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LOAN AGREEMENT
by and between
KNIGHT TRANSPORTATION, INC.
QUAD K LEASING, INC.
and
FIRST INTERSTATE BANK OF ARIZONA, N.A.
Dated as of __________________, 1996
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TABLE OF CONTENTS
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Page
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ARTICLE I RECITALS.............................................................................. 1
ARTICLE 2 DEFINITIONS........................................................................... 2
Section 2.1 Definitions............................................................. 2
Section 2.2 Terms Generally......................................................... 7
Section 2.3 Accounting Terms........................................................ 7
ARTICLE 3 RLC ........................................................................ 8
Section 3. 1 RLC Commitment Amount................................................... 8
Section 3.2 RLC Note................................................................ 8
Section 3.3 RLC Advances............................................................ 8
Section 3.4 Conversion of RLC Advances.............................................. 9
Section 3.5 RLC Unused Fee.......................................................... 9
Section 3.6 RLC Payments............................................................ 10
Section 3.7 Issuance of Letter of Credit............................................ 10
Section 3.8 Conditions Precedent to the Issuance of Letters of Credit............... 10
Section 3.9 Drawing of a Letter of Credit........................................... 11
ARTICLE 3A TERM LOAN............................................................................ 12
Section 3A.1 Term Loan Commitment.................................................... 12
Section 3A.2 Term Note............................................................... 12
Section 3A.3 TCM Rate Election....................................................... 12
Section 3A.4 Term Loan Payments...................................................... 12
ARTICLE 4 FIXED RATE PROVISIONS................................................................. 14
Section 4.1 Additional Provisions for Fixed Rate Advances........................... 14
Section 4.2 TCM Rate Prepayment..................................................... 16
ARTICLE 5 CONDITIONS PRECEDENT.................................................................. 17
Section 5.1 Conditions Precedent.................................................... 17
Section 5.2 Conditions Precedent to All Future Advances............................. 18
ARTICLE 6 GENERAL REPRESENTATIONS AND WARRANTIES................................................ 19
Section 6.1 Recitals................................................................ 19
Section 6.2 Organization............................................................ 19
Section 6.3 Power................................................................... 19
Section 6.4 Enforceable............................................................. 19
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(continued)
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Section 6.5 No Conflict............................................................. 19
Section 6.6 No Actions.............................................................. 19
Section 6.7 Financial Statements.................................................... 19
Section 6.8 Tax Payments............................................................ 20
Section 6.9 Margin Stock............................................................ 20
Section 6.10 Affirmation............................................................. 20
Section 6.11 Solvency................................................................ 20
ARTICLE 7 AFFIRMATIVE COVENANTS................................................................. 21
Section 7.1 Existence............................................................... 21
Section 7.2 Maintain Property....................................................... 21
Section 7.3 Insurance............................................................... 21
Section 7.4 Payments................................................................ 21
Section 7.5 Financial Reports....................................................... 21
Section 7.6 Records................................................................. 23
Section 7.7 Current Obligations..................................................... 23
Section 7.8 Other Documents......................................................... 23
ARTICLE 8 NEGATIVE COVENANTS.................................................................... 24
Section 8.1 Dissolution............................................................. 24
Section 8.2 Fiscal Year............................................................. 24
Section 8.3 Margin Stock............................................................ 24
Section 8.4 Debt/Worth.............................................................. 24
Section 8.5 TFCC.................................................................... 24
Section 8.6 Debt/Cash Flow.......................................................... 24
Section 8.7 Current Ratio........................................................... 24
ARTICLE 9 DEFAULT AND REMEDIES.................................................................. 25
Section 9.1 Event of Default........................................................ 25
Section 9.2 Remedies and Cure Period................................................ 26
ARTICLE 10 ACTION UPON AGREEMENT................................................................ 27
Section 10.1 Third Party............................................................. 27
Section 10.2 Entire Agreement........................................................ 27
Section 10.3 Writing Required........................................................ 27
Section 10.4 No Partnership.......................................................... 27
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(continued)
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ARTICLE 11 GENERAL.............................................................................. 28
Section 11.1 Survival................................................................ 28
Section 11.2 Context................................................................. 28
Section 11.3 Time.................................................................... 28
Section 11.4 Notices................................................................. 28
Section 11.5 Costs................................................................... 28
Section 11.6 Law..................................................................... 28
Section 11.7 Successors.............................................................. 28
Section 11.8 Headings................................................................ 28
Section 11.9 Arbitration............................................................. 28
EXHIBITS
A Compliance Letter
B Compliance Certificate
C Form of Term Note
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LOAN AGREEMENT
BY THIS LOAN AGREEMENT (the "Agreement"), made and entered into as of
this day_______ of _________, 1996, FIRST INTERSTATE BANK OF ARIZONA, N.A.,
whose address is 100 West Washington, Post Office Box 53456, Phoenix, Arizona
85072-3456 (hereinafter, together with successors and assigns, called "Lender"),
and KNIGHT TRANSPORTATION, INC., an Arizona corporation, whose address is 5601
West Buckeye Road, Phoenix, Arizona 85043-4603 (hereinafter called "Company")
and QUAD K LEASING, INC., a corporation (with the Company, the "Borrower"), a
wholly owned subsidiary of the Company, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, hereby confirm and agree as
follows:
ARTICLE I
RECITALS
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Section 1.1 Borrower has requested that Lender establish a revolving
line of credit (the "RLC") with Borrower in the amount of $15,000,000.00, under
which revolving line of credit advances ("RLC Advances") shall be made to
Borrower for the purposes of providing (i) Borrower with financing for general
corporate purposes, and (ii) a source of funding to any beneficiaries of any
letters of credit (each a "Letter of Credit") that may be issued, from time to
time by Lender on behalf of Borrower.
Section 1.2 Borrower has also requested that Lender allow Borrower,
upon its election, to term out the RLC.
Section 1.3 Lender has agreed to do so upon the terms, conditions and
provisions set forth herein.
Section 1.4 Effective as of the delivery of this Agreement, the Loan
Agreement dated November 30, 1994 (the "1994 Agreement") between the Company and
Lender will be terminated and replaced by this Agreement.
ARTICLE II
DEFINITIONS
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Section 2.1 Definitions. Although terms may be defined in other
sections of this Agreement, as used herein the following terms shall have the
meanings defined below:
"Advance" means an RLC Advance.
"Advance Minimum Amount" means $50,000.00.
"Agreement" means this Loan Agreement.
"Authorized Officer" means the chief executive officer or chief
financial officer of Borrower, or such other individual who is from time to time
designated to Lender in writing by said officer as authorized to act for
Borrower with respect to the Loan.
"Borrower": See the Preamble.
"Borrowing Base" means an amount equal to:
(i) Eighty percent (80%) of the outstanding amount of all
"Eligible Accounts" of Borrower, less any retentions, discounts,
delinquency or service charges, commissions, freight charges,
advertising allowances or other allowances granted or charged by
Borrower; plus
(ii) fifty percent (50%) of Net Fixed Assets less the
outstanding principal balance of all debt secured by any security
interest in, or lien on, such Net Fixed Assets.
"Business Day" means a day of the year on which commercial banks are
not required or authorized to close in Phoenix, Arizona and, if the applicable
Business Day relates to any LIBOR Rate RLC Advances or LIBOR Rate Term Loans, a
day on which dealings are carried on in the London interbank market.
"CD Base Rate" means, for the Interest Period for each CD Rate RLC
Advance, an interest rate per annum equal to the rate of interest determined by
Lender, based on quotations published in The Wall Street Journal or such other
comparable source selected by Lender, to be the "CD Base Rate" for a period
equal to such Interest Period, two (2) Business Days before the first day of
such Interest Period.
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"CD Rate" means an interest rate per annum equal to two and 15/100
percent (2.15%) in excess of the CD Base Rate, rounded upward, if necessary, to
the nearest 1/16 of 1%.
"CD Rate RLC Advance" means an RLC Advance that bears interest at the
CD Rate.
"Company": See the Preamble.
"Compliance Certificate": See Section 7.5(f).
"Convert," "Conversion," and "Converted" each refers to a conversion of
RLC Advances of one Type into RLC Advances of another Type pursuant to Section
3.4.
"Eligible Account" means any account of Borrower, so long as, at the
time of any RLC Advance: (i) the account is creditworthy in the reasonable
judgment of Lender; (ii) the original invoices or other statements or agreements
comprising that account require payment in full within sixty (60) days of the
date of delivery of the respective goods or services; and (iii) no invoice or
other statement or agreement comprising that account remained unpaid for more
than ninety (90) days after the due date for payment specified therein (at
Lender's option, if any account becomes ineligible because not paid within the
above specified period, all accounts from the same account debtor shall be
deemed ineligible).
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D by the Board of Governors of the Federal Reserve System, 12 C.F.R.
Part 204 as in effect from time to time.
" Eurodollar Reserve Percentage" for the Interest Period for each LIBOR
Rate RLC Advance or LIBOR Rate Tenn Loan means the reserve percentage applicable
two (2) Business Days before the first day of such Interest Period under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, but not limited to, any emergency, supplemental, or
other marginal reserve requirement) for a member Bank of the Federal Reserve
System in San Francisco with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other category of
liabilities which includes deposits by reference to which the interest rate on
LIBOR Rate RLC Advances or LIBOR Rate Tenn Loans is determined) having a term
equal to such Interest Period.
