<PAGE> 1
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. 000-22490
FORWARD AIR CORPORATION
(FORMERLY LANDAIR SERVICES, INC.)
(Exact name of registrant as specified in its charter)
TENNESSEE 62-1120025
(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) 636-7100
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 X NO
------ ------
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
FORWARD AIR CORPORATION (FORMERLY LANDAIR SERVICES, INC.)
<TABLE>
<CAPTION>
Page
Number
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<S> <C>
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 11
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 18
ITEM 2. Changes in Securities 18
ITEM 3. Defaults Upon Senior Securities 18
ITEM 4. Submission of Matters to a Vote of Security Holders 18
ITEM 5. Other Information 19
ITEM 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
EXHIBIT INDEX 21
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Forward Air Corporation
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------- --------
(Unaudited) (Note)
(In thousands, except share data)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 96 $ 895
Accounts receivable, less allowance of $925 in 1998 and $753 in 1997 19,247 17,671
Other current assets 2,337 1,752
------- --------
Total current assets 21,680 20,318
Property and equipment 38,906 19,540
Less accumulated depreciation and amortization 9,219 3,755
------- --------
29,687 15,785
Other assets 3,487 3,290
Deferred income taxes -- 572
Assets of discontinued operations -- 97,208
------- --------
Total assets $54,854 $137,173
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,475 $ 72
Accrued expenses 5,985 1,691
Current portion of long-term debt 4,758 625
Current portion of capital lease obligations 1,003 974
Due to truckload subsidiaries -- 17,447
------- --------
Total current liabilities 14,221 20,809
Long-term debt, less current portion 19,362 3,508
Capital lease obligations, less current portion 5,212 4,746
Deferred income taxes 214 --
Liabilities of discontinued operations -- 57,650
Shareholders' equity:
Preferred stock -- --
Common stock, $.01 par value:
Authorized shares - 20,000,000
Issued and outstanding shares - 6,293,542 in 1998 and 6,024,388 in 1997 63 60
Additional paid-in capital 15,592 26,804
Retained earnings 190 23,596
------- --------
Total shareholders' equity 15,845 50,460
------- --------
Total liabilities and shareholders' equity $54,854 $137,173
======= ========
</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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Forward Air Corporation
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
--------------------------------- ----------------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
-------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Operating revenue $ 33,354 $ 28,901 $ 92,943 $ 75,357
Operating expenses:
Purchased transportation:
Provided by Landair Corporation 1,339 1,811 4,268 4,386
Provided by others 13,232 10,507 36,096 28,514
Salaries, wages and employee benefits 7,704 6,199 21,876 16,939
Operating leases 1,717 1,516 4,785 4,237
Depreciation and amortization 1,193 746 3,177 1,952
Insurance and claims 700 669 2,360 2,101
Other operating expenses 3,257 2,900 9,675 7,719
-------- -------- -------- --------
29,142 24,348 82,237 65,848
-------- -------- -------- --------
Income from operations 4,212 4,553 10,706 9,509
Other income (expense):
Interest expense (236) (197) (661) (604)
Other, net 2 (2) 13 (60)
-------- -------- -------- --------
(234) (199) (648) (664)
-------- -------- -------- --------
Income from continuing operations
before income taxes 3,978 4,354 10,058 8,845
Income taxes 1,510 1,743 3,858 3,497
-------- -------- -------- --------
Income from continuing operations 2,468 2,611 6,200 5,348
-------- -------- -------- --------
Discontinued operations:
Income from operations (less income taxes
of $--, $269, $850 and $258,
respectively) -- 566 1,345 543
Loss on spin-off (less income taxes of
$--, $--, $380 and $--, respectively) -- -- (380) --
-------- -------- -------- --------
-- 566 965 543
-------- -------- -------- --------
Net income $ 2,468 $ 3,177 $ 7,165 $ 5,891
======== ======== ======== ========
Income per share:
Basic
Income from continuing operations $ .40 $ .44 $ 1.00 $ .90
Income from discontinued operations -- .09 .16 .09
-------- -------- -------- --------
Net income $ .40 $ .53 $ 1.16 $ .99
======== ======== ======== ========
Diluted
Income from continuing operations $ .39 $ .42 $ .97 $ .87
Income from discontinued operations -- .09 .15 .09
-------- -------- -------- --------
Net income $ .39 $ .51 $ 1.12 $ .96
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
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Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
---------------------------------
September 30, September 30,
1998 1997
-------- -------
(In thousands)
<S> <C> <C>
Cash provided by (used in) operations $ (4,708) $ 2,522
Investing activities:
Proceeds from disposal of property and equipment 19 --
Purchases of property and equipment (10,000) (2,331)
Contribution of capital to Landair Corporation (5,000) --
Other (197) (3)
-------- -------
(15,178) (2,334)
Financing activities:
Proceeds from long-term debt 23,996 580
Payments of long-term debt (6,647) --
Payments of capital lease obligations (736) (971)
Common Stock issued under employee stock purchase plan -- 55
Proceeds from exercise of stock options 2,474 78
-------- -------
19,087 (258)
-------- -------
Decrease in cash and cash equivalents $ (799) $ (70)
======== =======
Non-cash transactions:
Distribution of net assets of Landair Corporation $(44,254) $ --
======== =======
Contribution of net assets by Landair Corporation to the
Company $ 2,379 $ --
======== =======
</TABLE>
See notes to condensed consolidated financial statements.
5
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Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 1998
1. BASIS OF PRESENTATION
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
Forward Air Corporation (formerly Landair Services, Inc.) annual report on Form
10-K for the year ended December 31, 1997 and in the Form 8-K filed on September
4, 1998.
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. DISCONTINUED OPERATIONS
The accompanying condensed consolidated financial statements include Forward Air
Corporation and its subsidiaries. On July 9, 1998 (the "Measurement Date"), the
Board of Directors of the Company authorized the separation of the Company 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").
6
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Forward Air Corporation
Notes to Condensed Consolidated Financial Statements (continued)
3. DISCONTINUED OPERATIONS (CONTINUED)
The Spin-off was effected on September 23, 1998 through the distribution to
shareholders of the Company of all the outstanding shares of common 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 share of the Company's
common stock. Subsequent to the Spin-off, the Company has continued as the legal
entity that owns and operates the deferred air freight operations through its
operating subsidiaries and Landair Corporation is the legal entity that owns and
operates the truckload operations. Additionally, the name Landair Services, Inc.
was changed to Forward Air Corporation on August 26, 1998. As a result of the
Spin-off, the results of operations and cash flows of the truckload operations
have been reported as discontinued operations for all periods presented in the
accompanying condensed consolidated financial statements.
As used in the accompanying condensed consolidated financial statements, the
term "Forward Air" refers to the deferred air freight operations; the term
"truckload" refers to the truckload operations; and the term "the Company"
refers to the entity which, prior to the Spin-off, operated both the deferred
air freight and truckload groups and which, after the Spin-off, operates the
deferred air freight group.
A summary of the net assets distributed to Landair Corporation on September 23,
1998 is as follows (in thousands):
<TABLE>
<S> <C>
Current assets $ 22,754
Property and equipment, net 62,244
Other assets 39
--------
Assets of discontinued operations 85,037
--------
Current liabilities (21,009)
Long-term debt and capital lease obligations (7,972)
Deferred income taxes (11,802)
--------
Liabilities of discontinued operations (40,783)
--------
Net assets of discontinued operations $ 44,254
========
</TABLE>
Prior to the Spin-off, the Company made a $5.0 million contribution of capital
in the form of cash to Landair Corporation. In addition, Landair Corporation
contributed to the Company approximately $2.4 million of net assets related to
the Forward Air operations. The above net assets include these transactions. The
distribution of the net assets of Landair Corporation on September 23, 1998, was
charged to retained earnings, to the extent that the Company had positive
retained earnings, with the remainder to additional paid-in capital.
