WELLS FARGO BANK REVOLVING LINE OF CREDIT NOTE
$10,000,000.00 PHOENIX, ARIZONA
JULY 14,1998
FOR VALUE RECEIVED, the undersigned KNIGHT TRANSPORTATION, INC.
("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL
ASSOCIATION ("Bank") at its office at Arizona RCBO #03839, 100 WEST WASHINGTON,
PHOENIX, AZ 86003, or at such other place as the holder hereof may designate, in
lawful money of the United States of America and in immediately available funds,
the principal sum of $10,000,000.00, or so much thereof as may be advanced and
be outstanding, with interest thereon, to be computed on each advance from the
date of its disbursement as set forth herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth after
each, and any other term defined in this Note shall have the meaning set forth
at the place defined:
(a) "Business Day" means any day except a Saturday, Sunday or any other day
on which commercial banks in Arizona are authorized or required by law to close.
(b) "Fixed Rate Term" means a period commencing on a Business Day and
continuing for 1, 2, 3 or 6 months, as designated by Borrower, during which all
or a portion of the outstanding principal balance of this Note bears interest
determined in relation to LIBOR; provided however, that no Fixed Rate Term may
be selected for a principal amount less than $100,000.00; and provided further,
that no Fixed Rate Term shall extend beyond the scheduled maturity date hereof.
If any Fixed Rate Term would end on a day which is not a Business Day, then such
Fixed Rate Term shall be extended to the next succeeding Business Day.
(c) "LIBOR" means the rate per annum (rounded upward, if necessary, to the
nearest whole 1/8 of 1 %) determined by dividing Base LIBOR by a percentage
equal to 100% less any LIBOR Reserve Percentage.
(i) "Base LIBOR" means the rate per annum for United States dollar
deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first day
of a Fixed Rate Term for delivery of funds on said date for a period of time
approximately equal to the number of days in such Fixed Rate Term and in an
amount approximately equal to the principal amount to which such Fixed Rate Term
applies. Borrower understands and agrees that Bank may base its quotation of the
Inter-Bank Market Offered Rate upon such offers or other market indicators of
the Inter-Bank Market as Bank in its discretion deems appropriate including, but
not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve percentage prescribed
by the Board of Governors of the Federal Reserve System (or any successor) for
"Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable Fixed Rate Term.
(d) "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.
INTEREST:
(a) INTEREST. The outstanding principal balance of this Note shall bear
interest (computed on the basis of a 360-day year, actual days elapsed) either
(i) at a fluctuating rate per annum EQUAL TO the Prime Rate in effect from time
to time, or (ii) at a fixed rate per annum determined by Bank to be .62500%
above LIBOR in effect on the first day of the applicable Fixed Rate Term. When
interest is determined in relation to the Prime Rate, each change in the rate of
interest hereunder shall become effective on the date each Prime Rate change is
announced within Bank. With respect to each LIBOR selection hereunder, Bank is
hereby authorized to note the date, principal amount, interest rate and Fixed
Rate Term applicable thereto and any payments made thereon on Bank's books and
records (either manually or by electronic entry) and/or on any schedule attached
to this Note, which notations shall be prima facie evidence of the accuracy of
the information noted.
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(b) SELECTION OF INTEREST RATE OPTIONS. At any time any portion of this
Note bears interest determined in relation to LIBOR, it may be continued by
Borrower at the end of the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion
of this Note bears interest determined in relation to the Prime Rate, Borrower
may convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower. At such time as
Borrower requests an advance hereunder or wishes to select a LIBOR option for
all or a portion of the outstanding principal balance hereof, and at the end of
each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the
interest rate option selected by Borrower; (ii) the principal amount subject
thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed
Rate Term. Any such notice may be given by telephone so long as, with respect to
each LIBOR selection, (A) Bank receives written confirmation from Borrower not
later than 3 Business Days after such telephone notice is given, and (B) such
notice is given to Bank prior to 10:00 a.m., California time, of) the first day
of the Fixed Rate Term. For each LIBOR option requested hereunder, Batik will
quote the applicable fixed rate to Borrower at approximately 10:00 a.m.,
California time, on the first day of the Fixed Rate Term. if Borrower does not
immediately accept the rate quoted by Bank, any subsequent acceptance by
Borrower shall be subject to a redetermination by Bank of the applicable fixed
rate; provided however, that if Borrower fails to accept any such rate by 11 :00
a.m., California time, on the Business Day such quotation is given, then the
quoted rate shall expire and Bank shall have no obligation to permit a LIBOR
option to be selected on such day. If no specific designation of interest is
made at the time any advance is requested hereunder or at the end of any Fixed
Rate Term, Borrower shall be deemed to have made a Prime Rate interest selection
for such advance or the principal amount to which such Fixed Rate Term applied.
(c) ADDITIONAL LIBOR PROVISIONS.
(i) If Bank at any time shall determine that for any reason adequate and
reasonable means do not exist for ascertaining LIBOR, then Bank shall promptly
give notice thereof to Borrower. If such notice is given and until such notice
has been withdrawn by Bank, then (A) no new LIBOR option may be selected by
Borrower, and (B) any portion of the outstanding principal balance hereof which
bears interest determined in relation to LIBOR, subsequent to the end of the
Fixed Rate Term applicable thereto, shall bear interest determined in relation
to the Prime Rate.
(ii) If any law, treaty, rule, regulation or determination of a court or
governmental authority or any change therein or in the interpretation or
application thereof (each, a "Change in Law") shall make it unlawful for Bank
(A) to make LIBOR options available hereunder, or (8) to maintain interest rates
based on LIBOR, then in the former event, any obligation of Bank to make
available such unlawful LIBOR options shall immediately be cancelled, and in the
latter event, any such unlawful LIBOR-based interest rates then outstanding
shall be converted, at Bank's option, so that interest on the portion of the
outstanding principal balance subject thereto is determined in relation to the
Prime Rate; provided however, that if any such Change in Law shall permit any
LIBOR-based interest rates to remain in effect until the expiration of the Fixed
Rate Term applicable thereto, then such permitted LIBOR-based interest rates
shall continue in effect until the expiration of such Fixed Rate Term. Upon the
occurrence of any of the foregoing events, Borrower shall pay to Bank
immediately upon demand such amounts as may be necessary to compensate Bank for
any fines, fees, charges, penalties or other costs incurred or payable by Bank
as a result thereof and which are attributable to any LIBOR options made
available to Borrower hereunder, and any reasonable allocation made by Bank
among its operations shall be conclusive and binding upon Borrower.
