UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
Amendment No. 1
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 2005
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________.
Commission file number 000-50485
Central Freight Lines, Inc.
(Exact name of registrant as specified in its charter)
Nevada 74-2914331
( State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5601 West Waco Drive, Waco, TX 76710
(Address of principal executive offices) (Zip Code)
(Registrants telephone number, including area code)
(254) 741-5305
Not applicable
(Former name or former address, if changed since the last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X Yes No
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act.)
X Yes No
The number of shares of common stock outstanding at May 12, 2005 was 18,204,444.
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-Q/A ("Amendment No. 1") to the Quarterly
Report on Form 10-Q of Central Freight Lines, Inc. (the "Company") for the
quarter ended April 2, 2005, filed with the Securities Exchange Commission
on May 12, 2005 (the "Original Report"), is being filed solely to (i)
include Exhibit 10.26, which was inadvertently omitted as an exhibit to the
Original Report, (ii) to correct the final paragraph of footnote 4 to the
Company's unaudited financial statements in Part I, Item 1 of the Original
Report to state that purchase price adjustments of $56,000 (rather than
$64,000) were included in short-term notes payable at April 2, 2005, (iii)
to delete the eleventh paragraph of footnote 6(b) to the Company's
unaudited financial statements, regarding Short-term Notes Payable and
Liquidity, in Part I, Item 1 of the Original Report, and (iv) to make
non-substantive corrections of certain other typographical errors appearing
in Part I, Item 1, Part I, Item 2, and Part I, Item 4 of the Original
Report. Further, in filing this Amendment No. 1, the Company is electing to
file voluntarily the Company's First Amendment to Amended and Restated
Credit Agreement as an additional Exhibit 10.27 and is amending the exhibit
list included in Part II, Item 6 of the Original Report to reflect this
voluntary filing. The Amended and Restated Credit Agreement was discussed
in the Original Report but was not required to be filed under Item 601 of
Regulation S-K. In connection with the filing of this Amendment No. 1, the
Company is including as exhibits currently dated certifications of its
Chief Executive Officer and Chief Financial Officer. For convenience and
ease of reference, this Amendment No. 1 sets forth the quarterly report in
its entirety with the applicable changes. Other than as set forth above,
this Amendment No. 1 does not affect the consolidated financial statements
and footnotes or other disclosures filed in the Original Report.
Central Freight Lines, Inc.
Form 10-Q
Three months ended April 2, 2005
Table of Contents
Page Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of April 2, 2005 (unaudited) and
December 31, 2004 1
Consolidated Statements of Operations (unaudited) for the Three months
ended April 2, 2005 and April 3, 2004 2
Consolidated Statements of Cash Flows (unaudited) for the Three months
ended April 2, 2005 and April 3, 2004 3
Notes to Consolidated Financial Statements (Unaudited) 4
Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk 22
Item 4. Controls and Procedures 23
Part II. Other Information 24
Item 1. Legal Proceedings 24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24
Item 3. Defaults Upon Senior Securities 24
Item 4. Submission of Matters to a Vote of Security Holders. 24
Item.5. Other Information 24
Item 6. Exhibits 25
Signatures 26
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 2, 2005 and December 31, 2004
(In thousands, except share data)
2005
Assets (Unaudited) 2004
------------------ -----------------
Cash and cash equivalents $ 1,202 $ 2,144
Restricted cash 20,825
Accounts receivable less allowance for doubtful accounts and revenue
adjustments of $8,801 in 2005 and $7,854 in 2004 53,042 51,582
Other current assets 11,337 8,655
Deferred income taxes 8,959 6,689
------------------ -----------------
Total current assets 74,540 89,895
Property and equipment, net 131,198 135,274
Goodwill 4,324 4,324
Other assets 8,994 7,761
------------------ -----------------
Total assets $ 219,056 $ 237,254
================== =================
Liabilities and stockholders' equity
Liabilities:
Current maturities of long-term debt $ 10,538 $ 10,958
Short-term notes payable 14,337 28,108
Trade accounts payable 18,463 23,835
Payables for related party transportation services 1,537 988
Accrued expenses 29,799 23,050
------------------ -----------------
Total current liabilities 74,674 86,939
Long-term debt, excluding current maturities 20,869 21,884
Related party financing 22,852 22,852
Deferred income taxes 10,645 8,375
Claims and insurance accruals 10,644 9,646
------------------ -----------------
Total liabilities 139,684 149,696
------------------ -----------------
Stockholders' equity:
Preferred stock; $0.001 par value per share; 10,000,000 shares authorized
none issued or outstanding ---
Common Stock; $0.001 par value per share; 100,000,000 shares authorized,
18,204,444 and 18,188,894 shares issued and outstanding as of
April 2, 2005 and December 31, 2004 18 18
Additional paid-in capital 109,605 109,554
Unearned compensation (239) (266)
Accumulated deficit (30,012) (21,748)
------------------ -----------------
Total stockholders' equity 79,372 87,558
------------------ -----------------
Total liabilities and stockholders' equity $ 219,056 $ 237,254
================== =================
See accompanying notes to consolidated financial statements.
Page 1
CENTRAL FREIGHT LINES, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
Three months ended
--------------------------------
April 2, April 3,
2005 2004
--------------- ---------------
$ 89,322 $ 97,038
Operating revenues
--------------- ---------------
Operating expenses:
Salaries, wages and benefits 50,964 55,656
Purchased transportation 8,818 11,305
Purchased transportation-related parties 3,471 2,277
Operating and general supplies and expenses 20,605 18,580
Operating and general supplies and expenses-related parties 162 95
Insurance and claims 5,025 3,744
Building and equipment rentals 1,019 929
Building and equipment rentals-related parties 449 520
Depreciation and amortization 4,877 3,919
--------------- ---------------
Total operating expenses 95,390 97,025
--------------- ---------------
(Loss) income from operations (6,068) 13
Other expense:
Interest expense (615) (205)
Interest expense - related parties (1,581) (1,605)
--------------- ---------------
Loss before income taxes (8,264) (1,797)
Income taxes:
Income tax benefit --- 668
--------------- ---------------
Net loss $ (8,264) $ (1,129)
=============== ===============
Net loss per share:
Basic $ (0.45) $ (0.06)
Diluted (0.45) (0.06)
Weighted average outstanding shares:
Basic 18,192 17,714
Diluted 18,192 17,714
See accompanying notes to consolidated financial statements.
Page 2
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended April 2, 2005 and April 3, 2004
(Unaudited, in thousands)
2005 2004
----------------- -----------------
Cash flows from operating activities:
Net loss $ (8,264) $ (1,129)
Adjustments to reconcile net loss to
net cash used in operating activities:
Bad debt expense (recovery) 611 (23)
Equity in loss of affiliate (2) (1)
Depreciation and amortization 4,877 3,919
Amortization of deferred financing fees 44 ---
Deferred income taxes --- (643)
Decrease in unearned compensation 27 59
Change in operating assets and liabilities, net
of purchase accounting effects:
Accounts receivable (2,071) (848)
Other assets (2,760) (1,376)
Trade accounts payable (5,372) (706)
Trade accounts payable -related parties 549 254
Claims and insurance accruals (505) (1,363)
Accrued expenses and other liabilities 8,252 (443)
----------------- -----------------
Net cash used in operating activities (4,614) (2,300)
----------------- -----------------
Cash flows from investing activities:
Additions to property and equipment (1,078) (2,505)
Proceeds from sale of property and equipment 451 244
Cash paid for acquisition of business --- (7,058)
----------------- -----------------
Net cash used in investing activities (627) (9,319)
----------------- -----------------
Cash flows from financing activities:
Restricted Cash 20,825 ---
Proceeds from long-term debt 779 ---
Repayments of long-term debt (2,158) (3,577)
Proceeds from short-term debt 13,473 ---
Repayment of securitization facility (27,300) ---
Exercise of stock options 51 450
Payment of deferred financing fees (1,371) ---
----------------- -----------------
Net cash provided by (used in) financing activities 4,299 (3,127)
----------------- -----------------
Net decrease in cash (942) (14,746)
Cash at beginning of period 2,144 41,493
----------------- -----------------
Cash at end of period $ 1,202 $ 26,747
================= =================
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 2,295 $ 1,865
Income taxes $ --- $ 85
Non-cash transaction:
Note payable for acquisition of business: $ --- $ 3,024
See accompanying notes to consolidated financial statements.
Page 3
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In thousands, except per share amounts)
(1) Basis of Presentation
The accompanying consolidated financial statements of Central Freight Lines,Inc
and its wholly owned subsidiaries ("the Company") have been prepared by the
Company in accordance with accounting principles generally accepted in
the United States of America for interim financial information and the
instructions to Quarterly Reports on Form 10-Q and Rule 10-01 of Regulation S-X,
and should be read in conjunction with the Annual Report on Form 10-K for the
year ended December 31, 2004. Accordingly, significant accounting policies and
other disclosures normally provided have been omitted since such information
is provided therein.
In the opinion of management, the accompanying unaudited consolidated financial
statements reflect all adjustments (including normal recurring adjustments)
necessary to present fairly our consolidated financial position as of
April 2, 2005, the consolidated results of our operations for the three months
ended April 2, 2005 and April 3, 2004 and our consolidated cash flows for the
three months ended April 2, 2005 and April 3, 2004. The results of our
operations for the three months ended April 2, 2005 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2005.
(2) Revenue Recognition
The Company recognizes revenue upon the delivery of the related freight. A
portion of the Company's revenue is derived from shipments that originated or
terminated in other regions, where a portion of freight movement is handled by
another carrier. Most of this revenue is with carriers with which the Company
maintains transportation alliances. The Company does not recognize revenue or
the associated expenses that relate to the portion of the shipment transported
by its alliance partners.
Page 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -continued
(In thousands, except per share amounts)
(3) Stock-Based Compensation
The Company has a stock-based employee compensation plan. The Company accounts
for that plan under the recognition and measurement principles of Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. As such, the Company records
compensation expense only if the fair value of the underlying stock exceeds the
exercise price on the date of grant. The following table illustrates the effect
on net (loss) income and (loss) income per share as if the
Company had applied the fair value recognition provisions of Financial
Aaccounting Standards Board ("FASB") Statement No.123, Accounting for
Stock-Based Compensation, and as allowed by SFAS No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure, an Amendment of FASB
No. 123, to stock-based employee compensation.
Three months ended
--------------------------------
April 2, April 3,
2005 2004
--------------- --------------
Net loss, as reported: $ (8,264) $ (1,129)
Add:
Stock-based employee compensation expense included
in reported net loss, net of related tax effects 27 59
Deduct:
Total stock-based employee compensation expense
determined under fair value based method for all
awards (204) (156)
--------------- --------------
Pro forma net loss $ (8,441) (1,226)
=============== ===============
Net loss per share
Basic
As reported $ (0.45) (0.06)
Pro forma (0.46) (0.07)
Diluted
As reported $ (0.45) (0.06)
Pro forma (0.46) (0.07)
In December 2004, the FASB issued Statement No. 123R, Share-Based Payment.
This Statement is a revision of FASB Statement No. 123, Accounting for
Stock-Based Compensation. This Statement supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees and its related implementation
guidance. This Statement establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments for
goods or services. It also addresses transactions in which an entity incurs
liabilities in exchange for goods or services that are based that are based
on the fair value of the entity's equity instruments or that may be settled by
the issuance of those equity instruments. This Statement focuses primarily on
accounting for transactions in which an entity obtains employee services in
share-based payment transactions. This Statement does not change the
accounting guidance for share-based transactions with parties other than
employees provided in Statement No. 123 as originally issued and EITF Issue No.
96-18, "Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services."
This Statement does not address the accounting for employee share ownership
plans, which are subject to AICAP Statement of Position 93-6, Employers'
Accounting for Employee Stock Ownership Plans. The Company will be required to
adopt Statement No. 123R in fiscal 2006. The Company has not yet determined
the method of adoption or the effect of adopting SFAS No. 123R, and the
Company has not determined whether the adoption will result in amounts that are
similar to the current pro forma disclosures under SFAS No. 123.
Page 5
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -continued
(In thousands, except per share amounts)
(4) Acquisition
In March 2004, the Company expanded into the Pacific Northwest through the
purchase of selected terminal network and rolling stock of Eastern Oregon
Fast Freight ("EOFF"), a non-union LTL carrier that operated in the states of
Oregon, Washington, and Idaho. The selected assets of EOFF were purchased for
approximately $10,000, with the purchase price paid from cash reserves. The
assets acquired were recorded at fair market value as determined by
management based on information currently available and on assumptions
as to future operations.
Under terms of the agreement, the Company paid approximately $7,000 of the
purchase price at closing, and an additional $2,200 during 2004. A remaining
$864 (including purchase price adjustments of $56) is recorded on the
consolidated balance sheet under short-term notes payable at April 2, 2005, and
is expected to be paid prior to the end of the 2005-second quarter.
(5) Loss Per Share
The basic loss per share is calculated using the weighted average number of
shares outstanding. The weighted average shares outstanding used in the
calculation of the diluted loss per share includes the dilutive effect of
options to purchase common stock, calculated using the treasury stock
method as may be applicable.
The following table presents information necessary to calculate basic and
diluted loss per share:
Three months ended
-----------------------------------
April 2, 2005 April 3, 2004
------------- -------------
Net loss $ (8,264) $ (1,129)
============== ==============
Weighted average shares outstanding - basic 18,192 17,714
Common stock equivalents
-------------- -------------
Weighted average shares outstanding - diluted 18,192 17,714
============== =============
Basic loss per share (0.45) (0.06)
Diluted loss per share (0.45) (0.06)
Anti-dilutive unexercised options excluded
from calculation 1,321 1,906
Page 6
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -continued
(In thousands, except per share amounts)
(6) Debt and Related Party Financing
(a) Long term Debt
Long-term debt consists of the following at April 2, 2005 and December 31,
2004:
2005 2004
---- ----
Capital lease obligations $ 31,407 32,842
Less: Current portion 10,538 10,958
--------- ---------
$ 20,869 $ 21,884
====== ======
(b) Short term notes payable and liquidity
On April 30, 2002, the Company entered into a $40,000 revolving accounts
receivable securitization facility (the "Securitization Facility") and a
revolving credit facility (the "Revolving Facility"). Under the Securitization
Facility, the Company, on a revolving basis, sold its interests in its accounts
receivable to Central Receivables, a wholly-owned, special purpose subsidiary.
The Company could receive up to $40,000 of proceeds. The Company paid
commercial paper interest rates plus an applicable margin on the proceeds
received. The Securitization Facility included certain restrictions and
financial covenants.
On July 28, 2004, the Company and SunTrust Bank entered into an amended and
restated revolving facility (the "Amended and Restated Revolving Facility") , to
increase borrowing capacity to $30,000, and to extend the maturity date to
April 30, 2006. On November 5, 2004, the Company executed a first amendment
to the Amended and Restated Revolving Credit Facility. Under the first amendment
to the Amended and Restated Revolving Facility, the Company could receive up to
an aggregate of $30,000 of proceeds in the form of letters of credit, only.
The Amended and Restated Revolving Facility accrued interest at a variable rate
equal. The Amended and Restated Revolving Facility was secured by certain
revenue equipment, and letters of credit that were issued were secured by cash
collateral which was recordrd as restricted cash on the Company's consolidated
balance sheet at December 31, 2004. The facility contained, among other things,
certain financial and non-financial covenants.
On January 31, 2005, the Company entered into a four-year senior secured
revolving credit facility and letter of credit sub-facility (the "New Credit
Facility") with Bank of America, N.A., as Agent, and certain other lenders from
time to time party to the New Credit Facility, in the aggregate principal
amount of up to $70,000. The New Credit Facility replaces both the Amended and
Restated Revolving Facility and the Securitization Facility. The New Credit
Facility terminates on January 31, 2009.
Subject to the terms of the New Credit Facility, the maximum revolving borrowing
limit under the New Credit Facility is the lesser of (a) $70,000, or (b)85% of
the Company's eligible accounts receivable, plus 85% of the net orderly
liquidation value of the Company's eligible rolling stock owned as of January
31, 2005, plus 85% of the cost of eligible rolling stock acquired by Borrower
after January 31, 2005. Letters of Credit under the New Credit Facility are
subject to a sub-limit of $40,000 and are not required to be secured by cash
collateral.
Borrowings under the New Credit Facility bear interest at the base rate, as
defined, plus an applicable margin of 0.00% to 1.00%, or LIBOR plus an
applicable margin of 1.50% to 2.75%,based on the average quarterly availability
under the New Credit Facility. Letters of credit under the New Credit Facility
are subject to an applicable letter of credit margin of 1.25% to 2.50%, based
on the average quarterly availability under the New Credit Facility. The New
Credit Facility also prescribes additional fees for letter of
credit transactions, and an unused line fee of 0.25% to 0.375%, based on
aggregate amounts outstanding.
The New Credit Facility is collateralized by substantially all of the Company's
assets, other than certain revenue equipment and real estate that is
(or may in the future become) subject to other financing.
Page 7
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -continued
(In thousands, except per share amounts)
The New Credit Facility contains certain restrictions and covenants relating to
among other things, fixed charge coverage ratio, cash flow, capital expenditures
acquisitions and dispositions, sale-leaseback transactions, additional
indebtedness, additional liens, dividends and distributions, investment
transactions, and transactions with affiliates. The New Credit Facility
includes usual and customary events of default for a facility of this nature
and provides that, upon the occurrence and continuation of an event of default,
payment of all amounts payable under the New Credit Facility may be accelerated
and the lenders' commitments may be terminated.
Although it is a four-year credit facility, draws on the line are considered
current based on evolving interpretations of Emerging Issues Task Force 95-22
Balance Sheet Classifications, Borrowings Outstanding Under Revolving Credit
Agreements that include both a Subjective Acceleration Clause and a Lock-Box
Arrangement ("EITF 95-22"). EITF 95-22 requires revolving credit agreements
with a required lock-box arrangement that include subjective acceleration
clauses to be classified as current liabilities. The New Credit Facility
includes a lock-box agreement and also allows the lender, in its reasonable
credit judgment, to assess additional reserves against the borrowing base
calculation and take certain other discretionary actions. For example, certain
reserve requirements may result in an over advance borrowing position that
could require an accelerated repayment of the over advance portion. Since
the inception of this facility, the lender has not applied any additional
reserves to the borrowing base calculation. However, the lender, in its
reasonable credit judgment, can assess additional reserves to the borrowing
base calculation to account for changes in our business or the underlying value
of the collateral. The Company does not anticipate any changes that would
result in any material adjustments to the borrowing base calculation, but the
Company cannot be certain that additional reserves will not be assessed by the
bank to the borrowing base calculation. The Company believes the provisions in
the New Credit Facility are relatively common for credit facilities of this
type and, while the Company does not believe that this accounting requirement
accurately reflects the long-term nature of the facility, the Company
acknowledges the requirements of EITF 95-22. Accordingly, the Company has
classified borrowings under the New Credit Facility as a short-term obligation.
The line of credit established with Bank of America on January 31, 2005 has no
financial covenants until the end of May 2005. In lieu of covenants through May,
a $5,000 restriction on availability is in place. After May 2005, the $5,000
restriction is eliminated and no financial covenants exist as long as excess
available on the line remain above $15,000. If excess availability drops below
$15,000 the Company is required to maintain minimum EBITDA levels. As of April
2, 2005, the Company had approximately $18,783 in availability under the
revolving credit facility before the $5,000 restriction, loans drawn under the
credit facility amounted to $13,473, and letters of credit outstanding amounted
to $20,753.
On May 12, 2005, the Company entered into a first amendment to the New Credit
Facility. Under this amendment, the maximum revolving borrowing limit was
reduced from $70,000 to $60,000 to more closely reflect the Company's
borrowing base of $53,300 (thereby reducing fees on unused amounts) with an
option to increase the borrowing limit to $70,000 at a later date. This
amendment has no financial covenants until August 15, 2005. In lieu of
covenants through August 15, 2005, a $5,000 restriction on availability is in
place. After August 15, 2005, the $5,000 restriction is eliminated and no
financial covenants exist as long as excess availability on the line remains
above $15,000. If excess availability drops below $15,000, the Company is
required to maintain minimum EBITDA levels.
Page 8
In May 2005 the Company contracted to sell approximately 14 excess acres in
Phoenix and expected to recognize a gain on the sale. In addition, the Company
entered into agreements in principle covering an estimated $14,000 to $15,000 in
sale-leaseback and mortgage financing transactions on five terminal properties.
The Company signed a letter of intent concerning a sale-leaseback of the new
Phoenix terminal and is negotiating the definitive agreements concerning the
transaction. It is expected that the transaction will generate approximately
$6,000 in net proceeds and the Company will sign a ten-year lease with a
ten-year option with annual lease payments of approximately $600 annually. The
Company also signed a commitment letter concerning mortgage financing on four
other terminal properties that is expected to generate approximately $9,000 in
net proceeds. These transactions are subject to customary closing conditions.
The transactions are expected to close within 45 to 60 days.
Assuming the closing of these financings, or financings or other transactions
generating comparable proceeds, and the continuation of improvements in the
Company's operating results, the Company expects to have borrowing availability
in excess of $15,000 such that minimum EBITDA levels will not apply.
Although there can be no assurance, the Company believes cash from operations,
borrowing available under its new credit facility, and other sources of
liquidity will be sufficient to fund its operations at least through the end of
2005. To the extent that actual results or events differ from the Company's
financial projections or business plans, our liquidity may be adversely
affected and the Company may be unable to meet its financial covenants.
Specifically, the Company's liquidity may be adversely affected by one or
more of the following factors: weak freight demand or a loss in customer
relationships or volume, the Company's success in executing its turnaround
steps described above, the Company's ability to improve the collection of its
accounts receivable, elevated fuel prices and the ability to collect fuel
surcharges, costs associated with insurance and claims, an inability to
maintain compliance with, or negotiate amendments to, loan covenants,
the ability to finance tractors and trailers, and the possibility of shortened
payment terms by the Company's suppliers and vendors worried about our ability
to meet payment obligations.
In March 2004, the Company acquired certain assets of EOFF for approximately
$10,000. The remaining $864 is recorded on the consolidated balance sheet as
short-term notes payable. The Company expects to finalize and settle this
remaining liability in the second quarter of 2005.
(b) Related-Party Financing
In 1998, the Company entered into an agreement with Southwest Premier
Properties, L.L.C. ("Southwest Premier"), an entity controlled by the Company's
principal stockholder, for the sale and leaseback of the land, structures and
improvements of some of the Company's terminals. For financial accounting
purposes, this transaction has been accounted for as a financing arrangement.
Consequently, the related land, structures and improvements remain on the
Company's consolidated balance sheet. The initial lease term is for ten
years with an option for an additional ten years at the then fair market rental
rate. At the expiration of the original lease term, the Company has an option
to purchase all of the properties, excluding certain surplus properties, for
the then fair market value.
Since the fair value of the properties sold and leased back has always equaled
or exceeded the proceeds from the financing arrangement, the annual lease
payments have been reflected as a cost of the financing and recordedas interest
expense. During 2004, $301 of these properties were sold and accounted for as a
reduction in the financing obligation and a reduction in property. The amount
outstanding under the financing agreement was $22,852 at April 2, 2005 and
December 31, 2004 respectively. If the Company exercises the fair value purchase
option, the excess of the amount paid over the recorded financing obligation
will be reflected as additional interest expense. If the fair value purchase
option is not exercised at the end of the lease term, the excess of the
recorded financing obligation over the net book value of the related properties
will be reflected as a gain on the financing arrangement.
Page 9
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -continued
(In thousands, except per share amounts)
(7) Income Taxes
At April 2, 2005 and December 31, 2004, the Company had a federal net operating
loss carry forward of approximately $29,653 and $24,258, respectively, available
to reduce future taxable income. The net operating loss generated in the 2005
first quarter and all of 2004 amounted to $5,395 and $20,945, respectively,
and expires in varying amounts beginning in 2023 if not utilized.
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Significant management judgment is required in determining the provision for
income taxes and in determining whether deferred tax assets will be realized
in full or in part. Deferred tax assets and liabilities are measured using
enacted tax rates that are expected to apply to taxable income in years in
which the temporary differences are expected to be reversed. Under SFAS No.109
and applicable interpretations, in 2004, the Company established a $4,864
valuation allowance for deferred tax assets. Despite the requirements for such
allowance, the Company believes that the remaining net deferred tax assets will
be realized through future taxable income. As of April 2, 2005, the valuation
allowance for deferred tax assets was approximately $8,024.
(8) Contingencies
The Company is involved in certain claims and pending litigation arising from
the normal conduct of business. Based on the present knowledge of the facts,
management believes the resolution of the claims and pending litigation will
not have a material adverse effect on the consolidated financial position,
results of operations or liquidity of the Company.
In June and July 2004, three stockholder class actions were filed against the
Company and certain officers and directors. The class actions were filed in
the United States District Court - Western District of Texas and generally
allege that false and misleading statements were made in the initial public
offering registration statement and prospectus, during the period surrounding
the initial pubic offering and up to the press release dated June 16, 2004.
The class actions are in the initial phases. On August 9 and 10, 2004, two
purported derivative actions were filed agsinst the Company, as nominal
defendant, and against certain of our officers, directors, and former directors.
These actions were filed in the District Court of McLennan County, Texas and
generally allege breach of fiduciary duty, abuse of control, gross mismanagement
waste of corporate assets, and unjust enrichment on the part of certain of the
Company's present and former officers and directors in the period between
December 12, 2003 and August 2004. The purported derivative actions seek
declaratory, injunctive, and other relief. The Company does not believe there
is any factual or legal basis for the allegations and the Company intends to
vigorously defend against the suits. The Company has informed its insurance
carrier and has retained outside counsel to assist in the Company's defense.
Prior to December 12, 2004, the Company maintained a $5,000 directors' and
officers' insurance policy with a $350 deductible. On December 12, 2004, the
Company increased its directors' and officers' insurance coverage. The Company
currently maintains a $15,000 directors' and officers' insurance policy with a
$350 deductible. In the 2004 third quarter, in connection with this litigation,
the Company recorded an expense of $350, representing the full deductible
amount under its current directors' and officers' insurance policy.
Although it is not possible at this time to predict the litigation outcome of
these cases, the Company expects to prevail. However, an adverse litigation
outcome could be material to the Company's consolidated financial position
or results of operations. As a result of the uncertainty regarding the
outcome of this matter, no provision has been made in the consolidated financial
statements with respect to this contingent liability.
Page 10
CENTRAL FREIGHT LINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -continued
(In thousands, except per share amounts)
The Company is subject to loss contingencies pursuant to federal, state, and
local environmental regulations dealing with the transportation, storage,
presence, use, disposal, and handling of hazardous materials, discharge of
storm water and fuel storage tanks. Environmental liabilities, including
remediation costs, are accrued when amounts are probable and can be reasonably
estimated.
(9) Related-Party Transactions
During the three months and nine months ended April 2, 2005 and April 3, 2004
the Company incurred approximately $3,471 and $2,277, respectively, for
transportation services provided by companies for which the Company's principal
stockholder was the Chairman. At April 2, 2005 and December 31, 2004, the
Company had payables of $1,537 and $988, respectively, for these transportation
services.
During the three months ended April 2, 2005 and April 3, 2004, the Company
incurred $162 and $95, respectively, of legal services with an entity owned by
a stockholder of the Company.
During the three months ended April 2, 2005 and April 3, 2004, the Company
incurred $449 and $520, respectively, for building rental expense with
related parties.
See also note 6(c)
(10) Employee Benefit Plan
The Company initiated an Employee Stock Purchase Plan ("the Plan") in August
2004 whose purpose is to allow qualified employees to acquire shares of the
Company at a 10% discount to the closing market price as of the end of each
calendar month. These shares are issued from authorized but unissued shares
of the Company. The Plan qualifies as an Employee Stock Purchase Plan under
Section 423 of the Internal Revenue Code of 1986, as amended.
One million total shares have been authorized under the Plan.
Page 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Cautionary Note Regarding Forward-Looking Statements
Except for the historical information contained herein, the discussion in this
annual report contains "forward-looking statements," which include information
relating to future events, future financial performance, strategies,
expectations, competitive environment, regulation, and availability of
resources. These forward-looking statements include, without limitation,
statements regarding: expectations as to operational improvements; expectations
as to cost savings, revenue growth, and income; the time by which certain
objectives will be achieved; proposed new products and services; expectations
that claims, lawsuits, commitments, contingent liabilities, labor negotiations,
or agreements, or other matters will not have a materially adverse effect
on our consolidated financial position, results of operations, or liquidity;
statements concerning projections, predictions, expectations, estimates, or
forecasts as to our business, financial, and operational results and future
economic performance; and statements of management's goals and objectives,
and other similar expressions concerning matters that are not historical facts.
Words such as "may," "will," "should," "could," "would," "predicts," "plans,"
"potential," "continue," "expects," "anticipates," "future," "intends,"
"believes," "estimates," and similar expressions, as well as statements in
future tense, identify forward-looking statements. These statements are made
pursuant to the safe harbor provisions of Section 21E of the Securities
Exchange Act of 1934, as amended, and Section 27A of the Securities Act of
1933, as amended. Forward-looking statements should not be read as a guarantee
of future performance or results, and will not necessarily be accurate
indications of the times at, or by which, such performance or results will be
achieved.Forward-looking information is based on information available at the
time and/or management's good faith belief with respect to future events, and
is subject to risks and uncertainties that could cause actual performance or
results to differ materially from those expressed in the statements.
Readers should review and consider the factors discussed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Factors that May Affect Future Results" of our Annual Report on Form 10-K,
filed on March 31, 2005, along with the various disclosures by us in our press
releases, stockholder reports, and other filings with the Securities and
Exchange Commission. We do not assume, and specifically disclaim, any
obligation to update any forward-looking statement contained in this Report.
Business Overview
We are one of the ten largest regional LTL carriers in the United States based
on revenues, according to Transport Topics, generating approximately $386.6
million in revenue during fiscal 2004. In our operations, we pick up and deliver
multiple shipments for multiple customers on each trailer.
The history of the name Central Freight Lines and its franchise dates back to
1925, when Central Freight Lines was founded in Waco, Texas and served the
intrastate Texas LTL market for decades. Our company began its operations
effective June 30, 1997, when our former Chairman of the Board, Jerry Moyes,
organized our company and acquired the Central Freight Lines name, terminal
network, and physical assets from the Southwestern Division of Viking Freight
Lines, whose corporate group acquired our predecessor in 1993.
Prior to 2002, we conducted our operations almost exclusively in our eight-
state Southwest region, which is anchored by Texas and California. Since 2002,a
significant portion of our business has continued to be concentrated in our
Southwest region. Through the following two expansions, however, we have
increased the geographic scope of our business:
o In December 2002, we expanded service in a seven-state, Midwest region,
establishing all-points coverage in six of these states. Our expenses for the
year ended December 31, 2003, reflect the costs of this Midwest expansion,
primarily consisting of purchased transportation, employee training, and
relocation expenses.
o In March 2004, we expanded into the Pacific Northwest through the purchase of
selected terminal network and rolling stock of EOFF, a non-union LTL carrier
that operated in the states of Oregon, Washington, and Idaho. The selected
assets of EOFF were purchased for approximately $10.0 million, with the
purchase price paid from cash reserves. The assets acquired included six owned
terminal properties, fifteen leased terminal properties, 160 tractors, and
644 trailers.
Page 12
Recent Results of Operations and Quarter-End Financial Condition
For the quarter ended April 2, 2005, we reported a net loss of $8.3 million
equal to $(0.45) per diluted share compared to a net loss of $1.1 million for
the same period in 2004. A $0.17 per diluted share tax benefit generated, in
the 2005 first quarter, by the $8.3 million net loss was eliminated due to an
increase in our tax valuation for deferred tax assets. The increase in net loss
resulted primarily from an 8.0% decline in operating revenues and increased
costs discussed in more detail below in "Results of Operations."
At April 2, 2005, our consolidated balance sheet reflected $1.2 million in cash
$54.3 million in long-term debt and capital lease obligations, including
current portion, and $14.3 million in short-term debt. Stockholders' equity was
$79.4 million at April 2, 2005. As of that date, we had approximately $18.8
million in availability, subject to a $5.0 million restriction under our
revolving credit facility with Bank of America, although availability
fluctuates from day to day. We own real estate held for sale with an
estimated market value of $6.0 million that may be disposed of in 2005.
In May 2005, we entered into agreements in principle covering transactions
involving an estimated $14.0 million to $15.0 million in real estate proceeds
and financing on five terminal properties. We signed a letter of intent
concerning a sale-leaseback of a terminal and are negotiating the
definitive agreements concerning the transaction. It is expected that the
transaction will generate approximately $6.0 million in net proceeds and we will
sign a ten-year lease with a ten-year option with annual lease payments of
approximately $0.6 million. We also signed a commitment letter concerning
mortgage financing on four other terminal properties that is expected to
generate approximately $9.0 million in net proceeds. Both transactions are
subject to customary closing conditions. The transactions are expected to close
within 45 to 60 days. We also contracted to sell approximately 14 excess acres
in Phoenix for $1.3 million and expect to recognize a gain on the sale.
Operating Strategy for 2005
Our main goals for 2005 are to achieve quarter-by-quarter sequential improvement
in our operating performance and to return to profitability by the end of 2005.
We believe the first quarter of 2005 was a positive step in that direction, as
our operating ratio improved 240 basis points from 109.2% to 106.8% between the
fourth quarter of 2004 and the first quarter of 2005.
We have identified five specific areas of focus in our efforts to improve
results:
o Improving revenue yield and total tonnage.
o Reducing our cost structure to better align controllable costs with our
expected revenue base.
o Streamlining freight movements to consolidate movements and reduce the use
of third-party purchased transportation.
o Improving employee efficiency.
o Reducing insurance and claims expense.
We believe that much work remains to be done to return our results to
acceptable levels, particularly in the area of revenue yield and tonnage.
However, we believe the results for the first quarter of 2005 demonstrate
measurable improvement.
Revenues
Our revenues vary with the revenue per hundredweight we charge to customers and
the volume of freight we transport:
o Revenue per hundredweight measures the rates we receive from customers and
varies with the type of goods being shipped and the distance these goods are
transported. Our LTL revenue per hundredweight increased slightly from $11.45
in the first quarter of 2004 to $11.51 in the first quarter of 2005, due
mainly to increases in fuel surcharge revenue. Our LTL revenue per
hundredweight, without fuel surcharge revenue, declined to $10.56 in the first
quarter of 2005 from $11.11 in the first quarter of 2004. Effective
May 2, 2005, we enacted a general rate increase of 6.0% for customers
on our proprietary rate base.
o Volume depends on the number of customers we have, the amount of freight
those customers ship, geographic coverage, and the general economy. Our total
tonnage decreased by 8.8% from the first quarter of 2004 to the first quarter
of 2005 in part due to one less working day in the 2005 first quarter.
However, total tonnage per day in April 2005 has increased by approximately
8.3% compared to total tonnage per day in the 2005 first quarter.
Page 13
Historically, most of our revenue has been generated from transporting LTL
shipments from customers within our operating regions. In 2004, approximately
9.9% of our revenue was derived from shipments that originated or terminated
in regions outside our network, where a portion of the freight movement was
handled by another carrier. We refer to this as "interline freight." Most of
this revenue was obtained from carriers with which we maintain transportation
alliances. The revenue from interline freight in the first quarter of 2005
was lower compared to the first quarter of 2004, due in large part to our
geographic expansion. Because of the geographic expansion of our network, our
need to rely upon other carriers for freight movements declined. In addition,
some of our relationships with carriers handling interline freight were
negatively affected by our geographic expansion. We do not recognize the
portion of revenue (or the associated expenses) that relate to the portion of
shipments hauled by our alliance partners. In addition to transportation
revenue, we also recognize revenue from fuel surcharges we receive from our
customers when the national average diesel fuel price published by the U.S.
Department of Energy exceeds prices listed in our contracts and tariffs.
Operating Expenses
Our major expense categories can be summarized as follows:
Salaries, wages, and benefits. This category includes compensation for our
employees, health insurance, workers' compensation, 401(k) plan contributions,
and other fringe benefits. These expenses will vary depending upon several
factors, including our efficiency, our experience with health and workers'
compensation claims, and increases in health care costs. Salaries, wages, and
benefits also include the non-cash expense associated with stock options
granted to several of our executives that had exercise prices that were
determined to be below fair market value. This non-cash compensation expense is
expected to amount to approximately $106,400 annually through June of 2007.
Purchased transportation. This category primarily consists of the payments we
make to third parties to handle a portion of a freight movement for us. The
largest category is outsourced linehaul movements, where we contract with
truckload carriers to move our freight between origin and destination
terminals. Swift Transportation, a related party, has been our largest provider
of outsourced linehaul service. Purchased transportation also includes
outsourced pick-up and delivery service when we use alternative providers to
service areas where we lack the terminal density to provide economical service.
Operating and general supplies and expenses. This category includes fuel,
repairs and maintenance, tires, parts, general and administrative costs, office
supplies, operating taxes and licenses, communications and utilities, and other
general expenses. Repairs and maintenance, fuel, tires, and parts expenses
vary with the age of equipment and the amount of usage. We have a fuel surcharge
program that enables us to recover a significant portion of fuel price
increases.
Insurance and claims. This category includes the cost of insurance premiums and
the accruals we make for claims within our self-insured retention amounts,
primarily for personal injury, property damage, physical damage to our
equipment, and cargo claims. These expenses will vary primarily based upon
the frequency and severity of our accident experience and the market for
insurance.
Building and equipment rentals. This category consists mainly of payments to
unrelated third parties under terminal leases and payments to related parties
for seven terminals leased under operating leases.
Depreciation and amortization. This category relates to owned assets, assets
under capitalized leases, and 29 properties we lease from Southwest Premier
Properties, a related party, that are considered to be a financing arrangement.
Page 14
Results of Operations
The table below sets forth the percentage relationship of the specified
items to operating revenues for the periods indicated.
Three months ended
----------------------------
April 2, April 3,
2005 2004
------------ ------------
Operating revenues........................................ 100.0% 100.0%
Operating expenses:
Salaries, wages, and benefits........................... 57.1 57.4
Purchased transportation................................ 13.8 14.0
Operating and general supplies and
expenses............................................. 23.2 19.2
Insurance and claims.................................... 5.6 3.9
Building and equipment rentals.......................... 1.6 1.5
Depreciation and amortization........................... 5.5 4.0
--- ---
Total operating expenses (1)......................... 106.8 100.0
----- -----
Loss from operations...................................... (6.8) 0.0
Interest expense.......................................... (2.5) (1.9)
---- ----
Loss before income taxes.................................. (9.3) (1.9)
Income tax benefit........................................ --- 0.7
---
Net loss.................................................. (9.3)% (1.2)%
===== =====
__________
(1) Total operating expenses as a percentage of operating revenues, as presented
in this table, is also referred to as operating ratio.
Comparison of Three Months Ended April 2, 2005, to Three Months Ended April 3,
2004
Operating revenues. Operating revenues decreased $7.7 million, or 7.9%, from
$97.0 million for the first quarter of 2004 to $89.3 million for first quarter
of 2005. The decrease in operating revenues was partially due to one less
working day in the 2005 quarter (the 2005 quarter had 65 working days, compared
to 66 working days in the 2004 quarter). Further, revenue per working day was
$1.37 million in the 2005 quarter, which was 6.8% lower than the $1.47 million
per working day in the 2004 quarter. LTL revenue per hundredweight increased
0.5% from $11.45 in the 2004 quarter to $11.51 in the 2005 quarter as a
result of increased fuel surcharge revenue and length of haul. LTL revenue per
hundredweight in the first quarter of 2005, excluding fuel surcharge revenue,
decreased by 5.0% compared to the first quarter of 2004 despite an increase in
the average length of haul of 5.1%. Total tonnage decreased 42.3 thousand tons,
or 8.8%, from 482.2 thousand tons in the 2004-quarter to 439.9 thousand tons
in the 2005-quarter partially due to the one less working day in the 2005 first
quarter.
Page 15
Salaries, wages, and benefits. Salaries, wages, and benefits decreased
$4.7 million, or 8.4%, from $55.7 million for the first quarter of
2004 to $51.0 million for the first quarter of 2005. The decrease in
salaries, wages, and benefits resulted primarily from a decrease in
headcount of approximately 13% offset, in part, by an increase in
workers compensation expense due mainly to a single large claim that
occurred in January 2005 ($1.0 million - the maximum deductible was
expensed), and an increase in miles-based compensation for linehaul
drivers due to increases in length of haul. Despite this accident, the
average number of injuries reported for 200,000 hours worked in the
first quarter of 2005, was 27% lower than the average for 2004.) As a
percentage of operating revenues, salaries, wages, and benefits
decreased from 57.4% for the 2004 quarter to 57.1% for the 2005
quarter.
Purchased transportation. Purchased transportation decreased $1.3 million, or
9.6%, from $13.6 million for the first quarter of 2004 to $12.3 million for the
first quarter of 2005. The decrease in purchased transportation expenses
resulted primarily from a decreased usage of third party purchased
transportation due to a reduction in total tonnage shipped, an improvement
in lane balance and a reduction in total line miles of 9.1%. As a percentage
of operating revenues, purchased transportation decreased from 14.0% for
the 2004 quarter to 13.8% for the 2005 quarter.
Operating and general supplies and expenses. Operating and general supplies and
expenses increased $2.1 million, or 11.2%, from $18.7 million for the first
quarter of 2004 to $20.8 million for the first quarter of 2005. The increase in
operating and general supplies and expenses resulted primarily from an increase
in fuel expense that was partially offset by increases in fuel surcharge
revenue. As a percentage of operating revenues, operating and general supplies
and expenses increased from 19.2% for the 2004 quarter to 23.2% for the 2005
quarter.
Insurance and claims. Insurance and claims increased $1.3 million, or 35.1%,
from $3.7 million for the first quarter of 2004 to $5.0 million for the first
quarter of 2005. The increase in insurance and claims expense resulted
primarily from an increase in our third party accident claims (our first
quarter 2004 expense was unusually low) partially offset by a decrease in
cargo claims expense. As a percentage of operating revenues, insurance and
claims increased from 3.9% for the 2004 quarter to 5.6% for the 2005 quarter.
