-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, StBB+oqCVlODNm5Ttf943oDbQ0/xzGLd4DpOsP2wulyk35j8a3ayNKaiogE68D1i lMGd9vprcsBni9Qza+Wqsg== 0000931763-01-500781.txt : 20010530 0000931763-01-500781.hdr.sgml : 20010530 ACCESSION NUMBER: 0000931763-01-500781 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20010419 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010529 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSIT GROUP INC CENTRAL INDEX KEY: 0000853532 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 592576629 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-18601 FILM NUMBER: 1649875 BUSINESS ADDRESS: STREET 1: 2859 PACES FERRY ROAD STREET 2: SUITE 1740 CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 7704440240 MAIL ADDRESS: STREET 1: 2859 PACES FERRY ROAD, SUITE 1740 STREET 2: SUITE 1740 CITY: ATLANTA STATE: GA ZIP: 30339 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL PARCEL SERVICE INC DATE OF NAME CHANGE: 19920703 8-K 1 d8k.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of Earliest Event Reported): April 19, 2001 ________________ TRANSIT GROUP, INC. ------------------- (Exact name of Registrant as specified in its charter) Florida 000-18601 59-2576629 ------- --------- ---------- (State or other jurisdiction of (Commission File No.) (IRS Employer incorporation or organization) Identification No.)
2859 Paces Ferry Road Suite 1740 Atlanta, Georgia 30339 --------------------------------------------------------------- (Address of principal executive offices, including zip code) (770) 444-0240 --------------------------------------------------------------- (Registrant's telephone number, including area code) --------------------------------------------------------------- (Former name or Former Address if Changed Since Last Report) Item 5. Other Events On April 19, 2001, Transit Group, Inc. (the "Company") closed a financial reorganization in which the Company restructured its outstanding bank debt, equipment notes and leases, stock repurchase obligation from certain shareholders, obligations and terms of its Series A Preferred Stock and indebtedness to the Company's Chief Executive Officer and other third parties (the "Reorganization"). The Company issued a press release on April 23, 2001 that discusses the credit facility. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K. Item 7. Financial Information and Exhibits 3.1 Amended and Restated Certificate of Designations for Transit Group, Inc.'s Series A Convertible Preferred Stock. 3.2 Certificate of Designations for Transit Group, Inc.'s Series B Convertible Preferred Stock. 10.1 First Amendment to Purchase Agreement between Transit Group, Inc. and GE Capital Equity Investments, Inc. dated as of April 19, 2001. 10.2 Amendment and Joinder to Amended and Restated Registration Rights Agreement dated as of April 19, 2001. 10.3 Amendment to Stockholders Agreement dated as of April 19, 2001. 10.4 Stock Purchase Agreement by and among Transit Group, Inc., Cynthia F. Turner, Philip R. Fulmer, Timothy A. Fulmer, Barbara A. Fulmer, Carroll A. Fulmer and T. Wayne Davis dated as of April 19, 2001. 10.5 Amended and Restated Credit Agreement by and among Transit Group, Inc., various financial institutions and Bank One, N.A., as agent, dated as of April 19, 2001. 10.6 Loan and Security Agreement by and among Congress Financial Corporation (Southern), as Lender, and Transit Group, Inc., Transit Group Transportation, LLC, Carroll Fulmer and Company, Inc., and Land Transportation, LLC, as Borrowers, dated April 19, 2001. 10.7 Agreement Between Transit Group, Inc., T. Wayne Davis and the ECD Trust dated as of April 19, 2001. 99.1 Press Release. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TRANSIT GROUP, INC. Date: May 25, 2001 /s/ James G. Overley --------------------------------------- James G. Overley, Senior Vice President of Finance, Chief Financial Officer and Treasurer EX-3.1 2 dex31.txt AMENDED AND RESTATED CERTIFICATE OF DESIGNATIONS EXHIBIT 3.1 TRANSIT GROUP, INC. AMENDED AND RESTATED CERTIFICATE OF DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF PREFERRED STOCK AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF ____________________ Pursuant to Section 607.1004 of the Florida Business Corporation Act ____________________ TRANSIT GROUP, INC. (the "Company"), a corporation organized and existing under the laws of the State of Florida, hereby certifies that pursuant to the provisions of Section 607.1004 of the Florida Business Corporation Act, its Board of Directors, by action taken April 10, 2001, adopted the following resolution, which resolution remains in full force and effect as of the date hereof: WHEREAS, the Board of Directors of the Company is authorized, within the limitations and restrictions stated in the articles of incorporation, to fix by resolution or resolutions the designation of preferred stock and the powers, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions thereof, including, without limiting the generality of the foregoing, such provisions as may be desired concerning voting, redemption, dividends, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors under the Florida Business Corporation Act; and WHEREAS, the Board of Directors has previously created and fixed the terms of the Series A Preferred Stock; and WHEREAS, it is the desire of the Board of Directors of the Company, pursuant to its authority as aforesaid, to amend the terms of the Series A Convertible Preferred Stock of the Company and the number of shares constituting such preferred stock; NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized the Series A Convertible Preferred Stock on the terms and with the provisions herein set forth: AMENDED AND RESTATED TERMS, PREFERENCES, RIGHTS AND LIMITATIONS of SERIES A CONVERTIBLE PREFERRED STOCK of TRANSIT GROUP, INC. The relative rights, preferences, powers, qualifications, limitations and restrictions granted to or imposed upon the Series A Convertible Preferred Stock or the holders thereof are as follows: 1. Definitions. For purposes of this Designation, the following definitions shall apply: "Amendment Date" shall mean the date this amended and restated certificate is filed with the Florida Department of State. "Board" shall mean the Board of Directors of the Company. "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Common Stock" shall mean the Common Stock, $.01 par value per share, of the Company. "Company" shall mean Transit Group, Inc., a Florida corporation. "Conversion Price" shall mean the amount computed by dividing the Liquidation Preference by the Conversion Ratio. "Conversion Ratio" has the meaning set forth in Section 7 hereof. "Convertible Preferred Stock" shall refer to shares of Series A Convertible Preferred Stock, no par value per share, of the Company. "Current Market Price," when used with reference to shares of Common Stock or other securities on any date, shall mean the average of the daily market prices for the 10 consecutive Trading Days immediately prior to such date. The daily market price for each such Trading Day shall be (i) the last sale price on such day on the principal stock exchange or NASDAQ Stock Market on which such Common Stock is then listed or admitted to trading, (ii) if no sale takes place on such day on any such exchange or market, the average of the last reported closing bid and asked prices on such day as officially quoted on any such exchange or market, (iii) if the Common Stock is not then listed or admitted to trading on any stock exchange or such market, the average of the last reported closing bid and asked prices on such day in the over-the-counter market, as furnished by NASDAQ or the National Quotation Bureau, Inc., (iv) if neither 2 such corporation at the time is engaged in the business of reporting such prices, as furnished by any similar firm then engaged in such business, or (v) if there is no such firm, as furnished by any member of the National Association of Securities Dealers ("NASD") selected mutually by the Required Holders and Company or, if they cannot agree upon such selection, as selected by two such members of the NASD, one of which shall be selected by the Required Holders and one of which shall be selected by Company. "Dividend Rate" shall mean 9% per annum. "Event of Default" shall have the meaning assigned to it in the Purchase Agreement and shall also mean the failure of the Company to redeem shares of Convertible Stock pursuant to Section 6 hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar Federal statute, and the rules and regulations of the Securities and Exchange Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Exchange Act of 1934, as amended, shall include reference to the comparable section, if any, of any such similar Federal statute. "Fair Market Value" shall mean the amount which a willing buyer would pay a willing seller in an arm's-length transaction, with neither being under any compulsion to buy or sell. "Fully Diluted Outstanding" shall mean, with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock outstanding at such date and all shares of Common Stock issuable upon the conversion of the Convertible Preferred Stock outstanding on such date, and other options or warrants to purchase, or securities convertible into, shares of Common Stock outstanding on such date which would be deemed outstanding in accordance with GAAP for purposes of determining book value or net income per share. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time. "Liquidation Preference" shall mean $5.00 per share. "Organic Change" shall mean (A) any sale, lease, exchange or other transfer of all or substantially all of the property and assets of the Company, (B) any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, (C) any merger or consolidation to which the Company is a party and which the holders of the voting securities of the Company immediately prior thereto own less than a majority of the outstanding voting securities of the surviving entity immediately following such transaction, or (D) any transaction, other than the conversion of accrued and unpaid dividends on the Series B Preferred Stock into additional shares of Series B Preferred Stock, following which any Person or group of Persons (as such term is used in Section 13(d) of the Exchange Act) shall beneficially own (as defined in Rule 13d-3 under the Exchange Act) securities of the Company representing 50% or more of the voting securities of the Company then outstanding. For purposes of the preceding sentence, "voting securities" shall mean securities, the holders of which are ordinarily, in the absence of contingencies, entitled to elect the corporate directors (or Persons performing similar functions). 3 "Original Issue Date" shall mean the date of the original issuance of shares of Convertible Preferred Stock. "Permitted Issuances" shall mean issuances of shares of Common Stock (i) upon the exercise or conversion of warrants or convertible securities of the Company outstanding on the Original Issue Date (including the Convertible Preferred Stock), (ii) upon the exercise of employee stock options issued with the approval of the Company's Board of Directors pursuant to Company's current stock option plans, (iii) as consideration in connection with Permitted Acquisitions (as such term is defined in the Purchase Agreement) at a price (or deemed price) per share equal to or greater than the lower of (x) the Current Market Price per share of Common Stock (calculated as of the date on which such price per share is agreed upon whether upon the signing of a letter of intent, if so provided therein, or the signing of a definitive purchase agreement) and (y) the Conversion Price, (iv) upon the exercise of options to purchase up to an additional 30,000,000 shares of Common Stock issued with approval of the Company's Board of Directors, (v) upon the exercise of options to purchase shares of Common Stock issued to the bank group led by Bank One, N.A., the Company's primary lender, and General Electric Capital Corporation, and (vi) issued upon the conversion of Series B Preferred Stock. "Permitted Issuances" shall also include the issuance of Series B Preferred Stock (i) as a placement fee relating to the purchase of the Series B Preferred Stock and as a deferral fee to certain members of the Carroll Fulmer family in an aggregate amount up to 1,100,000 shares, (ii) as a dividend to holders of the Series B Preferred Stock, (iii) in connection with the conversion of certain indebtedness owed by the Company to Philip A. Belyew and certain other individuals in an amount up to 95,000 shares, and (iv) to holders of the Convertible Preferred Stock for dividends accrued prior to January 31, 2001. "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. "Purchase Agreement" shall mean the Purchase Agreement, dated as of May 13, 1999, by and between the Company and Purchaser named therein, as amended on the Amendment Date, and as it may be amended from time to time, a copy of which is on file at the principal office of the Company. "Redemption Date" shall mean the date on which any shares of Convertible Preferred Stock are redeemed by the Company. "Redemption Price" has the meaning set forth in Section 6(a) (i) of this Certificate of Designation. "Required Holders" shall mean the holders of at least a majority of the outstanding shares of Convertible Preferred Stock. "Series B Preferred Stock" shall mean the Series B Convertible Preferred Stock , no par value, of the Company. "Subsidiary" of any Person means any corporation or other entity of which a majority of the voting power or the voting equity securities or equity interest is owned, directly or indirectly, by such Person. 4 "Trading Day" shall mean a Business Day or, if the Common Stock is listed or admitted to trading on any national securities exchange or NASDAQ market, a day on which such exchange or market is open for the transaction of business. 2. Designation: Number of Shares. The designation of the preferred stock authorized by this resolution shall be "Series A Convertible Preferred Stock" and the number of shares of Convertible Preferred Stock authorized hereby shall be 5,000,000 shares. 3. Dividends. (a) So long as any shares of Convertible Preferred Stock shall be outstanding, the holders of such Convertible Preferred Stock shall be entitled to receive out of any funds legally available therefor, when, as and if declared by the Board of Directors of the Company, preferential dividends in cash at the Dividend Rate on the Liquidation Preference hereunder. Such dividends shall be cumulative and begin to accrue from January 31, 2001 whether or not declared and whether or not there shall be net profits or net assets of the Company legally available for the payment of those dividends. All dividends that have accrued through January 31, 2001, totaling $1,875,000, have been converted into Series B Preferred Stock at a price of $5.00 per share, which conversion satisfies all dividend obligations of the Company through such date. (b) So long as any shares of Convertible Preferred Stock shall be outstanding, (i) no dividend whatsoever shall be paid or declared, and no distribution shall be made, on account of any Common Stock, and (ii) no shares of Common Stock shall be purchased, redeemed or acquired by the Company and no funds shall be paid into or set aside or made available for a sinking fund for the purchase, redemption or acquisition thereof, other than redemptions of shares of Common Stock pursuant to contractual obligations in existence on the Amendment Date and the Series B Preferred Stock. (c) Notwithstanding anything to the contrary herein, the Company shall be entitled to pay preferential dividends in cash at 10.5 % per annum on the liquidation preference of the Series B Preferred Stock of the Company, when and as declared by the Board. 4. Liquidation Rights of Convertible Preferred Stock. (a) In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of Convertible Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, whether such assets are capital, surplus or earnings, before any payment or declaration and setting apart for payment of any amount shall be made in respect of any shares of Common Stock or any share of any other class or series of the Company's preferred stock ranking junior to the Convertible Preferred Stock with respect to the payment of dividends or distribution of assets on liquidation, dissolution or winding up of the Company, and after the payment in full of the liquidation preference on the Series B Preferred Stock, an amount equal to the Liquidation Preference plus all declared or accrued and unpaid dividends in respect of any liquidation, dissolution or winding up consummated. (b) If upon any liquidation, dissolution or winding up of Company, whether voluntary or involuntary, the remaining assets to be distributed among the holders of Convertible Preferred Stock shall be insufficient to permit the payment to such stockholders of 5 the full preferential amounts aforesaid, then the entire assets of the Company remaining to be distributed shall be distributed ratably among the holders of Convertible Preferred Stock, based on the full preferential amounts for the number of shares of Convertible Preferred Stock held by each holder. (c) After payment to the holders of Convertible Preferred Stock of the amounts set forth in Section 4(a) hereof, the entire remaining assets and funds of the Company legally available for distribution, if any, shall be distributed among the holders of any Company stock entitled to a preference over the Common Stock in accordance with the terms thereof and, thereafter, to the holders of Common Stock, in which distribution the holders of Convertible Preferred Stock and the Series B Preferred Stock shall participate on an as if converted basis. (d) If there is an Organic Change of the type referred to in clauses (a) or (c) of the definition of Organic Change, then such transaction shall be deemed a liquidation for purposes of distributions to stockholders of the consideration received in such transaction, subject, however, to the provisions of Section 5(b)(iii) hereof; provided, however, that solely for the purposes of this Section 4(d), an Organic Change of the type referred to in such clause (c) shall not be deemed a liquidation for purposes of this Section 4(d) if, immediately after consummation of the Organic Change, the stockholders of Company (as determined immediately prior to such Organic Change) own at least 35% of the voting capital stock of the surviving entity. 5. Voting Rights. In addition to any voting rights provided by law, the holders of shares of Convertible Preferred Stock shall have the following voting rights: (a) So long as any of the Convertible Preferred Stock is outstanding, each share of Convertible Preferred Stock shall entitle the holder thereof to vote on all matters voted on by the holders of Common Stock, voting together as a single and not separate class with other shares entitled to vote at all meetings of the stockholders of the Company. With respect to any such vote, each share of Convertible Preferred Stock shall entitle the holder thereof to cast the number of votes equal to the number of votes which could be cast in such vote by a holder of the number of shares of Common Stock of the Company into which such share of Convertible Preferred Stock is convertible on the record date for such vote. (b) The affirmative vote of the Required Holders, voting together as a class, in person or by proxy, at a special or annual meeting of stockholders called for the purpose, or pursuant to a written consent of stockholders shall be necessary to (i) authorize, adopt or approve an amendment to the articles of incorporation of the Company which would alter or change in any manner the terms, powers, preferences or special rights of the shares of Convertible Preferred Stock or grant waivers thereof, or which would otherwise adversely affect the rights of the Convertible Preferred Stock, provided that no such modification or amendment may, without the consent of each holder of Convertible Preferred Stock affected thereby, (A) change the redemption date of the Convertible Preferred Stock; (B) raise the Conversion Price or reduce the Liquidation Preference, Dividend Rate or Redemption Price of the Convertible Preferred Stock; (C) adversely affect any of the conversion features of the Convertible Preferred Stock set forth in Section 7 hereof; or (D) reduce the percentage of outstanding Convertible Preferred Stock necessary to modify or amend the terms thereof or to grant waivers thereof; 6 (ii) issue any shares of the capital stock of the Company ranking senior to, or pari passu with (either as to dividends or upon voluntary or involuntary liquidation, dissolution or winding up) the Convertible Preferred Stock, or issue any securities convertible into or exchangeable for such shares, except shares of Common Stock; or (iii) take any action which is in violation of Article V of the Purchase Agreement. (c) The holders of shares of Convertible Preferred Stock shall have, in addition to their other voting rights set forth herein, the exclusive right, voting separately as a single class, to elect two directors of the Company in accordance with this Section 5, and if, on any date after the Amendment Date, an Event of Default shall have occurred and be continuing, then the holders of the Convertible Preferred Stock shall have the right to elect one additional member of the Board. (d) (i) The foregoing rights of holders of shares of Convertible Preferred Stock to take any actions as provided in this Section 5 may be exercised at any annual meeting of stockholders or at a special meeting of stockholders held for such purpose as hereinafter provided or at any adjournment thereof or pursuant to any written consent of stockholders. (ii) If the holders of the Convertible Preferred Stock have the right to elect one director pursuant to Section 5(c) above, or at any time with respect to the two directors the holder of the Convertible Preferred Stock is entitled to elect pursuant to Section 5(c) above, a proper officer of the Company, upon the written request of the holders of record of at least ten percent (10%) of the shares of Convertible Preferred Stock then outstanding, addressed to the Secretary of the Company, shall call a special meeting in lieu of the annual meeting of stockholders or a special meeting of the holders of Convertible Preferred Stock, for the purpose of electing directors. Any such meeting shall be held at the earliest practicable date at the place for the holding of the annual meetings of stockholders. If such meeting shall not be called by the proper officer of the Company within twenty (20) days after personal service of said written request upon the Secretary of the Company, or within twenty (20) days after mailing the same within the United States by certified mail, addressed to the Secretary of the Company at its principal executive offices, then the holders of record of at least ten percent (10%) of the outstanding shares of Convertible Preferred Stock may designate in writing one of their number to call such meeting at the expense of the Company, and such meeting may be called by the person so designated upon the notice required for the annual meetings of stockholders of the Company and shall be held at the place for holding the annual meetings of stockholders. Any holder of Convertible Preferred Stock so designated shall have access to the lists of stockholders to be called pursuant to the provisions hereof. (e) Any vacancy occurring in the office of director to be elected by the holders of Convertible Preferred Stock pursuant to Section 5(d) above may be filled by the remaining director elected by the holders of Convertible Preferred Stock unless and until such vacancy shall be filled by the holders of Convertible Preferred Stock. The term of office of the directors elected by the holders of Convertible Preferred Stock shall terminate upon the election of their successors at any meeting of stockholders held for the purpose of electing directors, and the rights of the holders of the Convertible Preferred Stock to elect members of the Board of Directors of the Company as provided herein shall terminate at such time as less than five percent (5%) of the Convertible Preferred Stock remains outstanding. 7 (f) The directors elected by the holders of shares of Convertible Preferred Stock voting separately as a single class may be removed from office with or without cause by the vote of the holders of at least a majority of the outstanding shares of Convertible Preferred Stock. A special meeting of the holders of shares of Convertible Preferred Stock may be called in accordance with the procedures set forth in subparagraph (d) of this Section 5. 6. Redemption of Convertible Preferred Stock. (a) Upon at least thirty (30) Business Days prior written notice to the Company by any of the holders of the Convertible Preferred Stock (the "Redemption Notice"), which written notice may not be sent for a redemption prior to fifty-four months from the Amendment Date, the Company shall redeem, at the redemption price equal to the sum of the Liquidation Preference per share plus an amount equal to all accrued and unpaid dividends per share thereon (the "Redemption Price"), the number of shares of Convertible Preferred Stock specified in such notice, up to one-third of the shares issued on the Original Issue Date if the Redemption Notice is given for a redemption on or after fifty- four months from the Amendment Date, up to two-thirds of such amount if given for a redemption on or after sixty-six months from the Amendment Date and up to all such shares if given for a redemption on or after seventy-eight months from the Amendment Date and for a period of one year thereafter. If the Required Holders so elect, on or after seventy-eight months from the Amendment Date but before one hundred fourteen months from the Amendment Date or at any time upon the occurrence of an Organic Change, the Company shall redeem all of the outstanding shares of Convertible Preferred Stock; provided, however, that solely for the purposes of this Section 6(a), an Organic Change of the type referred to in clause (c) of the definition of Organic Change shall not be deemed an Organic Change for purposes of this Section 6(a) if, immediately after consummation of the Organic Change, the stockholders of Company (as determined immediately prior to such Organic Change) own at least 35% of the voting capital stock of the surviving entity. Such redemption rights shall expire one hundred fourteen months from the Amendment Date except upon the occurrence of an Organic Change. (b) Upon receipt of a Redemption Notice, the Company shall fix a date for redemption (the "Redemption Date"), which shall be no later than thirty (30) Business Days after the date of the Redemption Notice. Within five (5) business days following receipt of any Redemption Notice, the Company shall notify each other holder of record of shares of Convertible Preferred Stock and Series B Preferred Stock which has not made a redemption request at such time, specifying the name of the holder or holders who have given the Redemption Notice and the number of shares covered by such request. Each other holder shall then have a period of fifteen (15) Business Days following the date of such notice from the Company in which to provide to the Company a Redemption Notice in order for the Company to simultaneously redeem their shares of Convertible Preferred Stock and Series B Preferred Stock which are then subject to redemption. The redemption of any shares of Series B Preferred Stock will be made pursuant to the terms set forth in the Certificate of Designations with respect thereto. Each holder of Convertible Preferred Stock who has given the Company a Redemption Notice shall surrender the certificate or certificates representing such shares of Convertible Preferred Stock to the Company, duly endorsed for transfer in the manner and at the place designated by the Company in a notice to the redeeming holders, and thereupon the Redemption Price for such shares shall be payable in cash on the Redemption Date to the person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate 8 shall be cancelled and retired. In the event that less than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. (c) Unless the Company defaults in the payment in full of the Redemption Price, dividends on the Convertible Preferred Stock called for redemption shall cease to accumulate on the Redemption Date, and the holders of such shares redeemed shall cease to have any further rights with respect thereto on the Redemption Date, other than to receive the Redemption Price without interest. (d) If, at the time of any redemption pursuant to this Section 6, the funds of the Company legally available for redemption of Convertible Preferred Stock are insufficient to redeem the number of shares required to be redeemed, those funds which are legally available shall be used to redeem the maximum possible number of such shares, pro rata based upon the number of shares to be redeemed. At any time thereafter when additional funds of the Company become legally available for the redemption of Convertible Preferred Stock, such funds shall immediately be used to redeem the balance of the shares of Convertible Preferred Stock which the Company has become obligated to redeem pursuant to this subparagraph, but which it has not redeemed. (e) The Company may not otherwise redeem or repurchase the Convertible Preferred Stock. (f) Notwithstanding anything to the contrary herein, the rights granted under this Section 6 shall be subordinate to the redemption rights of the holders of the Series B Preferred Stock. In the event the holders of the Series B Preferred Stock exercise the redemption rights provided for in the Certificate of Designations of the Series B Preferred Stock, the available funds of the Company shall first be used to satisfy such redemption request. Any funds available after satisfaction in full of the redemption rights of the holders of the Series B Preferred Stock shall be available for redemption of the Convertible Preferred Stock pursuant to this Section 6. 7. Conversion. (a) Subject to the provisions for adjustment hereinafter set forth, each share of Convertible Preferred Stock shall be convertible at any time after the earlier of (i) the ninetieth (90th) day following the Amendment Date, or (ii) the effective date of an amendment to the Articles of Incorporation of the Company increasing the number of authorized shares of Common Stock to 500,000,000 and from time to time thereafter, at the option of the holder thereof (such conversion, an "Optional Conversion") into fully paid and nonassessable shares of Common Stock. The number of shares of Common Stock deliverable upon conversion of a share of Convertible Preferred Stock, adjusted as hereinafter provided, is referred to herein as the "Conversion Ratio." The Conversion Ratio shall initially be one (1), subject to adjustment from time to time pursuant to paragraph (f) of this Section 7. No fractional shares shall be issued upon the conversion of any shares of Convertible Preferred Stock. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Convertible Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a share of Common Stock, the Company shall, in lieu of issuing any fractional share, pay the holder otherwise entitled to such fraction a sum in cash equal to the Current Market Price of such fraction on the date of conversion. 9 (b) (i) An Optional Conversion of the Convertible Preferred Stock may be effected by any such holder upon the surrender to the Company at the principal office of the Company of the certificate for such Convertible Preferred Stock to be converted accompanied by a written notice stating that such holder elects to convert all or a specified number of such shares (which may be fractional shares) in accordance with the provisions of this Section 7 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. Upon an Optional Conversion of any shares of Convertible Preferred Stock, dividends on the Convertible Preferred Stock so converted shall cease to accumulate, and the Company shall pay the holder thereof all accrued and unpaid dividends owing in respect of such shares so converted, which dividends shall be paid when declared by the Board. (ii) In case the written notice specifying the name or name in which such holder wishes the certificate or certificates for shares of Common Stock to be issued shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issuance of shares of Common Stock in such name or names. Other than such taxes, the Company will pay any and all issue and other taxes (other than taxes based on income) that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Convertible Preferred Stock pursuant hereto. As promptly as practicable, and in any event within five Business Days after the surrender of such certificate or certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes (or the demonstration to the satisfaction of the Company that such taxes have been paid), the Company shall deliver or cause to be delivered (i) certificates representing the number of validly issued, fully paid and nonassessable full shares of Common Stock to which the holder of shares of Convertible Preferred Stock being converted shall be entitled and (ii) if less than the full number of shares of Convertible Preferred Stock evidenced by the surrendered certificate or certificates is being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares being converted. (iii) In the case of an Optional Conversion, such conversion shall be deemed to have been made at the close of business on the date of giving the written notice referred to in the first sentence of (b)(i) above and of such surrender of the certificate or certificates representing the shares of Convertible Preferred Stock to be converted so that the rights of the holder thereof as to the shares being converted shall cease except for the right to receive shares of Common Stock in accordance herewith, and the person entitled to receive the shares of Common Stock shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time. (c) In case any shares of Convertible Preferred Stock are to be redeemed pursuant to Section 6, all rights of conversion shall cease and terminate as to the shares of Convertible Preferred Stock to be redeemed at the close of business on the Business Day next preceding the date fixed for redemption unless the Company shall default in the payment of the Redemption Price. (d) The Conversion Ratio shall be subject to adjustment from time to time in certain instances as hereinafter provided. 10 (e) The Company shall at all times reserve, and keep available for issuance upon the conversion of the Convertible Preferred Stock, such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all outstanding shares of Convertible Preferred Stock, and shall take all action required to increase the authorized number of shares of Common Stock if necessary to permit the conversion of all outstanding shares of Convertible Preferred Stock. (f) The Conversion Ratio will be subject to adjustment from time to time as follows: (i) In case the Company shall at any time or from time to time after the Original Issue Date (A) pay a dividend, or make a distribution, on the outstanding shares of Common Stock in shares of Common Stock, (B) subdivide the outstanding shares of Common Stock, (C) combine the outstanding shares of Common Stock into a smaller number of shares or (D) issue by reclassification of the shares of Common Stock any shares of capital stock of the Company, then, and in each such case, the Conversion Ratio in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted so that the holder of any shares of Convertible Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock or other securities of the Company which such holder would have owned or have been entitled to receive after the happening of any of the events described above, had such shares of Convertible Preferred Stock been surrendered for conversion immediately prior to the happening of such event or the record date therefor, whichever is earlier. An adjustment made pursuant to this clause (i) shall become effective (x) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of such subdivision, reclassification or combination, at the close of business on the day upon which such corporate action becomes effective. No adjustment shall be made pursuant to this clause (i) in connection with any transaction to which paragraph (g) applies. (ii) In case the Company shall issue shares of Common Stock (or rights, warrants or other securities convertible into or exchangeable for shares of Common Stock) after the Original Issue Date, other than issuances covered by clause (i) above and Permitted Issuances, at a price per share (or having an exercise, conversion or exchange price per share) less than the Conversion Price as of the date of issuance of such shares or of such rights, warrants or other convertible or exchangeable securities, then, and in each such case, the Conversion Price shall be reduced (but not increased) to a price determined by dividing (A) an amount equal to the sum of (x) the number of shares of Fully Diluted Outstanding Common Stock outstanding immediately prior to such issue multiplied by the then existing Conversion Price, plus (y) the consideration, if any, received by Company upon such issue, by (B) the total number of shares of Fully Diluted Outstanding Common Stock outstanding immediately after such issue or sale. The Conversion Ratio shall be adjusted to equal the Liquidation Preference divided by the Conversion Price. For the purpose of determining the consideration received by the Company upon any such issue pursuant to clause (y) above, if the consideration received by the Company is other than cash, its value will be deemed its Fair Market Value, as determined in good faith by the Board of Directors of the Company. 