| | Amendment to Securitization Facility Covenant Transport, Inc., a Nevada corporation (the "Company"), is a party to an accounts receivable securitization facility. On October 20, 2006, the Company and certain of its subsidiaries, including CVTI Receivables Corp. ("CVTI Receivables"), a wholly-owned subsidiary of the Company and a bankruptcy-remote, special purpose entity, entered into certain amendments to the securitization facility, including (i) Amendment No. 11 to Loan Agreement, dated October 20, 2006, among Three Pillars Funding LLC, as lender, SunTrust Capital Markets, Inc., as administrator, CVTI Receivables, as borrower, and the Company, as master servicer, and (ii) Amendment and Joinder Agreement to Receivables Purchase Agreement, dated October 20, 2006, among Covenant Transport, Inc., a Tennessee corporation ("Covenant"), Southern Refrigerated Transport, Inc., an Arkansas corporation ("Southern Refrigerated"), CVTI Receivables, Covenant Transport Solutions, Inc., a Nevada corporation ("Solutions"), and Star Transportation, Inc., a Tennessee corporation ("Star") (together, the amendments described in clauses (i) and (ii), the "Securitization Facility Amendments"). Under the securitization facility, the Company, through certain of its subsidiaries, sells accounts receivable as part of a two-step process that provides funding similar to a revolving credit facility. Prior to entering into the Securitization Facility Amendments, CVTI Receivables purchased accounts receivable solely from Covenant and Southern Refrigerated, as originators, and funded these purchases with money borrowed under a credit facility with Three Pillars Funding, LLC. Pursuant to the Securitization Facility Amendments, Solutions and Star joined the securitization facility as additional originators, permitting CVTI Receivables to purchase accounts receivable from these subsidiaries of the Company as well as from Covenant and Southern Refrigerated. The Securitization Facility Amendments also effected an increase in the amount that the Company, through CVTI Receivables, can borrow under the securitization facility, from $62 million to $70 million, subject to eligible receivables. CVTI Receivables pays interest on such borrowings based on commercial paper interest rates, plus an applicable margin, and a commitment fee on the daily, unused portion of the facility. The borrowings are secured by, and paid down through collections on, the accounts receivable purchased by CVTI Receivables from the originators. The securitization facility is reflected as a current liability because the term, subject to annual renewals, runs until December 5, 2006. The securitization facility requires that certain performance ratios be maintained with respect to accounts receivable and that CVTI Receivables preserve its bankruptcy remote nature. The securitization facility includes usual and customary events of default for facilities of this nature and provides that, upon the occurrence and continuation of an event of default, payment of all amounts under the securitization facility may be accelerated and the lender's commitments may be terminated. |