Building and equipment rentals. Building and equipment rentals remained
essentially flat at $1.5 million in each of the two quarters. As a percentage
of operating revenues, building and equipment rentals increased from 1.5%
for the 2004 quarter to 1.6% for the 2005 quarter.
Depreciation and amortization. Depreciation and amortization expense increased
approximately $1.0 million, or 25.6%, from $3.9 million for the first quarter of
2004 to $4.9 million for the first quarter of 2005, mainly as a result of
additional depreciation on replacement tractors and trailers added to our fleet
in the 2004 fourth quarter. As a percentage of operating revenues, depreciation
and amortization increased from 4.0% for the 2004 quarter to 5.5% for the 2005
quarter.
Operating ratio. Our operating ratio increased from 100.0% for the first
quarter of 2004 to 106.8% for the first quarter of 2005.
Interest expense. Total interest expense increased $0.4 million, or 22.2%, from
$1.8 million for the first quarter of 2004 to $2.2 million for the first
quarter of 2005. Average debt, in the first quarter of 2005 amounted to
approximately $42.9 million compared to $26.1 million in the 2004 first
quarter. Our related party interest expense remained relatively flat in each
quarter. The amounts for related party interest are recorded as interest
expense because the associated leases are reflected as a financing arrangement
in our consolidated financial statements. As a percentage of operating
revenues, interest expense increased from 1.9% for the 2004 quarter to 2.5%
for the 2005 quarter.
Income taxes. In 2005 we maintained a tax valuation allowance, and
recorded an income tax benefit of approximately $3.2 million due
partially to a pre-tax loss of $8.3 million. This benefit was fully
reserved by increasing the valuation allowance for deferred tax
assets. The total valuation as of April 2, 2005 amounted to
approximately $8.0 million. In the 2004 first quarter, we recorded a
$0.7 million income tax benefit due partially to a pre-tax loss of
$1.8 million.
Page 16
Liquidity and Capital Resources
Our business has required substantial, ongoing capital investments,
particularly to replace revenue equipment such as tractors and trailers. Our
primary sources of liquidity have historically been cash from operations and
secured borrowings. During 2005 our net capital expenditure requirements
(purchases less proceeds from sales) are expected to be approximately ($3.0)
million to $3.0 million (gross capital expenditures for the remainder of
2005 are expected to range between $3.0 million to $9.0 million). Included in
this range is approximately $6.0 million for replacing revenue equipment. If
we decide to purchase the $6.0 million in replacement equipment, we expect to
obtain financing independent from our New Credit Facility.
We are currently executing a turnaround plan that is designed to reverse recent
negative cash flows. During 2004 and into early 2005 we have experienced a
period of negative cash flow attributable primarily to operating losses and
approximately $25.0 million for purchases of revenue equipment during 2004.
During the third and fourth quarters of 2004, our management began implementing
several steps that are intended to improve our operating results and maintain
compliance with our financial covenants. These steps include: reducing our cost
structure to better align controllable costs with our expected revenue base,
streamlining freight movements to consolidate movements and reduce the use of
third-party purchased transportation, improving employee efficiency, reducing
insurance and claims expense, and improving revenue yield and total tonnage.
These steps contributed to a 410 basis-point improvement in our operating ratio
between the third quarter of 2004 (when the steps were implemented) and the
first quarter of 2005. We expect additional improvement in our operating
ratio between the first quarter of 2005 and the second quarter of 2005. Although
our management believes that these actions should generate the required
improvements, there can be no assurance that the improvements will occur as
planned. Our ability to fund our cash requirements in future periods will
depend on our ability to improve operating results and cash flow and our
ability to comply with covenants contained in our financing arrangements.
Our ability to achieve required improvements will depend on general shipping
demand by our customers, insurance and claims expense, and other factors.
In May 2005 we contracted to sell approximately 14 excess acres in
Phoenix for $1.3 million and expect to recognize a gain on the sale.
In addition, we entered into agreements in principle covering an
estimated $14.0 million to $15.0 million in sale-leaseback and
mortgage financing transactions on five terminal properties. We signed
a letter of intent concerning a sale-leaseback of a terminal and are
negotiating the definitive agreements concerning the transaction. It
is expected that the transaction will generate approximately $6.0
million in net proceeds and we will sign a ten-year lease with a ten-
year option with annual payments of approximately $0.6 million. We
also signed a commitment letter concerning mortgage financing on four
other terminal properties that is expected to generate approximately
$9.0 million in net proceeds. Both transactions are subject to
customary closing conditions. The transactions are expected to close
within 45 to 60 days.
Assuming the closing of these financings, or financings or other
transactions generating comparable proceeds, and the continuation of
improvements in our operating results, we expect to have borrowing
availability in excess of $15.0 million such that the minimum EBITDA
levels rerquired by the New Credit Facility will not apply.
Although there can be no assurance, we believe cash from operations, borrowing
available under our new credit facility, and other sources of liquidity will be
sufficient to fund our operations at least through the end of 2005. To the
extent that actual results or events differ from management's financial
projections or business plans, our liquidity may be adversely affected and we
may be unable to meet our financial covenants. Specifically, our liquidity
may be adversely affected by one or more of the following factors: weak freight
demand or a loss in customer relationships or volume, our success in executing
management's turnaround steps described above, our ability to improve the
collection of our accounts receivable, elevated fuel prices and the ability to
collect fuel surcharges, costs associated with insurance and claims , an
inability to maintain compliance with, or negotiate amendments to, loan
covenants, the ability to finance tractors and trailers, and the possibility
of shortened payment terms by our suppliers and vendors worried about our
ability to meet payment obligations.
Page 17
Net cash used in operating activities was approximately $4.6 million
and $2.3 million for the three months ended April 2, 2005 and April 3,
2004, respectively. Net cash used in the 2005 period resulted mainly
from $5.4 million in payments through trade accounts payable and an
increase in accounts receivable of $2.1 million, offset by an increase
in accrued expenses. In 2004, net cash used resulted mainly from
payments on claims of $1.4 million, an increase in other assets
(mainly licenses) of $1.4 million and an increase in accounts
receivable of $0.8 million.
Net cash used in investing activities was approximately $0.6 million and $9.3
million for the three months ended April 2, 2005 and April 3, 2004 respectively
Our capital expenditures (purchases less proceeds from sales) were
approximately $0.6 million in the 2005 period and $2.3 million in the 2004
period. In 2004, we paid $7.0 million (of the total purchase price of $10.0
million) for the terminal network and rolling stock of EOFF - our Northwest
expansion. We expect our net capital expenditures for the remainder of 2005 to
be approximately $(3.0) million to $3.0 million. Included in this range is
approximately $6.0 million for replacing revenue equipment. If we decide to
purchase the $6.0 million in replacement equipment, we expect to obtain
financing independent from our New Credit Facility.
Net cash provided by financing activities was approximately $4.3 million for
the three months ended April 2, 2005 due mainly to borrowings from our new
credit facility of $13.5 million. During the transition from our previous
securitization facility to the current credit facility, we liquidated our
restricted cash investment of $20.8 million and used it to partially pay off
the debt under the securitization facility. In the three months ended
April 3, 2004, net cash used amounted to $3.1 million due mainly to payments
of long-term debt.
On April 30, 2002, we entered into a $40.0 million revolving accounts
receivable securitization facility (the "Securitization Facility") and a
revolving credit facility (the "Revolving Facility"). Under the Securitization
Facility, we, on a revolving basis, sold our interests in our accounts
receivable to Central Receivables, a wholly-owned, special purpose subsidiary.
We could receive up to $40.0 million of proceeds. We paid commercial
paper interest rates plus an applicable margin on the proceeds received. The
Securitization Facility included certain restrictions and financial covenants.
On July 28, 2004, SunTrust Bank and we entered into an amended and restated
revolving facility (the "Amended and Restated Revolving Facility"), to increase
borrowing capacity to $30.0 million, and to extend the maturity date to April
30, 2006. On November 5, 2004, we executed a first amendment to the
Amended and Restated Revolving Credit Facility. Under the first amendment to
the Amended and Restated Revolving Facility, we could receive up to an aggregate
of $30.0 million of proceeds in the form of letters of credit, only. The Amended
and Restated Revolving Facility accrued interest at a variable rate equal. The
Amended and Restated Revolving Facility was secured by certain revenue
equipment, and letters of credit that were issued were secured by cash
collateral. The facility contained, among other things, certain
financial and non-financial covenants.
On January 31, 2005, we entered into the New Credit Facility with Bank of
America, N.A., as Agent, and certain other lenders from time to time party to
the New Credit Facility, in the aggregate principal amount of up to $70.0
million. The New Credit Facility replaces both the Amended and Restated
Revolving Facility and the Securitization Facility. The New Credit Facility
terminates on January 31, 2009.
Subject to the terms of the New Credit Facility, the maximum revolving
borrowing limit under the New Credit Facility was the lesser of (a) $70.0
million, or (b) 85% of our eligible accounts receivable, plus 85% of the net
orderly liquidation value of our eligible rolling stock owned as of January 31,
2005, plus 85% of the cost of eligible rolling stock acquired by Borrower after
January 31, 2005. Letters of Credit under the New Credit Facility are subject
to a sub-limit of $40.0 million.
Page 18
Borrowings under the New Credit Facility bear interest at the base rate, as
defined, plus an applicable margin of 0.00% to 1.00%, or LIBOR plus an
applicable margin of 1.50% to 2.75%, based on the average quarterly
availability under the New Credit Facility. Letters of credit under the New
Credit Facility are subject to an applicable letter of credit margin of
1.25% to 2.50%, based on the average quarterly availability under the New Credit
Facility. The New Credit Facility also prescribes additional fees for letter of
credit transactions, and an unused line fee of 0.25% to 0.375%, based on
aggregate amounts outstanding.
The New Credit Facility is collateralized by substantially all of our assets,
other than certain revenue equipment and real estate that is (or may in the
future become) subject to other financing.
The New Credit Facility contains certain restrictions and covenants relating to
among other things, fixed charge coverage ratio, cash flow, capital
expenditures, acquisitions and dispositions, sale-leaseback transactions,
additional indebtedness, additional liens, dividends and distributions,
investment transactions, and transactions with affiliates. The New Credit
Facility includes usual and customary events of default for a facility of this
nature and provides that, upon the occurrence and continuation of an event
of default, payment of all amounts payable under the New Credit Facility may be
accelerated, and the lenders commitments may be terminated.
Although it is a four-year credit facility, draws on the line are considered
current based on evolving interpretations of Emerging Issues Task Force 95-22
Balance Sheet Classifications, Borrowings Outstanding Under Revolving Credit
Agreements that include both a Subjective Acceleration Clause and a Lock-Box
Arrangement ("EITF 95-22"). EITF 95-22 requires revolving credit agreements
with a required lock-box arrangement that include subjective acceleration
clauses to be classified as current liabilities. The New Credit Facility
includes a lock-box agreement and also allows the lender, in its reasonable
credit judgment, to assess additional reserves against the borrowing base
calculation and take certain other discretionary actions. For example, certain
reserve requirements may result in an over advance borrowing position that
could require an accelerated repayment of the over advance portion. Since
the inception of this facility, the lender has not applied any additional
reserves to the borrowing base calculation. However, the lender, in its
reasonable credit judgment, can assess additional reserves to the borrowing
base calculation to account for changes in our business or the underlying value
of the collateral. The Company does not anticipate any changes that would
result in any material adjustments to the borrowing base calculation, but the
Company cannot be certain that additional reserves will not be assessed by the
bank to the borrowing base calculation. The Company believes the provisions in
the New Credit Facility are relatively common for credit facilities of this
type and, while the Company does not believe that this accounting requirement
accurately reflects the long-term nature of the facility, the Company
acknowledges the requirements of EITF 95-22. Accordingly, the Company has
classified borrowings under the New Credit Facility as a short-term obligation.
The line of credit established with Bank of America on January 31, 2005 had
no financial covenants until the end of May 2005. In lieu of covenants
through May 2005, a $5.0 million restriction on availability is in place.
After May 2005 the $5.0 million restriction is eliminated and no financial
covenants would have existed as long as excess available on the line remain
above $15.0 million. If excess availability had dropped below $15.0 million
we were required to maintain minimum EBITDA levels. As of April 2, 2005, we
had approximately $18.8 million in availability under the revolving credit
facility before the $5.0 million restriction, loans drawn under the credit
facility amounted to $13.5 million, and letters of credit outstanding
amounted to $20.8 million.
On May 12, 2005, we entered into a first amendment to the New Credit Facility.
Under this amendment, the maximum revolving borrowing limit was reduced from
$70.0 million to $60.0 million to more closely reflect our borrowing base of
$53.3 million (thereby reducing fees on unused amounts) with an option to
increase the borrowing limit to $70.0 million at a later date. This amendment
has no financial covenants until August 15, 2005. In lieu of covenants through
August 15, 2005, a $5.0 million restriction on availability is in place. After
August 15, 2005, the $5.0 million restriction is eliminated and no financial
covenants exist as long as excess availability on the line remains above $15.0
million. If excess availability drops below $15.0 million we are required
In 1998, we entered into an agreement with Southwest Premier Properties, L.L.C.
(Southwest Premier), an entity controlled by our principal stockholder,
for the sale and leaseback of the land, structures and improvements of some of
the our terminals. For financial accounting purposes, this transaction
has been accounted for as a financing arrangement. Consequently, the related
land, structures and improvements remain on our consolidated balance sheet.
The initial lease term is for ten years with an option for an additional ten
years at the then fair market rental rate. At the expiration of the original
lease term, we have an option to purchase all of the properties, excluding
certain surplus properties, for the then fair market value.
Page 19
Since the fair value of the properties sold and leased back has always equaled
or exceeded the proceeds from the financing arrangement, the annual lease
payments have been reflected as a cost of the financing and recorded as
interest expense. During 2004, $0.3 million of these properties were sold and
accounted for as a reduction in the financing obligation and a reduction in
property. The amount outstanding under the financing agreement was $22.9
million at April 2, 2005 and December 31, 2004 respectively. If we exercise the
fair value purchase option, the excess of the amount paid over the recorded
financing obligation will be reflected as additional interest expense. If the
fair value purchase option is not exercised at the end of the lease term, the
excess of the recorded financing obligation over the net book value of the
related properties will be reflected as a gain on the financing arrangement.
Off-Balance Sheet Arrangements
Certain of our terminals and revenue equipment are financed off-balance sheet
through operating leases. As of April 2, 2005, 47 of our terminals, including
seven owned by related parties, were subject to operating leases.
Terminals and revenue equipment held under operating leases are not carried on
our consolidated balance sheets, and lease payments in respect of such
terminals and revenue equipment are reflected in our consolidated statements of
operations in the line items "Building and equipment rentals related parties."
Our total rental expense related to operating leases, including rent paid
to related parties, was $1.5 million for the first quarter of 2005, compared
to $1.4 million for the first quarter of 2004. The total amount of remaining
payments under operating leases as of April 2, 2005 was $18.8 million, with
$5.0 million due in the next 12 months.
Critical Accounting Policies
We believe that the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements.
Revenue Recognition. Operating revenue is recognized upon delivery of the
related freight, as is fuel surcharge revenue. We also generate revenues derived
from interline shipments. Most of this interline revenue was with carriers with
which we maintain transportation alliances. We do not recognize revenue
(or the associated expenses) that relates to the portion of the shipment
transported by our alliance partners.
Insurance and Claims Accruals. We record insurance and claims accruals based
upon our estimate of the ultimate total cost of claims, not covered by
insurance, for bodily injury and property damage, cargo loss and damage,
physical damage to our equipment, workers compensation, long-term disability,
and group health, and post-retirement health benefits. Our estimates are based
on our evaluation of the nature and severity of the claims and our past claims
experience. We include an estimate for incurred but not reported claims. The
estimated costs for bodily injury and property damage, cargo loss and damage,
and physical damage to our equipment are charged to insurance and claims. The
other estimated costs are charged to employee benefits expense.
While we believe that our insurance and claims accruals are adequate, such
estimates may be more or less than the amount ultimately paid when claims are
settled. The estimates are continually reviewed and any changes are
reflected in current operations.
Our self-insured retention for bodily injury and property damage, cargo loss
and damage, and physical damage to our equipment is an aggregate $1.0 million
per occurrence.
Our self-insured retention for workers compensation has been $1.0 million per
occurrence since October 28, 2002. We also self-insure for all health
claims up to $300,000 per occurrence.
Allowance for Doubtful Accounts and Revenue Adjustments. We maintain allowances
for doubtful accounts and revenue adjustments. Such allowances represent
our estimate of accounts that will not ultimately be collected and
correspondingly adjust our operating revenues to reflect the estimates of
non-collectible accounts. Estimates used in determining this allowance are
based on our historical collection experience, current trends, credit
policy, and a percentage of our accounts receivable by aging category. If
the financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances
may be required.
Page 20
Income Taxes. Significant management judgement is required in determining the
provision for income taxes and in determining whether deferred tax assets will
be realized in full or in part. Deferred tax assets and liabilities are measured
using enacted tax rates that are expected to apply to taxable income in years in
which the temporary differences are expected to be reversed. Under SFAS No. 109
and applicable interpretations, in 2004, the Company established a $4.9 million
valuation allowance for deferred tax assets. Despite the requirements for such
allowance, the Company believes that the remaining net deferred tax assets will
be realized through future taxable income.As of April 2, 2005, the valuation
allowance for deferred tax assets was approximately $8.0 million.
Inflation
Most of our expenses are affected by inflation, which generally results in
increased operating costs. In response to fluctuations in the cost of
petroleum products, particularly diesel fuel, we have implemented a fuel
surcharge in our tariffs and contractual agreements. The fuel surcharge
is designed to offset the cost of fuel above a base price and increases as fuel
prices escalate over the base. We do not expect the net effect of inflation
on our results of operations to be different from the effect on LTL carriers
generally.
Seasonality
We experience some seasonal fluctuations in freight volume. Historically, our
shipments decrease during winter months and our fuel efficiency declines,
but our operating expenses have been higher in the summer months due to
increased maintenance costs for our tractors and trailers in hotter weather as
a large percentage of our operating region is in the South and Southwest United
States. Our expansion into the Midwest and the Northwest may increase our
exposure to seasonal fluctuations in operating expenses.
Page 21
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to a variety of market risks, most importantly the effects of
the price and availability of diesel fuel and changes in interest rates. To
address the risk of high fuel prices, we maintain a fuel surcharge program.
Fuel surcharge programs are well established in the industry and are broadly
accepted by our customers. We believe our fuel surcharge program is effective at
mitigating the risk of high fuel prices. Accordingly, we have not engaged in
any fuel price hedging activities. Because fuel surcharges, typically, are
based on the weekly national average price of diesel fuel and our operations
are concentrated in the Southwest and West coast, we have structured our fuel
surcharge to reflect the cost in those regions where we conduct the majority of
our business. There remains some risk that this blended national average will
not fully reflect regional fuel prices. We are highly dependent on adequate
supplies of diesel fuel. If our supply were interrupted, for example as a
result of war or hostile action against the United States or in fuel producing
regions, we would be exposed to significant risks.
Our market risk is also affected by changes in interest rates. Historically,
we have used a combination of fixed rate and variable rate obligations to
manage our interest rate exposure. Fixed rate obligations expose us to the risk
that interest rates might fall. Variable rate obligations expose us to the
risk that interest rates might rise. We did not have any interest rate swaps at
April 2, 2005, although we may enter into such swaps in the future if we
deem appropriate.
Our variable rate obligation consists of our credit facility. Our credit
facility, provided there has been no default, carries a variable interest
rate based on either the prime rate or LIBOR. We currently have $13.5 million
in drawings under our New Credit Facility at April 2, 2005, a one percentage
point increase in LIBOR rates would increase our annual interest expense by
$135,000.
Page 22
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have evaluated our
disclosure controls and procedures, as defined by the Securities and Exchange
Commission (the "SEC"), as of the end of the period covered by this report.
Based upon this evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures were
effective at the reasonable assurance level to ensure that information
required to be disclosed by us in reports filed with the SEC is recorded,
processed, summarized, and reported on a timely basis.
Changes in Internal Controls
In our Annual Report on Form 10-K for the year ended December 31, 2004, our
management identified three material weaknesses in our internal controls over
financial reporting related to our accounting for revenue, inventory, and a
deferred tax asset. Specifically, as of December 31, 2004: (a) our billing
process lacked controls to ensure the accuracy of entries to the billing
system and to ensure that changes to customer contracts were reflected in the
billing system accurately and timely, (b) we did not reconcile, pursuant to
our policy, physical counts of tire and spare parts inventories to our year-end
general ledger, and (c) we did not provide for an effective review of deferred
tax asset amounts for purposes of evaluating realizability.
Subsequent to December 31, 2004, we have undertaken the following measures to
remediate the material weaknesses in internal control over financial reporting
discussed above:
o Our rate auditor, who was hired in the fourth quarter of 2004, has been
trained to effectively audit a representative sample of revenue transactions
on a daily basis, in order to monitor the accuracy of billing entries being
made to our billing system. Our traffic manager to ensure additional accuracy
is auditing a sample of the rate auditors work. In addition, our pricing
personnel are comparing changes in customer contracts and tariffs to the
billing system in order to ensure such changes are being made timely
and accurately. We continue to minotor the rate audit process and asess its
effectiveness. However, because sufficient time has not passed that will
allow us to determine that this control has operated successfully over a
required number of cycles, we believe that as of April 2, 2005 this control
is not completely remediated.
o Physical inventories of tires and spare parts will be completed by us at
least semi-annually. Our accounting department has implemented a control to
reconcile physical counts of tires and spare parts to the general ledger on a
quarterly basis. We conducted a physical inventory near the end of the 2005
first quarter that resulted in no material change to our consolidated balance
sheets.
o We developed a detailed analysis of our future utilization of deferred tax
assets and liabilities to ensure the valuation allowance is properly stated.
Other than as discussed above, during the last fiscal quarter, there were no
changes in our internal controls over financial reporting that have materially
affected, or that are reasonably likely to materially affect, our internal
control over financial reporting.
Limitations on the Effectiveness of Controls
Our management, including the Chief Executive Officer and Chief Financial
Officer, do not expect that our disclosure controls and procedures or our
internal controls will prevent all errors or intentional fraud. An internal
control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of such internal
controls are met. Further, the design of an internal control system must
reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of the inherent
limitations in all internal control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected.
Notwithstanding the foregoing limitations, our management believes that our
disclosure controls and procedures provide reasonable assurances that the
objectives of our control system are met.
Page 23
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
We are involved in litigation incidental to our operations. These
lawsuits primarily involve claims for workers' compensation, personal
injury, or property damage incurred in the transportation of freight.
In June and July 2004, three stockholder class actions were filed
against us and certain of our officers and directors. The class
actions were filed in the United States District Court - Western
District of Texas and generally alleged that false and misleading
statements were made in our initial public offering registration
statement and prospectus, during the period surrounding our initial
pubic offering and up to the press release dated June 16, 2004. The
class actions were subsequently consolidated in the United States
District Court Western District of Texas under the title In re
Central Freight Lines Securities Litigation. The Oklahoma Firefighters
Pension and Retirement System has been named lead plaintiff in the
consolidated action, and a Consolidated Amended Class Action Complaint
was filed on May 9, 2005. The Consolidated Amended Class Action
Complaint generally alleges that false and misleading statements were
made in our initial public offering registration statement and
prospectus, during the period surrounding our initial pubic offering
and up to March 17, 2005. We do not believe there is any factual or
legal basis for the allegations and we intend to vigorously defend
against the suits. We have informed our insurance carrier and have
retained outside counsel to assist in our defense. Prior to December
12, 2004, we maintained a $5.0 million directors' and officers'
insurance policy with a $350,000 deductible. On December 12, 2004, we
increased our directors' and officers' insurance coverage. We
currently maintain a $15.0 million directors' and officers' insurance
policy with a $350,000 deductible. In the 2004 third quarter, in
connection with this litigation, we recorded an expense of $350,000,
representing the full deductible amount under our current directors'
and officers' insurance policy.
On August 9 and 10, 2004, two purported derivative actions were filed
against us, as nominal defendant, and against certain of our officers,
directors, and former directors. These actions were filed in the District
Court of McLennan County, Texas and generally allege breach of fiduciary
duty, abuse of control, gross mismanagement, waste of corporate assets, and
unjust enrichment on the part of certain of our present and former officers
and directors in the period between December 12, 2003 and August 2004. The
purported derivative actions seek declaratory, injunctive, and other
relief.
Although it is not possible at this time to predict the litigation outcome
of these cases, we expect to prevail. However, an adverse litigation
outcome could be material to our consolidated financial position or results
of operations. As a result of the uncertainty regarding the outcome of this
matter, no provision has been made in the consolidated financial statements
with respect to this contingent liability. We are not aware of any other
claims that could materially affect our consolidated financial position or
results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Securities Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Page 24
Item 6. Exhibits.
Exhibit No. Description
3.1 Amended and Restated Articles of Incorporation of Central Freight Lines, Inc., a Nevada
corporation. Incorporated by reference to Exhibit 3.1(b) to the Company's Registration
Statement on Form S-1 No. 333-109068.
3.2 Bylaws of Central Freight Lines, Inc., a Nevada corporation. (Incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement on Form S-1 No.333-109068.)
4.1 Amended and Restated Articles of Incorporation of Central Freight Lines, Inc., a Nevada
corporation. (Incorporated by reference to Exhibit 3.1 to this Report on Form 10-Q.)
4.2 Bylaws of Central Freight Lines, Inc., a Nevada corporation. (Incorporated by reference to
Exhibit 3.2 to this Report on Form 10-Q.)
10.25 Obligation Guaranty dated January 31, 2005, by Central Freight Lines, Inc., a Nevada
corporation, for the benefit of Bank of America, N.A., in its capacity as Agent for the benefit
of the Lenders. (Incorporated by reference to Exhibit 10.25 to the Company's Current Report
on Form 8-K filed on February 4, 2005.)
10.26* Amended and Restated Credit Agreement, dated March 24, 2005, by and among the Financial
Institutions named Therein as the Lenders, Bank of America, N.A. as the Agent, and Central
Freight Lines, Inc., a Texas corporation, as the Borrower.
10.27* First Amendment to Amended and Restated Credit Agreement, dated May 12, 2005,
by and among Central Freight Lines, Inc., a Texas corporation, Required
Lenders under the Credit Agreement, Bank of America, N.A., in its capacity as
Agent for Lenders under the Credit Agreement.
31.1* Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002, by Robert V. Fasso, the Company's Chief Executive Officer.
31.2* Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002, by Jeffrey A. Hale, the Company's Chief Financial Officer.
32.1* Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, by Robert V. Fasso, the Company's Chief Executive Officer.
32.2* Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, by Jeffrey A. Hale, the Company's Chief Financial Officer.
* Filed herewith.
Page 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10-Quarterly Report to be signed on
its behalf by the undersigned thereunto duly authorized.
May 17, 2005
Central Freight Lines, Inc.
/s/ Jeffrey A. Hale
Jeffrey A. Hale
Senior Vice President and Chief Financial Officer
Page 26
EXHIBIT 10.26
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of March 24, 2005
Among
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders
and
BANK OF AMERICA, N.A.
as the Agent
and
CENTRAL FREIGHT LINES, INC.
as the Borrower
TABLE OF CONTENTS
Section Page
ARTICLE 1 LOANS AND LETTERS OF CREDIT.............................................................................1
1.1 Total Facility..................................................................................1
1.2 Revolving Loans.................................................................................1
1.3 Letters of Credit...............................................................................3
1.4 Bank Products...................................................................................5
ARTICLE 2 INTEREST AND FEES.......................................................................................6
2.1 Interest........................................................................................6
2.2 Continuation and Conversion Elections...........................................................6
2.3 Maximum Interest Rate...........................................................................7
2.4 Arrangement Fee.................................................................................7
2.5 Unused Line Fee.................................................................................7
2.6 Letter of Credit Fee............................................................................8
2.7 Vehicle Maintenance Fee.........................................................................8
ARTICLE 3 PAYMENTS AND PREPAYMENTS................................................................................8
3.1 Revolving Loans.................................................................................8
3.2 Termination of Facility.........................................................................8
3.3 Repayments of Obligations.......................................................................8
3.4 LIBOR Revolving Loan Prepayments................................................................9
3.5 Payments by the Borrower........................................................................9
3.6 Payments as Revolving Loans.....................................................................9
3.7 Apportionment, Application and Reversal of Payments.............................................9
3.8 Indemnity for Returned Payments................................................................10
3.9 Agent's and Lenders Books and Records; Monthly Statements......................................10
3.10 Collection of Accounts.........................................................................10
ARTICLE 4 TAXES, YIELD PROTECTION AND ILLEGALITY.................................................................11
4.1 Taxes..........................................................................................11
4.2 Illegality.....................................................................................11
4.3 Increased Costs and Reduction of Return........................................................12
4.4 Funding Losses.................................................................................12
4.5 Inability to Determine Rates...................................................................12
4.6 Certificates of Agent..........................................................................12
4.7 Survival.......................................................................................12
ARTICLE 5 BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES......................................................13
5.1 Books and Records..............................................................................13
5.2 Financial Information..........................................................................13
5.3 Notices to the Lenders.........................................................................15
ARTICLE 6 GENERAL WARRANTIES AND REPRESENTATIONS.................................................................17
6.1 Authorization, Validity, and Enforceability of this Agreement and the Loan Documents...........17
6.2 Validity and Priority of Security Interest.....................................................17
6.3 Organization and Qualification.................................................................17
6.4 Corporate Name; Prior Transactions.............................................................17
6.5 Subsidiaries and Affiliates....................................................................17
6.6 Financial Statements and Projections...........................................................18
6.7 Capitalization.................................................................................18
6.8 Solvency.......................................................................................18
6.9 Debt...........................................................................................18
6.10 Distributions..................................................................................18
6.11 Real Estate; Leases............................................................................18
6.12 Proprietary Rights.............................................................................18
6.13 Trade Names....................................................................................18
6.14 Litigation.....................................................................................19
6.15 Labor Disputes.................................................................................19
6.16 Environmental Laws.............................................................................19
6.17 No Violation of Law............................................................................20
6.18 No Default.....................................................................................20
6.19 ERISA Compliance...............................................................................20
6.20 Taxes..........................................................................................20
6.21 Regulated Entities.............................................................................20
6.22 Use of Proceeds; Margin Regulations............................................................21
6.23 Copyrights, Patents, Trademarks and Licenses, etc..............................................21
6.24 No Material Adverse Change.....................................................................21
6.25 Full Disclosure................................................................................21
6.26 Material Agreements............................................................................21
6.27 Bank Accounts..................................................................................21
6.28 Governmental Authorization.....................................................................21
ARTICLE 7 AFFIRMATIVE AND NEGATIVE COVENANTS.....................................................................22
7.1 Taxes and Other Obligations....................................................................22
7.2 Legal Existence and Good Standing..............................................................22
7.3 Compliance with Law and Agreements; Maintenance of Licenses....................................22
7.4 Maintenance of Property; Inspection of Property................................................22
7.5 Insurance......................................................................................22
7.6 Insurance and Condemnation Proceeds............................................................23
7.7 Environmental Laws.............................................................................23
7.8 Compliance with ERISA..........................................................................23
7.9 Mergers, Consolidations or Sales...............................................................23
7.10 Distributions; Capital Change; Restricted Investments..........................................24
7.11 Transactions Affecting Collateral or Obligations...............................................24
7.12 Guaranties.....................................................................................24
7.13 Debt...........................................................................................24
7.14 Prepayment.....................................................................................24
7.15 Transactions with Affiliates...................................................................24
7.16 Investment Banking and Finder's Fees...........................................................24
7.17 Business Conducted.............................................................................25
7.18 Liens..........................................................................................25
7.19 Sale and Leaseback Transactions................................................................25
7.20 Subsidiaries...................................................................................25
7.21 Fiscal Year....................................................................................25
7.22 Capital Expenditures...........................................................................25
7.23 Fixed Charge Coverage Ratio/Minimum EBITDA.....................................................26
7.24 Use of Proceeds................................................................................27
7.25 Further Assurances.............................................................................27
7.26 Collateral.....................................................................................27
7.27 Tax Shelter Regulations........................................................................27
7.28 Permitted Acquisitions.........................................................................28
7.29 Appraisals.....................................................................................29
7.30 Post Closing Agreements and Mortgages..........................................................29
7.31 Solvency.......................................................................................29
ARTICLE 8 CONDITIONS OF LENDING..................................................................................30
8.1 Conditions Precedent to Making of Loans on the Closing Date....................................30
8.2 Conditions Precedent to Each Loan..............................................................31
ARTICLE 9 DEFAULT; REMEDIES......................................................................................32
9.1 Events of Default..............................................................................32
9.2 Remedies.......................................................................................34
ARTICLE 10 TERM AND TERMINATION..................................................................................35
10.1 Term and Termination...........................................................................35
ARTICLE 11 AMENDMENTS; WAIVERs; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS..........................................35
11.1 Amendments and Waivers.........................................................................35
11.2 Assignments; Participations....................................................................36
ARTICLE 12 THE AGENT.............................................................................................38
12.1 Appointment and Authorization..................................................................38
12.2 Delegation of Duties...........................................................................38
12.3 Liability of Agent.............................................................................38
12.4 Reliance by Agent..............................................................................39
12.5 Notice of Default..............................................................................39
12.6 Credit Decision................................................................................39
12.7 Indemnification................................................................................39
12.8 Agent in Individual Capacity...................................................................40
12.9 Successor Agent................................................................................40
12.10 Withholding Tax................................................................................40
12.11 Collateral Matters.............................................................................41
12.12 Restrictions on Actions by Lenders; Sharing of Payments........................................42
12.13 Agency for Perfection..........................................................................42
12.14 Payments by Agent to Lenders...................................................................42
12.15 Settlement.....................................................................................43
12.16 Letters of Credit; Intra-Lender Issues.........................................................45
12.17 Concerning the Collateral and the Related Loan Documents.......................................47
12.18 Field Audit and Examination Reports; Disclaimer by Lenders.....................................47
12.19 Relation Among Lenders.........................................................................47
ARTICLE 13 MISCELLANEOUS.........................................................................................48
13.1 No Waivers; Cumulative Remedies................................................................48
13.2 Severability...................................................................................48
13.3 Governing Law; Choice of Forum; Service of Process.............................................48
13.4 WAIVER OF JURY TRIAL...........................................................................49
13.5 Survival of Representations and Warranties.....................................................49
13.6 Other Security and Guaranties..................................................................49
13.7 Fees and Expenses..............................................................................49
13.8 Notices........................................................................................50
13.9 Waiver of Notices..............................................................................50
13.10 Binding Effect.................................................................................50
13.11 Indemnity of the Agent and the Lenders by the Borrower.........................................51
13.12 Limitation of Liability........................................................................51
13.13 Final Agreement................................................................................51
13.14 Counterparts...................................................................................51
13.15 Captions...................................................................................... 51
13.16 Right of Setoff................................................................................52
13.17 Confidentiality................................................................................52
13.18 Conflicts with Other Loan Documents............................................................52
13.19 USA PATRIOT Act Notice.........................................................................53
13.20 Chapter 346....................................................................................53
13.21 Restatement of Original Credit Agreement.......................................................53
13.22 Confirmations..................................................................................53
ANNEXES, EXHIBITS AND SCHEDULES
ANNEX A - DEFINED TERMS
EXHIBIT A - FORM OF REVOLVING LOAN NOTE
EXHIBIT B - FORM OF BORROWING BASE CERTIFICATE
EXHIBIT C - LEFT INTENTIONALLY BLANK
EXHIBIT D - FORM OF NOTICE OF BORROWING
EXHIBIT E - FORM OF NOTICE OF CONTINUATION/CONVERSION
EXHIBIT F - FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
SCHEDULE 1.2 - LENDERS' COMMITMENTS (ANNEX A - DEFINED TERMS)
SCHEDULE 6.3 - ORGANIZATION AND QUALIFICATIONS
SCHEDULE 6.4 - PRIOR TRANSACTIONS
SCHEDULE 6.5 - SUBSIDIARIES AND AFFILIATES
SCHEDULE 6.9 - DEBT AND EXISTING LETTERS OF CREDIT
SCHEDULE 6.11 - REAL ESTATE; LEASES
SCHEDULE 6.12 - PROPRIETARY RIGHTS
SCHEDULE 6.13 - TRADE NAMES
SCHEDULE 6.14 - LITIGATION
SCHEDULE 6.15 - LABOR DISPUTES
SCHEDULE 6.16 - ENVIRONMENTAL LAW
SCHEDULE 6.19 - ERISA COMPLIANCE
SCHEDULE 6.26 - MATERIAL AGREEMENTS
SCHEDULE 6.27 - BANK ACCOUNTS
SCHEDULE 7.9A - REAL PROPERTY HELD FOR SALE
SCHEDULE 7.9B - REAL PROPERTY HELD FOR FINANCING OR SALE/LEASEBACK
EXHIBIT 10.26
AMENDED AND RESTATED CREDIT AGREEMENT
This Amended and Restated Credit Agreement, dated as of March 24, 2005, (this
"Agreement") among the financial institutions from time to time parties hereto
(such financial institutions, together with their respective successors and
assigns, are referred to hereinafter each individually as a "Lender" and
collectively as the "Lenders"), Bank of America, N.A. with an office at 901 Main
Street, 22nd Floor, Dallas, Texas 75202, as agent for the Lenders (in its
capacity as agent, the "Agent"), and Central Freight Lines, Inc., a Texas
corporation, with offices at 5601 West Waco Drive, Waco, Texas 76710 (the
"Borrower").
W I T N E S S E T H:
WHEREAS, the Borrower, Lenders, and Agent have entered into that certain Credit
Agreement dated as of January 31, 2005 ("Original Credit Agreement");
WHEREAS, subject to the terms and conditions set forth below, Borrower, Lenders,
and the Agent desire to entirely amend, modify, and restate the Original Credit
Agreement to provide for, among other things (a) updates to the Schedules
thereto; (b) addition of Lenders thereto; and (c) modification and amendment to
certain provisions therein, subject to the terms and conditions set forth in
this Agreement;
WHEREAS, the amendment and restatement of the Original Credit Agreement
hereunder is not intended by the parties to constitute either a novation or a
discharge or satisfaction of the indebtedness and "Obligations" under the
Original Credit Agreement, which indebtedness and obligations under the Original
Credit Agreement shall remain outstanding hereunder on the terms and conditions
hereinafter provided.
WHEREAS, capitalized terms used in this Agreement and not otherwise defined
herein shall have the meanings ascribed thereto in Annex A which is attached
hereto and incorporated herein; the rules of construction contained therein
shall govern the interpretation of this Agreement, and all Annexes, Exhibits and
Schedules attached hereto are incorporated herein by reference;
WHEREAS, the Lenders have agreed to continue to make available to the Borrower a
revolving credit facility upon the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual conditions and agreements set
forth in this Agreement, and for good and valuable consideration, the receipt of
which is hereby acknowledged, the Lenders, the Agent, and the Borrower hereby
agree as follows.
ARTICLE 1
LOANS AND LETTERS OF CREDIT
1.1 Total Facility.
Subject to all of the terms and conditions of this
Agreement, the Lenders agree to make available a total credit facility of
up to $70,000,000 (the "Total Facility") to the Borrower from time to time
during the term of this Agreement. The Total Facility shall be composed of
a revolving line of credit consisting of Revolving Loans and Letters of
Credit.
1.2 Revolving Loans.
(a) (i) Amounts. Subject to the satisfaction of the conditions precedent
set forth in Article 8, each Lender severally, but not jointly, agrees,
upon the Borrower's request from time to time on any Business Day during
the period from the Closing Date to the Termination Date, to make revolving
loans (the "Revolving Loans") to the Borrower in amounts not to exceed such
Lender's Pro Rata Share of Availability, except for Non-Ratable Loans and
Agent Advances. The Lenders, however, in their unanimous discretion, may
elect to make Revolving Loans or issue or arrange to have issued Letters of
Credit in excess of the Borrowing Base on one or more occasions, but if
they do so, neither the Agent nor the Lenders shall be deemed thereby to
have changed the limits of the Borrowing Base or to be obligated to exceed
such limits on any other occasion. If the Aggregate Revolver Outstandings
would exceed Availability after giving effect to any Borrowing, the Lenders
may refuse to make or may otherwise restrict the making of Revolving Loans
as the Lenders determine until such excess has been eliminated, subject to
the Agent's authority, in its sole discretion, to make Agent Advances
pursuant to the terms of Section 1.2(i).
(ii) Upon the request of any Lender, Borrower shall execute and deliver to
such Lender a note to evidence the Revolving Loan of that Lender. Each note
shall be in the principal amount of the Lender's Pro Rata Share of the
Revolving Loan Commitments, dated the date hereof and substantially in the
form of Exhibit A (each a "Revolving Loan Note" and, collectively, the
"Revolving Loan Notes"). Each Revolving Loan Note shall represent the
obligation of Borrower to pay the amount of Lender's Pro Rata Share of the
Revolving Loan Commitments, or, if less, such Lender's Pro Rata Share of
the aggregate unpaid principal amount of all Revolving Loans to Borrower
together with interest thereon as prescribed in Section 1.2. The entire
unpaid balance of the Revolving Loan and all other non-contingent
Obligations shall be immediately due and payable in full in immediately
available funds on the Termination Date.
(b) Procedure for Borrowing.
(1) Each Borrowing shall be made upon the Borrower's irrevocable written
notice delivered to the Agent in the form of a notice of borrowing ("Notice
of Borrowing"), which must be received by the Agent prior to (i) 11:00 a.m.
(Central Standard Time) three Business Days prior to the requested Funding
Date, in the case of LIBOR Revolving Loans and (ii) 11:00 a.m. (Central
Standard Time) on the requested Funding Date, in the case of Base Rate
Revolving Loans, specifying:
(A) the amount of the Borrowing, which in the case of a LIBOR Revolving
Loan must equal or exceed $2,000,000 (and increments of $500,000 in excess
of such amount);
(B) the requested Funding Date, which must be a Business Day;
(C) whether the Revolving Loans requested are to be Base Rate Revolving
Loans or LIBOR Revolving Loans (and if not specified, it shall be deemed a
request for a Base Rate Revolving Loan); and
(D) the duration of the Interest Period for LIBOR Revolving Loans (and if
not specified, it shall be deemed a request for an Interest Period of one
month);
provided, however, that with respect to the Borrowing to be made on the
Closing Date, such Borrowing will consist of Base Rate Revolving Loans
only.