11 (iii) An adjustment made pursuant to clause (ii) above shall be made on the next Business Day following the date on which any such issuance is made and shall be effective retroactively immediately after the close of business on such date. For purposes of clause (ii), the aggregate consideration received by the Company in connection with the issuance of shares of Common Stock or of rights, warrants or other securities exchangeable or convertible into shares of Common Stock shall be deemed to be equal to the sum of the aggregate offering price of all such Common Stock and such rights, warrants, or other exchangeable or convertible securities plus the minimum aggregate amount, if any, receivable upon exchange or conversion of any such exchangeable or convertible securities into shares of Common Stock. (iv) In case the Company shall at any time or from time to time after the Original Issue Date declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities or property or rights or warrants to subscribe for securities of the Company or any of its Subsidiaries by way of dividend or spinoff), on its Common Stock, other than dividends or distributions of shares of Common Stock which are referred to in clause (i) of this paragraph (f), then, and in each such case, the Conversion Ratio shall be adjusted so that the holder of each share of Convertible Preferred Stock shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (1) the applicable Conversion Ratio on the day immediately prior to the record date fixed for the determination of stockholders entitled to receive such dividend or distribution by (2) a fraction, the numerator of which shall be the Current Market Price per share of Common Stock at such record date, and the denominator of which shall be such Current Market Price per share of Common Stock less the Fair Market Value of such dividend or distribution per share of Common Stock. No adjustment shall be made pursuant to this clause (v) in connection with any transaction to which paragraph (g) applies. (v) For purposes of this paragraph (f), the number of shares of Common Stock at any time outstanding shall not include any shares of Common Stock then owned or held by or for the account of the Company or any of its subsidiaries. (vi) If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter and before the distribution to stockholders thereof legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment in the number of shares of Common Stock issuable upon exercise of the right of conversion granted by this paragraph (f) or in the Conversion Ratio then in effect shall be required by reason of the taking of such record. (vii) Anything in this paragraph (f) to the contrary notwithstanding, the Company shall not be required to give effect to any adjustment in the Conversion Ratio unless and until the net effect of one or more adjustments (each of which shall be carried forward), determined as above provided, shall have resulted in a change of the Conversion Ratio by at least one- tenth of one share of Common Stock, and when the cumulative net effect of more than one adjustment so determined shall be to change the Conversion Ratio by at least one-tenth of one share of Common Stock, such change in Conversion Ratio shall thereupon be given effect. 12 (viii) If any option or warrant expires or is cancelled without having been exercised, then, for the purposes of the adjustments set forth above, such option or warrant shall have been deemed not to have been issued and the Conversion Ratio shall be adjusted accordingly. No holder of Common Stock which was previously issued upon conversion of Convertible Preferred Stock shall have any obligation to redeem or cancel any such shares of Common Stock as a result of the operation of this paragraph (viii). (g) In case of any Organic Change (or any other merger or consolidation to which the Company is a party, which for purposes of this paragraph (g) shall be deemed an Organic Change), each share of Convertible Preferred Stock then outstanding, other than those shares to be redeemed pursuant to Section 6 hereof, shall thereafter be convertible into, in lieu of the Common Stock issuable upon such conversion prior to consummation of such Organic Change, the kind and amount of shares of stock and other securities and property receivable (including cash) upon the consummation of such Organic Change by a holder of that number of shares of Common Stock into which one share of Convertible Preferred Stock was convertible immediately prior to such Organic Change (including, on a pro rata basis, the cash, securities or property received by holders of Common Stock in any tender or exchange offer that is a step in such Organic Change). In case securities or property other than Common Stock shall be issuable or deliverable upon conversion as aforesaid, then all references in this Section 7 shall be deemed to apply, so far as appropriate and nearly as may be, to such other securities or property. (h) In case at any time or from time to time the Company shall pay any stock dividend or make any other non-cash distribution to the holders of its Common Stock, or shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or any other right, or there shall be any capital reorganization or reclassification of the Common Stock of the Company or consolidation or merger of the Company with or into another corporation, or any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, or there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company, then, in any one or more of said cases, the Company shall give at least 20 days' prior written notice to the registered holders of the Convertible Preferred Stock at the addresses of each as shown on the books of the Company as of the date on which (i) the books of the Company shall close or a record shall be taken for such stock dividend, distribution or subscription rights or (ii) such reorganization, reclassification, consolidation, merger, sale or conveyance, dissolution, liquidation or winding up shall take place, as the case may be, provided that in the case of any Organic Change to which paragraph (g) applies the Company shall give at least 30 days' prior written notice as aforesaid. Such notice shall also specify the date as of which the holders of the Common Stock of record shall participate in said dividend, distribution or subscription rights or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale or conveyance or participate in such dissolution, liquidation or winding up, as the case may be. Failure to give such notice shall not invalidate any action so taken. 8. Reports as to Adjustments. Upon any adjustment of the Conversion Ratio then in effect and any increase or decrease in the number of shares of Common Stock issuable upon the operation of the conversion set forth in Section 7, then, and in each such case, the Company shall promptly deliver to each holder of the Convertible Preferred Stock, a certificate signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company setting forth in reasonable detail the event 13 requiring the adjustment and the method by which such adjustment was calculated and specifying the Conversion Ratio then in effect following such adjustment and the increased or decreased number of shares issuable upon the conversion granted by Section 7, and shall set forth in reasonable detail the method of calculation of each and a brief statement of the facts requiring such adjustment. Where appropriate, such notice to holders of the Convertible Preferred Stock may be given in advance. 9. Certain Covenants. Any registered holder of Convertible Preferred Stock may proceed to protect and enforce its rights and the rights of such holders by any available remedy by proceeding at law or in equity to protect and enforce any such rights, whether for the specific enforcement of any provision in this Certificate of Designation or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. 10. No Reissuance of Preferred Stock. No Convertible Preferred Stock acquired by the Company by reason of redemption, purchase, or otherwise shall be reissued, and all such shares shall be cancelled, retired and eliminated from the shares which the Company shall be authorized to issue. 11. Notices. All notices to the Company permitted hereunder shall be personally delivered or sent by first class mail, postage prepaid, addressed to its principal office located at 2859 Paces Ferry Road, Suite 1740, Atlanta, Georgia 30339, or to such other address at which its principal office is located and as to which notice thereof is similarly given to the holders of the Convertible Preferred Stock at their addresses appearing on the books of the Company. IN WITNESS WHEREOF, TRANSIT GROUP, INC. has caused this Certificate to be signed by its President and Secretary, respectively, on this 10th day of April, 2001. /s/ Philip A. Belyew ------------------------------------ PHILIP A. BELYEW, President /s/ James G. Overley ------------------------------------ JAMES G. OVERLEY, Secretary 14 EX-3.2 3 dex32.txt CERTIFICATE OF DESIGNATIONS EXHIBIT 3.2 TRANSIT GROUP, INC. CERTIFICATE OF DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF PREFERRED STOCK AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF ____________________ Pursuant to Section 607.1004 of the Florida Business Corporation Act ____________________ TRANSIT GROUP, INC. (the "Company"), a corporation organized and existing under the laws of the State of Florida, hereby certifies that pursuant to the provisions of Section 607.1004 of the Florida Business Corporation Act, its Board of Directors, by action taken April 10, 2001, adopted the following resolution, which resolution remains in full force and effect as of the date hereof: WHEREAS, the Board of Directors of the Company is authorized, within the limitations and restrictions stated in the articles of incorporation, to fix by resolution or resolutions the designation of preferred stock and the powers, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions thereof, including, without limiting the generality of the foregoing, such provisions as may be desired concerning voting, redemption, dividends, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors under the Florida Business Corporation Act; and WHEREAS, it is the desire of the Board of Directors of the Company, pursuant to its authority as aforesaid, to authorize and fix the terms of the preferred stock to be designated the Series B Convertible Preferred Stock of the Company and the number of shares constituting such preferred stock; NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized the Series B Convertible Preferred Stock on the terms and with the provisions herein set forth: TERMS, PREFERENCES, RIGHTS AND LIMITATIONS of SERIES B CONVERTIBLE PREFERRED STOCK of TRANSIT GROUP, INC. The relative rights, preferences, powers, qualifications, limitations and restrictions granted to or imposed upon the Series B Convertible Preferred Stock or the holders thereof are as follows: 1. Definitions. For purposes of this Certificate, the following definitions shall apply: "Board" shall mean the Board of Directors of the Company. "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Common Stock" shall mean the Common Stock, $.01 par value per share, of the Company. "Company" shall mean Transit Group, Inc., a Florida corporation. "Conversion Price" shall mean the amount computed by dividing the Liquidation Preference by the Conversion Ratio. "Conversion Ratio" has the meaning set forth in Section 7 hereof, and shall initially be one hundred (100). "Convertible Preferred Stock" shall refer to shares of Series B Convertible Preferred Stock, no par value per share, of the Company. "Current Market Price," when used with reference to shares of Common Stock or other securities on any date, shall mean the average of the daily market prices for the 10 consecutive Trading Days immediately prior to such date. The daily market price for each such Trading Day shall be (i) the last sale price on such day on the principal stock exchange or NASDAQ Stock Market on which such Common Stock is then listed or admitted to trading, (ii) if no sale takes place on such day on any such exchange or market, the average of the last reported closing bid and asked prices on such day as officially quoted on any such exchange or market, (iii) if the Common Stock is not then listed or admitted to trading on any stock exchange or such market, the average of the last reported closing bid and asked prices on such day in the over-the-counter market, 2 as furnished by NASDAQ or the National Quotation Bureau, Inc., (iv) if neither such corporation at the time is engaged in the business of reporting such prices, as furnished by any similar firm then engaged in such business, or (v) if there is no such firm, as furnished by any member of the National Association of Securities Dealers ("NASD") selected mutually by the Required Holders and Company or, if they cannot agree upon such selection, as selected by two such members of the NASD, one of which shall be selected by the Required Holders and one of which shall be selected by Company. "Dividend Rate" shall mean 10.5% per annum. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar Federal statute, and the rules and regulations of the Securities and Exchange Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Exchange Act of 1934, as amended, shall include reference to the comparable section, if any, of any such similar Federal statute. "Fair Market Value" shall mean the amount which a willing buyer would pay a willing seller in an arm's-length transaction, with neither being under any compulsion to buy or sell. "Fully Diluted Outstanding" shall mean, with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock outstanding at such date and all shares of Common Stock issuable upon the conversion of the Convertible Preferred Stock outstanding on such date, and other options or warrants to purchase, or securities convertible into, shares of Common Stock outstanding on such date which would be deemed outstanding in accordance with GAAP for purposes of determining book value or net income per share. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time. "Liquidation Preference" shall mean $5.00 per share. "Organic Change" shall mean (A) any sale, lease, exchange or other transfer of all or substantially all of the property and assets of the Company, (B) any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, (C) any merger or consolidation to which the Company is a party and which the holders of the voting securities of the Company immediately prior thereto own less than a majority of the outstanding voting securities of the surviving entity immediately following such transaction, or (D) any transaction, other than the conversion of accrued and unpaid dividends into shares of Convertible Preferred Stock as contemplated in Section 3(a) below, following which any Person or group of Persons (as such term is used in Section 13(d) of the Exchange Act) shall beneficially own (as defined in Rule 13d-3 under the Exchange Act) securities of the Company representing 50% or more of the voting securities of the Company then outstanding. For purposes of the preceding 3 sentence, "voting securities" shall mean securities, the holders of which are ordinarily, in the absence of contingencies, entitled to elect the corporate directors (or Persons performing similar functions). "Original Issue Date" shall mean the date of the original issuance of shares of Convertible Preferred Stock. "Permitted Issuances" shall mean issuances of shares of Common Stock (i) upon the exercise or conversion of warrants or convertible securities of the Company outstanding on the Original Issue Date (including the Series A Preferred Stock and the Convertible Preferred Stock), (ii) upon the exercise of employee stock options issued with the approval of the Company's Board of Directors pursuant to Company's current stock option plans, (iii) upon the exercise of options to purchase up to an additional 30,000,000 shares of Common Stock issued with approval of the Company's Board of Directors, and (iv) upon the exercise of options to purchase shares of Common Stock issued to the bank group led by Bank One, N.A., the Company's primary lender, and General Electric Capital Corporation. "Permitted Issuances" shall also include the issuance of Convertible Preferred Stock (i) as a placement fee relating to the purchase of the Convertible Preferred Stock and as a deferral fee to certain members of the Carroll Fulmer family, in an aggregate amount up to 1,100,000 shares, (ii) as a dividend to holders of the Convertible Preferred Stock, and (iii) to holders of the Series A Preferred Stock for dividends accrued prior to January 31, 2001. "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. "Redemption Date" shall mean the date on which any shares of Convertible Preferred Stock are redeemed by the Company. "Redemption Price" has the meaning set forth in Section 6(a) (i) of this Certificate of Designation. "Required Holders" shall mean the holders of at least a majority of the outstanding shares of Convertible Preferred Stock. "Series A Preferred Stock" shall mean the Series A Convertible Preferred Stock, no par value, of the Company. "Subsidiary" of any Person means any corporation or other entity of which a majority of the voting power or the voting equity securities or equity interest is owned, directly or indirectly, by such Person. "Trading Day" shall mean a Business Day or, if the Common Stock is listed or admitted to trading on any national securities exchange or NASDAQ market, a day on which such exchange or market is open for the transaction of business. 4 2. Designation: Number of Shares. The designation of the preferred stock authorized by this resolution shall be "Series B Convertible Preferred Stock" and the number of shares of Convertible Preferred Stock authorized hereby shall be 4,000,000 shares. 3. Dividends. (a) So long as any shares of Convertible Preferred Stock shall be outstanding, the holders of such Convertible Preferred Stock shall be entitled to receive out of any funds legally available therefor, when, as and if declared by the Board of Directors of the Company, preferential dividends in cash at the Dividend Rate on the Liquidation Preference hereunder. Such dividends shall be cumulative and begin to accrue from the Original Issue Date, whether or not declared and whether or not there shall be net profits or net assets of the Company legally available for the payment of those dividends. Each holder of the Convertible Preferred Stock shall be entitled to convert its accrued and unpaid dividends into additional shares of Convertible Preferred Stock at a price per share of $5.00 (adjusted for stock splits and the like). (b) So long as any shares of Convertible Preferred Stock shall be outstanding, (i) no dividend whatsoever shall be paid or declared, and no distribution shall be made, on account of any Common Stock, and (ii) no shares of Common Stock shall be purchased, redeemed or acquired by the Company and no funds shall be paid into or set aside or made available for a sinking fund for the purchase, redemption or acquisition thereof, other than redemptions of shares of Common Stock pursuant to contractual obligations in existence on the Original Issue Date and shares of Series A Preferred Stock and Convertible Preferred Stock. Notwithstanding the foregoing, if the Company has made all dividend payments required by Section 3(a), the Company shall not be prohibited from paying dividends on the Series A Preferred Stock. 4. Liquidation Rights of Convertible Preferred Stock. (a) In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of Convertible Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, whether such assets are capital, surplus or earnings, before any payment or declaration and setting apart for payment of any amount shall be made in respect of any shares of Common Stock or any share of Series A Preferred Stock or any other class or series of the Company's preferred stock ranking junior to the Convertible Preferred Stock with respect to the payment of dividends or distribution of assets on liquidation, dissolution or winding up of the Company, for each share of Convertible Preferred Stock, an amount equal to the Liquidation Preference plus all declared or accrued and unpaid dividends in respect of any liquidation, dissolution or winding up consummated. (b) If upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the assets to be distributed among the holders of 5 Convertible Preferred Stock shall be insufficient to permit the payment to such stockholders of the full preferential amounts aforesaid, then the entire assets of the Company to be distributed shall be distributed ratably among the holders of Convertible Preferred Stock, based on the full preferential amounts for the number of shares of Convertible Preferred Stock held by each holder. (c) After payment to the holders of Convertible Preferred Stock of the amounts set forth in Section 4(a) hereof, the entire remaining assets and funds of the Company legally available for distribution, if any, shall be distributed among the holders of any Company stock entitled to a preference over the Common Stock in accordance with the terms thereof and, thereafter, to the holders of Common Stock, in which distribution the holders of Convertible Preferred Stock and Series A Preferred Stock shall participate on an as if converted basis. (d) If there is an Organic Change of the type referred to in clauses (a) or (c) of the definition of Organic Change, then such transaction shall be deemed a liquidation for purposes of distributions to stockholders of the consideration received in such transaction; provided, however, that solely for the purposes of this Section 4(d), an Organic Change of the type referred to in such clause (c) shall not be deemed a liquidation for purposes of this Section 4(d) if, immediately after consummation of the Organic Change, the stockholders of Company (as determined immediately prior to such Organic Change) own at least 35% of the voting capital stock of the surviving entity. 5. Voting Rights. In addition to any voting rights provided by law, the holders of shares of Convertible Preferred Stock shall have the following voting rights: (a) So long as any of the Convertible Preferred Stock is outstanding, each share of Convertible Preferred Stock shall entitle the holder thereof to vote on all matters voted on by the holders of Common Stock, voting together as a single and not separate class with other shares entitled to vote at all meetings of the stockholders of the Company. With respect to any such vote, each share of Convertible Preferred Stock shall entitle the holder thereof to cast the number of votes equal to the number of votes which could be cast in such vote by a holder of the number of shares of Common Stock of the Company into which such share of Convertible Preferred Stock is convertible on the record date for such vote. (b) The affirmative vote of the Required Holders, voting together as a class, in person or by proxy, at a special or annual meeting of stockholders called for the purpose, or pursuant to a written consent of stockholders shall be necessary to (i) authorize, adopt or approve an amendment to the articles of incorporation of the Company which would alter or change in any manner the terms, powers, preferences or special rights of the shares of Convertible Preferred Stock or grant waivers thereof, or which would otherwise adversely affect the rights of the Convertible Preferred Stock, provided that no such modification or 6 amendment may, without the consent of each holder of Convertible Preferred Stock affected thereby, (A) change the redemption date of the Convertible Preferred Stock; (B) raise the Conversion Price or reduce the Liquidation Preference, Dividend Rate or Redemption Price of the Convertible Preferred Stock; (C) adversely affect any of the conversion features of the Convertible Preferred Stock set forth in Section 7 hereof; or (D) reduce the percentage of outstanding Convertible Preferred Stock necessary to modify or amend the terms thereof or to grant waivers thereof; or (ii) issue any shares of the capital stock of the Company ranking senior to, or pari passu with (either as to dividends or upon voluntary or involuntary liquidation, dissolution or winding up) the Convertible Preferred Stock, or issue any securities convertible into or exchangeable for such shares, except shares of Common Stock. This provision is not intended to limit the right of the Company to increase the number of authorized shares of Convertible Preferred Stock as may be necessary for the Company to fulfill its obligations in the event that dividends accrued on the Convertible Preferred Stock are converted into additional shares of Convertible Preferred Stock pursuant to Section 3(a) hereof. (c) The foregoing rights of holders of shares of Convertible Preferred Stock to take any actions as provided in this Section 5 may be exercised at any annual meeting of stockholders or at a special meeting of stockholders held for such purpose as hereinafter provided or at any adjournment thereof or pursuant to any written consent of stockholders. 6. Redemption of Convertible Preferred Stock. (a) Upon at least thirty (30) Business Days prior written notice to the Company by any of the holders of the Convertible Preferred Stock (the "Redemption Notice"), which written notice may not be sent for a redemption prior to fifty-four months from the Original Issue Date, the Company shall redeem, at the redemption price equal to the sum of the Liquidation Preference per share plus an amount equal to the accrued and unpaid dividends per share of Convertible Preferred Stock to be redeemed (the "Redemption Price"), the number of shares of Convertible Preferred Stock specified in such notice, up to one- third of the shares issued on the Original Issue Date if the Redemption Notice is given for a redemption on or after fifty-four months from the Original Issue Date, up to two-thirds of such amount if given for a redemption on or after sixty-six months from the Original Issue Date and up to all such shares if given for a redemption on or after seventy-eight months from the Original Issue Date and for a period of one year thereafter. If the Required Holders so elect, on or after seventy-eight months from the Original Issue Date but before ninety months from the Original Issue Date or at any time upon the occurrence of an Organic Change, the Company shall redeem all of the outstanding shares of Convertible Preferred Stock; provided, however, that solely for the purposes of this Section 6(a), an Organic Change of the type referred to in clause (c) of the definition of Organic Change shall not be deemed an Organic Change for purposes of this Section 6(a) if, immediately after consummation of the Organic 7 Change, the stockholders of Company (as determined immediately prior to such Organic Change) own at least 35% of the voting capital stock of the surviving entity. Such redemption rights shall expire ninety months from the Original Issue Date, except upon the occurrence of an Organic Change. (b) Upon receipt of a Redemption Notice, the Company shall fix a date for redemption (the "Redemption Date"), which shall be no later than thirty (30) Business Days after the date of the Redemption Notice. Within five (5) business days following receipt of any Redemption Notice, the Company shall notify each other holder of record of shares of Convertible Preferred Stock and Series A Preferred Stock which has not made a redemption request at such time, specifying the name of the holder or holders who have given the Redemption Notice and the number of shares covered by such request. Each other holder shall then have a period of fifteen (15) Business Days following the date of such notice from the Company in which to provide to the Company a Redemption Notice in order for the Company to simultaneously redeem their shares of Convertible Preferred Stock and Series A Preferred Stock which are then subject to redemption. The redemption of any shares of Series A Preferred Stock will be made pursuant to the terms set forth in the Certificate of Designations with respect thereto. Each holder of Convertible Preferred Stock who has given the Company a Redemption Notice shall surrender the certificate or certificates representing such shares of Convertible Preferred Stock to the Company, duly endorsed for transfer in the manner and at the place designated by the Company in a notice to the redeeming holders, and thereupon the Redemption Price for such shares shall be payable in cash on the Redemption Date to the person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be cancelled and retired. In the event that less than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. (c) Unless the Company defaults in the payment in full of the Redemption Price, dividends on the Convertible Preferred Stock called for redemption shall cease to accumulate on the Redemption Date, and the holders of such shares redeemed shall cease to have any further rights with respect thereto on the Redemption Date, other than to receive the Redemption Price without interest. (d) If, at the time of any redemption pursuant to this Section 6, the funds of the Company legally available for redemption of Convertible Preferred Stock are insufficient to redeem the number of shares required to be redeemed, those funds which are legally available shall be used to redeem the maximum possible number of such shares, pro rata based upon the number of shares to be redeemed. At any time thereafter when additional funds of the Company become legally available for the redemption of Convertible Preferred Stock, such funds shall immediately be used to redeem the balance of the shares of Convertible Preferred Stock which the Company has become obligated to redeem pursuant to this subparagraph, but which it has not redeemed. (e) The Company may not otherwise redeem or repurchase the Convertible Preferred Stock. 8 (f) Notwithstanding anything to the contrary herein, the rights granted under this Section 6 shall be superior to the redemption rights of the holders of any other class of stock, including the Series A Preferred Stock. The available funds of the Company shall first be used to satisfy any redemption request made by the holders of Convertible Preferred Stock pursuant to this Section 6. Any funds available after satisfaction in full of the redemption rights of the holders of the Convertible Preferred Stock shall be available for the redemption of such other classes of the Company's stock. 7. Conversion. (a) Subject to the provisions for adjustment hereinafter set forth, each share of Convertible Preferred Stock shall be convertible at any time after the earlier of (i) the ninetieth (90th) day following the Original Issue Date or (ii) the effective date of an amendment to the Articles of Incorporation of the Company increasing the number of authorized shares of Common Stock to 500,000,000 and from time to time thereafter, at the option of the holder thereof (such conversion, an "Optional Conversion") into fully paid and nonassessable shares of Common Stock. The number of shares of Common Stock deliverable upon conversion of a share of Convertible Preferred Stock, adjusted as hereinafter provided, is referred to herein as the "Conversion Ratio." The Conversion Ratio shall initially be one hundred (100), subject to adjustment from time to time pursuant to paragraph (f) of this Section 7. No fractional shares shall be issued upon the conversion of any shares of Convertible Preferred Stock. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Convertible Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of a fraction of a share of Common Stock, the Company shall, in lieu of issuing any fractional share, pay the holder otherwise entitled to such fraction a sum in cash equal to the Current Market Price of such fraction on the date of conversion. (b) (i) An Optional Conversion of the Convertible Preferred Stock may be effected by any such holder upon the surrender to the Company at the principal office of the Company of the certificate for such Convertible Preferred Stock to be converted accompanied by a written notice stating that such holder elects to convert all or a specified number of such shares (which may be fractional shares) in accordance with the provisions of this Section 7 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. Upon an Optional Conversion of any shares of Convertible Preferred Stock, dividends on the Convertible Preferred Stock so converted shall cease to accumulate, and the Company shall pay the holder thereof all accrued and unpaid dividends owing in respect of such shares so converted, which dividends shall be paid when declared by the Board, or may be converted into additional shares of Convertible Preferred Stock at the holder's election as provided in Section 3(a) above. (ii) In case the written notice specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issuance 9 of shares of Common Stock in such name or names. Other than such taxes, the Company will pay any and all issue and other taxes (other than taxes based on income) that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Convertible Preferred Stock pursuant hereto. As promptly as practicable, and in any event within five Business Days after the surrender of such certificate or certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes (or the demonstration to the satisfaction of the Company that such taxes have been paid), the Company shall deliver or cause to be delivered (i) certificates representing the number of validly issued, fully paid and nonassessable full shares of Common Stock to which the holder of shares of Convertible Preferred Stock being converted shall be entitled and (ii) if less than the full number of shares of Convertible Preferred Stock evidenced by the surrendered certificate or certificates is being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares being converted. (iii) In the case of an Optional Conversion, such conversion shall be deemed to have been made at the close of business on the date of giving the written notice referred to in the first sentence of (b)(i) above and of such surrender of the certificate or certificates representing the shares of Convertible Preferred Stock to be converted so that the rights of the holder thereof as to the shares being converted shall cease except for the right to accrued dividends as set forth in Section (b) (ii) above and the right to receive shares of Common Stock in accordance herewith, and the person entitled to receive the shares of Common Stock shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time. (c) In case any shares of Convertible Preferred Stock are to be redeemed pursuant to Section 6, all rights of conversion shall cease and terminate as to the shares of Convertible Preferred Stock to be redeemed at the close of business on the Business Day next preceding the date fixed for redemption unless the Company shall default in the payment of the Redemption Price. (d) The Conversion Ratio shall be subject to adjustment from time to time in certain instances as hereinafter provided. (e) The Company shall at all times reserve, and keep available for issuance upon the conversion of the Convertible Preferred Stock, such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all outstanding shares of Convertible Preferred Stock, and shall take all action required to increase the authorized number of shares of Common Stock if necessary to permit the conversion of all outstanding shares of Convertible Preferred Stock. 10 (f) The Conversion Ratio will be subject to adjustment from time to time as follows: (i) In case the Company shall at any time or from time to time after the Original Issue Date (A) pay a dividend, or make a distribution, on the outstanding shares of Common Stock in shares of Common Stock, (B) subdivide the outstanding shares of Common Stock, (C) combine the outstanding shares of Common Stock into a smaller number of shares or (D) issue by reclassification of the shares of Common Stock any shares of capital stock of the Company, then, and in each such case, the Conversion Ratio in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted so that the holder of any shares of Convertible Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock or other securities of the Company which such holder would have owned or have been entitled to receive after the happening of any of the events described above, had such shares of Convertible Preferred Stock been surrendered for conversion immediately prior to the happening of such event or the record date therefor, whichever is earlier. An adjustment made pursuant to this clause (i) shall become effective (x) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of such subdivision, reclassification or combination, at the close of business on the day upon which such corporate action becomes effective. No adjustment shall be made pursuant to this clause (i) in connection with any transaction to which paragraph (g) applies. (ii) In case the Company shall issue shares of Common Stock (or rights, warrants or other securities convertible into or exchangeable for shares of Common Stock) after the Original Issue Date, other than issuances covered by clause (i) above and Permitted Issuances, at a price per share (or having an exercise, conversion or exchange price per share) less than the Conversion Price as of the date of issuance of such shares or of such rights, warrants or other convertible or exchangeable securities, then, and in each such case, the Conversion Price shall be reduced (but not increased) to a price determined by dividing (A) an amount equal to the sum of (x) the number of shares of Fully Diluted Outstanding Common Stock outstanding immediately prior to such issue multiplied by the then existing Conversion Price, plus (y) the consideration, if any, received by Company upon such issue, by (B) the total number of shares of Fully Diluted Outstanding Common Stock outstanding immediately after such issue or sale. The Conversion Ratio shall be adjusted to equal the Liquidation Preference divided by the Conversion Price. For the purpose of determining the consideration received by the Company upon any such issue pursuant to clause (y) above, if the consideration received by the Company is other than cash, its value will be deemed its Fair Market Value, as determined in good faith by the Board of Directors of the Company. 