7
<PAGE> 8
Forward Air Corporation
Notes to Condensed Consolidated Financial Statements (continued)
3. DISCONTINUED OPERATIONS (CONTINUED)
Summarized income statement information relating to the truckload operations (as
reported in discontinued operations) is as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------------------ -----------------------------
September 30, September 30, September 30, September 30,
1998(1) 1997 1998(1) 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating revenue $ -- $ 23,367 $ 51,543 $ 65,993
Operating expenses -- 22,113 48,450 63,770
-------- -------- -------- --------
Income from operations -- 1,254 3,093 2,223
Interest expense -- (453) (924) (1,386)
Other, net -- 34 26 (36)
-------- -------- -------- --------
Income before income taxes -- 835 2,195 801
Income taxes -- 269 850 258
-------- -------- -------- --------
Income from discontinued
truckload operations $ -- $ 566 $ 1,345 $ 543
======== ======== ======== ========
</TABLE>
(1) The fiscal 1998 summarized income statement information above includes
the results of operations only through July 9, 1998 as a result of the
July 9, 1998 Measurement Date.
8
<PAGE> 9
Forward Air Corporation
Notes to Condensed Consolidated Financial Statements (continued)
4. NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share data):
<TABLE>
<CAPTION>
Three months ended Nine months ended
---------------------------- ----------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic and diluted income per share:
Income from continuing operations $2,468 $2,611 $6,200 $5,348
Income from discontinued operations -- 566 965 543
------ ------
Net income $2,468 $3,177 $7,165 $5,891
====== ====== ====== ======
Denominator:
Denominator for basic income per share-
weighted-average shares 6,239 5,966 6,164 5,957
Effect of dilutive stock options 158 245 249 161
------ ------ ------ ------
Denominator for diluted income per share-
adjusted weighted-average shares 6,397 6,211 6,413 6,118
====== ====== ====== ======
Income per share - basic:
Income from continuing operations $ .40 $ .44 $ 1.00 $ 90
Income from discontinued operations -- .09 .16 .09
------ ------ ------ ------
Net income $ .40 $ .53 $ 1.16 $ .99
====== ====== ====== ======
Income per share - diluted:
Income from continuing operations $ .39 $ .42 $ .97 $ .87
Income from discontinued operations -- .09 .15 .09
------ ------ ------ ------
Net income $ .39 $ .51 $ 1.12 $ .96
====== ====== ====== ======
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 15 60 15 60
====== ====== ====== ======
</TABLE>
5. LONG-TERM DEBT
Effective with the Spin-off of Landair Corporation on September 23, 1998, the
Company entered into a $20.0 million working capital line of credit facility and
a $15.0 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 1.9% 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. As of September 30, 1998,
the Company had no borrowings and
9
<PAGE> 10
Forward Air Corporation
Notes to Condensed Consolidated Financial Statements (continued)
5. LONG-TERM DEBT (CONTINUED)
$3.2 million of letters of credit outstanding under the working capital line of
credit facility and $15.0 million outstanding under the equipment financing
facility.
The facilities 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.
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.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
On July 9, 1998, the Board of Directors of the Company authorized the separation
of the Company 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 the Company of all the outstanding shares of common 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 share of the Company's
common stock. Subsequent to the Spin-off, the Company has continued as the legal
entity that owns and operates the deferred air freight operations through its
operating subsidiaries and Landair Corporation is the legal entity that owns and
operates the truckload operations. Additionally, the name Landair Services, Inc.
was changed to Forward Air Corporation on August 26, 1998. As a result of the
Spin-off, the results of operations and cash flows of the truckload operations
have been reported as discontinued operations for all periods presented in the
accompanying condensed consolidated financial statements. The following does not
include a discussion and analysis of the discontinued truckload operations.
11
<PAGE> 12
The following table sets forth the percentage relationship of expense items to
operating revenue from continuing operations for the periods indicated.
<TABLE>
Three months ended Nine months ended
-------------------------------- --------------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Operating revenue 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Purchased transportation 43.7 42.6 43.4 43.7
Salaries, wages and employee
benefits 23.1 21.4 23.6 22.5
Operating leases 5.1 5.3 5.2 5.6
Depreciation and amortization 3.6 2.6 3.4 2.6
Insurance and claims 2.1 2.3 2.5 2.8
Other operating expenses 9.8 10.0 10.4 10.2
------ ------ ------ ------
87.4 84.2 88.5 87.4
Income from operations 12.6 15.8 11.5 12.6
Other income (expense):
Interest expense (0.7) (0.7) (0.7) (0.8)
Other, net -- -- -- (0.1)
------ ------ ------ ------
(0.7) (0.7) (0.7) (0.9)
------ ------ ------ ------
Income before income taxes 11.9 15.1 10.8 11.7
Income taxes 4.5 6.1 4.1 4.6
------ ------ ------ ------
Income from continuing operations 7.4 9.0 6.7 7.1
------ ------ ------ ------
Discontinued operations:
Income from operations -- 2.0 1.4 0.7
Loss on spin-off -- -- (0.4) --
------ ------ ------ ------
Net income 7.4% 11.0% 7.7% 7.8%
====== ====== ====== ======
</TABLE>
Three Months Ended September 30, 1998 compared to Three Months Ended September
30, 1997
Operating revenue increased by $4.5 million, or 15.6%, to $33.4 million in the
three months of 1998 from $28.9 million in the same period of 1997. The
operating revenue increase resulted primarily from increased volume from
domestic and international air cargo customers, increased operating terminals
and direct shuttles and enhanced logistics services. The operating revenue
increase in 1998 was also partially attributable to the acquisition on October
27, 1997, of the air cargo operating assets of Adams Air Cargo, Inc. In
addition, the Company benefited in the third quarter of 1997 from the United
Parcel Service ("UPS") strike which contributed an estimated approximately $2.3
million of additional revenue during the prior-year period as further discussed
below.
Purchased transportation represented 43.7% of operating revenue in the third
quarter of 1998 compared to 42.6% in the same period of 1997. The increase in
purchased transportation as a percentage of operating revenue between periods
was primarily attributable to operating
12
<PAGE> 13
efficiencies resulting from increased volumes of freight through the Forward Air
network in the prior year as a result of the UPS strike.
Salaries, wages and employee benefits were 23.1% of operating revenue in the
third quarter of 1998 compared to 21.4% in the same period of 1997. The increase
in salaries, wages and employee benefits as a percentage of operating revenue
between periods was due primarily to operating efficiencies resulting from
increased volumes of freight through the Forward Air network in the prior year
as a result of the UPS strike. In addition, additional cargo handling wages and
supervisory salaries were necessary in the 1998 period to operate
Company-staffed terminals added since the preceding period coupled with an
increase in labor costs associated with logistics services revenue as the
Company continues to expand in this area.
Operating leases, the largest component of which is terminal rent, were 5.1% of
operating revenue in the third quarter of 1998 compared to 5.3% in the same
period of 1997. The decrease in operating leases as a percentage of operating
revenue between periods was attributable to greater operating revenue through
the Forward Air network and the growth of logistics services revenue.
Depreciation and amortization expense as a percentage of operating revenue was
3.6% in the third quarter of 1998, compared to 2.6% in the same period of 1997.
The increase in depreciation and amortization expense as a percentage of
operating revenue was attributable to the implementation of the Company's
integrated freight order entry, tracking and billing information system during
1997 coupled with additional operating equipment (e.g., forklifts, trailers,
scales, etc.) required to operate Company-operated terminals that were added
from the preceding period.
Insurance and claims were 2.1% of operating revenue in the third quarter of
1998, compared with 2.3% in the same period of 1997. The decrease in insurance
and claims as a percentage of operating revenue was due primarily to a decrease
in the frequency and severity of accidents and lower premium costs.