(2) In lieu of delivering a Notice of Borrowing, the Borrower may give the
Agent telephonic notice of such request for advances to the Designated
Account on or before the deadline set forth above. The Agent at all times
shall be entitled to rely on such telephonic notice in making such
Revolving Loans, regardless of whether any written confirmation is
received.
(3) The Borrower shall have no right to request a LIBOR Revolving Loan
while a Default or Event of Default has occurred and is continuing.
(c) Reliance upon Authority. Prior to the Closing Date, the Borrower shall
deliver to the Agent, a notice setting forth the account of the Borrower
(including any account which Borrower may from time to time designate in
writing to Agent as a successor account, the "Designated Account") to which
the Agent is authorized to transfer the proceeds of the Revolving Loans
requested
Page 1
hereunder. The Borrower may designate a replacement account from time
to time by written notice. All such Designated Accounts must be reasonably
satisfactory to the Agent. The Agent is entitled to rely conclusively on
any person's request for Revolving Loans on behalf of the Borrower, so long
as the proceeds thereof are to be transferred to the Designated Account.
The Agent has no duty to verify the identity of any individual representing
himself or herself as a person authorized by theBorrower to make such
requests on its behalf.
(d) No Liability. The Agent shall not incur any liability to the Borrower
as a result of acting upon any notice referred to in Sections 1.2(b) and
(c), which the Agent believes in good faith to have been given by an
officer or other person duly authorized by the Borrower to request
Revolving Loans on its behalf. The crediting of Revolving Loans to the
Designated Account conclusively establishes the obligation of the Borrower
to repay such Revolving Loans as provided herein.
(e) Notice Irrevocable. Any Notice of Borrowing (or telephonic notice in
lieu thereof) made pursuant to Section 1.2(b) shall be irrevocable. The
Borrower shall be bound to borrow the funds requested therein in accordance
therewith.
(f) Agent's Election. Promptly after receipt of a Notice of Borrowing (or
telephonic notice in lieu thereof), the Agent shall elect to have the terms
of Section 1.2(g) or the terms of Section 1.2(h) apply to such requested
Borrowing. If the Bank declines in its sole discretion to make a
Non-Ratable Loan pursuant to Section 1.2(h), the terms of Section 1.2(g)
shall apply to the requested Borrowing.
(g) Making of Revolving Loans. If Agent elects to have the terms of this
Section 1.2(g) apply to a requested Borrowing, then promptly after receipt
of a Notice of Borrowing or telephonic notice in lieu thereof, the Agent
shall notify the Lenders by telecopy, telephone or e-mail of the requested
Borrowing. Each Lender shall transfer its Pro Rata Share of the requested
Borrowing available to the Agent in immediately available funds, to the
account from time to time designated by Agent, not later than 12:00 noon
(Central Standard Time) on the applicable Funding Date. After the Agent's
receipt of all proceeds of such Revolving Loans, the Agent shall make the
proceeds of such Revolving Loans available to the Borrower on the
applicable Funding Date by transferring same day funds to the Designated
Account; provided, however, that the amount of Revolving Loans so made on
any date shall not exceed the Availability on such date.
(h) Making of Non-Ratable Loans.
(A)......If Agent elects, with the consent of the Bank, to have the terms
of this Section 1.2(h) apply to a requested Borrowing, the Bank shall make
a Revolving Loan in the amount of that Borrowing available to the Borrower
on the applicable Funding Date by transferring same day funds to Borrower's
Designated Account. Each Revolving Loan made solely by the Bank pursuant to
this Section is herein referred to as a "Non-Ratable Loan", and such
Revolving Loans are collectively referred to as the "Non-Ratable Loans."
Each Non-Ratable Loan shall be subject to all the terms and conditions
applicable to other Revolving Loans except that all payments thereon shall
be payable to the Bank solely for its own account. The aggregate amount of
Non-Ratable Loans outstanding at any time shall not exceed $10,000,000. The
Agent shall not request the Bank to make any Non-Ratable Loan if (1) the
Agent has received written notice from any Lender that one or more of the
applicable conditions precedent set forth in Article 8 will not be
satisfied on the requested Funding Date for the applicable Borrowing, or
(2) the requested Borrowing would exceed Availability on that Funding Date.
(B)......The Non-Ratable Loans shall be secured by the Agent's Liens in and
to the Collateral and shall constitute Base Rate Revolving Loans, or LIBOR
Revolving Loans, as requested by Borrower, and shall be Obligations
hereunder.
(i) Agent Advances.
(A)......Subject to the limitations set forth below, the Agent is
authorized by the Borrower and the Lenders, from time to time in the
Agent's sole discretion, (A) after the occurrence of a Default or an Event
of Default, or (B) at any time that any of the other conditions precedent
set forth in Article 8 have not been satisfied, to make Base Rate Revolving
Loans to the Borrower on behalf of the Lenders in an aggregate amount
outstanding at any time not to exceed 10% of the Borrowing Base which the
Agent, in its reasonable business judgment, deems necessary or desirable
(1) to preserve or protect the Collateral, or any portion thereof, (2) to
enhance the likelihood of, or maximize the amount of, repayment of the
Loans and other Obligations, or (3) to pay any other amount chargeable to
the Borrower pursuant to the terms of this Agreement, including costs, fees
and expenses as described in Section 13.7 (any of such advances are herein
referred to as "Agent Advances"); provided, that the Majority Lenders may
at any time revoke the Agent's authorization to make Agent Advances. Any
such revocation must be in writing and shall become effective prospectively
upon the Agent's receipt thereof.
Page 2
(B)......The Agent Advances shall be secured by the Agent's Liens in and to
the Collateral and shall constitute Base Rate Revolving Loans and
Obligations hereunder.
1.3 Letters of Credit.
(a) Agreement to Issue or Cause To Issue. Subject to the terms and
conditions of this Agreement, the Agent agrees (i) to cause the Letter of
Credit Issuer to issue for the account of the Borrower one or more
commercial/documentary and standby letters of credit (each a "Letter of
Credit" and collectively, the "Letters of Credit") and/or (ii) to provide
credit support or other enhancement to a Letter of Credit Issuer acceptable
to Agent, which issues a Letter of Credit for the account of the Borrower
(any such credit support or enhancement being herein referred to as a
"Credit Support") from time to time during the term of this Agreement. All
Existing Letters of Credit shall be deemed to have been issued pursuant
hereto, and from and after the Closing Date shall be subject to and
governed by the terms and conditions hereof
(b) Amounts; Outside Expiration Date. The Agent shall not have any
obligation to issue or cause to be issued any Letter of Credit or to
provide Credit Support for any Letter of Credit at any time if: (i) the
maximum face amount of the requested Letter of Credit is greater than the
Unused Letter of Credit Subfacility at such time; (ii) the maximum undrawn
amount of the requested Letter of Credit and all commissions, fees, and
charges due from the Borrower in connection with the opening thereof would
exceed Availability at such time; or (iii) such Letter of Credit has an
expiration date less than 30 days prior to the Stated Termination Date or
more than 12 months from the date of issuance for standby letters of credit
and 180 days for documentary letters of credit. With respect to any Letter
of Credit which contains any "evergreen" or automatic renewal provision,
each Lender shall be deemed to have consented to any such extension or
renewal unless any such Lender shall have provided to the Agent, written
notice that it declines to consent to any such extension or renewal at
least thirty (30) days prior to the date on which the Letter of Credit
Issuer is entitled to decline to extend or renew the Letter of Credit. If
all of the requirements of this Section 1.3 are met and no Default or Event
of Default has occurred and is continuing, no Lender shall decline to
consent to any such extension or renewal. Unless otherwise consented to by
Agent, all Letters of Credit must call for sight drafts to be drawn, and
must be issued in Dollars.
(c) Other Conditions. In addition to conditions precedent contained in
Article 8, the obligation of the Agent to issue or to cause to be issued
any Letter of Credit or to provide Credit Support for any Letter of Credit
is subject to the following conditions precedent having been satisfied in a
manner satisfactory to the Agent in its sole discretion:
(1) The Borrower shall have delivered to the Letter of Credit Issuer, at
such times and in such manner as such Letter of Credit Issuer may
prescribe, an application in form and substance satisfactory to such Letter
of Credit Issuer and reasonably satisfactory to the Agent for the issuance
of the Letter of Credit and such other documents as may be required
pursuant to the terms thereof, and the form, terms and purpose of the
proposed Letter of Credit shall be reasonably satisfactory to the Agent and
the Letter of Credit Issuer; and
(2) As of the date of issuance, no order of any court, arbitrator or
Governmental Authority shall purport by its terms to enjoin or restrain
money center banks generally from issuing letters of credit of the type and
in the amount of the proposed Letter of Credit, and no law, rule or
regulation applicable to money center banks generally and no request or
directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over money center banks generally shall
prohibit, or request that the proposed Letter of Credit Issuer refrain
from, the issuance of letters of credit generally or the issuance of such
Letter of Credit.
(d) Issuance of Letters of Credit.
(1) Request for Issuance. Borrower must notify the Agent of a requested
Letter of Credit at least three (3) Business Days prior to the proposed
issuance date. Such notice shall be irrevocable and must specify the
maximum face amount of the Letter of Credit requested, the Business Day of
issuance of such requested Letter of Credit, whether such Letter of Credit
may be drawn in a single or in partial draws, the Business Day on which the
requested Letter of Credit is to expire, the purpose for which such Letter
of Credit is to be issued, and the beneficiary of the requested Letter of
Credit. The Borrower shall attach to such notice the proposed form of the
Letter of Credit.
Page 3
(2) Responsibilities of the Agent; Issuance. As of the Business Day
immediately preceding the requested issuance date of the Letter of Credit,
the Agent shall determine the amount of the applicable Unused Letter of
Credit Subfacility and Availability. If (i) the maximum face amount of the
requested Letter of Credit is less than the Unused Letter of Credit
Subfacility and (ii) the amount of such requested Letter of Credit and all
commissions, fees, and charges due from the Borrower in connection with the
opening thereof would not exceed Availability, the Agent shall cause the
Letter of Credit Issuer to issue the requested Letter of Credit on the
requested issuance date so long as the other conditions hereof are met.
(3) No Extensions or Amendment. The Agent shall not be obligated to cause
the Letter of Credit Issuer to extend or amend any Letter of Credit issued
pursuant hereto unless the requirements of this Section 1.3 are met as
though a new Letter of Credit were being requested and issued.
(e) Payments Pursuant to Letters of Credit. The Borrower agrees to
reimburse immediately the Letter of Credit Issuer for any draw under any
Letter of Credit and the Agent for the account of the Lenders upon any
payment pursuant to any Credit Support, and to pay the Letter of Credit
Issuer the amount of all other charges and fees payable to the Letter of
Credit Issuer in connection with any Letter of Credit immediately when due,
irrespective of any claim, setoff, defense or other right which the
Borrower may have at any time against the Letter of Credit Issuer or any
other Person. Each drawing under any Letter of Credit shall constitute a
request by the Borrower to the Agent for a Borrowing of a Base Rate
Revolving Loan in the amount of such drawing. The Funding Date with respect
to such borrowing shall be the date of such drawing.
(f) Indemnification; Exoneration; Power of Attorney.
(1) Indemnification. In addition to amounts payable as elsewhere provided
in this Section 1.3, the Borrower agrees to protect, indemnify, pay and
save the Letter of Credit Issuer, the Lenders and the Agent harmless from
and against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including reasonable attorneys' fees) which
any Lender or the Agent (other than a Lender in its capacity as Letter of
Credit Issuer) may incur or be subject to as a consequence, direct or
indirect, of the issuance of any Letter of Credit or the provision of any
Credit Support or enhancement in connection therewith. The Borrower's
obligations under this Section shall survive payment of all other
Obligations.
(2) Assumption of Risk by the Borrower. As among the Borrower, the Lenders,
the Letter of Credit Issuer, and the Agent, the Borrower assumes all risks
of the acts and omissions of, or misuse of any of the Letters of Credit by,
the respective beneficiaries of such Letters of Credit. In furtherance and
not in limitation of the foregoing, the Lenders and the Agent shall not be
responsible for and the Borrower shall not be relieved of any of its
obligations hereunder on account of: (A) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any
Person in connection with the application for and issuance of and
presentation of drafts with respect to any of the Letters of Credit, even
if it should prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (B) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign
any Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective
for any reason; (C) the failure of the beneficiary of any Letter of Credit
to comply duly with conditions required in order to draw upon such Letter
of Credit; (D) errors, omissions, interruptions, or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (E) errors in interpretation of technical
terms; (F) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Letter of Credit or
of the proceeds thereof; (G) the misapplication by the beneficiary of any
Letter of Credit of the proceeds of any drawing under such Letter of
Credit; (H) any consequences arising from causes beyond the control of the
Lenders or the Agent, including any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto Governmental
Authority or (I) the Letter of Credit Issuer's honor of a draw for which
the draw, any certificate, or any other document fails to comply in any
respect with the terms of the Letter of Credit. None of the foregoing shall
affect, impair or prevent the vesting of any rights or powers of the Agent
or any Lender under this Section 1.3(f).
Page 4
(3) Exoneration. Without limiting the foregoing, no action or omission
whatsoever by Agent, any Lender, or the Letter of Credit Issuer shall
result in any liability of Agent, any Lender, or the Letter of Credit
Issuer to the Borrower, or relieve the Borrower of any of its obligations
hereunder to any such Person.
(4) Rights Against Letter of Credit Issuer. Nothing contained in this
Agreement is intended to limit the Borrower's rights, if any, with respect
to the Letter of Credit Issuer which arise as a result of the letter of
credit application and related documents executed by and between the
Borrower and the Letter of Credit Issuer.
(5) Account Party. The Borrower hereby authorizes and directs any Letter of
Credit Issuer to name the Borrower as the "Account Party" therein and to
deliver to the Agent all instruments, documents and other writings and
property received by the Letter of Credit Issuer pursuant to the Letter of
Credit, and to accept and rely upon the Agent's instructions and agreements
with respect to all matters arising in connection with the Letter of Credit
or the application therefor.
(g) Supporting Letter of Credit; Cash Collateral. If, notwithstanding the
provisions of Section 1.3(b) and Section 10.1, any Letter of Credit or
Credit Support is outstanding upon the termination of this Agreement, then
upon such termination the Borrower shall, at the request of Agent in its
sole discretion, either: (A) deposit with the Agent, for the ratable
benefit of the Agent and the Lenders, with respect to each Letter of Credit
or Credit Support then outstanding (the "Remaining Letter of Credit
Obligations"), a standby letter of credit (a "Supporting Letter of Credit")
in form and substance satisfactory to the Agent, issued by an issuer
satisfactory to the Agent in an amount equal to 110% of the greatest amount
for which such Letter of Credit or such Credit Support may be drawn, under
which Supporting Letter of Credit the Agent is entitled to draw amounts
necessary to reimburse the Agent and the Lenders for payments to be made by
the Agent and the Lenders under such Letter of Credit or Credit Support and
any fees and expenses associated with such Letter of Credit or Credit
Support. Such Supporting Letter of Credit shall be held by the Agent, for
the ratable benefit of the Agent and the Lenders, as security for, and to
provide for the payment of, the aggregate undrawn amount of such Letters of
Credit or such Credit Support remaining outstanding, or (B) pledge or
deposit with or deliver to Agent, for the benefit of the Letter of Credit
Issuer, the Agent, and the Lenders, as collateral for the Remaining Letter
of Credit Obligations, cash or deposit account balances in the amount of
110% of the Remaining Letter of Credit Obligations, pursuant to
documentation in form and substance satisfactory to the Agent and the
Letter of Credit Issuer (which documents are hereby consented to by the
Lenders). The Borrower hereby grants to the Agent, for the benefit of the
Agent, the Letter of Credit Issuer, and the Lenders, a security interest in
all such cash, deposit accounts, and all balances therein, and all proceeds
of the foregoing. Cash Collateral shall be maintained in blocked,
non-interest bearing deposit accounts at Bank of America, N.A..
1.4 Bank Products.
The Borrower may request and the Agent may, in its sole
and absolute discretion, arrange for the Borrower to obtain from the Bank
or the Bank's Affiliates Bank Products although the Borrower is not
required to do so. If Bank Products are provided by an Affiliate of the
Bank, the Borrower agrees to indemnify and hold the Agent, the Bank and the
Lenders harmless from any and all costs and obligations now or hereafter
incurred by the Agent, the Bank or any of the Lenders which arise from any
indemnity given by the Agent to its Affiliates related to such Bank
Products; provided, however, nothing contained herein is intended to limit
the Borrower's rights, with respect to the Bank or its Affiliates, if any,
which arise as a result of the execution of documents by and between the
Borrower and the Bank which relate to Bank Products. The agreement
contained in this Section shall survive termination of this Agreement. The
Borrower acknowledges and agrees that the obtaining of Bank Products from
the Bank or the Bank's Affiliates (a) is in the sole and absolute
discretion of the Bank or the Bank's Affiliates, and (b) is subject to all
rules and regulations of the Bank or the Bank's Affiliates.
Page 5
ARTICLE 2
INTEREST AND FEES
2.1 Interest.
(a) Interest Rates. All outstanding Obligations shall bear interest on the
unpaid principal amount thereof (including, to the extent permitted by law,
on interest thereon not paid when due) from the date made until paid in
full in cash at a rate determined by reference to the Base Rate or the
LIBOR Rate plus the Applicable Margins as set forth below, but not to
exceed the Maximum Rate. If at any time Loans are outstanding with respect
to which the Borrower has not delivered to the Agent a notice specifying
the basis for determining the interest rate applicable thereto in
accordance herewith, those Loans shall bear interest at a rate determined
by reference to the Base Rate until notice to the contrary has been given
to the Agent in accordance with this Agreement and such notice has become
effective. Except as otherwise provided herein, the outstanding Obligations
shall bear interest as follows:
(i) For all Base Rate Revolving Loans and other Obligations (other than
LIBOR Revolving Loans) at a fluctuating per annum rate equal to the lesser
of : (A) the Maximum Rate, and (B) the Base Rate plus the Applicable
Margin; and
(ii) For all LIBOR Revolving Loans at a per annum rate equal to the lesser
of : (A) the Maximum Rate, and (B) the LIBOR Rate plus the Applicable
Margin.
Each change in the Base Rate shall be reflected in the interest rate
applicable to Base Rate Revolving Loans as of the effective date of such
change. All interest charges shall be computed on the basis of a year of
360 days and actual days elapsed. The Borrower shall pay to the Agent, for
the ratable benefit of Lenders, interest accrued on all Base Rate Revolving
Loans in arrears on the first day of each month hereafter and on the
Termination Date. The Borrower shall pay to the Agent, for the ratable
benefit of Lenders, interest on all LIBOR Revolving Loans in arrears on
each LIBOR Interest Payment Date.
(b) Default Rate. If any Default or Event of Default occurs and is
continuing and the Agent or the Required Lenders in their discretion so
elect, then, while any such Default or Event of Default is continuing, all
of the Obligations shall bear interest at the lesser of (i) the Maximum
Rate, and (ii) the Default Rate applicable thereto.
2.2 Continuation and Conversion Elections.
(a) The Borrower may:
(i) elect, as of any Business Day, in the case of Base Rate Revolving Loans
to convert any Base Rate Revolving Loans (or any part thereof in an amount
not less than $2,000,000, or that is in an integral multiple of $500,000 in
excess thereof) into LIBOR Revolving Loans; or
(ii) elect, as of the last day of the applicable Interest Period, to
continue any LIBOR Revolving Loans having Interest Periods expiring on such
day (or any part thereof in an amount not less than $2,000,000, or that is
in an integral multiple of $500,000 in excess thereof);
provided, that if at any time the aggregate amount of LIBOR Revolving Loans
in respect of any Borrowing is reduced, by payment, prepayment, or
conversion of part thereof to be less than $500,000, such LIBOR Revolving
Loans shall automatically convert into Base Rate Revolving Loans; provided
further that if the notice shall fail to specify the duration of the
Interest Period, such Interest Period shall be one month.
(b) The Borrower shall deliver a notice of continuation/conversion ("Notice
of Continuation/Conversion") to the Agent not later than 11:00 a.m.
(Central Standard Time) at least three (3) Business Days in advance of the
Continuation/Conversion Date, if the Loans are to be converted into or
continued as LIBOR Revolving Loans and specifying:
(i) the proposed Continuation/Conversion Date;
(ii) the aggregate amount of Loans to be converted or renewed;
(iii) the type of Loans resulting from the proposed conversion or
continuation; and
(iv) the duration of the requested Interest Period, provided, however, the
Borrower may not select an Interest Period that ends after the Stated
Termination Date.
Page 6
(c) If upon the expiration of any Interest Period applicable to LIBOR
Revolving Loans, the Borrower has failed to select timely a new Interest
Period to be applicable to LIBOR Revolving Loans or if any Default or Event
of Default then exists, the Borrower shall be deemed to have elected to
convert such LIBOR Revolving Loans into Base Rate Revolving Loans effective
as of the expiration date of such Interest Period.
(d) The Agent will promptly notify each Lender of its receipt of a Notice
of Continuation/Conversion. All conversions and continuations shall be made
ratably according to the respective outstanding principal amounts of the
Loans with respect to which the notice was given held by each Lender.
(e) There may not be more than six (6) different LIBOR Revolving Loans in
effect hereunder at any time.
2.3 Maximum Interest Rate.
In no event shall any interest rate provided for
hereunder (including any fees or other compensation which are deemed or
determined to be interest) exceed the maximum rate legally chargeable by
any Lender under applicable law for such Lender with respect to loans of
the type provided for hereunder (the "Maximum Rate"). If, in any period,
any interest, absent such limitation, would have exceeded the Maximum Rate,
then the interest rate for that period shall be the Maximum Rate, and, if
in future periods, that interest rate would otherwise be less than the
Maximum Rate, then that interest rate shall remain at the Maximum Rate
until such time as the amount of interest paid hereunder equals the amount
of interest which would have been paid if the same had not been limited by
the Maximum Rate. In the event that, upon payment in full of the
Obligations, the total amount of interest paid or accrued under the terms
of this Agreement is less than the total amount of interest which would,
but for this Section 2.3, have been paid or accrued if the interest rate
otherwise set forth in this Agreement had at all times been in effect, then
the Borrower shall, to the extent permitted by applicable law, pay the
Agent, for the account of the Lenders, an amount equal to the excess of (a)
the lesser of (i) the amount of interest which would have been charged if
the Maximum Rate had, at all times, been in effect or (ii) the amount of
interest which would have accrued had the interest rate otherwise set forth
in this Agreement, at all times, been in effect over (b) the amount of
interest actually paid or accrued under this Agreement. If the Agent and/or
any Lender has received interest and other charges hereunder in excess of
the Maximum Rate, such excess shall be deemed received on account of, and
shall automatically be applied to reduce, the Obligations other than
interest, and if there are no Obligations outstanding, the Agent and/or
such Lender shall refund to the Borrower such excess.
2.4 Arrangement Fee.
The Borrower agrees to pay the Agent on the Closing Date
an arrangement fee (the "Arrangement Fee") as set forth in the letter dated
January 14, 2005, between the Agent and Borrower, as amended.
2.5 Unused Line Fee.
On the first day of each month hereafter and on the
Termination Date the Borrower agrees to pay to the Agent, for the account
of the Lenders, in accordance with their respective Pro Rata Shares, an
unused line fee (the "Unused Line Fee") equal to the Applicable Margin for
the Unused Line Fee times the amount by which the Maximum Revolver Amount
exceeded the sum of the average daily outstanding amount of Revolving Loans
and the average daily undrawn face amount of outstanding Letters of Credit,
during the immediately preceding month or shorter period if calculated for
the first month hereafter or on the Termination Date. The Unused Line Fee
shall be computed on the basis of a 360-day year for the actual number of
days elapsed. All principal payments received by the Agent shall be deemed
to be credited to the Borrower's Loan Account immediately upon receipt for
purposes of calculating the Unused Line Fee pursuant to this Section 2.5.
Page 7
2.6 Letter of Credit Fee.
The Borrower agrees to pay (a) to the Agent, for the
account of the Lenders, in accordance with their respective Pro Rata
Shares, for each Letter of Credit, a per annum fee (the "Letter of Credit
Fee") equal to the Applicable Margin with respect to Letters of Credit
multiplied by the maximum stated amount of each Letter of Credit, (b) to
Agent for the benefit of the Letter of Credit Issuer, a fronting fee of
one-quarter of one percent (0.25%) per annum (the "Fronting Fee") of the
undrawn maximum face amount of each Letter of Credit, and (c) on the date
of issuance, increase, and/or extension, including, without limitation, any
automatic extension of any Letter of Credit, to the Letter of Credit
Issuer, all out-of-pocket costs, fees and expenses incurred by the Letter
of Credit Issuer in connection with the application for, processing of,
issuance of, or amendment to any Letter of Credit, which costs, fees and
expenses shall include a "fronting fee" payable to the Letter of Credit
Issuer. The Letter of Credit Fee and the Fronting Fee shall be payable
monthly in arrears on the first day of each month following any month in
which a Letter of Credit is outstanding and on the Termination Date. The
Letter of Credit Fee and the Fronting Fee shall be computed on the basis of
a 360-day year for the actual number of days elapsed.
2.7 Vehicle Maintenance Fee.
At Agent's sole and absolute discretion, Agent may
retain any third party servicer ("Title Servicer") to house, maintain,
service, release, perfect, and perform other matters relating to the
certificates of title relating to the Rolling Stock. The Borrower agrees to
pay all fees and expenses of such Title Servicer on demand.
ARTICLE 3
PAYMENTS AND PREPAYMENTS
3.1 Revolving Loans.
The Borrower shall repay the outstanding principal balance
of the Revolving Loans, plus all accrued but unpaid interest thereon, on
the Termination Date. The Borrower may prepay Revolving Loans at any time,
and reborrow subject to the terms of this Agreement. In addition, and
without limiting the generality of the foregoing, upon demand the Borrower
shall pay to the Agent, for account of the Lenders, the amount, without
duplication, by which the Aggregate Revolver Outstandings exceeds the
lesser of the Borrowing Base or the Maximum Revolver Amount.
3.2 Termination of Facility.
The Borrower may terminate this Agreement upon at
least ten (10) Business Days' notice to the Agent and the Lenders, upon (a)
the payment in full of all outstanding Revolving Loans, together with
accrued interest thereon, and the cancellation and return of all
outstanding Letters of Credit, (b) the payment in full in cash of all
reimbursable expenses and other Obligations, and (c) with respect to any
LIBOR Revolving Loans prepaid, payment of the amounts due under Section
4.4, if any. If this Agreement is terminated at any time prior to the First
Anniversary Date, whether pursuant to this Section or pursuant to Section
9.2, the Borrower shall pay to the Agent, for the account of the Lenders,
an early termination fee equal to 1.0% of the Maximum Revolver Amount.
3.3 Repayments of Obligations.
(a) Immediately upon receipt by Borrower or its Subsidiaries of proceeds of
any asset disposition (including, without limitation, any sale,
refinancing, mortgaging or sale/leaseback of any asset) or any sale of the
stock of any Subsidiary, Borrower shall prepay the Loans in an amount equal
to all such proceeds, net of (A) commissions and other reasonable and
customary transaction costs, fees and expenses properly attributable to
such transaction and payable by Borrower in connection therewith (in each
case, paid to non-Affiliates), (B) transfer taxes, (C) amounts payable to
holders of senior Liens (to the extent such Liens constitute Permitted
Liens under subpart (j) of the definition of Permitted Liens), if any, and
(D) an appropriate reserve for income taxes in accordance with GAAP in
connection therewith ("Net Proceeds"). Any such prepayment shall be applied
in accordance with Section 3.3(b).
(b) Prepayments from Net Proceeds shall be applied as follows: first, to
accrued interest with respect to the Base Rate Revolving Loans, second, to
pay the principal of the Base Rate Revolving Loans, and third to cash
collateralize outstanding Letters of Credit. So long as no Default or Event
of Default has occurred and is continuing, the Borrower may at its
election, prepay interest and principal of any LIBOR Rate Loan or direct
the Agent to hold such proceeds as Collateral for the Obligations.
Notwithstanding the foregoing, any prepayments made following the
occurrence and during the continuation of any Default or Event of Default
shall be applied to the Obligations in any order the Agent elects.
Page 8
(c) No provision contained in this Section 3.3 shall constitute a consent
to an asset disposition that is otherwise not permitted by the terms of
this Agreement.
3.4 LIBOR Revolving Loan Prepayments.
In connection with any prepayment, if any
LIBOR Revolving Loans are prepaid prior to the expiration date of the
Interest Period applicable thereto, the Borrower shall pay to the Lenders
the amounts described in Section 4.4.
3.5 Payments by the Borrower.
(a) All payments to be made by the Borrower shall be made without set-off,
recoupment or counterclaim. Except as otherwise expressly provided herein,
all payments by the Borrower shall be made to the Agent for the account of
the Lenders, at the account designated by the Agent and shall be made in
Dollars and in immediately available funds, no later than 12:00 noon
(Central Standard Time) on the date specified herein. Any payment received
by the Agent after such time shall be deemed (for purposes of calculating
interest only) to have been received on the following Business Day and any
applicable interest shall continue to accrue.
(b) Subject to the provisions set forth in the definition of "Interest
Period", whenever any payment is due on a day other than a Business Day,
such payment shall be due on the following Business Day, and such extension
of time shall in such case be included in the computation of interest or
fees, as the case may be.
3.6 Payments as Revolving Loans.
At the election of Agent, all payments of
principal, interest, reimbursement obligations in connection with Letters
of Credit and Credit Support for Letters of Credit, fees, premiums,
reimbursable expenses and other sums payable hereunder, may be paid from
the proceeds of Revolving Loans made hereunder. The Borrower hereby
irrevocably authorizes the Agent to charge the Loan Account for the purpose
of paying all amounts from time to time due hereunder and agrees that all
such amounts charged shall constitute Revolving Loans (including
Non-Ratable Loans and Agent Advances).
3.7 Apportionment, Application and Reversal of Payments.
Principal and interest
payments shall be apportioned ratably among the Lenders (according to the
unpaid principal balance of the Loans to which such payments relate held by
each Lender) and payments of the fees shall, as applicable, be apportioned
ratably among the Lenders, except for fees payable solely to Agent and the
Letter of Credit Issuer and except as provided in Section 11.1(b). All
payments shall be remitted to the Agent and all such payments not relating
to principal or interest of specific Loans, or not constituting payment of
specific fees, and all proceeds of Accounts or other Collateral received by
the Agent, shall be applied, ratably, subject to the provisions of this
Agreement, first, to pay any fees, indemnities or expense reimbursements
including any amounts relating to Bank Products (excluding Hedge
Agreements) then due to the Agent from the Borrower; second, to pay any
fees or expense reimbursements then due to the Lenders from the Borrower;
third, to pay interest due in respect of all Loans, including Non-Ratable
Loans and Agent Advances; fourth, to pay or prepay principal of the
Non-Ratable Loans and Agent Advances; fifth, to pay or prepay principal of
the Revolving Loans (other than Non-Ratable Loans and Agent Advances) and
unpaid reimbursement obligations in respect of Letters of Credit; sixth, to
pay an amount to Agent equal to all outstanding Letter of Credit
Obligations to be held as cash collateral for such Obligations; and
seventh, to the payment of any other Obligation (including Hedge
Agreements) due to the Agent or any Lender by the Borrower. Notwithstanding
anything to the contrary contained in this Agreement, unless so directed by
the Borrower, or unless an Event of Default has occurred and is continuing,
neither the Agent nor any Lender shall apply any payments which it receives
to any LIBOR Revolving Loan, except (a) on the expiration date of the
Interest Period applicable to any such LIBOR Revolving Loan, or (b) in the
event, and only to the extent, that there are no outstanding Base Rate
Revolving Loans and, in any event, the Borrower shall pay LIBOR breakage
losses in accordance with Section 4.4. The Agent and the Lenders shall have
the continuing and exclusive right to apply and reverse and reapply any and
all such proceeds and payments to any portion of the Obligations.
Page 9
3.8 Indemnity for Returned Payments.
If after receipt of any payment which is
applied to the payment of all or any part of the Obligations, the Agent,
any Lender, the Bank or any Affiliate of the Bank is for any reason
compelled to surrender such payment or proceeds to any Person because such
payment or application of proceeds is invalidated, declared fraudulent, set
aside, determined to be void or voidable as a preference, impermissible
setoff, or a diversion of trust funds, or for any other reason, then the
Obligations or part thereof intended to be satisfied shall be revived and
continued and this Agreement shall continue in full force as if such
payment or proceeds had not been received by the Agent or such Lender and
the Borrower shall be liable to pay to the Agent and the Lenders, and
hereby does indemnify the Agent and the Lenders and hold the Agent and the
Lenders harmless for the amount of such payment or proceeds surrendered.
The provisions of this Section 3.8 shall be and remain effective
notwithstanding any contrary action which may have been taken by the Agent
or any Lender in reliance upon such payment or application of proceeds, and
any such contrary action so taken shall be without prejudice to the Agent's
and the Lenders' rights under this Agreement and shall be deemed to have
been conditioned upon such payment or application of proceeds having become
final and irrevocable. The provisions of this Section 3.8 shall survive the
termination of this Agreement.
3.9 Agent's and Lenders' Books and Records; Monthly Statements.
The Agent shall
record the principal amount of the Loans owing to each Lender, the undrawn
face amount of all outstanding Letters of Credit and the aggregate amount
of unpaid reimbursement obligations outstanding with respect to the Letters
of Credit from time to time on its books. In addition, each Lender may note
the date and amount of each payment or prepayment of principal of such
Lender's Loans in its books and records. Failure by Agent or any Lender to
make such notation shall not affect the obligations of the Borrower with
respect to the Loans or the Letters of Credit. The Borrower agrees that the
Agent's and each Lender's books and records showing the Obligations and the
transactions pursuant to this Agreement and the other Loan Documents shall
be admissible in any action or proceeding arising therefrom, and shall
constitute rebuttably presumptive proof thereof, irrespective of whether
any Obligation is also evidenced by a promissory note or other instrument.
The Agent will provide to the Borrower a monthly statement of Loans,
payments, and other transactions pursuant to this Agreement. Such statement
shall be deemed correct, accurate, and binding on the Borrower and an
account stated (except for reversals and reapplications of payments made as
provided in Section 3.7 and corrections of errors discovered by the Agent),
unless the Borrower notifies the Agent in writing to the contrary within
thirty (30) days after such statement is rendered. In the event a timely
written notice of objections is given by the Borrower, only the items to
which exception is expressly made will be considered to be disputed by the
Borrower.
3.10 Collection of Accounts.
Borrower shall at all times after February 28, 2005
maintain lockboxes ("Lockboxes") and shall, on or before February 28, 2005,
instruct all Account Debtors with respect to Accounts and General
Intangibles of Borrower to remit all Collections in respect thereof to such
Lockboxes or local deposit accounts at financial institutions acceptable to
the Agent. Borrower, Agent and the Lockbox Banks shall enter into the
Lockbox Agreements, which among other things shall provide for the opening
of a Lockbox Account for the deposit of Collections at a Lockbox Bank.
Borrower agrees that: (a) all good funds on deposit in each local
collection account (other than a local collection account which is subject
to a Control Agreement) in excess of $25,000 per account shall be swept
pursuant to standing instructions (by wire transfer or ACH transaction) on
a daily basis to a Lockbox Account; and (b) all Collections and other
amounts received by Borrower from any Account Debtor or any other source
immediately upon receipt shall be deposited into a Lockbox Account. No
Lockbox Agreement or arrangement contemplated thereby shall be modified by
Borrower without the prior written consent of the Agent. All amounts
received in each Lockbox Account shall be wired each Business Day into an
account ("Agent's Account") with the Agent. If at any one time Borrower's
Availability has been $30,000,000 or more for at least the last thirty
consecutive days, then, upon Borrower's request, Agent shall give the
relevant Lockbox Bank an instruction permitting Borrower to direct the
disbursement of funds on deposit in such Lockbox Account. If at any time
thereafter either: (x) Borrower's Availability is less than $30,000,000 on
any day, or (y) the occurrence of an Event of Default, then all amounts
received in each Lockbox Account shall be wired each Business Day into the
Agent's Account and Borrower shall thereafter no longer be permitted to
direct disbursement of any funds in deposit in such Lockbox Account.
Page 10
ARTICLE 4
TAXES, YIELD PROTECTION AND ILLEGALITY
4.1 Taxes.
(a) Any and all payments by the Borrower to each Lender or the Agent under
this Agreement and any other Loan Document shall be made free and clear of,
and without deduction or withholding for any Taxes. In addition, the
Borrower shall pay all Other Taxes.
(b) The Borrower agrees to indemnify and hold harmless each Lender and the
Agent for the full amount of Taxes or Other Taxes (including any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this
Section) paid by any Lender or the Agent and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. Payment under this indemnification shall be
made within 30 days after the date such Lender or the Agent makes written
demand therefor.
(c) If the Borrower shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Lender or the Agent, then:
(i) the sum payable shall be increased as necessary so that after making
all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section) such
Lender or the Agent, as the case may be, receives an amount equal to the
sum it would have received had no such deductions or withholdings been
made;
(ii) the Borrower shall make such deductions and withholdings;
(iii) the Borrower shall pay the full amount deducted or withheld to the
relevant taxing authority or other authority in
accordance with applicable law; and
(iv) the Borrower shall also pay to each Lender or the Agent for the
account of such Lender, at the time interest is paid, all additional
amounts which the respective Lender specifies as necessary to preserve the
after-tax yield such Lender would have received if such Taxes or Other
Taxes had not been imposed.
(d) At the Agent's request, within 30 days after the date of any payment by
the Borrower of Taxes or Other Taxes, the Borrower shall furnish the Agent
the original or a certified copy of a receipt evidencing payment thereof,
or other evidence of payment satisfactory to the Agent.
(e) If the Borrower is required to pay additional amounts to any Lender or
the Agent pursuant to subsection (c) of this Section, then such Lender
shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its lending office so as to
eliminate any such additional payment by the Borrower which may thereafter
accrue, if such change in the judgment of such Lender is not otherwise
disadvantageous to such Lender.
4.2 Illegality.
(a) If any Lender determines that the introduction of any Requirement of
Law, or any change in any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is
unlawful, for any Lender or its applicable lending office to make LIBOR
Revolving Loans, then, on notice thereof by that Lender to the Borrower
through the Agent, any obligation of that Lender to make LIBOR Revolving
Loans shall be suspended until that Lender notifies the Agent and the
Borrower that the circumstances giving rise to such determination no longer
exist.
(b) If a Lender determines that it is unlawful to maintain any LIBOR
Revolving Loan, the Borrower shall, upon its receipt of notice of such fact
and demand from such Lender (with a copy to the Agent), prepay in full such
LIBOR Revolving Loans of that Lender then outstanding, together with
interest accrued thereon and amounts required under Section 4.4, either on
the last day of the Interest Period thereof, if that Lender may lawfully
continue to maintain such LIBOR Revolving Loans to such day, or
immediately, if that Lender may not lawfully continue to maintain such
LIBOR Revolving Loans. If the Borrower is required to so prepay any LIBOR
Revolving Loans, then concurrently with such prepayment, the Borrower shall
borrow from the affected Lender, in the amount of such repayment, a Base
Rate Revolving Loan.
Page 11
4.3 Increased Costs and Reduction of Return.
(a) If any Lender determines that due to either (i) the introduction of or
any change in the interpretation of any law or regulation or (ii) the
compliance by that Lender with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of
law), there shall be any increase in the cost to such Lender of agreeing to
make or making, funding or maintaining any LIBOR Revolving Loans, then the
Borrower shall be liable for, and shall from time to time, upon demand
(with a copy of such demand to be sent to the Agent), pay to the Agent for
the account of such Lender, additional amounts as are sufficient to
compensate such Lender for such increased costs.
(b) If any Lender shall have determined that (i) the introduction of any
Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or
(iv) compliance by such Lender or any corporation or other entity
controlling such Lender with any Capital Adequacy Regulation, affects or
would affect the amount of capital required or expected to be maintained by
such Lender or any corporation or other entity controlling such Lender and
(taking into consideration such Lender's or such corporation's or other
entity's policies with respect to capital adequacy and such Lender's
desired return on capital) determines that the amount of such capital is
increased as a consequence of its Commitments, loans, credits or
obligations under this Agreement, then, upon demand of such Lender to the
Borrower through the Agent, the Borrower shall pay to such Lender, from
time to time as specified by such Lender, additional amounts sufficient to
compensate such Lender for such increase.
4.4 Funding Losses.
The Borrower shall reimburse each Lender and hold each
Lender harmless from any loss or expense which such Lender may sustain or
incur as a consequence of:
(a) the failure of the Borrower to make on a timely basis any payment of
principal of any LIBOR Revolving Loan;
(b) the failure of the Borrower to borrow, continue or convert a Loan after
the Borrower has given (or is deemed to have given) a Notice of Borrowing
or a Notice of Continuation/Conversion; or
(c) the prepayment or other payment (including after acceleration thereof)
of any LIBOR Revolving Loans on a day that is not the last day of the
relevant Interest Period;
including any such loss of anticipated profit and any loss or expense
arising from the liquidation or reemployment of funds obtained by it to
maintain its LIBOR Revolving Loans or from fees payable to terminate the
deposits from which such funds were obtained. Borrower shall also pay any
customary administrative fees charged by any Lender in connection with the
foregoing.