"Event of Default": See Section 9. 1.
"Financial Covenants" means those financial covenants specified in
Sections 8.4, 8.5, 8.6 and 8.7.
"Fixed Rate Minimum Amount" means $1,000,000.00, with increments of
$100,000.00.
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"Fixed Rate Advance" means either a LIBOR Rate RLC Advance, a CD Rate
RLC Advance or a LIBOR Rate Term Loan.
"Fixed Rate RLC Advance" means either a LIBOR Rate RLC Advance or a CD
Rate RLC Advance.
"GAAP" means generally accepted accounting principles in the United
States, consistently applied.
" Interest Period" means, for each Fixed Rate RLC Advance, or LIBOR
Rate Tenn Loan, the period commencing on the date of such Fixed Rate RLC Advance
or LIBOR Rate Term Loan or the date of the Conversion of any RLC Advance into a
Fixed Rate RLC Advance and ending on the last day of the period selected by the
Borrower pursuant to the provisions herein and, thereafter, each subsequent
period commencing on the day after the last day of the immediately preceding
Interest Period and ending on the last day of the period selected by the
Borrower pursuant to the provisions herein. The duration of each such Interest
Period shall be 30, 60 or 90 days, as the Borrower may select; provided,
however, that:
(i) Interest Periods commencing on the same date for the same
Type of RLC Advances shall be of the same duration;
(ii) Whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day, provided that if such extension would cause the last day
of such Interest Period to occur in the next following calendar month,
the last day of such Interest Period shall occur on the next preceding
Business Day;
(iii) No Interest Period with respect to any RLC Advance shall
extend beyond the RLC Maturity Date; and
(iv) No Interest Period with respect to any LIBOR Rate Term
Loan shall extend beyond the Term Maturity Date.
"Lender": See the Preamble.
"Letter of Credit" mean any letter of credit issued at the request of
Borrower pursuant to Section 3.7.
"LIBOR Base Rate" means, for the Interest Period for each LIBOR Rate
RLC Advance or LIBOR Rate Term Loan, an interest rate per annum equal to the
rate of interest per annum obtained by dividing (i) the rate of interest
determined by Lender, based on Telerate System reports or such
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other source selected by Lender, to be the "London Interbank Offered Rate" at
which deposits in U.S. dollars for a period equal to such Interest Period are
offered by major banks in London, England, two (2) Business Days before the
first day of such Interest Period by (ii) a percentage equal to one hundred
percent (100%) minus the Eurodollar Reserve Percentage.
"LIBOR Rate" means:
(a) As to a LIBOR Rate RLC Advance, an interest rate per annum
equal to three-quarters percent (0.75%) in excess of the LIBOR Base
Rate, rounded upward, if necessary, to the nearest 1/16 of 1%, or
(b) As to a LIBOR Rate Term Loan, an interest rate per annum
equal to 90/100 percent (0.90%) in excess of the LIBOR Base Rate,
rounded upward, if necessary, to the 1/16 of 1%.
"LIBOR Rate Advance" means either a LIBOR Rate RLC Advance or a LIBOR
Rate Term Loan.
"LIBOR Rate RLC Advance" means an RLC Advance that bears interest at
the applicable LIBOR Rate.
"LIBOR Rate Term Loan" means the Term Loan bearing interest at the
applicable LIBOR Rate.
"Loans" means the RLC and the Term Loan.
"Material Amount" means $1,000,000.00 for purposes of Section 7.5.
"Maximum Letter of Credit Balance" means $1,250,000.00.
"Net Fixed Assets" means the consolidated net book value of all fixed
assets of Borrower determined in accordance with GAAP.
"1994 Agreement": See Section 1.4.
"Notes" means the RLC Note and the Tenn Note.
"Notice of RLC Advance": See Section 3.3(b).
"Organizational Documents" means Borrower's Articles of Incorporation
and Bylaws.
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"Prime Rate" means the interest rate per annum equal to the fluctuating
rate of interest announced publicly by Lender from time to time as its "prime
rate".
"Quarterly End Date" means the last day of March, June, September and
December.
"Regulatory Change" means any change effective after the date of this
Agreement in United States federal, state, or foreign law or regulations or the
adoption or making after such date of any interpretation, directive, or request
applying to a class of banks including Lender, of or under any United States
federal, state, or foreign law or regulations (whether or not having the force
of law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"RLC": See Section 1.1.
"RLC Advance" means an advance by Lender to the Borrower under the RLC
pursuant to Section 3 and includes a Variable Rate RLC Advance, a LIBOR Rate RLC
Advance and a CD Rate RLC Advance (each of which shall be a "Type" of RLC
Advance).
"RLC Commitment Amount" means $15,000,000.00.
"RLC Expiration Date" means the earlier of the RLC Maturity Date or the
Term Conversion Date.
"RLC Maturity Date" means , 1997 [12 months] .
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"RLC Note" means that Revolving Promissory Note of even date herewith
in the face amount equal to the RLC Commitment Amount from Borrower, evidencing
the RLC.
"RLC Payment Date" means the first day of each month.
"RLC Unused Fee" means one-eighth of one percent (1/8%).
"TCM Rate" means an interest rate per annum equal to one and
one-quarter percent (1.25%) in excess of the yield in percent per annum as shown
for three (3) year Treasury constant maturities, on the most recent Federal
Reserve statistical release H.15(519) available to Lender two (2) Business Days
before the Term Conversion Date.
"TCM Rate Election": See Section 3A.3.
"Term Conversion Date" means that date on which Lender shall have made
the Term Loan to the Borrower.
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"Term Loan" means the single advance term loan made available by Lender
to Borrower pursuant to Article 3A.
"Tenn Maturity Date" means that date that is three (3) years after the
Term Conversion Date.
"Term Note" means that Promissory Note dated the Term Conversion Date
in the face amount of the Term Loan from Borrower, evidencing the Term Loan,
substantially in the form attached hereto as Exhibit "C".
"Type": See the definition of RLC Advance.
"Variable Rate" means an interest rate per annum equal to the Prime
Rate, adjusted periodically on the effective date of, and in conformity with,
changes in that Prime Rate.
"Variable Rate RLC Advance" means an RLC Advance that bears interest at
the Variable Rate.
Section 2.2 Terms Generally. The definitions in Section 2.1 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. All references herein to Articles, Sections, Exhibits
and Schedules shall be deemed references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require.
Section 2.3 Accounting Terms. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time, consistently applied;
provided, however, that, for purposes of determining compliance with any
covenant set forth herein, such terms shall be construed in accordance with GAAP
as in effect on the date of this Agreement applied on a basis consistent with
the application used in preparing the Borrower's consolidated audited financial
statements referred to herein.
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ARTICLE III
RLC
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Section 3.1 RLC Commitment Amount. Subject to the conditions set forth
herein, Lender, from time to time, shall make such RLC Advances as Borrower may
request and shall issue such Letters of Credit as Borrower shall request,
provided that (a) the aggregate amount of RLC Advances and the face amount of
Letters of Credit, at any one time outstanding in either case, shall not exceed
the lesser of (i) the Borrowing Base, or (ii) the RLC Commitment Amount, and (b)
the aggregate amount of the face amount of Letters of Credit outstanding at any
one time shall not exceed the Maximum Letter of Credit Balance. The RLC shall be
a revolving credit, against which RLC Advances may be made to Borrower, repaid
by Borrower, and readvances made to Borrower and Letters of Credit issued,
terminated or repaid by Borrower and reissued, provided that (i) Borrower is not
in default under any provision of this Agreement or under the RLC Note, (ii) no
RLC Advance shall be made or Letter of Credit issued that would cause the
outstanding principal balance of the RLC to exceed the lesser of the Borrowing
Base or the RLC Commitment Amount, (iii) no Letter of Credit shall be issued
that would cause the aggregate amount of the face amount of Letters of Credit
outstanding at any one time to exceed the Maximum Letter of Credit Balance, and
(iv) no RLC Advance shall be made on or after the RLC Expiration Date.
Section 3.2 RLC Note. The RLC shall be evidenced by the RLC Note in the
form approved by Lender, payable to the order of Lender upon the terms and
conditions therein contained, and executed and delivered simultaneously with the
execution of this Agreement.
Section 3.3 RLC Advances.
(a) Lender may from time to time make RLC Advances of the RLC
in such sums as Borrower shall request. No such RLC Advance shall be
less than the Advance Minimum Amount.
(b) The Borrower shall give Lender written notice, or
telephonic notice confirmed immediately in writing, of the request for
any RLC Advances under this Agreement, which notice (the "Notice of RLC
Advance") shall be received by Lender not later than 11:00 A.M.
(Phoenix, Arizona local time) on the same Business Day in the case of a
Variable Rate RLC Advance, and in the case of a Fixed Rate RLC Advance
not later than 2:00 P.M. (Phoenix, Arizona local time) on the second
Business Day before the date of the proposed RLC Advance. Each such
Notice of RLC Advance shall specify: (i) the date of the proposed RLC
Advance, (ii) the amount of such RLC Advance, (iii) the Type of RLC
Advance, and (iv) in the case of a Fixed Rate RLC Advance, the Interest
Period. Each Notice of RLC Advance shall be irrevocable and binding on
the Borrower. Anything herein to the contrary
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notwithstanding, no Fixed Rate RLC Advance shall be less than the Fixed
Rate Minimum Amount.