Other operating expenses were 9.8% of operating revenue in the third quarter of
1998 compared to 10.0% in the same period of 1997. The decrease in other
operating expenses as a percentage of operating revenue was primarily
attributable to a lower operating cost structure due to increased operating
revenue and a reduction in commissions paid to agent terminals which were
partially offset by higher equipment maintenance costs associated with
Company-operated transportation equipment acquired in the acquisition on October
27, 1997 of the air cargo operating assets of Adams Air Cargo, Inc.
Income from operations decreased by $341,000, or 7.4%, to $4.2 million for the
third quarter of 1998 compared to $4.6 million for the same period in 1997. The
decrease in income from operations is due primarily to the benefit during the
third quarter of 1997 from non-recurring revenue that resulted from the UPS
strike as discussed below. This benefit was partially offset by a lower
operating cost structure in the current year resulting from an increase in
operating revenue which allowed the Company to spread the fixed costs of the
network over a larger base.
13
<PAGE> 14
Interest expense was $236,000, or 0.7%, of operating revenue in the third
quarter of 1998, compared to $197,000, or 0.7%, for the same period in 1997.
The combined federal and state effective tax rate for the three months of 1998
was 38.0%, compared to a rate of 40.0%, for the same period in 1997.
As a result of the foregoing factors, income from continuing operations
decreased by $143,000, or 5.5%, to $2.5 million for the third quarter of 1998,
compared to $2.6 million for the same period of 1997.
The Company's fiscal 1997 results were affected by the UPS strike occurring
during a two-week period in the third quarter of fiscal 1997 as the Company
shipped freight that would have ordinarily been shipped by UPS. The Company
estimates that the UPS strike resulted in approximately $2.5 million in
incremental revenue which generated an estimated $1.2 million of income from
operations or $0.12 per diluted share. The Company believes it did not retain a
significant amount of the business it gained through the UPS strike, as the two
companies generally occupy separate niches within the freight transportation
marketplace.
Nine Months Ended September 30, 1998 compared to Nine Months Ended September 30,
1997
Operating revenue increased by $17.5 million, or 23.2%, to $92.9 million in the
first nine months of 1998 from $75.4 million in the same period of 1997. The
operating revenue increase resulted primarily from increased volume from
domestic and international air cargo customers, increased operating terminals
and direct shuttles and enhanced logistics services. The operating revenue
increase was also partially attributable to the acquisition on October 27, 1997,
of the air cargo operating assets of Adams Air Cargo, Inc. The Company's 1997
results were also affected by the aforementioned UPS strike.
Purchased transportation represented 43.4% of operating revenue in the first
nine months of 1998 compared to 43.7% in the same period of 1997. The decrease
in purchased transportation as a percentage of operating revenue between periods
was primarily attributable to operating efficiencies resulting from increased
volumes of freight through the Forward Air network coupled with an increase in
logistics services revenue which does not involve the transportation of freight.
Salaries, wages and employee benefits were 23.6% of operating revenue in the
first nine months of 1998 compared to 22.5% in the same period of 1997. The
increase in salaries, wages and employee benefits as a percentage of operating
revenue between periods was due primarily to additional cargo handling wages and
supervisory salaries required to operate Company-operated terminals that were
added since the preceding period coupled with an increase in labor associated
with logistics services revenue as the Company continues to expand in this area.
Operating leases, the largest component of which is terminal rent, were 5.2% of
operating revenue in the first nine months of 1998 compared to 5.6% in the same
period of 1997. The decrease in operating leases as a percentage of operating
revenue between periods was attributable to greater operating revenue through
the Forward Air network and the growth of logistics services revenue.
14
<PAGE> 15
Depreciation and amortization expense as a percentage of operating revenue was
3.4% in the first nine months of 1998, compared to 2.6% in the same period of
1997. The increase in depreciation and amortization expense as a percentage of
operating revenue was attributable to the implementation of the Company's
integrated freight order entry, tracking and billing information system during
1997 coupled with additional operating equipment (e.g., forklifts, trailers,
scales, etc.) required to operate Company-operated terminals that were added
from the preceding period.
Insurance and claims were 2.5% of operating revenue for the first nine months of
1998, compared with 2.8% in the same period of 1997. The decrease in insurance
and claims as a percentage of operating revenue was due primarily to a decrease
in the frequency and severity of accidents and lower premium costs.
Other operating expenses were 10.4% of operating revenue in the first nine
months of 1998 compared to 10.2% in the same period of 1997. The increase in
other operating expenses as a percentage of operating revenue was primarily
attributable to higher equipment maintenance costs associated with
Company-operated transportation equipment acquired in the acquisition on October
27, 1997 of the air cargo operating assets of Adams Air Cargo, Inc. which were
partially offset by a lower operating cost structure due to increased operating
revenue and a reduction in commissions paid to agent terminals.
Income from operations increased by $1.2 million, or 12.6%, to $10.7 million for
the first nine months of 1998 compared to $9.5 million for the same period in
1997. The improvement in income from operations is due primarily to a lower
operating cost structure resulting from an increase in operating revenue which
allowed the Company to spread the fixed costs of the network over a larger base.
In addition, income from operations during 1997 benefited from non-recurring
revenue that resulted from the aforementioned UPS strike.
Interest expense was $661,000, or 0.7%, of operating revenue in the first nine
months of 1998, compared to $604,000, or 0.8%, for the same period in 1997.
The combined federal and state effective tax rate for the first nine months of
1998 was 38.4%, compared to a rate of 39.5%, for the same period in 1997.
As a result of the foregoing factors, income from continuing operations
increased by $852,000, or 16.1%, to $6.2 million for the first nine months of
1998, compared to $5.3 million for the same period of 1997.
Liquidity and Capital Resources
The Company has historically financed working capital needs with cash flows from
operations and borrowings under lines of credit. The Company has historically
financed capital purchases with cash flows from operations and through
borrowings under credit agreements with financial institutions. Net cash used in
operating activities was $4.7 million for the first nine months of 1998 compared
with net cash provided by operating activities of $2.5 million in the same
period of 1997.
15
<PAGE> 16
Net cash used in investing activities was approximately $15.2 million in the
first nine months of 1998 compared with $2.3 million in the same period of 1997.
Investing activities consisted primarily of a $5.0 million capital contribution
to Landair Corporation in 1998 and the acquisition of operating equipment and
enhanced management information systems during the first nine months of 1998 and
1997.
Net cash provided by financing activities was $19.1 million in the first nine
months of 1998 compared with net cash used in financing activities of $258,000
in the same period of 1997. These financing activities included the continued
financing of operating equipment and working capital needs, the repayment of
long-term debt and capital leases and proceeds received from the exercise of
stock options and common stock issued under an employee stock purchase plan.
Effective with the Spin-off of Landair Corporation on September 23, 1998, the
Company entered into a $20.0 million working capital line of credit facility and
a $15.0 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 1.9% 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. As of September 30, 1998,
the Company had no borrowings outstanding and $3.2 million of letters of credit
outstanding under the working capital line of credit facility and $15.0 million
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 some of 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.
16
<PAGE> 17
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 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 and downturns in customer business cycles, the
Company's inability to maintain its historical growth rate due to a decreased
volume of freight moving through the Company's network, competition, surplus
inventories, loss of a major customer, the Company's lack of prior operating
history as an entity independent of the truckload operations, the ability of the
Company's information systems to handle increased volume of freight moving
through its network, and the availability and compensation of qualified
independent owner-operators to serve the Company's transportation needs. The
Company disclaims any intent or obligation to update these forward-looking
statements.