4.5 Inability to Determine Rates.
If the Agent determines that for any reason
adequate and reasonable means do not exist for determining the LIBOR Rate
for any requested Interest Period with respect to a proposed LIBOR
Revolving Loan, or that the LIBOR Rate for any requested Interest Period
with respect to a proposed LIBOR Revolving Loan does not adequately and
fairly reflect the cost to the Lenders of funding such Loan, the Agent will
promptly so notify the Borrower and each Lender. Thereafter, the obligation
of the Lenders to make or maintain LIBOR Revolving Loans hereunder shall be
suspended until the Agent revokes such notice in writing. Upon receipt of
such notice, the Borrower may revoke any Notice of Borrowing or Notice of
Continuation/Conversion then submitted by it. If the Borrower does not
revoke such Notice, the Lenders shall make, convert or continue the Loans,
as proposed by the Borrower, in the amount specified in the applicable
notice submitted by the Borrower, but such Loans shall be made, converted
or continued as Base Rate Revolving Loans instead of LIBOR Revolving Loans.
4.6 Certificates of Agent.
If any Lender claims reimbursement or compensation
under this Article 4, Agent shall determine the amount thereof and shall
deliver to the Borrower (with a copy to the affected Lender) a certificate
setting forth in reasonable detail the amount payable to the affected
Lender, and such certificate shall be conclusive and binding on the
Borrower in the absence of manifest error.
4.7 Survival.
The agreements and obligations of the Borrower in this Article 4
shall survive the payment of all other Obligations.
Page 12
ARTICLE 5
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
5.1 Books and Records.
The Borrower shall maintain, at all times, correct and
complete books, records and accounts in which complete, correct and timely
entries are made of its transactions in accordance with GAAP applied
consistently with the audited Financial Statements required to be delivered
pursuant to Section 5.2(a). The Borrower shall, by means of appropriate
entries, reflect in such accounts and in all Financial Statements proper
liabilities and reserves for all taxes and proper provision for
depreciation and amortization of property and bad debts, all in accordance
with GAAP. The Borrower shall maintain at all times books and records
pertaining to the Collateral in such detail, form and scope as the Agent or
any Lender shall reasonably require, including, but not limited to, records
of (a) all payments received and all credits and extensions granted with
respect to the Accounts; and (b) all other dealings affecting the
Collateral.
5.2 Financial Information.
The Borrower shall promptly furnish to each Lender,
all such financial information as the Agent shall reasonably request.
Without limiting the foregoing, the Borrower will furnish to the Agent, in
sufficient copies for distribution by the Agent to each Lender, in such
detail as the Agent or the Lenders shall request, the following:
(a) As soon as available, but in any event not later than ninety (90) days
after the close of each Fiscal Year, consolidated audited balance sheets,
and income statements, cash flow statements and changes in stockholders'
equity for the Parent and its Subsidiaries for such Fiscal Year, and the
accompanying notes thereto, setting forth in each case in comparative form
figures for the previous Fiscal Year, all in reasonable detail, fairly
presenting the financial position and the results of operations of the
Parent and its consolidated Subsidiaries as at the date thereof and for the
Fiscal Year then ended, and prepared in accordance with GAAP. Such
statements shall be examined in accordance with generally accepted auditing
standards by and, in the case of such statements performed on a
consolidated basis, accompanied by: (i) a report thereon from Parent's
Registered Public Accounting Firm selected by the Parent and reasonably
satisfactory to the Agent, which report and opinion shall be prepared in
accordance with generally accepted auditing standards and applicable
Securities Laws and shall not be subject to any "going concern" or like
qualification or exception or any qualification or exception as to the
scope of such audit, and (ii) with respect to statements for fiscal year
2005 and thereafter, an attestation report of such Registered Public
Accounting Firm as to the Parent's internal controls pursuant to Section
404 of Sarbanes-Oxley expressing a conclusion to which the Agent does not
reasonably object, and in all cases, such consolidated statements to be
certified by a Responsible Officer of the Borrower to the effect that such
statements are fairly stated in all material respects when considered in
relation to the consolidated financial statements of the Parent and its
Subsidiaries. The Borrower and the Parent, simultaneously with retaining
such independent public accountants to conduct such annual audit, shall
send a letter to such accountants, with a copy to the Agent and the
Lenders, notifying such accountants that one of the primary purposes for
retaining such accountants' services and having audited financial
statements prepared by them is for use by the Agent and the Lenders. The
Borrower and the Parent hereby authorize the Agent to communicate directly
with their Registered Public Accountants and, by this provision, authorize
those accountants to disclose to the Agent any and all financial statements
and other supporting financial documents and schedules relating to the
Borrower and the Parent and to discuss directly with the Agent the finances
and affairs of the Borrower and the Parent.
(b) As soon as available, but in any event not later than the earlier of:
(i) the filing thereof with the SEC, and (ii) forty-five (45) days after
the last day of the first three fiscal quarters of each Fiscal Year,
consolidated unaudited balance sheets and income statements, and
consolidated cash flow statements and changes in stockholders' equity, for
Parent and its Subsidiaries for such fiscal quarter and for the period from
the beginning of the then current fiscal year to such last day. The
Borrower shall certify by a certificate signed by a Responsible Officer of
Borrower that all such statements have been prepared in accordance with
GAAP and present fairly the financial position for the Parent and its
Subsidiaries as at the dates thereof and its results of operations for the
periods then ended, subject to normal year-end adjustments and the absence
of applicable footnotes.
Page 13
(c) As soon as available, but in any event not later than thirty (30) days
after the end of each fiscal month, consolidated unaudited balance sheets
of the Parent and its consolidated Subsidiaries as at the end of such
fiscal month, and consolidated unaudited income statements and cash flow
statements for the Parent and its consolidated Subsidiaries for such fiscal
month and for the period from the beginning of the Fiscal Year to the end
of such fiscal month, all in reasonable detail, fairly presenting the
financial position and results of operations of the Parent and its
consolidated Subsidiaries as at the date thereof and for such periods, and,
in each case, in comparable form, figures for the corresponding period in
the prior Fiscal Year, and prepared in accordance with GAAP applied
consistently with the audited Financial Statements required to be delivered
pursuant to Section 5.2(a). The Borrower shall certify by a certificate
signed by its chief financial officer that all such statements have been
prepared in accordance with GAAP and present fairly the Borrower's
financial position as at the dates thereof and its results of operations
for the periods then ended, subject to normal year-end adjustments and the
absence of applicable footnotes.
(d) With each of the audited Financial Statements delivered pursuant to
Section 5.2(a), a certificate of the independent Registered Public
Accountants that examined such statement to the effect that they have
reviewed and are familiar with this Agreement and that, in examining such
Financial Statements, they did not become aware of any fact or condition
which then constituted a Default or Event of Default with respect to a
financial covenant, except for those, if any, described in reasonable
detail in such certificate.
(e) With each of the annual audited Financial Statements delivered pursuant
to Section 5.2(a), and within thirty (30) days after the end of each fiscal
month, and within forty-five (45) days after the end of each fiscal
quarter, a certificate of the chief financial officer of the Borrower
setting forth in reasonable detail the calculations required to establish
that the Borrower was in compliance with the covenants set forth in
Sections 7.22 and 7.23 during the period covered in such Financial
Statements and as at the end thereof. Within thirty (30) days after the end
of each fiscal month, a certificate of the chief financial officer of the
Borrower stating that, except as explained in reasonable detail in such
certificate, (A) all of the representations and warranties of the Borrower
contained in this Agreement and the other Loan Documents are correct and
complete in all material respects as at the date of such certificate as if
made at such time, except for those that speak as of a particular date, (B)
the Borrower is, at the date of such certificate, in compliance in all
material respects with all of its respective covenants and agreements in
this Agreement and the other Loan Documents, and (C) no Default or Event of
Default then exists or existed during the period covered by the Financial
Statements for such fiscal month. If such certificate discloses that a
representation or warranty is not correct or complete, or that a covenant
has not been complied with, or that a Default or Event of Default existed
or exists, such certificate shall set forth what action the Borrower has
taken or proposes to take with respect thereto.
(f) No less than fifteen (15) days prior to the beginning of each Fiscal
Year, annual forecasts (to include forecasted consolidated balance sheets,
income statements and cash flow statements) for the Parent and its
Subsidiaries as at the end of and for each quarter of such Fiscal Year.
(g) Promptly after filing with the PBGC and the IRS, a copy of each annual
report or other filing filed with respect to each Plan of the Borrower or
the Parent.
(h) Promptly upon the filing thereof, copies of all reports, if any, to or
other documents filed by the Parent or any of its Subsidiaries with the SEC
under the Exchange Act, and all reports, notices, or statements sent or
received by the Parent or any of its Subsidiaries to or from the holders of
any equity interests of the Parent (other than routine non-material
correspondence sent by shareholders of the Parent to the Parent) or any
such Subsidiary or of any Debt of the Parent or any of its Subsidiaries
registered under the Securities Act of 1933 or to or from the trustee under
any indenture under which the same is issued.
(i) As soon as available, but in any event not later than 15 days after the
Borrower's or the Parent's receipt thereof, a copy of all management
reports and management letters prepared for the Borrower or the Parent by
any Registered Public Accountants of the Borrower or the Parent.
Page 14
(j) Promptly after their preparation, copies of any and all proxy
statements, financial statements, and reports which the Parent makes
available to its shareholders.
(k) If at any time Availability is less than $20,000,000, at the sole
discretion of the Agent, either: (a) daily, or (b) weekly as soon as
available, but in such case by the second Business Day of each week for the
prior week ending on the last Business Day of such prior week; in either
case, in form and substance reasonably satisfactory to the Agent: (i) a
schedule of the Borrower's Accounts created, credit memoranda, and
collections for the applicable week, together with a reconciliation of the
Borrower's Accounts created, credit memos, collections and other
adjustments to Accounts since the last such weekly reconciliation and a
Borrowing Base Certificate; (ii) a summary of each credit memorandum in
excess of $250,000; and (iii) with the delivery of each of the foregoing, a
certificate executed by a Responsible Officer on behalf of the Borrower
certifying as to the accuracy and completeness of the foregoing.
(l) As soon as available, but in any event within fifteen (15) days after
the end of each fiscal month or more frequently if requested by the Agent
to determine Availability or otherwise, each in form and substance
reasonably satisfactory to the Agent: (i) a reconciliation of the
Borrower's Accounts created, credit memoranda, collections and other
adjustments to Accounts since the last such monthly reconciliation and (for
such month) a Borrowing Base Certificate; (ii) an aging of the Borrower's
Accounts together supporting information in accordance with a
reconciliation to the previous fiscal month end's accounts receivable
balance of the Borrower's Accounts and to its general ledger; (iii) an
aging of the Borrower's accounts payable; (iv) a detailed calculation of
Eligible Accounts and Eligible Rolling Stock; (v) upon the Agent's
reasonable request, copies of invoices in connection with the Borrower's
Accounts, customer statements, credit memos, remittance advices and
reports, deposit slips, and shipping and delivery documents in connection
with the Borrower's Accounts; (vi) a summary of all Rolling Stock disposed
of or acquired during such period, including the amount of proceeds
therefor or the purchase price thereof, as applicable; (vii) such other
reports as to the Collateral as the Agent shall reasonably request from
time to time; and (viii) with the delivery of each of the foregoing, a
certificate executed by a Responsible Officer on behalf of the Borrower
certifying as to the accuracy and completeness of the foregoing. If the
Borrower's records or reports of the Collateral are prepared by an
accounting service or other agent, the Borrower hereby authorizes such
service or agent to deliver such records, reports, and related documents to
the Agent for distribution to the Lenders.
(m) Such additional information as the Agent and/or any Lender may from
time to time reasonably request regarding the financial and business
affairs of the Borrower or any Subsidiary.
5.3 Notices to the Lenders.
The Borrower shall notify the Agent and the Lenders
in writing of the following matters at the following times:
(a) Immediately after becoming aware of any Default or Event of Default;
(b) Immediately after becoming aware of the assertion by the holder of any
capital stock of the Borrower or of any Subsidiary or the holder of any
Debt of the Borrower or any Subsidiary in a face amount in excess of
$100,000 that a default exists with respect thereto or that the Borrower or
such Subsidiary is not in compliance with the terms thereof, or the threat
or commencement by such holder of any enforcement action because of such
asserted default or non-compliance;
(c) Immediately after becoming aware of any event or circumstance which
could have a Material Adverse Effect;
(d) Immediately after becoming aware of any pending or threatened action,
suit, or proceeding, by any Person, or any pending or threatened
investigation by a Governmental Authority, which could reasonably be
expected to have a Material Adverse Effect;
(e) Immediately after becoming aware of any pending or threatened strike,
work stoppage, unfair labor practice claim, or other labor dispute
affecting the Borrower or any of its Subsidiaries in a manner which could
reasonably be expected to have a Material Adverse Effect;
(f) Immediately after becoming aware of any violation of any law, statute,
regulation, or ordinance of a Governmental Authority affecting the Borrower
or any Subsidiary which could reasonably be expected to have a Material
Adverse Effect;
(g) Immediately after receipt of any notice of any violation by the
Borrower or any of its Subsidiaries of any Environmental Law which could
reasonably be expected to have a Material Adverse Effect;
Page 15
(h) Immediately after receipt of any written notice that the Borrower or
any of its Subsidiaries is or may be liable to any Person as a result of
the Release or threatened Release of any Contaminant or that the Borrower
or any Subsidiary is subject to investigation by any Governmental Authority
evaluating whether any remedial action is needed to respond to the Release
or threatened Release of any Contaminant which, in either case, is
reasonably likely to give rise to liability in excess of $1,000,000;
(i) Immediately after receipt of any written notice of the imposition of
any Environmental Lien against any property of the Borrower or any of its
Subsidiaries;
(j) Any change in the Borrower's name, state of organization, locations of
Collateral, or form of organization, trade names under which the Borrower
will create Accounts, or to which instruments in payment of Accounts may be
made payable, in each case at least thirty (30) days prior thereto;
(k) Within ten (10) Business Days after the Borrower or any ERISA Affiliate
knows or has reason to know, that an ERISA Event or a prohibited
transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has
occurred, and, when known, any action taken or threatened by the IRS, the
DOL or the PBGC with respect thereto;
(l) Upon request, or, in the event that such filing reflects a significant
change with respect to the matters covered thereby, within three (3)
Business Days after the filing thereof with the PBGC, the DOL or the IRS,
as applicable, copies of the following: (i) each annual report (form 5500
series), including Schedule B thereto, filed with the PBGC, the DOL or the
IRS with respect to each Plan, (ii) a copy of each funding waiver request
filed with the PBGC, the DOL or the IRS with respect to any Plan and all
communications received by the Borrower or any ERISA Affiliate from the
PBGC, the DOL or the IRS with respect to such request, and (iii) a copy of
each other filing or notice filed with the PBGC, the DOL or the IRS, with
respect to each Plan by either the Borrower or any ERISA Affiliate;
(m) Upon request, copies of each actuarial report for any Plan or
Multi-employer Plan and annual report for any Multi-employer Plan; and
within three (3) Business Days after receipt thereof by the Borrower or any
ERISA Affiliate, copies of the following: (i) any notices of the PBGC's
intention to terminate a Plan or to have a trustee appointed to administer
such Plan; (ii) any favorable or unfavorable determination letter from the
IRS regarding the qualification of a Plan under Section 401(a) of the Code;
or (iii) any notice from a Multi-employer Plan regarding the imposition of
withdrawal liability;
(n) Within three (3) Business Days after the occurrence thereof: (i) any
changes in the benefits of any existing Plan which increase the Borrower's
annual costs with respect thereto by an amount in excess of $1,000,000, or
the establishment of any new Plan or the commencement of contributions to
any Plan to which the Borrower or any ERISA Affiliate was not previously
contributing; or (ii) any failure by the Borrower or any ERISA Affiliate to
make a required installment or any other required payment under Section 412
of the Code on or before the due date for such installment or payment; or
(o) Within three (3) Business Days after the Borrower or any ERISA
Affiliate knows or has reason to know that any of the following events has
or will occur: (i) a Multi-employer Plan has been or will be terminated;
(ii) the administrator or plan sponsor of a Multi-employer Plan intends to
terminate a Multi-employer Plan; or (iii) the PBGC has instituted or will
institute proceedings under Section 4042 of ERISA to terminate a
Multi-employer Plan.
Each notice given under this Section shall describe the subject matter
thereof in reasonable detail, and shall set forth the action that the
Borrower, its Subsidiary, or any ERISA Affiliate, as applicable, has taken
or proposes to take with respect thereto.
Page 16
ARTICLE 6
GENERAL WARRANTIES AND REPRESENTATIONS
The Borrower warrants and represents to the Agent and the Lenders that
except as hereafter disclosed to and accepted by the Agent and the Required
Lenders in writing:
6.1 Authorization, Validity, and Enforceability of this Agreement and the Loan
Documents.
The Borrower has the power and authority to execute, deliver and
perform this Agreement and the other Loan Documents to which it is a party,
to incur the Obligations, and to grant to the Agent Liens upon and security
interests in the Collateral. The Borrower has taken all necessary action
(including obtaining approval of its stockholders if necessary) to
authorize its execution, delivery, and performance of this Agreement and
the other Loan Documents to which it is a party. This Agreement and the
other Loan Documents to which it is a party have been duly executed and
delivered by the Borrower, and constitute the legal, valid and binding
obligations of the Borrower, enforceable against it in accordance with
their respective terms. The Borrower's execution, delivery, and performance
of this Agreement and the other Loan Documents to which it is a party do
not and will not conflict with, or constitute a violation or breach of, or
result in the imposition of any Lien upon the property of the Borrower or
any of its Subsidiaries, by reason of the terms of (a) any contract,
mortgage, lease, agreement, indenture, or instrument to which the Borrower
is a party or which is binding upon it, (b) any Requirement of Law
applicable to the Borrower or any of its Subsidiaries, or (c) the
certificate or articles of incorporation or by-laws or the limited
liability company or limited partnership agreement of the Borrower or any
of its Subsidiaries.
6.2 Validity and Priority of Security Interest.
The provisions of this
Agreement and the other Loan Documents create legal and valid Liens on all
the Collateral in favor of the Agent, for the ratable benefit of the Agent
and the Lenders, and such Liens constitute perfected and continuing Liens
on all the Collateral, having priority over all other Liens on the
Collateral, except for those Liens identified in clauses (c), (d) and (e)
of the definition of Permitted Liens securing all the Obligations, and
enforceable against the Borrower and all third parties.
6.3 Organization and Qualification.
The Borrower (a) is duly organized or
incorporated and validly existing in good standing under the laws of the
state of its organization or incorporation, (b) is qualified to do business
and is in good standing in the jurisdictions set forth on Schedule 6.3
which are the only jurisdictions in which qualification is necessary in
order for it to own or lease its property and conduct its business, and (c)
has all requisite power and authority to conduct its business and to own
its property.
6.4 Corporate Name; Prior Transactions.
The Borrower has not, during the past
five (5) years, been known by or used any other corporate or fictitious
name, or been a party to any merger or consolidation, or acquired all or
substantially all of the assets of any Person, or acquired any of its
property outside of the ordinary course of business, except as described on
Schedule 6.4 attached hereto.
6.5 Subsidiaries and Affiliates.
Schedule 6.5 is a correct and complete list of
the name and relationship to the Parent of each and all of the Parent's
Subsidiaries. Each Subsidiary is (a) duly incorporated or organized and
validly existing in good standing under the laws of its state of
incorporation or organization set forth on Schedule 6.5, and (b) qualified
to do business and in good standing in each jurisdiction in which the
failure to so qualify or be in good standing could reasonably be expected
to have a material adverse effect on any such Subsidiary's business,
operations, prospects, property, or condition (financial or otherwise) and
(c) has all requisite power and authority to conduct its business and own
its property.
Page 17
6.6 Financial Statements and Projections.
(a) The Borrower has delivered to the Agent and the Lenders the audited
balance sheet and related statements of income, retained earnings, cash
flows, and changes in stockholders equity for the Parent and its
consolidated Subsidiaries as of December 31, 2003, and for the Fiscal Year
then ended, accompanied by the report thereon of the Parent's Registered
Public Accountants, KPMG LLP. The Borrower has also delivered to the Agent
and the Lenders the unaudited balance sheet and related statements of
income and cash flows for the Parent and its consolidated Subsidiaries as
of October 2, 2004. All such financial statements have been prepared in
accordance with GAAP and present accurately and fairly in all material
respects the financial position of the Borrower and its consolidated
Subsidiaries as at the dates thereof and their results of operations for
the periods then ended.
(b) The Latest Projections when submitted to the Lenders as required herein
represent the Borrower's best estimate of the future financial performance
of the Borrower and its consolidated Subsidiaries for the periods set forth
therein. The Latest Projections have been prepared on the basis of the
assumptions set forth therein, which the Borrower believes are fair and
reasonable in light of current and reasonably foreseeable business
conditions at the time submitted to the Lenders.
6.7 Capitalization.
The Borrower's authorized capital stock consists of
20,000,000 shares of common stock, par value $0.001 per share, of which
10,945,794 shares are validly issued and outstanding, fully paid and
non-assessable and are owned beneficially and of record by Parent.
6.8 Solvency.
The Borrower is Solvent prior to and after giving effect to the
Borrowings to be made on the Closing Date and the issuance of the Letters
of Credit to be issued on the Closing Date.
6.9 Debt.
After giving effect to the making of the Revolving Loans to be made
on the Closing Date and the application of the proceeds thereof, the
Borrower and its Subsidiaries have no Debt, except (a) the Obligations, and
(b) Debt described on Schedule 6.9.
6.10 Distributions.
Since December 31, 2003 no Distribution has been declared,
paid, or made upon or in respect of any capital stock or other securities
of the Borrower or any of its Subsidiaries.
6.11 Real Estate; Leases.
Schedule 6.11 sets forth, as of the Closing Date, a
correct and complete list of all Real Estate owned by the Borrower and all
Real Estate owned by any of its Subsidiaries, all leases and subleases of
real or personal property held by the Borrower as lessee or sublessee
(other than leases of computer equipment and copiers) and all leases and
subleases of real or personal property held by the Borrower as lessor, or
sublessor. Each of such leases and subleases is valid and enforceable in
accordance with its terms and is in full force and effect, and no default
by any party to any such lease or sublease exists. The Borrower has good
and marketable title in fee simple to the Real Estate identified on
Schedule 6.11 as owned by the Borrower, or valid leasehold interests in all
Real Estate designated therein as "leased" by the Borrower and the Borrower
has good, indefeasible, and merchantable title to all of its other property
reflected on the October 2, 2004 Financial Statements delivered to the
Agent and the Lenders, except as disposed of in the ordinary course of
business since the date thereof, free of all Liens except Permitted Liens.
6.12 Proprietary Rights.
Schedule 6.12 sets forth a correct and complete list of
all of the Borrower's Proprietary Rights, which consist of patents,
trademarks, service marks, or copyrights. None of the Proprietary Rights is
subject to any licensing agreement or similar arrangement except as set
forth on Schedule 6.12. To the best of the Borrower's knowledge, none of
the Proprietary Rights infringes on or conflicts with any other Person's
property, and no other Person's property infringes on or conflicts with the
Proprietary Rights. The Proprietary Rights described on Schedule 6.12
constitute all of the property of such type necessary to the current
conduct of the Borrower's business.
6.13 Trade Names.
All trade names or styles under which the Borrower or any of
its Subsidiaries will create Accounts, or to which instruments in payment
of Accounts may be made payable, are listed on Schedule 6.13.
Page 18
6.14 Litigation.
Except as set forth on Schedule 6.14, there is no pending, or
to the best of the Borrower's knowledge threatened, action, suit,
proceeding, or counterclaim by any Person, or to the best of the Borrower's
knowledge, investigation by any Governmental Authority, or any basis for
any of the foregoing, which could reasonably be expected to have a Material
Adverse Effect.
6.15 Labor Disputes.
Except as set forth on Schedule 6.15, as of the Closing
Date (a) there is no collective bargaining agreement or other labor
contract covering employees of the Borrower or any of its Subsidiaries, (b)
no such collective bargaining agreement or other labor contract is
scheduled to expire during the term of this Agreement, (c) to the best of
Borrower's knowledge, no union or other labor organization is seeking to
organize, or to be recognized as, a collective bargaining unit of employees
of the Borrower or any of its Subsidiaries or for any similar purpose, and
(d) there is no pending or (to the best of the Borrower's knowledge)
threatened, strike, work stoppage, material unfair labor practice claim, or
other material labor dispute against or affecting the Borrower or its
Subsidiaries or their employees.
6.16 Environmental Laws.
Except as otherwise disclosed on Schedule 6.16 and
except as could not reasonably be expected to have a Material Adverse
Effect:
(a) The Borrower and its Subsidiaries have complied in all material
respects with all Environmental Laws and neither the Borrower nor any
Subsidiary nor any of its presently owned real property or presently
conducted operations, nor its previously owned real property or prior
operations, is subject to any enforcement order from or liability agreement
with any Governmental Authority or private Person respecting (i) compliance
with any Environmental Law or (ii) any potential liabilities and costs or
remedial action arising from the Release or threatened Release of a
Contaminant.
(b) The Borrower and its Subsidiaries have obtained all permits necessary
for their current operations under Environmental Laws, and all such permits
are in good standing and the Borrower and its Subsidiaries are in
compliance with all material terms and conditions of such permits.
(c) Neither the Borrower nor any of its Subsidiaries, nor, to the best of
the Borrower's knowledge, any of its predecessors in interest, has in
violation of applicable law stored, treated or disposed of any hazardous
waste.
(d) Neither the Borrower nor any of its Subsidiaries has received any
summons, complaint, order or similar written notice indicating that it is
not currently in compliance with, or that any Governmental Authority is
investigating its compliance with, any Environmental Laws or that it is or
may be liable to any other Person as a result of a Release or threatened
Release of a Contaminant.
(e) To the best of the Borrower's knowledge, none of the present or past
operations of the Borrower and its Subsidiaries is the subject of any
investigation by any Governmental Authority evaluating whether any remedial
action is needed to respond to a Release or threatened Release of a
Contaminant.
(f) There is not now, nor to the best of the Borrower's knowledge has there
ever been on or in the Real Estate:
(1) any underground storage tanks or surface impoundments,
(2) any asbestos-containing material, or
(3) any polychlorinated biphenyls (PCBs) used in hydraulic oils, electrical
transformers or other equipment.
(g) Neither the Borrower nor any of its Subsidiaries has filed any notice
under any requirement of Environmental Law reporting a spill or accidental
and unpermitted Release or discharge of a Contaminant into the environment.
Page 19
(h) Neither the Borrower nor any of its Subsidiaries has entered into any
negotiations or settlement agreements with any Person (including the prior
owner of its property) imposing material obligations or liabilities on the
Borrower or any of its Subsidiaries with respect to any remedial action in
response to the Release of a Contaminant or environmentally related claim.
(i) None of the products manufactured, distributed or sold by the Borrower
or any of its Subsidiaries contain asbestos containing material.
(j) No Environmental Lien has attached to the Real Estate.
6.17 No Violation of Law.
Neither the Borrower nor any of its Subsidiaries is in
violation of any law, statute, regulation, ordinance, judgment, order, or
decree applicable to it which violation could reasonably be expected to
have a Material Adverse Effect.
6.18 No Default.
Neither the Borrower nor any of its Subsidiaries is in default
with respect to any note, indenture, loan agreement, mortgage, lease, deed,
or other agreement to which the Borrower or such Subsidiary is a party or
by which it is bound, which default could reasonably be expected to have a
Material Adverse Effect.
6.19 ERISA Compliance.
Except as specifically disclosed in Schedule 6.19:
(a) Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code and other federal or state law. Each Plan
which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the IRS and to the best knowledge of
the Borrower, nothing has occurred which would cause the loss of such
qualification. The Borrower and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Borrower, threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect
to any Plan which has resulted or could reasonably be expected to result in
a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to occur;
(ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the
Borrower nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension
Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has occurred
which, with the giving of notice under Section 4219 of ERISA, would result
in such liability) under Section 4201 or 4243 of ERISA with respect to a
Multi-employer Plan; and (v) neither the Borrower nor any ERISA Affiliate
has engaged in a transaction that could be subject to Section 4069 or
4212(c) of ERISA.
6.20 Taxes.
The Borrower and its Subsidiaries have filed all federal and other
tax returns and reports required to be filed, and have paid all federal and
other taxes, assessments, fees and other governmental charges levied or
imposed upon them or their properties, income or assets otherwise due and
payable unless such unpaid taxes and assessments would constitute a
Permitted Lien.
6.21 Regulated Entities.
None of the Borrower, any Person controlling the
Borrower, or any Subsidiary, is an "Investment Company" within the meaning
of the Investment Company Act of 1940. The Borrower is not subject to
regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act, any state public utilities
code or law, or any other federal or state statute or regulation limiting
its ability to incur indebtedness.
Page 20
6.22 Use of Proceeds; Margin Regulations.
The proceeds of the Loans are to be
used solely (a) to refinance existing Debt, (b) to pay the costs and
expenses related to this Agreement, (c) for working capital purposes, and
(d) for general corporate purposes. None of such proceeds will be used for
the purpose of purchasing or carrying any "margin stock" as defined in
Regulations T, U, or X of the Board of Governors of the Federal Reserve
System or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of such Regulations. No part of the
proceeds of the Loan will be used for any purpose which violates, or is
inconsistent with, the provisions of Regulation X. Neither the Borrower nor
any Subsidiary is engaged in the business of purchasing or selling Margin
Stock or extending credit for the purpose of purchasing or carrying Margin
Stock. Following the application of the proceeds of each Loan or drawing
under each Letter of Credit, not more than 25% of the value of the assets
of the Borrower or subject to any restriction contained in any agreement or
instrument between the Borrower and any Lender or any Affiliate of any
Lender relating to Debt will be Margin Stock.
6.23 Copyrights, Patents, Trademarks and Licenses, etc.
The Borrower owns or is
licensed or otherwise has the right to use all of the patents, trademarks,
service marks, trade names, copyrights, contractual franchises, licenses,
rights of way, authorizations and other rights that are reasonably
necessary for the operation of its businesses, without conflict with the
rights of any other Person. To the best knowledge of the Borrower, no
slogan or other advertising device, product, process, method, substance,
part or other material now employed, or now contemplated to be employed, by
the Borrower or any Subsidiary infringes upon any rights held by any other
Person. No claim or litigation regarding any of the foregoing is pending or
to the best of Borrower's knowledge, threatened, and no patent, invention,
device, application, principle or any statute, law, rule, regulation,
standard or code is pending or, to the knowledge of the Borrower, proposed,
which, in either case, could reasonably be expected to have a Material
Adverse Effect.
6.24 No Material Adverse Change.
No Material Adverse Effect has occurred since
the latest date of the Financial Statements delivered to the Lenders.
6.25 Full Disclosure.
None of the representations or warranties made by the
Borrower or any Subsidiary in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate
furnished by or on behalf of the Borrower or any Subsidiary in connection
with the Loan Documents (including the offering and disclosure materials
delivered by or on behalf of the Borrower to the Lenders prior to the
Closing Date), contains any untrue statement of a material fact or omits
any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading as of the time when made or delivered.
6.26 Material Agreements.
Schedule 6.26 hereto sets forth as of the Closing Date
all material agreements and contracts to which the Borrower or any of its
Subsidiaries is a party or is bound as of the date hereof.
6.27 Bank Accounts.
Schedule 6.27 contains as of the Closing Date a complete and
accurate list of all bank accounts maintained by the Borrower with any bank
or other financial institution.
6.28 Governmental Authorization.
No approval, consent, exemption, authorization,
or other action by, or notice to, or filing with, any Governmental
Authority or other Person is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Borrower
or any of its Subsidiaries of this Agreement or any other Loan Document,
except for filings necessary to perfect security interests and the payment
of fees related thereto. Borrower is authorized to perform all services
under its carriage agreements, has all permits and licenses issued by the
U.S. Department of Transportation, or its successor, the Surface
Transportation Board, or by all applicable state or local regulatory
agencies necessary to conduct its business. Borrower is authorized to
transport, as a motor contract carrier, freight of all kinds in interstate
and intrastate commerce from, to, and between all points and places in the
United States.
Page 21
ARTICLE 7
AFFIRMATIVE AND NEGATIVE COVENANTS
The Borrower covenants to the Agent and each Lender that so long as any of
the Obligations remain outstanding or this Agreement is in effect:
7.1 Taxes and Other Obligations.
The Borrower shall, and shall cause each of
its Subsidiaries to, (a) file when due all tax returns and other reports
which it is required to file; (b) pay, or provide for the payment, when
due, of all taxes, fees, assessments and other governmental charges against
it or upon its property, income and franchises, make all required
withholding and other tax deposits, and establish adequate reserves for the
payment of all such items, and provide to the Agent and the Lenders, upon
request, satisfactory evidence of its timely compliance with the foregoing;
and (c) pay when due all Debt owed by it and all claims of materialmen,
mechanics, carriers, warehousemen, landlords, processors and other like
Persons, and all other indebtedness owed by it and perform and discharge in
a timely manner all other obligations undertaken by it; provided, however,
so long as the Borrower has notified the Agent in writing, neither the
Borrower nor any of its Subsidiaries need pay any tax, fee, assessment, or
governmental charge (i) it is contesting in good faith by appropriate
proceedings diligently pursued, (ii) as to which the Borrower or its
Subsidiary, as the case may be, has established proper reserves as required
under GAAP, and (iii) the nonpayment of which does not result in the
imposition of a Lien (other than a Permitted Lien).
7.2 Legal Existence and Good Standing.
The Borrower shall, and shall cause each
of its Subsidiaries to, maintain its legal existence and its qualification
and good standing in all jurisdictions in which the failure to maintain
such existence and qualification or good standing could reasonably be
expected to have a Material Adverse Effect.
7.3 Compliance with Law and Agreements; Maintenance of Licenses.
The Borrower
shall comply, and shall cause each Subsidiary to comply, in all material
respects with all Requirements of Law of any Governmental Authority having
jurisdiction over it or its business (including the Federal Fair Labor
Standards Act and all Environmental Laws), except for such non-compliance
as would not have a Material Adverse Effect. The Borrower shall, and shall
cause each of its Subsidiaries to, obtain and maintain all licenses,
permits, franchises, and governmental authorizations necessary to own its
property and to conduct its business as conducted on the Closing Date. The
Borrower shall not modify, amend or alter its certificate or articles of
incorporation, or its limited liability company operating agreement or
limited partnership agreement, as applicable, other than in a manner which
does not adversely affect the rights of the Lenders or the Agent.
7.4 Maintenance of Property; Inspection of Property.
(a) The Borrower shall, and shall cause each of its Subsidiaries to,
maintain all of its property necessary and useful in the conduct of its
business, in good operating condition and repair, ordinary wear and tear
excepted.
(b) The Borrower shall permit representatives and independent contractors
of the Agent (at the expense of the Borrower not to exceed four (4) times
per year unless an Event of Default has occurred and is continuing) to
visit and inspect any of its properties, to examine its corporate,
financial and operating records, and make copies thereof or abstracts
therefrom and to discuss its affairs, finances and accounts with its
directors, officers and independent public accountants, at such reasonable
times during normal business hours and as soon as may be reasonably
desired, upon reasonable advance notice to the Borrower; provided, however,
when an Event of Default exists, the Agent or any Lender may do any of the
foregoing at the expense of the Borrower at any time during normal business
hours and without advance notice.
7.5 Insurance.
(a) The Borrower shall maintain, and shall cause each of its Subsidiaries
to maintain, with financially sound and reputable insurers having a rating
of at least A or better by Best Rating Guide, insurance against loss or
damage by fire with extended coverage; theft, burglary, pilferage and loss
in transit; public liability and third party property damage; larceny,
embezzlement or other criminal liability; business interruption; public
liability and third party property damage; and such other hazards or of
such other types as is customary for Persons engaged in the same or similar
business, as the Agent, in its discretion, or acting at the direction of
the Required Lenders, shall specify, in amounts, and under policies
acceptable to the Agent and the Required Lenders
Page 22
(b) The Borrower shall cause the Agent, for the ratable benefit of the
Agent and the Lenders, to be named as secured party or mortgagee and sole
loss payee or additional insured, in a manner acceptable to the Agent. Each
policy of insurance shall contain a clause or endorsement requiring the
insurer to give not less than thirty (30) days' prior written notice to the
Agent in the event of cancellation of the policy for any reason whatsoever
and a clause or endorsement stating that the interest of the Agent shall
not be impaired or invalidated by any act or neglect of the Borrower or any
of its Subsidiaries or the owner of any Real Estate for purposes more
hazardous than are permitted by such policy. All premiums for such
insurance shall be paid by the Borrower when due, and certificates of
insurance and, if requested by the Agent or any Lender, photocopies of the
policies, shall be delivered to the Agent, in each case in sufficient
quantity for distribution by the Agent to each of the Lenders. If the
Borrower fails to procure such insurance or to pay the premiums therefor
when due, the Agent may, and at the direction of the Required Lenders
shall, do so from the proceeds of Revolving Loans.
7.6 Insurance and Condemnation Proceeds.
The Borrower shall promptly notify the
Agent and the Lenders of any loss, damage, or destruction to the
Collateral, exceeding $250,000, whether or not covered by insurance. The
Agent is hereby authorized to collect all insurance and condemnation
proceeds in respect of Collateral directly and to apply them, after
deducting from such proceeds the reasonable expenses, if any, incurred by
the Agent in the collection or handling thereof, ratably, to the reduction
of the Obligations in the order provided for in Section 3. 3.
7.7 Environmental Laws.
(a) The Borrower shall, and shall cause each of its Subsidiaries to,
conduct its business in compliance with all Environmental Laws applicable
to it, including those relating to the generation, handling, use, storage,
and disposal of any Contaminant, except where such non-compliance would not
have a Material Adverse Effect. The Borrower shall, and shall cause each of
its Subsidiaries to, take prompt and appropriate action to respond to any
non-compliance with Environmental Laws and shall regularly report to the
Agent on such response.
(b) Without limiting the generality of the foregoing, the Borrower shall
submit to the Agent and the Lenders annually, commencing on the first
Anniversary Date, and on each Anniversary Date thereafter, an update of the
status of each material environmental compliance or liability issue. The
Agent or any Lender may request copies of technical reports prepared by the
Borrower and its communications with any Governmental Authority to
determine whether the Borrower or any of its Subsidiaries is proceeding
reasonably to correct, cure or contest in good faith any alleged
non-compliance or environmental liability. The Borrower shall, at the
Agent's or the Required Lenders' request and at the Borrower's expense,
(i) retain an independent environmental engineer acceptable to the Agent to
evaluate the site, including tests if appropriate, where the material
non-compliance or alleged material non-compliance with Environmental Laws
has occurred and prepare and deliver to the Agent, in sufficient quantity
for distribution by the Agent to the Lenders, a report setting forth the
results of such evaluation, a proposed plan for responding to any
environmental problems described therein, and an estimate of the costs
thereof, and (ii) provide to the Agent and the Lenders a supplemental
report of such engineer whenever the scope of the environmental problems,
or the response thereto or the estimated costs thereof, shall increase in
any material respect.
7.8 Compliance with ERISA.
The Borrower shall, and shall cause each of its
ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other
federal or state law; (b) cause each Plan which is qualified under Section
401(a) of the Code to maintain such qualification; (c) make all required
contributions to any Plan subject to Section 412 of the Code; (d) not
engage in a prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan; and (e) not engage in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
7.9 Mergers, Consolidations or Sales.
Except as permitted by Section 7.28,
neither the Borrower nor any of its Subsidiaries shall enter into any
transaction of merger, reorganization, or consolidation, or transfer, sell,
assign, lease, or otherwise dispose of all or any part of its property, or
wind up, liquidate or dissolve, or agree to do any of the foregoing, except
for: (i) sales or other transfers of real property described on Schedule
7.9A attached hereto or refinancing or sale/leaseback of real property
described on Schedule 7.9B attached hereto, or otherwise consented to by
Agent; and (ii) sales or other dispositions of Rolling Stock and other
Equipment in the ordinary course of business in accordance with standard
business practices. The Borrower shall apply the proceeds of all sales and
other dispositions of real property, Rolling Stock, and other Equipment to
the Loans in accordance with Sections 3.3(b).
Page 23
7.10 Distributions; Capital Change; Restricted Investments.
Neither the Borrower
nor any of its Subsidiaries shall (i) directly or indirectly declare or
make, or incur any liability to make, any Distribution, except
Distributions to the Borrower by its Subsidiaries, (ii) make any change in
its capital structure which could have a Material Adverse Effect or (iii)
make any Restricted Investment.
7.11 Transactions Affecting Collateral or Obligations.
Neither the Borrower nor
any of its Subsidiaries shall enter into any transaction which would be
reasonably expected to have a Material Adverse Effect.
7.12 Guaranties.
Neither the Borrower nor any of its Subsidiaries shall make,
issue, or become liable on any Guaranty, except Guaranties of the
Obligations in favor of the Agent.
7.13 Debt.
Neither the Borrower nor any of its Subsidiaries shall incur or
maintain any Debt, other than: (a) the Obligations; (b) Debt described on
Schedule 6.9; (c) Capital Leases of Equipment and purchase money secured
Debt incurred to purchase Equipment and Debt or sale/leasebacks secured by
real property described in Schedule 7.9B hereto, provided that (i) Liens
securing the same attach only to the Equipment acquired by the incurrence
of such Debt, or in the case of the real property Liens, such real
property, and (ii) the aggregate amount of such Debt (including Capital
Leases) outstanding does not exceed $50,000,000 at any time; (d) other Debt
not exceeding $100,000 in aggregate outstanding principal amount; and (e)
Debt evidencing a refunding, renewal or extension of the Debt described on
Schedule 6.9; provided that (i) the principal amount thereof is not
increased, (ii) the Liens, if any, securing such refunded, renewed or
extended Debt do not attach to any assets in addition to those assets, if
any, securing the Debt to be refunded, renewed or extended, (iii) no Person
that is not an obligor or guarantor of such Debt as of the Closing Date
shall become an obligor or guarantor thereof, and (iv) the terms of such
refunding, renewal or extension are no less favorable to the Borrower, the
Agent or the Lenders than the original Debt.
7.14 Prepayment.
Neither the Borrower nor any of its Subsidiaries shall
voluntarily prepay any Debt, except the Obligations in accordance with the
terms of this Agreement, except as otherwise approved by the Agent in
writing.