(c) In the case of any RLC Advance which the related Notice of
RLC Advance specifies is to be a Fixed Rate RLC Advance, the Borrower
shall indemnify Lender on demand for, from, and against any loss, or
expense incurred by Lender as a result of any failure by Borrower to
fulfill on or before the date specified in such Notice of RLC Advance
for such RLC Advance the applicable conditions set forth in Section
5.2, including, without limitation, any loss, costs, and expenses
incurred by Lender by reason of liquidation or reemployment of deposits
or other funds acquired by Lender to fund the Fixed Rate RLC Advance to
be made by Lender when such Fixed Rate RLC Advance, as a result of such
failure, is not made on such date.
Section 3.4 Conversion of RLC Advances.
(a) The Borrower may, upon written notice to and received by
the Lender (i) not later than 2:00 P.M. (Phoenix, Arizona local time)
on the second Business Day before the requested Conversion, in the case
of any Conversion of a Variable Rate RLC Advance into a Fixed Rate RLC
Advance, or a Fixed Rate RLC Advance of one Type into a Fixed Rate RLC
Advance of another Type, and (ii) not later than 11:00 A.M. (Phoenix,
Arizona local time) on the same Business Day as the Conversion, in the
case of any Conversion of a Fixed Rate RLC Advance into a Variable Rate
RLC Advance, subject to the provisions of this Section 3.4, Convert any
RLC Advances of one Type into RLC Advances of another Type. Each such
notice of a Conversion shall be irrevocable and binding on the
Borrower. Each such notice of a Conversion shall, within the
restrictions specified above, specify (w) the date of such Conversion,
(x) the RLC Advances to be Converted, (y) the Type of RLC Advances into
which the RLC Advances are to be Converted, and (z) if such Conversion
is into Fixed Rate RLC Advances, the duration of the Interest Period
for each such RLC Advance.
(b) If the Borrower should fail to give the Lender any notice
of Conversion upon the termination of the Interest Period for a Fixed
Rate RLC Advance, such RLC Advance, upon the termination of the
Interest Period, shall automatically become a Variable Rate RLC
Advance.
Section 3.5 RLC Unused Fee. Borrower agrees to pay to Lender an unused
fee equal to the RLC Unused Fee times the average daily undrawn balance of the
RLC, within three (3) days after Lender gives Borrower a notice showing the
amount due with respect to the prior three-month period, the first such payment
to be due on 1996, and thereafter on each Quarterly End Date.
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Section 3.6 RLC Payments.
(a) Interest on the RLC shall accrue on the unpaid principal
of each RLC Advance:
(i) At the Variable Rate if it is a Variable Rate RLC
Advance.
(ii) At the applicable LIBOR Rate if it is a LIBOR
Rate RLC Advance.
(iii) At the applicable CD Rate if it is a CD Rate
RLC Advance.
(b) All accrued interest shall be due and payable on the RLC
Payment Date.
(c) The entire outstanding principal balance of the RLC Note,
all accrued and unpaid interest and all other sums which may have
become payable thereunder shall be due and payable in full on the RLC
Maturity Date.
Section 3.7 Issuance of Letter of Credit. Provided that the Borrower
has satisfied the conditions precedent contained in Section 3.8 hereof, the
Lender agrees, from time to time, to issue and/or renew Letters of Credit on
behalf of the Borrower so long as upon such issuance or renewal (i) a fee is
paid by Borrower to Under in an amount equal to Lender's current stated rate for
the issuance of all other types of Letters of Credit and for other Letter of
Credit services, (ii) in accordance with the terms and conditions of Section 3.1
hereof, the outstanding principal balance of the RLC would not exceed the lesser
of (i) the Borrowing Base, or (ii) the RLC Commitment Amount, and (iii) the
aggregate amount of the face amount of Letters of Credit outstanding at such
time would not exceed the Maximum Letter of Credit Balance.
Section 3.8 Conditions Precedent to the Issuance of Letters of Credit.
The obligation of the Lender to issue and/or renew any Letters of Credit on
behalf of the Borrower shall be subject to the following conditions precedent on
the date of issuance or renewal of each such Letter of Credit:
(a) The Borrower shall execute and deliver to Lender an
application for letter of credit, specifying the amount of the
requested letter of credit, the requested term thereof, which term may
not exceed the RLC Maturity Date, and the beneficiary thereof;
(b) No Event of Default shall exist and no event or condition
shall exist that after notice or lapse of time, or both would
constitute an Event of Default; and
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(c) The RLC Expiration Date shall not have occurred.
Section 3.9 Drawing of a Letter of Credit. Should any Letter of Credit
be drawn upon by the beneficiary thereof, such draw shall be deemed to be a
Variable Rate RLC Advance.
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ARTICLE 3A
TERM LOAN
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Section 3A.1 Term Loan Commitment. Subject to the terms and conditions
herein set forth, Lender agrees to make a Term Loan to the Borrower on or before
the RLC Maturity Date, in such amount as the Borrower shall request, up to but
not to exceed the RLC Commitment Amount; provided, however, that the Borrower
shall have satisfied the following conditions precedent:
(a) Borrower shall have given the Lender written notice of its
request at least thirty (30) days prior to the RLC Maturity Date;
(b) Borrower shall have paid to Lender prior to the Term
Conversion Date a fee equal to one quarter percent (0.25 %) of the
amount of the Term Loan; and
(c) Borrower shall not be in default under any provision of
this Agreement.
Section 3A.2 Term Note. The Term Loan shall be evidenced by the Term
Note, executed by Borrower and delivered to Lender on or before the Loan
Conversion Date.
Section 3A.3 TCM Rate Election.
(a) The Borrower may elect that the Term Loan bear interest at
the TCM Rate by giving Lender written notice of such election (the "TCM
Rate Election") at least two Business Days before the Term Conversion
Date. Should Borrower deliver to Lender its TCM Rate Election, interest
shall accrue on the Tenn Loan throughout its term at the TCM Rate.
(b) Should Borrower not deliver to Lender its TCM Rate
Election pursuant to subparagraph (a) of this Section 3A.3, interest
shall accrue on the entire Term Loan at the applicable LIBOR Rate for
the Interest Period selected by the Borrower from time to time. In the
event that the Borrower fails to select a new Interest Period for the
Term Loan prior to the termination of an existing Interest Period, the
Term Loan shall bear interest at the LIBOR Rate with a 30 day Interest
Period.
Section 3A.4 Term Loan Payments.
(a) In the event that interest accrues on the Term Loan at the
TCM Rate, interest and principal shall be due in thirty-six (36) equal
monthly payments, payable
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on the first day of each month, commencing on the first day of the
second month after the Term Conversion Date.
(b) In the event that interest accrues on the Term Loan at the
applicable LIBOR Rate, principal in an amount sufficient to fully
amortize the amount of the Term Loan over thirty-six (36) equal monthly
payments, together with accrued interest, shall be due and payable on
the first day of each month, commencing on the first day of the second
month after the Term Conversion Date.
(c) The entire unpaid principal balance, all accrued interest
and unpaid interest, and all other sums which may have become payable
hereunder shall be due and payable on the Term Maturity Date.
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ARTICLE IV
FIXED RATE PROVISIONS
---------------------
Section 4.1 Additional Provisions for Fixed Rate Advances.
(a) Unavailability of Deposits or Inability to Ascertain the
Rates. Notwithstanding any other provision of this Agreement, if prior
to the commencement of any Interest Period, Lender shall determine (i)
that United States dollar deposits in the amount of any LIBOR Rate
Advance to be outstanding during such Interest Period are not readily
available to Lender in the London interbank market, or (ii) by reason
of circumstances affecting the London interbank market, adequate and
reasonable means do not exist for ascertaining the LIBOR Base Rate,
then Lender shall promptly give notice thereof to the Borrower and the
obligation of Lender to create, or effect by conversion any LIBOR Rate
RLC Advance in such amount and for such Interest Period shall terminate
until United States dollar deposits in such amount and for the Interest
Period selected by the Borrower shall again be readily available in the
market and adequate and reasonable means exist for ascertaining the
LIBOR Base Rate.
(b) Increased Costs. (i) If, due to any Regulatory Change,
there shall be any increase in the cost to Lender of agreeing to make
or making, funding or maintaining Fixed Rate Advances (including,
without limitation, any increase in any applicable reserve
requirement), or of issuing or maintaining Letters of Credit, then the
Borrower shall from time to time, upon demand by Lender, pay to Lender
such amounts as Lender may reasonably determine to be necessary to
compensate Lender for any additional costs which it reasonably
determines are attributable to such Regulatory Change; (ii) if Lender
determines (in its reasonable discretion) that, as a result of any
Regulatory Change, the amount of capital required or expected to be
maintained by Lender is increased by or based upon the existence of
Lender's commitment to lend hereunder, then, upon demand by Lender, the
Borrower shall immediately pay to Lender such amounts as Lender may
reasonably determine to be necessary to compensate Lender for any
additional costs which it reasonably determines are attributable to the
maintenance by Lender of capital in respect of Lender's commitment to
lend hereunder; and (iii) Lender will notify the Borrower of any
Regulatory Change that will entitle Lender to compensation pursuant to
this Section 3.7(b) as promptly as practicable, but in any event within
90 days after Lender obtains knowledge thereof; provided, however, that
if Lender fails to give such notice within 90 days after it obtains
knowledge of such a Regulatory Change, Lender shall, with respect to
compensation payable in respect of any costs resulting from such
Regulatory Change, only be entitled to payment for costs incurred from
and after the date that Lender has given such notice. Lender will
furnish to Borrower
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a certificate setting forth in reasonable detail the basis for the
amount of each request by Lender for compensation. Determinations by
Lender of the amounts required to compensate Lender shall be made on a
reasonable basis. Lender shall be entitled to compensation in
connection with any Regulatory Change only for costs actually incurred
by such Lender. Upon receipt of notice of any such Regulatory Change
from Lender, Borrower shall have the option to prepay or Convert any
Fixed Rate Advances adversely affected by any Regulatory Change within
seven (7) days of receipt of such notice, without the obligation to pay
to Lender with respect to such prepayment or Conversion any amount or
amounts otherwise payable to Lender by Borrower pursuant to Section 4.