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<PAGE> 18
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
A special meeting of shareholders of the Company was held in lieu of an annual
meeting on August 24, 1998. Directors were elected at the meeting for a one (1)
year term until the annual meeting of shareholders to be held in 1999 following
the year ending December 31, 1998, or until successors are duly elected and
qualified. The nominees and votes cast with respect to each are as follows:
<TABLE>
<CAPTION>
Name For Withheld
---- --- --------
<S> <C> <C>
Bruce A. Campbell 3,871,142 18,520
Edward W. Cook 3,871,142 18,520
James A. Cronin, III 3,887,142 2,520
Robert K. Gray 3,887,142 2,520
Scott M. Niswonger 3,871,142 18,520
Richard H. Roberts 3,871,142 18,520
</TABLE>
A majority of the shareholders also voted to amend the Charter of the Company to
change the name of the Company to Forward Air Corporation. The votes as cast are
as follows:
For Against Abstain
--- ------- -------
3,887,342 1,320 1,000
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<PAGE> 19
In addition, the shareholders voted in favor of ratification of the appointment
of Ernst & Young LLP as the independent auditors of the Company for the year
ending December 31, 1998, and the votes as cast are as follows:
For Against Abstain
--- ------- -------
3,888,442 600 620
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 filed two reports on Form 8-K during
the three months ended September 30, 1998. The Form 8-K filed on
September 3, 1998 reported the filing of Articles of Amendment to the
Charter of the Company to change its name to Forward Air Corporation.
The Form 8-K filed on September 4, 1998 provided certain financial
information including (i) audited consolidated financial statements of
the Company, including the notes thereto, which were restated to report
the results of operations and cash flows of the truckload operations as
discontinued operations; and (ii) unaudited pro forma condensed
financial statements of the Company, including the related notes
thereto, which assumed the Spin-off had occurred on June 30, 1998 as to
the balance sheet or on January 1, 1997 as to the statements of income.
19
<PAGE> 20
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.
Forward Air Corporation
Date: November 13, 1998 By: /s/ Edward W. Cook
----------------------------------------
Edward W. Cook
Chief Financial Officer
and Senior Vice President
20
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. in
Exhibit No. Under Document Where
Item 601 of Incorporated by
Regulation S-K Reference
-------------- ---------
<S> <C> <C>
*2.1 Distribution Agreement between the registrant and Landair
Corporation 2.1
3.1 Bylaws of the registrant, as amended --
4.1 Form of Forward Air Corporation Common Stock Certificate --
*10.1 Transition Services Agreement between the registrant and
Landair Corporation 10.1
*10.2 Employee Benefit Matters Agreement between the registrant and
Landair Corporation 10.2
*10.3 Tax Sharing Agreement between the registrant and Landair
Corporation 10.3
10.4 Air Carrier Certificate, effective September 9, 1993, reissued
September 21, 1998 --
10.5 Amended and Restated Loan and Security Agreement, dated as of
September 10, 1998, between First Tennessee Bank National
Association and the registrant --
10.6 $20.0 million Amended and Restated Master Secured Promissory
Note (Line of Credit), dated as of September 10, 1998, to
First Tennessee Bank National Association --
10.7 $15.0 million Amended and Restated Secured Promissory Note
(Equipment Loan), dated as of September 10, 1998, to First
Tennessee Bank National Association --
10.8 Security Agreement, dated August 11, 1998, between SunTrust
Bank, Nashville, N.A. and FAF, Inc. --
10.9 $8,022,000 Promissory Note, dated August 11, 1998, to
SunTrust Bank, Nashville, N.A. --
27.1 Financial Data Schedule - Period Ended September 30, 1998
(Electronic Filing Only) --
27.2 Financial Data Schedule (Restated) - Period Ended September
30, 1997 (Electronic Filing Only) --
</TABLE>
*Filed as an exhibit to the Quarterly Report on Form 10-Q of Landair Corporation
for the quarterly period ended September 30, 1998, filed with the Commission on
November 16, 1998.
<PAGE> 1
EXHIBIT 3.1
BYLAWS
OF
FORWARD AIR CORPORATION
ARTICLE I
SHAREHOLDERS
Section 1.1 Annual Meeting. The annual meeting of the shareholders of
Forward Air 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 for 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 to 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 be
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
2
<PAGE> 3
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.
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 every 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 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
3
<PAGE> 4
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 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-
4
<PAGE> 5
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 arising 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 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
5
<PAGE> 6
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.
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
6
<PAGE> 7
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 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.
7
<PAGE> 8
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 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
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<PAGE> 9
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 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
9
<PAGE> 10
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 hold 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.
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.
10
<PAGE> 11
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 have 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
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
11
<PAGE> 12
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 Board 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 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
12
<PAGE> 13
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 or 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 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,
13
<PAGE> 14
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
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
14
<PAGE> 15
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.
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
15
<PAGE> 16
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 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
16
<PAGE> 17
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.
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.
17
<PAGE> 1
EXHIBIT 4.1
$.01 PAR VALUE $.01 PAR VALUE
COMMON STOCK COMMON STOCK
INCORPORATED UNDER THE LAWS OF THE STATE OF TENNESSEE
SEE REVERSE FOR ADDITIONAL INFORMATION
AND CERTAIN DEFINITIONS
CUSIP 349853 10 1
FORWARD AIR CORPORATION
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE, OF
FORWARD AIR CORPORATION
CERTIFICATE OF STOCK
transferable only on the books of the Corporation in person or by Attorney on
surrender of this Certificate properly endorsed. This Certificate is not valid
until countersigned and registered by the Transfer Agent and Registrar.
In Witness Whereof the Corporation has caused this Certificate to be
signed by the facsimile signatures of its duly authorized officers.
COUNTERSIGNED AND REGISTERED:
SUNTRUST BANK, ATLANTA
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
Dated:
/s/ Richard H. Roberts /s/ Scott M. Niswonger
Secretary Chairman
<PAGE> 2
FORWARD AIR CORPORATION
The Corporation will furnish to any shareholder, without charge and upon
request addressed to the Corporation at its principal office at 430 Airport
Road, Greeneville, Tennessee 37745, a full statement of the designations,
preferences, limitations, and relative rights of the shares of each class or
series authorized to be issued, so far as they have been determined, and the
authority of the Corporation's Board of Directors to determine the relative
rights and preferences of subsequent classes or series of shares.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT- _________ Custodian __________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of survivorship under Uniform Gifts to Minors
and not as tenants in common Act _______________
(State)
Additional abbreviations may also be used though not in the above list.
For value received,________________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFICATION NUMBER OF ASSIGNEE
- -----------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please print or typewrite name and address including postal zip code of assignee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
of the Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint
- --------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated
----------------------
-----------------------------------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UOPN THE FACE
OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED: ----------------------------------------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCK-
BROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
</TABLE>
<PAGE> 1
EXHIBIT 10.4
U.S. Department of Transportation
Federal Aviation Administration
AIR CARRIER CERTIFICATE
This certifies that
FORWARD AIR INTERNATIONAL AIRLINES, INC.
512 AIRPORT ROAD
GREENEVILLE, TENNESSEE 37743
has met the requirements of the Federal Aviation Act of 1958, as amended, and
the rules, regulations, and standards prescribed thereunder for the issuance
of this certificate and is hereby authorized to operate as an air carrier and
conduct common carriage operations in accordance with said Act and the rules,
regulations, and standards prescribed thereunder and the terms, conditions, and
limitations contained in the approved operations specifications.
This certificate is not transferable and, unless sooner surrendered, suspended,
or revoked, shall continue in effect indefinitely.
By Direction of the Administrator
Certificate number: LI7A769W /s/ JOHN D. FOX
--------------------- ---------------------------------
(Signature)
Effective date: SEPTEMBER 9, 1993 ACTING MANAGER
------------------------- ---------------------------------
REISSUED: SEPTEMBER 21, 1998 (Title)
Issued at SO-FSDO-03 SOUTHERN REGION FSDO-03
-------------- --------------------------------
(Region/Office)
<PAGE> 1
EXHIBIT 10.5
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED 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 FORWARD AIR CORPORATION, a Tennessee corporation with
principal offices in Greeneville, Tennessee that was formerly known as Landair
Services, Inc. ("Borrower").