(iii) If any Change in Law or compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority shall:
(A) subject Bank to any tax, duty or other charge with respect to any
LIBOR options, or change the basis of taxation of payments to Bank of
principal, interest, fees or any other amount payable hereunder
(except for changes in the rate of tax on the overall net income of
Bank); or
(B) impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances or
loans by, or any other acquisition of funds by any office of Bank; or
(C) impose on Bank any other condition;
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining any LIBOR options hereunder and/or to reduce any
amount receivable by Bank in connection therewith, then in any such case,
Borrower shall pay to Bank immediately upon demand such amounts as may be
necessary to compensate Bank for any additional costs incurred by Bank and/or
reductions in amounts received by Bank which are attributable to such LIBOR
options. In determining which costs incurred by Bank and/or reductions in
amounts received by Bank are attributable to any LIBOR options made available to
Borrower hereunder, any reasonable allocation made by Bank among its operations
shall be conclusive and binding upon Borrower.
(d) PAYMENT OF INTEREST. Interest accrued on this Note shall be payable on
the 15th day of each month, commencing JULY 15, 1998.
(e) DEFAULT INTEREST. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to 4% above the rate of
interest from time to time applicable to this Note.
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(f) UNUSED COMMITMENT FEE. Borrower shall pay to Bank a fee equal to
.06200% per annum (computed on the basis of a 360-day year, actual days elapsed)
on the average unused amount of this Note, which fee shall be calculated on a
monthly basis by Bank and shall be due and payable by borrower in arrears on the
15th day of each month.
(g) COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect all
interest and fees due hereunder by charging Borrower's demand deposit account
number 4159-518950 with Bank, or any other demand deposit account maintained by
any Borrower with Bank, for the full amount thereof. Should there be
insufficient funds in any such demand deposit account to pay all such sums when
due, the full amount of such deficiency shall be immediately due and payable by
Borrower.
STANDBY LETTER OF CREDIT SUBFEATURE:
(a) LETTER OF CREDIT SUBFEATURE. As a subfeature under this Note, Bank
agrees from time to time during the term hereof to issue standby letters of
credit for the account of Borrower to finance WORKING CAPITAL REQUIREMENTS
(each, a "Letter of Credit" and collectively, "Letters of Credit"); provided
however, that the form and substance of each Letter of Credit shall be subject
to approval by Bank, in its sole discretion; and provided further, that the
aggregate undrawn amount of all outstanding Letters of Credit shall not at any
time exceed $1,250,000.00. Each Letter of Credit shall be issued for a term not
to exceed 360 days, as designated by Borrower; provided however, that no Letter
of Credit shall have an expiration date subsequent to the maturity date of this
Note. The undrawn amount of all Letters of Credit shall be reserved tinder this
Note and shall not be available for borrowings hereunder. Each Letter of Credit
shall be subject to the additional terms and conditions of the Letter of Credit
Agreement and related documents, if any, required by Bank in connection with the
issuance thereof. Each draft paid by Bank under a Letter of Credit shall be
deemed an advance under this Note and shall be repaid by Borrower in accordance
with the terms and conditions of this Note; provided however, that if advances
hereunder are not available, for any reason, at the time any draft is paid by
Bank, then Borrower shall immediately pay to Bank the full amount of such draft,
together with interest thereon from the date such amount is paid by Bank to the
date such amount is fully repaid by Borrower, at the rate of interest applicable
to advances hereunder. In such event, Borrower agrees that Bank, in its sole
discretion, may debit any demand deposit account maintained by Borrower with
Bank for the amount of any such draft.
(b) LETTER OF CREDIT FEES. Borrower shall pay to Bank (i) fees upon the
issuance of each Letter of Credit equal to 0.900% per annum (computed on the
basis of a 360-day year, actual days elapsed) of the face amount thereof, and
(ii) fees upon the payment by Bank of each draft under any Letter of Credit and
upon the occurrence of any other activity with respect to any Letter of Credit
(including without limitation, the transfer, amendment or cancellation of any
Letter of Credit) determined in accordance with Bank's standard fees and charges
then in effect for such activity.
BORROWING AND REPAYMENT:
(a) USE OF PROCEEDS. Advances under this Note shall be available solely to
finance WORKING CAPITAL REQUIREMENTS.
(b) BORROWING AND REPAYMENT. Borrower may from time to time during the term
of this Note borrow, partially or wholly repay its outstanding borrowings, and
reborrow, subject to all of the limitations, terms and conditions of this Note
and of any document executed in connection with, or at any time as a supplement
to, this Note; provided however, that the total outstanding borrowings under
this Note shall not at any time exceed the principal amount stated above. All
payments credited to principal shall be applied first, to the outstanding
principal balance of this Note which bears interest determined in relation to
the Prime Rate, if any, and second, to the outstanding principal balance of this
Note which bears interest determined in relation to LIBOR, with such payments
applied to the oldest Fixed Rate Term first. The unpaid principal balance of
this obligation at any time shall be the total amounts advanced hereunder by the
holder hereof less the amount of any principal payments made hereon by or for
any Borrower, which balance may be endorsed hereon from time to time by the
holder. The outstanding principal balance of this Note shall be due and payable
in full on JULY 15, 2000.
(c) ADVANCES. Advances hereunder, to the total amount of the principal sum
available hereunder, may be made by the holder at the oral or written request of
(i) L. RANDY KNIGHT or KEVIN P. KNIGHT or CLARK JENKINS or GARY KNIGHT, any one
acting alone, who are authorized to request advances and direct the disposition
of any advances until written notice of the revocation of such authority is
received by the holder at the office designated above, or (ii) any person, with
respect to advances deposited to the credit of any account of any Borrower with
the holder, which advances, when so deposited, shall be conclusively presumed to
have been made to or for the benefit of each Borrower regardless of the fact
that persons other than those authorized to request advances may have authority
to draw against such account. The holder shall have no obligation to determine
whether any person requesting an advance is or has been authorized by any
Borrower.
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PREPAYMENT:
(a) PRIME RATE. Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to the Prime Rate at any time, in
any amount and without penalty.
(b) LIBOR. Borrower may prepay principal on any portion of this Note which
bears interest determined in relation to LIBOR at any time and in the minimum
amount of $100,000.00; provided however, that if the outstanding principal
balance of such portion of this Note is less than said amount, the minimum
prepayment amount shall be the entire outstanding principal balance thereof. In
consideration of Bank providing this prepayment option to Borrower, or if any
such portion of this Note shall become due and payable at any time prior to the
last day of the Fixed Rate Term applicable thereto by acceleration or otherwise,
Borrower shall pay to Bank immediately upon demand a fee which is the sum of the
discounted monthly differences for each month from the month of prepayment
through the month in which such Fixed Rate Tern) matures, calculated as follows
for each such month:
(i) DETERMINE the amount of interest which would have accrued each
month on the amount prepaid at the interest rate applicable to such amount had
it remained outstanding until the last day of the Fixed Rate Term applicable
thereto.
(ii) SUBTRACT from the amount determined in (i) above the amount of
interest which would have accrued for the same month on the amount prepaid for
the remaining term of such Fixed Rate Term at LIBOR in effect on the date of
prepayment for new loans made for such term and in a principal amount equal to
the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater than
zero, discount that difference by LIBOR used in (ii) above.