1 (e).
(c) Illegality. Notwithstanding any other provision of this
Agreement, if Lender shall notify the Borrower that as a result of a
Regulatory Change it is unlawful for Lender to perform its obligations
hereunder to make LIBOR Rate Advances or to fund or maintain LIBOR Rate
Advances hereunder (i) the obligation of Lender to make, or to Convert
RLC Advances into, LIBOR Rate Advances shall be suspended until Lender
shall notify Borrower that the circumstances causing such suspension no
longer exist and (ii) in the event such Regulatory Change makes the
maintenance of LIBOR Rate Advances hereunder unlawful, the Borrower
shall forthwith prepay in full all LIBOR Rate Advances then
outstanding, together with interest accrued thereon and all amounts in
connection with such prepayments specified in Section 4.1(e), unless
the Borrower, within five (5) Business Days of notice from Lender,
Converts all LIBOR Rate RLC Advances then outstanding into Variable
Rate RLC Advances in accordance with Section 3.4 with no obligation to
pay any amount described in Section 4.1 (e) in connection with such
prepayments.
(d) Discretion of Lender as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, Lender
shall be entitled to fund and maintain its funding of all or any part
of any Fixed Rate Advance in any manner it sees fit; provided, however,
that for the purposes of this Agreement, all determinations hereunder
shall be made as if Lender had actually funded and maintained each
Fixed Rate Advance during the Interest Period therefor through the
purchase of deposits having a maturity corresponding to the last day of
the Interest Period and bearing an interest rate equal to the
applicable Rate for such Interest Period.
(e) Non-availability of LIBOR Rate Advances. In the event that
Borrower shall have elected that the Tenn Loan accrue interest at the
LIBOR Rate and pursuant to this Section 4.1 LIBOR Rate Term Loans are
not available, the Term Loan shall accrue interest at a comparable rate
as shall be agreed to by Borrower in writing and as shall be acceptable
to Lender.
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Section 4.2 TCM Rate Prepayment. Should the Term Loan bear interest at
the TCM Rate, all prepayments of the Term Loan shall be made with a prepayment
premium computed as follows: 1 % of the outstanding principal balance if the
outstanding principal balance is less than $50,000.00, and if the outstanding
principal balance is equal to or more than $50,000.00, an amount equal to the
present value of the remaining cash flows discounted at the Treasury Constant
Yield (TCY) + 100 basis points] - outstanding principal. The TCY is calculated
as the interpolated constant maturity Treasury rate with a maturity matching the
remaining average term of the Term Note to the Term Maturity Date. Rate data is
obtained, at the time of prepayment, from the most recent Federal Reserve
statistical release H.15 (519), using data from the most recent week ending
column.
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ARTICLE V
CONDITIONS PRECEDENT
--------------------
Section 5.1 Conditions Precedent. The obligation of Lender to fund the
Loan is subject to the fulfillment of the following conditions:
(a) Borrower shall have executed (or obtained the execution or
issuing of) and delivered to Lender the following documents or
information, all in form satisfactory to Lender:
(i) The RLC Note;
(ii) A corporate resolution of Borrower authorizing
(i) the Loans, and (ii) the execution and delivery by Borrower
of all documents to be executed by Borrower, and the
performance by Borrower of all acts and things to be performed
by Borrower, pursuant to this Agreement; and
(iii) A copy of the current Organizational Documents,
so certified by the Secretary of the corporation, together
with a copy of a current Certificate of Good Standing in the
State of incorporation for Borrower; and such other documents
as Lender may require relating to the existence and good
standing of Borrower and the authority of any person acting or
executing documents on behalf of Borrower.
(b) All representations and warranties by Borrower contained
in this Agreement shall remain true and correct and the Borrower has
performed or complied with all agreements of Borrower made in this
Agreement that Borrower is to have performed or complied with by the
date of the first Advance.
(c) No Event of Default shall exist and no event or condition
shall exist that after notice or lapse of time, or both would
constitute an Event of Default.
(d) Should Lender so require, Lender shall have received an
opinion of Counsel to Borrower in a form satisfactory to it.
(e) All amounts under the 1994 Agreement due and payable to
Lender shall have been paid.
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Section 5.2 Conditions Precedent to All Future Advances. The obligation
of the Lender to make any Advances to the Borrower following the initial Advance
under Section 5.1 hereof shall be subject to the condition precedent that on the
date of each such Advance no Event of Default shall exist and no event or
condition shall exist that after notice of lapse of time or both, would
constitute an Event of Default.
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ARTICLE VI
GENERAL REPRESENTATIONS AND WARRANTIES
--------------------------------------
Each Borrower hereby represents and warrants to Lender as follows:
Section 6.1 Recitals. The recitals and statements of intent appearing
in this Agreement are true and correct.
Section 6.2 Organization. Borrower is duly organized, validly existing
and in good standing under the laws of the state of its organization. Borrower
is qualified to do business and is in good standing in the State of Arizona and
in each state in which it is required by law to do so.
Section 6.3 Power. Borrower has full power and authority to own its
properties and assets and to carry on its business as presently being conducted.
Section 6.4 Enforceable. Borrower is fully authorized and permitted to
enter into this Agreement, to execute any and all documentation required herein,
to borrow the amounts contemplated herein upon the terms set forth herein and to
perform the terms of this Agreement, none of which conflicts with any provision
of law or regulation applicable to Borrower. This Agreement and the RLC Note are
valid and binding legal obligations of Borrower, and each is enforceable in
accordance with its terms.
Section 6.5 No Conflict. The execution, delivery and performance by
Borrower of this Agreement, the Notes and all other documents and instruments
relating to the Loans are not in conflict with any provision by law applicable
to Borrower or with the Organizational Documents of Borrower and will not result
in any breach of the terms or conditions or constitute a default under any
agreement or instrument under which Borrower is a party or is obligated.
Borrower is not in default in the performance or observance of any obligations,
covenants or conditions of any such agreement or instrument.
Section 6.6 No Actions. There are no actions, suits or proceedings
pending or threatened against Borrower which materially affect the repayment of
the Loans, the performance by Borrower under this Agreement or the financial
condition, business or operations of Borrower.
Section 6.7 Financial Statements. All financial statements and profit
and loss statements, all statements as to ownership and all other statements or
reports previously or hereafter given to Lender by Borrower are and shall be
true and correct as of the date thereof. There has been no material adverse
change in the business, properties or condition (financial or otherwise) of
Borrower since the date of the latest financial statements given to Lender.
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Section 6.8 Tax Payments. Borrower has filed all federal, state and
local tax returns by the due date as extended and has paid all federal, state
and local taxes shown due thereon by such extended due date and all other
payments required under federal, state or local law.
Section 6.9 Margin Stock. No part of the proceeds of any financial
accommodation made by Lender in connection with this Agreement will be used to
purchase or carry "margin stock, " as that term is defined in Regulation U of
the Board of Governors of the Federal Reserve System, or to extend credit to
others for the purpose of purchasing or carrying such margin stock.
Section 6.10 Affirmation. Each request by Borrower for an Advance
hereunder shall constitute an affirmation on the part of the Borrower that the
representations and warranties of Section 6.7 are true and correct with respect
to any financial statements submitted by Borrower to Lender between the date of
this Agreement and the date of such request, that the representations and
warranties of Sections 6.1, 6.5, 6.6, 6.7 and 6.8 hereof are true and correct as
of the time of such request and that the condition precedents set forth in
Article 5 hereof are fully satisfied. All representations and warranties made
herein shall survive the execution of this Agreement, any and all Advances or
proceeds of the Loans and the execution and delivery of all other documents and
instruments in connection with the Loans, so long as Lender has any commitment
to lend to Borrower hereunder and until the Loans and all indebtedness hereunder
have been paid in full and all of Borrower's obligations hereunder have been
fully discharged.
Section 6.11 Solvency. Borrower (both before and after giving effect to
the transactions contemplated hereby) is solvent, has assets having a fair value
in excess of the amount required to pay its probable liabilities on its existing
debts as they become absolute and matured, and has, and will have, access to
adequate capital for the conduct of its business and the ability to pay its
debts from time to time incurred in connection therewith as such debts mature.
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ARTICLE VII
AFFIRMATIVE COVENANTS
---------------------
Each Borrower hereby covenants and agrees that so long as Lender has
any commitment to lend to Borrower hereunder and until the Loans and all other
indebtedness hereunder have been paid in full and all of Borrower's obligations
hereunder have been fully discharged:
Section 7.1 Existence. Borrower shall maintain its existence with no
material amendments or changes in its Organizational Documents without the prior
written approval of the Lender.
