written consent of Lender.
10.8. Successors and Assigns Included in Parties. Whenever in this
Agreement one of the parties hereto is named or referred to, the heirs, legal
representatives, successors, successors-in-title and assigns of such parties
shall be included, and all covenants and agreements contained in this Agreement
by or on behalf of Borrower or by or on behalf of Lender shall bind and inure to
the benefit of their respective heirs, legal representatives,
successors-in-title and assigns, whether so expressed or not.
10.9. Third Party Beneficiaries. This Agreement and the other Loan
Documents are intended for the sole and exclusive benefit of the parties hereto
and their respective successors and permitted assigns, and shall not serve to
confer any rights or benefits in favor of any person not a party hereto. No
other person shall have any right to rely on this Agreement or the other Loan
Documents, or to derive any benefit herefrom.
10.10. Time of the Essence. Time is of the essence with respect to each
and every covenant, agreement and obligation of Borrower hereunder and under all
of the other Loan Documents.
10.11. Severability. Any provision of this Agreement that is prohibited
or unenforceable with respect to any person or circumstance or in any
jurisdiction shall, as to such person, circumstance or jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision with respect to other persons or
circumstances or in any other jurisdiction.
10.12. Article and Section Headings; Terminology. Article and section
headings used herein are included for convenience of reference only and shall
not constitute a part hereof for any other purpose. References herein to
"Articles" and "Sections" shall be deemed to be references to Articles and
Sections, respectively, of this Agreement unless the context otherwise requires.
When used herein, the singular shall include the plural, and vice versa, and the
use of the masculine, feminine or neuter gender shall include all other genders,
as appropriate. Any reference herein to a person shall include natural persons,
corporations, partnerships, limited liability companies, associations and other
entities.
10.13. Notices. Any and all notices, elections or demands permitted or
required to be made under this Agreement shall be in writing and shall be
delivered personally, telecopied or sent
36
<PAGE> 37
by certified mail or nationally recognized courier service (such as Federal
Express) to the other party at the address set forth below, or at such other
address as may be supplied in writing and of which receipt has been acknowledged
in writing. The date of personal delivery or telecopy, or the date of mailing or
delivery to such courier service, as the case may be, shall be the date of such
notice, election or demand, and rejection, refusal to accept or inability to
deliver because of a changed address of which no notice was sent shall not
affect the validity of any notice, election or demand given in accordance with
the provisions of this Agreement. For the purposes of this Agreement:
The address of Lender is:
First Tennessee Bank National Association
2841 E. Andrew Johnson Highway
Greeneville, Tennessee 37745
Attention: Larry Estepp
Telecopy Number: 423-798-2230
The address of Borrower is:
Landair Corporation
430 Airport Road
Greeneville, Tennessee 37745
Attention: Edward W. Cook
Telecopy Number: 423-636-7274
10.14. Interest and Loan Charges Not to Exceed Maximum Amounts Allowed
by Law. Anything in this Agreement, the Notes, the Security Instruments or any
of the other Loan Documents to the contrary notwithstanding, in no event
whatsoever, whether by reason of advancement of proceeds of the Loans,
acceleration of the maturity of the unpaid balance of the Loans or otherwise,
shall the interest and loan charges agreed to be paid to Lender for the use of
the money advanced or to be advanced hereunder exceed the maximum amounts
collectible under applicable laws in effect from time to time. It is understood
and agreed by the parties that, if for any reason whatsoever the interest or
loan charges paid or contracted to be paid by Borrower in respect of the Loans
shall exceed the maximum amounts collectible under applicable laws in effect
from time to time, then ipso facto, the obligation to pay such interest and/or
loan charges shall be reduced to the maximum amounts collectible under
applicable laws in effect from time to time, and any amounts collected by Lender
that exceed such maximum amounts shall be applied to the reduction of the
principal balance of the Loans and/or refunded to Borrower so that at no time
shall the interest or loan charges paid or payable in respect of the Loans
exceed the maximum amounts permitted from time to time by applicable law.