11 (iii) An adjustment made pursuant to clause (ii) above shall be made on the next Business Day following the date on which any such issuance is made and shall be effective retroactively immediately after the close of business on such date. For purposes of clause (ii), the aggregate consideration received by the Company in connection with the issuance of shares of Common Stock or of rights, warrants or other securities exchangeable or convertible into shares of Common Stock shall be deemed to be equal to the sum of the aggregate offering price of all such Common Stock and such rights, warrants, or other exchangeable or convertible securities plus the minimum aggregate amount, if any, receivable upon exchange or conversion of any such exchangeable or convertible securities into shares of Common Stock. (iv) In case the Company shall at any time or from time to time after the Original Issue Date declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities or property or rights or warrants to subscribe for securities of the Company or any of its Subsidiaries by way of dividend or spinoff), on its Common Stock, other than dividends or distributions of shares of Common Stock which are referred to in clause (i) of this paragraph (f), then, and in each such case, the Conversion Ratio shall be adjusted so that the holder of each share of Convertible Preferred Stock shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (1) the applicable Conversion Ratio on the day immediately prior to the record date fixed for the determination of stockholders entitled to receive such dividend or distribution by (2) a fraction, the numerator of which shall be the Current Market Price per share of Common Stock at such record date, and the denominator of which shall be such Current Market Price per share of Common Stock less the Fair Market Value of such dividend or distribution per share of Common Stock. No adjustment shall be made pursuant to this clause (v) in connection with any transaction to which paragraph (g) applies. (v) For purposes of this paragraph (f), the number of shares of Common Stock at any time outstanding shall not include any shares of Common Stock then owned or held by or for the account of the Company or any of its subsidiaries. (vi) If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter and before the distribution to stockholders thereof legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment in the number of shares of Common Stock issuable upon exercise of the right of conversion granted by this paragraph (f) or in the Conversion Ratio then in effect shall be required by reason of the taking of such record. (vii) Anything in this paragraph (f) to the contrary notwithstanding, the Company shall not be required to give effect to any adjustment in the Conversion 12 Ratio unless and until the net effect of one or more adjustments (each of which shall be carried forward), determined as above provided, shall have resulted in a change of the Conversion Ratio by at least one-tenth of one share of Common Stock, and when the cumulative net effect of more than one adjustment so determined shall be to change the Conversion Ratio by at least one-tenth of one share of Common Stock, such change in Conversion Ratio shall thereupon be given effect. (viii) If any option or warrant expires or is cancelled without having been exercised, then, for the purposes of the adjustments set forth above, such option or warrant shall have been deemed not to have been issued and the Conversion Ratio shall be adjusted accordingly. No holder of Common Stock which was previously issued upon conversion of Convertible Preferred Stock shall have any obligation to redeem or cancel any such shares of Common Stock as a result of the operation of this paragraph (viii). (g) In case of any Organic Change (or any other merger or consolidation to which the Company is a party, which for purposes of this paragraph (g) shall be deemed an Organic Change), each share of Convertible Preferred Stock then outstanding, other than those shares to be redeemed pursuant to Section 6 hereof, shall thereafter be convertible into, in lieu of the Common Stock issuable upon such conversion prior to consummation of such Organic Change, the kind and amount of shares of stock and other securities and property receivable (including cash) upon the consummation of such Organic Change by a holder of that number of shares of Common Stock into which one share of Convertible Preferred Stock was convertible immediately prior to such Organic Change (including, on a pro rata basis, the cash, securities or property received by holders of Common Stock in any tender or exchange offer that is a step in such Organic Change). In case securities or property other than Common Stock shall be issuable or deliverable upon conversion as aforesaid, then all references in this Section 7 shall be deemed to apply, so far as appropriate and nearly as may be, to such other securities or property. (h) In case at any time or from time to time the Company shall pay any stock dividend or make any other non-cash distribution to the holders of its Common Stock, or shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or any other right, or there shall be any capital reorganization or reclassification of the Common Stock of the Company or consolidation or merger of the Company with or into another corporation, or any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, or there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company, then, in any one or more of said cases, the Company shall give at least 20 days' prior written notice to the registered holders of the Convertible Preferred Stock at the addresses of each as shown on the books of the Company as of the date on which (i) the books of the Company shall close or a record shall be taken for such stock dividend, distribution or subscription rights or (ii) such reorganization, reclassification, consolidation, merger, sale or conveyance, dissolution, liquidation or winding up shall 13 take place, as the case may be, provided that in the case of any Organic Change to which paragraph (g) applies the Company shall give at least 30 days' prior written notice as aforesaid. Such notice shall also specify the date as of which the holders of the Common Stock of record shall participate in said dividend, distribution or subscription rights or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale or conveyance or participate in such dissolution, liquidation or winding up, as the case may be. Failure to give such notice shall not invalidate any action so taken. 8. Reports as to Adjustments. Upon any adjustment of the Conversion Ratio then in effect and any increase or decrease in the number of shares of Common Stock issuable upon the operation of the conversion set forth in Section 7, then, and in each such case, the Company shall promptly deliver to each holder of the Convertible Preferred Stock, a certificate signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated and specifying the Conversion Ratio then in effect following such adjustment and the increased or decreased number of shares issuable upon the conversion granted by Section 7, and shall set forth in reasonable detail the method of calculation of each and a brief statement of the facts requiring such adjustment. Where appropriate, such notice to holders of the Convertible Preferred Stock may be given in advance. 9. Certain Covenants. Any registered holder of Convertible Preferred Stock may proceed to protect and enforce its rights and the rights of such holders by any available remedy by proceeding at law or in equity to protect and enforce any such rights, whether for the specific enforcement of any provision in this Certificate of Designation or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. 10. No Reissuance of Preferred Stock. No Convertible Preferred Stock acquired by the Company by reason of redemption, purchase, or otherwise shall be reissued, and all such shares shall be cancelled, retired and eliminated from the shares which the Company shall be authorized to issue. 11. Notices. All notices to the Company permitted hereunder shall be personally delivered or sent by first class mail, postage prepaid, addressed to its principal office located at 2859 Paces Ferry Road, Suite 1740, Atlanta, Georgia 30339, or to such other address at which its principal office is located and as to which notice thereof is similarly given to the holders of the Convertible Preferred Stock at their addresses appearing on the books of the Company. [EXECUTION SET FORTH ON THE FOLLOWING PAGE] 14 IN WITNESS WHEREOF, TRANSIT GROUP, INC. has caused this Certificate to be signed by its President and Secretary, respectively, on this 10th day of April, 2001. /s/ Philip A. Belyew ---------------------------------------- PHILIP A. BELYEW, President /s/ James G. Overley ---------------------------------------- JAMES G. OVERLEY, Secretary 15 EX-10.1 4 dex101.txt FIRST AMENDMENT TO PURCHASE AGREEMENT EXHIBIT 10.1 FIRST AMENDMENT TO PURCHASE AGREEMENT ------------------------------------- This FIRST AMENDMENT TO PURCHASE AGREEMENT (this "Amendment"), dated as of April 19, 2001, by and between Transit Group, Inc., a Florida corporation having an office at 2859 Paces Ferry Road, Suite 1740, Atlanta, Georgia 30339 (the "Company"), and GE Capital Equity Investments, Inc., a Delaware corporation having an office at 120 Long Ridge Road, Stamford, Connecticut 06927 (the "Purchaser"). W I T N E S S E T H : ------------------- WHEREAS, Company and Purchaser have previously entered into that certain Purchase Agreement dated May 13, 1999 (the "Purchase Agreement") whereby Purchaser acquired 5,000,000 shares of the Company's Series A Convertible Preferred Stock, no par value per share; WHEREAS, Company desires to issue and sell to Purchaser, and Purchaser desires to purchase from Company, upon the terms and conditions hereinafter provided, 400,000 shares of Company's Series B Convertible Preferred Stock, no par value per share, the terms, preferences and limitations of which are set forth in the Certificate of Designations attached as Exhibit "A" hereto (the ----------- "Series B Convertible Preferred Stock"); and WHEREAS, the parties hereto desire to amend the Purchase Agreement to provide for the purchase of Series B Convertible Preferred Stock as set forth herein. NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, it is agreed as follows: I. The Purchase Agreement is hereby amended to add a new Article II.B. as follows: II.B. THE PURCHASE OF SERIES B CONVERTIBLE PREFERRED STOCK 2.B.1. Purchase of Series B Convertible Preferred Stock. Subject to ------------------------------------------------ the terms and conditions set forth in this Agreement, Purchaser herewith purchases from Company, and Company herewith issues and sells to Purchaser a total of 400,000 shares of its Series B Convertible Preferred Stock (the "Series B Preferred Stock") containing the terms, preferences and limitations set forth in Exhibit "A" to this Agreement, for an aggregate ----------- purchase price of $2,000,000, payable in full simultaneously herewith. The Company has herewith delivered to Purchaser a certificate representing the Series B Convertible Preferred Stock purchased by Purchaser registered in such names and in such denominations as Purchaser has requested against delivery by Purchaser of the purchase price therefor by wire transfer of funds to the account of Company. 2.B.2. Use of Proceeds. Company shall use the proceeds of the sale --------------- of the Series B Convertible Preferred Stock to provide for its working capital, including repayment of revolving credit indebtedness. II. COVENANTS --------- Section 5.1 of the Purchase Agreement is hereby amended by adding the ----------- following subsections to the end of such Section: (l) The Company will not replace or remove its current Chief Financial Officer without Purchaser's consent and with the concurrence of T. Wayne Davis, Chairman of the Board of Directors of the Company. (m) The Company will deliver to Purchaser within twenty (20) days of the end of each calendar month (i) a profit and loss statement, (ii) a balance sheet, (iii) a cash flow statement and (iv) a report on the aging of receivables with respect to each such month. The senior management of the Company shall be available to meet with Purchaser at least once each month at a time and place reasonably acceptable to Purchaser to discuss such reports and statements. (n) The Board of Directors shall have regularly scheduled board meetings no less frequently than monthly. At least one of such scheduled meetings in every fiscal quarter shall be held in person rather than by telephone. (o) The Company shall cause its auditors to complete the audit of the Company's fiscal year ended December 31, 2000 financial statements by no later than June 15, 2001. (p) The Company will deliver to Purchaser, by April 30 of each year, audited financial statements for the fiscal year ending immediately prior to such date, certified by a nationally recognized accounting firm reasonably acceptable to Purchaser. (q) The Company shall use its best efforts to obtain the resignation of any member of the Company's Board of Directors who does not attend any two consecutive board meetings or any three board meetings in a calendar year. III. PURCHASER'S REPRESENTATIONS --------------------------- Purchaser hereby represents and warrants to the Company that the representations and warranties made to the Company in Article III of the ----------- Purchase Agreement are true and correct on the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof. Solely for purposes of this Section III, the term "Convertible Preferred Stock" as used in such representations and warranties shall mean the Series B Convertible Preferred Stock, the term "Closing Date" shall mean the date hereof, and the term "Transaction Documents" shall mean this Amendment, the Certificate of Designations for the Series B Convertible Preferred Stock, the Amendment and Joinder to Registration Rights -2- Agreement between the parties hereto and other holders of the Series B Convertible Preferred Stock of even date herewith, and the Amendment to Stockholders Agreement between the parties hereto of even date herewith. IV. COMPANY'S REPRESENTATIONS AND WARRANTIES ---------------------------------------- Except as set forth in the disclosure schedules to the Purchase Agreement and as set forth on Exhibit "B" hereto, the Company hereby represents ----------- and warrants to the Purchaser that the representations and warranties made to Purchaser in Article IV of the Purchase Agreement are true and correct on the ---------- date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof. Solely for purposes of this Section IV, the term "Convertible Preferred Stock" as used in such representations and warranties shall mean the Series B Convertible Preferred Stock, the term "Closing Date" shall mean the date hereof, and the term "Transaction Documents" shall mean this Amendment, the Certificate of Designations for the Series B Convertible Preferred Stock, the Amendment and Joinder to Registration Rights Agreement between the parties hereto and other holders of the Series B Convertible Preferred Stock of even date herewith, and the Amendment to Stockholders Agreement between the parties hereto of even date herewith. V. CONVERSION OF SERIES A CONVERTIBLE PREFERRED STOCK DIVIDENDS/PLACEMENT FEE. --------------------------------------------------------------------------- Company and Purchaser hereby acknowledge that currently payable dividends accrued through January 31, 2001 and due to Purchaser in an amount equal to $1.875 million shall be converted into 375,000 shares of the Company's Series B Convertible Preferred Stock. Company and Purchaser hereby acknowledge that simultaneously with the closing of the purchase and sale of the 400,000 shares of Series B Convertible Preferred Stock as contemplated by section 2.B.1 above, the Company will issue to the Purchaser 228,571 shares of Series B Convertible Preferred Stock as a placement fee for no additional cash consideration. VI. SECURITIES LAW MATTERS ---------------------- Purchaser acknowledges receipt of the Company's Confidential Offering Memorandum dated April 6, 2001, as amended. Each certificate representing the Series B Convertible Preferred Stock shall bear a legend substantially in the following form: "THE SERIES B CONVERTIBLE PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED BY THE HOLDER FOR ITS OWN ACCOUNT, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO THE DISTRIBUTION OF SUCH SERIES B CONVERTIBLE PREFERRED STOCK. THE SHARES OF SERIES B CONVERTIBLE PREFERRED STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION THEREFROM." -3- VII. SURVIVAL; INDEMNIFICATION ------------------------- 7.1. Survival. All of the representations and warranties made by any -------- party in this Amendment shall survive the purchase and sale of the Series B Convertible Preferred Stock until the second anniversary of the date hereof; provided, however, that (i) the representations and warranties of the Company in Section IV hereof as it relates to Section 4.10 of the Purchase Agreement shall survive until the fourth anniversary of the date hereof and (ii) the representations and warranties of Company in Section IV hereof as it relates to Sections 4.13 and 4.19 of the Purchase Agreement shall survive for their respective statutes of limitations. This provision does not amend or modify the survival periods stated in Section 8.1 of the Purchase Agreement with respect to the representation and warranties of the parties made thereunder. 7.2 Indemnification. Company agrees to indemnify and hold harmless --------------- Purchaser and its Affiliates and their respective officers, directors and employees (collectively, the "Indemnified Parties") from and against any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of any kind, other than any special or consequential damages ("Losses"), which may be imposed upon, incurred by or asserted against such Purchaser or such other indemnified Persons in any manner relating to or arising out of any untrue representation, breach of warranty or failure to perform any covenants or agreement by Company contained herein or in any certificate or document delivered pursuant hereto or arising out of any Environmental Law applicable to Company or its Subsidiaries or in connection with any third-party claim otherwise relating to or arising out of the transactions contemplated hereby; provided that Company shall have no -------- obligation to an Indemnified Party hereunder with respect to liabilities arising from the gross negligence or willful misconduct of that Indemnified Party as determined by a court of competent jurisdiction. Each Indemnified Party shall, as soon as practicable after receipt of notice of a claim or action against such Indemnified Party in respect of which indemnity may be sought hereunder, notify Company in writing of the claim or action (stating in reasonable detail the facts giving rise to such action); provided that the failure to notify Company -------- shall not relieve Company from any liability which it may have to an Indemnified Party except to the extent that Company was prejudiced by such failure, and in no event shall such failure relieve Company from any other liability which it may have to such Indemnified Party. If any such claim or action shall be brought against an Indemnified Party, and it shall have notified Company, Company shall be entitled to participate therein, and, to the extent that it wishes, to assume the defense therein, with counsel reasonably satisfactory to the Indemnified Party. After notice to the Indemnified Party from Company of its election to assume the defense of any claim or action, Company shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof. Company may not without the prior written consent of the Indemnified Party, not to be unreasonably withheld, agree to (i) any settlement of any claim or action indemnifiable hereunder, other than a settlement solely for monetary damages for which Company shall be responsible hereunder or (ii) any remedy or relief which will be applied against the -4- Indemnified Party. In any action hereunder as to which Company has assumed the defense thereof with counsel reasonably satisfactory to the Indemnified Party, the Indemnified Party shall continue to be entitled to participate in the defense thereof, with counsel of its own choice, but Company shall not be obligated hereunder to reimburse the Indemnified Party for the costs thereof. Company shall only be liable to the Indemnified Parties for any Losses resulting from a breach of representation or warranty (i) if the claim therefor is asserted in writing prior to the end of the applicable survival period as set forth in Section 7.1 hereof; (ii) which exceed an aggregate amount equal to $50,000 and only for such Losses in excess thereof, and (iii) up to an aggregate amount of $1,200,000. VIII. EXPENSES -------- The Company agrees to reimburse Purchaser for all reasonable out-of- pocket expenses of Purchaser (including, without limitation, the reasonable fees and expenses of its counsel) not exceeding $35,000 in connection with the execution of this Amendment, the issuance of the Series B Convertible Preferred Stock and the transactions contemplated hereby. IX. MISCELLANEOUS ------------- The provisions of Article X of the Purchase Agreement shall apply equally to this Amendment, and are incorporated herein by reference. This Amendment and the exhibits hereto, and the Purchase Agreement amended hereby, represent the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supercede all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, of the parties with respect to the subject matter hereof. Except as specifically amended herein, the Purchase Agreement shall remain in full force and effect. Following the date hereof, any references made hereafter to the Purchase Agreement shall be deemed to mean the Purchase Agreement as amended hereby. IN WITNESS WHEREOF, Company and Purchaser have executed this Amendment as of the day and year first above written. TRANSIT GROUP, INC. By: /s/ Philip A. Belyew ------------------------------------------- Name: Philip A. Belyew Title: Chief Executive Officer -5- GE CAPITAL EQUITY INVESTMENTS, INC. By: /s/ Patrick H. Dowling ------------------------------------------- Name: Patrick H. Dowling Title: Managing Director -6- EX-10.2 5 dex102.txt AMENDMENT AND JOINDER TO AMENDED/RESTATED AGMT EXHIBIT 10.2 AMENDMENT and JOINDER TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT THIS AGREEMENT is made as of the 19th day of April, 2001 by and among Transit Group, Inc., a Florida corporation (the "Company"), the holders of Series A Preferred Stock, no par value per share, of the Company (the "Series A Holders") and all of the holders of Series B Preferred Stock, no par value per share, of the Company, (the "Series B Holders" and together with the Series A Holders, the "Stockholders"). WHEREAS, the Company sold 5,000,000 shares of its Series A Preferred Stock, no par value per share ("Series A Preferred"), to the Series A Holders pursuant to the terms of that certain Stock Purchase Agreement by and between the Company and the Series A Holders dated May 13, 1999 (the "Series A Agreement"); and WHEREAS, the Company desires to sell up to 1,870,000 shares of its Series B Preferred Stock (the "Series B Preferred") to the Series B Holders, and the Series B Holders desire to purchase the Series B Preferred, and the Company desires to issue up to 1,100,000 shares of Series B Preferred as a placement or deferral fee in connection therewith; and WHEREAS, the Series A Holders and the Company are parties to that certain Registration Rights Agreement by and among the Company and the Series A Holder dated May 13, 1999, attached hereto as Exhibit A (the "Registration Rights Agreement"); and WHEREAS, the parties to the Registration Rights Agreement desire for certain of the terms and conditions of the Registration Rights Agreement to apply to the Series B Preferred, subject to the amendments set forth herein. NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree to amend the Registration Rights Agreement as follows: 1. Upon the issuance of the Series B Preferred to the Series B Holders, the term "Convertible Preferred Stock" shall be amended to include the Company's Series B Preferred Stock, no par value per share. 2. Upon issuance of the Series B Preferred to the Series B Holders, the definition of "Registrable Securities" shall be deleted and replaced with the following: "Registrable Securities" shall mean the shares of Common Stock from time to time issued or issuable to (x) the holders of Convertible Preferred Stock (i) upon the conversion thereof or (ii) hereafter acquired by a Holder as a dividend or other distribution with respect to, or in exchange or replacement of, the securities referred to in subsection (i) or which it hereafter obtains the right to acquire pursuant to the terms of the Stockholders Agreement or otherwise, and (y) General Electric Capital Corporation upon exercise of its option to purchase Common Stock pursuant to that certain Forebearance Restructuring Agreement dated on or about the date hereof. 1 3. The following provision shall be added to the end of Section 2: "The Company hereby agrees to use its best efforts to file a Registration Statement for the Common Stock issuable upon conversion of the Series B Preferred with the Commission within ninety (90) days of the date hereof and to cause such Registration Statement to become effective within ninety (90) days of such filing date, to remain effective until April 19, 2002. The Company may include in the registration under this Section 2: (i) any authorized but unissued shares of Common Stock for sale by the Company; (ii) any shares of its Common Stock held by employees, consultants, directors or other advisers of the Company; and (iii) any shares of its Common Stock held by shareholders having the right to require such registration, provided that in the event that such offering is underwritten and the underwriters advise the Company that a reduction in the number of offered shares is necessary to successfully market such offering, then the shares of stock offered by the Company and any other selling shareholder shall be eliminated before reducing the number of shares of Series B Preferred included therein." 3. The parties hereto expressly acknowledge and agree that this Agreement shall be for the benefit of all Holders irrespective of whether they have executed a counterpart signature page hereto. 4. Except as expressly set forth in this Amendment, the Registration Rights Agreement is ratified and confirmed, shall remain in full force and effect and shall not be altered, amended or modified. 5. This Agreement may be executed in counterparts, all of which taken together shall constitute one in the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the date first written above. TRANSIT GROUP, INC. By: /s/ Philip A. Belyew ---------------------------------------------- Philip A. Belyew, CEO GE CAPITAL EQUITY INVESTMENTS, INC. By: /s/ Patrick H. Dowling ---------------------------------------------- Patrick H. Dowling, Managing Director /s/ T. Wayne Davis ---------------------------------------------------- T. Wayne Davis 2 The ECD Trust /s/ T. Wayne Davis ------------------------------------------------ By: T. Wayne Davis, Trustee GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Dennis Bickerstaff -------------------------------------------- Name: Dennis Bickerstaff Title: Managing Director / Senior Risk Manager 3 EX-10.3 6 dex103.txt AMENDMENT TO STOCKHOLDERS AGREEMENT EXHIBIT 10.3 AMENDMENT TO STOCKHOLDERS AGREEMENT THIS AGREEMENT is made as of the 19th day of April, 2001 by and among Transit Group, Inc., a Florida corporation (the "Company"), those holders of Series B Preferred Stock, no par value per share, of the Company (the "Series B Stock") and common stock of the Company set forth on Annex I hereto (individually, a "Stockholder and collectively, the "Stockholders"). WHEREAS, the Company and the Stockholders entered into that certain Stockholders Agreement dated as of May 13, 1999 (the "Stockholders Agreement") in connection with the sale by the Company of 5,000,000 shares of its Series A Preferred Stock, no par value per share ("Series A Stock"), to GE Capital Equity Investments, Inc. (the "Purchaser") pursuant to the terms of that certain Stock Purchase Agreement by and between the Company and the Purchaser dated May 13, 1999 (the "Series A Agreement"); and WHEREAS, the Company has issued to General Electric Capital Corporation an option to purchase shares of the Company's Common Stock (the "Option"); and WHEREAS, the parties to the Stockholders Agreement desire for certain of the terms and conditions of the Stockholders Agreement to apply to the Series B Stock and the common stock underlying the Option, subject to the amendments set forth herein. NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree to amend the Stockholders Agreement as follows: 1. Upon the consummation of the sale of the Series B Stock to the Stockholders, the definition of "Convertible Preferred Stock" shall mean the Series A Convertible Preferred Stock, no par value, of the Company and the Series B Convertible Preferred Stock, no par value, of the Company. 2. Upon the issuance of the Option, the term "Stock" shall be deemed to include shares of Common Stock issuable upon exercise of the Option in accordance with the terms thereof. 3. Except as expressly set forth in this Amendment, the Stockholders Agreement is ratified and confirmed, shall remain in full force and effect and shall not be altered, amended or modified. 4. This Agreement may be executed in counterparts, all of which taken together shall constitute one in the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the date first written above. TRANSIT GROUP, INC. By: /s/ Philip A. Belyew ----------------------------------------- Philip A. Belyew, CEO GE CAPITAL EQUITY INVESTMENTS, INC. By: /s/ Patrick H. Dowling ----------------------------------------- Patrick H. Dowling, Managing Director /s/ T. Wayne Davis --------------------------------------------- T. WAYNE DAVIS /s/ Philip A. Belyew --------------------------------------------- PHILIP A. BELYEW GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Dennis Bickerstaff ------------------------------------------ Name: Dennis Bickerstaff Title: Managing Director / Senior Risk Manager 2 EX-10.4 7 dex104.txt STOCK PURCHASE AGREEMENT EXHIBIT 10.4 STOCK PURCHASE AGREEMENT ------------------------ THIS STOCK PURCHASE AGREEMENT ("Agreement"), effective as of this 19th day of April, 2001, is entered into by, between and among TRANSIT GROUP, INC., a Florida corporation, (hereinafter referred to as the "Company") and CYNTHIA F. TURNER, a resident of the State of Alabama, PHILIP R. FULMER, TIMOTHY A. FULMER, BARBARA FULMER and CARROLL A. FULMER, each a resident of the State of Florida (hereinafter referred to collectively as "Sellers", or individually as "Seller") and T. WAYNE DAVIS, a Florida resident ("Davis"). WHEREAS, Sellers are the owners of record of 726,609 shares of the common capital stock of the Company (the "Stock") which are subject to purchase by the Company and/or Davis pursuant to Section 2.9 of that certain Agreement and Plan of Reorganization dated August 15, 1997 (the "Reorganization Agreement) and that certain Stock Purchase Agreement dated August 29, 1997 (the "Stock Purchase Agreement"); WHEREAS, the Sellers have exercised their rights to require the Company and Davis to purchase the Stock, and the Sellers, the Company and Davis have reached a further agreement with respect to the terms thereof, all on the terms and conditions hereinafter set forth. NOW, THEREFORE, for and in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Sale and Purchase of Stock. Subject to the terms and conditions hereof, each of the Sellers herewith irrevocably agrees to sell to the Company, and the Company herewith irrevocably agrees to purchase from the Sellers, the Stock owned by Sellers (the "Purchased Shares") for the consideration set forth herein and in accordance with allocations set forth in Schedule A attached hereto. (The obligations of the parties hereto are not contingent or dependent upon the financial condition of the Company, whether the Company is in bankruptcy or reorganization (under any law),whether the Company is in existence or not as a corporation or other entity (active or otherwise), nor are the obligations contingent or dependent in any way upon the current value or future value of the stock being transferred.) The aggregate purchase price for the Purchased Shares shall be the amount equal to Two Million Six Hundred Fifteen Thousand Seven Hundred Ninety Four dollars ($2,615,794.00) (the "Purchase Price"). The Purchase Price shall be paid in thirty monthly installments, as set forth below, and shall bear interest as provided in Section 3 hereof. Upon receipt of each payment of principal and interest each month from the Company as set forth below in Schedule A, each of the Sellers shall deliver to the Company for cancellation the number of Purchased Shares set forth beside such Seller's name on Schedule A hereto. Carroll Anthony Fulmer and the Company hereby acknowledge that Carroll Anthony Fulmer has simultaneously herewith returned 138,889 shares of Stock to the Company in consideration of the Company's forgiveness of all principal and interest accrued under his Promissory Note to the Company in the original principal amount of $500,000 and therefore, the obligations of the Company and Davis, and the Purchase Price stated above, have been reduced by such amount, and the Company and Davis have no further obligations to Carroll Anthony Fulmer with respect to the put rights provided for in the Reorganization Agreement and the Stock Purchase Agreement. The Parties further acknowledge that the allocations, calculations and provisions hereof differ from and thereby supersede the provisions of the Reorganization Agreement and Stock Purchase Agreement, and agree that upon payment in full of the Purchase Price and interest thereon in the manner set forth herein, any and all rights of the Sellers to require either Davis or the Company to redeem any of their shares of common stock of the Company will be satisfied in full and thereby terminate. 2. Payment of Purchase Price. The Purchase Price and interest accrued thereon shall be paid in monthly installments at such times and in such amounts as follows: On April 15, 2001 and on the 15th day of each month thereafter until and including August 15, 2003, the Company shall pay to Sellers an aggregate amount equal to One Hundred Thousand dollars ($100,000.00). On September 15, 2003, the Company shall pay to Sellers an aggregate amount equal to Eighty Three Thousand Four Hundred Eighty dollars and Eighty Six cents ($83,480.86). Such payments shall be made in advance, rather than in arrears, and allocated as set forth on Schedule A hereto. The Company shall have the right to prepay any or all installments in whole or in part at any time without premium or penalty. Any prepayment in part shall reduce the amount of the next installment due hereunder. The Company shall be obligated to prepay the Purchase Price to the extent of any net proceeds received by the Company in any stock offering by the Company subsequent to the date hereof. 3. Interest. Interest shall accrue on the outstanding Purchase Price hereof, at a constant rate per annum equal to ten and one-half percent (10.5%). Said interest payments shall be paid monthly together with the principal amount of the Purchase Price in the manner and amounts set forth in Section 2 above. 4. Partial Release of Davis Obligation. Each of the Sellers hereby agrees that notwithstanding anything to the contrary in the Reorganization Agreement and Stock Purchase Agreement, on and after the date hereof, the obligations of Davis to repurchase the Stock from the Sellers thereunder (i) shall be limited to $1,800,000 and shall be further reduced by the principal amount of each installment payment by the Company of the Purchase Price after such payments have reduced the Purchase Price to $1,800,000 and (ii) Davis is hereby unconditionally released from any obligation whatsoever on any amounts above $1,800,000 and on such reductions. Except for the releases and reductions (which shall also be for the benefit of Davis' affiliates) provided for in this paragraph 4, nothing in this Agreement shall alter Davis' put obligations under the Reorganization Agreement and Stock Purchase Agreement (it being understood that Davis is not responsible for the obligations of the Company hereunder). So long as the Company is current in its payment obligations provided for herein, the Sellers agree not to attempt to enforce the put obligations of Davis under the Reorganization Agreement and the Stock Purchase Agreement. Notwithstanding anything herein to the contrary, the put obligation 2 of Davis under the Reorganization Agreement and the Stock Purchase Agreement will not expire as provided therein before the latest to occur of either (i) the receipt by the Sellers from the Company, Davis or upon any other sale of shares subject to the provisions of Section 2.9 of the Reorganization Agreement of an aggregate principal amount of $1,800,000, or (ii) the original expiration date provided for in Section 2.9 of the Reorganization Agreement, except that such put obligation shall expire on or prior to August 29, 2004. 5. Representations and Warranties of Sellers. Each of the Sellers represents and warrants to the Company at the time of the execution of this Agreement and at the time of the transfer of the Purchased Shares (the "Closing") as follows: (a) Each share certificate for the Purchased Shares is and will be delivered by Sellers to the Company, properly endorsed by Seller in blank or accompanied by a duly executed stock power of attorney, in either case with signature guaranteed, for transfer to the Company on the books and records of the Company. (b) The Sellers have the power and authority to transfer the Purchased Shares, there are no restrictions on such transfer, and the Sellers are the owners of record of the Purchased Shares and have good and marketable title to the Purchased Shares, free and clear of any and all liens, pledges, hypothecations or any other encumbrances whatsoever. (c) No consent or approval of any person, entity, or government or regulatory authority is necessary for the consummation of the transaction described in this Agreement. (d) The amount of gross proceeds from the sale of any shares originally subject to the provisions of Section 2.9 of the Reorganization Agreement by any Seller (or a trust for the benefit of the children of such Seller) has been applied to reduce the amount of the obligation under the Reorganization Agreement or Stock Purchase Agreement to the extent required by the third paragraph of Section 2.9 of the Reorganization Agreement. Each of the Sellers (other than Carroll Anthony Fulmer) agree that the number of shares which any Seller (other than Carroll Anthony Fulmer) may require Davis or the Company to redeem shall be reduced by the dollar amount of the gross proceeds resulting from any sale by such Seller (including sales by a trust for the benefit of the children of such Seller, but excluding sales of the Company's Series B Convertible Preferred Stock and the common stock issuable upon the conversion thereof) of shares of the Company's common stock at any time prior to the expiration of the Company's and Davis' put obligation. 6. Indemnification. (a) The Sellers shall jointly and severally indemnify and hold the Company harmless against any and all claims, demands, actions, investigations, costs (including reasonable attorneys' fees), judgments and executions against the Company arising from: (i) any breach of Sellers' representations and warranties hereunder; (ii) any breach by Sellers of this Agreement; and/or (iii) the enforcement by the Company of this indemnity. 3 (b) The Sellers shall jointly and severally indemnify and hold Davis harmless against any and all claims, demands, actions, investigations, costs (but not including any attorneys' fees), judgments and executions against Davis arising from: (i) any breach of Sellers' representations and warranties hereunder; and/or (ii) the enforcement by Davis of this indemnity. Nothing in this Section 6(b) shall require the Sellers to indemnify Davis against attorneys' fees. 7. Covenants of the Company. (a) Simultaneously with the execution of this Agreement, in consideration of the mutual covenants contained herein, the Company agrees to issue 300,000 shares of its Series B Convertible Preferred Stock to the Sellers, with each Seller receiving 60,000 of said shares. (b) The Company shall not place, nor permit its subsidiaries to place, any additional mortgages other than those outstanding on the date hereof or in connection with the refinancing of the indebtedness secured by such existing liens on the real property owned by Transit Group Transportation, LLC in Groveland, Florida which was acquired by the Company in connection with the Reorganization Agreement. (c) The Company and Sellers shall amend the Employment Agreements by and between the Company and the Sellers, as appropriate, so that each such Employment Agreement shall have substantially the same terms and conditions, including the duration thereof, as the Employment Agreements between the Company and Carroll A. Fulmer and Philip R. Fulmer. (d) Until payment in full of the Purchase Price, and provided that the Company's Huntsville, Alabama facility remains open and meets the EBITDAR expectations of the Company's management, the employment of Sara Hunter and Jeff Hunter shall not be terminated by the Company other than for cause. (e) The Company shall make the following payments in a timely manner: i) The payments to Carroll Fulmer Management, Inc. including payments for the generator and the phone system used at the Company's Groveland, Florida facility; ii) Rent or lease payments to PACT Leasing in California, to Wisconsin Pacific and to Cynthia F. Turner in Madison, Alabama; iii) Payroll obligation of the Carroll Fulmer Group division of Transit Group Transportation, LLC as to the Sellers; iv) Payments under the promissory notes made by the Company and held by Cynthia F. Turner, Philip R. Fulmer, Timothy A. Fulmer, Carroll A. Fulmer and Barbara Fulmer; 4 v) Reimbursement of all expenses, including automobile expenses, to the Sellers as required under their respective employment agreements with Transit Group Transportation, LLC; vi) Premiums on certain life insurance policies on the lives of Cynthia F. Turner, Philip R. Fulmer, Timothy A. Fulmer and Carroll A. Fulmer; and vii) Payment of amounts deducted from the salaries of Cynthia F. Turner, Philip R. Fulmer, Timothy A. Fulmer and Carroll A. Fulmer to the Barbara Fulmer Irrevocable Trust. 