Section 7.2 Maintain Property. Borrower shall maintain in full force
and effect all agreements, rights, trademarks, patents and licenses necessary to
carry out its business, shall keep all of its properties in good condition and
repair, and shall make all needed and proper repairs and improvements to its
properties in order to properly conduct its business.
Section 7.3 Insurance. To the extent Borrower is not self-insured,
Borrower shall maintain in full force and effect at all times insurance
coverages in scope and amount not less than, and not less extensive than, the
scope and amount of insurance coverages customary for companies of comparable
size and financial strength in the trades or businesses in which Borrower is
from time to time engaged. All of the aforesaid insurance coverages shall be
issued by insurers acceptable to Lender. Copies of all policies of, or
certificates of, insurance evidencing such coverages in effect from time to time
shall be delivered to Lender prior to the initial advance of funds under this
Agreement and promptly upon issuance of new policies thereafter. From time to
time, promptly upon Lender's request, Borrower shall provide evidence
satisfactory to Lender that required coverage in required amounts is in effect.
Borrower shall deliver to Lender certificates of, and copies of the originals
of, all such policies of insurance in effect from time to time, to be retained
by Lender so long as Lender shall have any commitment to lend to Borrower and/or
any portion of the Loans shall be outstanding or unsatisfied.
Section 7.4 Payments. Borrower shall make all payments of interest and
principal on the Loans as and when the same become due and payable and shall
keep and comply with all covenants, terms and provisions of the Notes.
Section 7.5 Financial Reports. Borrower shall maintain a standard
system of accounting in accordance with good business practices, that reflects
the application of GAAP and Borrower shall furnish to Lender the following:
(a) Within thirty (30) days after the end of each monthly
period (or comparable fiscal accounting period of Borrower), monthly
and year-to-date financial and operating statements for Borrower as of
the end of the preceding month and profit and loss statements covering
that period, certified by Borrower to be a true
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and accurate representation of its operations and financial condition
during that period and at its end.
(b) Not later than thirty-one (31) days after the end of each
fiscal year, a copy of Borrower's monthly financial projections
relating to its business operations for the new fiscal year and annual
financial projections relating to the Borrower's business operations
for the new fiscal year, certified by Borrower to be representative of
its projected operation and projected financial condition during the
period covered.
(c) Within ninety (90) days after the end of each fiscal year
of Borrower, financial statements which accurately and completely
reflect Borrower's assets, liabilities and net worth, as of the end of
the fiscal year, together with profit and loss statements for the
fiscal year, all prepared in accordance with GAAP together with an
opinion thereon (which shall not be limited by reason of any limitation
imposed by Borrower) of independent certified public accountants of
national standing selected by Borrower and acceptable to Lender to the
effect that such financial statements have been prepared in accordance
with GAAP and that their examination of such accounts in connection
with such financial statements has been made in accordance with
generally accepted auditing standards and, accordingly, included such
tests of the accounting records and such other auditing procedures as
were considered necessary under the circumstances.
(d) With each statement submitted by Borrower under
subparagraphs (a) and (c) above, a certificate signed by an Authorized
Officer, in the form of Exhibit "A" attached hereto, stating that no
Event of Default exists and no event has occurred and no condition
exists that, after notice or passage of time, or both, would constitute
an Event of Default.
(e) A statement of litigation matters involving Borrower that
could cause any materially adverse effect upon the operations of the
Borrower or in which the amount in controversy or exposure to the
Borrower is in excess of a Material Amount, such statement to be
furnished within fifteen (15) days after date of service of such
litigation or the occurrence of any such change.
(f) Within thirty (30) days of each fiscal quarter of
Borrower, a certificate signed by an Authorized Officer in the form of
Exhibit "B" attached hereto (the "Compliance Certificate").
(g) Such other information as Lender may reasonably request.
Section 7.6 Records. Borrower shall maintain, in a safe place, proper
and accurate books, ledgers, correspondence and other records relating to its
operations and business affairs. Lender
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shall have the right from time to time to examine and audit and to make
abstracts from and photocopies of Borrower's books, ledgers, correspondence and
other records.
Section 7.7 Current Obligations. Except for tax protests made in good
faith and, the posting, if required, of any and all bonds therewith, Borrower
shall pay all of its current obligations before they become delinquent,
including all federal, state and local taxes, assessments, levies and
governmental charges and all other payments required under any federal, state or
local law.
Section 7.8 Other Documents. Borrower shall execute and deliver to
Lender such other instruments and documents and do such other acts as Lender may
reasonably require in connection with the Loans.
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ARTICLE VIII
NEGATIVE COVENANTS
------------------
Each Borrower covenants and agrees that so long as Lender has any
commitment to lend to Borrower hereunder and until the Loans and all other
indebtedness hereunder have been paid in full and all of the Borrower's
obligations hereunder have been fully discharged, Borrower shall not without
receiving the prior written consent of Lender:
Section 8.1 Dissolution. Dissolve, liquidate, or merge or consolidate
with or into any corporation or entity, or turn over the management or operation
of its property, assets or businesses to any other person, firm or corporation,
or make any material change in its ownership, management structure or management
personnel.
Section 8.2 Fiscal Year. Change the times of commencement or
termination of its fiscal year or other accounting periods; or change its
methods of accounting other than to conform to GAAP.
Section 8.3 Margin Stock. Use any proceeds of the Loans, or any
proceeds of any other or future financial accommodation from Lender to Borrower,
directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any "margin stock" as that term is defined
in Regulation U of the Board of Governors of the Federal Reserve System, and
will not use such proceeds in a manner that would involve Borrower in a
violation of Regulation T, U or X of such Board, nor use such proceeds for any
purpose not permitted by Section 7 of the Securities Exchange Act of 1934, as
amended, or any of the rules or regulations respecting the extensions of credit
promulgated thereunder.
Section 8.4 Debt/Worth. Permit the ratio of Borrower's total
liabilities to its net worth at the end of any fiscal quarter of Borrower to
exceed 1.0 to 1.
Section 8.5 TFCC. Permit (i) the sum of Borrower's net profit,
depreciation expense, amortization expense, deferred income tax expense,
interest expense and rent expense, (ii) divided by the sum of Borrower's prior
period current portion of long-term debt, interest expense and rent expense (the
latter two adjusted for taxes) to be less than 3.0.
Section 8.6 Debt/Cash Flow. Permit (i) the sum of Borrower's long-term
debt, including the current portion thereof, and the outstanding balance of the
RLC, (ii) divided by Borrower's net profit, depreciation expense and
amortization expense for the most recent four quarters to be more than 3.0.
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Section 8.7 Current Ratio. Permit the ratio of Borrower's current
assets to its current liabilities, excluding the outstanding balance of the RLC
at the end of any fiscal quarter of Borrower to be less than 1.00 to 1.
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ARTICLE IX
DEFAULT AND REMEDIES
--------------------
Section 9.1 Event of Default. The occurrence of any of the following
events or conditions shall constitute an "Event of Default" under this
Agreement:
(a) Failure to pay any installment of principal or interest
under the Notes as and when the same become due and payable, or the
failure to pay any other sum due under the Notes or this Agreement when
the same shall become due and payable;
(b) Any failure or neglect to perform or observe any of the
terms, provisions, or covenants of this Agreement (other than a failure
or neglect described in one or more of the other provisions of this
Section 9. 1);
(c) Any warranty, representation or statement contained in
this Agreement, or made or furnished to the Lender by or on behalf of
the Borrower, that shall be or shall prove to have been false when made
or furnished;
(d) The filing by Borrower (or against Borrower in which
Borrower acquiesces or which is not dismissed within forty-five (45)
days of the filing thereof) of any proceeding under the federal
bankruptcy laws now or hereafter existing or any other similar statute
now or hereafter in effect; the entry of an order for relief under such
laws with respect to Borrower; or the appointment of a receiver,
trustee, custodian or conservator of all or any part of the assets of
Borrower;
(e) The insolvency of Borrower; or the execution by Borrower
of an assignment for the benefit of creditors; or the convening by
Borrower of a meeting of its creditors, or any class thereof, for
purposes of effecting a moratorium upon or extension or composition of
its debts; or the failure of Borrower to pay its debts as they mature;
or if Borrower is generally not paying its debts as they mature;
(f) The admission in writing by Borrower that it is unable to
pay its debts as they mature or that it is generally not paying its
debts as they mature;
(g) The liquidation, termination or dissolution of Borrower;
(h) The occurrence of any default under the Notes or any
document or instrument given by Borrower in connection with any other
indebtedness of Borrower to Lender and the expiration of any grace
period provided therein;
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(i) The failure of Borrower to comply with any Financial
Covenant at the end of any fiscal quarter; or
(j) The occurrence of any adverse change in the financial
condition of Borrower that Lender, in its reasonable discretion, deems
material, or if Lender in good faith shall believe that the prospect of
payment or performance of the Loan is impaired.