Each Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Each Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to
pay any prepayment fee when due, the amount of such prepayment fee shall
thereafter bear interest until paid at a rate per annum 2.000% above the Prime
Rate in effect from time to time (computed on the basis of a 360-day year,
actual days elapsed). Each change in the rate of interest on any such past due
prepayment fee shall become effective on the date each Prime Rate change is
announced within Bank.
EVENTS OF DEFAULT:
Any default in the payment or performance of any obligation under this
Note, or any defined event of default under any loan agreement now or at any
time hereafter in effect between Borrower and Bank (whether executed prior to,
concurrently with or at any time after this Note), shall constitute an "Event of
Default" under this Note.
MISCELLANEOUS:
(a) REMEDIES. Upon the occurrence of any Event of Default, the holder of
this Note, at the holder's option, may declare all sums of principal, interest,
fees and charges outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by each Borrower, and the
obligation, it any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Each Borrower shall pay to the holder
immediately upon demand the full amount of all payments. advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of the holder's in-house counsel), expended
or incurred by the holder in connection with the enforcement of the holder's
rights and/or the collection of any amounts which become due to the holder under
this Note, and the prosecution or defense of any action in any way related to
this Note, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
(b) OBLIGATIONS JOINT AND SEVERAL. Should more than one person or entity
sign this Note as a Borrower, the obligations of each such Borrower shall be
joint and several.
(c) GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the state of Arizona.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.
KNIGHT TRANSPORTATION INC.
By: /s/ Clark Jenkins
- ---------------------------------
CLARK JENKINS
CHIEF FINANCIAL OFFICER/SECRETARY
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WELLS FARGO BANK LOAN AGREEMENT
This Loan Agreement (this "Agreement") is entered into by and between
KNIGHT TRANSPORTATION, INC. ("Borrower") and WELLS FARGO BANK, NATIONAL
ASSOCIATION ("Bank") and sets forth the terms and conditions which govern all
Borrower's commercial credit accommodations from Bank, whether now existing or
hereafter granted (each, a "Credit" and collectively, "Credits"), which terms
and conditions are in addition to those set forth in any other contract,
instrument or document (collectively with this Agreement, the "Loan Documents")
required by this Agreement or heretofore or at any time hereafter delivered to
Bank in connection with any Credit.
I. REPRESENTATIONS AND WARRANTIES. Borrower makes the following
representations and warranties to Bank, which representations and warranties
shall be true as of the date hereof and on the date of each extension of credit
under each Credit with the same effect as though made on each such date:
(a) LEGAL STATUS. Borrower is a CORPORATION, duly organized and existing
and in good standing under the laws of the State of ARIZONA, and is qualified or
licensed to do business in all jurisdictions in which such qualification or
licensing is required or in which the failure to be qualified or licensed could
have a material adverse effect on Borrower.
(b) AUTHORIZATION AND VALIDITY. Each of the Loan Documents has been duly
authorized, and upon its execution and delivery to Bank will constitute a legal,
valid and binding obligation of Borrower or the party which executes the same,
enforceable in accordance with its respective terms.
(c) NO VIOLATION. The execution, delivery and performance by Borrower of
each of the Loan Documents do not violate any provision of law or regulation, or
contravene any provision of Borrower's Articles of Incorporation or By-Laws, or
result in any breach of or default under any agreement, indenture or other
instrument to which Borrower is a party or by which Borrower may be bound.
(d) NO LITIGATION. There are no pending, or to the best of Borrower's
knowledge threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which could have a material adverse effect on the financial condition or
operation of Borrower except as disclosed by Borrower to Bank in writing prior
to the date hereof.
(e) FINANCIAL STATEMENTS. The most recent annual financial statement of
Borrower, and all interim financial statements delivered to Bank since the date
of said annual financial statement, true copies of which have been delivered by
Borrower to Bank prior to the date hereof, are complete and correct, present
fairly the financial condition of Borrower and disclose all liabilities of
Borrower, and have been prepared in accordance with generally accepted
accounting principles. Since the dates of such financial statements there has
been no material adverse change in the financial condition of Borrower, nor has
Borrower mortgaged, pledged, granted a security interest in or otherwise
encumbered any of its assets or properties except in favor of Bank or as
otherwise permitted by Bank in writing.
(f) TAX RETURNS. Borrower has no knowledge of any pending assessments or
adjustments of its income tax payable with respect to any year except as
disclosed by Borrower to Bank in writing prior to the date hereof.
II. ADDITIONAL TERMS.
(a) CONDITIONS PRECEDENT. The obligation of Bank to grant any Credit is
subject to the condition that Bank shall have received all contracts,
instruments and documents, duly executed where applicable, deemed necessary by
Bank to evidence such Credit and all terms and conditions applicable thereto,
all of which shall be in form and substance satisfactory to Bank.
(b) APPLICATION OF PAYMENTS. Each payment made on each Credit shall be
applied first, to any interest then due, second, to any fees and charges then
due, and third, to the outstanding principal balance thereof.
III. COVENANTS. So long as any Credit remains available or any amounts
under any Credit remain outstanding, Borrower shall, unless Bank otherwise
consents in writing:
(a) INSURANCE. Maintain and keep in force, for each business in which
Borrower is engaged, insurance of the types and in amounts customarily carried
in similar lines of business, including but not limited to fire, extended
coverage, public liability, property damage and workers' compensation, carried
with companies and in amounts satisfactory to Bank, and deliver to Bank from
time to time at Bank's request schedules setting forth all insurance then in
effect.
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(b) COMPLIANCE: LAWS AND REGULATIONS; YEAR 2000.
(i) Preserve and maintain all licenses, permits, governmental
approvals, rights, privileges and franchises necessary for the conduct of
Borrower's business; and comply with the provisions of all documents pursuant to
which Borrower is organized arid/or which govern Borrower's continued existence
and with the requirements of all laws, rules, regulations arid orders of any
governmental authority applicable to Borrower and/or its business, and all state
or federal environmental, hazardous waste, health arid safety statutes, arid any
rules or regulations adopted pursuant thereto, which govern or affect any
operations and/or properties of Borrower.
(ii) Perform all acts reasonably necessary to ensure that (A) Borrower
and any business in which Borrower holds a substantial interest, and (B) all
customers, suppliers and vendors that are material to Borrower's business,
become Year 2000 Compliant in a timely manner. Such acts shall include, without
limitation, performing a comprehensive review and assessment of all of
Borrower's systems and adopting a detailed plan, with itemized budget, for the
remediation, monitoring and testing of such systems. As used herein, "Year 2000
Compliant" shall mean, in regard to any entity, that all software, hardware,
firmware, equipment, goods or systems utilized by or material to the business
operations or financial condition of such entity, will properly perform date
sensitive functions before, during and after the year 2000. Borrower shall,
immediately upon request, provide to Bank such certifications or other evidence
of Borrower's compliance with the terms hereof as Bank may from time to time
require.