8. Further Assurances. The Sellers from time to time after the date hereof, at the request of the Company or Davis and without further consideration, shall promptly take such actions as may be required to remove any and all liens on and encumbrances to the title of the Purchased Shares which arose prior to the transfer thereof pursuant to this Agreement, and to otherwise more effectively transfer to the Company or Davis of good and marketable title to the Purchased Shares, free and clear of any and all liens, claims and encumbrances. 9. Miscellaneous. This Agreement contains the entire understanding between the parties hereto with respect to the matters contained herein, the purpose of which is to implement and amend the provisions of Section 2.9 of the Reorganization Agreement, which shall remain in full force and effect and unchanged, except as expressly hereby modified. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida. Sections 4, 5, 6 and 7 shall survive the purchase and sale of the Purchased Shares as set forth herein. This Agreement shall be binding upon each of the parties hereto and their respective successors, heirs and assigns. The captions are for convenience only and shall not affect interpretation herein. 10. Notices. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to other parties): Sellers: Philip R. Fulmer 8000 Cherry Lake Road Groveland, Florida 34736 Timothy A. Fulmer 13045 Sugar Bluff Road Clermont, Florida 34711 5 Barbara Fulmer 11050 Autumn Lane Clermont, Florida 34711 Carroll A. Fulmer 11610 Osprey Pointe Clermont, Florida 34711 Cynthia F. Turner 12928 Lookingbill Lane Athens, Alabama 35611 With a copy to: Richard A. Wagner, Esquire 304 E Colonial Drive Orlando, Florida 32801 Facsimile (407) 422-2870 Davis: T. Wayne Davis 1910 San Marco Boulevard Jacksonville, Florida 32207 Facsimile (904) 398-9533 With a Copy to: Duncan Mitchell, Esquire LeBoeuf, Lamb, Greene & MacRae, LLP 50 North Laura Street, Suite 2800 Jacksonville, Florida 32202-3650 Facsimile (904) 353-1673 Company: Transit Group, Inc. Overlook III Suite 1740 2859 Paces Ferry Road Atlanta, Georgia 30339 With a copy to: G. Donald Johnson, Esquire Womble, Carlyle, Sandridge & Rice, PLLC One Atlantic Center, Suite 3500 1201 W. Peachtree Street Atlanta, Georgia 30309 Facsimile (404) 888-7490 6 11. Attorney's Fees. In the event that any legal action is instituted by the Company against the Seller or the Seller against the Company to enforce the terms of this Agreement, the prevailing party shall be entitled to its attorney's fees, costs and expenses incurred in connection with said action, which shall include reasonable attorneys' fees through the appellate process. 12. Default. In the event any installment payment or interest payment pursuant to paragraphs two (2) and three (3) hereof or any other payment pursuant to paragraph 7(e) is not made within ten (10) days of the due date thereof, and such default shall continue for five (5) days after receipt by the Company of Notice of Default given pursuant to paragraph ten (10) hereof, then all remaining unpaid amounts due pursuant to paragraphs two (2) and three (3) hereof shall be accelerated and shall become immediately due and payable in full. 13. Change of Control of the Company. In the event the Company completes (A) any sale, lease, exchange or other transfer of all or substantially all of the property and assets of the Company, (B) any merger or consolidation which the holders of the voting securities of the Company immediately prior thereto own less than a majority of the outstanding voting securities of the surviving entity immediately following such transaction or 100% of the issued and outstanding stock of the Company is sold in a transaction or series of transactions, then all remaining unpaid amounts due pursuant to paragraphs 2 and 3 hereof shall be accelerated and shall become immediately due and payable. [SIGNATURES ON FOLLOWING PAGE] 7 IN WITNESS WHEREOF, the parties have hereunto affixed their hands and seals as of the date first above written. COMPANY: TRANSIT GROUP, INC. By: /s/ Philip A. Belyew -------------------------------------------- Philip A. Belyew, President DAVIS: /s/ T. Wayne Davis ----------------------------------------------- T. Wayne Davis SELLERS: /s/ Cynthia F. Turner ----------------------------------------------- CYNTHIA F. TURNER /s/ Philip R. Fulmer ----------------------------------------------- PHILIP R. FULMER /s/ Timothy A. Fulmer ----------------------------------------------- TIMOTHY A. FULMER /s/ Barbara Fulmer ----------------------------------------------- BARBARA FULMER /s/ Carroll A. Fulmer ----------------------------------------------- CARROLL A. FULMER 8 EX-10.5 8 dex105.txt AMENDED AND RESTATED CREDIT AGREEMENT EXHIBIT 10.5 AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 19, 2001 among TRANSIT GROUP, INC., VARIOUS FINANCIAL INSTITUTIONS and BANK ONE, NA, as Agent TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS................................................................................ 1 ARTICLE II THE LOANS.................................................................................. 13 2.1. Making of Loans............................................................. 13 2.2. Required Payments........................................................... 13 2.3. Optional Principal Prepayments.............................................. 14 2.4. Interest Rate; Rate Applicable After Default................................ 14 2.5. Method of Payment........................................................... 14 2.6. Noteless Agreement; Evidence of Indebtedness................................ 14 2.7. Interest Payment Dates; Interest and Fee Basis.............................. 15 2.8. Notification of Prepayments................................................. 15 2.9. Lending Installations....................................................... 15 2.10. Non-Receipt of Funds by the Agent........................................... 15 ARTICLE III TAXES...................................................................................... 16 3.1. Taxes....................................................................... 16 3.2. Lender Statements; Survival of Indemnity.................................... 18 ARTICLE IV CONDITIONS PRECEDENT....................................................................... 18 4.1. Documents................................................................... 18 4.2. Existing LCs................................................................ 20 ARTICLE V REPRESENTATIONS AND WARRANTIES............................................................. 20 5.1. Existence and Standing...................................................... 20 5.2. Authorization and Validity.................................................. 20 5.3. No Conflict; Government Consent............................................. 20 5.4. Financial Statements........................................................ 21 5.5. Material Adverse Change..................................................... 21 5.6. Taxes....................................................................... 21 5.7. Litigation and Contingent Obligations....................................... 21 5.8. Subsidiaries................................................................ 21 5.9. ERISA....................................................................... 21 5.10. Accuracy of Information..................................................... 22
5.11. Regulation U................................................................ 22 5.12. Material Agreements......................................................... 22 5.13. Compliance With Laws........................................................ 22 5.14. Ownership of Properties..................................................... 22 5.15. Plan Assets; Prohibited Transactions........................................ 22 5.16. Environmental Matters....................................................... 23 5.17. Investment Company Act...................................................... 23 5.18. Public Utility Holding Company Act.......................................... 23 5.19. Post-Retirement Benefits.................................................... 23 ARTICLE VI COVENANTS.................................................................................. 23 6.1. Financial Reporting........................................................ 23 6.2. Notice of Default.......................................................... 25 6.3. Conduct of Business........................................................ 25 6.4. Taxes...................................................................... 25 6.5. Insurance.................................................................. 25 6.6. Compliance with Laws....................................................... 26 6.7. Maintenance of Properties.................................................. 26 6.8. Inspection; Collateral Audit............................................... 26 6.9. Restricted Payments........................................................ 26 6.10. Indebtedness............................................................... 26 6.11. Merger..................................................................... 27 6.12. Sale of Assets............................................................. 27 6.13. Investments and Acquisitions............................................... 27 6.14. Liens...................................................................... 28 6.15. Affiliates................................................................. 28 6.16. No Amendment to GECC Convertible Preferred Stock; No Issuance of Additional Redeemable Stock................................................ 29 6.17. Sale of Accounts........................................................... 29 6.18. Sale and Leaseback Transactions and other Off-Balance Sheet Liabilities.... 29 6.19. Contingent Obligations..................................................... 29 6.20. Letters of Credit.......................................................... 29 6.21. Prepayment of Other Debt................................................... 29 6.22. Consolidated Capital Expenditures.......................................... 29 6.23. Additional Subsidiaries; Further Assurances................................ 29 6.24. Release and Covenant Not to Sue............................................ 30 ARTICLE VII DEFAULTS................................................................................... 30 ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES............................................. 33
8.1. Acceleration................................................................ 33 8.2. Amendments.................................................................. 34 8.3. Preservation of Rights...................................................... 34 ARTICLE IX GENERAL PROVISIONS......................................................................... 35 9.1. Survival of Representations.................................................. 35 9.2. Governmental Regulation...................................................... 35 9.3. Headings..................................................................... 35 9.4. Entire Agreement............................................................. 35 9.5. Several Obligations; Benefits of this Agreement.............................. 35 9.6. Expenses; Indemnification.................................................... 35 9.7. Numbers of Documents......................................................... 36 9.8. Accounting................................................................... 36 9.9. Severability of Provisions................................................... 36 9.10. Nonliability of Lenders..................................................... 36 9.11. Confidentiality............................................................. 36 9.12. Nonreliance................................................................. 37 9.13. Disclosure.................................................................. 37 ARTICLE X THE AGENT.................................................................................. 37 10.1. Appointment; Nature of Relationship......................................... 37 10.2. Powers...................................................................... 37 10.3. General Immunity............................................................ 37 10.4. No Responsibility for Loans, Recitals, etc.................................. 38 10.5. Action on Instructions of Lenders........................................... 38 10.6. Employment of Agents and Counsel............................................ 38 10.7. Reliance on Documents; Counsel.............................................. 38 10.8. Agent's Reimbursement and Indemnification................................... 39 10.9. Notice of Default........................................................... 39 10.10. Rights as a Lender......................................................... 39 10.11. Lender Credit Decision..................................................... 39 10.12. Successor Agent............................................................ 40 10.13. Delegation to Affiliates................................................... 40 10.14. Execution of Collateral Documents.......................................... 40 10.15. Collateral Releases........................................................ 41 ARTICLE XI SETOFF; RATABLE PAYMENTS.................................................................... 41 11.1. Setoff...................................................................... 41 11.2. Ratable Payments............................................................ 41
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS.......................................... 41 12.1. Successors and Assigns..................................................... 41 12.2. Participations............................................................. 42 12.2.1 Permitted Participants; Effect..................................... 42 12.2.2 Voting Rights...................................................... 42 12.2.3 Benefit of Setoff.................................................. 43 12.3. Assignments................................................................ 43 12.3.1 Permitted Assignments.............................................. 43 12.3.2 Effect; Effective Date............................................. 43 12.4. Dissemination of Information............................................... 44 12.5. Tax Treatment.............................................................. 44 ARTICLE XIII NOTICES.................................................................................... 44 13.1. Notices.................................................................... 44 13.2. Change of Address.......................................................... 44 ARTICLE XIV COUNTERPARTS............................................................................... 45 ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL............................... 45 15.1. CHOICE OF LAW.............................................................. 45 15.2. CONSENT TO JURISDICTION.................................................... 45 15.3. WAIVER OF JURY TRIAL....................................................... 45 15.4. WAIVER OF AND AGREEMENT TO TERMINATE AUTOMATIC STAY........................ 46
SCHEDULES Schedule 1 Guarantors and other Investments Schedule 2 Liens and Indebtedness Schedule 2.1 Commitments of the Lenders Schedule 2.2 Repayment of Term A Loans Schedule 3 Series B Preferred Stockholders Schedule 5.7 Litigation and Contingent Obligations Schedule 5.12 Material Adverse Effect EXHIBITS - -------- EXHIBIT A Form of Opinion of Counsel EXHIBIT B Form of Compliance Certificate EXHIBIT C Form of Assignment Agreement EXHIBIT D Form of Note AMENDED AND RESTATED CREDIT AGREEMENT This Agreement, dated as of April 19, 2001, is among Transit Group, Inc., a Florida corporation (the "Borrower"), the Lenders (as defined below) and Bank -------- One, NA, a national banking association having its principal office in Chicago, Illinois, as Agent. WHEREAS, the Borrower, the Lenders and Bank One, NA, as agent, have entered into an Acquisition Credit Agreement dated as of October 25, 1999 (as amended, the "Existing Acquisition Credit Agreement") and a Credit Agreement dated as of ------------------------------------- October 25, 1999 (as amended, the "Existing Working Capital Credit Agreement"; ----------------------------------------- together with the Existing Acquisition Credit Agreement, the "Existing -------- Agreements"); - ---------- WHEREAS, the Borrower will issue preferred stock and will enter into a working capital credit facility on the date hereof, and a portion of the proceeds of such issuance and/or such facility will be applied to pay loans under the Existing Agreements; WHEREAS, the parties hereto have agreed to amend and restate the Existing Agreements so as to, among other things, (a) convert the outstanding loans under the Existing Agreements into term loans under this Agreement and (b) amend certain covenants and various other provisions of the Existing Agreements; and WHEREAS, the parties hereto intend that this Agreement and the documents executed in connection herewith not effect a novation of the obligations of the Borrower under the Existing Agreements, but merely a restatement of and, where applicable, an amendment to the terms governing such obligations; NOW, THEREFORE, in consideration of the mutual agreements contained herein, the Existing Agreements are amended and restated in their entirety, and the parties hereto agree as follows: ARTICLE I DEFINITIONS ----------- As used in this Agreement: "Acquisition" means any transaction, or any series of related transactions, consummated after the date hereof, by which the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or limited liability company, or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding ownership interests of a partnership or limited liability company. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise. "Agent" means Bank One in its capacity as contractual representative of the Lenders pursuant to Article X, and not in its individual capacity as a Lender, and any successor Agent appointed pursuant to Article X. "Agreement" means this amended and restated credit agreement, as it may be amended or modified and in effect from time to time. "Agreement Accounting Principles" means generally accepted accounting principles as in effect from time to time, applied in a manner consistent with that used in preparing the financial statements referred to in Section 5.4. "Article" means an article of this Agreement unless another document is specifically referenced. "Asset Sale" means the sale, lease, assignment or other transfer for value by the Borrower or any Subsidiary to any Person (other than the Borrower or any Subsidiary) of any asset or right of the Borrower or such Subsidiary for which the Agent has been granted a first priority lien that it has not subordinated pursuant to the Subordination Agreement (including any sale or other transfer of stock of any Subsidiary, whether by merger, consolidation or otherwise, but excluding any sale of inventory in the ordinary course of business). "Authorized Officer" means any of the Chief Executive Officer, the Chief Financial Officer, the President or any Vice President of the Borrower, acting singly. "Bank One" means Bank One, NA, a national banking association having its principal office in Chicago, Illinois, in its individual capacity, and its successors. "Borrower" - see the introductory paragraph. "Business Day" means a day (other than a Saturday or Sunday) on which banks generally are open in Chicago for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system. 2 "Capital Expenditures" means, without duplication, expenditures for any purchase or other acquisition of any asset which would be classified as a fixed or capital asset on a consolidated balance sheet of the Borrower and its Subsidiaries prepared in accordance with Agreement Accounting Principles excluding (i) expenditures of insurance proceeds to rebuild or replace any asset after a casualty loss and (ii) leasehold improvement expenditures for which the Borrower or a Subsidiary is reimbursed promptly by the lessor. "Capitalized Lease" of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Capitalized Lease Obligations" of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Cash Equivalent Investments" means (i) short-term obligations of, or fully guaranteed by, the United States of America or mutual funds limited to the same, (ii) commercial paper rated A-1 or better by S&P or P-1 or better by Moody's, (iii) demand deposit accounts maintained in the ordinary course of business, and (iv) certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) having capital and surplus in excess of $100,000,000; provided that in each case the same shall provide for payment of -------- both principal and interest (and not principal alone or interest alone) and shall not be subject to any contingency regarding the payment of principal or interest. "Change in Control" means (i) any Person or group (within the meaning of Rule 13d-5 under the Securities and Exchange Act of 1934), excluding (x) Wayne Davis, any member of his immediate family and any trust therefor or Affiliate thereof and (y) any Series B Preferred Stockholder, shall be or become the beneficial owner (within the meaning of Rule 13d-3 under the Securities and Exchange Act of 1934) of issued and outstanding capital stock of the Borrower representing 20% or more of the voting power in elections for directors of the Borrower on a fully diluted basis or (ii) a majority of the members of the Board of Directors of the Borrower shall cease to be Continuing Members. "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "Collateral Documents" means, collectively, the Pledge and Security Agreement, each Mortgage and any other document pursuant to which the Borrower or any Guarantor grants collateral to the Agent for the benefit of the Lenders. "Confirmation" means the Confirmation dated as of the date hereof executed by the Borrower and each Guarantor, as it may be amended or modified from time to time. 3 "Congress" means Congress Financial Corporation (Southern). "Congress Credit Agreement" means the $50,000,000 Loan and Security Agreement dated as of the date hereof among the Borrower, various Subsidiaries and Congress, as amended or modified from time to time. "Consolidated Capital Expenditures" means, with reference to any period, the Capital Expenditures of the Borrower and its Subsidiaries calculated on a consolidated basis for such period. "Consolidated EBITDAR" means Consolidated Net Income plus, to the extent deducted from revenues in determining Consolidated Net Income, (i) Consolidated Interest Expense, (ii) expense for taxes paid, (iii) depreciation, (iv) amortization, (v) consolidated Rentals and (vi) extraordinary losses incurred other than in the ordinary course of business, minus, to the extent included in Consolidated Net Income, extraordinary gains realized other than in the ordinary course of business, all calculated for the Borrower and its Subsidiaries on a consolidated basis. "Consolidated Interest Expense" means, with reference to any period, the interest expense of the Borrower and its Subsidiaries calculated on a consolidated basis for such period. "Consolidated Net Income" means, with reference to any period, the net income (or loss) after taxes of the Borrower and its Subsidiaries calculated on a consolidated basis for such period. "Contingent Obligation" of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or the obligations of any such Person as general partner of a partnership with respect to the liabilities of the partnership. "Continuing Member" means a member of the Board of Directors of the Borrower who either (a) was a member of the Borrower's Board of Directors on the date hereof and has been such continuously thereafter or (b) became a member of such Board of Directors after the date hereof and whose election or nomination for election was approved by a vote of the majority of the Continuing Members then members of the Borrower's Board of Directors. "Controlled Group" means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. "Default" means an event described in Article VII. 4 "Dividends" means, with respect to any Person dividends on such Person's equity securities and, without duplication, (i) payments in respect of such equity securities, including without limitation payments in respect of interest under such equity securities or in connection with any redemption, purchase, retirement or defeasance of such equity securities and (ii) in the case of the Borrower, payments of annual and cumulative dividends on the Series B Preferred Stock to the Series B Preferred Stock Holders. "Effective Date" means the date on which all conditions precedent to the effectiveness of this Agreement have been satisfied. "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) a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, (c) any Lender, (d) any Affiliate of any Lender, and (e) if a Default exists and is continuing, any Person reasonably acceptable to the Agent. "Environmental Laws" means any and all Federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to (i) the protection of the environment, (ii) the effect of the environment on human health, (iii) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water or land, or (iv) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder. "Excess Availability" means the amount, as determined by Congress, calculated at any time as (a) the lesser of (i) the Borrowing Base under and as defined in the Congress Credit Agreement and (ii) the Revolving Loan Limit under and as defined in the Congress Credit Agreement minus (b) the sum of: (i) the ----- amount of all then outstanding and unpaid Obligations under and as defined in the Congress Credit Agreement, plus (ii) the aggregate amount of all then ---- outstanding and unpaid trade payables and other obligations of the borrowers under the Congress Credit Agreement which are more than 60 days past due as of such time, plus (iii) the amount of checks issued by a borrower under the ---- Congress Credit Agreement to pay trade payables and other obligations which are more than 60 days past due as of such time, but not yet sent, plus (iv) the book ---- overdraft of the borrowers under the Congress Credit Agreement. "Excess Cash Flow" means, for any period, the remainder of (a) Consolidated EBITDAR for such period less (b) the total, without duplication, of (i) ---- regularly scheduled principal payments made on the Loans during such period, plus (ii) cash payments made in such period with respect to Capital - ---- Expenditures, plus (iii) expenses for taxes paid during such period, plus (iv) ---- ---- cash Interest Expense 5 of the Borrower and its Subsidiaries during such period with respect to the Loans and loans outstanding under the Congress Credit Agreement plus (v) ---- regularly scheduled payments under Operating Leases. "Excluded Taxes" means, in the case of each Lender or applicable Lending Installation and the Agent, taxes imposed on its overall net income, and franchise taxes imposed on it, by (i) the jurisdiction under the laws of which such Lender or the Agent is incorporated or organized or (ii) the jurisdiction in which the Agent's or such Lender's principal executive office or such Lender's applicable Lending Installation is located. "Exhibit" refers to an exhibit to this Agreement, unless another document is specifically referenced. "Existing Acquisition Credit Agreement" - see the recitals. "Existing Agreements" - see the recitals. "Existing Working Capital Credit Agreement" - see the recitals. "Existing LCs" means the Letters of Credit outstanding under the Existing Working Capital Credit Agreement. "Federal Funds Effective Rate" means, for any day, an interest rate per annum 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 for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion. "Fiscal Quarter" means a fiscal quarter of a Fiscal Year. "Fiscal Year" means the fiscal year of the Borrower and its Subsidiaries, which period shall be the 12-month period ending on December 31 of each year. References to a Fiscal Year with a number corresponding to any calendar year (e.g., "Fiscal Year 2001") refer to the Fiscal Year ending on December 31 of such calendar year. "Foreign Subsidiary" means each Subsidiary of the Borrower that is organized under the laws of a jurisdiction outside the United States of America. 6 "GECC Convertible Preferred Stock" means the Series A Convertible Preferred Stock issued by the Borrower pursuant to the Purchase Agreement dated as of May 13, 1999 between the Borrower and GE Capital Equity Investments, Inc. "Guarantor" means each Subsidiary of the Borrower which has executed the Guaranty, and each of their respective successors and permitted assigns. "Guaranty" means the Guaranty dated as of October 25, 1999 executed by each Guarantor and various other parties in favor of the Agent, for the ratable benefit of the Lenders, as it may be amended or modified and in effect from time to time. "Indebtedness" of a Person means such Person's (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) obligations of such Person to purchase securities or other Property arising out of or in connection with the sale of the same or substantially similar securities or Property, (vi) Capitalized Lease Obligations, (vii) Contingent Obligations, (viii) Operating Lease Obligations and (ix) any other obligation for borrowed money or other financial accommodation which in accordance with Agreement Accounting Principles would be shown as a liability on the consolidated balance sheet of such Person. "Intercreditor Agreement" means the Intercreditor Agreement dated as of the date hereof among Congress Financial Corporation (Southern), the Borrower and the Agent. "Investment" of a Person means any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade) or contribution of capital by such Person; any stock, bond, mutual fund, partnership interest, note, debenture or other security owned by such Person; any deposit account or certificate of deposit owned by such Person; and any structured note, derivative financial instrument or other similar instrument or contract owned by such Person. "Lenders" means the lending institutions listed on the signature pages of this Agreement and their respective successors and assigns. "Lending Installation" means, with respect to a Lender, the office, branch, subsidiary or affiliate of such Lender listed on the signature pages hereof or on a Schedule or otherwise selected by such Lender pursuant to Section 2.9. 7 "Letter of Credit" of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable. "Lien" means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement). "Loan" means a Term A Loan or a Term B Loan. "Loan Documents" means this Agreement, each Note issued pursuant to Section 2.6, the Confirmation, the Guaranty and the Collateral Documents. "Material Adverse Effect" means a material adverse effect on (i) the business, Property, condition (financial or otherwise), results of operations, or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Borrower to perform its obligations under the Loan Documents to which it is a party, or (iii) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Agent or the Lenders thereunder. "Material Financial Obligation" is defined in Section 7.5. "Moody's" means Moody's Investors Service, Inc. "Mortgage" means a mortgage, deed of trust, leasehold mortgage or similar instrument granting the Agent a Lien on real property owned or leased by the Borrower or any Subsidiary. "Multiemployer Plan" means a Plan maintained pursuant to a collective bargaining agreement or any other arrangement to which the Borrower or any member of the Controlled Group is a party to which more than one employer is obligated to make contributions. "Net Cash Proceeds" means: (a) with respect to any Asset Sale, the aggregate cash proceeds (including cash proceeds received by way of deferred payment of principal pursuant to a note, installment receivable or otherwise, but only as and when received) received by the Borrower or any Subsidiary pursuant to such Asset Sale, net of (i) the direct costs relating to such Asset Sale (including sales commissions and legal, accounting and investment banking fees), (ii) taxes paid or reasonably estimated by the Borrower to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), and (iii) amounts required to be applied to the repayment of any Indebtedness secured by a Lien on the asset subject to such Asset Sale (other than Indebtedness hereunder); and 8 (b) with respect to any accounts receivable of the Borrower or any Subsidiary, any amounts paid to the Borrower or such Subsidiary by an insurer pursuant to a claim filed with respect to all or any portion of such accounts receivable. "Non-U.S. Lender" is defined in Section 3.1(iv). "Note" means any promissory note issued at the request of a Lender pursuant to Section 2.6 in the form of Exhibit D. "Notice of Assignment" is defined in Section 12.3.2. "Obligations" means all unpaid principal of and accrued and unpaid interest on the Loans, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrower to any Lender, the Agent or any indemnified party arising under the Loan Documents. "Off-Balance Sheet Liability" of a Person means (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability under any sale and leaseback transaction which is not a Capitalized Lease, (iii) any liability under any so- called "synthetic lease" transaction entered into by such Person, or (iv) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheets of such Person (excluding Operating Leases). "Operating Lease" of a Person means any lease of Property (other than a Capitalized Lease) by such Person as lessee which has an original term (including any required renewals and any renewals effective at the option of the lessor) of one year or more. "Operating Lease Obligations" means, as at any date of determination, the amounts for such operating lease obligations set forth in the most current Form 10-K filed by the Borrower with the Securities and Exchange Commission, discounted in the case of each Operating Lease by applying a discount rate (which shall be 10%) from the date on which each fixed lease payment is due under such Operating Lease to the date of filing of such Form 10-K, adjusted for any Operating Leases entered into after the date of filing of such Form 10-K. "Other Taxes" is defined in Section 3.1(ii). "Participants" is defined in Section 12.2.1. "Payment Date" means the last day of each calendar month. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. 9 "Person" means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Borrower or any member of the Controlled Group may have any liability. "Pledge and Security Agreement" means the Pledge and Security Agreement dated as of October 25, 1999 executed by the Borrower, the Guarantors and various other parties in favor of the Agent, for the ratable benefit of the Lenders, as it may be amended or modified and in effect from time to time. "Property" of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person. "Pro Rata Share" means, with respect to a Lender, a portion equal to a fraction the numerator of which is the outstanding principal amount of such Lender's Loans and the denominator of which is the outstanding principal amount of all Loans. "Purchasers" is defined in Section 12.3.1. "Rate Management Obligations" of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all Rate Management Transactions, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Rate Management Transactions. "Rate Management Transaction" means any transaction (including an agreement with respect thereto) now existing or hereafter entered into between the Borrower and any Lender or Affiliate thereof which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System. 10 "Rentals" of a Person means the aggregate fixed amounts payable by such Person under any Operating Lease. "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event; provided that a failure to meet the minimum -------- funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code. "Required Lenders" means, at any time, Lenders having in the aggregate at least 66 2/3% of the outstanding principal amount of the Loans at such time. "Schedule" refers to a specific schedule to this Agreement, unless another document is specifically referenced. "Section" means a numbered section of this Agreement, unless another document is specifically referenced. "Series B Preferred Stock" means the Series B convertible preferred stock, no par value per share, of the Borrower issued pursuant to the Certificate of Designation dated April 10, 2001. "Series B Preferred Stock Holders" means the persons listed on Schedule 3. "Single Employer Plan" means a Plan maintained by the Borrower or any member of the Controlled Group for employees of the Borrower or any member of the Controlled Group. "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the Borrower. "Substantial Portion" means, with respect to the Property of the Borrower and its Subsidiaries, Property which (i) represents more than 10% of the consolidated assets of the Borrower and its Subsidiaries as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries as at the beginning of the 12-month period ending with the month in which such determination is made, or (ii) is responsible for more than 10% of the consolidated net sales or of the consolidated net income of the Borrower and its Subsidiaries as reflected in the financial statements referred to in clause (i) above. 11 "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, excluding Excluded Taxes. "Term A Commitment" means, as to any Lender, the amount set forth opposite such Lender's name on Schedule 2.1 under the heading "Term A Commitment." "Term A Loan" - see Section 2.1. "Term B Commitment" means, as to any Lender, the amount set forth opposite such Lender's name on Schedule 2.1 under the heading "Term B Commitment." "Term B Loan" - see Section 2.1. "Transferee" is defined in Section 12.4. "Unfunded Liabilities" means the amount (if any) by which the present value of all vested and unvested accrued benefits under all Single Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans using PBGC actuarial assumptions for single employer plan terminations. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default. "Warrant Agreement" means the Warrant Agreement dated as of the date hereof among the Borrower and the Lenders. "Warrants" means the Warrants issued to the Lenders on the Effective Date under the Warrant Agreement to purchase capital stock of the Borrower. "Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, limited liability company, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. For purposes of calculating Consolidated EBITDAR, Consolidated Rentals, Consolidated Net Income, Consolidated Interest Expense and expense for taxes paid or accrued for any period, any Person heretofore or hereafter acquired by the Borrower or any Subsidiary during such period shall be deemed to have been acquired on the first day of such period, with pro forma adjustments limited to salaries, taxes and extraordinary charges (as defined by generally accepted 12 accounting principles) and other items approved by the Agent in its reasonable discretion of such acquired Person relating to any prior period. ARTICLE II THE LOANS --------- 2.1. Making of Loans. Each Lender severally agrees, on the terms and --------------- conditions set forth in this Agreement, that on the Effective Date its outstanding loans under the Existing Agreements and all accrued and unpaid interest thereon shall (to the extent not paid on such date) be converted into two term loans, one (for each Lender, its "Term A Loan") in the amount of such Lender's Term A Commitment and the other (for each Lender, its "Term B Loan") in the amount of such Lender's Term B Commitment. 2.2. Required Payments. ----------------- (a) (i) The Term A Loans shall be repaid in installments on the dates, and in the amounts, set forth on Schedule 2.2. (ii) The Term B Loans shall be repaid in full by the Borrower on September 30, 2005. (b) If the average Excess Availability exceeds $12,000,000 for any Fiscal Quarter, beginning with the Fiscal Quarter ending December 31, 2001, the Loans shall be prepaid, concurrently with the delivery of the compliance certificate as of the end of such Fiscal Quarter pursuant to Section 6.1(ii), by an amount equal to the lesser of (i) the Excess Availability for such Fiscal Quarter minus $12,000,000 or (ii) the Specified Portion of Excess Cash Flow for such Fiscal Quarter (but not less than zero). As used herein, "Specified Portion" means (i) 50% for each Fiscal Quarter ending on March 31 and December 31 and (ii) 25% for each Fiscal Quarter ending June 30 and September 30. (c) Concurrently with the delivery of the Borrower's audited financial statements as of the end of any Fiscal Year pursuant to Section 6.1(i), beginning with the Fiscal Year ending December 31, 2002, the Loans shall be prepaid by an amount equal to the result of (i) 50% of Excess Cash Flow for such Fiscal Year minus (ii) the aggregate amount of payments previously or concurrently made pursuant to clause (b) above with respect to Excess Cash Flow for the Fiscal Quarters of such Fiscal Year (for any Fiscal Year, the "Prior ECF Payments"). If such result is negative, the Borrower may deduct such amount (but not more than the Prior ECF Payments) from subsequent mandatory prepayments required to be made pursuant to clause (b) above or clause (d) below. (d) Concurrently with the receipt by the Borrower or any Subsidiary of any Net Cash Proceeds, the Loans shall be prepaid by an amount equal to 100% of all such Net Cash Proceeds 13 received since the Effective Date minus the aggregate amount previously applied to prepay the Loans pursuant to this clause (d). (e) Each prepayment of Loans shall be applied first, to unpaid fees and ----- expenses of the Agent and the Lenders, second, to unpaid interest with respect ------ to the Loans, third, to outstanding principal with respect to the Term B Loans ----- until the Term B Loans have been paid in full, and finally, to outstanding ------- principal with respect to the Term A Loans until the Term A Loans have been paid in full. Each repayment of interest and principal shall be applied to the applicable Loans of the Lenders according to their Pro Rata Shares. (f) No principal amount of a Loan which is repaid may be reborrowed. 2.3. Optional Principal Prepayments. The Borrower may from time to time ------------------------------ prepay, without penalty or premium, all outstanding Loans or, in a minimum aggregate amount of $10,000 or any higher integral multiple of $10,000, any portion of the outstanding Loans upon two Business Days' prior notice to the Agent. All prepayments shall be applied to the Loans of the Lenders according to their Pro Rata Shares. 2.4. Interest Rate; Rate Applicable After Default. Each Loan shall bear -------------------------------------------- interest on the outstanding principal amount thereof, for each day from and including the date hereof to but excluding the date it is paid, at 10.5% per annum. During the continuance of a Default the Required Lenders may, at their option, by written notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that each Loan shall bear interest at 12.5% per annum. 2.5. Method of Payment. All payments of the Obligations shall be made, ----------------- without setoff, deduction, or counterclaim, in immediately available funds to the Agent at the Agent's address specified pursuant to Article XIII, or at any other Lending Installation of the Agent specified in writing by the Agent to the Borrower, by noon (local time) on the date when due and shall be applied by the Agent among the Lenders in accordance with their respective shares thereof. Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Agent from such Lender. The Agent is hereby authorized to charge any account of the Borrower maintained with Bank One for each payment of principal, interest or fees as it becomes due hereunder. 2.6. Noteless Agreement; Evidence of Indebtedness. (i) Each Lender shall -------------------------------------------- maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. 14 (ii) The Agent shall also maintain accounts in which it will record (a) the amount of each Loan made hereunder, (b) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (c) the amount of any sum received by the Agent hereunder from the Borrower and each Lender's share thereof. (iii) The entries maintained in the accounts maintained pursuant to paragraphs (i) and (ii) above shall be prima facie evidence of the existence and amounts of the Obligations therein recorded; provided that the failure of the -------- Agent or any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Obligations in accordance with their terms. (iv) Any Lender may request that its Loans be evidenced by a Note. In such event, the Borrower shall prepare, execute and deliver to such Lender a Note payable to the order of such Lender. Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after any assignment pursuant to Section 12.3) be represented by one or more Notes payable to the order of the payee named therein or any assignee pursuant to Section 12.3, except to the extent that any such Lender or assignee subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in paragraphs (i) and (ii) above. 2.7. Interest Payment Dates; Interest and Fee Basis. Interest accrued on ---------------------------------------------- each Loan shall be payable on each Payment Date, on any date on which such Loan is prepaid, whether due to acceleration or otherwise, and at maturity. Interest shall be calculated for actual days elapsed on the basis of a year of 365 or, if applicable, 366 days. If any payment of principal of or interest on a Loan shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment. 2.8. Notification of Prepayments. Promptly after receipt thereof, the --------------------------- Agent will notify each Lender of the contents of each prepayment notice received by it hereunder. 2.9. Lending Installations. Each Lender may book its Loans at any Lending --------------------- Installation selected by such Lender, and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Loans and any applicable Note issued hereunder shall be deemed held by each Lender for the benefit of any such Lending Installation. Each Lender may, by written notice to the Agent and the Borrower in accordance with Article XIII, designate replacement or additional Lending Installations for whose account Loan payments are to be made. 2.10. Non-Receipt of Funds by the Agent. Unless the Borrower notifies the --------------------------------- Agent, prior to the date on which it is scheduled to make payment to the Agent of a payment of principal, interest or fees to the Agent for the account of the Lenders, that it does not intend to make such payment, the Agent may assume that such payment has been made. The Agent may, but shall not be obligated to, make the amount of such payment available to the Lenders in reliance upon such assumption. 15 If the Borrower does not in fact make such payment to the Agent, each Lender shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to the Federal Funds Effective Rate for the first three days and, thereafter, the greater of the Federal Funds Effective Rate and the interest rate applicable to the Loans. Nothing in this Section 2.10 shall relieve the Borrower of its obligation to make any payment hereunder. ARTICLE III TAXES ----- 3.1. Taxes. (i) All payments by the Borrower to or for the account of ----- any Lender or the Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all Taxes. If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or the Agent, (a) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.1) 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 been made, (b) the Borrower shall make such deductions, (c) the Borrower shall pay the full amount deducted to the relevant authority in accordance with applicable law and (d) the Borrower shall furnish to the Agent the original copy of a receipt evidencing payment thereof within 30 days after such payment is made. (ii) In addition, the Borrower hereby agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note ("Other Taxes"). (iii) The Borrower hereby agrees to indemnify the Agent and each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 3.1) paid by the Agent or such Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Payments due under this indemnification shall be made within 30 days of the date the Agent or such Lender makes written demand therefor pursuant to Section 3.2. (iv) Each Lender that is not incorporated under the laws of the United States of America or a state thereof (each a "Non-U.S. Lender") agrees that it will, not less than ten Business Days after the date hereof, (i) deliver to each of the Borrower and the Agent two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, certifying in either case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States Federal income taxes, and (ii) deliver to each of the Borrower and the Agent a United States Internal Revenue Form W-9 and certify that it is entitled to an exemption from United States backup withholding tax. Each Non-U.S. Lender further undertakes to deliver to each of the 16 Borrower and the Agent (x) renewals or additional copies of such form (or any successor form) on or before the date that such form expires or becomes obsolete, and (y) after the occurrence of any event requiring a change in the most recent forms so delivered by it, such additional forms or amendments thereto as may be reasonably requested by the Borrower or the Agent. All forms or amendments described in the preceding sentence shall certify that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States Federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form or amendment with respect to it and such Lender advises the Borrower and the Agent that it is not capable of receiving payments without any deduction or withholding of United States Federal income tax. (v) For any period during which a Non-U.S. Lender has failed to provide the Borrower with an appropriate form pursuant to clause (iv), above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 3.1 with respect to Taxes imposed by the United States; provided -------- that, should a Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form required under clause (iv), above, the Borrower shall take such steps as such Non-U.S. Lender shall reasonably request to assist such Non- U.S. Lender to recover such Taxes. (vi) Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments under this Agreement or any Note pursuant to the law of any relevant jurisdiction or any treaty shall deliver to the Borrower (with a copy to the Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. (vii) If the U.S. Internal Revenue Service or any other governmental authority of the United States or any other country or any political subdivision thereof 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 or properly completed, because such Lender failed to notify the Agent of a change in circumstances which rendered its exemption from withholding 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, withholding therefor, or otherwise, including penalties and interest, and including taxes imposed by any jurisdiction on amounts payable to the Agent under this subsection, together with all costs and expenses related thereto (including attorneys' fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent). The obligations of the Lenders under this Section 3.1(vii) shall survive the payment of the Obligations and termination of this Agreement. 17 3.2. Lender Statements; Survival of Indemnity. Each Lender shall deliver ---------------------------------------- a written statement of such Lender to the Borrower (with a copy to the Agent) as to the amount due, if any, under Section 3.1. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the absence of manifest error. Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by the Borrower of such written statement. The obligations of the Borrower under Section 3.1 shall survive payment of the Obligations and termination of this Agreement. ARTICLE IV CONDITIONS PRECEDENT -------------------- This Agreement shall not become effective until all of the following conditions precedent have been satisfied: 4.1. Documents. The Borrower shall have furnished to the Agent with --------- sufficient copies for the Lenders: (i) Copies of the articles or certificate of incorporation of the Borrower and each Guarantor, together with all amendments, and a certificate of good standing, each certified by the appropriate governmental officer in its jurisdiction of incorporation. (ii) Copies, certified by the Secretary or Assistant Secretary of the Borrower and each Guarantor, of its bylaws and of its Board of Directors' resolutions and of resolutions or actions of any other body authorizing the execution of the Loan Documents to which the Borrower or such Guarantor is a party. (iii) An incumbency certificate, executed by the Secretary or Assistant Secretary of the Borrower and each Guarantor, which shall identify by name and title and bear the signatures of the Authorized Officers and any other officers of the Borrower or such Guarantor authorized to sign the Loan Documents to which the Borrower or such Guarantor is a party, upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Borrower or such Guarantor. (iv) A certificate, signed by the chief financial officer of the Borrower, stating that on the Effective Date no Default or Unmatured Default (other than any default under the Existing Agreements which will be inapplicable on and after the Effective Date) has occurred and is continuing. (v) A written opinion of the Borrower's counsel, in substantially the form of Exhibit A. 18 (vi) Any Note requested by a Lender pursuant to Section 2.6 payable to the order of such requesting Lender. (vii) The Confirmation executed by the Borrower and each Guarantor. (viii) An Option Agreement executed by the Borrower and each Lender. (ix) A Warrant for each Lender representing the right to purchase shares of the Borrower's capital stock. (x) A certified copy of the Congress Credit Agreement executed by the parties thereto, and evidence that the proceeds of loans thereunder have been used to repay not less than $26,500,000 of loans outstanding under the Existing Working Capital Credit Agreement. (xi) Evidence that the Borrower has issued Series B Preferred Stock to the Series B Preferred Stock Holders for a cash purchase price of not less than $7,000,000. (xii) The Intercreditor Agreement executed by Congress Financial Corporation (Southern). (xiii) Copies of (A) the 1998 and 1999 Federal income tax returns (including amended returns) of the Borrower and its Subsidiaries, (B) a copy of the borrowing base certificate delivered to Congress on the date hereof and (C) a report setting forth the information in Section 6.1(xii) for March 2001. (xiv) A certificate, signed by the chief financial officer of the Borrower, stating that, as of the Effective Date, the Borrower and its Subsidiaries have filed all documents and instruments necessary to submit all possible claims under their respective credit insurance policies, together with all documents necessary to perfect the Agent's security interest in such claims and to cause all payments in respect of such claims to be made directly to the Agent for application in accordance with Section 2.2. (xv) Copies of restructuring agreements with each of the lessors listed in Item 7 of Schedule 5.12 (other than those lessors approved by the Administrative Agent), along with a certification from the chief financial officer of the Borrower that each lessor will restructure the scheduled lease payments under such lessor's lease agreements with the Borrower so that such scheduled lease payments are substantially as set forth on Schedule 4. (xvi) Such other documents as any Lender or its counsel may have reasonably requested. (xvii) The Borrower shall have paid all outstanding invoices of Mayer, Brown & Platt, Freed Maxick ABL Services, Inc., Dovebid Norman Levy & Associates and Blake Cassels & Graydon. 19 4.2. Existing LCs. The Borrower shall have (a) replaced all Existing LCs ------------ or (b) deposited cash collateral in the face amount of the Existing LCs in an account maintained with the Agent. ARTICLE V REPRESENTATIONS AND WARRANTIES ------------------------------ The Borrower represents and warrants to the Lenders that: 5.1. Existence and Standing. The Borrower is a corporation, and each of ---------------------- its Subsidiaries is a corporation, partnership or limited liability company, in each case duly and properly incorporated or organized, as the case may be, validly existing and (to the extent such concept applies to such entity) in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted. 5.2. Authorization and Validity. The Borrower and each Guarantor has the -------------------------- power and authority and legal right to execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder. The execution and delivery by the Borrower and each Guarantor of the Loan Documents to which it is a party and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings, and the Loan Documents to which the Borrower and such Guarantor is a party constitute legal, valid and binding obligations of the Borrower or such Guarantor, as the case may be, enforceable against the Borrower or such Guarantor, as the case may be, in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally. 5.3. No Conflict; Government Consent. Neither the execution and delivery ------------------------------- by the Borrower or any Guarantor of the Loan Documents to which it is a party, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate (i) any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Borrower or any of its Subsidiaries, (ii) the Borrower's or any Subsidiary's articles or certificate of incorporation, partnership agreement, certificate of partnership, articles or certificate of organization, bylaws, or operating or other management agreement, as the case may be, or (iii) the provisions of any indenture, instrument or agreement to which the Borrower or any of its Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, or result in, or require, the creation or imposition of any Lien in, of or on the Property of the Borrower or a Subsidiary pursuant to the terms of any such indenture, instrument or agreement. No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any governmental or public body or authority, or any subdivision thereof, which has not been obtained by the Borrower or any of its Subsidiaries, is required to be obtained by the Borrower or any of its Subsidiaries in connection with the execution and delivery of the Loan Documents, the payment and performance by the Borrower 20 of the Obligations or the legality, validity, binding effect or enforceability of any of the Loan Documents. 5.4. Financial Statements. The June 30, 2000 consolidated financial -------------------- statements of the Borrower and its Subsidiaries heretofore delivered to the Lenders were prepared in accordance with generally accepted accounting principles in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of the Borrower and its Subsidiaries at such date and the consolidated results of their operations for the period then ended. 5.5. Material Adverse Change. Since the Effective Date, there has been no ----------------------- change in the business, Property, prospects, condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries which has had or could reasonably be expected to have a Material Adverse Effect. 5.6. Taxes. The Borrower and its Subsidiaries have filed all United ----- States Federal income tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided in accordance with Agreement Accounting Principles and as to which no Lien exists. The United States Federal income tax returns of the Borrower and its Subsidiaries have been filed with the Internal Revenue Service through the Fiscal Year ended December 31, 1999. No tax liens have been filed and no claims are being asserted with respect to any such taxes. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of any taxes or other governmental charges are adequate. 5.7. Litigation and Contingent Obligations. Except as set forth on ------------------------------------- Schedule 5.7, there is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which seeks to prevent, enjoin or delay the making of any Loan. Other than any liability incident to any litigation, arbitration or proceeding which could not reasonably be expected to have a Material Adverse Effect, the Borrower has no material contingent obligations not provided for or disclosed in the financial statements referred to in Section 5.4. 5.8. Subsidiaries. Schedule 1 contains an accurate list of all ------------ Subsidiaries of the Borrower as of the date hereof, setting forth their respective jurisdictions of organization and the percentage of their respective capital stock or other ownership interests owned by the Borrower or other Subsidiaries. All of the issued and outstanding shares of capital stock or other ownership interests of such Subsidiaries have been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and nonassessable. 5.9. ERISA. There are no Unfunded Liabilities of any Single Employer ----- Plan. Neither the Borrower nor any other member of the Controlled Group has incurred, or is reasonably expected to 21 incur, any withdrawal liability to Multiemployer Plans. Each Plan complies in all material respects with all applicable requirements of law and regulations, no Reportable Event has occurred with respect to any Plan, neither the Borrower nor any other member of the Controlled Group has withdrawn from any Plan or initiated steps to do so, and no steps have been taken to reorganize or terminate any Plan. 5.10. Accuracy of Information. No information, exhibit or report ----------------------- furnished by the Borrower or any of its Subsidiaries to the Agent or to any Lender in connection with the negotiation of, or compliance with, the Loan Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein, taken as a whole, not misleading. 5.11. Regulation U. Margin stock (as defined in Regulation U) constitutes ------------ less than 25% of the value of those assets of the Borrower and its Subsidiaries which are subject to any limitation on sale or pledge or any other restriction hereunder. 5.12. Material Agreements. Except as set forth on Schedule 5.12, neither ------------------- the Borrower nor any Subsidiary is (a) a party to any agreement or instrument or (b) subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (i) any agreement to which it is a party, which default could reasonably be expected to have a Material Adverse Effect or (ii) any agreement or instrument evidencing or governing Indebtedness. 5.13. Compliance With Laws. The Borrower and its Subsidiaries have -------------------- complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property except for any failure to comply with any of the foregoing which could not reasonably be expected to have a Material Adverse Effect. 5.14. Ownership of Properties. Except as set forth on Schedule 2, on the ----------------------- date hereof, the Borrower and its Subsidiaries will have good title, free of all Liens other than those permitted by Section 6.14, to all of the Property and assets reflected in the Borrower's most recent consolidated financial statements provided to the Agent as owned by the Borrower and its Subsidiaries. 5.15. Plan Assets; Prohibited Transactions. The Borrower is not an entity ------------------------------------ deemed to hold "plan assets" within the meaning of 29 C.F.R. (S) 2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan (within the meaning of Section 4975 of the Code), and neither the execution of this Agreement nor the making of the Loans hereunder gives rise to a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. 22 5.16. Environmental Matters. In the ordinary course of its business, the --------------------- officers of the Borrower consider the effect of Environmental Laws on the business of the Borrower and its Subsidiaries, in the course of which they identify and evaluate potential risks and liabilities accruing to the Borrower due to Environmental Laws. On the basis of this consideration, the Borrower has concluded that Environmental Laws cannot reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary has received any notice to the effect that its operations are not in material compliance with any of the requirements of applicable Environmental Laws or are the subject of any Federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which noncompliance or remedial action could reasonably be expected to have a Material Adverse Effect. 5.17. Investment Company Act. Neither the Borrower nor any Subsidiary is ---------------------- an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 5.18. Public Utility Holding Company Act. Neither the Borrower nor any ---------------------------------- Subsidiary is a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 5.19. Post-Retirement Benefits. There are no post-retirement medical and ------------------------ insurance benefits payable by the Borrower and its Subsidiaries to its employees and former employees. ARTICLE VI COVENANTS --------- So long as any Obligations are outstanding, unless the Required Lenders shall otherwise consent in writing: 6.1. Financial Reporting. The Borrower will maintain, for itself and ------------------- each Subsidiary, a system of accounting established and administered in accordance with generally accepted accounting principles, and furnish to the Lenders: (i) Within 180 days after the close of each Fiscal Year, an unqualified audit report certified by independent certified public accountants acceptable to the Lenders, prepared on a consolidated basis in accordance with Agreement Accounting Principles, including balance sheets as of the end of such period, related profit and loss and reconciliation of surplus statements, and a statement of cash flows for itself and its Subsidiaries, accompanied by (a) any management letter prepared by said accountants, (b) a certificate of said accountants that, in the course of their examination necessary for their certification of the foregoing, they have obtained no knowledge of 23 any Default or Unmatured Default in respect of Section 6.10(iii) or 6.23, or if, in the opinion of such accountants, any such Default or Unmatured Default shall exist, stating the nature and status thereof and (c) profit and loss statements on a consolidating basis for itself and its Subsidiaries, certified by its chief financial officer. (ii) Within 45 days after the close of the first three Fiscal Quarters of each of its Fiscal Years, for itself and its Subsidiaries, consolidated unaudited balance sheets as at the close of each such period and consolidated and consolidating profit and loss and reconciliation of surplus statements and a statement of cash flows for the period from the beginning of such Fiscal Year to the end of such Fiscal Quarter, all certified by its chief financial officer, along with a calculation of Excess Availability and Excess Cash Flow. (iii) Together with the financial statements required under Sections 6.1(i) and (ii), (A) a compliance certificate in substantially the form of Exhibit B signed by its chief financial officer showing the calculations necessary to determine compliance with this Agreement and stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof and (B) a receivables monitoring report in form and substance acceptable to the Required Lenders covering the accounts receivable and inventory owned by the Borrower and its Subsidiaries; provided that the Borrower shall not be required to reimburse the Administrative - -------- Agent for more than $15,000 of the cost of any such report per Fiscal Quarter. (iv) Within 270 days after the close of each Fiscal Year, a statement of the Unfunded Liabilities of each Single Employer Plan, certified as correct by an actuary enrolled under ERISA. (v) As soon as possible and in any event within 10 days after the Borrower knows that any Reportable Event has occurred with respect to any Plan, a statement, signed by the chief financial officer of the Borrower, describing said Reportable Event and the action which the Borrower proposes to take with respect thereto. (vi) As soon as possible and in any event within 15 days after receipt by the Borrower, a copy of (a) any written notice or claim to the effect that the Borrower or any of its Subsidiaries is or may be liable to any Person as a result of the release by the Borrower, any of its Subsidiaries, or any other Person of any toxic or hazardous waste or substance into the environment, and (b) any written notice alleging any violation of any Federal, state or local environmental, health or safety law or regulation by the Borrower or any of its Subsidiaries, which, in either case, has had or could reasonably be expected to have a Material Adverse Effect. (vii) Promptly upon the furnishing thereof to the shareholders of the Borrower, copies of all financial statements, reports and proxy statements so furnished. (viii) Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission. 24 (ix) Promptly upon the furnishing thereof to Congress, a copy of each borrowing base certificate delivered pursuant to the Congress Credit Agreement. (x) As soon as available, but in any event within 60 days after the beginning of each Fiscal Year a copy of the plan and forecast (including a projected consolidated balance sheet and funds flow statement and a projected consolidated and consolidating income statement) of the Borrower for such Fiscal Year. (xi) Promptly upon the furnishing thereof to Congress, each accounts receivable aging report delivered to Congress pursuant to the Congress Credit Agreement. (xii) Within 10 days after the end of each month, a copy of each report detailing actual dispositions of personal property covered by certificates of title during such month and planned dispositions of such personal property for the next succeeding month. (xiii) Such other information (including nonfinancial information) as the Agent or any Lender may from time to time reasonably request. 6.2. Notice of Default. The Borrower will, and will cause each ----------------- Subsidiary to, give prompt notice in writing to the Agent of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise, which has had or could reasonably be expected to have a Material Adverse Effect. 6.3. Conduct of Business. The Borrower will, and will cause each ------------------- Subsidiary to, carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted and do all things necessary to remain duly incorporated or organized, validly existing and (to the extent such concept applies to such entity) in good standing as a domestic corporation, partnership or limited liability company in its jurisdiction of incorporation or organization, as the case may be, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted. 6.4. Taxes. The Borrower will, and will cause each Subsidiary to, timely ----- file complete and correct United States Federal and applicable foreign, state and local tax returns required by law and pay when due all taxes, assessments and governmental charges and levies upon it or its income, profits or Property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with Agreement Accounting Principles. At any time that the Borrower or any of its Subsidiaries is organized as a limited liability company, each such limited liability company will qualify for partnership tax treatment under United States Federal tax law. 6.5. Insurance. The Borrower will, and will cause each Subsidiary to, --------- maintain with financially sound and reputable insurance companies insurance on all their Property in such amounts 25 and covering such risks as is consistent with sound business practice, and the Borrower will furnish to any Lender upon request full information as to the insurance carried. 6.6. Compliance with Laws. The Borrower will, and will cause each -------------------- Subsidiary to, comply with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject including, without limitation, all Environmental Laws. 6.7. Maintenance of Properties. The Borrower will, and will cause each ------------------------- Subsidiary to, do all things necessary to maintain, preserve, protect and keep its Property in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times. 6.8. Inspection; Collateral Audit. The Borrower will, and will cause ---------------------------- each Subsidiary to, permit the Agent and the Lenders, by their respective representatives and agents, to (a) inspect any of the Property, books and financial records of the Borrower and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Borrower and each Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and each Subsidiary with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Agent or any Lender may designate and (b) conduct a collateral audit with respect to the Borrower and its Subsidiaries (i) within 90 days following the date hereof and (ii) on a semiannual basis for the first year following the date hereof (provided that the Agent and the Lenders may thereafter request an annual -------- collateral audit in their reasonable discretion), all at the Borrower's expense. 6.9. Restricted Payments. The Borrower will not, nor will it permit any ------------------- Subsidiary to, (a) declare or pay any Dividends or make any other distributions on its capital stock (other than Dividends payable in its own capital stock), including Dividends on the GECC Preferred Stock, or redeem, repurchase or otherwise acquire or retire any capital stock of the Borrower or any Subsidiary at any time outstanding, except that any Subsidiary may declare and pay Dividends or make distributions to the Borrower or to a Wholly-Owned Subsidiary or (b) make payments (other than mandatory prepayments by the Borrower with the net proceeds of any issuance of equity of the Borrower after the date hereof) in excess of $100,000 during any month with respect to Indebtedness of the Borrower or any Subsidiary arising under the Stock Purchase Agreement dated as of April 19, 2001 among the Borrower, T. Wayne Davis, Cynthia F. Turner, Philip R. Fulmer, Timothy A. Fulmer, Barbara Fulmer and Carroll A. Fulmer, as such Stock Purchase Agreement is in effect on April 19, 2001. 6.10. Indebtedness. The Borrower will not, nor will it permit any ------------ Subsidiary to, create, incur or suffer to exist any Indebtedness, except: (i) The Loans. (ii) Indebtedness existing on the date hereof and described in Schedule 2. 26 (iii) After the date hereof, (A) purchase money Indebtedness for equipment, including Capitalized Leases, (B) Operating Lease Obligations, and (C) the approximately $4,300,000 Rocor seller note, not to exceed $75,000,000 in aggregate principal amount outstanding at any time for all Indebtedness under clauses (A), (B), (C) and (D). (iv) Indebtedness under the Congress Credit Agreement. (v) Indebtedness arising under interest rate, fuel management or hedging agreements between the Borrower and any Person entered into in the ordinary course of business and not for speculation. 6.11. Merger. The Borrower will not, nor will it permit any Subsidiary ------ to, merge or consolidate with or into any other Person, except that a Subsidiary may merge into the Borrower or a Wholly-Owned Subsidiary, or change its legal name or status as a corporation, limited liability or partnership, as applicable, without the prior written consent of the Required Banks. 6.12. Sale of Assets. The Borrower will not, nor will it permit any -------------- Subsidiary to, lease, sell or otherwise dispose of its Property to any other Person, except: (i) Sales of inventory in the ordinary course of business. (ii) Sales of revenue equipment in the ordinary course of business for a purchase price not less than 80% of the orderly liquidation value of such equipment as set forth in the valuation reports of Dovebid Norman Levy & Associates delivered from time to time to the Agent. (iii) Leases, sales or other dispositions of its Property that, together with all other Property of the Borrower and its Subsidiaries previously leased, sold or disposed of (other than inventory in the ordinary course of business) as permitted by this Section during the 12-month period ending with the month in which any such lease, sale or other disposition occurs, do not constitute a Substantial Portion of the Property of the Borrower and its Subsidiaries. 6.13. Investments and Acquisitions. The Borrower will not, nor will it ---------------------------- permit any Subsidiary to, make or suffer to exist any Investments, or commitments therefor, or to become or remain a partner in any partnership or joint venture, or to make any Acquisition, except: (i) Cash Equivalent Investments. (ii) Existing Investments in Subsidiaries and other Investments in existence on the date hereof and described in Schedule 1. (iii) Investments in the ordinary course of business in connection with the formation of new Subsidiaries in similar lines of business as the Borrower and its existing Subsidiaries. 