Section 9.2 Remedies and Cure Period. Upon the occurrence of any Event
of Default and at any time thereafter while such Event of Default is continuing,
subject to the provisions of subparagraphs (b) and (c) hereof, Lender may do one
or more of the following:
(a) Cease making Advances or extensions of financial
accommodations in any form to or for the benefit of Borrower and
declare the entire Loans immediately due and payable, without notice or
demand;
(b) Proceed to protect and enforce its rights and remedies
under this Agreement and the Notes; and
(c) Avail itself of any other relief to which Lender may be
legally or equitably entitled.
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ARTICLE X
ACTION UPON AGREEMENT
---------------------
Section 10.1 Third Party. This Agreement is made for the sole
protection and benefit of the parties hereto, their successors and assigns, and
no other person or organization shall have any right of action hereon. No
representation of any kind is made to third parties by the execution hereof, by
the existence or form of the indebtedness treated herein, or by any performance,
or failure or waiver thereof, by any party of the terms hereof. Specifically,
without limitation of the foregoing, the Lender makes no representation to any
third party as to the solvency of the Borrower or of the commercial
practicability of any business enterprise to which or for which the Loans are
made.
Section 10.2 Entire Agreement. This Agreement embodies the entire
Agreement of the parties with regard to the subject matter hereof. There are no
representations, promises, warranties, understandings or agreements express or
implied, oral or otherwise, in relation thereto, except those expressly referred
to or set forth herein. Borrower acknowledges that the execution and the
delivery of this Agreement is its free and voluntary act and deed, and that said
execution and delivery have not been induced by, nor done in reliance upon, any
representations, promises, warranties, understandings or agreements made by
Lender, its agents, officers, employees or representatives.
Section 10.3 Writing Required. No promise, representation, warranty or
agreement made subsequent to the execution and delivery hereof by either party
hereto, and no revocation, partial or otherwise, or change, amendment, addition,
alteration or modification of this Agreement shall be valid unless the same
shall be in writing signed by all parties hereto.
Section 10.4 No Partnership. Lender and Borrower each have separate and
independent rights and obligations under this Agreement. Nothing contained
herein shall be construed as creating, forming or, constituting any partnership,
joint venture, merger or consolidation of Borrower and Lender for any purpose or
in any respect.
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ARTICLE XI
GENERAL
-------
Section 11.1 Survival. This Agreement shall survive the making of the
Loans and shall continue so long as any part of the Loans, or any extension or
renewal thereof, or any Letter of Credit remains outstanding.
Section 11.2 Context. This Agreement shall apply to the parties hereto
according to the context hereof, and without regard to the number or gender of
words or expressions used herein.
Section 11.3 Time. Time is expressly made of the essence of this
Agreement.
Section 11.4 Notices. All notices required or permitted to be given
hereunder shall be in writing, and shall become effective immediately if
personally delivered or effective twenty-four (24) hours after such are
deposited in the United States mail, certified or registered, postage prepaid,
addressed as shown above, or to such other address as such party may from time
to time designate in writing. Any notice sent to Borrower shall be sent to the
attention of its chief financial officer.
Section 11.5 Costs. Borrower shall pay all costs and expenses arising
from the preparation of this Agreement, the Notes, the closing of the Loans, the
making of Advances thereunder, and the enforcement of Lender's rights hereunder,
including but not limited to, accounting fees, appraisal fees, attorneys' fees
and any charges that may be imposed on Lender as a result of this transaction.
At the option of Lender and upon written notice to Borrower, RLC Advances may be
made and disbursed from time to time by Lender directly in payment of such costs
and expenses.
Section 11.6 Law. This Agreement shall be construed according to the
laws of the State of Arizona.
Section 11.7 Successors. This Agreement shall, except as herein
otherwise provided, be binding upon and inure to the benefit of the successors
and assigns of the parties, hereto.
Section 11.8 Headings. The headings or captions of sections in this
Agreement are for convenience and reference only, and in no way define, limit or
describe the scope or intent of this Agreement or the provisions of such
sections.
Section 11.9 Arbitration.
(a) Binding Arbitration. Upon the demand of Borrower or Lender
(collectively, the "parties"), whether made before the institution of
any judicial proceeding or not more than 60 days after service of a
complaint, third party complaint, cross-claim or counterclaim or any
answer thereto or any amendment to
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any of the above, any Dispute (as defined below) shall be resolved by
binding arbitration in accordance with the terms of this arbitration
clause. A "Dispute" shall include any action, dispute, claim, or
controversy of any kind, whether founded in contract, tort, statutory
or common law, equity, or otherwise, now existing or hereafter
occurring between the parties arising out of, pertaining to or in
connection with this Agreement or any related agreements, documents, or
instruments (the "Documents"). The parties understand that by this
Agreement they have decided that the Disputes may be submitted to
arbitration rather than being decided through litigation in court
before a judge or jury and that once decided by an arbitrator the
claims involved cannot be brought, filed or pursued in court.
(b) Governing Rules. Arbitrations conducted pursuant to this
Agreement, including selection of arbitrators, shall be administered by
the American Arbitration Association ("Administrator") pursuant to the
Commercial Arbitration rules of the Administrator. Arbitrations
conducted pursuant to the terms hereof shall be governed by the
provisions of the Federal Arbitration Act (Title 9 of the United States
Code), and to the extent the foregoing are inapplicable, unenforceable
or invalid, the laws of the State of Arizona. Judgment upon any award
rendered hereunder may be entered in any court having jurisdiction;
provided, however, that nothing contained herein shall be deemed to be
a waiver by any party that is a Lender of the protections afforded to
it under 12 U.S.C. ss. 91 or similar governing state law. Amy party who
fails to submit to binding arbitration following a lawful demand by the
opposing party shall bear all costs and expenses, including reasonable
attorney's fees, incurred by the opposing party in compelling
arbitration of any Dispute.
(c) No Waiver, Preservation of Remedies, Multiple Parties. No
provision of, nor the exercise of any rights under, this arbitration
clause shall limit the right of any party to (1) foreclose against any
real or personal property collateral or other security, (2) exercise
self-help remedies (including repossession and setoff rights) or (3)
obtain provisional or ancillary remedies such as injunctive relief,
sequestration, attachment, replevin, garnishment, or the appointment of
a receiver from a court having jurisdiction. Such rights can be
exercised at any time except to the extent such action is contrary to a
final award or decision in any arbitration proceeding. The institution
and maintenance of an action as described above shall not constitute a
waiver of the right of any party, including the plaintiff, to submit
the Dispute to arbitration, nor render inapplicable the compulsory
arbitration provisions hereof. Any claim or Dispute related to exercise
of any self-help, auxiliary or other exercise of rights under this
section (c) shall be a Dispute hereunder.
(d) Arbitrator Powers and Qualifications, Awards.
Arbitrator(s) shall resolve all Disputes in accordance with the
applicable substantive law. Arbitrator(s) may make an award of
attorneys' fees and expenses if permitted by law or the
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agreement of the parties. All statutes of limitation applicable to any
Dispute shall apply to any proceeding in accordance with this
arbitration clause. Any arbitrator selected to act as the only
arbitrator in a Dispute shall be required to be a practicing attorney
with not less than 10 years practice in commercial law in the State of
Arizona. With respect to a Dispute in which the claims or amounts in
controversy do not exceed five hundred thousand dollars ($500,000), a
single arbitrator shall be chosen and shall resolve the Dispute. In
such case the arbitrator shall have authority to render an award up to
but not to exceed five hundred thousand dollars ($500,000) including
all damages of any kind whatsoever, costs, fees and expenses.
Submission to a single arbitrator shall be a waiver of all parties'
claims to recover more than five hundred thousand dollars ($500,000). A
Dispute involving claims or amounts in controversy exceeding five
hundred thousand dollars ($500,000) shall be decided by a majority vote
of a panel of three arbitrators ("Arbitration Panel"). An Arbitration
Panel shall be composed of one arbitrator who would be qualified to sit
as a single arbitrator in a Dispute decided by one arbitrator, one who
has at least ten years experience in commercial lending and one who has
at least ten years experience in the trucking industry. Arbitrator(s)
may, in the exercise of their discretion, at the written request of a
party in any Dispute, (1) consolidate in a single proceeding any
multiple party claims that are substantially identical and all claims
arising out of a single loan or series of loans including claims by or
against borrower(s) guarantors, sureties and or owners of collateral if
different from the Borrower, and (2) administer multiple arbitration
claims as class actions in accordance with Rule 23 of the Federal Rules
of Civil Procedure. The arbitrator(s) shall be empowered to resolve any
dispute regarding the terms of this Agreement or the arbitrability of
any Dispute or any claim that all or any part (including this
provision) is void or voidable but shall have no power to change or
alter the terms of this Agreement. The award of the arbitrator(s) shall
be in writing and shall specify the factual and legal basis for the
award.
(e) Miscellaneous. To the maximum extent practicable, the
Administrator, the Arbitrator(s) and the parties shall take any action
necessary to require that an arbitration proceeding hereunder be
concluded within 180 days of the filing of the Dispute with the
Administrator. The Arbitrator(s) shall be empowered to impose sanctions
for any party's failure to proceed within the times established herein.
Arbitration proceedings hereunder shall be conducted in Arizona at a
location determined by the Administrator. In any such proceeding a
party shall state as a counterclaim any claim which arises out of the
transaction or occurrence or is in any way related to the Documents
which does not require the presence of a third party which could not be
joined as a party in the proceeding. The provisions of this arbitration
clause shall survive any termination, amendment, or expiration of the
Documents and repayment in full of sums owed to Lender by Borrower
unless the parties otherwise expressly agree in writing. Each party
agrees to keep all Disputes
-31-
and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business
of the parties or as required by applicable law or regulation.