(c) OTHER INDEBTEDNESS. Not create, incur, assume or permit to exist any
indebtedness or other liabilities, whether secured or unsecured, matured or
unmatured, liquidated or unliquidated, joint or several, direct or contingent
(including any contingent liability under any guaranty of the obligations of any
person or entity), except (i) the liabilities of Borrower to Bank, Iii) trade
debt incurred by Borrower in the normal course of its business, and (iii) any
other liabilities of Borrower existing as of, and disclosed to Bank in writing
prior to, the date hereof.
(d) MERGER; CONSOLIDATION; TRANSFER OF ASSETS. Not merge into or
consolidate with any other entity; nor make any substantial change in the nature
of Borrower's business as conducted as of the date hereof; nor acquire all or
substantially all of the assets of any other person or entity; nor sell, lease,
transfer or otherwise dispose of all or a substantial or material portion of
Borrower's assets except in the ordinary course of its business.
(e) PLEDGE OF ASSETS. Not mortgage, pledge, grant or permit to exist a
security interest in, or lien upon, all or any portion of Borrower's assets now
owned or hereafter acquired, except in favor of Bank and except any of the
foregoing existing as of, and disclosed to Bank in writing prior to, the date
hereof.
(f) FINANCIAL STATEMENTS. Provide to Bank all of the following, in form and
detail satisfactory to Bank, together with such current financial and other
information as Bank from time to time may reasonably request:
(i) As soon as available, but in no event later than 120 days after and
as of the end of each FISCAL year, AN AUDITED financial statement of Borrower,
prepared by an independent certified public accountant acceptable to Bank, to
include a balance sheet, income statement and statement of cash flow, together
with all supporting schedules and footnotes.
(ii) As soon as available, but in no event later than 60 days after and
as of the end of EACH FISCAL QUARTER, a financial statement of Borrower,
prepared by Borrower and certified as correct by an officer of Borrower
authorized to borrow under the Most current Corporate Borrowing Resolution
delivered by Borrower to Bank, to include a balance sheet and income statement,
together with all supporting schedules and footnotes.
(g) Financial Condition. Maintain Borrower's financial condition as follows
using generally accepted accounting principles consistently applied and used
consistently with prior practices, except to the extent modified by the
following definitions:
(i) Current Ratio not at any time less than 1.00 to 1 .0, with "Current
Ratio" defined as total current assets divided by total current liabilities.
(ii) Tangible Net Worth not at any time less than $50,000,000.00, with
"Tangible Net Worth" defined as the aggregate of total stockholders' equity plus
subordinated debt less any intangible assets.
(iii) Total Liabilities divided by Tangible Net Worth not at any time
greater than 1.00 to 1.0, with "Total Liabilities" defined as the aggregate of
current liabilities and non-current liabilities less subordinated debt, and with
"Tangible Net Worth" as defined above.
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IV. DEFAULT; REMEDIES.
(a) EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement:
(i) The failure to pay any principal, interest, fees or other charges
when due under any of the Loan Documents.
(ii) Any representation or warranty hereunder or under any other Loan
Document shall prove to be incorrect, false or misleading in any material
respect when made.
(iii) Any violation or breach of any term or condition of this
Agreement or any other of the Loan ocuments.
(iv) Any default in the payment or performance of any obligation, or
any defined event of default, under any provisions of any contract, instrument
or document pursuant to which Borrower or any guarantor hereunder has incurred
debt or any other liability of any kind to any person or entity, including Bank.
(v) The filing of a petition by or against Borrower or any guarantor
hereunder under any provisions of the Bankruptcy Reform Act, Title 11 of the
United States Code, as amended or recodified from time to time, or under any
similar or other law relating to bankruptcy, insolvency, reorganization or other
relief for debtors; the appointment of a receiver, trustee, custodian or
liquidator of or for any part of the assets or property of Borrower or any such
guarantor; Borrower or any such guarantor becomes insolvent, makes a general
assignment for the benefit of creditors or is generally not paying its debts as
they become due; or any attachment or like levy on any property of Borrower or
any such guarantor.
(vi) Any material adverse change, as determined solely by Bank, in the
financial condition of Borrower.
(vii) The death or incapacity of any individual guarantor hereunder; or
the dissolution or liquidation of Borrower or of any guarantor hereunder which
is a corporation, partnership or other type of entity.
(viii) Any change in ownership during the term hereof of an aggregate
of 25% or more of the common stock of Borrower.
(b) REMEDIES. Upon the occurrence of any Event of Default: (i) the entire
balance of principal, interest, fees and charges on each Credit shall, at Bank's
option, become immediately due and payable in full without presentment; "demand,
protest or notice of dishonor, all of which are expressly waived by Borrower;
(ii) the obligation, if any, of Bank to extend any further credit to Borrower
under any Credit shall immediately cease and terminate; and (iii) Bank shall
have all rights, powers and remedies available under each of the Loan Documents,
or accorded by law, including without limitation the right to resort to any
security for any Credit, All rights, powers and remedies of Bank shall be
cumulative.
V. MISCELLANEOUS.
(a) NO WAIVER. No delay, failure or discontinuance of Bank in exercising
any right, power or remedy under any of the Loan Documents shall affect or
operate as a waiver of such right, power or remedy; nor shall any single or
partial exercise of any such right, power or remedy preclude, waive or otherwise
affect any other or further exercise thereof or the exercise of any other right,
power or remedy. Any waiver, permit, consent or approval of any kind by Bank of
any breach of or default under this Agreement, or any such waiver of any
provisions or conditions hereof, must be in writing and shall be effective only
to the extent set forth in writing.
(b) NOTICES. All notices, requests and demands required under this
Agreement must be in writing, addressed to the applicable party at its address
specified below or to such other address as any party may designate by written
notice to each other party, and shall be deemed to have been given or made as
follows: (i) if personally delivered, upon delivery; (ii) if sent by mail, upon
the earlier of the date of receipt or 3 days after deposit in the U.S. mail,
first class and postage prepaid; and (iii) if sent by telecopy, upon receipt.
(c) COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with (i) the negotiation and preparation of this
Agreement and the other Loan Documents, and Bank's continued administration of
each Credit, Iii) the enforcement of Bank's rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents, and (iii) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
of otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
(d) SUCCESSORS; ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the heirs, executors, administrators, legal representatives,
successors and assigns of the parties; provided however, that Borrower may not
assign or transfer its interests or rights. hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any Credit, Borrower or its business, any guarantor of any
Credit or the business of any such guarantor, or any collateral for any Credit.
(e) CONTROLLING AGREEMENT; Amendment. In the event of any direct conflict
between any provision of this Agreement and any provision of any other Loan
Document, the terms of this Agreement shall control. This Agreement may be
amended or modified only in writing signed by Bank and Borrower.
7
(f) NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into
for the sole protection and benefit of the parties hereto and their respective
permitted successors and assigns, and no other person or entity shall be a third
party beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any other Loan Document to which it is riot a
party.