RECITALS:
A. Pursuant to that certain Loan Agreement (Equipment Loan)
between Lender, Borrower, Landair Transport, Inc., a Tennessee corporation
("LTI"), and Forward Air International Airlines, Inc., a Tennessee corporation
(formerly known as Landair International Airlines, Inc.) ("FAIA"), dated
October 17, 1994, as amended by a First Amendment to Loan and Security
Agreements dated October 20, 1994, a Second Amendment to Loan and Security
Agreements dated December 23, 1994, a Third Amendment to Loan and Security
Agreements dated May 24, 1995, a Fourth Amendment to Loan and Security
Agreements dated May 31, 1995, a Fifth Amendment to Loan and Security
Agreements dated December 22, 1995, a Sixth Amendment to Loan and Security
Agreements dated January 30, 1998, a Seventh Amendment to Loan and Security
Agreements dated January 30, 1998, a Eighth Amendment to Loan and Security
Agreements dated February 24, 1998, and a Ninth Amendment to Loan and Security
Agreements dated March 24, 1998 (collectively, the "Equipment Loan Agreement"),
Lender has made available to Borrower an equipment loan facility in the
original principal amount not exceeding $15,000,000 (the "Equipment Loan") on
the terms and conditions set forth in the Equipment Loan Agreement.
B. Pursuant to that certain Line of Credit Loan Agreement
between Lender, Borrower, LTI, FAIA, Forward Air, Inc., a Tennessee corporation
("FAI"), and Transportation Properties, Inc., a Tennessee corporation (formerly
known as Landair Properties, Inc.) ("TPI"), dated October 17, 1994, as amended
by a First Amendment to Line of Credit Loan Agreement and to Amended and
Restated Security Agreement dated May 31, 1995, a Second Amendment to Line of
Credit Loan Agreement and to Amended and Restated Security Agreement dated
January 28, 1997, and a Third Amendment to Line of Credit Loan Agreement and to
Amended and Restated Security Agreement dated January 30, 1998 (collectively,
the "Line of Credit Loan Agreement"), Lender has made available to Borrower 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") on the terms and conditions set forth in the Line
of Credit Loan Agreement.
C. The indebtedness of Debtor under the Equipment Loan is
evidenced by Debtor's Restated, Amended and Replacement Promissory Note
(Equipment Loan) in favor of Lender dated January 30, 1998 (the "Prior
Equipment Note") and the indebtedness of Debtor under the Line
<PAGE> 2
of Credit is evidenced by Debtor's Restated, Amended and Replacement Promissory
Note (Line of Credit) in favor of Lender dated January 30, 1998 (the "Prior
Line of Credit Note").
D. Borrower intends to effect a spin-off of LTI and certain of
its other subsidiaries and has requested Lender to amend and restate the
Equipment Loan Agreement and Line of Credit Loan Agreement to reflect such
reorganization, to extend the maturity of the Loans and to increase the Line of
Credit to $20,000,000.
E. Lender, in reliance upon the representations and inducements
of Borrower contained herein, has agreed to amend and restate the Equipment
Loan Agreement and Line of Credit Loan Agreement and amend the terms of the
Loans subject to and 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:
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 1.5:1.0 1.00% 1.10%
From 1.5 up to and including 2.0:1.0 1.25% 1.35%
From 2.0 up to and including 2.5:1.0 1.50% 1.60%
Greater than 2.5:1.0 1.75% 1.85%
</TABLE>
2
<PAGE> 3
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 (a) for the period from the date of
the Distribution, as defined in Section 6.1, until the earlier of (i) nine
months thereafter or (ii) the date the Borrower receives the proceeds of the
Public Offering, an aggregate amount equal to one hundred and ten percent
(110%) of Eligible Receivables and (b) thereafter 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.
"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)
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<PAGE> 4
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 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 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 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.
"Interim Period" shall mean the period of time from the date
hereof until the earlier of (i) the date the Borrower receives the proceeds of
the Public Offering, or (ii) November 30, 2000.
"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
4
<PAGE> 5
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.
"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.
"Public Offering" means the public offering of equity
securities of Borrower that is contemplated by Borrower in an approximate
amount of $18,000,000.
"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.
5
<PAGE> 6
ARTICLE II
THE EQUIPMENT LOAN
2.1. Evidence of Equipment Loan Indebtedness; Advances; Repayment.
(a) The Equipment Loan shall be evidenced by an Amended and
Restated Secured Promissory Note (Equipment Loan) of even date herewith, in the
original principal amount of 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-1, which amends and restates the Prior
Equipment Note in its entirety (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
$15,000,000 provided, however, that (i) no advance under the Equipment Loan
after the date of this Agreement shall be in 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 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 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). 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
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<PAGE> 7
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 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.
7
<PAGE> 8
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 Amended
and Restated Master Secured Promissory Note (Line of Credit Loan) of even date
herewith, in the original principal amount not exceeding Twenty Million and
No/100 Dollars ($20,000,000), made and executed by Borrower, payable to the
order of Lender, in substantially the form attached hereto as Exhibit A-2,
which amends and restates the Prior Line of Credit Note in its entirety
(together with any extensions, modifications, renewals and/or replacements
thereof, herein referred to as the "Line of Credit 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 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) $20,000,000.
(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
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<PAGE> 9
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"). 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.
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<PAGE> 10
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 2.0:1.0 .100%
2.0:1.0 or greater .125%
</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.
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 1.5:1.0 .25%
From 1.5 up to and including 2.5:1.0 .50%
2.5:1.0 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
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<PAGE> 11
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:
(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):
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<PAGE> 12
(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 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:
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<PAGE> 13
(1) Equipment. All equipment of Borrower
(including, but not limited to, the equipment listed on
Exhibit E attached hereto) other than equipment in which a
security interest has been previously granted to other
lenders as of the date hereof, together with all parts,
accessories and attachments and all replacements thereof and
additions thereto and all additional equipment or other
property purchased with the proceeds of the Equipment Note;
and
(2) Accounts, Chattel Paper, Instruments and
General Intangibles. All of Borrower's present and future
accounts, accounts receivable, chattel paper, 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
13
<PAGE> 14
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.
(b) Guaranty. The Guaranty Agreement of even date
herewith, executed by FAI, FAF Inc. and 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 of the stock of Forward Air Royalty Company,
Forward Air International Airlines, Inc., Transportation Properties
(Texas), Inc., and Forward Air Licensing Company, wholly-owned
subsidiaries of Borrower, and pledging 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,
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<PAGE> 15
(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 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;
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(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;
(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. Borrower shall have effected a
distribution of the common stock of Landair Corporation as approved by
its Board of Directors on July 9, 1998 and
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shall have completed the transfer of certain assets of Borrower as
described in that certain August, 1998 letter from the Internal
Revenue Service to Borrower (the "Distribution").
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
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its obligations thereunder are within the corporate powers of Borrower and such
Guarantor, have 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.
7.14. Other Subsidiaries. The net income from the Other
Subsidiaries is less than five percent (5%) of the combined net income of the
Borrower, Guarantors and Other Subsidiaries and the assets of the Other
Subsidiaries is less than five percent (5%) of the combined assets of the
Borrower, Guarantors and Other Subsidiaries.
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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 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
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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 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.
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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 intangible collateral security for the Obligations,
without thirty (30) days' prior written notice to Lender in each instance.
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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 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.
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(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 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.
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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 (i) 3.75 to 1.00 for
the period from September 10, 1998 until December 31, 1998, (ii) 3.50 to 1.00
for the period from January 1, 1999 until March 31, 1999, (iii) 3.25 for the
period from April 1, 1999 until June 30, 1999, and (iv) 3.00 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
plus one hundred percent (100%) of the aggregate proceeds from the issuance of
stock, warrants or other equity interests in Borrower or any Guarantor
occurring from the date hereof through the date of 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 F 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 or 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 the 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 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
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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 enters
into an amendment of the Pledge Agreement whereby it 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 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.