IN WITNESS WHEREOF, these presents have been executed as of the day and
year first set forth above.
FIRST INTERSTATE BANK OF ARIZONA,
N.A.
By
--------------------------------------
Its
--------------------------------
LENDER
KNIGHT TRANSPORTATION, INC., an
Arizona corporation
By
--------------------------------------
Name
------------------------------------
Its
-------------------------------------
QUAD K LEASING, INC., a______________
corporation
By
--------------------------------------
Name
------------------------------------
Its
-------------------------------------
BORROWER
-32-
Each party hereby acknowledges that it has read the Arbitration
provisions contained in Section 11.9 of this Agreement.
FIRST INTERSTATE BANK OF ARIZONA,
N.A.
By
--------------------------------------
Its
-----------------------------------
LENDER
KNIGHT TRANSPORTATION, INC., an
Arizona corporation
By
--------------------------------------
Name
------------------------------------
Its
-------------------------------------
QUAD K LEASING, INC., a
corporation
By
--------------------------------------
Name
------------------------------------
Its
-------------------------------------
BORROWER
-33-
EXHIBIT "A"
___________________
Mr.
Vice President
Commercial Banking Division
First Interstate Bank of Arizona, N.A.
P.O. Box 53456
Phoenix, Arizona 85072-3456
Dear Mr.
Enclosed are the required financial statements for the [month] [fiscal
year] ending _________________for Borrower as required under Section 7.5 of the
Loan Agreement dated ________________, 1996 (the "Agreement").
To the best of my knowledge in all material respects, no "Event of
Default, " as defined in the Agreement, exists and no event has occurred and no
condition exists that, after notice or passage of time, or both, would
constitute an Event of Default.
Very truly yours,
EXHIBIT "B"
TO: FIRST INTERSTATE BANK OF ARIZONA, N.A.
Certificateof Borrower's Covenant Compliance with Section 7.5(f)
of the Loan Agreement dated _________________, 1996 between
Knight Transportation, Inc., an Arizona corporation and
Quad K Leasing, Inc., a ____________ corporation
and First Interstate Bank of Arizona, N.A.
Date__________________
The undersigned officer of Knight Transportation, Inc., an Arizona corporation,
and Quad K Leasing, Inc., a ______________ corporation, Borrower under said Loan
Agreement, hereby certifies that as of the date written above, the following
computations were true and correct:
I. Section 8.4 - Debt/Worth
Numerator: Total Liabilities A
divided by: -----
Denominator: Net Worth B
-----
equals A/B
=====
maximum 1.0x
=====
II. Section 8.5 - TFCC
Numerator: Long-term debt (with CPLTD)
-----
plus: RLC balance
-----
Equals A
-----
divided by:
Denominator: Net profit
-----
plus: depreciation
-----
plus: amortization
-----
= Cash Flow B
-----
A divided by B equals
=====
maximum 3.0x
=====
III. Section 8.6 - Debt/Cash Flow
Numerator: Net Profit
-----
plus: Depreciation
-----
plus: Amortization
-----
plus: Interest Expense
-----
plus: Operating Lease Rent Expense
-----
plus: Deferred Income Tax Expense
-----
EBITDA A
-----
divided by:
Denominator: CPLTD
-----
plus: Operating Leases Rent Expense
-----
plus: Interest Expense
-----
= Current Portion B
-----
A divided by B equals A/B
=====
minimum 3.0x
=====
IV. Section 8.7 - Current Ratio
Numerator: Cash
-----
plus: Accounts Receivable
-----
Equals A
-----
divided by:
Denominator: Current liabilities
-----
excluding: any RLC Advances outstanding
-----
Equals B
-----
A divided by B equals A/B
=====
minimum 10x
=====
KNIGHT TRANSPORTATION, INC., an
Arizona corporation
By
--------------------------------------
Name
------------------------------------
Its
-------------------------------------
QUAD K LEASING, INC., a ________________
corporation
By
--------------------------------------
Name
------------------------------------
Its
-------------------------------------
EXHIBIT "C"
PROMISSORY NOTE
---------------
$___________________ Phoenix, Arizona
______________, 1996
FOR VALUE RECEIVED, the undersigned KNIGHT TRANSPORTATION, INC., an
Arizona corporation and QUAD K LEASING, INC., a _______________________
corporation (together, "Maker"), promises to pay to the order of FIRST
INTERSTATE BANK OF ARIZONA, N.A. (the "Payee"; Payee and each subsequent
transferee and/or owner of this Note, whether taking by endorsement or
otherwise, are herein successively called "Holder"), at Post Office Box 53456,
Phoenix, Arizona 85072-3456, or at such other place as Holder may from time to
time designate in writing, the principal sum of ____________________ MILLION AND
NO/100 DOLLARS ($_____________________) or so much thereof as Holder may advance
to or for the benefit of Maker plus interest calculated on a daily basis (based
on a 360-day year) from the date hereof on the principal balance from time to
time outstanding as hereinafter provided, principal, interest and all other sums
payable hereunder to be paid in lawful money of the United States of America as
follows:
(a) Interest. Interest shall accrue on the unpaid principal of
this Note at [the applicable LIBOR Rate] [the TCM Rate].
(b) Monthly Payments. [In the event that interest accrues on
the Term Loan at the TCM Rate,] Interest and principal shall be due
hereunder in thirty-six (36) equal monthly payments payable on the
first day of each month, commencing on the first day of the second
month after the Term Conversion Date.
[In the event that interest accrues on the Term Loan at the
applicable LIBOR Rate,] Principal in an amount sufficient to fully
amortize the amount of the Term Loan over thirty-six (36) equal monthly
payments, together with accrued interest, shall be due and payable
hereunder on the first day of each month, commencing on the first day
of the second month after the Term Conversion Date.
(c) Final Payment. The entire outstanding principal balance,
all accrued and unpaid interest and all other sums which may have
become payable thereunder shall be due and payable in full on the Term
Maturity Date.
(d) Definitions. The capitalized terms used and not otherwise
defined herein shall have the same meanings as defined in the Loan
Agreement (defined below).
Maker agrees to an effective rate of interest that is the rate stated
above plus any additional rate of interest resulting from any other charges in
the nature of interest paid or to be paid by or on behalf of Maker, or any
benefit received or to be received by Holder, in connection with this Note.
If any payment required under this Note is not paid within five (5)
Business Days when due, then, at the option of Holder, Maker shall pay a "late
charge" equal to four percent (4%) of the amount of that payment to compensate
Holder for administrative expenses and other costs of delinquent payments. This
late charge may be assessed without notice, shall be immediately due and payable
and shall be in addition to all other rights and remedies available to Holder.
All payments on this Note shall be applied first to the payment of any
costs, fees or other charges incurred in connection with the indebtedness
evidenced hereby, next to the payment of accrued interest and then to the
reduction of the principal balance.
This Note is issued pursuant to that Loan Agreement dated of even date
herewith between Maker and Payee, the ("Loan Agreement").
Time is of the essence of this Note. At the option of Holder, the
entire unpaid principal balance, all accrued and unpaid interest and all other
amounts payable hereunder shall become immediately due and payable without
notice upon the failure to pay any sum due and owing hereunder as provided
herein or upon the occurrence of any event of default under the Loan Agreement
or any Security Documents.
After maturity, including maturity upon acceleration, the unpaid
principal balance, all accrued and unpaid interest and all other amounts payable
hereunder shall bear interest at that rate that is five percent (5%) above the
rate that would otherwise be payable under the terms hereof. Maker shall pay all
costs and expenses, including reasonable attorneys' fees and court costs,
incurred in the collection or enforcement of all or any part of this Note. Such
court costs and attorneys' fees shall be set by the court and not by jury, shall
be included in any judgment obtained by Holder.
Maker shall have the option to prepay this Note, in full or in part, at
any time. In the event interest accrues hereunder at the TCM Rate, Maker shall
pay to Holder such premium as provided for in Section 4.2 of the Loan Agreement.
Failure of Holder to exercise any option hereunder shall not constitute
a waiver of the right to exercise the same in the event of any subsequent
default or in the event of continuance of any existing default after demand for
strict performance hereof.
Maker (a) waives any and all formalities in connection with this Note
to the maximum extent allowed by law, including (but not limited to) demand,
diligence, presentment for payment, protest and demand, and notice of extension,
dishonor, protest, demand and nonpayment of this Note; and (b) consents that
Holder may extend the time of payment or otherwise modify the terms of payment
-2-
of any part or the whole of the debt evidenced by this Note, at the request of
any other person liable hereon, and such consent shall not alter nor diminish
the liability of any person hereon.
In addition, Maker waives and agrees not to assert: (a) any right to
require Holder to proceed against Maker to proceed against or exhaust any
security for the Note, to pursue any other remedy available to Holder, or to
pursue any remedy in any particular order or manner; (b) the benefit of any
statute of limitations affecting its liability hereunder or the enforcement
hereof; (c) the benefits of any legal or equitable doctrine or principle of
marshalling; (d) notice of the existence, creation or incurring of new or
additional indebtedness of Maker to Holder; (e) the benefits of any statutory
provision limiting the liability of a surety, including without limitation the
provisions of Sections 12-1641, et seq., of the Arizona Revised Statutes; and
(f) any defense arising by reason of any disability or other defense of Maker or
by reason of the cessation from any cause whatsoever (other than payment in
full) of the liability of Maker for payment of the Note.