10.15. Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same
37
<PAGE> 38
shall not apply a presumption that the terms hereof shall be more strictly
construed against one party by reason of the rule of construction that a
document is to be more strictly construed against the party that itself or
through its agent prepared the same, it being agreed that Borrower, Lender and
their respective agents have participated in the preparation hereof.
10.16. Governing Law. This Agreement and the Notes shall be governed
by, and construed in accordance with, the laws of State of Tennessee.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
LENDER:
FIRST TENNESSEE BANK
NATIONAL ASSOCIATION
By: /s/ Larry Estepp
--------------------------------
Title: Regional President
--------------------------------
BORROWER:
LANDAIR CORPORATION
By: /s/ E.R. Brown
--------------------------------
Title: President
--------------------------------
38
<PAGE> 1
EXHIBIT 10.6
MASTER SECURED PROMISSORY NOTE
(Line of Credit)
$15,000,000 Greeneville, Tennessee September 10, 1998
FOR VALUE RECEIVED, on or before September 10, 2000 (the "Maturity
Date"), the undersigned, LANDAIR CORPORATION, a Tennessee corporation (referred
to herein as "Maker"), promises to pay to the order of FIRST TENNESSEE BANK
NATIONAL ASSOCIATION, a national banking association organized under the laws of
the United States of America ("Payee"; Payee and any subsequent holder[s] hereof
are hereinafter referred to collectively as "Holder"), without grace except as
provided for herein, at the office of Payee at 2841 Andrew Johnson Highway,
Greeneville, Tennessee 37745, or at such other place as Holder may designate to
Maker in writing from time to time, the principal sum of FIFTEEN MILLION AND
NO/100THS DOLLARS ($15,000,000), or such other amount as may hereafter be
outstanding hereunder, whichever is less, together with interest on the
outstanding principal balance hereof from date at LIBOR plus the Applicable
Margin, as calculated and adjusted in accordance with the Loan Agreement (as
hereinafter defined); provided that in no event shall the rate of interest
payable in respect of the indebtedness evidenced hereby exceed the maximum rate
of interest from time to time allowed to be charged by applicable law (the
"Maximum Rate"). Interest shall be calculated on the basis of a 360-day year for
each day that all or any part of the indebtedness evidenced hereby shall be
outstanding, to the extent permitted by applicable law.
Interest only on the outstanding principal balance hereof shall be due
and payable monthly, in arrears, with the first installment being payable on the
first (1st) business day of the first month after the date hereof, and
subsequent installments being payable on the same day of each succeeding month
thereafter until the Maturity Date, at which time the entire outstanding
principal balance, together with all accrued and unpaid interest, shall be due
and payable in full.
All payments in respect of the indebtedness evidenced hereby shall be
made in collected funds, and shall be applied to principal, accrued interest and
charges and expenses owing under or in connection with this Note in such order
as Holder elects, except that payments shall be applied to accrued interest
before principal.
The indebtedness evidenced hereby may be prepaid only in accordance
with the provisions of the Loan Agreement.
Any advance by Payee to Maker that is not evidenced by another
instrument or agreement between the parties shall be conclusively presumed to
have been made hereunder when such advance is either (1) deposited or credited
to an account of Maker with Payee, notwithstanding that such advance was
requested, orally or in writing, by someone other than Maker or that someone
other than Maker is authorized to draw on such account and may or does withdraw
the whole or part of such advance, or (2) made in accordance with the oral or
written instructions of Maker. The entire balance of all advances hereunder that
may be outstanding from time to time shall constitute a single indebtedness, and
no single advance increasing the outstanding balance hereof
<PAGE> 2
shall itself be considered a separate loan, but rather an increase in the
aggregate outstanding balance of the indebtedness evidenced hereby.