27 6.14. Liens. The Borrower will not, nor will it permit any Subsidiary to, ----- create, incur, or suffer to exist any Lien in, of or on the Property of the Borrower or any of its Subsidiaries, except: (i) Liens for taxes, assessments or governmental charges or levies on its Property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with Agreement Accounting Principles shall have been set aside on its books. (ii) Liens imposed by law, such as carriers', warehousemen's and mechanics' liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due. (iii) Liens arising out of pledges or deposits under worker's compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation. (iv) Utility easements, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Borrower or its Subsidiaries. (v) Liens existing on the date hereof and described in Schedule 2. (vi) Liens in favor of the Agent, for the benefit of the Lenders, granted pursuant to any Collateral Document. (vii) Liens covering equipment (but not other assets) securing Indebtedness incurred or assumed for the purpose of financing such equipment and permitted under Section 6.11(iii); provided that (A) any such Lien attaches to -------- such equipment concurrently with or within 60 days after the acquisition thereof, (B) such Lien attaches solely to such equipment so acquired in such transaction, and (C) the principal amount of the Indebtedness secured thereby does not exceed 100% of the cost of such equipment. (viii) Liens securing obligations under or related to the Congress Credit Agreement. 6.15. Affiliates. The Borrower will not, and will not permit any ---------- Subsidiary to, enter into any transaction (including, without limitation, the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate except in the ordinary course of business and pursuant to the reasonable requirements of the Borrower's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary would obtain in a comparable arm's-length transaction. 28 6.16. No Amendment to GECC Convertible Preferred Stock; No Issuance of ---------------------------------------------------------------- Additional Redeemable Stock. The Borrower will not after the Effective Date (a) - --------------------------- amend the terms, preferences, rights and limitations of the GECC Convertible Preferred Stock in any manner having the effect of increasing the amount of dividends thereon or redemptions thereof or providing for any earlier payment in respect of dividends or redemptions or otherwise in respect of such stock or (b) issue any redeemable shares of stock after the date hereof. 6.17. Sale of Accounts. The Borrower will not, nor will it permit any ---------------- Subsidiary to, sell or otherwise dispose of any notes receivable or accounts receivable, with or without recourse. 6.18. Sale and Leaseback Transactions and other Off-Balance Sheet ----------------------------------------------------------- Liabilities. The Borrower will not, nor will it permit any Subsidiary to, enter - ----------- into or suffer to exist any (i) Sale and Leaseback Transaction or (ii) any other transaction pursuant to which it incurs or has incurred Off-Balance Sheet Liabilities, except with respect to revenue equipment in the ordinary course of business. 6.19. Contingent Obligations. The Borrower will not, nor will it permit ---------------------- any Subsidiary to, make or suffer to exist any Contingent Obligations (including, without limitation, any Contingent Obligation with respect to the obligations of a Subsidiary) exceeding at any time $5,000,000 in the aggregate, except (i) by endorsement of instruments for deposit or collection in the ordinary course of business, (ii) the Guaranty and (iii) the guaranty by the Borrower and various Subsidiaries under the Congress Credit Agreement. 6.20. Letters of Credit. The Borrower will not, nor will it permit any ----------------- Subsidiary to, apply for or become liable upon or in respect of any Letter of Credit, except for the Existing LCs. 6.21. Prepayment of Other Debt. If an Unmatured Default or a Default has ------------------------ occurred, Borrower will not, nor will it permit any Subsidiary to, prepay any Indebtedness (including, without limitation, the GECC Convertible Preferred Stock) other than the Obligations and loans under the Congress Credit Agreement. 6.22. Consolidated Capital Expenditures. The Borrower will not permit the --------------------------------- aggregate amount of Consolidated Capital Expenditures made by the Borrower and its Subsidiaries during any period of 12 consecutive months to (a) exceed $30,000,000 or (b) be less than $1,000,000. 6.23. Additional Subsidiaries; Further Assurances. The Borrower will cause ------------------------------------------- each Subsidiary acquired or created after the date hereof to execute a counterpart of the Guaranty and grant to the Agent for the benefit of the Agent and the Lenders perfected security interests in all of its personal property as collateral to secure the Obligations, in each case pursuant to the applicable Collateral Documents (subject only to Liens in favor of other Persons permitted under Section 6.15); provided that no Foreign Subsidiary shall have an -------- obligation to execute a counterpart of the Guaranty or to grant any security interest in its personal property; and provided, further that neither the -------- ------- Borrower nor any Subsidiary shall be required to pledge more than 65% of the stock of any Foreign 29 Subsidiary. The Borrower agrees to take and to cause each Guarantor to take such actions as the Agent or the Required Lenders may from time to time reasonably request to establish and maintain perfected security interests in all of their personal property, including without limitation the perfection of the Agent's security interest in all such personal property covered by certificates of title substantially contemporaneously with the date of acquisition of such property (subject to Liens in favor of other Persons permitted under Section 6.15). 6.24. Release and Covenant Not to Sue. (a) In consideration of the ------------------------------- agreements and understandings in this Agreement, the Borrower and each of the Guarantors, for themselves and, to the extent that any of the following is claiming by, through, or otherwise on behalf of (including, without limitation, on any derivative basis) either the Borrower or any Guarantor, for their respective employees, officers, agents, executors, heirs, successors and assigns, jointly and severally, hereby release each of the Agent and each Lender, and its employees, officers, participants, agents, affiliates, subsidiaries, successors and assigns from any claim, right or cause of action which now exists, in any way related to facts in existence as of the date hereof, whether known or unknown, including without limitation any claims in any way related to the Loan Documents and the business relationship with the Agent and the Lenders. (b) The Borrower and each of the Guarantors hereby covenant that they will refrain from commencing any action or suit or prosecuting any action or suit, in law or in equity, against each of the Agent and the Lenders, its employees, officers, agents, participants, affiliates, subsidiaries, successors and assigns, on account of any claim, action or cause of action which now exists in the Borrower's or any Guarantor's favor based upon facts existing as of the date of this Agreement. In addition to the other liability which shall accrue upon the breach of this covenant, the breaching party shall be liable to the Agent and the Lenders for all reasonable attorneys' fees and costs incurred by such party in the defense of such action or suit. ARTICLE VII DEFAULTS -------- The occurrence or continuance of any one or more of the following events on or after the date hereof shall constitute a Default: 7.1. Any representation or warranty made or deemed made by or on behalf of the Borrower or any of its Subsidiaries to the Lenders or the Agent under or in connection with this Agreement or any other Loan Document shall be materially false on the date as of which made. 7.2. Nonpayment of principal of any Loan when due or nonpayment of interest upon any Loan or of any fee or other obligation under any Loan Document within five days after the same becomes due. 30 7.3. The breach by the Borrower of any of the terms or provisions of Article VI, Section 6.2, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16, 6.17, 6.18, 6.19 or 6.23. 7.4. The breach by the Borrower (other than a breach which constitutes a Default under another Section of this Article VII) of any of the terms or provisions of this Agreement which is not remedied within 30 days after written notice from the Agent or any Lender. 7.5. Failure of the Borrower or any of its Subsidiaries to pay when due (after any applicable grace period) any funded Indebtedness or amounts under any interest rate, fuel management or hedging agreement aggregating in excess of $1,000,000 ("Material Financial Obligation"); or the default by the Borrower or any of its Subsidiaries in the performance (beyond the applicable grace period with respect thereto, if any) of any term, provision or condition contained in any agreement under which any such Material Financial Obligation was created or is governed, or any other event shall occur or condition exist, the effect of which default or event is to cause, or to permit the holder or holders of such Material Financial Obligation to cause, such Material Financial Obligation to become due prior to its stated maturity; or any Material Financial Obligation of the Borrower or any of its Subsidiaries shall be declared to be due and payable or required to be prepaid or repurchased (other than by a regularly scheduled payment) prior to the stated maturity thereof; or the Borrower or any of its Subsidiaries shall not pay, or admit in writing its inability to pay, its debts generally as they become due. 7.6. The Borrower or any of its Subsidiaries shall (i) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect, (ii) make an assignment for the benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (iv) institute any proceeding seeking an order for relief under the Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (v) take any corporate or partnership action to authorize or effect any of the foregoing actions set forth in this Section 7.6 or (vi) fail to contest in good faith any appointment or proceeding described in Section 7.7. 7.7. Without the application, approval or consent of the Borrower or any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any of its Subsidiaries or any Substantial Portion of its Property, or a proceeding described in Section 7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of 30 consecutive days. 7.8. Any court, government or governmental agency shall condemn, seize or otherwise appropriate, or take custody or control of, all or any portion of the Property of the Borrower and its 31 Subsidiaries which, when taken together with all other Property of the Borrower and its Subsidiaries so condemned, seized, appropriated, or taken custody or control of, during the 12-month period ending with the month in which any such action occurs, constitutes a Substantial Portion. 7.9. The Borrower or any of its Subsidiaries shall fail within 30 days to pay, bond or otherwise discharge one or more (i) judgments or orders for the payment of money in excess of $1,000,000 (or the equivalent thereof in currencies other than U.S. Dollars) in the aggregate, or (ii) nonmonetary judgments or orders which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, which judgment(s), in any such case, is/are not stayed on appeal or otherwise being appropriately contested in good faith. 7.10. The Unfunded Liabilities of all Single Employer Plans shall exceed in the aggregate $1,000,000 or any Reportable Event shall occur in connection with any Plan. 7.11. The Borrower or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that it has incurred withdrawal liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Borrower or any other member of the Controlled Group as withdrawal liability (determined as of the date of such notification), exceeds $1,000,000 or requires payments exceeding $500,000 per annum. 7.12. The Borrower or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Borrower and the other members of the Controlled Group (taken as a whole) to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years of each such Multiemployer Plan immediately preceding the plan year in which the reorganization or termination occurs by an amount exceeding $1,000,000. 7.13. The Borrower or any of its Subsidiaries shall (i) be the subject of any proceeding or investigation pertaining to the release by the Borrower, any of its Subsidiaries or any other Person of any toxic or hazardous waste or substance into the environment, or (ii) violate any Environmental Law, which, in the case of an event described in clause (i) or clause (ii), could reasonably be expected to have a Material Adverse Effect. 7.14. Any Change in Control shall occur. 7.15. The occurrence of any "default", as defined in any Loan Document (other than this Agreement) or the breach of any of the terms or provisions of any Loan Document (other than this Agreement), which default or breach continues beyond any period of grace therein provided. 32 7.16. Nonpayment by the Borrower or any Subsidiary of any Rate Management Obligation within 1 day after such obligation is due or the breach by the Borrower or any Subsidiary of any term, provision or condition contained in any Rate Management Transaction, which default or breach continues beyond any period of grace therein provided. 7.17. The Guaranty shall fail to remain in full force or effect or any action shall be taken to discontinue or to assert the invalidity or unenforceability of the Guaranty, or any Guarantor shall fail to comply with any of the terms or provisions of the Guaranty, or any Guarantor shall deny that it has any further liability under the Guaranty, or shall give notice to such effect. 7.18. Any Collateral Document shall for any reason fail to create a valid and perfected security interest in any collateral purported to be covered thereby, except as permitted by the terms of any Collateral Document, or any Collateral Document shall fail to remain in full force or effect or any action shall be taken to discontinue or to assert the invalidity or unenforceability of any Collateral Document, or the Borrower or any Guarantor shall fail to comply with any of the terms or provisions of any Collateral Document. 7.19. The representations and warranties set forth in Section 5.15 shall at any time not be true and correct in any material respect. 7.20. An "Event of Default" under and as defined in the Congress Credit Agreement has occurred and is continuing. 7.21. The Borrower shall fail to make any regularly scheduled payment under any Operating Lease after any applicable grace period. ARTICLE VII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES ---------------------------------------------- 8.1. Acceleration. (i) If any Default described in Section 7.6 or 7.7 ------------ occurs with respect to the Borrower, the obligations of the Lenders to maintain Loans hereunder shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Agent or any Lender. If any other Default occurs, the Required Lenders (or the Agent with the consent of the Required Lenders) may declare the Obligations to be due and payable, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrower hereby expressly waives. 33 (ii) If, within 30 days after acceleration of the maturity of the Obligations or termination of the obligations of the Lenders to make Loans hereunder as a result of any Default (other than any Default as described in Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in their sole discretion) shall so direct, the Agent shall, by notice to the Borrower, rescind and annul such acceleration and/or termination. 8.2. Amendments. Subject to the provisions of this Article VIII, the ---------- Required Lenders (or the Agent with the consent in writing of the Required Lenders) and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or waiving any Default hereunder; provided that no such supplemental agreement shall, without -------- the consent of all of the Lenders: (i) Extend the final maturity of any Loan or postpone any regularly scheduled payment of principal of any Loan or forgive all or any portion of the principal amount thereof or reduce the rate or extend the time of payment of interest or fees thereon. (ii) Reduce the percentage specified in the definition of Required Lenders. (iii) Reduce the amount of, or extend the payment date for, the mandatory payments required under Section 2.2, or permit the Borrower to assign its rights under this Agreement. (iv) Amend this Section 8.2. (v) Release any Guarantor of any Obligations or, except as provided in the Collateral Documents, release all or substantially all of the Collateral. No amendment of any provision of this Agreement relating to the Agent shall be effective without the written consent of the Agent. The Agent may waive payment of the fee required under Section 12.3.2 without obtaining the consent of any other party to this Agreement. 8.3. Preservation of Rights. No delay or omission of the Lenders or the ---------------------- Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of any Loan Document whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Agent and the Lenders until the Obligations have been paid in full. 34 ARTICLE IX GENERAL PROVISIONS ------------------ 9.1. Survival of Representations. All representations and warranties of --------------------------- the Borrower contained in this Agreement shall survive the making of the Loans. 9.2. Governmental Regulation. Anything contained in this Agreement to the ----------------------- contrary notwithstanding, no Lender shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation. 9.3. Headings. Section headings in the Loan Documents are for convenience -------- of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents. 9.4. Entire Agreement. The Loan Documents embody the entire agreement and ---------------- understanding among the Borrower, the Agent and the Lenders and supersede all prior agreements and understandings among the Borrower, the Agent and the Lenders relating to the subject matter thereof. 9.5. Several Obligations; Benefits of this Agreement. The respective ----------------------------------------------- obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns. 9.6. Expenses; Indemnification. (i) The Borrower shall reimburse the ------------------------- Agent for any reasonable costs, internal charges and out-of-pocket expenses (including actual attorneys' fees and time charges of attorneys for the Agent, which attorneys may be employees of the Agent) paid or incurred by the Agent in connection with the preparation, negotiation, execution, delivery, syndication, review, amendment, modification, and administration of the Loan Documents. The Borrower also agrees to reimburse the Agent and the Lenders for any reasonable costs, internal charges and out-of-pocket expenses (including actual attorneys' fees and time charges of attorneys for the Agent and the Lenders, which attorneys may be employees of the Agent or the Lenders) paid or incurred by the Agent or any Lender in connection with the collection and enforcement of the Loan Documents. (ii) The Borrower hereby further agrees to indemnify the Agent, each Lender, their respective affiliates, and each of their directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent, any Lender or any affiliate is a party thereto) which any of them may pay or incur arising out of or relating to this Agreement, the other Loan Documents, the transactions contemplated hereby or the direct or indirect application or 35 proposed application of the proceeds of any Loan hereunder except to the extent that they are determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the party seeking indemnification. The obligations of the Borrower under this Section 9.6 shall survive the termination of this Agreement. 9.7. Numbers of Documents. All statements, notices, closing documents, -------------------- and requests hereunder shall be furnished to the Agent with sufficient counterparts so that the Agent may furnish one to each of the Lenders. 9.8. Accounting. Except as provided to the contrary herein, all ---------- accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles. 9.9. Severability of Provisions. Any provision in any Loan Document that -------------------------- is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 9.10. Nonliability of Lenders. The relationship between the Borrower on ----------------------- the one hand and the Lenders and the Agent on the other hand shall be solely that of borrower and lender. Neither the Agent nor any Lender shall have any fiduciary responsibilities to the Borrower. Neither the Agent nor any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower's business or operations. The Borrower agrees that neither the Agent nor any Lender shall have liability to the Borrower (whether sounding in tort, contract or otherwise) for losses suffered by the Borrower in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought. Neither the Agent nor any Lender shall have any liability with respect to, and the Borrower hereby waives, releases and agrees not to sue for, any special, indirect or consequential damages suffered by the Borrower in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby. 9.11. Confidentiality. Each Lender agrees to hold any confidential --------------- information which it may receive from the Borrower pursuant to this Agreement in confidence, except for disclosure (i) to its Affiliates and to other Lenders and their respective Affiliates, (ii) to legal counsel, accountants, and other professional advisors to such Lender or to a Transferee, (iii) to regulatory officials, (iv) to any Person as requested pursuant to or as required by law, regulation, or legal process, (v) to any Person in connection with any legal proceeding to which such Lender is a party, (vi) to such Lender's direct or indirect contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties, and (vii) permitted by Section 12.4. 36 9.12. Nonreliance. Each Lender hereby represents that it is not relying ----------- on or looking to any margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System) for the repayment of the Loans provided for herein. 9.13. Disclosure. The Borrower and each Lender hereby (i) acknowledge and ---------- agree that Bank One and/or its Affiliates from time to time may hold investments in, make other loans to or have other relationships with the Borrower and its Affiliates, and (ii) waive any liability of Bank One or such Affiliate of Bank One to the Borrower or any Lender, respectively, arising out of or resulting from such investments, loans or relationships other than liabilities arising out of the gross negligence or willful misconduct of Bank One or its Affiliates. ARTICLE X THE AGENT --------- 10.1. Appointment; Nature of Relationship. Bank One, NA is hereby appointed ----------------------------------- by each of the Lenders as its contractual representative (herein referred to as the "Agent") hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents. The Agent agrees to act as such contractual representative upon the express conditions contained in this Article X. Notwithstanding the use of the defined term "Agent," it is expressly understood and agreed that the Agent shall not have any fiduciary responsibilities to any Lender by reason of this Agreement or any other Loan Document and that the Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Lenders' contractual representative, the Agent (i) does not hereby assume any fiduciary duties to any of the Lenders, (ii) is a "representative" of the Lenders within the meaning of Section 9-105 of the Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders hereby agrees to assert no claim against the Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender hereby waives. 10.2. Powers. The Agent shall have and may exercise such powers under the ------ Loan Documents as are specifically delegated to the Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Agent. 10.3. General Immunity. Neither the Agent nor any of its directors, ---------------- officers, agents or employees shall be liable to the Borrower or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith 37 except to the extent such action or inaction is determined in a final non- appealable judgment by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of such Person. 10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor any ------------------------------------------ of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (c) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered solely to the Agent; (d) the existence or possible existence of any Default or Unmatured Default; (e) the validity, enforceability, effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation, perfection or priority of any Lien in any collateral security; or (g) the financial condition of the Borrower or any guarantor of any of the Obligations or of any of the Borrower's or any such guarantor's respective Subsidiaries. The Agent shall have no duty to disclose to the Lenders information that is not required to be furnished by the Borrower to the Agent at such time, but is voluntarily furnished by the Borrower to the Agent (either in its capacity as Agent or in its individual capacity). 10.5. Action on Instructions of Lenders. The Agent shall in all cases be --------------------------------- fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. The Lenders hereby acknowledge that the Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders. The Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action. 10.6. Employment of Agents and Counsel. The Agent may execute any of its -------------------------------- duties as Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The Agent shall be entitled to advice of counsel concerning the contractual arrangement between the Agent and the Lenders and all matters pertaining to the Agent's duties hereunder and under any other Loan Document. 10.7. Reliance on Documents; Counsel. The Agent shall be entitled to rely ------------------------------ upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in 38 respect to legal matters, upon the opinion of counsel selected by the Agent, which counsel may be employees of the Agent. 10.8. Agent's Reimbursement and Indemnification. The Lenders agree to ----------------------------------------- reimburse and indemnify the Agent ratably in proportion to their respective Pro Rata Shares (i) for any amounts not reimbursed by the Borrower for which the Agent is entitled to reimbursement by the Borrower under the Loan Documents, (ii) for any other expenses incurred by the Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents (including, without limitation, for any expenses incurred by the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby (including, without limitation, for any such amounts incurred by or asserted against the Agent in connection with any dispute between the Agent and any Lender or between two or more of the Lenders), or the enforcement of any of the terms of the Loan Documents or of any such other documents; provided that (i) no Lender shall be -------- liable for any of the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Agent and (ii) any indemnification required pursuant to Section 3.1(vii) shall, notwithstanding the provisions of this Section 10.8, be paid by the relevant Lender in accordance with the provisions thereof. The obligations of the Lenders under this Section 10.8 shall survive payment of the Obligations and termination of this Agreement. 10.9. Notice of Default. The Agent shall not be deemed to have knowledge or ----------------- notice of the occurrence of any Default or Unmatured Default hereunder unless the Agent has received written notice from a Lender or the Borrower referring to this Agreement describing such Default or Unmatured Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders. 10.10. Rights as a Lender. In the event the Agent is a Lender, the Agent ------------------ shall have the same rights and powers hereunder and under any other Loan Document with respect to its Loans as any Lender and may exercise the same as though it were not the Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a Lender, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby from engaging with any other Person. The Agent, in its individual capacity, is not obligated to remain a Lender. 10.11. Lender Credit Decision. Each Lender acknowledges that it has, ---------------------- independently and without reliance upon the Agent, the Arranger or any other Lender and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed 39 appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Agent 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 and the other Loan Documents. 10.12. Successor Agent. The Agent may resign at any time by giving written --------------- notice thereof to the Lenders and the Borrower, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, forty-five days after the retiring Agent gives notice of its intention to resign. The Agent may be removed at any time with or without cause by written notice received by the Agent from the Required Lenders, such removal to be effective on the date specified by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint, on behalf of the Borrower and the Lenders, a successor Agent with (so long as no Default or Unmatured Default shall have occurred and be continuing) the consent of the Borrower (such consent not to be unreasonably withheld). If no successor Agent shall have been so appointed by the Required Lenders within thirty days after the resigning Agent's giving notice of its intention to resign, then the resigning Agent may appoint, on behalf of the Borrower and the Lenders, a successor Agent. Notwithstanding the previous sentence, the Agent may at any time without the consent of the Borrower or any Lender, appoint any of its Affiliates which is a commercial bank as a successor Agent hereunder. If the Agent has resigned or been removed and no successor Agent has been appointed, the Lenders may perform all the duties of the Agent hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with the Lenders. No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment. Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning or removed Agent. Upon the effectiveness of the resignation or removal of the Agent, the resigning or removed Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation or removal of an Agent, the provisions of this Article X shall continue in effect for the benefit of such Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder and under the other Loan Documents. 10.13. Delegation to Affiliates. The Borrower and the Lenders agree that ------------------------ the Agent may delegate any of its duties under this Agreement to any of its Affiliates. Any such Affiliate (and such Affiliate's directors, officers, agents and employees) which performs duties in connection with this Agreement shall be entitled to the same benefits of the indemnification, waiver and other protective provisions to which the Agent is entitled under Articles IX and X. 10.14. Execution of Collateral Documents. The Lenders hereby empower and --------------------------------- authorize the Agent to execute and deliver to the Borrower on their behalf any financing statements, agreements, 40 documents or instruments as shall be necessary or appropriate to effect the purposes of the Pledge and Security Agreement. 10.15. Collateral Releases. The Lenders hereby empower and authorize the ------------------- Agent to execute and deliver to the Borrower on their behalf any agreements, documents or instruments as shall be necessary or appropriate to effect any releases of Collateral which shall be permitted by the terms hereof or of any other Loan Document or which shall otherwise have been approved by the Required Lenders (or, if required by the terms of Section 8.2, all of the Lenders) in writing. ARTICLE XI SETOFF; RATABLE PAYMENTS ------------------------ 11.1. Setoff. In addition to, and without limitation of, any rights of the ------ Lenders under applicable law, if the Borrower becomes insolvent, however evidenced, or any Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender or any Affiliate of any Lender to or for the credit or account of the Borrower may be offset and applied toward the payment of the Obligations owing to such Lender, whether or not the Obligations, or any part thereof, shall then be due. 11.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has ---------------- payment made to it upon the outstanding principal amount of its Loans (other than payments received pursuant to Section 3.1) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the aggregate outstanding principal amount of the Loans held by the other Lenders so that after such purchase each Lender will hold its Pro Rata Share of the aggregate outstanding principal amount of the Loans. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their respective Pro Rata Shares. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made. ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS ------------------------------------------------- 12.1. Successors and Assigns. The terms and provisions of the Loan ---------------------- Documents shall be binding upon and inure to the benefit of the Borrower and the Lenders and their respective successors and assigns, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents and (ii) any assignment by any Lender must be made in 41 compliance with Section 12.3. The parties to this Agreement acknowledge that clause (ii) of this Section 12.1 relates only to absolute assignments and does not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by any Lender of all or any portion of its rights under this Agreement and any Note to a Federal Reserve Bank; provided -------- that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 12.3. The Agent may treat the Person which made any Loan or which holds any Note as the owner thereof for all purposes hereof unless and until such Person complies with Section 12.3; provided that the Agent may in its discretion (but shall not be required to) - -------- follow instructions from the Person which made any Loan or which holds any Note to direct payments relating to such Loan or Note to another Person. Any assignee of the rights to any Loan or any Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Loan (whether or not a Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the rights to such Loan. 12.2. Participations. -------------- 12.2.1 Permitted Participants; Effect. Any Lender may, in the ordinary ------------------------------ course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan of such Lender, any Note held by such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of its Loans and the holder of any Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. 12.2.2 Voting Rights. Each Lender shall retain the sole right to ------------- approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Loan in which such Participant has an interest which forgives principal, interest or fees or reduces the interest rate or fees payable with respect to any such Loan, postpones any date fixed for any regularly-scheduled payment of principal of, or interest or fees on, any such Loan, releases any guarantor of any such Loan or releases all or substantially all of the collateral, if any, securing any such Loan. 42 12.2.3 Benefit of Setoff. The Borrower agrees that each Participant ----------------- shall be deemed to have the right of setoff provided in Section 11.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents; provided that each Lender shall retain the right of setoff provided in Section 11.1 with respect to the amount of participating interests sold to each Participant. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 11.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender. 12.3. Assignments. ----------- 12.3.1 Permitted Assignments. Any Lender may, in the ordinary course --------------------- of its business and in accordance with applicable law, at any time assign to one or more Eligible Assignees ("Purchasers") all or any part of its rights and obligations under the Loan Documents. Such assignment shall be substantially in the form of Exhibit C or in such other form as may be agreed to by the parties thereto. Each such assignment with respect to a Purchaser which is not a Lender or an Affiliate thereof shall (unless each of the Borrower and the Agent otherwise consents) be in an amount not less than the lesser of (i) $5,000,000 or (ii) the remaining amount of the assigning Lender's Commitment (calculated as at the date of such assignment) or outstanding Loans (if the applicable Commitment has been terminated). 12.3.2 Effect; Effective Date. Upon (i) delivery to the Agent of an ---------------------- assignment, together with any consents required by Section 12.3.1, and (ii) payment of a $3,500 fee to the Agent for processing such assignment (unless such fee is waived by the Agent), such assignment shall become effective on the effective date specified in such assignment, and the Agent shall promptly provide the Borrower with notice of such assignment. The assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Loan under the applicable assignment agreement constitutes "plan assets" as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be "plan assets" under ERISA. On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by or on behalf of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and no further consent or action by the Borrower, the Lenders or the Agent shall be required to release the transferor Lender with respect to the percentage of the Loans assigned to such Purchaser. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.2, the transferor Lender, the Agent and the Borrower shall, if the transferor Lender or the Purchaser desires that its Loan be evidenced by a Note, make appropriate arrangements so that a new Note or, as appropriate, a 43 replacement Note is issued to such transferor Lender and a new Note or, as appropriate, a replacement Note, is issued to such Purchaser, in each case in principal amounts reflecting their outstanding Loans, as adjusted pursuant to such assignment. 12.4. Dissemination of Information. The Borrower authorizes each Lender to ---------------------------- disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "Transferee") and any prospective Transferee any and all information in such Lender's possession concerning the creditworthiness of the Borrower and its Subsidiaries, including without limitation any information contained in any Reports; provided that each -------- Transferee and prospective Transferee agrees to be bound by Section 9.11 of this Agreement. 12.5. Tax Treatment. If any interest in any Loan Document is transferred to ------------- any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 3.1(iv). ARTICLE XII NOTICES ------- 13.1. Notices. All notices, requests and other communications to any party ------- hereunder shall be in writing (including electronic transmission, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Agent, at its address or facsimile number set forth on the signature pages hereof, (y) in the case of any Lender, at its address or facsimile number set forth below its signature hereto or (z) in the case of any party, at such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Borrower in accordance with the provisions of this Section 13.1. Each such notice, request or other communication shall be effective (i) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when delivered (or, in the case of electronic transmission, received) at the address specified in this Section; provided that notices to the Agent under Article II shall not be effective until - -------- received. 13.2. Change of Address. The Borrower, the Agent and any Lender may each ----------------- change the address for service of notice upon it by a notice in writing to the other parties hereto. 44 ARTICLE XIV COUNTERPARTS ------------ This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL ------------------------------------------------------------ 15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A ------------- CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION 105/5-1 ET SEQ, BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 15.2. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO ----------------------- THE NONEXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS. 15.3. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER HEREBY -------------------- WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING 45 IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER. 15.4. WAIVER OF AND AGREEMENT TO TERMINATE AUTOMATIC STAY. EACH OF THE --------------------------------------------------- BORROWER AND EACH GUARANTOR HEREBY AGREES THAT, IN THE EVENT THAT IT EVER BECOMES A DEBTOR IN A CASE UNDER 11 U.S.C. (S)101 ET SEQ. (AS AMENDED), IT HEREBY CONSENTS TO THE WAIVER OR TERMINATION OF THE AUTOMATIC STAY IMPOSED UNDER SECTION 362(a) OF THAT STATUTE AND ANY OTHER STAY IMPOSED IN ANY SUCH CASE SO THAT THE AGENT ON BEHALF OF THE LENDERS CAN PROCEED AGAINST THE COLLATERAL OF THE BORROWER OR SUCH GUARANTOR GRANTED UNDER THE COLLATERAL DOCUMENTS. [SIGNATURES BEGIN ON NEXT PAGE] 46 IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed this Agreement as of the date first above written. TRANSIT GROUP, INC. By: /s/ Philip A. Belyew --------------------- Name: Philip A. Belyew ------------------- Title: President ------------------ 2859 Paces Ferry Road, Suite 1740 Atlanta, Georgia 30339 Attention: James G. Overley Telephone: (770) 444-0240 FAX: (770) 444-0246 S-1 BANK ONE, NA, Individually and as Agent By: /s/ Linda M. Thompson --------------------------- Name: Linda M. Thompson ------------------------ Title: Senior Vice President ---------------------- 1 Bank One Plaza Chicago, Illinois 60670 Attention: Linda M. Thompson Telephone: (312) 732-6423 FAX: (312) 732-1775 S-2 AMSOUTH BANK By: /s/ William R. Hoog -------------------- Name: William R. Hoog ------------------ Title: Vice President ---------------- 100 N. Tampa Street Suite 3400 Tampa, Florida 33602 Attention: William Hoog Telephone: (813) 226-1104 FAX: (813) 226-1102 S-3 BANK OF AMERICA, N.A. By: /s/ Michael J. Fey -------------------- Name: Michael J. Fey ----------------- Title: Vice President ---------------- 101 N. Tryon Street, 13/th/ Floor NC1-001-13-26 Charlotte, North Carolina 28255 Attention: Michael Fey Telephone: (704) 388-2461 FAX: (704) 386-5856 S-4 COMPASS BANK By: /s/ T. Ray Sandefur ------------------------ Name: T. Ray Sandefur ----------------------- Title: Senior Vice President ---------------------- 15 South 20th Street 15th Floor Birmingham, Alabama 35233 Attention: T. Ray Sandefur Telephone: (205) 933-3652 FAX: (205) 715-7212 S-5 BRANCH BANKING AND TRUST By: /s/ Rufus Yates ---------------------------- Name: Rufus Yates -------------------------- Title: Executive Vice President ------------------------- 110 South Stratford Road Suite 301 Winston Salem, North Carolina 27104 Attention: Mark Redmond Telephone: (336) 733-3242 FAX: (336) 733-3254 S-6 NATIONAL CANADA FINANCE LLC (as successor to National Canada Finance Corp). By: /s/ Martin Feig ----------------- Name: Martin Feig ---------------- Title: Vice President --------------- By: /s/ Frank H. Dalt --------------------------- Name: Frank H. Dalt ------------------------- Title: Senior Credit Officer ----------------------- 125 West 55th Street New York, New York 10019 Attention: Martin Feig Telephone: (212) 632-8629 FAX: (212) 632-8545 S-7 UNION BANK OF CALIFORNIA By: /s/ Daniel Isenberg --------------------- Name: Daniel Isenberg -------------------- Title: ------------------ 445 S. Figueroa Street Los Angeles, California 90071 Attention: Daniel Isenberg Telephone: (213) 236-6202 FAX: (213) 236-6293 S-8 Solely for purposes of Section 6.24 and 15.4: CARROLL FULMER & COMPANY, INC. By: /s/ Philip A. Belyew -------------------- Title: Sole Director ------------------ J&L TRUCK LEASING OF FARMINGTON, INCORPORATED By: /s/ Philip A. Belyew -------------------- Title: Sole Director ------------------ LAND TRANSPORTATION, LLC By: /s/ Philip A. Belyew -------------------- Title: Sole Manager ------------------ TRANSIT GROUP TRANSPORTATION, LLC By: /s/ Philip A. Belyew -------------------- Title: Sole Manager ------------------ TRANSIT LOGISTICS, LLC By: /s/ Philip A. Belyew -------------------- Title: Sole Manager ------------------ TRANSIT HOLDINGS COMPANY, INC. By: /s/ Philip A. Belyew -------------------- Title: Sole Director ------------------ S-9 EX-10.6 9 dex106.txt LOAN AND SECURITY AGREEMENT EXHIBIT 10.6 LOAN AND SECURITY AGREEMENT by and among CONGRESS FINANCIAL CORPORATION (SOUTHERN) as Lender and TRANSIT GROUP, INC., TRANSIT GROUP TRANSPORTATION, LLC CARROLL FULMER & COMPANY, INC., and LAND TRANSPORTATION, LLC, as Borrowers Dated: April 19, 2001 TABLE OF CONTENTS -----------------