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8.30. Operations of Other Subsidiaries. Without the prior written
permission of Lender, Borrower shall not permit the Other Subsidiaries 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;
(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
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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 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:
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(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 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. Release of LTI. LTI is hereby released of any liability with
regard to the Loans, this Agreement, the Notes or any other document relating
this Loans.
10.3. 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.
10.4. 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. This Agreement amends and restates in their entirety the Equipment
Loan Agreement and the Line of Credit Loan Agreement.
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10.5. 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 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 G attached hereto.
10.6. 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.
10.7. 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.
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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.
10.8. 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.
10.9. 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.
10.10. 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.
10.11. 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.
10.12. 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.
10.13. 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.
36
<PAGE> 37
10.14. 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 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:
Forward Air Corporation
430 Airport Road
Greeneville, Tennessee 37745
Attention: Edward W. Cook
Telecopy Number: 423-636-7274
37
<PAGE> 38
10.15. 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.
10.16. Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same 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.
10.17. 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:
FORWARD AIR CORPORATION
By: /s/ Bruce A. Campbell
Title: President
38
<PAGE> 1
Exhibit 10.6
AMENDED AND RESTATED MASTER SECURED PROMISSORY NOTE
(Line of Credit)
$20,000,000 Greeneville, Tennessee September 10, 1998
FOR VALUE RECEIVED, on or before September 10, 2000 (the "Maturity
Date"), the undersigned, FORWARD AIR 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 TWENTY
MILLION AND NO/100THS DOLLARS ($20,000,000), 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 Amended and
Restated 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 Forward Air, Inc., FAF, Inc.
and 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:
FORWARD AIR CORPORATION
By: /s/ Bruce A. Campbell
---------------------------------
Title: President
---------------------------------
4
<PAGE> 1
EXHIBIT 10.7
AMENDED AND RESTATED SECURED PROMISSORY NOTE
(Equipment Loan)
$15,000,000 Greeneville, Tennessee September 10, 1998
FOR VALUE RECEIVED, the undersigned, FORWARD AIR 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
FIFTEEN MILLION DOLLARS ($15,000,000), 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, other than the
amount originally outstanding hereunder on the date hereof (the "Original
Amount"), 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 Amended and Restated 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,
including the Original Amount, 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 Original Amount outstanding hereunder shall be payable in equal
monthly installments of combined principal and interest in the amount of
$314,590 each beginning on October 20, 1998 and continuing on the twentieth day
of each month thereafter until September 20, 2003 at which time the entire
Original Amount and all accrued but unpaid interest thereon shall be due and
payable. Such payments are based on an assumed rate of interest as provided in
Section 2.1(c) of the Loan Agreement, and Maker recognizes that such payments
may be adjusted by Holder as provided in Section 2.1(c) of the Loan Agreement.
The Principal Draw Amount of each disbursement and accrued interest
thereon, other than the Original Amount, 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
<PAGE> 2
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.
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
2
<PAGE> 3
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 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 Forward Air, Inc., FAF, Inc. and 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.
3
<PAGE> 4
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, 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:
FORWARD AIR CORPORATION
By: /s/ Bruce A. Campbell
---------------------------------
Title: President
---------------------------------
4
<PAGE> 1
EX-10.8
SUNTRUST SECURITY AGREEMENT
(FOR USE WITH ALL TYPES OF TANGIBLE COLLATERAL)
FAF, Inc. 430 Airport Road
- ----------------------------------- -----------------------------------------
Name of Debtor Street and Number
hereinafter called "Debtor", whether Greeneville, TN 37744
one or more, hereby grants to -----------------------------------------
SunTrust Bank, Nashville, N.A., 201 City and State
Fourth Avenue North, Nashville,
Tennessee, hereinafter called August 11, 1998
"Secured Party", a security interest -----------------------------------------
pursuant to the Uniform Commercial Date
Code as adopted in the state of
Tennessee in and to the following
described collateral:
SEE ATTACHED EXHIBIT A
together with all similar collateral hereafter acquired, all replacements and
substitutions thereof and all accessories, parts and equipment now or hereafter
affixed thereto or used in connection therewith, and if livestock or farm
crops, said security interest shall include all natural increases thereof, all
of which property is hereafter collectively referred to as "Collateral", and is
located or will be located at:
430 Airport Road, Greeneville, TN 37744
- -------------------------------------------------------------------------------
If Livestock, the marks and brands above described are holding marks and brands
of the Debtor and carry title although said livestock may have other marks and
brands, and as additional collateral, Debtor grants to Secured Party a security
interest in and all feed, both hay and grain, owned by Debtor and all water
privileges, and all equipment used in feeding and handling said livestock, and
also all of the Debtor's rights, title and interest in all contracts and leases
covering lands for pasture and grazing purposes. If crops, this agreement
includes annual and perennial crops and products thereof growing or planted on
the following described real property; or if the Collateral is to be so affixed
or related to realty as to become a part thereof, it is or will be affixed to
the following described REAL PROPERTY:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
If other than Debtor, the RECORD OWNER of the real property is
----------------
(unless realty is described above, it is agreed that the said Collateral is
not, and is not to become, affixed to real property).
If the chief executive office of the Debtor is other than that shown as the
Debtor's residence, such CHIEF EXECUTIVE OFFICE is located at
- -------------------------------------------------------------------------------
DESCRIPTION OF ORIGINAL INDEBTEDNESS
Amount
-------------------------------------------------------------------------
($ ) Dollars
- -------------------------------------------------- -----------------
(UNLESS OTHERWISE INDICATED BELOW, the Original Indebtedness is owed by Debtor
and evidenced by promissory note of even date herewith.)
Owed by FAF, Inc.
----------------------------------------------------------------------
----------------------------------------------------------------------
Evidenced by Promissory Note in the amount of $8,022,000.00 (Eight Million
-----------------------------------------------------------------
Twenty-Two Thousand) Dated August 11 , 1998
------------------------------------- -------------- ---
This security interest is given to secure the performance of the covenants and
agreements herein set forth and to secure the payment of (1) the above
described Original Indebtedness with applicable interest owed to said Secured
Party; (2) all costs and expenses incurred in the collection of same including
reasonable attorney's fees; (3) all extensions, renewals and all changes in
form of the Note evidencing the Original Indebtedness which may be from time to
time effected by agreement; (4) all advances made by Secured Party for taxes,
levies and repairs to, or maintenance or protection of the Collateral; (5) all
costs and expenses incurred in the collection of same and enforcement of
Secured Party's rights hereunder; (6) all money heretofor and hereafter
advanced by Secured Party to or for the account of Debtor at the option of the
Secured Party; (7) all other present or future, direct or contingent
liabilities of Debtor to Secured Party, of any nature whatsoever; and (8)
interest on any money expended by Secured Party for taxes, levies and repairs
to or maintenance of the Collateral, or on any money expended for costs and
expenses incurred in the collection of said note and the enforcement of Secured
Party's rights hereunder.
Proceeds of collateral are also covered; however, such shall not be construed
to mean that the Secured Party consents to any sale of the Collateral.
The proceeds of the note are to be paid, at the Secured Party's election as
indicated below. (Check 1, 2 or 3)
(1) to the seller of the Collateral, and the Debtor hereby
- ----------------- authorizes Secured Party to do so, or
(2) to the Debtor in trust who immediately will apply the
- ----------------- loan proceeds to the payment of the purchase price of the
Collateral, or
X (3) to the Debtor.
- -----------------
Debtor warrants, covenants and agrees that the Collateral is, or will be used
by the Debtor primarily as indicated below. (Check 1, 2 or 3)
X (1) In business.
- -----------------
(2) For personal, family or household purposes.