Time is of the essence of this Note. It is hereby expressly agreed that
in the event that any Event of Default, as defined in that certain Loan and
Security Agreement of even date herewith, by and between Maker and Payee (the
"Loan Agreement"), shall occur; or should any default or event of default occur
under any other instrument or document now or hereafter evidencing, securing or
otherwise relating to the indebtedness evidenced hereby, subject to applicable
cure periods; then, and in such event, the entire outstanding principal balance
of the indebtedness evidenced hereby, together with any other sums advanced
hereunder, under the Loan Agreement or under any other instrument, document or
agreement now or hereafter evidencing, securing or in any way relating to the
indebtedness evidenced hereby, together with all unpaid interest accrued
thereon, shall, at the option of Holder and without notice to Maker, at once
become due and payable and may be collected forthwith, regardless of the
stipulated date of maturity. Upon the occurrence of any default as set forth
herein, at the option of Holder and without notice to Maker, all accrued and
unpaid interest, if any, shall be added to the outstanding principal balance
hereof, and the entire outstanding principal balance, as so adjusted, shall bear
interest thereafter until paid at a rate (the "Default Rate") equal to the
lesser of (i) the rate that is four percentage points (4%) in excess of Payee's
Base Rate, as it varies from time to time, or (ii) the Maximum Rate, regardless
of whether there has been an acceleration of the payment of principal as set
forth herein. All such interest shall be paid at the time of and as a condition
precedent to the curing of any such default.
To the extent permitted by applicable law, Maker shall pay to Holder a
late charge equal to four percent (4%) of any monthly payment hereunder that is
not received by Holder within fifteen (15) days of the date on which it is due,
in order to cover the additional expenses incident to the handling and
processing of delinquent payments; provided, however, that nothing in this
provision shall be deemed to waive any other right or remedy of the Holder
hereof by reason of Maker's failure to make payments when due hereunder.
In the event this Note is placed in the hands of an attorney for
collection or for enforcement or protection of the security, or if Holder incurs
any costs incident to the collection of the indebtedness evidenced hereby or the
enforcement or protection of the security, Maker and any indorsers hereof agree
to pay a reasonable attorney's fee, all court and other costs, and the
reasonable costs of any other collection efforts.
Presentment for payment, demand, protest and notice of demand, protest
and nonpayment are hereby waived by Maker and all other parties hereto. No
failure to accelerate the indebtedness evidenced hereby by reason of default
hereunder, acceptance of a past-due installment or other indulgences granted
from time to time, shall be construed as a novation of this Note or as a waiver
of such right of acceleration or of the right of Holder thereafter to insist
upon strict compliance with the terms of this Note or to prevent the exercise of
such right of acceleration or any other right granted hereunder or by applicable
laws. Unless otherwise specifically agreed by Holder in
2
<PAGE> 3
writing, the liability of Maker and all other persons now or hereafter liable
for payment of the indebtedness evidenced hereby, or any portion thereof, shall
not be affected by (1) any renewal hereof or other extension of the time for
payment of the indebtedness evidenced hereby or any amount due in respect
thereof, (2) the release of all or any part of any collateral now or hereafter
securing the payment of the indebtedness evidenced hereby or any portion
thereof, or (3) the release of or resort to any person now or hereafter liable
for payment of the indebtedness evidenced hereby or any portion thereof. This
Note may not be changed orally, but only by an agreement in writing signed by
the party against whom enforcement of any waiver, change, modification or
discharge is sought.
The indebtedness and other obligations evidenced by this Note are
further evidenced and/or secured by (1) the Loan Agreement, (2) the Guaranty
Agreement dated as of the dated hereof executed by Landair Transport, Inc.,
Volunteer Adjustment, Inc. and Landair Transportation Properties, Inc. (the
"Guarantors"), (3) the Security Agreement dated as of the date hereof executed
by the Guarantors, (4) a Pledge and Security Agreement dated as of the date
hereof executed by the Maker, and (5) certain other instruments and documents as
more particularly described in the Loan Agreement.