7.15 Transactions with Affiliates.
Except as set forth below, neither the
Borrower nor any of its Subsidiaries shall, sell, transfer, distribute, or
pay any money or property, including, but not limited to, any fees or
expenses of any nature (including, but not limited to, any fees or expenses
for management services), to any Affiliate, or lend or advance money or
property to any Affiliate, or invest in (by capital contribution or
otherwise) or purchase or repurchase any stock or indebtedness, or any
property, of any Affiliate, or become liable on any Guaranty of the
indebtedness, dividends, or other obligations of any Affiliate.
Notwithstanding the foregoing, and except as permitted by Section 7.19
hereof, while no Event of Default has occurred and is continuing, the
Borrower and its Subsidiaries may engage in transactions with Affiliates in
the ordinary course of business consistent with past practices, in amounts
and upon terms fully disclosed to the Agent and the Lenders, and no less
favorable to the Borrower and its Subsidiaries than would be obtained in a
comparable arm's-length transaction with a third party who is not an
Affiliate.
7.16 Investment Banking and Finder's Fees.
Neither the Borrower nor any of its
Subsidiaries shall pay or agree to pay, or reimburse any other party with
respect to, any investment banking or similar or related fee, underwriter's
fee, finder's fee, or broker's fee to any Person in connection with this
Agreement, except for fees payable to Agent and its Affiliates. The
Borrower shall defend and indemnify the Agent and the Lenders against and
hold them harmless from all claims of any Person that the Borrower is
obligated to pay for any such fees, and all costs and expenses (including
attorneys' fees) incurred by the Agent and/or any Lender in connection
therewith.
Page 24
7.17 Business Conducted.
The Borrower shall not and shall not permit any of its
Subsidiaries to, engage directly or indirectly, in any line of business
that is substantially different than the businesses in which the Borrower
is engaged on the Closing Date.
7.18 Liens.
Neither the Borrower nor any of its Subsidiaries shall create,
incur, assume, or permit to exist any Lien on any property now owned or
hereafter acquired by any of them, except Permitted Liens, and Liens, if
any, in effect as of the Closing Date described in Schedule 6.9 securing
Debt described in Schedule 6.9 and Liens securing Capital Leases and
purchase money Debt and Debt secured by certain real property permitted in
Section 7.13.
7.19 Sale and Leaseback Transactions.
Neither the Borrower nor any of its
Subsidiaries shall, directly or indirectly, enter into any arrangement with
any Person providing for the Borrower or such Subsidiary to lease or rent
property that the Borrower or such Subsidiary has sold or will sell or
otherwise transfer to such Person, other than the Southwest Sale/Leaseback,
the GE Capital Sale/Leaseback, and any sale and leaseback of any real
property of Borrower described in Schedule 7.30, or all or any of the 2005
Sterling tractors, upon terms and conditions in accordance with standard
business practices.
7.20 Subsidiaries.
Except as permitted by Section 7.28, the Borrower shall not,
directly or indirectly, organize, create, acquire or permit to exist any
Subsidiary.
7.21 Fiscal Year.
The Borrower shall not change its Fiscal Year.
7.22 Capital Expenditures.
Neither the Borrower nor any of its Subsidiaries
shall make or incur any Capital Expenditure if, after giving effect
thereto, the aggregate amount of all Capital Expenditures by the Borrower
and its Subsidiaries on a consolidated basis would exceed $10,000,000 in
the Fiscal Year ending December 31, 2005, and thereafter as follows:
- ----------------------------------------------------------------------------------------------------------------------
Capital Expenditures
- ----------------------------------------------------------------------------------------------------------------------
- --------------------------- ------------------------------------------------- ----------------------------------------
Fiscal Year Ending If Fixed Charge Coverage Ratio If Fixed Charge Coverage
< 1.0 to 1.0 after giving effect to such Ratio > 1.0 to 1.0 after
Capital Expenditure giving effect to such Capital
Expenditure
- --------------------------- ------------------------------------------------- ----------------------------------------
- --------------------------- ------------------------------------------------- ----------------------------------------
December 31, 2006 $7,000,000 After giving effect to such Capital
Expenditure(s), Availability shall be
greater than $30,000,000 for a period
of at least 60 days after such Capital
Expenditure
- --------------------------- ------------------------------------------------- ----------------------------------------
- --------------------------- ------------------------------------------------- ----------------------------------------
December, 31, 2007 $7,000,000
- --------------------------- ------------------------------------------------- ----------------------------------------
- --------------------------- ------------------------------------------------- ----------------------------------------
December 31, 2008 $7,000,000
- --------------------------- ------------------------------------------------- ----------------------------------------
Page 25
7.23 Fixed Charge Coverage Ratio/Minimum EBITDA.
(a) At all times from the earlier of: (i) delivery by the Borrower to the
Agent of the April, 2005 financial statements in compliance with Section
5.2(c), and (ii) May 30, 2005, until the earlier of: (i) delivery by the
Borrower to the Agent of the May, 2006 financial statements in compliance
with Section 5.2(c), and (ii) June 30, 2006, as of the last day of each
fiscal month of the Borrower set forth below, the fiscal year-to-date
(fiscal year-to-date in fiscal year 2005 shall mean fiscal year-to-date,
and with respect to each month in fiscal year 2006, shall mean the
immediately preceding twelve fiscal months) EBITDA of Parent and its
Subsidiaries shall not be less than the amount set forth opposite each
date.
- ------------------------------------------------------------ ---------------------------------------------------------
Fiscal Month Ending on Minimum Year-to-Date EBITDA
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
April 30, 2005 ($585,000)
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
May 31, 2005 $143,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
June 30, 2005 $1,177,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
July 31, 2005 $2,651,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
August 31, 2005 $4,794,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
September 30, 2005 $7,174,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
October 31, 2005 $9,896,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
November 30, 2005 $11,665,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
December 31, 2005 $14,130,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
January 31, 2006 $15,764,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
February 28, 2006 $17,590,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
March 31, 2006 $19,494,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
April 30, 2006 $20,882,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
May 31, 2006 $22,359,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
June 30, 2006 $25,000,000
- ------------------------------------------------------------ ---------------------------------------------------------
Page 26
(b) Commencing on and after the earlier of: (i) August 15, 2006, and (ii)
the delivery of the June, 2006 quarterly financial statements in compliance
with Section 5.2(b), on any day Availability is less than $15,000,000, the
Borrower will maintain a Fixed Charge Coverage Ratio for each period of
four consecutive fiscal quarters ended on the last day of each fiscal
quarter of not less than 1.0 to 1.0. For purposes of this Section 7.23, on
any date compliance hereunder is required, compliance shall commence on
such date with reference to the most recently reported monthly or quarterly
financial information, as the case may be.
Notwithstanding anything set forth above to the contrary, during any period
commencing on the day Availability has exceeded $15,000,000 for at least 60
consecutive days and ending on any day on which Availability is less than
$15,000,000, Borrower shall not be required to comply with either covenant
set forth in (a) and (b) above.
7.24 Use of Proceeds.
The Borrower shall not, and shall not suffer or permit any
Subsidiary to, use any portion of the Loan proceeds, directly or
indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or
otherwise refinance indebtedness of the Borrower or others incurred to
purchase or carry Margin Stock, (iii) to extend credit for the purpose of
purchasing or carrying any Margin Stock, or (iv) to acquire any security in
any transaction that is subject to Section 13 or 14 of the Exchange Act.
7.25 Further Assurances.
The Borrower shall execute and deliver, or cause to be
executed and delivered, to the Agent and/or the Lenders such documents and
agreements, and shall take or cause to be taken such actions, as the Agent
or any Lender may, from time to time, request to carry out the terms and
conditions of this Agreement and the other Loan Documents.
7.26 Collateral.
To secure the full and complete payment and performance of the
Obligations, Borrower shall (and shall cause each Subsidiary to) enter into
Loan Documents (in form and substance acceptable to the Agent) pursuant to
which, among other things, each such entity shall, to the extent permitted
by applicable law, grant, pledge, assign, and create first priority Agent's
Liens (except to the extent Permitted Liens affect such priority) in and to
all Collateral owned by such entity. Borrower agrees that all Rolling Stock
(other than Rolling Stock subject to Permitted Liens under subpart (f) of
the definition of Permitted Liens, but only so long as such Permitted Liens
exist) shall be subject to Agent's Liens, and Borrower shall deliver all
original certificates of title relating thereto to the Agent, together with
any necessary releases of Liens, lien documents, powers of attorney, or
other certificates, instruments, documents, odometer readings, and other
matters so that the Agent shall at all times on and after March 31, 2005
have a perfected, first priority Agent's Lien on all Rolling Stock (other
than Rolling Stock subject to Permitted Liens under subpart (f) of the
definition of Permitted Liens, but only so long as such Permitted Liens
exist), and other than the Rolling Stock described on Schedule 7.30(a)
hereto. Borrower agrees that upon the occurrence of any Default or Event of
Default hereunder, Agent may, but shall not be required to perfect its
liens on the Rolling Stock described on Schedule 7.30(a) hereto. In the
event Borrower creates any investment accounts, it agrees to enter into a
control agreement, in form and substance acceptable to Agent, executed and
delivered by Borrower, Agent, and the applicable broker, bank, or
investment house with respect to such investment account.
7.27 Tax Shelter Regulations.
(a) The Borrower does not intend to treat the Loans and/or Letters of
Credit and related transactions as being a "reportable transaction" (within
the meaning of Treasury Regulation Section 1.6011-4). In the event the
Borrower determines to take any action inconsistent with such intention, it
will promptly notify the Agent thereof. If the Borrower so notifies the
Agent, the Borrower acknowledges that one or more of the Lenders may treat
its Loans and/or its interest in Non-Ratable Loans and/or Agent Advances
and/or Letters of Credit as part of a transaction that is subject to
Treasury Regulation Section 301.6112-1, and such Lender or Lenders, as
applicable, will maintain the lists and other records required by such
Treasury Regulation.
Page 27
(b) Neither the Agent nor any Lender intends to treat the Loans and/or
Letters of Credit and related transactions as being a "reportable
transaction" (within the meaning of Treasury Regulation Section 1.6011-4).
In the event the Agent or any Lender determines to take any action
inconsistent with this intention, such person will so notify Borrower. If
the Agent or any Lender so notifies Borrower, the Agent and such Lender
acknowledge that the Borrower may treat any Loans and/or Letter of Credit
as part of a transaction that is subject to Treasury Regulation Section
301.6112-1, and the Borrower will maintain the lists and other records
required by such Treasury Regulation.
7.28 Permitted Acquisitions. The Borrower may consummate Acquisitions, so long
as:
(a) the Acquisition by the Borrower is of a Person or assets which are in
substantially the same lines of business as the business conducted by the
Borrower on the date hereof, or any other business reasonably related
thereto;
(b) as of the closing thereof, each Acquisition has been approved and
recommended by the board of directors (or equivalent body) of the Person to
be acquired or from which such business or asset is to be acquired;
(c) prior to the closing of such Acquisition (other than an Acquisition of
assets), the Person to be acquired is Solvent;
(d) as of the closing of the Acquisition, after giving effect thereto, the
Borrower must be Solvent and the Borrower and its Subsidiaries, on a
consolidated basis, must be Solvent;
(e) as of the closing of any such Acquisition, (i) such Acquisition is
structured as a merger, a Borrower or a wholly-owned Subsidiary must be the
surviving entity after giving effect to such merger; and (ii) if such
Acquisition is structured as a stock/equity acquisition, the Borrower shall
own not less than a 100% interest in the entity being acquired and such
acquired entity will be a domestic company that is or becomes a borrower or
a guarantor hereunder and grants a lien on its assets to Agent for the
benefit of the Agent and the Lenders, all in a manner satisfactory to
Agent, as set forth in subparagraph (g) below;
(f) as of the closing of any Acquisition, no Default or Event of Default
shall exist or occur as a result thereof, and after giving effect thereto;
(g) if the Acquisition target is to be a Subsidiary or if the survivor is a
Subsidiary, then Borrower shall cause such Subsidiary to deliver articles
of incorporation, bylaws, and resolutions (or other corresponding
constituent documents) and such opinions as the Agent shall require and to
execute a joinder agreement, guaranty, a security agreement, and pledge
agreement (if applicable) as shall be required by the Agent, for the
benefit of the Agent and the Lenders, in such Subsidiary's assets, to
secure the Obligations;
(h) the absence of action, suit, investigation, or proceeding pending or
threatened in a any court or before any arbitrator or Governmental
Authority that affects the target or the proposed Acquisition, which could
reasonably be expected to have a Material Adverse Effect on the target or
the Loan Parties;
(i) no Acquisition results in the formation or Acquisition of a Foreign
Subsidiary of the Borrower;
(j) the Purchase Price for such Acquisition, when aggregated with the
Purchase Price of all other Acquisitions consummated during such Fiscal
Year, does not exceed $5,000,000 in the aggregate;
Page 28
(k) immediately prior to such Acquisition and after giving effect to any
Revolving Loans to be made in connection therewith, (A) there is at least
$30,000,000 of Availability, and (B) the Fixed Charge Coverage Ratio for
the most-recently ended four fiscal quarters after giving pro forma effect
to the transaction, is at least 1.00 to 1.00; for purposes hereof, EBITDA
for any period shall include on a pro forma basis all EBITDA for the Parent
and its Subsidiaries for such period relating to assets acquired (including
any Subsidiaries formed or acquired) in accordance with this Agreement
during such period, but shall exclude on a pro forma basis all EBITDA for
the Parent and its Subsidiaries for such period relating to any such assets
disposed of in accordance with this Agreement during such period; and
(l) for the purposes of calculating Availability under this Section 7.28,
no assets of the Person to be acquired or the assets to be acquired shall
be included in the Borrowing Base unless such assets are acceptable to the
Agent in its sole discretion.
7.29 Appraisals.
Upon Agent's request, Agent may require annually, on or before
January 31 of each year, commencing January 31, 2006, an updated appraisal
of the Eligible Rolling Stock, performed by an appraiser acceptable to
Agent, and in form and substance acceptable to Agent ("Required
Appraisal"). Notwithstanding the foregoing, in the event Availability on
any day is equal to or less than $25,000,000, but greater than $20,000,000
Agent may request two Required Appraisals during the twelve months
following such request. Further notwithstanding the foregoing, in the event
the Availability on any day is equal to or less than $20,000,000 Agent may
request four Required Appraisal during the twelve months following such
request. Borrower shall cooperate with all reasonable requests and do all
acts reasonably required by the Agent and any Persons employed by it as
appraisers to assure the timely completion of such new appraisals, and
Borrower shall pay to Agent the actual charges paid or incurred therefor.
7.30 Post Closing Agreements and Mortgages.
(a) Borrower agrees that it shall cause the Agent's Lien on all Rolling
Stock owned by the Borrower as of the Closing Date (other than Rolling
Stock which is subject to a perfected Lien in favor of a third party as of
the Closing Date and as of March 31, 2005 and the Rolling Stock described
on a list furnished by Borrower to Agent on the Closing Date) to be
properly perfected on or before March 31, 2005; provided that the failure
of the Agent to receive a certificate of title noting the Agent's Lien
thereon from the applicable Governmental Authority prior to March 31, 2005
shall not constitute a breach of this Section 7.30(a) so long as the
Borrower has taken all action necessary to obtain such certificate of title
with the Agent's Lien noted thereon.
(b) Borrower will cause each of its principal depository accounts,
including operating, administrative, cash management, collection, and other
deposit accounts to be maintained with Agent (unless Agent otherwise agrees
in writing) to be maintained at the Agent, on or before March 31, 2005.
(c) Borrower shall cause all of its owned real property to be encumbered by
valid, enforceable, recorded first lien mortgages, deeds of trust, or other
applicable security instruments ("Mortgages") satisfactory in form and
substance to Agent, provided, however, that such real property is subject
to being released pursuant to Section 7.9.
7.31 Solvency.
The Borrower shall at all times be Solvent, including prior to
and after giving effect to the Borrowings and the issuance of the Letters
of Credit hereunder.
Page 29
ARTICLE 8
CONDITIONS OF LENDING
8.1 Conditions Precedent to Making of Loans on the Closing Date. The obligation
of the Lenders to make the initial Revolving Loans hereunder, and the
obligation of the Agent to cause the Letter of Credit Issuer to issue any
Letter of Credit hereunder, are subject to the following conditions
precedent having been satisfied in a manner satisfactory to the Agent and
each Lender:
(a) This Agreement and the other Loan Documents shall have been executed by
each party hereto and thereto and the Borrower shall have performed and
complied with all covenants, agreements and conditions contained herein and
in the other Loan Documents which are required to be performed or complied
with by the Borrower before or on such Closing Date.
(b) All representations and warranties made hereunder and in the other Loan
Documents shall be true and correct as if made on such date.
(c) No Default or Event of Default shall have occurred and be continuing
after giving effect to the Loans to be made and the Letters of Credit to be
issued on the Closing Date.
(d) The Agent and the Lenders shall have received such opinions of counsel
for the Borrower and its Subsidiaries as the Agent or any Lender shall
request, each such opinion to be in a form, scope, and substance
satisfactory to the Agent, the Lenders, and their respective counsel.
(e) The Agent shall have received:
(i) acknowledgment copies of proper financing statements, duly filed on or
before the Closing Date under the Original Credit Agreement under the UCC
of all jurisdictions that the Agent may deem necessary or desirable in
order to perfect the Agent's Liens;
(ii) duly executed documents acceptable in form and substance to Agent to
perfect Agent's Liens on the Rolling Stock (other than Rolling Stock which
is subject to a perfected Lien in favor of a third party as of the Closing
Date and as of March 31, 2005 and the Rolling Stock described on Schedule
7.30 attached hereto);
(iii) original titles to all Rolling Stock other than Rolling Stock which
is subject to a perfected Lien in favor of a third party as of the Closing
Date; and
(iv) such other instruments, in form and substance satisfactory to the
Agent, as shall be necessary to terminate and satisfy all Liens on the
Property of the Borrower and its Subsidiaries except Permitted Liens.
(f) The Borrower shall have paid all fees and expenses of the Agent and the
Attorney Costs incurred in connection with any of the Loan Documents and
the transactions contemplated thereby to the extent invoiced.
(g) The Agent shall have received evidence, in form, scope, and substance,
reasonably satisfactory to the Agent, of all insurance coverage as required
by this Agreement.
(h) The Agent and the Lenders shall have had an opportunity, if they so
choose, to examine the books of account and other records and files of the
Borrower and to make copies thereof, and to conduct a pre-closing audit
which shall include, without limitation, verification of Rolling Stock,
Accounts, and the Borrowing Base, and the results of such examination and
audit shall have been satisfactory to the Agent and the Lenders in all
respects.
(i) All proceedings taken in connection with the execution of this
Agreement, all other Loan Documents and all documents and papers relating
thereto shall be satisfactory in form, scope, and substance to the Agent
and the Lenders.
(j) The Agent shall have received an appraisal, satisfactory in form and
substance to Agent, of all Rolling Stock included in the Borrowing Base.
(k) Borrower shall have established all of its deposit accounts at the Bank
or shall have entered into Blocked Account Agreements or control agreements
(on terms acceptable to the Agent) with respect to all deposit accounts not
established at the Bank, for which the Agent has requested such Blocked
Account Agreements.
Page 30
(l) Without limiting the generality of the items described above, the
Borrower and each Person guarantying or securing payment of the Obligations
shall have delivered or caused to be delivered to the Agent (in form and
substance reasonably satisfactory to the Agent), the financial statements,
instruments, resolutions, documents, agreements, certificates, opinions,
pay-off letters, and other items set forth on the "Closing Checklist"
delivered by the Agent to the Borrower prior to the Closing Date.
The acceptance by the Borrower of any Loans made or Letters of Credit
issued on the Closing Date shall be deemed to be a representation and
warranty made by the Borrower to the effect that all of the conditions
precedent to the making of such Loans or the issuance of such Letters of
Credit have been satisfied, with the same effect as delivery to the Agent
and the Lenders of a certificate signed by a Responsible Officer of the
Borrower, dated the Closing Date, to such effect.
Execution and delivery to the Agent by a Lender of a counterpart of this
Agreement shall be deemed confirmation by such Lender that (i) all
conditions precedent in this Section 8.1 have been fulfilled to the
satisfaction of such Lender, (ii) the decision of such Lender to execute
and deliver to the Agent an executed counterpart of this Agreement was made
by such Lender independently and without reliance on the Agent or any other
Lender as to the satisfaction of any condition precedent set forth in this
Section 8.1, and (iii) all documents sent to such Lender for approval
consent, or satisfaction were acceptable to such Lender.
8.2 Conditions Precedent to Each Loan.
The obligation of the Lenders to make
each Loan, including the initial Revolving Loans on the Closing Date, and
the obligation of the Agent to cause the Letter of Credit Issuer to issue
any Letter of Credit shall be subject to the further conditions precedent
that on and as of the date of any such extension of credit:
(a) The following statements shall be true, and the acceptance by the
Borrower of any extension of credit shall be deemed to be a statement to
the effect set forth in clauses (i), (ii) and (iii) with the same effect as
the delivery to the Agent and the Lenders of a certificate signed by a
Responsible Officer, dated the date of such extension of credit, stating
that:
(i) The representations and warranties contained in this Agreement and the
other Loan Documents are correct in all material respects on and as of the
date of such extension of credit as though made on and as of such date,
other than any such representation or warranty which relates to a specified
prior date and except to the extent the Agent and the Lenders have been
notified in writing by the Borrower that any representation or warranty is
not correct and the Required Lenders have explicitly waived in writing
compliance with such representation or warranty; and
(ii) No event has occurred and is continuing, or would result from such
extension of credit, which constitutes a Default or an Event of Default;
and
(iii) No event has occurred and is continuing, or would result from such
extension of credit, which has had or would have a Material Adverse Effect.
(b) No such Borrowing shall exceed Availability, provided, however, that
the foregoing conditions precedent are not conditions to each Lender
participating in or reimbursing the Bank or the Agent for such Lenders' Pro
Rata Share of any Non-Ratable Loan or Agent Advance made in accordance with
the provisions of Sections 1.2(h) and (i).
Page 31
ARTICLE 9
DEFAULT; REMEDIES
9.1 Events of Default. It shall constitute an event of default ("Event of
Default") if any one or more of the following shall occur for any reason:
(a) any failure by the Borrower to pay the principal of or interest or
premium on any of the Obligations or any fee or other amount owing
hereunder when due, whether upon demand or otherwise;
(b) any representation or warranty made or deemed made by the Borrower in
this Agreement or by the Borrower or any of its Subsidiaries in any of the
other Loan Documents, any Financial Statement, or any certificate furnished
by the Borrower or any of its Subsidiaries at any time to the Agent or any
Lender shall prove to be untrue in any material respect as of the date on
which made, deemed made, or furnished;
(c) (i) any default shall occur in the observance or performance of any of
the covenants and agreements contained in Sections 5.2(k), 7.2, 7.5,
7.9-7.27, or Section 11 of the Security Agreement, (ii) any default shall
occur in the observance or performance of any of the covenants and
agreements contained in Sections 5.2 (other than 5.2(k) or 5.3) and such
default shall continue for three (3) days or more; or (iii) any default
shall occur in the observance or performance of any of the other covenants
or agreements contained in any other Section of this Agreement or any other
Loan Document, any other Loan Documents, or any other agreement entered
into at any time to which the Borrower or any Subsidiary and the Agent or
any Lender are party (including in respect of any Bank Products) and such
default shall continue for fifteen (15) days or more;
(d) any default shall occur with respect to any Debt (other than the
Obligations) of the Borrower or any of its Subsidiaries in an outstanding
principal amount which individually or in the aggregate exceeds $500,000,
or under any agreement or instrument under or pursuant to which any such
Debt may have been issued, created, assumed, or guaranteed by the Borrower
or any of its Subsidiaries, and such default shall continue for more than
the period of grace, if any, therein specified, if the effect thereof (with
or without the giving of notice or further lapse of time or both) is to
accelerate, or to permit the holders of any such Debt to accelerate, the
maturity of any such Debt; or any such Debt shall be declared due and
payable or be required to be prepaid (other than by a regularly scheduled
required prepayment) prior to the stated maturity thereof;
(e) the Borrower or any of its Subsidiaries shall (i) file a voluntary
petition in bankruptcy or file a voluntary petition or an answer or
otherwise commence any action or proceeding seeking reorganization,
arrangement or readjustment of its debts or for any other relief under the
federal Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency act or law, state or federal, now or hereafter existing, or
consent to, approve of, or acquiesce in, any such petition, action or
proceeding; (ii) apply for or acquiesce in the appointment of a receiver,
assignee, liquidator, sequestrator, custodian, monitor, trustee or similar
officer for it or for all or any part of its property; (iii) make an
assignment for the benefit of creditors; or (iv) be unable generally to pay
its debts as they become due;
(f) an involuntary petition shall be filed or an action or proceeding
otherwise commenced seeking reorganization, arrangement, consolidation or
readjustment of the debts of the Borrower or any of its Subsidiaries or for
any other relief under the federal Bankruptcy Code, as amended, or under
any other bankruptcy or insolvency act or law, state or federal, now or
hereafter existing and such petition or proceeding shall not be dismissed
within thirty (30) days after the filing or commencement thereof or an
order of relief shall be entered with respect thereto;
(g) a receiver, assignee, liquidator, sequestrator, custodian, monitor,
trustee or similar officer for the Borrower or any of its Subsidiaries or
for all or any part of its property shall be appointed or a warrant of
attachment, execution or similar process shall be issued against any part
of the property of the Borrower or any of its Subsidiaries;
Page 32
(h) the Borrower or any of its Subsidiaries shall file a certificate of
dissolution under applicable state law or shall be liquidated, dissolved or
wound-up or shall commence or have commenced against it any action or
proceeding for dissolution, winding-up or liquidation, or shall take any
corporate action in furtherance thereof;
(i) all or any material part of the property of the Borrower or any of its
Subsidiaries shall be nationalized, expropriated or condemned, seized or
otherwise appropriated, or custody or control of such property or of the
Borrower or such Subsidiary shall be assumed by any Governmental Authority
or any court of competent jurisdiction at the instance of any Governmental
Authority, except where contested in good faith by proper proceedings
diligently pursued where a stay of enforcement is in effect;
(j) any Loan Document shall be terminated, revoked or declared void or
invalid or unenforceable or challenged by the Borrower or any other
obligor;
(k) one or more judgments, orders, decrees or arbitration awards is entered
against the Borrower involving in the aggregate liability (to the extent
not covered by independent third-party insurance as to which the insurer
does not dispute coverage) as to any single or related or unrelated series
of transactions, incidents or conditions, of $500,000 or more, and the same
shall remain unsatisfied, unvacated and unstayed pending appeal for a
period of thirty (30) days after the entry thereof;
(l) any loss, theft, damage or destruction of any item or items of
Collateral or other property of the Borrower or any Subsidiary occurs which
could reasonably be expected to cause a Material Adverse Effect and is not
adequately covered by insurance;
(m) there is filed against the Borrower or any of its Subsidiaries any
action, suit or proceeding under any federal or state racketeering statute
(including the Racketeer Influenced and Corrupt Organization Act of 1970),
which action, suit or proceeding (i) is not dismissed within one hundred
twenty (120) days, and (ii) could reasonably be expected to result in the
confiscation or forfeiture of any material portion of the Collateral;
(n) for any reason other than the failure of the Agent to take any action
available to it to maintain perfection of the Agent's Liens, pursuant to
the Loan Documents, any Loan Document ceases to be in full force and effect
or any Lien with respect to any material portion of the Collateral intended
to be secured thereby ceases to be, or is not, valid, perfected and prior
to all other Liens (other than Permitted Liens) or is terminated, revoked
or declared void;
(o) (i) an ERISA Event shall occur with respect to a Pension Plan or
Multi-employer Plan which has resulted or could reasonably be expected to
result in liability of the Borrower under Title IV of ERISA to the Pension
Plan, Multi-employer Plan or the PBGC in an aggregate amount in excess of
$250,000 ; (ii) the aggregate amount of Unfunded Pension Liability among
all Pension Plans at any time exceeds $250,000; or (iii) the Borrower or
any ERISA Affiliate shall fail to pay when due, after the expiration of any
applicable grace period, any installment payment with respect to its
withdrawal liability under Section 4201 of ERISA under a Multi-employer
Plan in an aggregate amount in excess of $250,000; or
(p) there occurs a Change of Control.
Page 33
9.2 Remedies.
(a) If a Default or an Event of Default exists, the Agent may, in its
discretion, and shall, at the direction of the Required Lenders, do one or
more of the following at any time or times and in any order, without notice
to or demand on the Borrower: (i) reduce the Maximum Revolver Amount, or
the advance rates against Eligible Accounts and/or Eligible Rolling Stock
used in computing the Borrowing Base, or reduce one or more of the other
elements used in computing the Borrowing Base; (ii) restrict the amount of
or refuse to make Revolving Loans; and (iii) restrict or refuse to provide
Letters of Credit or Credit Support. If an Event of Default exists, the
Agent shall, at the direction of the Required Lenders, do one or more of
the following, in addition to the actions described in the preceding
sentence, at any time or times and in any order, without notice to or
demand on the Borrower: (A) terminate the Commitments and this Agreement;
(B) declare any or all Obligations to be immediately due and payable;
provided, however, that upon the occurrence of any Event of Default
described in Sections 9.1(e), 9.1(f), 9.1(g), or 9.1(h), the Commitments
shall automatically and immediately expire and all Obligations shall
automatically become immediately due and payable without notice or demand
of any kind; (C) require the Borrower to cash collateralize all outstanding
Letter of Credit Obligations; and (D) pursue its other rights and remedies
under the Loan Documents and applicable law.
(b) If an Event of Default has occurred and is continuing: (i) the Agent
shall have for the benefit of the Lenders, in addition to all other rights
of the Agent and the Lenders, the rights and remedies of a secured party
under the Loan Documents and the UCC; (ii) the Agent may, at any time, take
possession of the Collateral and keep it on the Borrower's premises, at no
cost to the Agent or any Lender, or remove any part of it to such other
place or places as the Agent may desire, or the Borrower shall, upon the
Agent's demand, at the Borrower's cost, assemble the Collateral and make it
available to the Agent at a place reasonably convenient to the Agent; and
(iii) the Agent may sell and deliver any Collateral at public or private
sales, for cash, upon credit or otherwise, at such prices and upon such
terms as the Agent deems advisable, in its sole discretion, and may, if the
Agent deems it reasonable, postpone or adjourn any sale of the Collateral
by an announcement at the time and place of sale or of such postponed or
adjourned sale without giving a new notice of sale. Without in any way
requiring notice to be given in the following manner, the Borrower agrees
that any notice by the Agent of sale, disposition or other intended action
hereunder or in connection herewith, whether required by the UCC or
otherwise, shall constitute reasonable notice to the Borrower if such
notice is mailed by registered or certified mail, return receipt requested,
postage prepaid, or is delivered personally against receipt, at least five
(5) Business Days prior to such action to the Borrower's address specified
in or pursuant to Section 13.8. If any Collateral is sold on terms other
than payment in full at the time of sale, no credit shall be given against
the Obligations until the Agent or the Lenders receive payment, and if the
buyer defaults in payment, the Agent may resell the Collateral without
further notice to the Borrower. In the event the Agent seeks to take
possession of all or any portion of the Collateral by judicial process, the
Borrower irrevocably waives: (A) the posting of any bond, surety or
security with respect thereto which might otherwise be required; (B) any
demand for possession prior to the commencement of any suit or action to
recover the Collateral; and (C) any requirement that the Agent retain
possession and not dispose of any Collateral until after trial or final
judgment. The Borrower agrees that the Agent has no obligation to preserve
rights to the Collateral or marshal any Collateral for the benefit of any
Person. The Agent is hereby granted a license or other right to use,
without charge, the Borrower's labels, patents, copyrights, name, trade
secrets, trade names, trademarks, and advertising matter, or any similar
property, in completing production of, advertising or selling any
Collateral, and the Borrower's rights under all licenses and all franchise
agreements shall inure to the Agent's benefit for such purpose. The
proceeds of sale shall be applied first to all expenses of sale, including
attorneys' fees, and then to the Obligations. The Agent will return any
excess to the Borrower and the Borrower shall remain liable for any
deficiency.
(c) If an Event of Default occurs, the Borrower hereby waives all rights to
notice and hearing prior to the exercise by the Agent of the Agent's rights
to repossess the Collateral without judicial process or to reply, attach or
levy upon the Collateral without notice or hearing.
Page 34
ARTICLE 10
TERM AND TERMINATION
10.1 Term and Termination.
The term of this Agreement shall end on the Stated
Termination Date unless sooner terminated in accordance with the terms
hereof. The Agent upon direction from the Required Lenders may terminate
this Agreement without notice upon the occurrence of an Event of Default.
Upon the effective date of termination of this Agreement for any reason
whatsoever, all Obligations (including all unpaid principal, accrued and
unpaid interest and any early termination or prepayment fees or penalties)
shall become immediately due and payable and the Borrower shall immediately
arrange for the cancellation and return of Letters of Credit then
outstanding. Notwithstanding the termination of this Agreement, until all
Obligations are indefeasibly paid and performed in full in cash, the
Borrower shall remain bound by the terms of this Agreement and shall not be
relieved of any of its Obligations hereunder or under any other Loan
Document, and the Agent and the Lenders shall retain all their rights and
remedies hereunder (including the Agent"s Liens in and all rights and
remedies with respect to all then existing and after-arising Collateral).
ARTICLE 11
AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
11.1 Amendments and Waivers.
(a) No amendment or waiver of any provision of this Agreement or any other
Loan Document, and no consent with respect to any departure by the Borrower
therefrom, shall be effective unless the same shall be in writing and
signed by the Required Lenders (or by the Agent at the written request of
the Required Lenders) and the Borrower and then any such waiver or consent
shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such waiver, amendment,
or consent shall, unless in writing and signed by all the Lenders and the
Borrower and acknowledged by the Agent, do any of the following:
(i) increase or extend the Commitment of any Lender;
(ii) postpone or delay any date fixed by this Agreement or any other Loan
Document for any payment of principal, interest, fees or other amounts due
to the Lenders (or any of them) hereunder or under any other Loan Document;
(iii) reduce the principal of, or the rate of interest specified herein on
any Loan, or any fees or other amounts payable hereunder or under any other
Loan Document;
(iv) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans which is required for the Lenders or any of
them to take any action hereunder;
(v) increase any of the percentages set forth in the definition of the
Borrowing Base;
(vi) amend this Section or any provision of this Agreement providing for
consent or other action by all Lenders;
(vii) release any Guaranties of the Obligations or release Collateral other
than as permitted by Section 12.11;
(viii) change the definitions of "Majority Lenders" or "Required Lenders";
or
(ix) increase the Maximum Revolver Amount, the Maximum Rolling Stock Loan
Amount, and Letter of Credit Subfacility;
provided, however, the Agent may, in its sole discretion and
notwithstanding the limitations contained in clauses (v) and (ix) above and
any other terms of this Agreement, make Agent Advances in accordance with
Section 1.2(i) and, provided further, that no amendment, waiver or consent
shall, unless in writing and signed by the Agent, affect the rights or
duties of the Agent under this Agreement or any other Loan Document and
provided further, that Schedule 1.2 hereto (Commitments) may be amended
from time to time by Agent alone to reflect assignments of Commitments in
accordance herewith.
Page 35
(b) If any fees are paid to the Lenders as consideration for amendments,
waivers or consents with respect to this Agreement, at Agent"s election,
such fees may be paid only to those Lenders that agree to such amendments,
waivers or consents within the time specified for submission thereof.
(c) If, in connection with any proposed amendment, waiver or consent :
(i) requiring the consent of all Lenders, the consent of Required Lenders
is obtained, but the consent of other Lenders is not obtained (any such
Lender whose consent is not obtained as described in this clause (i) and in
clause (ii) below being referred to as a "Non-Consenting Lender"), or
(ii) requiring the consent of Required Lenders, the consent of Majority
Lenders is obtained,
then, so long as the Agent is not a Non-Consenting Lender, at the
Borrower's request, the Agent or an Eligible Assignee shall have the right
(but not the obligation) with the Agent's approval, to purchase from the
Non-Consenting Lenders, and the Non-Consenting Lenders agree that they
shall sell, all the Non-Consenting Lenders' Commitments for an amount equal
to the principal balances thereof and all accrued interest and fees with
respect thereto through the date of sale pursuant to Assignment and
Acceptance Agreement(s), without premium or discount.
11.2 Assignments; Participations.
(a) Any Lender may, with the written consent of the Agent (which consent
shall not be unreasonably withheld), assign and delegate to one or more
Eligible Assignees (provided that no consent of the Agent shall be required
in connection with any assignment and delegation by a Lender to an
Affiliate of such Lender) (each an "Assignee") all, or any ratable part of
all, of the Loans, the Commitments and the other rights and obligations of
such Lender hereunder, in a minimum amount of $5,000,000; (provided that,
unless an assignor Lender has assigned and delegated all of its Loans and
Commitments, no such assignment and/or delegation shall be permitted
unless, after giving effect thereto, such assignor Lender retains a
Commitment in a minimum amount of $5,000,000; provided, however, that the
Borrower and the Agent may continue to deal solely and directly with such
Lender in connection with the interest so assigned to an Assignee until (i)
written notice of such assignment, together with payment instructions,
addresses and related information with respect to the Assignee, shall have
been given to the Borrower and the Agent by such Lender and the Assignee;
(ii) such Lender and its Assignee shall have delivered to the Borrower and
the Agent an Assignment and Acceptance in the form of Exhibit F
("Assignment and Acceptance") together with any note or notes subject to
such assignment and (iii) the assignor Lender or Assignee has paid to the
Agent a processing fee in the amount of $3,500. The Borrower agrees to
promptly execute and deliver new promissory notes and replacement
promissory notes as reasonably requested by the Agent to evidence
assignments of the Loans and Commitments in accordance herewith.
(b) From and after the date that the Agent notifies the assignor Lender
that it has received an executed Assignment and Acceptance and payment of
the above-referenced processing fee, (i) the Assignee thereunder shall be a
party hereto and, to the extent that rights and obligations, including, but
not limited to, the obligation to participate in Letters of Credit and
Credit Support have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the
Loan Documents, and (ii) the assignor Lender shall, to the extent that
rights and obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement (and
in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
Page 36
(c) By executing and delivering an Assignment and Acceptance, the assigning
Lender thereunder and the Assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
this Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Loan
Document furnished pursuant hereto or the attachment, perfection, or
priority of any Lien granted by the Borrower to the Agent or any Lender in
the Collateral; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Borrower or the performance or observance by the Borrower
of any of its obligations under this Agreement or any other Loan Document
furnished pursuant hereto; (iii) such Assignee confirms that it has
received a copy of this Agreement, together with such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance; (iv) such
Assignee will, independently and without reliance upon the Agent, such
assigning Lender or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement;
(v) such Assignee appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement as are
delegated to the Agent by the terms hereof, together with such powers,
including the discretionary rights and incidental power, as are reasonably
incidental thereto; and (vi) such Assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of
this Agreement are required to be performed by it as a Lender.
(d) Immediately upon satisfaction of the requirements of Section 11.2(a),
this Agreement shall be deemed to be amended to the extent, but only to the
extent, necessary to reflect the addition of the Assignee and the resulting
adjustment of the Commitments arising therefrom. The Commitment allocated
to each Assignee shall reduce such Commitments of the assigning Lender pro
tanto.
(e) Any Lender may at any time sell to one or more commercial banks,
financial institutions, or other Persons not Affiliates of the Borrower (a
"Participant") participating interests in any Loans, the Commitment of that
Lender and the other interests of that Lender (the "originating Lender")
hereunder and under the other Loan Documents; provided, however, that
(i) the originating Lender's obligations under this Agreement shall remain
unchanged, (ii) the originating Lender shall remain solely responsible for
the performance of such obligations, (iii) the Borrower and the Agent shall
continue to deal solely and directly with the originating Lender in
connection with the originating Lender's rights and obligations under this
Agreement and the other Loan Documents, and (iv) no Lender shall transfer
or grant any participating interest under which the Participant has rights
to approve any amendment to, or any consent or waiver with respect to, this
Agreement or any other Loan Document except the matters set forth in
Section 11.1(a) (i), (ii) and (iii), and all amounts payable by the
Borrower hereunder shall be determined as if such Lender had not sold such
participation; except that, if amounts outstanding under this Agreement are
due and unpaid, or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall be deemed to have the right of
set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent and subject to the same limitation as if
the amount of its participating interest were owing directly to it as a
Lender under this Agreement.
(f) Notwithstanding any other provision in this Agreement, any Lender may
at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement in favor of any Federal
Reserve Bank in accordance with Regulation A of the Federal Reserve Board
or U.S. Treasury Regulation 31 CFR 203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law.
Page 37
ARTICLE 12
THE AGENT
12.1 Appointment and Authorization.
Each Lender hereby designates and appoints
Bank as its Agent under this Agreement and the other Loan Documents and
each Lender hereby irrevocably authorizes the Agent to take such action on
its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto.
The Agent agrees to act as such on the express conditions contained in this
Article 12. The provisions of this Article 12 are solely for the benefit of
the Agent and the Lenders and the Borrower shall have no rights as a third
party beneficiary of any of the provisions contained herein.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any
duties or responsibilities, except those expressly set forth herein, nor
shall the Agent have or be deemed to have any fiduciary relationship with
any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other
Loan Document or otherwise exist against the Agent. Without limiting the
generality of the foregoing sentence, the use of the term "agent" in this
Agreement with reference to the Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a
matter of market custom, and is intended to create or reflect only an
administrative relationship between independent contracting parties. Except
as expressly otherwise provided in this Agreement, the Agent shall have and
may use its sole discretion with respect to exercising or refraining from
exercising any discretionary rights or taking or refraining from taking any
actions which the Agent is expressly entitled to take or assert under this
Agreement and the other Loan Documents, including (a) the determination of
the applicability of ineligibility criteria with respect to the calculation
of the Borrowing Base, (b) the making of Agent Advances pursuant to Section
1.2(i), and (c) the exercise of remedies pursuant to Section 9.2, and any
action so taken or not taken shall be deemed consented to by the Lenders.