(g) SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be
held to be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition of invalidity, without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
(h) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of Arizona.
(i) CANCELLATION OF PRIOR LOAN AGREEMENTS. This Agreement cancels and
supersedes all prior loan agreements between Borrower and Bank relating to any
Credit.
VI. ARBITRATION.
(a) ARBITRATION. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (a) below) in accordance
with the terms of this Agreement. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Loan Documents, or any
past, present or future extensions of credit and other activities, transactions
or obligations of any kind related directly or indirectly to any of the Loan
Documents, including without limitation, any of the foregoing arising in
connection with the exercise of any self-help, ancillary or other remedies
pursuant to any of the Loan Documents. Any party may by summary proceedings
bring an action in court to compel arbitration of a Dispute. Any party who fails
or refuses to submit to arbitration following a lawful demand by any other party
shall bear all costs and expenses incurred by such other party in compelling
arbitration of any Dispute.
(b) GOVERNING RULES. Arbitration proceedings shall be administered by the
American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in Arizona selected
by the AAA or other administrator. If there is any inconsistency between the
terms hereof and any such rules, the terms and procedures set forth herein shall
control. All statutes of limitation applicable to any Dispute shall apply to any
arbitration proceeding. All discovery activities shall be expressly limited to
matters directly relevant to the Dispute being arbitrated. Judgment upon any
award rendered in an arbitration 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 bank of the protections afforded to it under
12 U.S.C. ss.91 or any similar applicable state law.
(c) NO WAIVER; PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration hereunder.
(d) ARBITRATOR QUALIFICATIONS AND POWERS; AWARDS. Arbitrators must be
active members of the Arizona State Bar or retired judges of the state or
federal judiciary of Arizona, with expertise in the substantive law applicable
to the subject matter of the Dispute. Arbitrators are empowered to resolve
Disputes by summary rulings in response to motions filed prior to the final
arbitration hearing. Arbitrators (i) shall resolve all Disputes in accordance
with the substantive law of the state of Arizona, (ii) may grant any remedy or
relief that a court of the state of Arizona could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award, and (iii) shall have the power to award recovery of all costs and fees,
to impose sanctions and to take such other actions as they deem necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
Arizona Rules of Civil Procedure or other applicable law. Any Dispute in which
the amount in controversy is $5,000,000 or less shall be decided by a single
arbitrator who shall not render an award of greater than $5,000,000 (including
damages, costs, fees and expenses). By submission to a single arbitrator, each
party expressly waives any right or claim to recover more than $5,000,000. Any
Dispute in which the amount in controversy exceeds $5,000,000 shall be decided
by majority vote of a panel of three arbitrators; provided however, that all
three arbitrators must actively participate in all hearings and deliberations.
8
(e) JUDICIAL REVIEW. Notwithstanding anything herein to the contrary, in
any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
Arizona, and (iii) the parties shall have in addition to the grounds referred to
in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (A) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the state of
Arizona. Judgment confirming an award in such a proceeding may be entered only
if a court determines the award is supported by substantial evidence and not
based on legal error under the substantive law of the state of Arizona.
(f) MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Loan Documents or the Subject matter of the Dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.
IN WITNESS WHEREOF, Borrower and Bank have executed this Agreement as of
JULY 14, 1998.
KNIGHT TRANSPORTATION, INC. WELLS FARGO BANK,
NATIONAL ASSOCIATION
By: /s/ Clark Jenkins
------------------------------------ By: /s/
CLARK JENKINS ------------------------------
CHIEF FINANCIAL OFFICER/SECRETARY Title:
--------------------------
Address: 5601 W. BUCKEYE ROAD Address: 100 West Washington
PHOENIX AZ 85043 Phoenix, AZ 85003
9
WELLS FARGO BANK CERTIFICATE OF INCUMBENCY
TO: WELLS FARGO BANK, NATIONAL ASSOCIATION
The undersigned, CLARK JENKINS, Secretary of KNIGHT TRANSPORTATION, INC., a
corporation created and existing under the laws of the state of ARIZONA, hereby
certifies to Wells Fargo Bank, National Association ("Bank") that (a) the
following named persons are duly elected officers of this corporation and
presently hold the titles specified below, (b) said officers are authorized to
act on behalf of this Corporation in transactions with Bank, and (c) the
signature opposite each officer's name is his or her true signature:
Title Name Signature
- ----- ---- ---------
Chairman Randy Knight /s/ Randy Knight
Chief Executive Officer Kevin P. Knight /s/ Kevin P. Knight
President Gary Knight /s/ Gary Knight
Chief Financial Officer Clark Jenkins /s/ Clark Jenkins
The undersigned further certifies that if any of the above-named officers
change, or this corporation shall immediately provide to Bank a new Certificate
of Incumbency. Bank is hereby authorized to rely on this Certificate of
Incumbency until a new Certificate of Incumbency certified by the Secretary of
this corporation is received by Bank.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the corporate seal
of said corporation as of Knight Transportation, Inc.
/s/ Clark Jenkins
-----------------------------------
CLARK JENKINS, Secretary
(SEAL)
10
To: Wells Fargo Bank,
National Association
100 West Washington
Phoenix, AZ 85003
Re: KNIGHT TRANSPORTATION, INC. ("Borrower")
Attn:____________________________________________
The undersigned is the Chief Financial Officer* of Borrower. In said
capacity, the undersigned hereby certifies to Wells Fargo Bank, National
Association ("Bank") that (a) the financial statement of Borrower dated as of
3/31/98, heretofore or concurrently herewith delivered by Borrower to Bank, and
all schedules and footnotes thereto, are true and correct, and have been
prepared in accordance with generally accepted accounting principles, and (b) as
of the date hereof, there exists no default or defined Event of Default under
any loan agreement, promissory note or any other document in effect with respect
to any credit accommodation granted by Bank to Borrower.
Dated: 7/14/98 KNIGHT TRANSPORTATION, INC.
By: /s/ Clark Jenkins
-------------------------------------
Title: Chief Financial Officer
* Insert the title of the signer who must be an officer of Borrower authorized
to borrow under the most current Corporate Borrowing Resolution delivered by
Borrower to Bank.
11
WELLS FARGO BANK CORPORATE RESOLUTION: BORROWING
TO: WELLS FARGO BANK, NATIONAL ASSOCIATION
RESOLVED: That this corporation, KNIGHT TRANSPORTATION, INC., proposes to
obtain credit from time to time, or has obtained credit, from Wells Fargo Bank,
National Association ("Bank").