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the interest and loan
charges agreed to be paid to Holder for the use of the money advanced or to be
advanced hereunder exceed the maximum amounts collectible under applicable laws
in effect from time to time. If for any reason whatsoever the interest or loan
charges paid or contracted to be paid in respect of the indebtedness evidenced
hereby shall exceed the maximum amounts collectible under applicable laws in
effect from time to time, then, ipso facto, the obligation to pay such interest
and/or loan charges shall be reduced to the maximum amounts collectible under
applicable laws in effect from time to time, and any amounts collected by Holder
that exceed such maximum amounts shall be applied to the reduction of the
principal balance remaining unpaid hereunder and/or refunded to Maker so that at
no time shall the interest or loan charges paid or payable in respect of the
indebtedness evidenced hereby exceed the maximum amounts permitted from time to
time by applicable law. This provision shall control every other provision in
any and all other agreements and instruments now existing or hereafter arising
between Maker and Holder with respect to the indebtedness evidenced hereby.
This Note has been negotiated, executed and delivered in the State of
Tennessee, and is intended as a contract under and shall be construed and
enforceable in accordance with the laws of said state, except to the extent that
Federal law may be applicable to the determination of the Maximum Rate.
As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law. In the event that
more than one person, firm or entity is a maker hereunder, then all references
to "Maker" shall be deemed to refer equally to each of said persons,
3
<PAGE> 4
firms, or entities, all of whom shall be jointly and severally liable for all of
the obligations of Maker hereunder.
IN WITNESS WHEREOF, the undersigned Maker has caused this Note to be
executed by its duly authorized officer as of the date first above written.
MAKER:
LANDAIR CORPORATION
By: /s/ E. R. Brown
---------------------------------
Title: President
---------------------------------
4
<PAGE> 1
EXHIBIT 10.7
SECURED PROMISSORY NOTE
(Equipment Loan)
$10,000,000 Greeneville, Tennessee September 10, 1998
FOR VALUE RECEIVED, the undersigned, LANDAIR CORPORATION, a Tennessee
corporation (referred to herein as "Maker"), promises to pay to the order of
FIRST TENNESSEE BANK NATIONAL ASSOCIATION, a national banking association
organized under the laws of the United States of America ("Payee"; Payee and any
subsequent holder[s] hereof are hereinafter referred to collectively as
"Holder"), without grace, at the office of Payee at 2841 Andrew Johnson Highway,
Greeneville, Tennessee 37745, or at such other place as Holder may designate to
Maker in writing from time to time, the principal sum of up to TEN MILLION
DOLLARS ($10,000,000), with interest on the disbursed and unpaid principal
balance from the date of disbursement, until paid, at the rate of interest
hereinafter specified. The principal amount hereof shall be disbursed in one or
more disbursements each made pursuant to a Certificate of Draw Against Equipment
Loan, in the form attached hereto, executed by Maker and delivered to Payee with
regard to such disbursement (each a "Certificate"). Subject to the limitations
hereinafter set forth, the unpaid principal balance of each disbursement of
indebtedness evidenced hereby shall be due and payable in accordance with the
Certificate with regard to such disbursement and as provided in the Loan
Agreement, as herein defined. Capitalized terms used herein but not otherwise
defined shall have the meaning ascribed to them in that certain Loan and
Security Agreement of even date herewith, by and between Maker and Payee (the
"Loan Agreement"), except that the terms "Principal Draw Amount", "First Payment
Date", and "Maturity Date" as used herein shall have the meanings ascribed to
them in the applicable Certificate.
The outstanding Principal Draw Amount of each disbursement hereunder
shall bear interest from date of disbursement at a rate per annum equal to LIBOR
plus the Applicable Rate, as calculated and adjusted from time to time in
accordance with the Loan Agreement.
The Principal Draw Amount of each disbursement and accrued interest
thereon shall be due and payable with interest thereon in monthly installments
as set forth in the Certificate for such Principal Draw Amount and in Section
2.1(c) of the Loan Agreement beginning on the First Payment Date with respect to
such disbursement, with subsequent installments being payable on the same day of
each succeeding month thereafter until the Maturity Date with respect to such
disbursement, at which time the entire outstanding Principal Amount of such
disbursement, together with all accrued and unpaid interest, shall be due and
payable in full.