12.2 Delegation of Duties.
The Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for
the negligence or misconduct of any agent or attorney-in-fact that it
selects as long as such selection was made without gross negligence or
willful misconduct.
12.3 Liability of Agent.
None of the Agent-Related Persons shall (i) be liable
for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or (ii) be responsible in any manner to any of the
Lenders for any recital, statement, representation or warranty made by the
Borrower or any Subsidiary or Affiliate of the Borrower, or any officer
thereof, contained in this Agreement or in any other Loan Document, or in
any certificate, report, statement or other document referred to or
provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
Loan Document, or for any failure of the Borrower or any other party to any
Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower or
any of the Borrower's Subsidiaries or Affiliates.
Page 38
12.4 Reliance by Agent.
The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel
(including counsel to the Borrower), independent accountants and other
experts selected by the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other
Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate and, if it so requests, it
shall first be indemnified to its satisfaction by the Lenders against any
and all liability and expense which may be incurred by it by reason of
taking or continuing to take any such action. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or
consent of the Required Lenders (or all Lenders if so required by Section
11.1) and such request and any action taken or failure to act pursuant
thereto shall be binding upon all of the Lenders.
12.5 Notice of Default.
The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default, unless the
Agent shall have received written notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default
and stating that such notice is a "notice of default." The Agent will
notify the Lenders of its receipt of any such notice. The Agent shall take
such action with respect to such Default or Event of Default as may be
requested by the Required Lenders in accordance with Section 9; provided,
however, that unless and until the Agent has received any such request, the
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it
shall deem advisable.
12.6 Credit Decision.
Each Lender acknowledges that none of the Agent-Related
Persons has made any representation or warranty to it, and that no act by
the Agent hereinafter taken, including any review of the affairs of the
Borrower and its Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to the Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial
and other condition and creditworthiness of the Borrower and its
Affiliates, and all applicable bank regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Borrower. Each Lender also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly herein required to be furnished to the Lenders by the
Agent, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Borrower which may come into the possession of any
of the Agent-Related Persons.
12.7 Indemnification.
Whether or not the transactions contemplated hereby are
consummated, the Lenders shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Borrower and
without limiting the obligation of the Borrower to do so), in accordance
with their Pro Rata Shares, from and against any and all Indemnified
Liabilities as such term is defined in Section 13.11; provided, however,
that no Lender shall be liable for the payment to the Agent-Related Persons
of any portion of such Indemnified Liabilities resulting solely from such
Person's gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender shall reimburse the Agent upon demand for its Pro
Rata Share of any costs or out-of-pocket expenses (including Attorney
Costs) incurred by the Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice
in respect of rights or responsibilities under, this Agreement, any other
Loan Document, or any document contemplated by or referred to herein, to
the extent that the Agent is not reimbursed for such expenses by or on
behalf of the Borrower. The undertaking in this Section shall survive the
payment of all Obligations hereunder and the resignation or replacement of
the Agent.
Page 39
12.8 Agent in Individual Capacity.
The Bank and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business
with the Borrower and its Subsidiaries and Affiliates as though the
Bank were not the Agent hereunder and without notice to or consent of
the Lenders. The Bank or its Affiliates may receive information
regarding the Borrower, its Affiliates and Account Debtors (including
information that may be subject to confidentiality obligations in
favor of the Borrower or such Subsidiary) and acknowledge that the
Agent and the Bank shall be under no obligation to provide such
information to them. With respect to its Loans, the Bank shall have
the same rights and powers under this Agreement as any other Lender
and may exercise the same as though it were not the Agent, and the
terms "Lender" and "Lenders" include the Bank in its individual
capacity.
12.9 Successor Agent.
The Agent may resign as Agent upon at least 30 days'
prior notice to the Lenders and the Borrower, such resignation to be
effective upon the acceptance of a successor agent to its appointment
as Agent. In the event the Bank sells all of its Commitment and
Revolving Loans as part of a sale, transfer or other disposition by
the Bank of substantially all of its loan portfolio, the Bank shall
resign as Agent and such purchaser or transferee shall become the
successor Agent hereunder. Subject to the foregoing, if the Agent
resigns under this Agreement, the Required Lenders shall appoint from
among the Lenders a successor agent for the Lenders. If no successor
agent is appointed prior to the effective date of the resignation of
the Agent, the Agent may appoint, after consulting with the Lenders
and the Borrower, a successor agent from among the Lenders. Upon the
acceptance of its appointment as successor agent hereunder, such
successor agent shall succeed to all the rights, powers and duties of
the retiring Agent and the term "Agent" shall mean such successor
agent and the retiring Agent's appointment, powers and duties as Agent
shall be terminated. After any retiring Agent's resignation hereunder
as Agent, the provisions of this Article 12 shall continue to inure to
its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement.
12.10 Withholding Tax.
(a) If any Lender is a "foreign corporation, partnership or trust" within
the meaning of the Code and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code,
such Lender agrees with and in favor of the Agent, to deliver to the Agent:
(i) if such Lender claims an exemption from, or a reduction of, withholding
tax under a United States of America tax treaty, properly completed IRS
Forms W-8BEN and W-8ECI before the payment of any interest in the first
calendar year and before the payment of any interest in each third
succeeding calendar year during which interest may be paid under this
Agreement;
(ii) if such Lender claims that interest paid under this Agreement is
exempt from United States of America withholding tax because it is
effectively connected with a United States of America trade or business of
such Lender, two properly completed and executed copies of IRS Form W-8ECI
before the payment of any interest is due in the first taxable year of such
Lender and in each succeeding taxable year of such Lender during which
interest may be paid under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under the Code or other
laws of the United States of America as a condition to exemption from, or
reduction of, United States of America withholding tax.
Such Lender agrees to promptly notify the Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of, withholding tax
under a United States of America tax treaty by providing IRS Form W-8BEN
and such Lender sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations owing to such Lender, such Lender
agrees to notify the Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of the Borrower to such Lender.
To the extent of such percentage amount, the Agent will treat such Lender's
IRS Form W-8BEN as no longer valid.
Page 40
(c) If any Lender claiming exemption from United States of America
withholding tax by filing IRS Form W-8ECI with the Agent sells, assigns,
grants a participation in, or otherwise transfers all or part of the
Obligations owing to such Lender, such Lender agrees to undertake sole
responsibility for complying with the withholding tax requirements imposed
by Sections 1441 and 1442 of the Code.
(d) If any Lender is entitled to a reduction in the applicable withholding
tax, the Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into
account such reduction. If the forms or other documentation required by
subsection (a) of this Section are not delivered to the Agent, then the
Agent may withhold from any interest payment to such Lender not providing
such forms or other documentation an amount equivalent to the applicable
withholding tax.
(e) If the IRS or any other Governmental Authority of the United States of
America or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered, was not properly executed,
or because such Lender failed to notify the Agent of a change in
circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Lender shall
indemnify the Agent fully for all amounts paid, directly or indirectly, by
the Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to
the Agent under this Section, together with all costs and expenses
(including Attorney Costs). The obligation of the Lenders under this
subsection shall survive the payment of all Obligations and the resignation
or replacement of the Agent.
12.11 Collateral Matters.
(a) The Lenders hereby irrevocably authorize the Agent, at its option and
in its sole discretion, to release any Agent's Liens upon any Collateral
(i) upon the termination of the Commitments and payment and satisfaction in
full by Borrower of all Loans and reimbursement obligations in respect of
Letters of Credit and Credit Support, and the termination of all
outstanding Letters of Credit (whether or not any of such obligations are
due) and all other Obligations; (ii) constituting property being sold or
disposed of if the Borrower certifies to the Agent that the sale or
disposition is made in compliance with Section 7.9 (and the Agent may rely
conclusively on any such certificate, without further inquiry);
(iii) constituting property in which the Borrower owned no interest at the
time the Lien was granted or at any time thereafter; or (iv) constituting
property leased to the Borrower under a lease which has expired or been
terminated in a transaction permitted under this Agreement. Any other sale,
lease, sale/leaseback, or mortgaging of any collateral shall be solely
subject to the Agent's consent.
(b) Upon receipt by the Agent of any authorization required pursuant to
Section 12.11(a) from the Lenders of the Agent's authority to release
Agent's Liens upon particular types or items of Collateral, and upon at
least five (5) Business Days prior written request by the Borrower, the
Agent shall (and is hereby irrevocably authorized by the Lenders to)
execute such documents as may be necessary to evidence the release of the
Agent's Liens upon such Collateral; provided, however, that (i) the Agent
shall not be required to execute any such document on terms which, in the
Agent's opinion, would expose the Agent to liability or create any
obligation or entail any consequence other than the release of such Liens
without recourse or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens (other than those
expressly being released) upon (or obligations of the Borrower in respect
of) all interests retained by the Borrower, including the proceeds of any
sale, all of which shall continue to constitute part of the Collateral.
Page 41
(c) The Agent shall have no obligation whatsoever to any of the Lenders to
assure that the Collateral exists or is owned by the Borrower or is cared
for, protected or insured or has been encumbered, or that the Agent's Liens
have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to the Agent pursuant to any of
the Loan Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, the Agent may
act in any manner it may deem appropriate, in its sole discretion given the
Agent's own interest in the Collateral in its capacity as one of the
Lenders and that the Agent shall have no other duty or liability whatsoever
to any Lender as to any of the foregoing.
12.12 Restrictions on Actions by Lenders; Sharing of Payments.
(a) Each of the Lenders agrees that it shall not, without the express
consent of all Lenders, and that it shall, to the extent it is lawfully
entitled to do so, upon the request of all Lenders, set off against the
Obligations, any amounts owing by such Lender to the Borrower or any
accounts of the Borrower now or hereafter maintained with such Lender. Each
of the Lenders further agrees that it shall not, unless specifically
requested to do so by the Agent, take or cause to be taken any action to
enforce its rights under this Agreement or against the Borrower, including
the commencement of any legal or equitable proceedings, to foreclose any
Lien on, or otherwise enforce any security interest in, any of the
Collateral.
(b) If at any time or times any Lender shall receive (i) by payment,
foreclosure, setoff or otherwise, any proceeds of Collateral or any
payments with respect to the Obligations of the Borrower to such Lender
arising under, or relating to, this Agreement or the other Loan Documents,
except for any such proceeds or payments received by such Lender from the
Agent pursuant to the terms of this Agreement, or (ii) payments from the
Agent in excess of such Lender's ratable portion of all such distributions
by the Agent, such Lender shall promptly (1) turn the same over to the
Agent, in kind, and with such endorsements as may be required to negotiate
the same to the Agent, or in same day funds, as applicable, for the account
of all of the Lenders and for application to the Obligations in accordance
with the applicable provisions of this Agreement, or (2) purchase, without
recourse or warranty, an undivided interest and participation in the
Obligations owed to the other Lenders so that such excess payment received
shall be applied ratably as among the Lenders in accordance with their Pro
Rata Shares; provided, however, that if all or part of such excess payment
received by the purchasing party is thereafter recovered from it, those
purchases of participations shall be rescinded in whole or in part, as
applicable, and the applicable portion of the purchase price paid therefor
shall be returned to such purchasing party, but without interest except to
the extent that such purchasing party is required to pay interest in
connection with the recovery of the excess payment.
12.13 Agency for Perfection.
Each Lender hereby appoints each other Lender as
agent for the purpose of perfecting the Lenders' security interest in
assets which, in accordance with Article 9 of the UCC can be perfected only
by possession. Should any Lender (other than the Agent) obtain possession
of any such Collateral, such Lender shall notify the Agent thereof, and,
promptly upon the Agent's request therefor shall deliver such Collateral to
the Agent or in accordance with the Agent's instructions.
12.14 Payments by Agent to Lenders.
All payments to be made by the Agent to the
Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds to each Lender pursuant to wire transfer
instructions delivered in writing to the Agent on or prior to the Closing
Date (or if such Lender is an Assignee, on the applicable Assignment and
Acceptance), or pursuant to such other wire transfer instructions as each
party may designate for itself by written notice to the Agent. Concurrently
with each such payment, the Agent shall identify whether such payment (or
any portion thereof) represents principal, premium or interest on the
Revolving Loans or otherwise. Unless the Agent receives notice from the
Borrower prior to the date on which any payment is due to the Lenders that
the Borrower will not make such payment in full as and when required, the
Agent may assume that the Borrower has made such payment in full to the
Agent on such date in immediately available funds and the Agent may (but
shall not be so required), in reliance upon such assumption, distribute to
each Lender on such due date an amount equal to the amount then due such
Lender. If and to the extent the Borrower has not made such payment in full
to the Agent, each Lender shall repay to the Agent on demand such amount
distributed to such Lender, together with interest thereon at the Federal
Funds Rate for each day from the date such amount is distributed to such
Lender until the date repaid.
Page 42
12.15 Settlement.
(a) (i) Each Lender's funded portion of the Revolving Loans is intended by
the Lenders to be equal at all times to such Lender's Pro Rata Share of the
outstanding Revolving Loans. Notwithstanding such agreement, the Agent, the
Bank, and the other Lenders agree (which agreement shall not be for the
benefit of or enforceable by the Borrower) that in order to facilitate the
administration of this Agreement and the other Loan Documents, settlement
among them as to the Revolving Loans, the Non-Ratable Loans and the Agent
Advances shall take place on a periodic basis in accordance with the
following provisions:
(ii) The Agent may request settlement ("Settlement") with the Lenders on at
least a weekly basis, or on a more frequent basis at Agent's election, (A)
on behalf of the Bank, with respect to each outstanding Non-Ratable Loan,
(B) for itself, with respect to each Agent Advance, and (C) with respect to
collections received, in each case, by notifying the Lenders of such
requested Settlement by telecopy, telephone or other similar form of
transmission, of such requested Settlement, no later than 12:00 noon
(Central Standard Time) on the date of such requested Settlement (the
"Settlement Date"). Each Lender (other than the Bank, in the case of
Non-Ratable Loans and the Agent in the case of Agent Advances) shall
transfer the amount of such Lender's Pro Rata Share of the outstanding
principal amount of the Non-Ratable Loans and Agent Advances with respect
to each Settlement to the Agent, to Agent's account, not later than 2:00
p.m. (Central Standard Time), on the Settlement Date applicable thereto.
Settlements may occur during the continuation of a Default or an Event of
Default and whether or not the applicable conditions precedent set forth in
Article 8 have then been satisfied. Such amounts made available to the
Agent shall be applied against the amounts of the applicable Non-Ratable
Loan or Agent Advance and, together with the portion of such Non-Ratable
Loan or Agent Advance representing the Bank's Pro Rata Share thereof, shall
constitute Revolving Loans of such Lenders. If any such amount is not
transferred to the Agent by any Lender on the Settlement Date applicable
thereto, the Agent shall be entitled to recover such amount on demand from
such Lender together with interest thereon at the Federal Funds Rate for
the first three (3) days from and after the Settlement Date and thereafter
at the Interest Rate then applicable to the Revolving Loans (A) on behalf
of the Bank, with respect to each outstanding Non-Ratable Loan, and (B) for
itself, with respect to each Agent Advance.
(iii) Notwithstanding the foregoing, not more than one (1) Business Day
after demand is made by the Agent (whether before or after the occurrence
of a Default or an Event of Default and regardless of whether the Agent has
requested a Settlement with respect to a Non-Ratable Loan or Agent
Advance), each other Lender (A) shall irrevocably and unconditionally
purchase and receive from the Bank or the Agent, as applicable, without
recourse or warranty, an undivided interest and participation in such
Non-Ratable Loan or Agent Advance equal to such Lender's Pro Rata Share of
such Non-Ratable Loan or Agent Advance and (B) if Settlement has not
previously occurred with respect to such Non-Ratable Loans or Agent
Advances, upon demand by Bank or Agent, as applicable, shall pay to Bank or
Agent, as applicable, as the purchase price of such participation an amount
equal to one-hundred percent (100%) of such Lender's Pro Rata Share of such
Non-Ratable Loans or Agent Advances. If such amount is not in fact made
available to the Agent by any Lender, the Agent shall be entitled to
recover such amount on demand from such Lender together with interest
thereon at the Federal Funds Rate for the first three (3) days from and
after such demand and thereafter at the Interest Rate then applicable to
Base Rate Revolving Loans.
(iv) From and after the date, if any, on which any Lender purchases an
undivided interest and participation in any Non-Ratable Loan or Agent
Advance pursuant to clause (iii) above, the Agent shall promptly distribute
to such Lender, such Lender's Pro Rata Share of all payments of principal
and interest and all proceeds of Collateral received by the Agent in
respect of such Non-Ratable Loan or Agent Advance.
Page 43
(v) Between Settlement Dates, the Agent, to the extent no Agent Advances
are outstanding, may pay over to the Bank any payments received by the
Agent, which in accordance with the terms of this Agreement would be
applied to the reduction of the Revolving Loans, for application to the
Bank's Revolving Loans including Non-Ratable Loans. If, as of any
Settlement Date, collections received since the then immediately preceding
Settlement Date have been applied to the Bank's Revolving Loans (other than
to Non-Ratable Loans or Agent Advances in which such Lender has not yet
funded its purchase of a participation pursuant to clause (iii) above), as
provided for in the previous sentence, the Bank shall pay to the Agent for
the accounts of the Lenders, to be applied to the outstanding Revolving
Loans of such Lenders, an amount such that each Lender shall, upon receipt
of such amount, have, as of such Settlement Date, its Pro Rata Share of the
Revolving Loans. During the period between Settlement Dates, the Bank with
respect to Non-Ratable Loans, the Agent with respect to Agent Advances, and
each Lender with respect to the Revolving Loans other than Non-Ratable
Loans and Agent Advances, shall be entitled to interest at the applicable
rate or rates payable under this Agreement on the actual average daily
amount of funds employed by the Bank, the Agent and the other Lenders.
(vi) Unless the Agent has received written notice from a Lender to the
contrary, the Agent may assume that the applicable conditions precedent set
forth in Article 8 have been satisfied and the requested Borrowing will not
exceed Availability on any Funding Date for a Revolving Loan or Non-Ratable
Loan.
(b) Lenders' Failure to Perform. All Revolving Loans (other than
Non-Ratable Loans and Agent Advances) shall be made by the Lenders
simultaneously and in accordance with their Pro Rata Shares. It is
understood that (i) no Lender shall be responsible for any failure by any
other Lender to perform its obligation to make any Revolving Loans
hereunder, nor shall any Commitment of any Lender be increased or decreased
as a result of any failure by any other Lender to perform its obligation to
make any Revolving Loans hereunder, (ii) no failure by any Lender to
perform its obligation to make any Revolving Loans hereunder shall excuse
any other Lender from its obligation to make any Revolving Loans hereunder,
and (iii) the obligations of each Lender hereunder shall be several, not
joint and several.
(c) Defaulting Lenders. Unless the Agent receives notice from a Lender on
or prior to the Closing Date or, with respect to any Borrowing after the
Closing Date, at least one Business Day prior to the date of such
Borrowing, that such Lender will not make available as and when required
hereunder to the Agent that Lender's Pro Rata Share of a Borrowing, the
Agent may assume that each Lender has made such amount available to the
Agent in immediately available funds on the Funding Date. Furthermore, the
Agent may, in reliance upon such assumption, make available to the Borrower
on such date a corresponding amount. If any Lender has not transferred its
full Pro Rata Share to the Agent in immediately available funds and the
Agent has transferred corresponding amount to the Borrower on the Business
Day following such Funding Date that Lender shall make such amount
available to the Agent, together with interest at the Federal Funds Rate
for that day. A notice by the Agent submitted to any Lender with respect to
amounts owing shall be conclusive, absent manifest error. If each Lender's
full Pro Rata Share is transferred to the Agent as required, the amount
transferred to the Agent shall constitute that Lender's Revolving Loan for
all purposes of this Agreement. If that amount is not transferred to the
Agent on the Business Day following the Funding Date, the Agent will notify
the Borrower of such failure to fund and, upon demand by the Agent, the
Borrower shall pay such amount to the Agent for the Agent's account,
together with interest thereon for each day elapsed since the date of such
Borrowing, at a rate per annum equal to the Interest Rate applicable at the
time to the Revolving Loans comprising that particular Borrowing. The
failure of any Lender to make any Revolving Loan on any Funding Date (any
such Lender, prior to the cure of such failure, being hereinafter referred
to as a "Defaulting Lender") shall not relieve any other Lender of its
obligation hereunder to make a Revolving Loan on that Funding Date. No
Lender shall be responsible for any other Lender's failure to advance such
other Lenders' Pro Rata Share of any Borrowing.
Page 44
(d) Retention of Defaulting Lender's Payments. The Agent shall not be
obligated to transfer to a Defaulting Lender any payments made by Borrower
to the Agent for the Defaulting Lender's benefit; nor shall a Defaulting
Lender be entitled to the sharing of any payments hereunder. Amounts
payable to a Defaulting Lender shall instead be paid to or retained by the
Agent. In its discretion, the Agent may loan Borrower the amount of all
such payments received or retained by it for the account of such Defaulting
Lender. Any amounts so loaned to the Borrower shall bear interest at the
rate applicable to Base Rate Revolving Loans and for all other purposes of
this Agreement shall be treated as if they were Revolving Loans, provided,
however, that for purposes of voting or consenting to matters with respect
to the Loan Documents and determining Pro Rata Shares, such Defaulting
Lender shall be deemed not to be a "Lender". Until a Defaulting Lender
cures its failure to fund its Pro Rata Share of any Borrowing (A) such
Defaulting Lender shall not be entitled to any portion of the Unused Line
Fee and (B) the Unused Line Fee shall accrue in favor of the Lenders which
have funded their respective Pro Rata Shares of such requested Borrowing
and shall be allocated among such performing Lenders ratably based upon
their relative Commitments. This Section shall remain effective with
respect to such Lender until such time as the Defaulting Lender shall no
longer be in default of any of its obligations under this Agreement. The
terms of this Section shall not be construed to increase or otherwise
affect the Commitment of any Lender, or relieve or excuse the performance
by the Borrower of its duties and obligations hereunder.
(e) Removal of Defaulting Lender. At the Borrower's request, the Agent or
an Eligible Assignee reasonably acceptable to the Agent and the Borrower
shall have the right (but not the obligation) to purchase from any
Defaulting Lender, and each Defaulting Lender shall, upon such request,
sell and assign to the Agent or such Eligible Assignee, all of the
Defaulting Lender's outstanding Commitments hereunder. Such sale shall be
consummated promptly after Agent has arranged for a purchase by Agent or an
Eligible Assignee pursuant to an Assignment and Acceptance, and at a price
equal to the outstanding principal balance of the Defaulting Lender's
Loans, plus accrued interest and fees, without premium or discount.
12.16 Letters of Credit; Intra-Lender Issues.
(a) Notice of Letter of Credit Balance. On each Settlement Date the Agent
shall notify each Lender of the issuance of all Letters of Credit since the
prior Settlement Date.
(b) Participations in Letters of Credit.
(i) Purchase of Participations. Immediately upon issuance of any Letter of
Credit in accordance with Section 1.4(d), each Lender shall be deemed to
have irrevocably and unconditionally purchased and received without
recourse or warranty, an undivided interest and participation equal to such
Lender's Pro Rata Share of the face amount of such Letter of Credit or the
Credit Support provided through the Agent to the Letter of Credit Issuer,
if not the Bank, in connection with the issuance of such Letter of Credit
(including all obligations of the Borrower with respect thereto, and any
security therefor or guaranty pertaining thereto).
(ii) Sharing of Reimbursement Obligation Payments. Whenever the Agent
receives a payment from the Borrower on account of reimbursement
obligations in respect of a Letter of Credit or Credit Support as to which
the Agent has previously received for the account of the Letter of Credit
Issuer thereof payment from a Lender, the Agent shall promptly pay to such
Lender such Lender's Pro Rata Share of such payment from the Borrower. Each
such payment shall be made by the Agent on the next Settlement Date.
(iii) Documentation. Upon the request of any Lender, the Agent shall
furnish to such Lender copies of any Letter of Credit, Credit Support for
any Letter of Credit, reimbursement agreements executed in connection
therewith, applications for any Letter of Credit, and such other
documentation as may reasonably be requested by such Lender.
(iv) Obligations Irrevocable. The obligations of each Lender to make
payments to the Agent with respect to any Letter of Credit or with respect
to their participation therein or with respect to any Credit Support for
any Letter of Credit or with respect to the Revolving Loans made as a
result of a drawing under a Letter of Credit and the obligations of the
Borrower for whose account the Letter of Credit or Credit Support was
issued to make payments to the Agent, for the account of the Lenders, shall
be irrevocable and shall not be subject to any qualification or exception
whatsoever, including any of the following circumstances:
Page 45
(1) any lack of validity or enforceability of this Agreement or any of the
other Loan Documents;
(2) the existence of any claim, setoff, defense or other right which the
Borrower may have at any time against a beneficiary named in a Letter of
Credit or any transferee of any Letter of Credit (or any Person for whom
any such transferee may be acting), any Lender, the Agent, the issuer of
such Letter of Credit, or any other Person, whether in connection with this
Agreement, any Letter of Credit, the transactions contemplated herein or
any unrelated transactions (including any underlying transactions between
the Borrower or any other Person and the beneficiary named in any Letter of
Credit);
(3) any draft, certificate or any other document presented under the Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(4) the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Loan Documents;
(5) the occurrence of any Default or Event of Default; or
(6) the failure of the Borrower to satisfy the applicable conditions
precedent set forth in Article 8.
(c) Recovery or Avoidance of Payments; Refund of Payments In Error. In the
event any payment by or on behalf of the Borrower received by the Agent
with respect to any Letter of Credit or Credit Support provided for any
Letter of Credit and distributed by the Agent to the Lenders on account of
their respective participations therein is thereafter set aside, avoided or
recovered from the Agent in connection with any receivership, liquidation
or bankruptcy proceeding, the Lenders shall, upon demand by the Agent, pay
to the Agent their respective Pro Rata Shares of such amount set aside,
avoided or recovered, together with interest at the rate required to be
paid by the Agent upon the amount required to be repaid by it. Unless the
Agent receives notice from the Borrower prior to the date on which any
payment is due to the Lenders that the Borrower will not make such payment
in full as and when required, the Agent may assume that the Borrower has
made such payment in full to the Agent on such date in immediately
available funds and the Agent may (but shall not be so required), in
reliance upon such assumption, distribute to each Lender on such due date
an amount equal to the amount then due such Lender. If and to the extent
the Borrower has not made such payment in full to the Agent, each Lender
shall repay to the Agent on demand such amount distributed to such Lender,
together with interest thereon at the Federal Funds Rate for each day from
the date such amount is distributed to such Lender until the date repaid.
(d) Indemnification by Lenders. To the extent not reimbursed by the
Borrower and without limiting the obligations of the Borrower hereunder,
the Lenders agree to indemnify the Letter of Credit Issuer ratably in
accordance with their respective Pro Rata Shares, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including attorneys' fees) or disbursements of any
kind and nature whatsoever that may be imposed on, incurred by or asserted
against the Letter of Credit Issuer in any way relating to or arising out
of any Letter of Credit or the transactions contemplated thereby or any
action taken or omitted by the Letter of Credit Issuer under any Letter of
Credit or any Loan Document in connection therewith; provided that no
Lender shall be liable for any of the foregoing to the extent it arises
from the gross negligence or willful misconduct of the Person to be
indemnified. Without limitation of the foregoing, each Lender agrees to
reimburse the Letter of Credit Issuer promptly upon demand for its Pro Rata
Share of any costs or expenses payable by the Borrower to the Letter of
Credit Issuer, to the extent that the Letter of Credit Issuer is not
promptly reimbursed for such costs and expenses by the Borrower. The
agreement contained in this Section shall survive payment in full of all
other Obligations.
Page 46
12.17 Concerning the Collateral and the Related Loan Documents.
Each Lender
authorizes and directs the Agent to enter into the other Loan Documents,
for the ratable benefit and obligation of the Agent and the Lenders. Each
Lender agrees that any action taken by the Agent, Majority Lenders or
Required Lenders, as applicable, in accordance with the terms of this
Agreement or the other Loan Documents, and the exercise by the Agent, the
Majority Lenders, or the Required Lenders, as applicable, of their
respective powers set forth therein or herein, together with such other
powers that are reasonably incidental thereto, shall be binding upon all of
the Lenders. The Lenders acknowledge that the Revolving Loans, Agent
Advances, Non-Ratable Loans, Hedge Agreements, Bank Products and all
interest, fees and expenses hereunder constitute one Debt, secured pari
passu by all of the Collateral.
12.18 Field Audit and Examination Reports; Disclaimer by Lenders.
By signing this Agreement, each Lender:
(a) is deemed to have requested that the Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or
examination report (each a "Report" and collectively, "Reports") prepared
by or on behalf of the Agent;
(b) expressly agrees and acknowledges that neither the Bank nor the Agent
(i) makes any representation or warranty as to the accuracy of any Report,
or (ii) shall be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that the Agent or the Bank or other
party performing any audit or examination will inspect only specific
information regarding the Borrower and will rely significantly upon the
Borrower's books and records, as well as on representations of the
Borrower's personnel;
(d) agrees to keep all Reports confidential and strictly for its internal
use, and not to distribute except to its participants, or use any Report in
any other manner; and
(e) without limiting the generality of any other indemnification provision
contained in this Agreement, agrees: (i) to hold the Agent and any such
other Lender preparing a Report harmless from any action the indemnifying
Lender may take or conclusion the indemnifying Lender may reach or draw
from any Report in connection with any loans or other credit accommodations
that the indemnifying Lender has made or may make to the Borrower, or the
indemnifying Lender's participation in, or the indemnifying Lender's
purchase of, a loan or loans of the Borrower; and (ii) to pay and protect,
and indemnify, defend and hold the Agent and any such other Lender
preparing a Report harmless from and against, the claims, actions,
proceedings, damages, costs, expenses and other amounts (including Attorney
Costs) incurred by the Agent and any such other Lender preparing a Report
as the direct or indirect result of any third parties who might obtain all
or part of any Report through the indemnifying Lender.
12.19 Relation Among Lenders.
The Lenders are not partners or co-venturers, and
no Lender shall be liable for the acts or omissions of, or (except as
otherwise set forth herein in case of the Agent) authorized to act for, any
other Lender.
Page 47
ARTICLE 13
MISCELLANEOUS
13.1 No Waivers; Cumulative Remedies.
No failure by the Agent or any Lender to
exercise any right, remedy, or option under this Agreement or any present
or future supplement thereto, or in any other agreement between or among
the Borrower and the Agent and/or any Lender, or delay by the Agent or any
Lender in exercising the same, will operate as a waiver thereof. No waiver
by the Agent or any Lender will be effective unless it is in writing, and
then only to the extent specifically stated. No waiver by the Agent or the
Lenders on any occasion shall affect or diminish the Agent's and each
Lender's rights thereafter to require strict performance by the Borrower of
any provision of this Agreement. The Agent and the Lenders may proceed
directly to collect the Obligations without any prior recourse to the
Collateral. The Agent's and each Lender's rights under this Agreement will
be cumulative and not exclusive of any other right or remedy which the
Agent or any Lender may have.
13.2 Severability.
The illegality or unenforceability of any provision of this
Agreement or any Loan Document or any instrument or agreement required
hereunder shall not in any way affect or impair the legality or
enforceability of the remaining provisions of this Agreement or any
instrument or agreement required hereunder.
13.3 Governing Law; Choice of Forum; Service of Process.
(a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF
THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICT OF LAWS PROVISIONS PROVIDED THAT PERFECTION ISSUES
WITH RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE
OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF THE UCC) OF THE STATE OF
TEXAS; PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR
OF THE UNITED STATES OF AMERICA LOCATED IN DALLAS COUNTY, TEXAS, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER, THE AGENT
AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWER, THE AGENT
AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS,
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY
DOCUMENT RELATED HERETO. NOTWITHSTANDING THE FOREGOING: (1) THE AGENT AND
THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST
THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THE
AGENT OR THE LENDERS DEEM NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON
THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS AND (2) EACH OF THE
PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN
THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE THOSE JURISDICTIONS.
(c) THE BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON
IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED
MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO THE BORROWER AT ITS ADDRESS SET
FORTH IN SECTION 13.8 AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED
FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS
POSTAGE PREPAID. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF AGENT
OR THE LENDERS TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.
Page 48
13.4 WAIVER OF JURY TRIAL.
THE BORROWER, THE LENDERS AND THE AGENT EACH
IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY
TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY
AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWER, THE LENDERS AND
THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED
BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY
PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS.
13.5 Survival of Representations and Warranties.
All of the Borrower's
representations and warranties contained in this Agreement shall survive
the execution, delivery, and acceptance thereof by the parties,
notwithstanding any investigation by the Agent or the Lenders or their
respective agents.
13.6 Other Security and Guaranties.
The Agent, may, without notice or demand and
without affecting the Borrower's obligations hereunder, from time to time:
(a) take from any Person and hold collateral (other than the Collateral)
for the payment of all or any part of the Obligations and exchange, enforce
or release such collateral or any part thereof; and (b) accept and hold any
endorsement or guaranty of payment of all or any part of the Obligations
and release or substitute any such endorser or guarantor, or any Person who
has given any Lien in any other collateral as security for the payment of
all or any part of the Obligations, or any other Person in any way
obligated to pay all or any part of the Obligations.
13.7 Fees and Expenses.
The Borrower agrees to pay to the Agent, for its
benefit, on demand, all costs and expenses that Agent pays or incurs in
connection with the negotiation, preparation, syndication, consummation,
administration, enforcement, and termination of this Agreement or any of
the other Loan Documents, including: (a) Attorney Costs; (b) costs and
expenses (including attorneys' and paralegals fees and disbursements) for
any amendment, supplement, waiver, consent, or subsequent closing in
connection with the Loan Documents and the transactions contemplated
thereby; (c) costs and expenses of lien and title searches and title
insurance; (d) taxes, fees and other charges for recording the Mortgages,
filing financing statements and continuations, and other actions to
perfect, protect, and continue the Agent's Liens (including costs and
expenses paid or incurred by the Agent in connection with the consummation
of Agreement); (e) sums paid or incurred to pay any amount or take any
action required of the Borrower under the Loan Documents that the Borrower
fails to pay or take; (f) costs of appraisals, inspections, and
verifications of the Collateral, including travel, lodging, and meals for
inspections of the Collateral and the Borrower's operations by the Agent
plus the Agent's then customary charge for field examinations and audits
and the preparation of reports thereof (such charge is currently $850 per
day (or portion thereof) for each Person retained or employed by the Agent
with respect to each field examination or audit); and (g) costs and
expenses of forwarding loan proceeds, collecting checks and other items of
payment, and establishing and maintaining Payment Accounts and lock boxes,
and costs and expenses of preserving and protecting the Collateral. In
addition, the Borrower agrees to pay costs and expenses incurred by the
Agent (including Attorneys' Costs) to the Agent, for its benefit, on
demand, and to the other Lenders for their benefit, on demand, and all
reasonable fees, expenses and disbursements incurred by such other Lenders
for one law firm retained by such other Lenders, in each case, paid or
incurred to obtain payment of the Obligations, enforce the Agent's Liens,
sell or otherwise realize upon the Collateral, and otherwise enforce the
provisions of the Loan Documents, or to defend any claims made or
threatened against the Agent or any Lender arising out of the transactions
contemplated hereby (including preparations for and consultations
concerning any such matters). The foregoing shall not be construed to limit
any other provisions of the Loan Documents regarding costs and expenses to
be paid by the Borrower. All of the foregoing costs and expenses shall be
charged to the Borrower s Loan Account as Revolving Loans as described in
Section 3.7.
Page 49
13.8 Notices.
Except as otherwise provided herein, all notices, demands and
requests that any party is required or elects to give to any other shall be
in writing, or by a telecommunications device capable of creating a written
record, and any such notice shall become effective (a) upon personal
delivery thereof, including, but not limited to, delivery by overnight mail
and courier service, (b) four (4) days after it shall have been mailed by
United States mail, first class, certified or registered, with postage
prepaid, or (c) in the case of notice by such a telecommunications device,
when properly transmitted, in each case addressed to the party to be
notified as follows:
If to the Agent:
Bank of America, N.A.
901 Main Street, 22nd Floor
Mailcode: TX1-492-22-13
Dallas, Texas 75202
Attention: Joy L. Bartholomew
Telecopy No.: 214.209.4766
with copies to:
Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, TX 75202
Attention: Sue P. Murphy
Telecopy No.: 214.200.0565
If to the other Lenders:
At the address set forth opposite their respective signatures.
If to the Borrower:
Central Freight Lines, Inc.
5601 West Waco Drive
Waco, TX 76710
Attention: Steve Owen
Telecopy No.: 254.741.5337
with copies to:
Scudder Law Firm, P.C. L.L.O.
411 South 13th St., Second Floor
Lincoln, Nebraska 68508
Attention: Mark Scudder
Telecopy No.: 402.435.4239
or to such other address as each party may designate for itself by like
notice. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the
persons designated above to receive copies shall not adversely affect the
effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.
13.9 Waiver of Notices.
Unless otherwise expressly provided herein, the Borrower
waives presentment, and notice of demand or dishonor and protest as to any
instrument, notice of intent to accelerate the Obligations and notice of
acceleration of the Obligations, as well as any and all other notices to
which it might otherwise be entitled. No notice to or demand on the
Borrower which the Agent or any Lender may elect to give shall entitle the
Borrower to any or further notice or demand in the same, similar or other
circumstances.
13.10 Binding Effect.
The provisions of this Agreement shall be binding upon and
inure to the benefit of the respective representatives, successors, and
assigns of the parties hereto; provided, however, that no interest herein
may be assigned by the Borrower without prior written consent of the Agent
and each Lender. The rights and benefits of the Agent and the Lenders
hereunder shall, if such Persons so agree, inure to any party acquiring any
interest in the Obligations or any part thereof.
Page 50
13.11 Indemnity of the Agent and the Lenders by the Borrower.
(a) THE BORROWER AGREES TO DEFEND, INDEMNIFY AND HOLD THE AGENT-RELATED
PERSONS, AND EACH LENDER AND EACH OF ITS RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES, COUNSEL, REPRESENTATIVES, AGENTS AND ATTORNEYS-IN-FACT (EACH, AN
"INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
CHARGES, EXPENSES AND DISBURSEMENTS (INCLUDING ATTORNEY COSTS) OF ANY KIND
OR NATURE WHATSOEVER WHICH MAY AT ANY TIME (INCLUDING AT ANY TIME FOLLOWING
REPAYMENT OF THE LOANS AND THE TERMINATION, RESIGNATION OR REPLACEMENT OF
THE AGENT OR REPLACEMENT OF ANY LENDER) BE IMPOSED ON, INCURRED BY OR
ASSERTED AGAINST ANY SUCH PERSON IN ANY WAY RELATING TO OR ARISING OUT OF
THIS AGREEMENT OR ANY DOCUMENT CONTEMPLATED BY OR REFERRED TO HEREIN, OR
THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY ACTION TAKEN OR OMITTED BY ANY
SUCH PERSON UNDER OR IN CONNECTION WITH ANY OF THE FOREGOING, INCLUDING
WITH RESPECT TO ANY INVESTIGATION, LITIGATION OR PROCEEDING (INCLUDING ANY
INSOLVENCY PROCEEDING OR APPELLATE PROCEEDING) RELATED TO OR ARISING OUT OF
THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR THE LOANS OR THE USE OF THE
PROCEEDS THEREOF, WHETHER OR NOT ANY INDEMNIFIED PERSON IS A PARTY THERETO
(ALL THE FOREGOING, COLLECTIVELY, THE "INDEMNIFIED LIABILITIES"); PROVIDED,
THAT THE BORROWER SHALL HAVE NO OBLIGATION HEREUNDER TO ANY INDEMNIFIED
PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES RESULTING SOLELY FROM THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PERSON, HOWEVER
THE BORROWER'S INDEMNIFICATION OBLIGATIONS SHALL INCLUDE, IN ALL CASES,
CLAIMS, WHETHER OR NOT CAUSED BY OR ARISING , IN WHOLE OR IN PART, OUT OF
THE COMPARATIVE, CONTRIBUTORY, OR SOLE NEGLIGENCE (OTHER THAN GROSS
NEGLIGENCE) OF THE INDEMNIFIED PARTY. THE AGREEMENTS IN THIS SECTION SHALL
SURVIVE PAYMENT OF ALL OTHER OBLIGATIONS.
(b) THE BORROWER AGREES TO INDEMNIFY, DEFEND AND HOLD HARMLESS THE AGENT
AND THE LENDERS FROM ANY LOSS OR LIABILITY DIRECTLY OR INDIRECTLY ARISING
OUT OF THE USE, GENERATION, MANUFACTURE, PRODUCTION, STORAGE, RELEASE,
THREATENED RELEASE, DISCHARGE, DISPOSAL OR PRESENCE OF A HAZARDOUS
SUBSTANCE RELATING TO THE BORROWER'S OPERATIONS, BUSINESS OR PROPERTY. THIS
INDEMNITY WILL APPLY WHETHER THE HAZARDOUS SUBSTANCE IS ON, UNDER OR ABOUT
THE BORROWER'S PROPERTY OR OPERATIONS OR PROPERTY LEASED TO THE BORROWER.
THE INDEMNITY INCLUDES BUT IS NOT LIMITED TO ATTORNEYS COSTS. THE INDEMNITY
EXTENDS TO THE AGENT AND THE LENDERS, THEIR PARENTS, AFFILIATES,
SUBSIDIARIES AND ALL OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,
SUCCESSORS, ATTORNEYS AND ASSIGNS. "HAZARDOUS SUBSTANCES" MEANS ANY
SUBSTANCE, MATERIAL OR WASTE THAT IS OR BECOMES DESIGNATED OR REGULATED AS
"TOXIC," "HAZARDOUS," "POLLUTANT," OR "CONTAMINANT" OR A SIMILAR
DESIGNATION OR REGULATION UNDER ANY FEDERAL, STATE OR LOCAL LAW (WHETHER
UNDER COMMON LAW, STATUTE, REGULATION OR OTHERWISE) OR JUDICIAL OR
ADMINISTRATIVE INTERPRETATION OF SUCH, INCLUDING PETROLEUM OR NATURAL GAS.