- -----------------
(3) In farming operations.
- -----------------
THIS AGREEMENT IS SUBJECT TO THE ADDITIONAL PROVISIONS SET FORTH ON THE REVERSE
SIDE HEREOF, THE SAME BEING INCORPORATED HEREIN BY REFERENCE.
SunTrust Bank, Nashville, N.A.
/s/ A. Oakley FAF, Inc.
- ----------------------------------- -----------------------------------------
By Debtor
Senior Vice President Edward W. Cook, CFO
- ----------------------------------- -----------------------------------------
Title Debtor
<PAGE> 2
DEBTOR FURTHER REPRESENTS, WARRANTS AND AGREES THAT
TITLE TO COLLATERAL. The statements herein as to Debtor's residence and
possession and location of the Collateral specifically described herein are
true, and that Debtor has or will acquire title thereto free and clear of all
liens, encumbrances and security interest except the security interest hereby
given to Second Party and other rights, if any, of Secured Party, and Debtor
will defend the Collateral against the claims and demands of all persons.
SALE OR ENCUMBRANCE OF COLLATERAL. Without prior written consent of Secured
Party, Debtor will not sell, exchange, lease or otherwise dispose of the
Collateral or any of the Debtor's rights therein or under this agreement, or
permit any lien or security interest to attach to same except that created by
this agreement and other rights, if any, of Secured Party.
MAINTENANCE OF COLLATERAL. Debtor will maintain the Collateral in good
condition and repair but without permitting any lien to affix to the Collateral
as a result thereof, and will pay and discharge all taxes, levies and other
impositions levied thereon as well as the cost of repairs to or maintenance of
the same and not permit anything to be done that may impair the value of any of
the Collateral. If Debtor fails to pay such sums, Secured Party may do so for
the Debtor's account, adding the amount thereof to the other amounts secured
hereby.
INSURANCE OF COLLATERAL. Debtor shall procure, keep in force, and pay for,
insurance on said collateral, in such amounts and forms, and against such risks,
and with such insurers as may be acceptable to Secured Party and such polices
evidencing said insurance shall be furnished to Secured Party. If Debtor fails
to furnish said insurance or fails to pay the premiums thereof, Secured Party
may do so or may obtain insurance of its interest only, adding the amount of any
such premium thereof to other amounts secured hereby; however, Secured Party is
under no obligation nor duty to pay such premiums or obtain insurance. Debtor
hereby assigns to Secured Party any return or unearned premiums which may be due
upon cancellation of any said policies for any reason whatsoever, and directs
the insurers to pay Secured Party any amount so due, unless the Secured Party
has been previously fully satisfied. In order to collect such return or unearned
premiums or the benefits of such insurance, the Secured Party or any of its
officers, agents or employees are hereby appointed Debtor's attorney-in-fact to
endorse any draft or check which may be payable to Debtor; any balance of
insurance proceeds remaining after payment in full of all amounts owing to
Secured Party shall be paid to Debtor. Such return or unearned insurance premium
or the benefits of such insurance, may, at Secured Party's option, be used for
other insurance or to repair, restore or replace the Collateral, or may be
applied to any indebtedness secured hereunder, and if the indebtedness is
payable in installments, then to the installments in reverse order, satisfying
the final maturing installments first.
REMOVAL OF COLLATERAL PROHIBITED. Debtor will not permit any of the Collateral
to be removed from the specified location herein, and Debtor will promptly
notify Secured Party of any change of Debtor's residence, or in the Collateral
within the state, and Debtor will not remove the Collateral from the county of
the Debtor's residence or from the county where the Collateral is to be located
as shown herein without the prior written consent of Secured Party and will
permit Secured Party to inspect the Collateral at any time.
PERFECTION OF SECURITY INTEREST. Debtor will pay all costs of filing any
financing, continuation or termination statements with respect to the security
interest by this agreement; Secured Party is hereby appointed Debtor's
attorney-in-fact to do, at Secured Party's option and at Debtor's expense, all
that is necessary to perfect the security interest created by this agreement
and to keep the security interest perfected and the Collateral protected,
including, but not limited to signing the Debtor's name on any financing
statements or amendments thereto, or the completion of this agreement or of the
financing statement by inserting information or terms not consistent with the
parties' agreement. Debtor agrees that a photographic copy or other
reproduction of this agreement shall be sufficient as a financing statement.
IMPAIRMENT OF VALUE. Debtor will not permit anything to be done that may
impair the value of any Collateral or the security intended to be afforded by
this agreement.
DEFAULT. In the event that: (1) the Debtor: (a) gives false or misleading
information concerning the warranties or covenants made herein, or reaches
such warranties or covenants, or (b) voluntarily or involuntarily files any
proceeding under any provision of the federal Bankruptcy Code, or (c)
institutes or has commenced against Debtor any proceeding under a state
insolvency statute for the appointment of a receiver, or (d) makes an
assignment for the benefit of creditors, or becomes insolvent, or (e) fails to
procure and furnish proof of, or maintain the insurance required under this
agreement, or (f) fails to pay promptly when due any Original Indebtedness or
any other indebtedness secured hereunder, or (2) the Collateral is confiscated
by any local, state or federal government agency due to its alleged illegal use
or acquisition, or (3) the Secured Party has any other reasonable cause to
believe that the Collateral is in jeopardy or that the Original Indebtedness or
any other indebtedness secured hereunder will not be paid when due, then upon
the occurrence of any such events, the Debtor shall be in default.
Upon default the Original Indebtedness and all other indebtedness secured under
this agreement shall become immediately due and payable, at the option of the
Secured Party, with or without notice to the Debtor and the Secured Party shall
have the following rights in addition to all other remedies available to it
under applicable law:
(1) The Secured Party shall be entitled to possession of the Collateral
and may, with or without notice to the Debtor, enter any premises where the
Collateral is located and take possession thereof.
(2) The Collateral may be sold by the Secured Party at one or more public
or private sales as the Secured Party may elect. Should the Collateral be
disposed of by private sale, the Secured Party may bid at any such sale.
Reasonable notification of the time, place and date of any public sale or, if
the Collateral is sold by private sale, reasonable notice of the date after
which such private sale or any other disposition of the Collateral will occur
shall be provided to the Debtor by the Secured Party.
(3) The proceeds from the sale or other disposition of the Collateral
shall be applied as follows: (a) first to the expenses of taking, removing,
storing and repairing the Collateral and all costs of holding the sale
(including reasonable attorney's fees), (b) secondly, to liquidating any prior
liens or claims on the Collateral, and (c) thirdly, the balance will be applied
to all indebtedness secured under this agreement in any order the Secured Party
may elect.
(4) If a deficiency balance should exist after the sale of Collateral on
any indebtedness secured by this agreement, the Debtor shall immediately pay
such balance to the Secured Party without further notice or demand. Should all
indebtedness secured hereunder be fully paid from the proceeds of the sale of
the Collateral and a surplus exist, the remaining surplus shall be paid to the
Debtor or the Debtor's order.
(5) If the Collateral consists of more than one item, the Secured Party
may dispose of the Collateral as one unit, or each item singularly at different
times, as the Secured Party may elect.
MISCELLANEOUS. The rights and privileges of the Secured Party under this
agreement shall inure to the benefits of its successors and assigns. All
covenants, representations, warranties and agreements of Debtor contained in
this agreement are joint and several if Debtor is more than one and shall bind
Debtor's personal representatives, heirs, successors and assigns. If any
provisions of this agreement shall for any reason be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision hereof, but this agreement shall be construed as if such invalid or
unenforceable provision has never been contained herein.