BE IT FURTHER RESOLVED, that any ONE of the following officers:
CHAIRMAN OR CHIEF EXECUTIVE OFFICER OR CHIEF FINANCIAL OFFICER/SECRETARY OR
PRESIDENT
together with any ONE of the following officers:
NONE
of this corporation be and they are hereby authorized and empowered for and on
behalf of and in the name of this corporation and as its corporate act and deed:
(a) To borrow money from Bank and to assume any liabilities of any other
person or entity to Bank, in such form and on such terms and conditions as shall
be agreed upon by those authorized above and Bank, and to sign and deliver to
Bank such promissory notes and other evidences of indebtedness for money
borrowed or advanced and/or for indebtedness assumed as Bank shall require; such
promissory notes or other evidences of indebtedness may provide that advances be
requested by telephone communication and by any officer, employee or agent of
this corporation so long as the advances are deposited into any deposit account
of this corporation with Bank; this corporation shall be bound to Bank by, and
Bank may rely upon, any communication or act, including telephone
communications, purporting to be done by any officer, employee of agent of this
corporation provided that Bank believes, in good faith, that the same is done by
such person.
(b) To contract for the issuance by Bank of letters of credit, to discount
with Bank notes, acceptances and evidences of indebtedness payable to or due
this corporation, to endorse the same and execute such contracts and instruments
for repayment thereof to Bank as Bank shall require, and to enter into foreign
exchange transactions with or through Bank.
(c) To mortgage, encumber, pledge, convey, grant, assign or otherwise
transfer all or any part of this corporation's real or personal property for the
purpose of securing the payment of any of the promissory notes, contracts,
instruments and other evidences of indebtedness authorized hereby, and to
execute and deliver to Bank such deeds of trust, mortgages, pledge agreements,
security agreements and/or other related documents as Bank shall require.
(d) To perform all acts and to execute and deliver all documents described
above and all other contracts and instruments which Bank deems necessary or
convenient to accomplish the purposes of this resolution and/or to perfect or
continue the rights, remedies and security interests to be given to Bank
pursuant hereto, including without limitation, any modifications, renewals
and/or extensions of any of this corporation's obligations to Bank, however
evidenced; provided that the aggregate principal amount of all sums borrowed and
credits established pursuant to this resolution shall not at any time exceed the
sum of $10,100,000.00 outstanding and unpaid.
Loans made pursuant to a special resolution and loans made by offices of
Bank other than the office to which this resolution is delivered shall be in
addition to foregoing limitation.
BE IT FURTHER RESOLVED, that the authority hereby conferred is in addition
to that conferred by any other resolution heretofore or hereafter delivered by
this corporation to Bank and shall continue in full force and effect until Bank
shall have received notice in writing, certified by the Secretary of this
12
corporation, of the revocation hereof by a resolution duly adopted by the Board
of Directors of this corporation. Any such revocation shall be effective only as
to credit which is extended or committed by Bank, or actions which are taken by
this corporation pursuant to the resolutions contained herein, subsequent to
Bank's receipt of such notice. The authority hereby conferred shall be deemed
retroactive, and any and all acts authorized herein which were performed prior
to the passage of this resolution are hereby approved and ratified.
CERTIFICATION
I, CLARK JENKINS, Secretary of KNIGHT TRANSPORTATION, INC., a corporation
created and existing under the laws of the state of ARIZONA, do hereby certify
and declare that the foregoing is a full, true and correct copy of the
resolutions duly passed and adopted by the Board of Directors of said
corporation, by written consent of all Directors of said corporation or at a
meeting of said Board duly and regularly called, noticed and held on May 13,
1998, at which meeting a quorum of the Board of Directors was present and voted
in favor of said resolutions; that said resolutions are now in full force and
effect; that there is no provision in the Articles of Incorporation or Bylaws of
said corporation, or any shareholder agreement, limiting the power of the Board
of Directors of said corporation to pass the foregoing resolutions and that such
resolutions are in conformity with the provisions of such Articles of
Incorporation and Bylaws; and that no approval by the shareholders of, or of the
Outstanding shares of, said corporation is required with respect to the matters
which are the subject of the foregoing resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand and, if required by Bank
affixed the corporate seal of said corporation, as of 7/14/98.
By: /s/ Clark Jenkins
-------------------------------------
CLARK JENKINS, Secretary
(SEAL)
13
WELLS FARGO BANK LOAN AGREEMENT
This Loan Agreement (this "Agreement" is entered into by and between KNIGHT
TRANSPORTATION, INC. ("Borrower") and WELLS FARGO BANK, NATIONAL ASSOCIATION
("Bank") and sets forth the terms and conditions which govern all Borrower's
commercial credit accommodations from Bank, whether now existing or hereafter
granted (each, a "Credit" and collectively, 'Credits"), which terms and
conditions are in addition to those set forth in any other contract, instrument
or document (collectively with this Agreement, the "Loan Documents") required by
this Agreement or heretofore or at any time hereafter delivered to Bank in
connection with any Credit.
I. REPRESENTATIONS AND WARRANTIES. Borrower makes the following
representations and warranties to Bank, which representations and warranties
shall be true as of the date hereof and on the date of each extension of credit
under each Credit with the same effect as though made on each such date:
(a) LEGAL STATUS. Borrower is a CORPORATION, duly organized and existing
and in good standing under the laws of the State of ARIZONA, and is qualified or
licensed to do business in all jurisdictions in which such qualification or
licensing is required or in which the failure to be qualified or licensed could
have a material adverse effect on Borrower.
(b) AUTHORIZATION AND VALIDITY. Each of the Loan Documents has been duly
authorized, and upon its execution and delivery to Bank will constitute a legal,
valid and binding obligation of Borrower or the party which executes the same,
enforceable in accordance with its respective terms.
(c) NO VIOLATION. The execution, delivery and performance by Borrower of
each of the Loan Documents do not violate any provision of law or regulation, or
contravene any provision of Borrower's Articles of Incorporation or By-Laws, or
result in any breach of or default under any agreement, indenture or other
instrument to which Borrower is a party or by which Borrower may be bound.
(d) NO LITIGATION. There are no pending, or to the best of Borrower's
knowledge threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which could have a material adverse effect on the financial condition or
operation of Borrower except as disclosed by Borrower to Bank in writing prior
to the date hereof.
(e) FINANCIAL STATEMENTS. The most recent annual financial statement of
Borrower, and all interim financial statements delivered to Bank since the date
of said annual financial statement, true copies of which have been delivered by
Borrower to Bank prior to the date hereof, are complete and correct, present
fairly the financial condition of Borrower and disclose all liabilities of
Borrower, and have been prepared in accordance with generally accepted
accounting principles. Since the dates of such financial statements there has
been no material adverse change in the financial condition of Borrower, nor has
Borrower mortgaged, pledged, granted a security interest in or otherwise
encumbered any of its assets or properties except in favor of Bank or as
otherwise permitted by Bank in writing.
(f) TAX RETURNS. Borrower has no knowledge of any pending assessments or
adjustments of its income tax payable with respect to any year except as
disclosed by Borrower to Bank in writing prior to the date hereof.