THIS INDEMNITY WILL SURVIVE REPAYMENT OF ALL OTHER OBLIGATIONS.
13.12Limitation of Liability.
NO CLAIM MAY BE MADE BY THE BORROWER, ANY LENDER
OR OTHER PERSON AGAINST THE AGENT, ANY LENDER, OR THE AFFILIATES,
DIRECTORS, OFFICERS, EMPLOYEES, COUNSEL, REPRESENTATIVES, AGENTS OR
ATTORNEYS-IN-FACT OF ANY OF THEM FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL
OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY
OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, AND THE BORROWER AND
EACH LENDER HEREBY WAIVE, RELEASE AND AGREE NOT TO SUE UPON ANY CLAIM FOR
SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED
TO EXIST IN ITS FAVOR.
13.13Final Agreement.
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. No
modification, rescission, waiver, release, or amendment of any provision of
this Agreement or any other Loan Document shall be made, except by a
written agreement signed by the Borrower and a duly authorized officer of
each of the Agent and the requisite Lenders.
13.14 Counterparts.
This Agreement may be executed in any number of counterparts,
and by the Agent, each Lender and the Borrower in separate counterparts,
each of which shall be an original, but all of which shall together
constitute one and the same agreement; signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that
all signature pages are physically attached to the same document.
13.15 Captions.
The captions contained in this Agreement are for convenience of
reference only, are without substantive meaning and should not be construed
to modify, enlarge, or restrict any provision.
Page 51
13.16 Right of Setoff.
In addition to any rights and remedies of the Lenders
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Lender is authorized at any time and from time to time,
without prior notice to the Borrower, any such notice being waived by the
Borrower to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final)
at any time held by, and other indebtedness at any time owing by, such
Lender or any Affiliate of such Lender to or for the credit or the account
of the Borrower against any and all Obligations owing to such Lender, now
or hereafter existing, irrespective of whether or not the Agent or such
Lender shall have made demand under this Agreement or any Loan Document and
although such Obligations may be contingent or unmatured. Each Lender
agrees promptly to notify the Borrower and the Agent after any such set-off
and application made by such Lender; provided, however, that the failure to
give such notice shall not affect the validity of such set-off and
application. NOTWITHSTANDING THE FOREGOING, NO LENDER SHALL EXERCISE ANY
RIGHT OF SET-OFF, BANKER'S LIEN, OR THE LIKE AGAINST ANY DEPOSIT ACCOUNT OR
PROPERTY OF THE BORROWER HELD OR MAINTAINED BY SUCH LENDER WITHOUT THE
PRIOR WRITTEN UNANIMOUS CONSENT OF THE LENDERS.
13.17 Confidentiality.
(a) The Borrower hereby consents that the Agent and each Lender may issue
and disseminate to the public general information describing the credit
accommodation entered into pursuant to this Agreement, including the name
and address of the Borrower and a general description of the Borrower's
business and may use the Borrower's name in advertising and other
promotional material.
(b) Each Lender severally agrees to take normal and reasonable precautions
and exercise due care to maintain the confidentiality of all information
identified as "confidential" or "secret" by the Borrower and provided to
the Agent or such Lender by or on behalf of the Borrower, under this
Agreement or any other Loan Document, except to the extent that such
information (i) was or becomes generally available to the public other than
as a result of disclosure by the Agent or such Lender, or (ii) was or
becomes available on a nonconfidential basis from a source other than the
Borrower, provided that such source is not bound by a confidentiality
agreement with the Borrower known to the Agent or such Lender; provided,
however, that the Agent and any Lender may disclose such information (1) at
the request or pursuant to any requirement of any Governmental Authority to
which the Agent or such Lender is subject or in connection with an
examination of the Agent or such Lender by any such Governmental Authority;
(2) pursuant to subpoena or other court process; (3) when required to do so
in accordance with the provisions of any applicable Requirement of Law; (4)
to the extent reasonably required in connection with any litigation or
proceeding (including, but not limited to, any bankruptcy proceeding) to
which the Agent, any Lender or their respective Affiliates may be party;
(5) to the extent reasonably required in connection with the exercise of
any remedy hereunder or under any other Loan Document; (6) to the Agent's
or such Lender's independent auditors, accountants, attorneys and other
professional advisors; (7) to any prospective Participant or Assignee under
any Assignment and Acceptance, actual or potential, provided that such
prospective Participant or Assignee agrees to keep such information
confidential to the same extent required of the Agent and the Lenders
hereunder; (8) as expressly permitted under the terms of any other document
or agreement regarding confidentiality to which the Borrower is party or is
deemed party with the Agent or such Lender, and (9) to its Affiliates.
13.18 Conflicts with Other Loan Documents.
Unless otherwise expressly provided in
this Agreement (or in another Loan Document by specific reference to the
applicable provision contained in this Agreement), if any provision
contained in this Agreement conflicts with any provision of any other Loan
Document, the provision contained in this Agreement shall govern and
control.
Page 52
13.19 USA PATRIOT Act Notice.
Each Lender that is subject to the Act (as
hereinafter defined) and the Agent (for itself and not on behalf of any
Lender) hereby notifies the Borrower that pursuant to the requirements of
the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October
26, 2001)) (the "Act"), it is required to obtain, verify and record
information that identifies the Borrower and the Parent, which information
includes the name and address of the Borrower and the Parent and other
information that will allow such Lender or the Agent, as applicable, to
identify the Borrower and the Parent in accordance with the Act.
13.20 Chapter 346.
Borrower agrees that Chapter 346 of the Texas Finance Code, as
amended (which regulates certain revolving credit loan documents and
revolving tri-party accounts) does not apply to the Obligations.
13.21 Restatement of Original Credit Agreement.
The parties hereto agree that, on
the Closing Date: (a) the Obligations (as defined in this Agreement)
represent, among other things, the restatement, renewal, amendment,
extension and modification of the "Obligations" (as defined in the Original
Credit Agreement); (b) this Agreement is intended to, and does hereby,
restate, renew, extend, amend, modify, supersede and replace the Original
Agreement in its entirety; (c) the Notes, if any, executed pursuant to this
Agreement amend, renew, extend, modify, replace, restate, substitute for
and supersede in their entirety (but do not extinguish, the indebtedness
arising under) the promissory notes issued pursuant to the Original Credit
Agreement, which existing promissory notes shall be returned to the
Administrative Agent promptly after the Closing Date, marked "canceled and
replaced," and, thereafter, delivered by the Administrative Agent to the
Borrower; and (d) the entering into and performance of their respective
obligations under the Loan Documents and the transactions evidenced hereby
do not constitute a novation nor shall they be deemed to have terminated,
extinguished or discharged the indebtedness under the Original Agreement,
all of which indebtedness shall continue under and be governed by this
Agreement and the other Loan Documents, except as expressly provided
otherwise herein.
13.22 Confirmations.
Each of Borrower and Parent ratifies and confirms that the
Parent Guaranty, the Security Agreement, the Parent Pledge Agreement, the
Trademark Security Agreement, the Mortgages, and that the other Loan
Documents (to the extent it is a party thereto) are and remain in full
force and effect in accordance with their respective terms, as amended
hereby. In addition, Parent acknowledges, agrees, accepts, and consents to
the terms and provisions hereof and each other Loan Document as amended
hereby. Except as expressly provided herein, this Agreement does not
constitute a waiver or modification of any of the terms or provisions set
forth in the Loan Documents and shall not impair any right that
Administrative Agent or Lenders may now or hereafter have under or in
connection with any Loan Document. Borrower and Parent confirm, renew,
regrant, and acknowledge all liens and security interests set forth in the
Loan Documents continue to secure the Obligations, and Parent confirms that
the Obligations shall continue to be guaranteed pursuant to the Parent
Guaranty.
[Remainder of Page Intentionally Blank. Signature Page Follows.]
Page 53
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
"BORROWER"
CENTRAL FREIGHT LINES, INC., a Texas corporation
By:
Title:
"AGENT"
BANK OF AMERICA, N.A., as Agent
By:
Joy L. Bartholomew, Senior Vice President
Address: "LENDERS"
Bank of America, N.A.
901 Main Street, 22nd Floor
Mailcode: TX1-492-22-13 BANK OF AMERICA, N.A., as a Lender
Dallas, Texas 75202
Attention: Joy L. Bartholomew......
Telecopy No.: 214.209.4766 By:
Joy L. Bartholomew, Senior Vice President
Address:
TEXTRON FINANCIAL CORPORATION
By:
Title: _____________________________
"PARENT"
CENTRAL FREIGHT LINES, INC., a Nevada corporation
By:
Title: _____________________________
Page 54
A-1
Amended and Restated Credit Agreement (Edgar Copy)1.DOC
ANNEX A
to
Credit Agreement
Definitions
Capitalized terms used in the Loan Documents shall have the following
respective meanings (unless otherwise defined therein), and all section
references in the following definitions shall refer to sections of the
Agreement:
"Account Debtor" means each Person obligated in any way on or in connection
with an Account, Chattel Paper, or General Intangible (including, without
limitation, any payment intangible).
"Accounts" means all of the Borrower's now owned or hereafter acquired or
arising accounts, as defined in the UCC, including any rights to payment
for the sale or lease of goods or rendition of services, whether or not
they have been earned by performance.
"ACH Transactions" means any cash management or related services including
the automatic clearing house transfer of funds by the Bank for the account
of the Borrower pursuant to agreement or overdrafts.
"Acquisition" means any transaction or series of related transactions for
the purpose of, or resulting in, directly or indirectly, (a) the
acquisition by the Borrower of all or substantially all of the assets of a
Person or of any business or division of a Person; (b) the acquisition by
the Borrower of more than 50% of any class of Voting Stock (or similar
ownership interests) of any Person; or (c) a merger, consolidation,
amalgamation, or other combination by the Borrower with another Person if
the Borrower is the surviving entity.
"Adjusted Net Earnings from Operations" means, with respect to any fiscal
period of the Parent, the Parent's net income after provision for income
taxes for such fiscal period, as determined in accordance with GAAP and
reported on the Financial Statements for such period, excluding any and all
of the following included in such net income: (a) gain or loss arising from
the sale of any capital assets; (b) gain arising from any write-up in the
book value of any asset; (c) earnings of any Person, substantially all the
assets of which have been acquired by the Parent or any of its Subsidiaries
in any manner, to the extent realized by such other Person prior to the
date of acquisition; (d) earnings of any Person in which the Parent or any
of its Subsidiaries has an ownership interest unless (and only to the
extent) such earnings shall actually have been received by the Parent or
any of its Subsidiaries in the form of cash distributions; (e) earnings of
any Person to which assets of the Parent or any of its Subsidiaries shall
have been sold, transferred or disposed of, or into which the Parent or any
of its Subsidiaries shall have been merged, or which has been a party with
the Parent or any of its Subsidiaries to any consolidation or other form of
reorganization, prior to the date of such transaction; (f) gain arising
from the acquisition of debt or equity securities of the Parent or any of
its Subsidiaries or from cancellation or forgiveness of Debt; and (g) gain
arising from extraordinary items, as determined in accordance with GAAP, or
from any other non-recurring transaction.
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person or which owns, directly or indirectly, five percent (5%)
or more of the outstanding equity interest of such Person. A Person shall
be deemed to control another Person if the controlling Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the ownership
of voting securities, by contract, or otherwise.
Page 55
Agent means the Bank, solely in its capacity as agent for the Lenders,
and any successor agent.
"Agent Advances" has the meaning specified in Section 1.2(i).
"Agent's Liens" means the Liens in the Collateral granted to the Agent, for
the benefit of the Lenders, Bank, and Agent pursuant to this Agreement and
the other Loan Documents.
"Agent-Related Persons" means the Agent, together with its Affiliates, and
the officers, directors, employees, counsel, representatives, agents and
attorneys-in-fact of the Agent and such Affiliates.
"Aggregate Revolver Outstandings" means, at any date of determination, and
without duplication: the sum of (a) the unpaid balance of Revolving Loans,
(b) the aggregate amount of Pending Revolving Loans, (c) one hundred
percent (100%) of the greater of : (i) the aggregate undrawn maximum face
amount and (ii) the maximum undrawn available amount of all outstanding
Letters of Credit, and (d) the aggregate amount of any unpaid reimbursement
obligations in respect of Letters of Credit.
"Agreement" means the Amended and Restated Credit Agreement to which this
Annex A is attached, as from time to time amended, modified or restated.
"Anniversary Date" means each anniversary of the Closing Date.
"Applicable Margin" means:
(i) with respect to Base Rate Revolving Loans and all other Obligations
(other than LIBOR Revolving Loans), .25%;
(ii) with respect to LIBOR Revolving Loans, 2.0%; and
(iii) with respect to Letters of Credit, 1.75%.
Page 56
The Applicable Margins shall be adjusted (up or down) prospectively on a
quarterly basis as determined by the Parent's consolidated financial
performance, commencing with the earliest of: (x) June 30, 2005, (y) the
date a Person (other than Bank of America, N.A. and Textron Financial
Corporation) becomes a Lender under the Agreement; and (z) upon the
occurrence and during the continuation of a Default or an Event of Default
(the "Rate Adjustment Date"). Adjustments in Applicable Margins shall be
determined by reference to the following grids:
- --------------------------------------------- ---------------------------------
If Average Quarterly Level of
Availability is: Applicable Margins:
- --------------------------------------------- ---------------------------------
- --------------------------------------------- ---------------------------------
< $20,000,000 Level I
- --------------------------------------------- ---------------------------------
- --------------------------------------------- ---------------------------------
= $20,000,000, but < $30,000,000 Level II
- --------------------------------------------- ---------------------------------
- --------------------------------------------- ---------------------------------
> $30,000,000, but < $40,000,000 Level III
- --------------------------------------------- ---------------------------------
- --------------------------------------------- ---------------------------------
> $40,000,000, but < $50,000,000 Level IV
- --------------------------------------------- ---------------------------------
- --------------------------------------------- ---------------------------------
> $50,000,000, but < $55,000,000 or the Level V
Fixed Charge Coverage Ratio is > 1.25 to
1.0, but < 1.5 to 1.0
- --------------------------------------------- ---------------------------------
- --------------------------------------------- ---------------------------------
> $55,000,000 or the Fixed Charge Coverage Level VI
Ratio is > 1.5 to 1.0
- --------------------------------------------- ---------------------------------
- ------------------------------- -------------------------------------------------------------------------------------
Applicable Margins
- ------------------------------- -------------------------------------------------------------------------------------
- ------------------------------- ------------ ----------- ---------------- ------------- ------------ ----------------
Level I Level II Level III Level IV Level V Level VI
- ------------------------------- ------------ ----------- ---------------- ------------- ------------ ----------------
- ------------------------------- ------------ ----------- ---------------- ------------- ------------ ----------------
Base Rate Revolving Loans 1.00% .75% .50% 0.25% 0.0% 0.0%
- ------------------------------- ------------ ----------- ---------------- ------------- ------------ ----------------
- ------------------------------- ------------ ----------- ---------------- ------------- ------------ ----------------
LIBOR Revolving Loans 2.75% 2.50% 2.25% 2.00% 1.75% 1.50%
- ------------------------------- ------------ ----------- ---------------- ------------- ------------ ----------------
- ------------------------------- ------------ ----------- ---------------- ------------- ------------ ----------------
Applicable L/C Margin 2.50% 2.25% 2.00 1.75% 1.50% 1.25%
- ------------------------------- ------------ ----------- ---------------- ------------- ------------ ----------------
The Applicable Margin with respect to the Unused Line Fee shall be .375%
per annum with respect to any month in which the average Aggregate Revolver
Outstandings are less than $30,000,000, and in all other cases shall be
.25% per annum.
All adjustments in the Applicable Margins commencing on the Rate Adjustment
Date shall be implemented quarterly on a prospective basis in a two step
process, provided that in the event the Rate Adjustment Date occurs prior
to June 30, 2005, the Average Quarterly Availability shall be calculated as
the Average Daily Availability and the Rate Adjustment shall remain in
effect until the first day of the next fiscal quarter. First, calculations
based on Average Quarterly Availability shall be made and be effective as
of the first day of each fiscal quarter. With respect to the adjustments
based on Levels V and VI, an additional adjustment shall be made, if
warranted by the calculation of the Fixed Charge Coverage Ratio, for any
calendar month commencing at least 5 days after the date of delivery to the
Lenders of quarterly unaudited or annual audited (as applicable) Financial
Statements evidencing the need for an adjustment and shall become effective
as of the first day of such month. Concurrently with the delivery of those
Financial Statements, the Borrower shall deliver to the Agent and the
Lenders a certificate, signed by its chief financial officer, setting forth
in reasonable detail the basis for the continuance of, or any change in,
the Applicable Margins. Failure to timely deliver such Financial Statements
shall, in addition to any other remedy provided for in this Agreement,
result in an increase in the Applicable Margins to the highest level set
forth in the foregoing grid, until the first day of the first calendar
month following the delivery of those Financial Statements demonstrating
that such an increase is not required. If a Default or Event of Default has
occurred and is continuing at the time any reduction in the Applicable
Margins is to be implemented, no reduction may occur until the first day of
the first calendar month following the date on which such Default or Event
of Default is waived or cured.
Page 57
"Arrangement Fee has the meaning specified in Section 2.4.
"Assignee" has the meaning specified in Section 11.2(a).
"Assignment and Acceptance" has the meaning specified in Section 11.2(a).
"Attorney Costs" means and includes all reasonable fees, expenses and
disbursements of any law firm or other counsel engaged by the Agent, the
reasonably allocated costs and expenses of internal legal services of the
Agent.
"Availability" means, at any time (a) the lesser of (i) the Maximum
Revolver Amount or (ii) the Borrowing Base, minus (b) Reserves other than
Reserves deducted in the calculation of the Borrowing Base, minus (c) in
each case, the Aggregate Revolver Outstandings, minus (d) $5,000,000 until
the earlier of: (i) the delivery by Borrower to Agent of its April, 2005
monthly financials in compliance with Section 5.2(c), and (ii) May 30, 2005
"Average Daily Availability" means as of any date of determination, (a) the
average Borrowing Base, less (b) the average Daily Aggregate Revolver
Outstandings from the Closing Date to the Rate Adjustment Date.
"Average Quarterly Availability" means as of any date of determination, (a)
the average Borrowing Base, less (b) the average Daily Aggregate Revolver
Outstandings during the immediately preceding fiscal quarter.
"Bank" means Bank of America, N.A., a national banking association, or any
successor entity thereto.
"Bank Product Reserves" means all reserves which the Agent from time to
time establishes in its reasonable discretion for the Bank Products then
provided or outstanding.
"Bank Products" means any one or more of the following types of services or
facilities extended to the Borrower by the Bank or any affiliate of the
Bank in reliance on the Bank's agreement to indemnify such affiliate: (i)
credit cards; (ii) ACH Transactions; (iii) cash management, including
controlled disbursement services; and (iv) Hedge Agreements.
"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C. 101
et seq.).
"Base Rate" means, for any day, the rate of interest in effect for such day
as publicly announced from time to time by the Bank in Charlotte, North
Carolina as its "prime rate" (the "prime rate" being a rate set by the Bank
based upon various factors including the Bank's costs and desired return,
general economic conditions and other factors, and is used as a reference
point for pricing some loans, which may be priced at, above, or below such
announced rate). Any change in the prime rate announced by the Bank shall
take effect at the opening of business on the day specified in the public
announcement of such change. Each Interest Rate based upon the Base Rate
shall be adjusted simultaneously with any change in the Base Rate.
"Base Rate Revolving Loan" means a Revolving Loan during any period in
which it bears interest based on the Base Rate.
"Blocked Account Agreement" means an agreement among the Borrower, the
Agent and a Clearing Bank, in form and substance reasonably satisfactory to
the Agent, concerning the collection of payments which represent the
proceeds of Accounts or of any other Collateral.
"Borrowing" means a borrowing hereunder consisting of Revolving Loans made
on the same day by the Lenders to the Borrower or by Bank in the case of a
Borrowing funded by Non-Ratable Loans or by the Agent in the case of a
Borrowing consisting of an Agent Advance, or the issuance of Letters of
Credit hereunder.
"Borrowing Base" means, at any time, an amount equal to (a) the sum of
(A) up to eighty-five percent (85%) of the Net Amount of Eligible Accounts;
plus (B) the sum of (i) up to eighty-five percent (85%) of the Net Orderly
Liquidation Value of Eligible Rolling Stock adjusted for monthly
depreciation and for any dispositions of Rolling Stock, and (ii) up to
eighty-five percent (85%) of the cost of Eligible Rolling Stock acquired
after the Closing Date (excluding sales tax, delivery charges or other soft
costs) and adjusted for monthly depreciation, but in no event shall the sum
of (i) and (ii) exceed 90% of the net book value of such Eligible Rolling
Stock; minus (b) Reserves from time to time established by the Agent in its
reasonable credit judgment; provided that the aggregate Revolving Loans
advanced against Eligible Rolling Stock shall not exceed the Maximum
Rolling Stock Loan Amount, and provided further that the aggregate
Revolving Loans advanced against Eligible Unbilled Accounts shall not
exceed $5,000,000. For the purposes hereof, depreciation shall be
calculated based upon the average remaining life of the Eligible Rolling
Stock as shown on the then most recent appraisal.
Page 58
"Borrowing Base Certificate" means a certificate by a Responsible Officer
of the Borrower, substantially in the form of Exhibit B (or another form
acceptable to the Agent) setting forth the calculation of the Borrowing
Base, including a calculation of each component thereof, all in such detail
as shall be reasonably satisfactory to the Agent. All calculations of the
Borrowing Base in connection with the preparation of any Borrowing Base
Certificate shall originally be made by the Borrower and certified to the
Agent; provided, that the Agent shall have the right to review and adjust,
in the exercise of its reasonable credit judgment, any such calculation (1)
to reflect its reasonable estimate of declines in value of any of the
Collateral described therein, and (2) to the extent that such calculation
is not in accordance with this Agreement.
"Business Day" means (a) any day that is not a Saturday, Sunday, or a day
on which banks in Dallas, Texas, Pasadena, California, or Charlotte, North
Carolina are required or permitted to be closed, and (b) with respect to
all notices, determinations, fundings and payments in connection with the
LIBOR Rate or LIBOR Revolving Loans, any day that is a Business Day
pursuant to clause (a) above and that is also a day on which trading in
Dollars is carried on by and between banks in the London interbank market.
"Capital Adequacy Regulation" means any guideline, request or directive of
any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Capital Expenditures" means all payments due (whether or not paid during
any fiscal period) in respect of the cost of any fixed asset or
improvement, or replacement, substitution, or addition thereto, which has a
useful life of more than one year, including, without limitation, those
costs arising in connection with the direct or indirect acquisition of such
asset by way of increased product or service charges or in connection with
a Capital Lease.
"Capital Lease" means any lease of property by the Borrower which, in
accordance with GAAP, should be reflected as a capital lease on the balance
sheet of the Borrower.
"Change of Control" shall mean the occurrence of one or more of the
following events: (a) any sale, lease, exchange or other transfer (in a
single transaction or a series of related transactions) of all or
substantially all of the assets of the Borrower or Parent to any Person or
"group" (within the meaning of the Securities Exchange Act of 1934 and the
rules of the Securities and Exchange Commission thereunder in effect on the
date hereof), (b) the acquisition of ownership, directly or indirectly,
beneficially or of record, by any Unrelated Person or "group" (within the
meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the date
hereof) of 30% or more of the outstanding shares of the voting stock of
Parent; or (c) occupation of a majority of the seats (other than vacant
seats) on the board of directors of Parent by Persons who were neither
(i) nominated or appointed by the current board of directors or
(ii) nominated or appointed by directors so nominated or appointed. For
purposes of this definition, "Unrelated Person" means any Person or "group"
(within the meaning of the Securities Exchange Act of 1934 and the rules of
the Securities and Exchange Commission thereunder in effect on the date
hereof) other than: (1) Jerry Moyes and his spouse, lineal descendants and
spouses of his lineal descendents; (2) the estates of Persons described in
clause (1); (3) trusts established for the benefit of any Person or Persons
described in clause (1); (4) corporations, limited liability companies,
partnerships or similar entities 75% or more owned by any Person or Persons
described in clauses (1) through (3); (5) the Moyes Children's Trust;
(6) the Moyes Family Trust; and (7) Ronald Moyes. For purposes of
calculating the number of outstanding shares of the voting stock of Parent
beneficially owned by any "group" (within the meaning of the Exchange Act
and the rules of the SEC thereunder in effect on the date hereof), shares
beneficially owned by Persons described in clauses (1) through (7) of the
preceding sentence shall be excluded from such calculation.
"Chattel Paper" means all of the Borrower's now owned or hereafter acquired
chattel paper, as defined in the UCC, including electronic chattel paper.
"Clearing Bank" means the Bank or any other banking institution with whom a
Payment Account has been established pursuant to a Blocked Account
Agreement.
Page 59
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986.
"Collateral" means all of the Borrower's personal property and all other
assets of any Person from time to time subject to Agent's Liens securing
payment or performance of the Obligations.
"Collections" means all cash, checks, notes, instruments, and other items
of payment (including, without limitation, insurance proceeds, proceeds of
sales, rental proceeds, and tax refunds).
"Commitment" means, at any time with respect to a Lender, the principal
amount set forth beside such Lender's name under the heading "Commitment"
on Schedule 1.2 attached to the Agreement or on the signature page of the
Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 11.2, as such
Commitment may be adjusted from time to time in accordance with the
provisions of Section 11.2, and "Commitments" means, collectively, the
aggregate amount of the commitments of all of the Lenders.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated
biphenyls ("PCBs"), or any constituent of any such substance or waste.
"Continuation/Conversion Date" means the date on which a Loan is converted
into or continued as a LIBOR Revolving Loan.
"Control Agreement" means a control agreement, in form and substance
satisfactory to Agent, executed and delivered by Borrower, Agent, and the
applicable bank with respect to a deposit account.
"Credit Support" has the meaning specified in Section 1.3(a).
"Daily Aggregate Revolver Outstandings" means the amount of the Aggregate
Revolver Outstandings at the end of a given day.
"Debt" means, without duplication, all liabilities, obligations and
indebtedness of the Borrower to any Person, of any kind or nature, now or
hereafter owing, arising, due or payable, howsoever evidenced, created,
incurred, acquired or owing, whether primary, secondary, direct,
contingent, fixed or otherwise, consisting of indebtedness for borrowed
money or the deferred purchase price of property, excluding trade payables,
but including (a) all Obligations; (b) all obligations and liabilities of
any Person secured by any Lien on the Borrower's property, even though the
Borrower shall not have assumed or become liable for the payment thereof;
provided, however, that all such obligations and liabilities which are
limited in recourse to such property shall be included in Debt only to the
extent of the book value of such property as would be shown on a balance
sheet of the Borrower prepared in accordance with GAAP; (c) all obligations
or liabilities created or arising under any Capital Lease or conditional
sale or other title retention agreement with respect to property used or
acquired by the Borrower, even if the rights and remedies of the lessor,
seller or lender thereunder are limited to repossession of such property;
provided, however, that all such obligations and liabilities which are
limited in recourse to such property shall be included in Debt only to the
extent of the book value of such property as would be shown on a balance
sheet of the Borrower prepared in accordance with GAAP; (d) all obligations
and liabilities under Guaranties and (e)the present value (discounted at
the implied interest rate under such synthetic lease) of lease payments due
under synthetic leases.
"Default" means any event or circumstance which, with the giving of notice,
the lapse of time, or both, would (if not cured, waived, or otherwise
remedied during such time) constitute an Event of Default.
"Default Rate" means a fluctuating per annum interest rate at all times
equal to the sum of (a) the otherwise applicable Interest Rate plus (b) two
percent (2%) per annum. Each Default Rate shall be adjusted simultaneously
with any change in the applicable Interest Rate. In addition, the Default
Rate shall result in an increase in the Letter of Credit Fee by two (2)
percentage points per annum.
Page 60
"Defaulting Lender" has the meaning specified in Section 12.15(c).
"Designated Account" has the meaning specified in Section 1.2(c).
"Distribution" means, in respect of any corporation: (a) the payment or
making of any dividend or other distribution of property in respect of
capital stock (or any options or warrants for, or other rights with respect
to, such stock) of such corporation, other than distributions in capital
stock (or any options or warrants for such stock) of the same class; or
(b) the redemption or other acquisition by such corporation of any capital
stock (or any options or warrants for such stock) of such corporation.
"Documents" means all documents as such term is defined in the UCC,
including bills of lading, warehouse receipts or other documents of title,
now owned or hereafter acquired by the Borrower.
"DOL" means the United States Department of Labor or any successor
department or agency.
"Dollar" and "$" means dollars in the lawful currency of the United States.
Unless otherwise specified, all payments under the Agreements shall be made
in Dollars.
"EBITDA" means, with respect to any fiscal period of the Parent, Adjusted
Net Earnings from Operations, plus, to the extent deducted in the
determination of Adjusted Net Earnings from Operations for that fiscal
period, interest expenses, Federal, state, local and foreign income taxes,
depreciation, amortization, and non-cash stock option expense.
"Eligible Accounts" means the Accounts which the Agent in the exercise of
its reasonable judgment, in good faith and consistent with its standard
lending procedures, determines to be Eligible Accounts. Without limiting
the discretion of the Agent to establish other criteria of ineligibility,
Eligible Accounts shall not, unless the Agent in its sole discretion
elects, include any Account:
(a) with respect to which either: more than 90 days have elapsed since the
date of the original invoice therefor, or more than 100 days have elapsed
since the date of the freight bill therefor;
(b) with respect to which any of the representations, warranties,
covenants, and agreements contained in the Security Agreement are incorrect
or have been breached;
(c) with respect to which Account (or any other Account due from such
Account Debtor), in whole or in part, a check, promissory note, draft,
trade acceptance or other instrument for the payment of money has been
received, presented for payment and returned uncollected for any reason;
(d) which represents a progress billing (as hereinafter defined) or as to
which the Borrower has extended the time for payment without the consent of
the Agent; for the purposes hereof, "progress billing" means any invoice
for goods sold or leased or services rendered under a contract or agreement
pursuant to which the Account Debtor's obligation to pay such invoice is
conditioned upon the Borrowe's completion of any further performance under
the contract or agreement;
(e) with respect to which any one or more of the following events has
occurred to the Account Debtor on such Account: death or judicial
declaration of incompetency of an Account Debtor who is an individual; the
filing by or against the Account Debtor of a request or petition for
liquidation, reorganization, arrangement, adjustment of debts, adjudication
as a bankrupt, winding-up, or other relief under the bankruptcy,
insolvency, or similar laws of the United States, any state or territory
thereof, or any foreign jurisdiction, now or hereafter in effect; the
making of any general assignment by the Account Debtor for the benefit of
creditors; the appointment of a receiver or trustee for the Account Debtor
or for any of the assets of the Account Debtor, including, without
limitation, the appointment of or taking possession by a "custodian," as
defined in the Federal Bankruptcy Code; the institution by or against the
Account Debtor of any other type of insolvency proceeding (under the
bankruptcy laws of the United States or otherwise) or of any formal or
informal proceeding for the dissolution or liquidation of, settlement of
claims against, or winding up of affairs of, the Account Debtor; the sale,
assignment, or transfer of all or any material part of the assets of the
Account Debtor; the nonpayment generally by the Account Debtor of its debts
as they become due; or the cessation of the business of the Account Debtor
as a going concern;
Page 61
(f) if fifty percent (50%) or more of the aggregate Dollar amount of
outstanding Accounts owed at such time by the Account Debtor thereon is
classified as ineligible under clause (a) above;
(g) owed by an Account Debtor which: (i) does not maintain its chief
executive office in the United States of America or Canada (other than the
Province of Newfoundland); or (ii) is not organized under the laws of the
United States of America or Canada or any state or province thereof; or
(iii) is the government of any foreign country or sovereign state, or of
any state, province, municipality, or other political subdivision thereof,
or of any department, agency, public corporation, or other instrumentality
thereof; except to the extent that such Account is secured or payable by a
letter of credit satisfactory to the Agent in its discretion;
(h) owed by an Account Debtor which is an Affiliate or employee of the
Borrower; other than any Accounts owed to Borrower by Swift Transportation
Co., Inc.;
(i) except as provided in clause (k) below, with respect to which either
the perfection, enforceability, or validity of the Agent's Liens in such
Account, or the Agent's right or ability to obtain direct payment to the
Agent of the proceeds of such Account, is governed by any federal, state,
or local statutory requirements other than those of the UCC;
(j) owed by an Account Debtor to which the Borrower or any of its
Subsidiaries, is indebted in any way, or which is subject to any right of
setoff or recoupment by the Account Debtor, unless the Account Debtor has
entered into an agreement acceptable to the Agent to waive setoff rights;
or if the Account Debtor thereon has disputed liability or made any claim
with respect to any other Account due from such Account Debtor; but in each
such case only to the extent of such indebtedness, setoff, recoupment,
dispute, or claim;
(k) owed by the government of the United States of America, or any
department, agency, public corporation, or other instrumentality thereof,
unless the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C.
3727 et seq.), and any other steps necessary to perfect the Agent's Liens
therein, have been complied with to the Agent's satisfaction with respect
to such Account;
(l) owed by any state, municipality, or other political subdivision of the
United States of America, or any department, agency, public corporation, or
other instrumentality thereof and as to which the Agent determines that its
Lien therein is not or cannot be perfected;
(m) which represents a sale on a bill-and-hold, guaranteed sale, sale and
return, sale on approval, consignment, or other repurchase or return basis;
(n) which is evidenced by a promissory note or other instrument or by
chattel paper;
(o) if the Agent believes, in the exercise of its reasonable judgment, that
the prospect of collection of such Account is impaired or that the Account
may not be paid by reason of the Account Debtor's financial inability to
pay;
(p) with respect to which the Account Debtor is located in any state
requiring the filing of a Notice of Business Activities Report or similar
report in order to permit the Borrower to seek judicial enforcement in such
State of payment of such Account, unless such Borrower has qualified to do
business in such state or has filed a Notice of Business Activities Report
or equivalent report for the then current year;
(q) which arises out of a sale not made in the ordinary course of the
Borrower's business;
(r) with respect to which the delivery of goods giving rise to such Account
have not been shipped and delivered to and accepted by the intended
recipient;
(s) owed by an Account Debtor which is obligated to the Borrower respecting
Accounts the aggregate unpaid balance of which exceeds fifteen percent
(15%), or in the case of Dell, Inc., which exceeds twenty percent (20%) of
the aggregate unpaid balance of all Eligible Accounts owed to the Borrower
at such time by all of the Borrower's Account Debtors, and in the case of
any other Account Debtor, a percentage approved by the Agent, but only to
the extent of such excess;
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(t) which is subject to any payments to any interline carrier, but in each
case only to the extent of the amount owed to such interline carrier;
(u) on and after a Default, Event of Default, or during the periods in
which Agent has full dominion over the Borrower's accounts pursuant to
Section 3.10, with respect to which the Agent does not have control of the
Payment Accounts;
(v) which is not subject to a first priority and perfected security
interest in favor of the Agent for the benefit of the Lenders; and
If any Account at any time ceases to be an Eligible Account, then such
Account shall promptly be excluded from the calculation of Eligible
Accounts, until such time as it again becomes an Eligible Account.
"Eligible Assignee" means (a) a commercial bank, commercial finance company
or other asset based lender, having total assets in excess of
$1,000,000,000; (b) any Lender listed on the signature page of this
Agreement; (c) any Affiliate of any Lender; and (d) if an Event of Default
has occurred and is continuing, any Person reasonably acceptable to the
Agent.
"Eligible Rolling Stock" means Rolling Stock, which the Agent, in its
reasonable judgment, in good faith and consistent with its standard lending
procedures, determines to be Eligible. Without limiting the discretion of
the Agent to establish other criteria of ineligibility, Eligible Rolling
Stock shall not, unless the Agent in its sole discretion elects, include
any Rolling Stock:
(a) that is not owned by the Borrower;
(b) that is not subject to the Agent's Liens, which are perfected as to
such Rolling Stock, or that are subject to any other Lien whatsoever;
(c) that is not in good condition, is unmerchantable, or does not meet all
standards imposed by any Governmental Authority, having regulatory
authority over such Rolling Stock and their use;
(d) that is not currently either usable or salable;
(e) that is obsolete;
(f) that is located outside the United States of America; or
(g) that contains or bears any Proprietary Rights licensed to the Borrower
by any Person, if the Agent is not satisfied that it may sell or otherwise
dispose of such Rolling Stock in accordance with the terms of the Security
Agreement and Section 9.2 without infringing the rights of the licensor of
such Proprietary Rights or violating any contract with such licensor (and
without payment of any royalties other than any royalties due with respect
to the sale or disposition of such Rolling Stock pursuant to the existing
license agreement), and, as to which the Borrower has not delivered to the
Agent a consent or sublicense agreement from such licensor in form and
substance acceptable to the Agent if requested.
If any Rolling Stock at any time ceases to be Eligible Rolling Stock, such
Rolling Stock shall promptly be excluded from the calculation of Eligible
Rolling Stock, until such time as it again becomes Eligible Rolling Stock.
"Eligible Unbilled Account" means an Account which would otherwise be an
Eligible Account except that it has not been billed by the Borrower and it
is less than ten days from the date of the freight bill relating thereto.
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for a Release or
injury to the environment.
"Environmental Compliance Reserve" means any reserve which the Agent
establishes in its reasonable discretion after prior written notice to the
Borrower from time to time for amounts that are reasonably likely to be
expended by the Borrower in order for the Borrower and its operations and
property (a) to comply with any notice from a Governmental Authority
asserting material non-compliance with Environmental Laws, or (b) to
correct any such material non-compliance identified in a report delivered
to the Agent and the Lenders pursuant to Section 7.7.
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"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with
all administrative orders, directed duties, licenses, authorizations and
permits of, and agreements with, any Governmental Authority, in each case
relating to environmental, health, safety and land use matters.
"Environmental Lien" means a Lien in favor of any Governmental Authority
for (a) any liability under Environmental Laws, or (b) damages arising
from, or costs incurred by such Governmental Authority in response to, a
Release or threatened Release of a Contaminant into the environment.
"Equipment" means all of the Borrower's now owned and hereafter acquired
Rolling Stock, wheels, tires, navigational equipment, satellite units, or
tracking units installed on Rolling Stock, or otherwise, machinery,
equipment, furniture, furnishings, fixtures, and other tangible personal
property (except Inventory), including embedded software, motor vehicles
with respect to which a certificate of title has been issued, aircraft,
dies, tools, jigs, molds and office equipment, as well as all of such types
of property leased by the Borrower and all of the Borrower's rights and
interests with respect thereto under such leases (including, without
limitation, options to purchase); together with all present and future
additions and accessions thereto, replacements therefor, component and
auxiliary parts and supplies used or to be used in connection therewith,
and all substitutes for any of the foregoing, and all manuals, drawings,
instructions, warranties and rights with respect thereto; wherever any of
the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
under common control with the Borrower within the meaning of Section 414(b)
or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension Plan,
(b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under
Section 4062(e) of ERISA, (c) a complete or partial withdrawal by the
Borrower or any ERISA Affiliate from a Multi-employer Plan or notification
that a Multi-employer Plan is in reorganization, (d) the filing of a notice
of intent to terminate, the treatment of a Plan amendment as a termination
under Section 4041 or 4041A of ERISA, or the commencement of proceedings by
the PBGC to terminate a Pension Plan or Multi-employer Plan, (e) the
occurrence of an event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan or
Multi-employer Plan, or (f) the imposition of any liability under Title IV
of ERISA, other than for PBGC premiums due but not delinquent under
Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.
"Event of Default" has the meaning specified in Section 9.1.
"Exchange Act" means the Securities Exchange Act of 1934, and regulations
promulgated thereunder.
"Existing Letters of Credit" means all "Letters of Credit" issued and
outstanding under the Original Credit Agreement.
"FDIC" means the Federal Deposit Insurance Corporation, and any
Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business
Day next succeeding such day; provided that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day as so published on the
next succeeding Business Day, and (b) if no such rate is so published on
such next succeeding Business Day, the Federal Funds Rate for such day
shall be the average rate charged to the Bank on such day on such
transactions as determined by the Agent.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
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"Financial Statements" means, according to the context in which it is used,
the financial statements referred to in Sections 5.2 and 6.6 or any other
financial statements required to be given to the Lenders pursuant to this
Agreement.
"Fiscal Year" means the Borrower's fiscal year for financial accounting
purposes. The current Fiscal Year of the Borrower will end on December 31,
2005.
"Fixed Assets" means the Equipment and Real Estate of the Borrower.
"Fixed Charge Coverage Ratio" means, with respect to any fiscal period of
Borrower, the ratio of EBITDA to Fixed Charges.
"Fixed Charges" means, with respect to any fiscal period of the Borrower on
a consolidated basis, without duplication, the sum of: (a) Net Unfinanced
Capital Expenditures; (b) interest expense to the extent actually paid
during such period, (c) principal payments of Debt either scheduled to be
made or actually made during such period, and (d) Federal, state, local and
foreign income taxes, excluding deferred taxes, to the extent actually paid
during such period.
"Foreign Subsidiary" of any Person means a Subsidiary of such Person that
is organized or incorporated under the laws of a jurisdiction other than a
jurisdiction of the United States.
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles and practices set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature
and authority within the U.S. accounting profession), which are applicable
to the circumstances as of the Closing Date.
"GE Capital Sale/Leaseback" means the agreement between the Borrower and
General Electric Capital Corporation for the sale and leaseback of certain
Rolling Stock.