Notwithstanding any other provision hereof, in no event shall the rate
of interest payable in respect of the indebtedness evidenced hereby exceed the
maximum rate of interest from time to time allowed to be charged by applicable
law (the "Maximum Rate"). Interest shall be calculated on the basis of a 360-day
year for each day that all or any part of the indebtedness evidenced hereby
shall be outstanding, to the extent permitted by applicable law.
<PAGE> 2
All payments in respect of the indebtedness evidenced hereby shall be
made in collected funds, and shall be applied to principal, accrued interest and
charges and expenses owing under or in connection with this Note in such order
as Holder elects, except that payments shall be applied to accrued interest
before principal.
The indebtedness evidenced hereby may be prepaid only in accordance
with the provisions of the Loan Agreement.
Any advance by Payee to Maker that is not evidenced by another
instrument or agreement between the parties shall be conclusively presumed to
have been made hereunder when such advance is either (1) deposited or credited
to an account of Maker with Payee, notwithstanding that such advance was
requested, orally or in writing, by someone other than Maker or that someone
other than Maker is authorized to draw on such account and may or does withdraw
the whole or part of such advance, or (2) made in accordance with the oral or
written instructions of Maker. The entire balance of all advances hereunder that
may be outstanding from time to time shall constitute a single indebtedness, and
no single advance increasing the outstanding balance hereof shall itself be
considered a separate loan, but rather an increase in the aggregate outstanding
balance of the indebtedness evidenced hereby.
Time is of the essence of this Note. It is hereby expressly agreed that
in the event that any Event of Default, as defined in the Loan Agreement, shall
occur; or should any default or event of default occur under any other
instrument or document now or hereafter evidencing, securing or otherwise
relating to the indebtedness evidenced hereby, subject to applicable cure
periods; then, and in such event, the entire outstanding principal balance of
the indebtedness evidenced hereby, together with any other sums advanced
hereunder, under the Loan Agreement or under any other instrument, document or
agreement now or hereafter evidencing, securing or in any way relating to the
indebtedness evidenced hereby, together with all unpaid interest accrued
thereon, shall, at the option of Holder and without notice to Maker, at once
become due and payable and may be collected forthwith, regardless of the
stipulated date of maturity. Upon the occurrence of any default as set forth
herein, at the option of Holder and without notice to Maker, all accrued and
unpaid interest, if any, shall be added to the outstanding principal balance
hereof, and the entire outstanding principal balance, as so adjusted, shall bear
interest thereafter until paid at a rate (the "Default Rate") equal to the
lesser of (i) the rate that is four percentage points (4%) in excess of the
interest rate designated from time to time by Payee as its "Base Rate," which
rate shall be adjusted on each day that said "Base Rate" changes, or (ii) the
Maximum Rate, regardless of whether there has been an acceleration of the
payment of principal as set forth herein. All such interest shall be paid at the
time of and as a condition precedent to the curing of any such default.
To the extent permitted by applicable law, Maker shall pay to Holder a
late charge equal to four percent (4%) of any payment hereunder that is not
received by Holder within fifteen (15) days of the date on which it is due, in
order to cover the additional expense incident to the handling and processing of
delinquent payments; provided, however, that nothing in this provision
2
<PAGE> 3
shall be deemed to waive any other right or remedy of the Holder hereof by
reason of Maker's failure to make payments when due hereunder.
In the event this Note is placed in the hands of an attorney for
collection or for enforcement or protection of the security, or if Holder incurs
any costs incident to the collection of the indebtedness evidenced hereby or the
enforcement or protection of the security, Maker and any indorsers hereof agree
to pay a reasonable attorney's fee, all court and other costs and the reasonable
costs of any other collection efforts.