Maker agrees that to the extent Maker makes any payment to Holder in
connection with the indebtedness evidenced by this Note, and all or any part of
such payment is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid by Holder or paid over to a
trustee, receiver or any other entity, whether under any bankruptcy act or
otherwise (any such payment is hereinafter referred to as a "Preferential
Payment"), then the indebtedness of Maker under this Note shall continue or
shall be reinstated, as the case may be, and, to the extent of such payment or
repayment by Holder, the indebtedness evidenced by this Note or part thereof
intended to be satisfied by such Preferential Payment shall be revived and
continued in full force and effect as if said Preferential Payment had not been
made.
Without limiting the right of Holder to bring any action or proceeding
against Maker or against any property of Maker (an "Action") arising out of or
relating to this Note or any indebtedness evidenced hereby in the courts of
other jurisdictions, Maker hereby irrevocably submits to the jurisdiction,
process and venue of any Arizona State or Federal court sitting in Phoenix,
Arizona, and hereby irrevocably agrees that any Action may be heard and
determined in such Arizona State court or in such Federal court. Maker hereby
irrevocably waives, to the fullest extent it may effectively do so, the defenses
of lack of jurisdiction over any person, inconvenient forum or improper venue,
to the maintenance of any Action in any jurisdiction.
This Note shall be binding upon Maker and its successors and assigns
and shall inure to the benefit of Payee, and any subsequent holders of this
Note, and their successors and assigns.
All notices required or permitted in connection with this Note shall be
given at the place and in the manner provided in the Loan Agreement for the
giving of notices.
This Note shall be construed according to the laws of the State of
Arizona.
-3-
IN WITNESS WHEREOF, this Promissory Note has been executed as of the
date first written above.
KNIGHT TRANSPORTATION, INC., an
Arizona corporation
By
--------------------------------------
Its
--------------------------------
QUAD K LEASING, INC., a_________________
corporation
By
--------------------------------------
Its
--------------------------------
MAKER
-4-
REVOLVING PROMISSORY NOTE
-------------------------
$15,000,000.00 Phoenix, Arizona
_______________, 1996
FOR VALUE RECEIVED, the undersigned KNIGHT TRANSPORTATION, INC., an
Arizona corporation and QUAD K LEASING, INC., a ________________ corporation
(together, "Maker"), promises to pay to the order of FIRST INTERSTATE BANK OF
ARIZONA, N.A. (the "Payee"; Payee and each subsequent transferee and/or owner of
this Note, whether taking by endorsement or otherwise, are herein successively
called "Holder"), at Post Office Box 53456, Phoenix, Arizona 85072-3456, or at
such other place as Holder may from time to time designate in writing, the
principal sum of FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00) or so much
thereof as Holder may advance to or for the benefit of Maker plus interest
calculated on a daily basis (based on a 360-day year) from the date hereof on
the principal balance from time to time outstanding as hereinafter provided,
principal, interest and all other sums payable hereunder to be paid in lawful
money of the United States of America as follows:
(a) Interest. Interest shall accrue on the unpaid principal of
each RLC Advance:
(i) At the Variable Rate if it is a Variable Rate RLC
Advance.
(ii) At the applicable LIBOR Rate if it is a LIBOR
Rate RLC Advance.
(iii) At the applicable CD Rate if it is a CD Rate
RLC Advance.
(b) Interest Payment. All accrued interest shall be due and
payable on the RLC Payment Date.
(c) Principal Payment. The entire outstanding principal
balance, all accrued and unpaid interest and all other sums which may
have become payable thereunder shall be due and payable in full on the
RLC Maturity Date.
(d) Definitions. The capitalized terms used and not otherwise
defined herein shall have the same meanings as defined in the Loan
Agreement (defined below).
The principal balance of this Note represents a revolving credit all or
any part of which may be advanced to Maker, repaid by Maker, and readvanced to
Maker from time to time, subject to the other terms hereof and the conditions,
if any, contained in the Loan Agreement and provided that the principal balance
outstanding at any one time shall not exceed the face amount hereof.
Maker agrees to an effective rate of interest that is the rate stated
above plus any additional rate of interest resulting from any other charges in
the nature of interest paid or to be paid by or on behalf of Maker, or any
benefit received or to be received by Holder, in connection with this Note.
All payments on this Note shall be applied first to the payment of any
costs, fees or other charges incurred in connection with the indebtedness
evidenced hereby, next to the payment of accrued interest and then to the
reduction of the principal balance.
This Note is issued pursuant to that Loan Agreement dated of even date
herewith between Maker and Payee, the ("Loan Agreement").
Time is of the essence of this Note. At the option of Holder, the
entire unpaid principal balance, all accrued and unpaid interest and all other
amounts payable hereunder shall become immediately due and payable without
notice upon the failure to pay any sum due and owing hereunder as provided
herein or upon the occurrence of any event of default under the Loan Agreement
or any Security Documents.
After maturity, including maturity upon acceleration, the unpaid
principal balance, all accrued and unpaid interest and all other amounts payable
hereunder shall bear interest at the rate that would otherwise be payable under
the terms hereof. Maker shall costs and expenses, including reasonable
attorneys' fees and court costs, incurred in the collection or enforcement of
all or any part of this Note. Such court costs and attorneys' fees shall be set
by the court and not by jury, shall be included in any judgment obtained by
Holder.
Maker shall have the option to prepay this Note, in full or in part, at
any time. Maker shall pay to Holder such amount or amounts as shall be
sufficient to compensate for any losses (including without limitations loss of
anticipated profit), costs or expenses which Holder may reasonably incur as a
result of payment or Conversion of any LIBOR Rate RLC Advance or of any CD Rate
RLC Advance other than on the last Business Day of the Interest Period for such
RLC Advance.
Failure of Holder to exercise any option hereunder shall not constitute
a waiver of the right to exercise the same in the event of any subsequent
default or in the event of continuance of any existing default after demand for
strict performance hereof.
Maker (a) waives any and all formalities in connection with this Note
to the maximum extent allowed by law, including (but not limited to) demand,
diligence, presentment for payment, protest and demand, and notice of extension,
dishonor, protest, demand and nonpayment of this Note; and
-2-
(b) consents that Holder may extend the time of payment or other-wise modify the
terms of payment of any part or the whole of the debt evidenced by this Note, at
the request of any other person liable hereon, and such consent shall not alter
nor diminish the liability of any person hereon.
In addition, Maker waives and agrees not to assert: (a) any right to
require Holder to proceed against Maker to proceed against or exhaust any
security for the Note, to pursue any other remedy available to Holder, or to
pursue any remedy in any particular order or manner; (b) the benefit of any
statute of limitations affecting its liability hereunder or the enforcement
hereof; (c) the benefits of any legal or equitable doctrine or principle of
marshalling; (d) notice of the existence, creation or incurring of new or
additional indebtedness of Maker to Holder; (e) the benefits of any statutory
provision limiting the liability of a surety, including without limitation the
provisions of Sections 12- 1641, et seq., of the Arizona Revised Statutes; and
(f) any defense arising by reason of any disability or other defense of Maker or
by reason of the cessation from any cause whatsoever (other than payment in
full) of the liability of Maker for payment of the Note.
Maker agrees that to the extent Maker makes any payment to Holder in
connection with the indebtedness evidenced by this Note, and all or any part of
such payment is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid by Holder or paid over to a
trustee, receiver or any other entity, whether under any bankruptcy act or
otherwise (any such payment is hereinafter referred to as a "Preferential
Payment"), then the indebtedness of Maker under this Note shall continue or
shall be reinstated, as the case may be and, to the extent of such payment or
repayment by Holder, the indebtedness evidenced by this Note or part thereof
intended to be satisfied by such Preferential Payment shall be revived and
continued in full force and effect as if said Preferential Payment had not been
made.
Without limiting the right of Holder to bring any action or proceeding
against Maker or against any property of Maker (an "Action") arising out of or
relating to this Note or any indebtedness evidenced hereby in the courts of
other jurisdictions, Maker hereby irrevocably submits to the jurisdiction,
process and venue of any Arizona State or Federal court sitting in Phoenix,
Arizona, and hereby irrevocably agrees that any Action may be heard and
determined in such Arizona State court or in such Federal court. Maker hereby
irrevocably waives, to the fullest extent it may effectively do so, the defenses
of lack of jurisdiction over any person, inconvenient forum or improper venue,
to the maintenance of any Action in any jurisdiction.
This Note shall be binding upon Maker and its successors and assigns
and shall inure to the benefit of Payee, and any subsequent holders of this
Note, and their successors and assigns.
All notices required or permitted in connection with this Note shall be
given at the place and in the manner provided in the Loan Agreement for the
giving of notices.
This Note shall be construed according to the laws of the State of
Arizona.
-3-
IN WITNESS WHEREOF, this Revolving Promissory Note has been executed as
of the date first written above.
KNIGHT TRANSPORTATION, INC., an
Arizona corporation
By
--------------------------------------
Its
-----------------------------------
QUAD K LEASING, INC., a
corporation
By
--------------------------------------
Its
-----------------------------------
MAKER
-4-