II. ADDITIONAL TERMS.
(a) CONDITIONS PRECEDENT. The obligation of Bank to grant any Credit is
subject to the condition that Bank shall have received all contracts,
instruments and documents, duly executed where applicable, deemed necessary by
Bank to evidence such Credit and all terms and conditions applicable thereto,
all of which shall be in form and substance satisfactory to Bank.
(b) APPLICATION OF PAYMENTS. Each payment made on each Credit shall be
applied first, to any interest then due, second, to any fees and charges then.
due, and third, to the outstanding principal balance thereof.
III. COVENANTS. So long as any Credit remains available or any amounts
under any Credit remain outstanding, Borrower shall, unless Bank otherwise
consents in writing:
(a) INSURANCE. Maintain and keep in force, for each business in which
Borrower is engaged, insurance of the types and in amounts customarily carried
in similar lines of business, including but not limited to fire, extended
coverage, public liability, property damage and workers' compensation, carried
with companies and in amounts satisfactory to Bank, and deliver to Bank from
time to time at Bank's request schedules setting forth all insurance then in
effect.
14
(b) COMPLIANCE: LAWS AND REGULATIONS; YEAR 2000.
(i) Preserve and maintain all licenses, permits, governmental
approvals, rights, privileges and franchises necessary for the conduct of
Borrower's business; and comply with the provisions of all documents pursuant to
which Borrower is organized and/or which govern Borrower's continued existence
and with the requirements of all laws, rules, regulations and orders of any
governmental authority applicable to Borrower and/or its business, and all state
or federal environmental, hazardous waste, health and safety statutes, and any
rules or regulations adopted pursuant thereto, which govern or affect any
operations and/or properties of Borrower.
(ii) Perform all acts reasonably necessary to ensure that (A) Borrower
and any business in which Borrower holds a substantial interest, and (B) all
customers, suppliers and vendors that are material to Borrower's business,
become Year 2000 Compliant in a timely manner. Such acts shall include, without
limitation, performing a comprehensive review and assessment of all of
Borrower's systems and adopting a detailed plan, with itemized budget, for the
remediation, monitoring and testing of such systems. As used herein, "Year 2000
Compliant" shall mean, in regard to any entity, that all software, hardware,
firmware, equipment, goods or systems utilized by or material to the business
operations or financial condition of such entity, will properly perform date
sensitive functions before, during and after the year 2000. Borrower shall,
immediately upon request, provide to Bank such certifications or other evidence
of Borrower's compliance with the terms hereof as Bank may from time to time
require.
(c) OTHER INDEBTEDNESS. Not create, incur, assume or permit to exist any
indebtedness or other liabilities, whether secured or unsecured, matured or
unmatured, liquidated or unliquidated, joint or several, direct or contingent
(including any contingent liability under any guaranty of the obligations of any
person or entity), except (i) the liabilities of Borrower to Bank, (ii) trade
debt incurred by Borrower in the normal course of its business, and (iii) any
other liabilities of Borrower existing as of, and disclosed to Bank in writing
prior to, the date hereof.
(d) MERGER; CONSOLIDATION; TRANSFER OF ASSETS. Not merge into or
consolidate with any other entity; nor make any substantial change in the nature
of Borrower's business as conducted as of the date hereof; nor acquire all or
substantially all of the assets of any other person or entity; nor sell, lease,
transfer or otherwise dispose of all or a substantial or material portion of
Borrower's assets except in the ordinary course of its business.
(e) PLEDGE OF ASSETS. Not mortgage, pledge, grant or permit to exist a
security interest in, or lien upon, all or any portion of Borrower's assets now
owned or hereafter acquired, except in favor of Bank and except any of the
foregoing existing as of, and disclosed to Bank in writing prior to, the date
hereof.
(f) FINANCIAL STATEMENTS. Provide to Bank all of the following, in form and
detail satisfactory to Bank, together with such current financial and other
information as Bank from time to time may reasonably request:
(i) As soon as available, but in no event later than 120 days after and
as of the end of each FISCAL year, AN AUDITED financial statement of Borrower,
prepared by an independent certified public accountant acceptable to Bank, to
include a balance sheet, income statement and statement of cash flow, together
with all supporting schedules and footnotes.
(ii) As soon as available, but in no event later than 60 days after and
as of the end of EACH FISCAL QUARTER, a financial statement of Borrower,
prepared by Borrower and certified as correct by an officer of Borrower
authorized to borrow under the most current Corporate Borrowing Resolution
delivered by Borrower to Bank, to include a balance sheet and income statement,
together with all supporting schedules and footnotes.
*(g) FINANCIAL CONDITION. Maintain Borrower's financial condition as
follows using generally accepted accounting principles consistently applied and
used consistently with prior practices, except to the extent modified by the
following definitions:
(i) Current Ratio not at any time less than 1.00 to 1 .0, with "Current
Ratio" defined as total current assets divided by total current liabilities.
(ii) Tangible Net Worth not at any time less than $50,000,000.00, with
"Tangible Net Worth" defined as the aggregate of total stockholders' equity plus
subordinated debt less any intangible assets.
(iii) Total Liabilities divided by Tangible Net Worth not at any time
greater than 1.00 to 1.0, with "Total Liabilities" defined as the aggregate of
current liabilities and non-current liabilities less subordinated debt, and with
"Tangible Net Worth" as defined above.
(iv) EBITDA Coverage Ratio not less than 3.00 to 1.0 as of each FISCAL
quarter end, with "EBITDA" defined as net profit before tax plus interest
expense (net of capitalized interest expense), depreciation expense and
amortization expense, and with "EBITDA Coverage Ratio" defined as EBITDA divided
by the aggregate of interest expense plus the prior period current maturity of
long-term debt and the prior period current maturity of subordinated debt.*
*To be measured on a rolling four quarter basis.
15
IV. DEFAULT; REMEDIES.
(a) EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement:
(i) The failure to pay any principal, interest, fees or other charges
when due under any of the Loan Documents.
(ii) Any representation or warranty hereunder or under any other Loan
Document shall prove to be incorrect, false or misleading in any material
respect when made.
(iii) Any violation or breach of any term or condition of this
Agreement or any other of the Loan Documents.
(iv) Any default in the payment or performance of any obligation, or
any defined event of default, under any provisions of any contract, instrument
or document pursuant to which Borrower or any guarantor hereunder has incurred
debt or any other liability of any kind to any person or entity, including Bank.
(v) The filing of a petition by or against Borrower or any guarantor
hereunder under any provisions of the Bankruptcy Reform Act, Title 11 of the
United States Code, as amended or recodified from time to time, or under any
similar or other law relating to bankruptcy, insolvency, reorganization or other
relief for debtors; the appointment of a receiver, trustee, custodian or
liquidator of or for any part of the assets or property of Borrower or any such
guarantor; Borrower or any such guarantor becomes insolvent, makes a general
assignment for the benefit of creditors or is generally not paying its debts as
they become due; or any attachment or like levy on any property of Borrower or
any such guarantor.