"General Intangibles" means all of the Borrower's now owned or hereafter
acquired general intangibles, choses in action and causes of action and all
other intangible personal property of the Borrower of every kind and nature
(other than Accounts), including, without limitation, all contract rights,
payment intangibles, Proprietary Rights, corporate or other business
records, inventions, designs, blueprints, plans, specifications, patents,
patent applications, trademarks, service marks, trade names, trade secrets,
goodwill, copyrights, computer software, customer lists, registrations,
licenses, franchises, tax refund claims, any funds which may become due to
the Borrower in connection with the termination of any Plan or other
employee benefit plan or any rights thereto and any other amounts payable
to the Borrower from any Plan or other employee benefit plan, rights and
claims against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, property, casualty or any
similar type of insurance and any proceeds thereof, proceeds of insurance
covering the lives of key employees on which the Borrower is beneficiary,
rights to receive dividends, distributions, cash, Instruments and other
property in respect of or in exchange for pledged equity interests or
Investment Property and any letter of credit, guarantee, claim, security
interest or other security held by or granted to the Borrower.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Guaranty" means, with respect to any Person, all obligations of such
Person which in any manner directly or indirectly guarantee or assure, or
in effect guarantee or assure, the payment or performance of any
indebtedness, dividend or other obligations of any other Person (the
"guaranteed obligations"), or assure or in effect assure the holder of the
guaranteed obligations against loss in respect thereof, including any such
obligations incurred through an agreement, contingent or otherwise: (a) to
purchase the guaranteed obligations or any property constituting security
therefor; (b) to advance or supply funds for the purchase or payment of the
guaranteed obligations or to maintain a working capital or other balance
sheet condition; or (c) to lease property or to purchase any debt or equity
securities or other property or services.
Page 65
"Hedge Agreement" means any and all transactions, agreements or documents
now existing or hereafter entered into, which provides for an interest
rate, credit, commodity or equity swap, cap, floor, collar, forward foreign
exchange transaction, currency swap, cross currency rate swap, currency
option, or any combination of, or option with respect to, these or similar
transactions, for the purpose of hedging the Borrower's exposure to
fluctuations in interest or exchange rates, loan, credit exchange, security
or currency valuations or commodity prices.
"Instruments" means all instruments as such term is defined in the UCC, now
owned or hereafter acquired by the Borrower.
"Interest Period" means, as to any LIBOR Revolving Loan, the period
commencing on the Funding Date of such Loan or on the
Continuation/Conversion Date on which the Loan is converted into or
continued as a LIBOR Revolving Loan, and ending on the date one, two, or
three months thereafter as selected by the Borrower in its Notice of
Borrowing, in the form attached hereto as Exhibit D, or Notice of
Continuation/Conversion, in the form attached hereto as Exhibit E, provided
that:
(a) if any Interest Period would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(b) any Interest Period pertaining to a LIBOR Revolving Loan that begins on
the last Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the calendar month
at the end of such Interest Period; and
(c) no Interest Period shall extend beyond the Stated Termination Date.
"Interest Rate" means each or any of the interest rates, including the
Default Rate, set forth in Section 2.1.
"Inventory" means all of the Borrower's now owned and hereafter acquired
inventory, goods and merchandise, wherever located, to be furnished under
any contract of service or held for sale or lease, all returned goods, raw
materials, work-in-process, finished goods (including embedded software),
other materials and supplies of any kind, nature or description which are
used or consumed in the Borrower's business or used in connection with the
packing, shipping, advertising, selling or finishing of such goods,
merchandise, and all documents of title or other Documents representing
them.
"Investment Property" means all of the Borrower's right title and interest
in and to any and all: (a) securities whether certificated or
uncertificated; (b) securities entitlements; (c) securities accounts; (d)
commodity contracts; or (e) commodity accounts.
"IRS" means the Internal Revenue Service and any Governmental Authority
succeeding to any of its principal functions under the Code.
"Latest Projections" means: (a) on the Closing Date and thereafter until
the Agent receives new projections pursuant to Section 5.2(e), the
projections of the Borrower s financial condition, results of operations,
and cash flows, for the period commencing on January 1, 2005 and ending on
December 31, 2006 and delivered to the Agent prior to the Closing Date; and
(b) thereafter, the projections most recently received by the Agent
pursuant to Section 5.2(f).
"Lender" and "Lenders" have the meanings specified in the introductory
paragraph hereof and shall include the Agent to the extent of any Agent
Advance outstanding and the Bank to the extent of any Non-Ratable Loan
outstanding; provided that no such Agent Advance or Non-Ratable Loan shall
be taken into account in determining any Lender's Pro Rata Share.
"Letter of Credit" has the meaning specified in Section 1.4(a).
"Letter of Credit Fee" has the meaning specified in Section 2.6.
"Letter of Credit Issuer" means the Bank, any affiliate of the Bank or any
other financial institution that issues any Letter of Credit pursuant to
this Agreement.
Page 66
"Letter of Credit Subfacility" means $40,000,000.
"LIBOR Interest Payment Date" means, with respect to a LIBOR Revolving
Loan, the first day of each month hereafter, the last day of each Interest
Period applicable to such Loan, and the Termination Date.
"LIBOR Rate" means, for any Interest Period, with respect to LIBOR
Revolving Loans, the rate of interest per annum determined pursuant to the
following formula:
LIBOR Rate = Offshore Base Rate
1.00 - Eurodollar Reserve Percentage
Where,
"Offshore Base Rate" means the rate per annum appearing on Telerate Page
3750 (or any successor page) as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period for a term comparable
to such Interest Period. If for any reason such rate is not available, the
Offshore Base Rate shall be, for any Interest Period, the rate per annum
appearing on Reuters Screen LIBO Page as the London interbank offered rate
for deposits in Dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period; provided, however, if more than one
rate is specified on Reuters Screen LIBO Page, the applicable rate shall be
the arithmetic mean of all such rates. If for any reason none of the
foregoing rates is available, the Offshore Base Rate shall be, for any
Interest Period, the rate per annum determined by Agent as the rate of
interest at which dollar deposits in the approximate amount of the LIBOR
Revolving Loan comprising part of such Borrowing would be offered by the
Bank's London Branch to major banks in the offshore dollar market at their
request at or about 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such Interest
Period.
"Eurodollar Reserve Percentage" means, for any day during any Interest
Period, the reserve percentage (expressed as a decimal, rounded upward to
the next 1/8th of 1%) in effect on such day applicable to member banks
under regulations issued from time to time by the Federal Reserve Board for
determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect to
Eurocurrency funding (currently referred to as "Eurocurrency liabilities").
The Offshore Rate for each outstanding LIBOR Revolving Loan shall be
adjusted automatically as of the effective date of any change in the
Eurodollar Reserve Percentage.
"LIBOR Revolving Loan" means a Revolving Loan during any period in which it
bears interest based on the LIBOR Rate.
"Lien" means: (a) any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute, or contract, and including a
security interest, charge, claim, or lien arising from a mortgage, deed of
trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement,
agreement, security agreement, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes; (b) to the extent not
included under clause (a), any reservation, exception, encroachment,
easement, right-of-way, covenant, condition, restriction, lease or other
title exception or encumbrance affecting property; and (c) any contingent
or other agreement to provide any of the foregoing.
"Loan Account" means the loan account of the Borrower, which account shall
be maintained by the Agent.
"Loan Documents" means this Agreement, the Trademark Security Agreement,
the Security Agreement, the Parent Pledge Agreement, the Parent Guaranty,
the Mortgages, and any other agreements, instruments, and documents
heretofore, now or hereafter evidencing, securing, guaranteeing or
otherwise relating to the Obligations, the Collateral, or any other aspect
of the transactions contemplated by this Agreement.
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"Loans" means, collectively, all loans and advances provided for in
Article 1.
"Lockbox Account" means a depository account established pursuant to one of
the Lockbox Agreements.
"Lockbox Agreement" means those certain lockbox operating procedural
agreements and those certain depository account agreements, in form and
substance satisfactory to Agent each of which is among Borrower, Agent, and
a Lockbox Bank.
"Lockbox Bank" means Bank of America, N.A, or any other financial
institution mutually acceptable to Borrower and Agent.
"Majority Lenders" means at any date of determination Lenders whose Pro
Rata Shares aggregate more than 50%.
"Margin Stock" means "margin stock" as such term is defined in Regulation
T, U or X of the Federal Reserve Board.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, or
condition (financial or otherwise) of the Borrower, the Collateral or any
guarantor of the Obligations; (b) a material impairment of the ability of
the Borrower or any Affiliate of Borrower to perform under any Loan
Document to which it is a party; or (c) a material adverse effect upon the
legality, validity, binding effect or enforceability against the Borrower
of any Loan Document to which it is a party.
"Maximum Revolver Amount" means $70,000,000.
"Maximum Rolling Stock Loan Amount" means $30,000,000.
"Multi-employer Plan" means a "multi-employer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding six (6) years contributed to by the
Borrower or any ERISA Affiliate.
"Net Amount of Eligible Accounts" means, at any time, the gross amount of
Eligible Accounts less sales, excise or similar taxes, and less returns,
discounts, claims, credits, allowances, accrued rebates, offsets,
deductions, counterclaims, disputes and other defenses of any nature at any
time issued, owing, granted, outstanding, available or claimed.
"Net Orderly Liquidation Value" shall mean (a) the "net orderly liquidation
value" determined by a valuation company acceptable to the Agent after
performance of a Rolling Stock valuation to be done at the Agent's request
and the Borrower's expense, less the amount estimated by such valuation
company for marshalling, reconditioning, carrying, and sales expenses
designed to maximize the resale value of such Rolling Stock and assuming
that the time required to dispose of such Rolling Stock is six (6) months;
or (b) if no such Rolling Stock valuation has been requested by the Agent,
the value customarily attributed to Rolling Stock in the appraisal industry
for Rolling Stock of similar quality and quantity, and similarly dispersed
(under similar and relevant circumstances under standard asset-based
lending procedures), at the time of the valuation, less the amount
customarily estimated in the appraisal industry at the time of any
determination for marshalling, recondition, carrying, and sales expenses
designed to maximize the resale value of such Rolling Stock and assuming
that the time required to dispose of such Rolling Stock is six (6) months.
"Net Proceeds" has the meaning specified in Section 3.4(b).
"Net Unfinanced Capital Expenditures" for any period means the sum of:
(a) Capital Expenditures made during such period, less (b) the net cash
proceeds received by Borrower during such period from the sale, lease or
other disposition of any capital assets, less (c) cash proceeds received by
Borrower during such period from any financed purchase of any capital
assets.
"Non-Ratable Loan" and "Non-Ratable Loans" have the meanings specified in
Section 1.2(h).
"Notes" means Revolving Loan Notes.
"Notice of Borrowing" has the meaning specified in Section 1.2(b).
"Notice of Continuation/Conversion" has the meaning specified in
Section 2.2(b).
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"Obligations" means all present and future loans, advances, liabilities,
obligations, covenants, duties, and debts owing by the Borrower to the
Agent and/or any Lender, arising under or pursuant to this Agreement or any
of the other Loan Documents, whether or not evidenced by any note, or other
instrument or document, whether arising from an extension of credit,
opening of a letter of credit, acceptance, loan, guaranty, indemnification
or otherwise, whether direct or indirect, absolute or contingent, due or to
become due, primary or secondary, as principal or guarantor, and including
all principal, interest, charges, expenses, fees, attorneys' fees, filing
fees and any other sums chargeable to the Borrower hereunder or under any
of the other Loan Documents. "Obligations" includes, without limitation,
(a) all debts, liabilities, and obligations now or hereafter arising from
or in connection with the Letters of Credit and (b) all debts, liabilities
and obligations now or hereafter arising from or in connection with Bank
Products.
"Other Taxes" means any present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies which arise from
any payment made hereunder or from the execution, delivery or registration
of, or otherwise with respect to, this Agreement or any other Loan
Documents.
"Parent" means Central Freight Lines, Inc., a Nevada corporation.
"Parent Guaranty" means that certain Guaranty of the Obligations executed
by the Parent for the benefit of the Agent and the other Lenders.
"Parent Pledge Agreement" means that certain Pledge Agreement executed by
the Parent for the benefit of the Agent and the other Lenders.
"Participant" means any Person who shall have been granted the right by any
Lender to participate in the financing provided by such Lender under this
Agreement, and who shall have entered into a participation agreement in
form and substance satisfactory to such Lender.
"Payment Account" means each bank account established pursuant to the
Security Agreement, to which the proceeds of Accounts and other Collateral
are deposited or credited, and which is maintained in the name of the Agent
or the Borrower, as the Agent may determine, on terms acceptable to the
Agent.
"PBGC" means the Pension Benefit Guaranty Corporation or any Governmental
Authority succeeding to the functions thereof.
"Pending Revolving Loans" means, at any time, the aggregate principal
amount of all Revolving Loans requested in any Notice of Borrowing received
by the Agent which have not yet been advanced.
"Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA which the Borrower sponsors, maintains, or to
which it makes, is making, or is obligated to make contributions, or in the
case of a Multi-employer Plan has made contributions at any time during the
immediately preceding five (5) plan years.
"Permitted Liens" means:
(a) Liens for taxes not delinquent or statutory Liens for taxes in an
amount not to exceed $100,000 provided that the payment of such taxes which
are due and payable is being contested in good faith and by appropriate
proceedings diligently pursued and as to which adequate financial reserves
have been established on Borrower's books and records and a stay of
enforcement of any such Lien is in effect;
(b) the Agent's Liens;
Page 69
(c) Liens consisting of deposits made in the ordinary course of business in
connection with, or to secure payment of, obligations under worker's
compensation, unemployment insurance, social security and other similar
laws, or to secure the performance of bids, tenders or contracts (other
than for the repayment of Debt) or to secure indemnity, performance or
other similar bonds for the performance of bids, tenders or contracts
(other than for the repayment of Debt) or to secure statutory obligations
(other than liens arising under ERISA or Environmental Liens) or surety or
appeal bonds, or to secure indemnity, performance or other similar bonds;
(d) Liens securing the claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons, provided that if
any such Lien arises from the nonpayment of such claims or demand when due,
such claims or demands do not exceed $100,000 in the aggregate;
(e) Liens constituting encumbrances in the nature of reservations,
exceptions, encroachments, easements, rights of way, covenants running with
the land, and other similar title exceptions or encumbrances affecting any
Real Estate; provided that they do not in the aggregate materially detract
from the value of the Real Estate or materially interfere with its use in
the ordinary conduct of the Borrower's business;
(f) Liens on Rolling Stock or other Equipment created under Capitalized
Leases which attach only to the Rolling Stock or other Equipment subject to
the Capital Lease Liens and Liens on Rolling Stock or other Equipment to
secure purchase money security interests therein so long as such Liens
solely secure the purchase price of such Rolling Stock or other Equipment,
and such Debt does not exceed the purchase price of such Rolling Stock or
other Equipment; and
(g) Liens arising from judgments and attachments in connection with court
proceedings provided that the attachment or enforcement of such Liens would
not result in an Event of Default hereunder and such Liens are being
contested in good faith by appropriate proceedings, adequate reserves have
been set aside and no material Property is subject to a material risk of
loss or forfeiture and the claims in respect of such Liens are fully
covered by insurance (subject to ordinary and customary deductibles) and a
stay of execution pending appeal or proceeding for review is in effect.
"Person" means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, Governmental Authority, or any other entity.
"Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA)
which the Borrower sponsors or maintains or to which the Borrower makes, is
making, or is obligated to make contributions and includes any Pension
Plan.
"Pro Rata Share" means, with respect to a Lender, a fraction (expressed as
a percentage), the numerator of which is the amount of such Lender's
Commitment and the denominator of which is the sum of the amounts of all of
the Lenders' Commitments, or if no Commitments are outstanding, a fraction
(expressed as a percentage), the numerator of which is the amount of
Obligations owed to such Lender and the denominator of which is the
aggregate amount of the Obligations owed to the Lenders, in each case
giving effect to a Lender's participation in Non-Ratable Loans and Agent
Advances.
"Proprietary Rights" means all of the Borrower's now owned and hereafter
arising or acquired: licenses, franchises, permits, patents, patent rights,
copyrights, works which are the subject matter of copyrights, trademarks,
service marks, trade names, trade styles, patent, trademark and service
mark applications, and all licenses and rights related to any of the
foregoing, including those patents, trademarks, service marks, trade names
and copyrights set forth on Schedule 6.12 hereto, and all other rights
under any of the foregoing, all extensions, renewals, reissues, divisions,
continuations, and continuations-in-part of any of the foregoing, and all
rights to sue for past, present and future infringement of any of the
foregoing.
"Real Estate" means all of the Borrower's now or hereafter owned or leased
estates in real property, including, without limitation, all fees,
leaseholds and future interests, together with all of the Borrower's now or
hereafter owned or leased interests in the improvements thereon, the
fixtures attached thereto and the easements appurtenant thereto.
Page 70
"Registered Public Accounting Firm" has the meaning specified in the
Securities Laws and shall be independent of the Borrower and the Parent as
prescribed by the Securities Laws. Registered Public Accountants shall mean
the accountants in such Registered Public Accounting Firm.
"Release" means a release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the indoor or outdoor environment or into or out of any
Real Estate or other property, including the movement of Contaminants
through or in the air, soil, surface water, groundwater or Real Estate or
other property.
"Reportable Event" means, any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder, other than any such event for which
the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.
"Required Lenders" means at any time at least two Lenders (or in the case
where there is only one Lender, such Lender) whose Pro Rata Shares
aggregate more than 66-2/3%.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of
a Governmental Authority, in each case applicable to or binding upon the
Person or any of its property or to which the Person or any of its property
is subject.
"Reserves" means reserves that limit the availability of credit hereunder,
consisting of reserves against Availability, Eligible Accounts or Eligible
Rolling Stock, established by Agent from time to time in Agent's reasonable
credit judgment. Without limiting the generality of the foregoing, the
following reserves shall be deemed to be a reasonable exercise of Agent's
credit judgment: (a) Bank Product Reserves, (b) a reserve for accrued,
unpaid interest on the Obligations, (c) reserves for rent at leased
locations subject to statutory or contractual landlord liens,
(d) Environmental Compliance Reserves, (e) insurance reserves,
(f) dilution, (g) litigation reserves, and (h) reserves for amounts due to
any Person with whom the Borrower has a transportation alliance.
"Responsible Officer" means the chief executive officer, the president, or
any executive vice president, senior vice president, or vice
president-finance of the Borrower, or any other officer having
substantially the same authority and responsibility; or, with respect to
compliance with financial covenants and the preparation of the Borrowing
Base Certificate, the chief financial officer or the treasurer of the
Borrower, or any other officer having substantially the same authority and
responsibility.
"Restricted Investment" means, as to the Borrower, any acquisition of
property by the Borrower in exchange for cash or other property, whether in
the form of an acquisition of stock, debt, or other indebtedness or
obligation, or the purchase or acquisition of any other property, or a
loan, advance, capital contribution, or subscription, except the following:
(a) acquisitions of Equipment to be used in the business of the Borrower so
long as the acquisition costs thereof constitute Capital Expenditures
permitted hereunder; (b) acquisitions of Rolling Stock in the ordinary
course of business of the Borrower; (c) acquisitions of current assets
acquired in the ordinary course of business of the Borrower; (d) direct
obligations of the United States of America, or any agency thereof, or
obligations guaranteed by the United States of America, provided that such
obligations mature within one year from the date of acquisition thereof;
(e) acquisitions of certificates of deposit maturing within one year from
the date of acquisition, bankers' acceptances, Eurodollar bank deposits, or
overnight bank deposits, in each case issued by, created by, or with a bank
or trust company organized under the laws of the United States of America
or any state thereof having capital and surplus aggregating at least
$100,000,000; (f) acquisitions of commercial paper given a rating of "A2"
or better by Standard & Poor's Corporation or "P2" or better by Moody's
Investors Service, Inc. and maturing not more than 90 days from the date of
creation thereof; (g) Hedge Agreements; (h) investments made in connection
with Acquisitions permitted by Section 7.28; (i) investments constituting
Debt permitted by Section 7.13; (j) investments in securities of Account
Debtors received pursuant to any plan or reorganization or similar
arrangement upon the bankruptcy or insolvency of such Account Debtors, so
long as Agent has a valid, perfect first priority lien therein; and
(k) loans or advances to employees, officers, or directors of the Borrower
or the Parent in the ordinary course of business for travel, relocation,
entertainment and related expenses not to exceed $50,000 at any time.
"Revolving Loan Note" and "Revolving Loan Notes" have the meanings
specified in Section 1.2(a)(ii).
"Revolving Loans" has the meaning specified in Section 1.2 and includes
each Agent Advance and Non-Ratable Loan.
Page 71
"Rolling Stock" means any interest in any tractor, trailer, or other
vehicle now or hereafter owned by the Borrower.
"Rolling Stock Capital Expenditure" means any Capital Expenditure made with
respect to Rolling Stock.
"Sarbanes-Oxley" means the Sarbanes-Oxley Act of 2002.
"SEC" means the Securities and Exchange Commission or any Governmental
Authority succeeding to the functions thereof.
"Securities Laws" means the Securities Act of 1933, the Securities Exchange
Act of 1934, Sarbanes-Oxley and the applicable accounting and auditing
principles, rules, standards and practices promulgated, approved or
incorporated by the SEC or the Public Company Accounting Oversight Board,
as each of the foregoing may be amended and in effect on any applicable
date hereunder.
"Security Agreement" means the Security Agreement dated as of January 31,
2005 between Borrower and Agent for the benefit of Agent and other Lenders,
as ratified and confirmed hereby.
"Settlement" and "Settlement Date" have the meanings specified in
Section 12.15(a)(ii).
"Solvent" means, when used with respect to any Person, that at the time of
determination:
(a) the assets of such Person, at a fair valuation, are in excess of the
total amount of its debts (including contingent liabilities); and
(b) the present fair saleable value of its assets is greater than its
probable liability on its existing debts as such debts become absolute and
matured; and
(c) it is then able and expects to be able to pay its debts (including
contingent debts and other commitments) as they mature; and
(d) it has capital sufficient to carry on its business as conducted and as
proposed to be conducted.
For purposes of determining whether a Person is Solvent, the amount of any
contingent liability shall be computed as the amount that, in light of all
the facts and circumstances existing at such time, represents the amount
that can reasonably be expected to become an actual or matured liability.
Southwest Sale/Leaseback means the agreement between the Borrower and
Southwest Premier Properties, L.L.C. for the sale and leaseback of the
land, structures, and improvements of certain of the Borrower's terminals.
"Stated Termination Date" means January 31, 2009.
"Subsidiary" of a Person means any corporation, association, partnership,
limited liability company, joint venture or other business entity of which
more than fifty percent (50%) of the voting stock or other equity interests
(in the case of Persons other than corporations), is owned or controlled
directly or indirectly by the Person, or one or more of the Subsidiaries of
the Person, or a combination thereof. Unless the context otherwise clearly
requires, references herein to a "Subsidiary" refer to a Subsidiary of the
Borrower.
"Supporting Obligations" means all supporting obligations as such term is
defined in the UCC.
"Taxes" means any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Agent, such taxes
(including income taxes or franchise taxes) as are imposed on or measured
by the Agent's or each Lender's net income in any jurisdiction (whether
federal, state or local and including any political subdivision thereof).
"Termination Date" means the earliest to occur of (i) the Stated
Termination Date, (ii) the date the Total Facility is terminated either by
the Borrower pursuant to Section 3.2 or by the Required Lenders pursuant to
Section 9.2, and (iii) the date this Agreement is otherwise terminated for
any reason whatsoever pursuant to the terms of this Agreement.
Page 72
"Total Facility" has the meaning specified in Section 1.1.
"Trademark Agreements" means the Trademark Security Agreement, dated as of
January 31, 2005, as ratified and confirmed hereby, executed and delivered
by the Borrower to the Agent to evidence and perfect the Agent's security
interest in the Borrower's present and future patents, trademarks, and
related licenses and rights, for the benefit of the Agent and the Lenders.
"UCC" means the Uniform Commercial Code, as in effect from time to time, of
the State of Texas or of any other state the laws of which are required as
a result thereof to be applied in connection with the issue of perfection
of security interests.
"Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of
that Plan's assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the
applicable plan year.
"Unused Letter of Credit Subfacility" means an amount equal to $40,000,000
minus the sum of (a) the aggregate undrawn amount of all outstanding
Letters of Credit plus, without duplication, (b) the aggregate unpaid
reimbursement obligations with respect to all Letters of Credit.
"Unused Line Fee" has the meaning specified in Section 2.5.
"Voting Stock" of any Person as of any date means the capital stock of such
Person that is at the time entitled to vote in the election of the board of
directors of such Person.
Accounting Terms. Any accounting term used in the Agreement shall have,
unless otherwise specifically provided herein, the meaning customarily
given in accordance with GAAP, and all financial computations in the
Agreement shall be computed, unless otherwise specifically provided
therein, in accordance with GAAP as consistently applied and using the same
method for valuations as used in the preparation of the Financial
Statements.
Interpretive Provisions. (a) The meanings of defined terms are equally
applicable to the singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar words refer to
the Agreement as a whole and not to any particular provision of the
Agreement; and Subsection, Section, Schedule and Exhibit references are to
the Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments, documents,
agreements, certificates, indentures, notices and other writings, however
evidenced.
(ii) The term "including" is not limiting and means "including without
limitation."
(iii) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including," the words
"to" and "until" each mean "to but excluding" and the word "through" means
"to and including."
Page 73
1
(iv) The word "or" is not exclusive.
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including the Agreement) and other contractual instruments
shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and
(ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting the statute or regulation.
(e) The captions and headings of the Agreement and other Loan Documents are
for convenience of reference only and shall not affect the interpretation
of the Agreement.
(f) The Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters.
All such limitations, tests and measurements are cumulative and shall each
be performed in accordance with their terms.
(g) For purposes of Section 9.1, a breach of a financial covenant contained
in Sections 7.22-7.26 shall be deemed to have occurred as of any date of
determination thereof by the Agent or as of the last day of any specified
measuring period, regardless of when the Financial Statements reflecting
such breach are delivered to the Agent.
(h) The Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the
Borrower and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lenders or the Agent
merely because of the Agent's or Lenders' involvement in their preparation.
Page 74
EXHIBIT 10.27
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
This FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment")
is entered into as of May 12, 2005, among CENTRAL FREIGHT LINES, INC., a Texas
corporation ("Borrower"), Required Lenders under the Credit Agreement, BANK OF
AMERICA, N.A., in its capacity as Agent for Lenders under the Credit Agreement
(the "Agent"), and the Parent under the Credit Agreement (hereinafter defined).
Reference is made to the Amended and Restated Credit Agreement, dated as of
March 24, 2005 (as amended, modified, and supplemented, the "Credit Agreement"),
among the Borrower, the Agent, and Lenders party thereto. Unless otherwise
defined in this Amendment, capitalized terms used herein shall have the meanings
set forth in the Credit Agreement; all Section references herein are to Sections
in the Credit Agreement; and all Paragraph references herein are to Paragraphs
in this Amendment.
RECITALS
A. Borrower has requested that Required Lenders amend certain provisions of the
Credit Agreement.
B. Subject to the terms and conditions of this Amendment, Required Lenders are
willing to agree to such amendments and waivers.
Accordingly, for adequate and sufficient consideration, the parties hereto
agree, as follows:
Paragraph 1. Amendments. By execution of this Amendment, the Credit Agreement is
hereby amended as follows:
1.1 The reference in Section 1.1 of the Credit Agreement to "$70,000,000" shall
be amended to refer to "$60,000,000."
1.2 Section 1.2(a) of the Credit Agreement shall be amended by adding to the end
thereof the following new subsection (iii):
"Borrower may from time to time request any one or more Lenders to increase
their respective Commitments or request other financial institutions first
approved by Agent to agree to a Commitment, so that the total Commitments may be
increased to $70,000,000. That increase must be effected by an amendment that is
executed in accordance with Section 11.1 (except, for this Section 1.2(a) only,
the requirement of unanimous consent will not be required) by Borrower, Parent,
Agent, and the one or more Lenders who have agreed to increase their Commitments
or by new Lenders who have agreed to new Commitments in accordance with
Section 11.1, except as set forth above. In the event the total Commitments are
increased, Borrower shall execute and deliver to each Lender extending such
additional Commitment a Revolving Loan Note in the stated amount of its new or
increased Commitment. No Lender is obligated to increase its Commitment under
any circumstances, and no Lender's Commitment may be increased except by its
execution of an amendment to this Agreement in accordance with Section 11.1,
except as set forth above. Each new Lender providing such additional Commitment
shall be a "Lender" hereunder, entitled to the rights and benefits, and subject
to the duties, of a Lender under the Loan Documents. In such case, each Lender's
Pro Rata Share shall be recalculated to reflect the new proportionate share of
the revised total Commitments and the Lender responsible for the additional
Commitments (the "purchasing Lender") shall, immediately upon receiving notice
from Agent, pay to each Lender an amount equal to its Pro Rata Share of the
Revolving Loans (and any funded participations by Lenders under the Letter of
Credit Subfacility) outstanding as of such date. All such payments with respect
to the Revolving Loans shall reduce the outstanding principal balance of the
Revolving Note of each Lender receiving such payments and shall represent
Revolving Loans to Borrower under the purchasing Lender's Revolving Loan Note;
all such payments with respect to funded participations under the Letter of
Credit Subfacility shall reduce the applicable participation of each Lender
receiving such payment and shall represent the purchase by the purchasing Lender
of a participation under the Letter of Credit Subfacility. The purchasing Lender
shall be entitled to share ratably in interest accruing on the balances
purchased, at the rates provided herein for such balances, from and after the
date of purchase. All new Revolving Loans occurring after an increase of the
total Commitments shall be funded in accordance with the Lender's revised Pro
Rata Share."
1.3 Section 2.3 is amended by adding the following sentence to the end
thereof:
"Agent hereby notifies and discloses to Borrower that, for purposes of Tex. Rev.
Civ. Stat. Ann. Article 5069-1D.001 (codified in the Texas Finance Code
303.001) as it may from time to time be amended, the "applicable ceiling" shall
be the "weekly ceiling" from time to time in effect as limited by Article
5069-1D.009 (codified in the Texas Finance Code 303.009); provided, however,
that to the extent permitted by applicable law, Agent reserves the right to
change the "applicable ceiling" from time to time by further notice and
disclosure to Borrower."
1.4 Section 7.4(b) is amended in its entirety to read as follows:
"(b) The Borrower shall permit representatives and independent contractors of
the Agent (at the expense of the Borrower) to visit and inspect any of its
properties, to examine its corporate, financial and operating records, and make
copies thereof or abstracts therefrom and to discuss its affairs, finances and
accounts with its directors, officers and independent public accountants, at any
time during normal business hours and without advance notice."
1.5 Section 7.23 is amended in its entirety to read as follows:
"(a) At all times from the earlier of: (i) delivery by the Borrower to the Agent
of the June, 2005 financial statements in compliance with Section 5.2(c), and
(ii) August 15, 2005, until the earlier of: (i) delivery by the Borrower to the
Agent of the May, 2006 financial statements in compliance with Section 5.2(c),
and (ii) June 30, 2006, as of the last day of each fiscal month of the Borrower
set forth below, the fiscal year-to-date (fiscal year-to-date in fiscal year
2005 shall mean fiscal year-to-date, and with respect to each month in fiscal
year 2006, shall mean the immediately preceding twelve fiscal months) Adjusted
EBITDA of Parent and its Subsidiaries shall not be less than the amount set
forth opposite each date.
- ------------------------------------------------------------ ---------------------------------------------------------
Fiscal Month Ending Minimum Year-to-Date Adjusted EBITDA
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
June, 2005 ($1,000,000)
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
July, 2005 $350,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
August, 2005 $2,727,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
September, 2005 $5,179,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
October, 2005 $7,249,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
November, 2005 $8,503,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
December, 2005 $10,254,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
January, 2006 $13,103,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
February, 2006 $14,973,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
March, 2006 $15,726,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
April, 2006 $18,758,000
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
May, 2006 $20,740,000
- ------------------------------------------------------------ ---------------------------------------------------------
(b) Commencing on and after the earlier of: (i) August 15, 2006, and (ii) the
delivery of the June, 2006 quarterly financial statements in compliance with
Section 5.2(b), on any day Availability is less than $15,000,000, the Borrower
will maintain a Fixed Charge Coverage Ratio for each period of four consecutive
fiscal quarters ended on the last day of each fiscal quarter of not less than
1.0 to 1.0.
(c) Notwithstanding anything set forth above to the contrary, Borrower shall not
be required to comply with either covenant set forth in (a) or (b) above if
Availability (plus any amount deducted from Availability pursuant to clause (d)
of the definition of Availability; "Adjusted Availability") has exceeded
$15,000,000 on each day beginning July 15, 2005. Further, notwithstanding
anything set forth above to the contrary, if Adjusted Availability is less than
or equal to $15,000,000 on any day on or after July 15, 2005, Borrower shall not
be required to comply with either covenant set forth in (a) or (b) above if
(i) Adjusted Availability thereafter exceeds $15,000,000 for at least 60
consecutive days, and (ii) Adjusted Availability is not again less than
$15,000,000 on any day following such 60-day period.
(d) For purposes of this Section 7.23, on any date that compliance hereunder is
required with respect to Borrower's Adjusted EBITDA or Fixed Charge Coverage
Ratio, compliance shall commence on such date with reference to the most
recently reported monthly or quarterly financial information, as the case may
be."
1.6 Section 9.1(a) shall be amended in its entirety to read as follows:
"(a) any failure by the Borrower to pay the principal of or interest or premium
on any of the Obligations or any fee, including without limitation, any fee
payable pursuant to the Fee Letter dated May 12, 2005, among Borrower, Parent,
Agent, and Lenders, or other amount owing hereunder when due, whether upon
demand or otherwise;"
1.7 A definition of "Adjusted EBITDA" shall be added to Annex A to the Credit
Agreement, immediately following the definition of "Acquisition" to read as
follows:
""Adjusted EBITDA" means for any period the sum of: (i) EBITDA, plus (ii) the
amount of fees paid by Borrower during such period pursuant to the Fee Letter
dated as of May 12, 2005 among Borrower, Parent, Agent, and the Lenders, as
amended from time to time."
1.8 The definition of "Applicable Margin" set forth in Annex A to the Credit
Agreement shall be amended by adding the following sentence to the end thereof:
"Notwithstanding the foregoing, if on any day of any month, Availability is less
than $10,000,000, the otherwise Applicable Margin shall be increased by 2.0% per
annum during such month."
1.9 The definition of "Availability" set forth in Annex A to the Credit
Agreement shall be amended in its entirety to read as follows:
""Availability" means, at any time (a) the lesser of (i) the Maximum Revolver
Amount or (ii) the Borrowing Base, minus (b) Reserves other than Reserves
deducted in the calculation of the Borrowing Base, minus (c) in each case, the
Aggregate Revolver Outstandings, minus (d) $5,000,000, until Borrower has closed
one or more sales, financings, or sale/leaseback transactions with respect to
Borrower's real property with aggregate proceeds of sales or sale/leasebacks and
principal amount of financings to Borrower in excess of $15,000,000.
1.10 The definition of Maximum Revolver Amount shall be amended in its entirety
to read as follows:
""Maximum Revolver Amount" means $60,000,000, subject to increase pursuant to
Section 1.2(a)(iii) of this Agreement."
1.11 Schedule 1.2 to the Credit Agreement shall be amended to read as Schedule
1.2 attached hereto.
1.12 The references to "$70,000,000" in Exhibit B to the Credit Agreement shall
be amended to refer to "$60,000,000."
Paragraph 2. Conditions.
(a) Notwithstanding any contrary provision, this Amendment is not effective
until the date (the "Effective Date") upon which (i) the representations and
warranties in this Amendment are true and correct; (ii) after giving effect to
this Amendment, no Default or Event of Default has occurred and is continuing
under the Credit Agreement; (iii) the Agent has received counterparts of this
Amendment executed by Borrower, Parent, and Required Lenders; and (iii) Borrower
has paid all attorney fees of the Agent incurred in connection with the Loan
Documents, including any outstanding attorney's fees of the Agent on the date
hereof.
(b) Borrower shall have executed and delivered to each Lender a renewal and
replacement Note in the amount of such Lender's Commitment, as amended hereby.
(c) Borrower shall have paid to Agent for the benefit of Lender an amendment fee
as set forth in the Fee Letter dated the date hereof among Borrower, Parent,
Agent and Lenders, in immediately available funds.
(d) Borrower and Parent shall deliver to Agent such other agreements, documents,
instruments, opinions, certificates, and evidences as the Agent or Required
Lenders may reasonably request.
Paragraph 3. Acknowledgment and Ratification. As a material inducement to the
Agent and Lenders to execute and deliver this Amendment, Borrower and Parent
(a) consent to the agreements in this Amendment and (b) agree and acknowledge
that the execution, delivery, and performance of this Amendment shall in no way
release, diminish, impair, reduce, or otherwise affect the respective
obligations of Borrower or Parent under their respective Loan Documents, which
Loan Documents shall remain in full force and effect, and all Liens, guaranties,
and rights thereunder are hereby ratified and confirmed and shall secure the
Obligations.
Paragraph 4. Pro Rata Share. Effective on the date hereof, each Lender's Pro
Rata Share shall be recalculated to reflect the new proportionate share of the
revised total Commitments and the Lender responsible for the additional
Commitments (the "purchasing Lender") shall, immediately upon receiving notice
from Agent, pay to each Lender an amount equal to its Pro Rata Share of the
Revolving Loans (and any funded participations by Lenders under the Letter of
Credit Subfacility) outstanding as of such date. All such payments with respect
to the Revolving Loans shall reduce the outstanding principal balance of the
Revolving Loan Note of each Lender receiving such payments and shall represent
Revolving Loans to Borrower under the purchasing Lender's Revolving Loan Note;
all such payments with respect to funded participations under the Letter of
Credit Subfacility shall reduce the applicable participation of each Lender
receiving such payment and shall represent the purchase by the purchasing Lender
of a participation under the Letter of Credit Subfacility. The purchasing Lender
shall be entitled to share ratably in interest accruing on the balances
purchased, at the rates provided herein for such balances, from and after the
date of purchase. All new Revolving Loans occurring after an increase of the
total Commitments shall be funded in accordance with the Lender's revised Pro
Rata Share.
Paragraph 5. Representations. As a material inducement to Lenders to execute and
deliver this Amendment, Borrower and Parent represent and warrant to Lenders
(with the knowledge and intent that Lenders are relying upon the same in
entering into this Amendment) that as of each Effective Date and as of the date
of execution of this Amendment, (a) all representations and warranties in the
Loan Documents are true and correct in all material respects as though made on
the date hereof, except to the extent that (i) any of them speaks to a different
specific date or (ii) the facts on which any of them were based have been
changed by transactions contemplated or permitted by the Credit Agreement, or
(iii) any of them is waived herein and (b) no Default or Event of Default exists
other than as waived herein.
Paragraph 6 Expenses. Borrowers shall pay all reasonable costs, fees, and
expenses paid or incurred by Agent in connection with this Amendment, including,
without limitation, attorney fees of Agent in connection with the negotiation,
preparation, delivery, and execution of this Amendment and any related
documents.
Paragraph 7. Miscellaneous.
7.1 This Amendment is a "Loan Document" referred to in the Credit Agreement, and
the provisions relating to Loan Documents in Article 13 of the Credit Agreement
are incorporated in this Amendment by reference. Unless stated otherwise (a) the
singular number includes the plural and vice versa and words of any gender
include each other gender, in each case, as appropriate, (b) headings and
captions may not be construed in interpreting provisions, (c) this Amendment
must be construed, and its performance enforced, under Texas law, (d) if any
part of this Amendment is for any reason found to be unenforceable, all other
portions of it nevertheless remain enforceable, and (e) this Amendment may be
executed in any number of counterparts with the same effect as if all
signatories had signed the same document, and all of those counterparts must be
construed together to constitute the same document.
7.2 The Loan Documents shall remain unchanged and in full force and effect,
except as provided in this Amendment, and are hereby ratified and confirmed. On
and after the Effective Date, all references to the "Credit Agreement" shall be
to the Credit Agreement as herein amended. The execution, delivery, and
effectiveness of this Amendment shall not, except as expressly provided herein,
operate as a waiver of any rights of Lenders under any Loan Document, nor
constitute a waiver under any of the Loan Documents.
Paragraph 8. Entire Agreement. This Amendment represents the final agreement
between the parties about the subject matter of this Amendment and may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties.
Paragraph 9. Parties. This Amendment binds and inures to Borrower, Parent,
Agent, Lenders, and their respective successors and assigns.
The parties hereto have executed this Amendment in multiple counterparts to be
effective as of the Effective Date.
Remainder of Page Intentionally Blank.
Signature Pages to Follow.
Signature Page to that certain First Amendment to Amended and Restated Credit
Agreement dated as of the date first stated above, among Central Freight Lines,
Inc., as Borrower, Bank of America, N.A., in its capacity as Agent, Required
Lenders, and Parent.
Signature Page to First Amendment to
Amended and Restated Credit Agreement
BANK OF AMERICA, N.A., as Agent and a Lender
By:
Joy L. Bartholomew
Senior Vice President
TEXTRON FINANCIAL CORPORATION,
as a Lender
By:
Name:
Title:
Signature Page to First Amendment to
Amended and Restated Credit Agreement
BORROWER:
CENTRAL FREIGHT LINES, INC.,
a Texas corporation, as Borrower
By:
Name:
Title:
GUARANTOR:
CENTRAL FREIGHT LINES, INC.,
a Nevada corporation, as Parent
By:
Name:
Title:
SCHEDULE 1.2
COMMITMENTS
Pro Rata Share
Lender Revolving Loan Commitment (3 decimals)
Bank of America, N.A. $35,000,000 58.333%
Textron Financial Corporation $25,000,000 41.667%
Total $60,000,000 100.000%
EXHIBIT 31.1
CERTIFICATION
I, Robert V. Fasso, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Central Freight
Lines, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: May 17, 2005
/s/ Robert V. Fasso
Robert V. Fasso
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION
I, Jeffrey A. Hale, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Central Freight
Lines, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: May 17, 2005
/s/ Jeffrey A. Hale
Jeffrey A. Hale
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Central Freight Lines, Inc.
(the "Company") on Form 10-Q for the period ended April 2, 2005, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Robert V. Fasso, Chief Executive Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
/s/ Robert V. Fasso
Robert V. Fasso
Chief Executive Officer
May 17, 2005
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Central Freight Lines, Inc.
(the "Company") on Form 10-Q for the period ended April 2, 2005, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"),
I, Jeffrey A. Hale, Chief Financial Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
/s/ Jeffrey A. Hale
Jeffrey A. Hale
Chief Financial Officer
May 17, 2005