<PAGE> 1
EXHIBIT 10.9
<TABLE>
<CAPTION>
OBLIGOR NOTE COMMIT. SERVICE
NAME NO. NO. OFFICER MATURITY DISCOUNT RATE UNIT COLL. TYPE
- ------- ---- ------- ------- -------- -------- ---- ------- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
659 10/11/98 [X] 360 4116
[ ] 365
</TABLE>
FAF, Inc. Nashville, Tenn. August 11 1998 $8,022,000.00
- ---------- ---------- -- ------------
I, or we, jointly and severally promise to pay to the order of and at SunTrust
Bank, Nashville, N.A., (hereinafter called "Bank") the sum of Eight Million
Twenty Two Thousand and no cents************************
- ---------------------------------------------------------------------- DOLLARS
including an origination fee of $ -----------------------
for value received, together with interest on the unpaid balance at the
interest rate set forth and in the following manner:
[ ] One single installment due days after the date hereof.
---------
[ ] One single installment due days after the date hereof, with no
---------
interest until after maturity (Note Discounted).
[ ] On demand with interest payable
------------------------------------------
[ ] In installments of $ principal plus interest, and a final
------ -------
installment of the remaining unpaid principal plus any unpaid
accrued interest, beginning on the day of , 19 and on the
----- ------- --
same day of each [ ] month [ ] quarter [ ] thereafter.
-------
[ ] In installments of $ each and a final installment of the remaining
----- -------
unpaid principal plus any unpaid accrued interest, beginning on the day
----
of , 19 and on the same day of each [ ] month [ ] quarter
----------- --
[ ] thereafter.
----------
[X] In accordance with the following schedule Revolving line of credit --
--------------------------------
Interest only due for the first 60 days then the outstanding balance will
--------------------------------------------------------------------------
amortize over 60 equal monthly principal payments plus interest.
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Interest to be calculated as follows: [ ] At % per annum [ ] By separate
---
agreement [X] At the LIBOR rate plus 100 bps % per annum from date until
--------
payment is due. Rate changes are effective as follows: As SunTrust 30 day
-------------------
LIBOR rate changes
------------------
If we do not make payments on the scheduled dates, we understand that our
final payment will be increased or decreased as appropriate.
The maker has this day pledged with the said Bank the following securities
or other property, via: Trucks (trailers) as listed on Exhibit A
--------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
THIS NOTE SHALL BE GOVERNED BY THE LAWS OF THE U.S. AND OF TENNESSEE,
EXCEPT WHEN ANOTHER STATE IS INDICATED HERE:
------------------
SUBJECT TO THE ADDITIONAL PROVISIONS SET FORTH ON THE REVERSE SIDE HEREOF,
THE SAME BEING INCORPORATED HEREIN BY REFERENCE.
FAF, Inc. X /s/ Edward W. Cook
----------------------------- ------------------------------- OFF INIT.
Edward W. Cook [ ]
----------------------------- -------------------------------
Senior Vice President & CEO
----------------------------- -------------------------------
<PAGE> 2
DEFINITIONS: "Maker" means all makers, co-makers, and other parties signing on
the face of this note; as used herein, the term "base rate" is that rate
established from time to time and announced by SunTrust Bank, Nashville, N.A.
as its "base rate," such rate being an interest rate used as an index for
establishing interest rates on loans; and "Collateral" means the pledged
property, including securities, listed on the face hereof, any additional
collateral for which provision is made herein and proceeds of such.
PREPAYMENT REBATE: In those cases were the Note has been discounted and the
entire balance is paid before maturity, a pro rata rebate credit will be given
for the unearned portion of the interest.
LATE FEE: If a payment is late by as much as 15 days, a late fee of 5% may be
charged.
DEFAULT: In the event that (1) additional Collateral is not provided upon
demand as required below, (2) any payment is not made when due, (3) Maker
defaults in the performance of any other note or obligation, whether to Bank or
otherwise, unless prohibited by law or Federal regulations, or Bank deems
itself insecure, Bank may accelerate the maturity of this note with or without
notice. In the event payment is not made to Bank when due, either by the
original terms or after acceleration, Bank may sell any collateral in
accordance with the provisions of the Uniform Commercial Code and ten days'
notice of such sale shall be deemed reasonable.
COLLATERAL: Bank's security interest in the Collateral shall extend to the
proceeds thereof, and any dividends, stock dividends, or any payment or
distribution of any kind which may become due to Maker because of Maker's
ownership of any Collateral. Bank shall have the right to require that Maker or
any third party, including the issuer for any security, send or deliver such
payments, distributions or dividends to Bank, which is hereby granted
power-of-attorney to take any action, including executing for Maker and filing
a financing statement, to perfect or enforce Bank's security interest. Said
security interest shall secure all amounts which become due under the terms of
this note and, (1) the Collateral shall also secure all other loans with Bank
made to Maker, and all sums which Maker may now, or hereafter, owe Bank either
individually or jointly or severally with other parties, directly or
contingently, or whether as principal, surety, guarantor, or otherwise. And,
(2) this note shall be secured by any other security-interest granted Bank by
Maker. However, Collateral securing other loans with Bank will not secure this
loan unless Bank makes such disclosures and gives such notices as are required
by any applicable provision of Regulation "Z" of the Board of Governors of the
Federal Reserve System. In the event that any Collateral depreciates in value,
Maker shall provide such additional Collateral as is satisfactory to Bank. Bank
shall not be under any obligation to take any legal action for collection,
protection, or preservation of any of said Collateral, except after written
demand by Maker, and after Maker's adequate assurance to Bank of full indemnity
against all costs and expenses, including counsel fees attendant thereto. Bank
shall have the unqualified right to apply any interest, dividends, proceeds of
the sale of Collateral or other payments herein assigned to Bank to any
indebtedness secured hereby. Bank may, at its option, deliver to Maker any or
all of said Collateral, with or without the substitution of any other
Collateral. In all such cases, the Collateral so delivered to the Maker shall
be deemed to be held in trust for the Bank by the Maker. Bank shall have the
right to rehypothecate the Collateral.
MISCELLANEOUS: Upon renewal or extension of this note the interest rate may be
renegotiated. Unless otherwise agreed in writing, after maturity, interest
shall be paid at the highest contract rate permissible under applicable law. At
Bank's option interest may be computed on the basis of a 360-day year. If this
note is not paid as agreed, Maker agrees to pay all costs of collection,
including a reasonable attorney's fee. All parties hereto, including endorsers,
waive presentment, demand, notice and protest, and agree that Bank may grant
such extension, or renewals, as it deems advisable. Any indebtedness due from
Bank to Maker is hereby assigned to Bank as additional security and may be
appropriated and applied hereon at any time either before or after the
maturity hereof.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FORWARD AIR CORPORATION FOR THE NINE MONTHS ENDED
SEPTEMBER 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> 96
<SECURITIES> 0
<RECEIVABLES> 20,172
<ALLOWANCES> 925
<INVENTORY> 0
<CURRENT-ASSETS> 21,680
<PP&E> 38,906
<DEPRECIATION> 9,219
<TOTAL-ASSETS> 54,854
<CURRENT-LIABILITIES> 14,221
<BONDS> 0
0
0
<COMMON> 63
<OTHER-SE> 15,782
<TOTAL-LIABILITY-AND-EQUITY> 54,854
<SALES> 0
<TOTAL-REVENUES> 92,943
<CGS> 0
<TOTAL-COSTS> 82,237
<OTHER-EXPENSES> (13)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 661
<INCOME-PRETAX> 10,058
<INCOME-TAX> 3,858
<INCOME-CONTINUING> 6,200
<DISCONTINUED> 965
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,165
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.12
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FORWARD AIR CORPORATION FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 75,357
<CGS> 0
<TOTAL-COSTS> 65,848
<OTHER-EXPENSES> 60
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 604
<INCOME-PRETAX> 8,845
<INCOME-TAX> 3,497
<INCOME-CONTINUING> 5,348
<DISCONTINUED> 543
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,891
<EPS-PRIMARY> .99
<EPS-DILUTED> .96
</TABLE>