Presentment for payment, demand, protest and notice of demand, protest
and nonpayment are hereby waived by Maker and all other parties hereto. No
failure to accelerate the indebtedness evidenced hereby by reason of default
hereunder, acceptance of a past-due installment or other indulgences granted
from time to time, shall be construed as a novation of this Note or as a waiver
of such right of acceleration or of the right of Holder thereafter to insist
upon strict compliance with the terms of this Note or to prevent the exercise of
such right of acceleration or any other right granted hereunder or by applicable
laws. Unless otherwise specifically agreed by Holder in writing, the liability
of Maker and all other persons now or hereafter liable for payment of the
indebtedness evidenced hereby, or any portion thereof, shall not be affected by
(1) any renewal hereof or other extension of the time for payment of the
indebtedness evidenced hereby or any amount due in respect thereof, (2) the
release of all or any part of any collateral now or hereafter securing the
payment of the indebtedness evidenced hereby or any portion thereof, or (3) the
release of or resort to any person now or hereafter liable for payment of the
indebtedness evidenced hereby or any portion thereof. This Note may not be
changed orally, but only by an agreement in writing signed by the party against
whom enforcement of any waiver, change, modification or discharge is sought.
The indebtedness and other obligations evidenced by this Note are
secured by (1) the Loan Agreement, (2) the Guaranty Agreement dated as of the
dated hereof executed by Landair Transport, Inc., Volunteer Adjustment, Inc. and
Landair Transportation Properties, Inc. (the "Guarantors"), (3) the Security
Agreement dated as of the date hereof executed by the Guarantors, (4) a Pledge
and Security Agreement dated as of the date hereof executed by the Maker, and
(5) certain other instruments and documents, as more particularly described in
the Loan Agreement.
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the interest and loan
charges agreed to be paid to Holder for the use of the money advanced or to be
advanced hereunder exceed the maximum amounts collectible under applicable laws
in effect from time to time. If for any reason whatsoever the interest or loan
charges paid or contracted to be paid in respect of the indebtedness evidenced
hereby shall exceed the maximum amounts collectible under applicable laws in
effect from time to time, then, ipso facto, the obligation to pay such interest
and/or loan charges shall be reduced to the maximum amounts collectible under
applicable laws in effect from time to time, and any amounts collected
3
<PAGE> 4
by Holder that exceed such maximum amounts shall be applied to the reduction of
the principal balance remaining unpaid hereunder and/or refunded to Maker so
that at no time shall the interest or loan charges paid or payable in respect of
the indebtedness evidenced hereby exceed the maximum amounts permitted from time
to time by applicable law. This provision shall control every other provision in
any and all other agreements and instruments now existing or hereafter arising
between Maker and Holder with respect to the indebtedness evidenced hereby.
This Note has been negotiated, executed and delivered in the State of
Tennessee, and is intended as a contract under and shall be construed and
enforceable in accordance with the laws of said state, except to the extent that
Federal law may be applicable to the determination of the Maximum Rate.
As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law. In the event that
more than one person, firm or entity is a maker hereunder, then all references
to "Maker" shall be deemed to refer equally to each of said persons, firms, or
entities, all of whom shall be jointly and severally liable for all of the
obligations of Maker hereunder.
IN WITNESS WHEREOF, the undersigned Maker has caused this Note to be
executed by its duly authorized officer as of the date first above written.
MAKER:
LANDAIR CORPORATION
By: /s/ E. R. Brown
---------------------------------
Title: President
---------------------------------
4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LANDAIR SERVICES INC FOR THE NINE MONTHS ENDED
SEP-30-1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 6,032
<SECURITIES> 0
<RECEIVABLES> 11,906
<ALLOWANCES> 309
<INVENTORY> 0
<CURRENT-ASSETS> 22,821
<PP&E> 94,308
<DEPRECIATION> 32,064
<TOTAL-ASSETS> 85,104
<CURRENT-LIABILITIES> 21,009
<BONDS> 0
0
0
<COMMON> 63
<OTHER-SE> 44,258
<TOTAL-LIABILITY-AND-EQUITY> 85,104
<SALES> 0
<TOTAL-REVENUES> 79,188
<CGS> 0
<TOTAL-COSTS> 74,377
<OTHER-EXPENSES> (44)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,382
<INCOME-PRETAX> 3,473
<INCOME-TAX> 1,331
<INCOME-CONTINUING> 2,142
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,142
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