(vi) Any material adverse change, as determined solely by Bank, in the
financial condition of Borrower.
(vii) The death or incapacity of any individual guarantor hereunder; or
the dissolution or liquidation of Borrower or of any guarantor hereunder which
is a corporation, partnership or other type of entity.
(viii) Any change in ownership during the term hereof of an aggregate
of 25% or more of the common stock of Borrower.
(b) REMEDIES. Upon the occurrence of any Event of Default: (i) the entire
balance of principal, interest, fees and charges on each Credit shall, at Bank's
option, become immediately due and payable in full without presentment, demand,
protest or notice of dishonor, all of which are expressly waived by Borrower;
(ii) the obligation, if any, of Bank to extend any further credit to Borrower
under any Credit shall immediately cease and terminate; and (iii) Bank shall
have all rights, powers and remedies available under each of the Loan Documents,
or accorded by law, including without limitation the right to resort to any
security for any Credit. All rights, powers and remedies of Bank shall be
cumulative.
V. MISCELLANEOUS.
(a) NO WAIVER. No delay, failure or discontinuance of Bank in exercising
any right, power or remedy under any of the Loan Documents shall affect or
operate as a waiver of such right, power or remedy; nor shall any single or
partial exercise of any such right, power or remedy preclude, waive or otherwise
affect any other or further exercise thereof or the exercise of any other right,
power or remedy. Any waiver, permit, consent or approval of any kind by Bank of
any breach of or default under this Agreement, or any such waiver of any
provisions or conditions hereof, must be in writing and shall be effective only
to the extent set forth in writing.
(b) NOTICES. All notices, requests and demands required under this
Agreement must be in writing, addressed to the applicable party at its address
specified below or to such other address as any party may designate by written
notice to each other party, and shall be deemed to have been given or made as
follows: (i) if personally delivered, upon delivery; (ii) if sent by mail, upon
the earlier of the date of receipt or 3 days after deposit in the U.S. mail,
first class and postage prepaid; and (iii) if sent by telecopy, upon receipt.
(c) COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Bank
immediately upon demand the full amount all payments, advances, charges, costs
and expenses, including reasonable attorneys' fees (to include outside counsel
fees and all allocated costs of Bank's in-house counsel), expended or incurred
by Bank in connection with (i) the negotiation and preparation of this Agreement
and the other Loan Documents, and Bank's continued administration of each
Credit, (ii) the enforcement of Bank's rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents, and (iii) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
(d) SUCCESSORS; ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the heirs, executors, administrators, legal representatives,
successors and assigns of the parties; provided however, that Borrower may not
assign or transfer its interests or rights hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any Credit, Borrower or its business, any guarantor of any
Credit or the business of any such guarantor, or any collateral for any Credit.
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(e) CONTROLLING AGREEMENT; AMENDMENT. In the event of any direct conflict
between any provision of this Agreement and any provision of any other Loan
Document the terms of this Agreement shall control. This Agreement may be
amended or modified only in writing signed by Bank and Borrower.
(f) NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into
for the sole protection and benefit of the parties hereto and their respective
permitted successors and assigns, and no other person or entity shall be a third
party beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any other Loan Document to which it is not a
party.
(g) SEVERABILITY OF PROVISIONS. If any provision of this Agreement snail be
held to be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
(h) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of Arizona.
(i) CANCELLATION OF PRIOR LOAN AGREEMENTS. This Agreement cancels and
supersedes all prior loan agreements between Borrower and Bank relating to any
Credit.
VI. ARBITRATION.
(a) ARBITRATION. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (a) below) in accordance
with the terms of this Agreement. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Loan Documents, or any
past, present or future extensions of credit and other activities, transactions
or obligations of any kind related directly or indirectly to any of the Loan
Documents, including without limitation, any of the foregoing arising in
connection with the exercise of any self-help, ancillary or other remedies
pursuant to any of the Loan Documents. Any party may by summary proceedings
bring an action in court to compel arbitration of a Dispute. Any party who fails
or refuses to submit to arbitration following a lawful demand by any other party
shall bear all costs and expenses incurred by such other party in compelling
arbitration of any Dispute.
(b) GOVERNING RULES. Arbitration proceedings shall be administered by the
American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in Arizona selected
by the AAA or other administrator. If there is any inconsistency between the
terms hereof and any such rules, the terms and procedures set forth herein shall
control. All statutes of limitation applicable to any Dispute shall apply to any
arbitration proceeding. All discovery activities shall be expressly limited to
matters directly relevant to the Dispute being arbitrated. Judgment upon any
award rendered in an arbitration 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 bank of the protections afforded to it under
12 U.S.C. ss.91 or any similar applicable state law.
(c) NO WAIVER; PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration hereunder.
(d) ARBITRATOR QUALIFICATIONS AND POWERS; AWARDS. Arbitrators must be
active members of the Arizona State Bar or retired judges of the state or
federal judiciary of Arizona, with expertise in the substantive law applicable
to the subject matter of the Dispute. Arbitrators are empowered to resolve
Disputes by summary rulings in response to motions filed prior to the final
arbitration hearing. Arbitrators (i) shall resolve all Disputes in accordance
with the substantive law of the state of Arizona, (ii) may grant any remedy or
relief that a court of the state of Arizona could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award, and (iii) shall have the power to award recovery of all costs and fees,
to impose sanctions and to take such other actions as they deem necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
Arizona Rules of Civil Procedure or other applicable law. Any Dispute in which
the amount in controversy is $5,000,000 or less shall be decided by a single
arbitrator who shall not render an award of greater than $5,000,000 (including
damages, costs, fees and expenses). By submission to a single arbitrator, each
party expressly waives any right or claim to recover more than $5,000,000. Any
Dispute in which the amount in controversy exceeds $5,000,000 shall be decided
by majority vote of a panel of three arbitrators; provided however, that all
three arbitrators must actively participate in all hearings and deliberations.
(e) JUDICIAL REVIEW. Notwithstanding anything herein to the contrary, in
any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
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Arizona, and (iii) the parties shall have in addition to the grounds referred to
in the Federal Arbitration Act for vacating, reducing or correcting an award the
right to judicial review of (A) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the state of
Arizona. Judgment confirming an award in such a proceeding may be entered only
if a court determines the award is supported by substantial evidence and not
based on legal error under the substantive law of the state of Arizona.
(f) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more then one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the Dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.
IN WITNESS WHEREOF, Borrower and Bank have executed this Agreement as of
OCTOBER 1, 1998.
KNIGHT TRANSPORTATION, INC. WELLS FARGO BANK,
NATIONAL ASSOCIATION
By: /s/ Clark Jenkins By: /s/
--------------------------------- -------------------------------
CLARK JENKINS Title: Vice President
CHIEF FINANCIAL OFFICER/SECRETARY
Address: 5601 W. BUCKEYE ROAD Address: 100 West Washington
PHOENIX, AZ 85043 Phoenix, AZ 85003
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