Page SECTION 1. DEFINITIONS................................................ -1- SECTION 2. CREDIT FACILITIES.......................................... -17- 2.1 Revolving Loans............................................ -17- 2.2 Letter of Credit Accommodations............................ -18- 2.3 Borrower Agent............................................. -20- SECTION 3. INTEREST AND FEES.......................................... -20- 3.1 Interest -20- 3.2 Closing Fee................................................ -21- 3.3 Servicing Fee.............................................. -21- 3.4 Increased Line Fee......................................... -21- 3.5 Maximum Interest........................................... -21- 3.6 Nature and Extent of Each Borrower's Liability............. -23- SECTION 4. CONDITIONS PRECEDENT....................................... -25- 4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations............................................ -25- 4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations............................................ -27- SECTION 5. SECURITY INTEREST.......................................... -27- SECTION 6. COLLECTION AND ADMINISTRATION.............................. -28- 6.1 Borrowers' Loan Account.................................... -28- 6.2 Statements................................................. -28- 6.3 Collection of Accounts..................................... -28- 6.4 Payments................................................... -29- 6.5 Authorization to Make Loans................................ -30- 6.6 Use of Proceeds............................................ -30- SECTION 7. COLLATERAL REPORTING AND COVENANTS......................... -30- 7.1 Collateral Reporting....................................... -30- 7.2 Accounts Covenants......................................... -31- 7.3 Equipment and Real Property Covenants...................... -32- 7.4 Power of Attorney.......................................... -32- 7.5 Right to Cure.............................................. -33- 7.6 Access to Premises......................................... -33- SECTION 8. REPRESENTATIONS AND WARRANTIES............................. -33- 8.1 Corporate Existence, Power and Authority; Subsidiaries..... -34- 8.2 Financial Statements; No Material Adverse Change........... -34- 8.3 Chief Executive Office; Collateral Locations............... -34- 8.4 Priority of Liens; Title to Properties..................... -34- 8.5 Tax Returns................................................ -34- 8.6 Litigation................................................. -35- 8.7 Compliance with Other Agreements and Applicable Laws....... -35-
(i)
8.8 Environmental Matters...................................... -35- 8.9 Employee Benefits.......................................... -35- 8.10 Bank Accounts.............................................. -36- 8.11 Intellectual Property...................................... -36- 8.12 Capitalization............................................. -37- 8.13 Labor Disputes............................................. -37- 8.14 Corporate Name; Prior Transactions......................... -37- 8.15 Restrictions on Subsidiaries............................... -37- 8.16 Material Contracts......................................... -37- 8.17 Payable Practices.......................................... -37- 8.18 Accuracy and Completeness of Information................... -37- 8.19 Brokerage Receivables...................................... -38- 8.20 Survival of Warranties; Cumulative......................... -38- SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS......................... -38- 9.1 Maintenance of Existence................................... -38- 9.2 New Collateral Locations................................... -38- 9.3 Compliance with Laws, Regulations, Etc..................... -38- 9.4 Payment of Taxes and Claims................................ -39- 9.5 Insurance.................................................. -40- 9.6 Financial Statements and Other Information................. -40- 9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.... -41- 9.8 Encumbrances............................................... -42- 9.9 Indebtedness............................................... -42- 9.10 Loans, Investments, Guarantees, Etc........................ -44- 9.11 Dividends and Redemptions.................................. -45- 9.12 Transactions with Affiliates............................... -45- 9.13 Additional Bank Accounts................................... -45- 9.14 Compliance with ERISA...................................... -46- 9.15 End of Fiscal Years: Fiscal Quarters....................... -46- 9.16 Change in Business......................................... -46- 9.17 Limitation of Restrictions Affecting Subsidiaries.......... -46- 9.18 Tangible Net Worth......................................... -46- 9.19 License Agreements......................................... -47- 9.20 After Acquired Real Property............................... -48- 9.21 Costs and Expenses......................................... -48- 9.22 Further Assurances......................................... -49- 9.23 Capital Expenditures....................................... -49- 9.24 Payment of Existing Indebtedness........................... -49- 9.25 Excess Availability........................................ -49- 9.26 Brokerage Fees............................................. -49- 9.27 Consultant................................................. -49- 9.28 License Tag Reserves....................................... -49- SECTION 10. EVENTS OF DEFAULT AND REMEDIES............................. -50- 10.1 Events of Default.......................................... -50- 10.2 Remedies................................................... -52-
(ii)
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW....................................................... -53- 11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.............................................. -53- 11.2 Waiver of Notices.......................................... -54- 11.3 Amendments and Waivers..................................... -54- 11.4 Waiver of Counterclaims.................................... -55- 11.5 Indemnification............................................ -55- SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS........................... -55- 12.1 Term....................................................... -55- 12.2 Interpretative Provisions.................................. -56- 12.3 Notices -57- 12.4 Partial Invalidity......................................... -58- 12.5 Successors................................................. -58- 12.6 Counterparts, Etc.......................................... -58- 12.7 Entire Agreement........................................... -58-
(iii) INDEX TO EXHIBITS AND SCHEDULES ---------------------- Exhibit A Information Certificates Exhibit B Compliance Certificate Schedule 1 Permitted Holders Schedule 4.1(d) Equipment Leases Schedule 8.4 Existing Liens Schedule 8.8 Environmental Matters Schedule 8.10 Bank Accounts Schedule 8.11 Licensed Intellectual Property Schedule 8.13 Labor Matters Schedule 8.16 Material Contacts Schedule 9.9 Existing Indebtedness Schedule 9.10 Existing Loans, Advances and Guarantees (iv) LOAN AND SECURITY AGREEMENT --------------------------- THIS LOAN AND SECURITY AGREEMENT is made on April 19, 2001, by and among CONGRESS FINANCIAL CORPORATION (SOUTHERN), a Georgia corporation ("Lender"), and TRANSIT GROUP, INC., a Florida corporation ("Transit Group"), TRANSIT GROUP TRANSPORTATION, LLC, a Delaware limited liability company ("Transportation"), CARROLL FULMER & COMPANY, INC., a Florida corporation ("Carroll"), and LAND TRANSPORTATION, LLC, a Delaware limited liability company ("Land"; Transit Group, Transportation, Carroll and Land are collectively referred to herein as "Borrowers" and individually as a "Borrower"). Recitals: -------- Each Borrower has requested that Lender make available a revolving credit facility and letter of credit facility to Borrowers, which shall be used by Borrowers to finance their mutual and collective enterprise of providing trucking services including dry van and refrigerated hauling, freight brokering and warehousing. In order to utilize the financial powers of each Borrower in the most efficient and economical manner, and in order to facilitate the financing of each Borrower's needs, Lender will, at the request of any Borrower, make loans to all Borrowers under the revolving credit facility and letter of credit facility on a combined basis and in accordance with the provisions hereinafter set forth. Borrowers' business is a mutual and collective enterprise, and Borrowers believe that the consolidation of all loans and other financial accommodations under this Agreement will enhance the aggregate borrowing power of each Borrower and ease the administration of their loan relationship with Lender, all to the mutual advantage of Borrowers. Lender=s willingness to extend credit to Borrowers and to administer each Borrower's collateral security therefor, on a combined basis as more fully set forth in this Agreement, is done solely as an accommodation to Borrowers and at Borrowers' request in furtherance of Borrowers' mutual and collective enterprise. Lender is willing to make such loans and provide such financial accommodations on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing premises and the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS ----------- "Accommodation Payment" shall have the meaning set forth in Section 3.6(d) of this Agreement. "Accounts" shall have the meaning ascribed to "account" in the UCC and shall include any and all present and future rights of a Borrower to payment for goods sold or leased or for services rendered, whether or not evidenced by instruments or chattel paper, and whether or not earned by performance. "Affiliate" shall mean, with respect to a specified Person, any other Person: (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person; (b) which beneficially owns or holds ten percent (10%) or more of any class of the Voting Stock of such specified Person; or (c) ten percent (10%) or more of the Voting Stock of which is beneficially owned or held by such specified Person or a Subsidiary of such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with") when used with respect to any specified Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by agreement or otherwise. "Allocable Percentage" shall have the meaning set forth in Section 3.6(d) of this Agreement. "Applicable Margin" shall mean, (a) at any time prior to October 19, 2001, one percent (1.00%), and, (b) effective on and after October 19, 2001, a percentage equal to the percentage shown below for the corresponding level of Excess Availability on any date of determination: ---------------------------------------------------------------------------- | Excess Availability: | Applicable Margin | |-----------------------------------------------------|--------------------| | Equal to or less than $9,000,000 | 1.00% | |-----------------------------------------------------|--------------------| | Greater than $9,000,0000, but less than $16,000,000 | 0.75% | |-----------------------------------------------------|--------------------| | Equal to or greater than $16,000,000 | 0.50% | ---------------------------------------------------------------------------- provided, however, that on or after October 19, 2001, the percentages set forth - -------- ------- above which are less than 1.00% shall be applicable to Revolving Loans from time to time, if (i) no Default or Event of Default exists at such time, and (ii) if the Excess Availability has not been less than the level indicated during the immediately preceding three-month period for more than three (3) consecutive Business Days or six (6) total Business Days during such prior three month period. If conditions (i) and (ii) are not satisfied, the Applicable Margin shall be 1.00%. Any change in the Applicable Margin shall become effective on the first day of the immediately following month. "Average Availability" shall mean Excess Availability during the period in question divided by the number of days in such period. "Bankruptcy Code" shall mean Title 11 of the United States Code. "Blocked Accounts" shall have the meaning set forth in Section 6.3 of this Agreement. "Borrower Agent" shall mean Transit Group. "Borrowing Base" shall mean, at any time, the amount equal to: (a) the lesser of: (i) eighty-five percent (85%) of the Net Amount of Eligible Accounts, or (ii) the aggregate amount of cash collections for the immediately preceding 60-day period, less (b) any Reserves. ---- "Brokerage Contract" shall mean a contract that has been executed by a Borrower and a licensed carrier, in form and substance satisfactory to Lender in all respects. -2- "Brokerage Receivables" shall mean Receivables owing to a Borrower by a customer of such Borrower that arises from the delivery of goods by a licensed carrier pursuant to a Brokerage Contract. "Business Day" shall mean any day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required to close under the laws of the State of New York, the State of Georgia or the State of North Carolina, and a day on which the Reference Bank and Lender are open for the transaction of business. "Business Interruption Insurance Assignments" shall mean the Collateral Assignments of Business Interruption Insurance to be executed by each Borrower on the date hereof in favor of Lender, as security for the payment of the Obligations. "Capital Expenditures" shall mean expenditures made or liabilities incurred for the acquisition of any fixed assets or improvements, replacements, substitutions or additions thereto which have a useful life of more than one year, including the total principal portion of Capitalized Leases. "Capital Leases" shall mean, as applied to any Person, any lease of (or any agreement conveying the right to use) any Property (whether real, personal or mixed) by such Person as lessee which in accordance with GAAP, is required to be reflected as a liability on the balance sheet of such Person. "Capital Stock" shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's capital stock, partnership interests or limited liability company interests at any time outstanding, and any and all rights, warrants or options exchangeable for or convertible into such capital stock or other interests (but excluding any debt security that is exchangeable for or convertible into such capital stock). "Cash Equivalents" shall mean, at any time, (a) any evidence of Indebtedness with a maturity date of one hundred eighty (180) days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof; provided, that, the full faith and credit of the United -------- ---- States of America is pledged in support thereof; (b) certificates of deposit or bankers' acceptances with a maturity of one hundred eighty (180) days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $250,000,000; (c) commercial paper (including variable rate demand notes) with a maturity of one hundred eighty (180) days or less issued by a corporation (except an Affiliate of a Borrower) organized under the laws of any State of the United States of America or the District of Columbia and rated at least A-1 by Standard & Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc. or at least P-1 by Moody's Investors Service, Inc.; (d) repurchase obligations with a term of not more than thirty (30) days for underlying securities of the types described in clause (a) above entered into with any financial institution having combined capital and surplus and undivided profits of not less than $250,000,000; (e) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any governmental agency thereof and backed by the full faith and credit to the United States of America, in each case maturing within one hundred eighty (180) days or less from the date of acquisition; provided, that, the terms of such agreements comply with the -------- ---- guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985; and (f) investments in money market funds and mutual funds which invest substantially all of their assets in securities of the types described in clauses (a) through (e) above. -3- "Change of Control" shall mean (a) the transfer (in one transaction or a series of transactions) of all or substantially all of the assets of a Borrower to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act); (b) the liquidation or dissolution of a Borrower or the adoption of a plan by the stockholders of a Borrower relating to the dissolution or liquidation of a Borrower; (c) the acquisition by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), except for one or more Permitted Holders, of beneficial ownership, directly or indirectly, of fifty percent (50%) or more of the voting power of the total outstanding Voting Stock of a Borrower or the Board of Directors of a Borrower. "Closing Date" shall mean the date on which all of the conditions precedent in Section 4 of this Agreement are satisfied (or waived by Lender in its sole and absolute discretion) and the initial Revolving Loans are made under this Agreement. "Code" shall mean the Internal Revenue Code of 1986, as the same now exists or may from time to time hereafter be amended, modified, recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto. "Collateral" shall have the meaning set forth in Section 5 of this Agreement. "Collateral Access Agreement" shall mean an agreement in writing, in form and substance satisfactory to Lender, from any lessor of premises to a Borrower, or any other Person to whom any Collateral (including Inventory, Equipment, bills of lading or other documents of title) is consigned or who has custody, control or possession of any such Collateral or is otherwise the owner or operator of any premises on which any of such Collateral is located, pursuant to which such lessor, consignee or other Person, inter alia, acknowledges the first ----- ---- priority security interest of Lender in such Collateral, agrees to waive any and all claims such lessor, consignee or other Person may, at any time, have against such Collateral, whether for processing, storage or otherwise, and agrees to permit Lender access to, and the right to remain on, the premises of such lessor, consignee or other Person so as to exercise Lender's rights and remedies and otherwise deal with such Collateral and in the case of any Person who at any time has custody, control or possession of any bills of lading or other documents of title, agrees to hold such bills of lading or other documents as bailee for Lender and to follow all instructions of Lender with respect thereto. "Consolidated EBITDA" shall mean, for any fiscal period of Borrowers and their Subsidiaries, Borrowers' and such Subsidiaries' (i) income (or loss) before interest and taxes plus, (ii) to the extent deducted in determining such ---- income (or loss), depreciation, amortization and other similar non-cash charges, minus (iii) to the extent recognized in determining such income (or loss), - ----- extraordinary gains (or losses). "Consolidated EBITDAR" shall mean, for any period for Borrowers and their Subsidiaries, the sum of (i) Consolidated EBITDA, plus (ii) lease and rent expense, in each case determined in accordance with GAAP. "Contributing Borrower" shall have the meaning set forth in Section 3.6(d) of this Agreement. "Default" shall mean an event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, become an Event of Default. "Deposit Accounts" shall mean all of a Person's demand, time, savings, passbook, money market or other depository accounts, and all certificates of deposit, maintained by such Person with any bank, savings and loan association, credit union or other depository institution. "Deposit Account Assignments" shall mean the Collateral Assignments of Deposit Accounts to be executed by each Borrower on or before the Closing Date in favor of Lender, as security for the Obligations. "Eligible Accounts" shall mean Accounts created by a Borrower which are and continue to be acceptable to Lender based on the criteria set forth below. In general, Accounts shall be Eligible Accounts if: (a) such Accounts arise from the actual and bona fide sale and delivery ---- ---- of goods by a Borrower (or constitute Eligible Brokerage Receivables) or rendition of services by a Borrower in the ordinary course of business of such Borrower which transactions are completed in accordance with the terms and provisions contained in any documents related thereto; (b) such Accounts are not unpaid more than sixty (60) days after the original due date thereof or more than ninety (90) days after the date of the original invoice for them; (c) such Accounts comply with the terms and conditions contained in Section 7.2(c) of this Agreement and do not constitute Unbilled Amounts; (d) such Accounts do not arise from sales on consignment, guaranteed sale, sale and return, sale on approval, or other terms under which payment by the account debtor may be conditional or contingent; (e) the chief executive office of the account debtor with respect to such Accounts is located in the United States of America or Canada (provided, -------- that, at any time promptly upon Lender's request, each Borrower shall execute - ---- and deliver, or cause to be executed and delivered, such other agreements, documents and instruments as may be required by Lender to perfect the security interests of Lender in those Accounts of an account debtor with its chief executive office or principal place of business in Canada in accordance with the applicable laws of the Province of Canada in which such chief executive office or principal place of business is located and take or cause to be taken such other and further actions as Lender may request to enable Lender as secured party with respect thereto to collect such Accounts under the applicable Federal or Provincial laws of Canada) or, at Lender's option, if the chief executive office and principal place of business of the account debtor with respect to such Accounts is located other than in the United States of America or Canada, then if either: (1) the account debtor has delivered to such Borrower an irrevocable letter of credit issued or confirmed by a bank satisfactory to Lender and payable only in the United States of America and in U.S. dollars, sufficient to cover such Account, in form and substance satisfactory to Lender and if required by Lender, the original of such letter of credit has been delivered to Lender or Lender's agent and the issuer has acknowledged in writing to Lender the assignment of the proceeds of such letter of credit to Lender, or such Account is subject to credit insurance payable to Lender issued by an insurer and on terms and in an amount acceptable to Lender, or such Account is otherwise acceptable in all respects to Lender (subject to such lending formula with respect thereto as Lender may determine); (2) such Accounts do not consist of progress billings (such that the obligation of the account debtors with respect to such Accounts is conditioned upon such Borrower's satisfactory completion -5- of any further performance under the agreement giving rise thereto), bill and hold invoices or retainage invoices, except as to bill and hold invoices, if Lender shall have received an agreement in writing from the account debtor, in form and substance satisfactory to Lender, confirming the unconditional obligation of the account debtor to take the goods related thereto and pay such invoice; (f) the account debtor with respect to such Accounts has not asserted a counterclaim, defense or dispute and does not have, and does not engage in transactions which may give rise to, any right of setoff or recoupment against such Accounts (but the portion of the Accounts of such account debtor in excess of the amount at any time and from time to time owed by a Borrower to such account debtor or claimed owed by such account debtor may be deemed Eligible Accounts); (g) there are no facts, events or occurrences which would impair the validity, enforceability or collectability of such Accounts or reduce the amount payable or delay payment thereunder; (h) such Accounts are subject to the first priority, valid and perfected Lien and security interest of Lender and any goods giving rise thereto are not, and were not at the time of the sale thereof, subject to any Liens (including any carrier lien) except those permitted in this Agreement; (i) neither the account debtor nor any officer or employee of the account debtor with respect to such Accounts is an officer, employee, agent or other Affiliate of any Borrower (other than T. Wayne Davis who is the chairman of Winn-Dixie and General Electric Capital Corporation which is a preferred stockholder of Transit Group); (j) the account debtor with respect to such Accounts is not any foreign government, the United States of America, any State, political subdivision, department, agency or instrumentality thereof, unless, if the account debtor is the United States of America, any State, political subdivision, department, agency or instrumentality thereof, upon Lender's request, the Federal Assignment of Claims Act of 1940 or any similar State or local law, if applicable, has been complied with in a manner satisfactory to Lender; (k) there are no proceedings or actions which are threatened or pending against the account debtors with respect to such Accounts which might result in any material adverse change in any such account debtor's financial condition; (l) such Accounts are not evidenced by or arising under any instrument or chattel paper; (m) such Accounts of a single account debtor or its Affiliates do not constitute more than ten percent (10%) of all otherwise Eligible Accounts (but the portion of the Accounts not in excess of such percentage may be deemed Eligible Accounts); (n) such Accounts are not owed by an account debtor who has Accounts unpaid more than sixty (60) days after the original due date thereof or more than ninety (90) days after the original invoice date for them which constitute more than fifty percent (50%) or more of the total Accounts owing by such account debtor to Borrowers as ineligible hereunder; (o) the account debtor is not located in a state requiring the filing of a Notice of Business Activities Report or similar report in order to permit a 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 or such failure to file and -6- inability to seek judicial enforcement is capable of being remedied without any material delay or material cost; (p) such Accounts are owed by account debtors whose total Indebtedness to a Borrower does not exceed the credit limit with respect to such account debtors as determined by Lender from time to time (but the portion of the Accounts not in excess of such credit limit may be deemed Eligible Accounts); (q) such Accounts are owed by account debtors that are Solvent; and (r) such Accounts are owed by account debtors deemed creditworthy at all times by each Borrower consistent with its current practice and who are reasonably acceptable to Lender. General criteria for Eligible Accounts may be established and revised from time to time by Lender in good faith based on an event, condition or other circumstance arising after the date hereof, or existing on the date hereof to the extent Lender has no written notice thereof from a Borrower, which adversely affects or could reasonably be expected to adversely affect the Accounts in the good faith determination of Lender. Any Accounts which are not Eligible Accounts shall nevertheless be part of the Collateral. "Eligible Brokerage Receivables" shall mean Brokerage Receivables that satisfy all of the criteria contained in the definition of "Eligible Account". "Environmental Laws" shall mean all foreign, Federal, State and local laws (including common law), legislation, rules, codes, licenses, permits (including any conditions imposed therein), authorizations, judicial or administrative decisions, injunctions or agreements between a Borrower and any Governmental Authority, relating to pollution and the protection, preservation or restoration of the environment (including air, water vapor, surface water, ground water, drinking water, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety, relating to the exposure to, or the use, storage, recycling, treatment, generation, manufacture, processing, distribution, transportation, handling, labeling, production, release or disposal, or threatened release, of Hazardous Materials, or relating to all laws with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials. The term "Environmental Laws" includes (i) the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii) applicable state counterparts to such laws, and (iii) any common law or equitable doctrine that may impose liability or obligations for injuries or damages due to, or threatened as a result of, the presence of or exposure to any Hazardous Materials. "Equipment" shall mean all of a Borrower's now owned and hereafter acquired equipment, machinery, computers and computer hardware and software (whether owned or licensed), vehicles, tools, furniture, fixtures, all attachments, accessions and Property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located. "Equipment Lessors" shall mean those Persons listed on Schedule 4.1(d) attached hereto, which have leased equipment to a Borrower on or prior to the Closing Date. -7- "ERISA" shall mean the United States Employee Retirement Income Security Act of 1974, together with all rules, regulations and interpretations thereunder or related thereto. "ERISA Affiliate" shall mean any Person required to be aggregated with a Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m) or 414(o) of the Code. "ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan; (b) the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section 412 of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (e) the occurrence of a "prohibited transaction" with respect to which a Borrower or any of its Subsidiaries is a "disqualified person" (within the meaning of Section 4975 of the Code) or with respect to which a Borrower or any of its Subsidiaries could otherwise be liable; (f) a complete or partial withdrawal by the a Borrower or any ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is treated as such a withdrawal or notification that a Multiemployer Plan is in reorganization; (g) 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 Pension Benefit Guaranty Corporation to terminate a Plan or Multiemployer Plan; (h) 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 Plan or Multiemployer Plan; (i) the imposition of any liability under Title IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon a Borrower or any ERISA Affiliate; and (j) any other event or condition with respect to a Plan or Multiemployer Plan or any Plan subject to Title IV of ERISA maintained, or contributed to, by any ERISA Affiliate that could reasonably be expected to result in liability of a Borrower. "Event of Default" shall mean the occurrence or existence of any event or condition described in Section 10.1 hereof. "Excess" shall have the meaning set forth in Section 3.5(c) of this Agreement. "Excess Availability" shall mean the amount, as determined by Lender, calculated at any time, equal to the Borrowing Base on such date minus the sum ----- of: (i) the amount of all then outstanding and unpaid Obligations, plus (ii) the aggregate amount of all then outstanding and unpaid trade payables and other obligations of Borrowers which are more than sixty (60) days past due as of such time, plus (iii) the amount of checks issued by a Borrower to pay trade payables and other obligations which are more than sixty (60) days past due as of such time, but not yet sent and (iv) the book overdraft of Borrowers. "Exchange Act" shall mean the Securities Exchange Act of 1934, together with all rules, regulations and interpretations thereunder or related thereto. "Financing Agreements" shall mean, collectively, this Agreement and all notes, guarantees, security agreements, and other agreements, documents and instruments now or at any time hereafter executed and/or delivered by any or all Borrowers or any other Obligor in connection with this Agreement, including the Security Documents and the Intercreditor Agreement. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time as set forth in the opinions and pronouncements of the Accounting Principles Board -8- and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board which are applicable to the circumstances as of the date of determination consistently applied, except that, for purposes of Section 9.18 hereof, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements delivered to Lender prior to the date hereof. "Governmental Authority" shall mean any nation or government, any state, province, 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. "Hazardous Materials" shall mean any hazardous, toxic or dangerous substances, materials and wastes, including hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including materials which include hazardous constituents), sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes and including any other substances, materials or wastes that are or become regulated under any Environmental Law (including any that are or become classified as hazardous or toxic under any Environmental Law). "Increased Line Fee" shall have the meaning ascribed to such term in Section 3.4 of this Agreement. "Indebtedness" shall mean, with respect to any Person, any liability, whether or not contingent, (a) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes, debentures or similar instruments; (b) representing the balance deferred and unpaid of the purchase price of any Property or services (except any such balance that constitutes an account payable to a trade creditor (whether or not an Affiliate) created, incurred, assumed or guaranteed by such Person in the ordinary course of business of such Person in connection with obtaining goods, materials or services that is not overdue by more than ninety (90) days, unless the trade payable is being contested in good faith); (c) all obligations as lessee under leases which have been, or should be, in accordance with GAAP recorded as Capital Leases; (d) any contractual obligation, contingent or otherwise, of such Person to pay or be liable for the payment of any indebtedness described in this definition of another Person, including any such indebtedness, directly or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise acquire such indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof, or to maintain solvency, assets, level of income, or other financial condition; (e) all obligations with respect to redeemable stock and redemption or repurchase obligations under any Capital Stock or other equity securities issued by such Person; (f) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker's acceptances or similar documents or instruments issued for such Person's account; and (g) all indebtedness of such Person in respect of indebtedness of another Person for borrowed money or indebtedness of another Person otherwise described in this definition which is secured by any consensual lien, security interest, collateral assignment, conditional sale, mortgage, deed of trust, or other encumbrance on any asset of such Person, whether or not such obligations, liabilities or indebtedness are assumed by or are a personal liability of such Person, all as of such time. "Information Certificates" shall mean the Information Certificates of Borrowers constituting Exhibit A attached hereto containing material information --------- with respect to Borrowers, their businesses and assets -9- provided by or on behalf of Borrowers to Lender in connection with the preparation of this Agreement and the other Financing Agreements and the financing arrangements provided for herein. "Intangibles" shall mean the value of patents, trademarks, tradenames, copyrights, licenses, goodwill, and other intangible assets, in determined accordance with GAAP. "Intellectual Property" shall mean a Borrower's now owned and hereafter arising or acquired: patents, patent rights, patent applications, copyrights, works which are the subject matter of copyrights, copyright registrations, trademarks, trade names, trade styles, trademark and service mark applications, and licenses and rights to use any of the foregoing; all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing; all rights to sue for past, present and future infringement of any of the foregoing; inventions, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating standards; goodwill; customer and other lists in whatever form maintained; and trade secret rights, copyright rights, rights in works of authorship, and contract rights relating to computer software programs, in whatever form created or maintained. "Intercreditor Agreement" shall mean the Intercreditor Agreement to be entered into on the Closing Date among Lender and Term Lenders, pursuant to which the parties thereto shall set forth the priority of their respective Liens in the Collateral. "Interest" shall have the meaning set forth in Section 3.5(a) of this Agreement. "Interest Rate" shall mean a rate equal to the Prime Rate plus the ---- Applicable Margin; and, provided, that, notwithstanding anything to the contrary -------- ---- contained herein, the Interest Rate shall mean the rate of two (2%) percent per annum in excess of the interest rate otherwise in effect at such time, at Lender's option, without notice, (a) either (i) for the period on and after the date of termination or non-renewal hereof until such time as all Obligations are indefeasibly paid and satisfied in full in immediately available funds, or (ii) for the period from and after the date of the occurrence of any Event of Default, and for so long as such Event of Default is continuing as determined by Lender and (b) on the Revolving Loans at any time outstanding in excess of the amounts available to a Borrower under Section 2 (whether or not such excess(es) arise or are made with or without Lender's knowledge or consent and whether made before or after an Event of Default). "Inventory" shall have the meaning ascribed to "inventory" in the UCC and shall include all of a Borrower's now owned and hereafter existing or acquired raw materials, work in process, finished goods and all other inventory of whatsoever kind or nature, wherever located. "Investment Property" shall have the meaning ascribed to "investment property" in the UCC. "Letter of Credit Accommodations" shall mean, collectively, the letters of credit, merchandise purchase or other guaranties which are from time to time either (a) issued or opened by Lender for the account of a Borrower or any other Obligor or (b) with respect to which Lender has agreed to indemnify the issuer or guaranteed to the issuer the performance by a Borrower of its obligations to such issuer; sometimes being referred to herein individually as "Letter of Credit Accommodation". "Letter of Credit Rights" shall mean a right of a Borrower to payment or performance under a letter of credit (whether the letter of credit is written or electronic), whether or not such Borrower has demanded or is at the time entitled to demand payment or performance. -10- "License Agreements" shall have the meaning set forth in Section 8.11 hereof. "Lien" shall mean 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 common law, statute or contract. The term "Lien" shall also include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting Real Property. For the purpose of this Agreement, a Borrower shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes. "Material Adverse Effect" shall mean the effect of any event or condition which, alone or when taken together with other events or conditions occurring or existing concurrently therewith, (i) has a material adverse effect upon the business, operations, Properties or financial condition of any Borrower; (ii) has a material adverse effect upon the business, operations, Properties or financial condition of Obligors, taken as a whole; (iii) has or could be reasonably expected to have any material adverse effect whatsoever upon the validity or enforceability of this Agreement, or any of the other Financing Agreements; (iv) has any material adverse effect upon the value of the whole or any material part of the Collateral, the Liens of Lender with respect to the Collateral or the priority of any such Liens; (v) materially impairs the ability of Obligors as a group to perform its obligations under this Agreement, or any of the other Financing Agreements, including repayment of any of the Obligations when due; or (vi) materially impairs the ability of Lender to enforce or collect the Obligations or realize upon any of the Collateral in accordance with the Financing Agreements and applicable law. "Material Contract" shall mean (a) any written contract or other written agreement (other than the Financing Agreements), written or oral, of a Borrower involving monetary liability of or to any Person in an amount in excess of $1,000,000 in any fiscal year and (b) any other contract or other agreement (other than the Financing Agreements), whether written or oral, to which a Borrower is a party as to which the breach, nonperformance, cancellation or failure to renew by any party thereto would have a Material Adverse Effect. "Maximum Credit" shall mean the amount of $50,000,000 on and after the date that the Maximum Credit Conditions are satisfied, otherwise "Maximum Credit" shall mean $30,000,000. "Maximum Credit Conditions" shall mean, on any date, each of the following conditions, the satisfaction of each of which shall be required, as determined by Lender in its sole and absolute discretion, before the Maximum Credit and Revolving Loan Limit shall be increased from $30,000,000 to $50,000,000: (i) No Default or Event of Default exists at such time or would result therefrom; (ii) The outstanding principal amount of Revolving Loans on such date, after giving effect to any further Revolving Loans after such date, would exceed $30,000,000; (iii) Borrowers achieve Consolidated EBITDAR of at least the amount shown below for the applicable period corresponding thereto, as determined by Lender based upon the most recent financial statements of Borrowers delivered to Lender in accordance with the terms of Section 9.6(a) hereof for the immediately preceding month: -11- Period Amount ------ ----------- July 1, 2001 through August 31, 2001 $ 7,034,000 July 1, 2001 through September 30, 2001 $ 9,700,000 July 1, 2001 through October 31, 2001 $13,423,000 July 1, 2001 through November 30, 2001 $16,613,000 July 1, 2001 through December 31, 2001 $19,466,000 July 1, 2001 through January 30, 2002 $23,186,000 July 1, 2001 through February 28, 2002 $26,467,000 July 1, 2001 through March 30, 2002 $30,344,000 July 1, 2001 through April 30, 2002 $34,379,000 July 1, 2001 through May 31, 2002 $38,438,000 Thereafter, Consolidated EBITDAR shall be tested as the last day of each month, based upon the immediately preceding twelve (12) month period: June 2002 $41,984,000 July 2002 $42,701,000 August 2002 $42,854,000 September 2002 $43,536,000 October 2002 $43,994,000 November 2002 $44,110,000 December 2002 $45,420,000 January 2003 $45,761,000 February 2003 $46,029,000 March 2003 $46,276,000 April 2003 $46,542,000 May 2003 $46,805,000 June 2003 $47,358,000 (iv) Excess Availability (without taking into account any Reserves) is not less than the amount set forth below for the applicable period corresponding thereto, tested as of the last day of such month: Period Amount ------ ----------- July 2001 $15,043,000 August 2001 $16,836,000 September 2001 $17,208,000 October 2001 $17,077,000 November 2001 $17,283,000 December 2001 $17,160,000 January 2002 $19,382,000 February 2002 $19,990,000 March 2002 $19,403,000 April 2002 $20,577,000 May 2002 $20,639,000 June 2002 $18,156,000 July 2002 $19,829,000 August 2002 $20,163,000 -12- September 2002 $19,766,000 October 2002 $21,294,000 November 2002 $20,456,000 December 2002 $21,498,000 January 2003 $21,498,000 February 2003 $22,104,000 March 2003 $21,418,000 April 2003 $22,953,000 May 2003 $23,194,000 June 2003 $21,071,000 (v) Borrowers pay the Increased Line Fee to Lender, in immediately available funds, on such date. "Maximum Rate" shall mean the maximum non-usurious rate of interest under applicable Federal or State law as in effect from time to time, that may be contracted for, taken, reserved, charged or received in respect of the Indebtedness of Borrowers to Lender, or, to the extent that at any time such applicable law may thereafter permit a higher maximum non-usurious rate of interest, then such higher rate that applicable law may allow. Notwithstanding any other provision hereof, the Maximum Rate shall be calculated on a daily basis (computed on the actual number of days elapsed over a year of three hundred sixty-five (365) or three hundred sixty-six (366) days, as the case may be). "Mortgages" shall mean any and all deeds to secure debt, mortgages, deeds of trust or other documents now or hereafter executed by any Obligor in favor of Lender with respect to the Real Property, as security for the Obligations. "Multiemployer Plan" shall mean 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 a Borrower or any ERISA Affiliate. "Net Amount of Eligible Accounts" shall mean the gross amount of Eligible Accounts less (a) sales, excise or similar taxes included in the amount thereof and (b) returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed with respect thereto. "Obligations" shall mean any and all Revolving Loans, Letter of Credit Accommodations and all other obligations, liabilities and Indebtedness of every kind, nature and description owing by any Borrower or any other Obligor to Lender and/or its Affiliates, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, whether arising under this Agreement or otherwise, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any case with respect to any Borrower or any other Obligor under the Bankruptcy Code or any similar statute (including the payment of interest and other amounts which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and however acquired by Lender. "Obligors" shall mean a Borrower, guarantor or other Person who is liable on or with respect to any of the Obligations or who is the owner of any Property which is security for the Obligations. -13- "Patent Security Agreement" shall mean a Patent Security Agreement to be executed by Transit Group in favor of Lender on or about the Closing Date and by which Transit Group shall assign to Lender, as security for the Obligations, all of Transit Group's right, title and interest in and to all of its patents and patent applications. "Payment Account" shall have the meaning set forth in Section 6.3 of this Agreement. "Permitted Holders" shall mean the persons listed on Schedule 1 hereto and their respective successors and assigns. "Permitted Liens" shall mean those Liens permitted by Section 9.8 of this Agreement. "Person" or "person" shall mean any individual, sole proprietorship, partnership, corporation (including any corporation which elects subchapter S status under the Code), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality or political subdivision thereof. "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which a Borrower sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a Multiemployer Plan has made contributions at any time during the immediately preceding six (6) plan years. "Prime Rate" shall mean the rate from time to time publicly announced by First Union National Bank, or its successors, from time to time, as its prime rate, whether or not such announced rate is the best rate available at such bank. "Property" shall mean any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Real Property" shall mean all now owned and hereafter acquired real property of a Borrower, including leasehold interests, together with all buildings, structures, and other improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located, including the real property and related assets more particularly described in the Mortgages. "Receivables" shall mean: (a) all Accounts; (b) all amounts at any time payable to a Borrower in respect of the sale or other disposition by a Borrower of any Account or other obligation for the payment of money; (c) all interest, fees, late charges, penalties, collection fees and other amounts due or to become due or otherwise payable in connection with any Account; (d) all letters of credit, indemnities, guarantees, security or other deposits and proceeds thereof issued payable to a Borrower or otherwise in favor of or delivered to a Borrower in connection with any Account; (e) Unbilled Amounts; or (f) all other contract rights, chattel paper, instruments, notes, general intangibles and other forms of obligations owing to a Borrower, whether from the sale and lease of goods or other property, licensing of any property (including Intellectual Property or other general intangibles), rendition of services or from loans or advances by a Borrower or to or for the benefit of any third Person (including loans or advances to any Affiliates or Subsidiaries of a Borrower) or otherwise associated with any Accounts, Inventory or general intangibles of a Borrower (including choses in action, causes of action, tax refunds, tax refund claims, any funds which may become payable to a Borrower in connection with the termination of any Plan or other employee benefit plan and any other amounts payable to a Borrower from any Plan or other employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds -14- thereof, casualty or any similar types of insurance and any proceeds thereof and proceeds of insurance covering the lives of employees on which a Borrower is beneficiary). "Records" shall mean all of a Borrower's present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of a Borrower with respect to the foregoing maintained with or by any other). "Reference Bank" shall mean First Union National Bank, or such other bank as Lender may from time to time designate. "Renewal Date" shall the meaning set forth in Section 12.1 hereof. "Reserves" shall mean as of any date of determination, such amounts as Lender may from time to time establish and revise in good faith reducing the amount of Revolving Loans and Letter of Credit Accommodations which would otherwise be available to a Borrower under the lending formula(s) provided for herein: (a) to reflect events, conditions, contingencies or risks which, as determined by Lender in good faith, adversely affect, or would have a reasonable likelihood of adversely affecting, either (i) the Collateral or any other Property which is security for the Obligations or its value, (ii) the assets, business or prospects of a Borrower or any other Obligor or (iii) the security interests and other rights of Lender in the Collateral (including the enforceability, perfection and priority thereof) or (b) to reflect Lender's good faith belief that any collateral report or financial information furnished by or on behalf of a Borrower or any other Obligor to Lender is or may have been incomplete, inaccurate or misleading in any material respect or (c) to reflect outstanding Letter of Credit Accommodations as provided in Section 2.2 hereof or (d) in respect of any state of facts which Lender determines in good faith constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default. To the extent Lender may revise the lending formulas used to determine the Borrowing Base or establish new criteria or revise existing criteria for Eligible Accounts so as to address any circumstances, condition, event or contingency in a manner satisfactory to Lender, Lender shall not establish a Reserve for the same purpose. The amount of any Reserve established by Lender shall have a reasonable relationship to the event, condition or other matter which is the basis for such reserve as determined by Lender in good faith. "Revolving Loans" shall mean the loans now or hereafter made by Lender to or for the benefit of Borrowers on a revolving basis (involving advances, repayments and readvances) as set forth in Section 2.1 of this Agreement. "Revolving Loan Limit" shall mean $50,000,000 on and after the date that the Maximum Credit Conditions are satisfied, otherwise, "Revolving Loan Limit" shall mean $30,000,000. "Security Documents" shall mean the Business Interruption Insurance Assignments, the Deposit Account Assignments, the Patent Security Agreement, the Stock Pledge Agreements and any and all other documents, instruments or agreements that now or hereafter secure all or any part of the Obligations. "Senior Officer" shall mean any member of the board of directors, the president, executive vice-president or the chief financial officer of, or in- house legal counsel to, an Obligor. -15- "Solvent" shall mean, as to any Person, such Person (i) owns Property whose fair saleable value is greater than the amount required to pay all of such Person's debts (including contingent debts), (ii) is able to pay all of its debts as such debts mature, (iii) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage, and (iv) is not "insolvent" within the meaning of Section 101(32) of the Bankruptcy Code. "Stock Pledge Agreements" shall mean the Stock Pledge Agreements to be executed by Transit Group and Transportation on or about the Closing Date and by which such Borrower shall pledge to Lender, as security for the Obligations, all of such Borrower's Voting Stock in the other Borrowers and Obligors. "Subsidiary" or "subsidiary" shall mean, with respect to any Person, any corporation, limited liability company, limited liability partnership or other limited or general partnership, trust, association or other business entity of which an aggregate of at least a majority of the outstanding Capital Stock or other interests entitled to vote in the election of the board of directors of such corporation (irrespective of whether, at the time, Capital Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency), managers, trustees or other controlling persons, or an equivalent controlling interest therein, of such Person is, at the time, directly or indirectly, owned by such Person and/or one or more subsidiaries of such Person. "Tangible Net Worth" shall mean as to any Person, at any time, in accordance with GAAP, on a consolidated basis for such Person and its Subsidiaries (if any), the amount equal to the difference between: (a)(i) the aggregate net book value of all assets of such Person and its Subsidiaries, minus (ii) the aggregate amount of the Indebtedness and other liabilities of such Person and its Subsidiaries (including tax and other proper accruals) and (b) Intangibles. "Term Lender Loan Agreement" shall mean the Amended and Restated Credit Agreement dated April 19, 2001, among Transit Group, Term Lenders and Bank One, NA. "Term Lender Debt" shall mean all Indebtedness owing by Borrowers to Term Lenders pursuant to the Term Lender Documents. "Term Lender Documents" shall mean, collectively, the Term Lender Loan Agreement and any and all other documents and agreements executed pursuant thereto or in connection therewith. "Term Lenders" shall mean each of Bank One, NA, AmSouth Bank, Compass Bank, Bank of America, National Bank of Canada, Branch Banking & Trust Company and Union Bank of California and the successors and permitted assigns of each. "UCC" shall mean the Uniform Commercial Code (or any successor statute) as adopted and in force in the State of Georgia or, when the laws of any other state govern the method or manner of the perfection or enforcement of any security interest in any of the Collateral, the Uniform Commercial Code (or any successor statute) of such state. "Unbilled Amount" shall mean an amount owing by an account debtor to a Borrower arising from a sale of goods or rendition of services by such Borrower but which amount has not yet been billed by such Borrower. "Voting Stock" shall mean with respect to any Person, (a) one (1) or more classes of Capital Stock of such Person having general voting powers to elect at least a majority of the board of directors, managers -16- or trustees of such Person, irrespective of whether at the time Capital Stock of any other class or classes have or might have voting power by reason of the happening of any contingency, and (b) any Capital Stock of such Person convertible or exchangeable without restriction at the option of the holder thereof into Capital Stock of such Person described in clause (a) of this definition. SECTION 2. CREDIT FACILITIES ----------------- 2.1 Revolving Loans. --------------- (a) Subject to and upon the terms and conditions contained herein, Lender agrees to make Revolving Loans to Borrowers from time to time in amounts requested by Borrowers up to the amount equal to the lesser of: (i) the Borrowing Base or (ii) the Revolving Loan Limit. (b) Lender may, in its discretion, from time to time, upon not less than five (5) days prior notice to Borrower Agent, reduce the lending formula with respect to Eligible Accounts to the extent that Lender determines in good faith that: (i) the dilution with respect to the Accounts for any period (based on the ratio of (A) the aggregate amount of reductions in Accounts other than as a result of payments in cash to (B) the aggregate amount of total sales) has increased in any material respect or may be reasonably anticipated to increase in any material respect above historical levels, or (ii) the general creditworthiness of account debtors has declined. The amount of any decrease in the lending formulas shall have a reasonable relationship to the event, condition or circumstance which is the basis for such decrease as determined by Lender in good faith. In determining whether to reduce the lending formula(s), Lender may consider events, conditions, contingencies or risks which are also considered in determining Eligible Accounts or in establishing Reserves. (c) Except in Lender's discretion, (i) the aggregate amount of the Revolving Loans outstanding at any time shall not exceed the Revolving Loan Limit and (ii) the aggregate amount of the Revolving Loans and the Letter of Credit Accommodations outstanding at any time shall not exceed the Maximum Credit. In the event that the outstanding amount of any component of the Revolving Loans, or the aggregate amount of the outstanding Revolving Loans and Letter of Credit Accommodations, exceed the amounts available under the lending formulas, the Revolving Loan Limit, the sublimits for Letter of Credit Accommodations set forth in Section 2.2(e) or the Maximum Credit, as applicable, such event shall not limit, waive or otherwise affect any rights of Lender in that circumstance or on any future occasions and Borrowers shall, upon demand by Lender, which may be made at any time or from time to time, immediately repay to Lender the entire amount of any such excess(es) for which payment is demanded. 2.2 Letter of Credit Accommodations. ------------------------------- (a) Subject to and upon the terms and conditions contained herein, at the request of any Borrower, Lender agrees to provide or arrange for Letter of Credit Accommodations for the account of Borrowers containing terms and conditions acceptable to Lender and the issuer thereof. Any payments made by Lender to any issuer thereof and/or related parties in connection with the Letter of Credit Accommodations shall constitute additional Revolving Loans to Borrowers pursuant to this Section 2. (b) In addition to any charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations, Borrowers shall jointly and severally pay to Lender a letter of credit fee at a rate equal to two percent (2%) per annum on the daily outstanding balance of the Letter of Credit Accommodations for the immediately preceding month (or part thereof), payable in arrears as of the first day of each succeeding month, except that Borrowers shall jointly and severally pay to Lender such -17- letter of credit fee, at Lender's option, without notice, at a rate equal to four percent (4%) per annum on such daily outstanding balance for: (i) the period from and after the date of termination or non-renewal hereof until Lender has received full and final payment of all Obligations (notwithstanding entry of a judgment against Borrowers) and (ii) the period from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing as determined by Lender. Such letter of credit fee shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed and the obligation of Borrowers to pay such fees shall survive the termination or non-renewal of this Agreement. (c) A Borrower shall give Lender two (2) Business Days' prior written notice of such Borrower's request for the issuance of a Letter of Credit Accommodation. Such notice shall be irrevocable and shall specify the original face amount of the Letter of Credit Accommodation requested, the effective date (which date shall be a Business Day) of issuance of such requested Letter of Credit Accommodation, whether such Letter of Credit Accommodations may be drawn in a single or in partial draws, the date on which such requested Letter of Credit Accommodation is to expire (which date shall be a Business Day), the purpose for which such Letter of Credit Accommodation is to be issued, and the beneficiary of the requested Letter of Credit Accommodation. Such Borrower shall attach to such notice the proposed form of the Letter of Credit Accommodation. (d) In addition to being subject to the satisfaction of the applicable conditions precedent contained in Section 4 hereof and the other terms and conditions contained herein, no Letter of Credit Accommodations shall be available unless each of the following conditions precedent have been satisfied in a manner satisfactory to Lender: (i) a Borrower shall have delivered to the proposed issuer of such Letter of Credit Accommodation at such times and in such manner as such proposed issuer may require, an application in form and substance satisfactory to such proposed issuer and Lender for the issuance of the Letter of Credit Accommodation and such other documents as may be required pursuant to the terms thereof, and the form and terms of the proposed Letter of Credit Accommodation shall be satisfactory to Lender and such proposed issuer, (ii) as of the date of issuance, no order of any court, arbitrator or other 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 Accommodation, 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 issuer of such Letter of Credit Accommodation refrain from, the issuance of letters of credit generally or the issuance of such Letters of Credit Accommodation; and (iii) the Excess Availability, prior to giving effect to any Reserves with respect to such Letter of Credit Accommodations, on the date of the proposed issuance of any Letter of Credit Accommodations, shall be equal to or greater than an amount equal to one hundred (100%) percent of the face amount of the Letter of Credit Accommodation and all other commitments and obligations made or incurred by Lender with respect thereto. Effective on the issuance of each Letter of Credit Accommodation, a Reserve shall be established in the amount of one hundred percent (100%) of the face amount of such Letter of Credit Accommodation ("LC Reserve"). (e) Except in Lender's discretion, the amount of all outstanding Letter of Credit Accommodations and all other commitments and obligations made or incurred by Lender in connection therewith shall not at any time exceed $5,000,000. At any time an Event of Default exists or has occurred and is continuing, upon Lender's request, Borrowers will either furnish cash collateral to secure the reimbursement obligations to the issuer in connection with any Letter of Credit Accommodations or furnish cash collateral to Lender for the Letter of Credit Accommodations and if cash collateral is provided to Lender, Lender will release the LC Reserve, if any, in such amount equal to the cash collateral but Lender shall have no obligation to make any Loans as long as such Event of Default exists. -18- (f) Borrowers shall jointly and severally indemnify, defend and hold Lender harmless from and against any and all losses, claims, damages, liabilities, costs and expenses which Lender may suffer or incur in connection with any Letter of Credit Accommodations and any documents, drafts or acceptances relating thereto, including any losses, claims, damages, liabilities, costs and expenses due to any action taken by any issuer or correspondent with respect to any Letter of Credit Accommodation. Borrowers assume all risks with respect to the acts or omissions of the drawer under or beneficiary of any Letter of Credit Accommodation and for such purposes the drawer or beneficiary shall be deemed Borrowers' agent. Borrowers assume all risks for, and agree to pay, all foreign, Federal, State and local taxes, duties and levies relating to any goods subject to any Letter of Credit Accommodations or any documents, drafts or acceptances thereunder. Borrowers hereby release and hold Lender harmless from and against any acts, waivers, errors, delays or omissions, whether caused by Borrowers, by any issuer or correspondent or otherwise with respect to or relating to any Letter of Credit Accommodation, except for the gross negligence or willful misconduct of Lender as determined pursuant to a final, non-appealable order of a court of competent jurisdiction. The provisions of this Section 2.2(f) shall survive the payment of Obligations and the termination or non-renewal of this Agreement. (g) Each Borrower hereby irrevocably authorizes and directs any issuer of a Letter of Credit Accommodation to name such Borrower as the account party therein and to deliver to Lender all instruments, documents and other writings and property received by issuer pursuant to the Letter of Credit Accommodations and to accept and rely upon Lender's instructions and agreements with respect to all matters arising in connection with the Letter of Credit Accommodations or the applications therefor. Nothing contained herein shall be deemed or construed to grant Borrowers any right or authority to pledge the credit of Lender in any manner. Lender shall have no liability of any kind with respect to any Letter of Credit Accommodation provided by an issuer other than Lender unless Lender has duly executed and delivered to such issuer the application or a guarantee or indemnification in writing with respect to such Letter of Credit Accommodation. Borrowers shall be bound by any interpretation made in good faith by Lender, or any other issuer or correspondent under or in connection with any Letter of Credit Accommodation or any documents, drafts or acceptances thereunder, notwithstanding that such interpretation may be inconsistent with any instructions of Borrowers. Lender shall have the sole and exclusive right and authority to, and Borrowers shall not: (i) at any time an Event of Default exists or has occurred and is continuing, (A) approve or resolve any questions of non-compliance of documents, (B) give any instructions as to acceptance or rejection of any documents or goods or (C) execute any and all applications for steamship or airway guaranties, indemnities or delivery orders, and (ii) at all times, (A) grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents, and (B) agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letter of Credit Accommodations, or documents, drafts or acceptances thereunder or any letters of credit included in the Collateral. Lender may take such actions either in its own name or in Borrowers' names. (h) Any rights, remedies, duties or obligations granted or undertaken by Borrowers to any issuer or correspondent in any application for any Letter of Credit Accommodation, or any other agreement in favor of any issuer or correspondent relating to any Letter of Credit Accommodation, shall be deemed to have been granted or undertaken by Borrowers to Lender. Any duties or obligations undertaken by Lender to any issuer or correspondent in any application for any Letter of Credit Accommodation, or any other agreement by Lender in favor of any issuer or correspondent relating to any Letter of Credit Accommodation, shall be deemed to have been undertaken by Borrowers to Lender and to apply in all respects to Borrowers. -19- 2.3 Borrower Agent. Each Borrower hereby irrevocably appoints Transit -------------- Group, and Transit Group agrees to act under this Agreement, as the agent and representative of itself and each other Borrower for all purposes under this Agreement, including receiving account statements and other notices and communications to Borrowers (or any of them) from Lender. Lender may rely, and shall be fully protected in relying, on any disbursement instructions, reports, information or any other notice or communication made or given by Transit Group, whether in its own name, on behalf of any Borrower or on behalf of "the Borrowers," and Lender shall have no obligation to make any inquiry or request any confirmation from or on behalf of any other Borrower as to the binding effect on such Borrower of any such request, instruction, report, information, notice or communication, nor shall the joint and several character of Borrowers' liability for any of the Revolving Loans or other Obligations be affected, provided that the provisions of this Section 2.3 shall not be construed so as to preclude any Borrower from directly requesting Revolving Loans or taking other actions permitted to be taken by "a Borrower" hereunder. Lender intends to maintain a single loan account in the name of "Transit Group" hereunder, and each Borrower expressly agrees to such arrangement and confirms that such arrangement shall have no effect on the joint and several character of such Borrower's liability for the Revolving Loans and other Obligations. SECTION 3. INTEREST AND FEES ----------------- 3.1 Interest. -------- (a) Borrowers shall jointly and severally pay to Lender interest on the outstanding principal amount of the Revolving Loans at the Interest Rate. All interest accruing hereunder on and after the date of any Event of Default or termination or non-renewal hereof shall be payable on demand. (b) Interest shall jointly and severally be payable by Borrowers to Lender monthly in arrears not later than the first day of each calendar month and shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed. The interest rate on non-contingent Obligations shall increase or decrease by an amount equal to each increase or decrease in the Prime Rate effective on the first day of the month after any change in such Prime Rate is announced based on the Prime Rate in effect on the last day of the month in which any such change occurs. Each Borrower acknowledges and understands that the calculation of interest on the basis of the actual days elapsed over the period of a 360-day year as opposed to a year of three hundred sixty-five (365) (or three hundred sixty-six (366)) days results in a higher effective rate of interest under this Agreement. In no event shall charges constituting interest payable by Borrowers to Lender exceed the Maximum Rate and if any part or provision of this Agreement is in contravention of the Maximum Rate, such part or provision shall be deemed amended to conform thereto. On the date hereof, the Prime Rate is seven and one-half percent (7.50%) and therefore the rate of interest in effect hereunder for Revolving Loans outstanding on the date of this Agreement, expressed in simple interest terms, is eight and one- half percent (8.50%) per annum. 3.2 Closing Fee. Borrowers shall pay to Lender a closing fee of $450,000 ----------- which shall be fully earned on the Closing Date and $375,000 of which shall be payable by Borrowers to Lender on the Closing Date, in immediately available funds (less any unused deposits paid by Borrowers to Lender prior to the Closing Date) and $75,000 of which shall be payable by Borrowers to Lender on or before April 19, 2002, in immediately available funds. Such closing fee shall not be subject to rebate upon any prepayment of the Obligations except to the extent required by Section 3.6 of this Agreement or applicable law. Such closing fee shall compensate Lender for the costs associated with the origination, structuring, processing, approving and closing of the transactions contemplated in this Agreement, exclusive of any expenses for which Borrowers have agreed to reimburse Lender pursuant to any other provision of this Agreement or the other Financing Agreements (such as attorneys' fees). -20- 3.3 Servicing Fee. Borrowers shall jointly and severally pay to Lender ------------- monthly a servicing fee in an amount equal to $7,500 per month in respect of Lender's services for each month (or part thereof) while this Agreement remains in effect and for so long thereafter as any of the Obligations are outstanding, which fee shall be fully earned as of and payable in advance on the date hereof and on the first day of each month hereafter. 3.4 Increased Line Fee. Borrowers shall jointly and severally pay to Lender ------------------ a one time increased line fee in the amount of $300,000 (the "Increased Line Fee"), in immediately available funds, on the date that the Maximum Credit Conditions are satisfied and the Maximum Credit and Revolving Loan Limit are increased from $30,000,000 to $50,000,000. Such Increased Line Fee shall not be subject to rebate upon any prepayment of the Obligations except to the extent required by Section 3.6 of this Agreement or applicable law. 3.5 Maximum Interest. ---------------- (a) Notwithstanding anything to the contrary contained in this Agreement or any of the other Financing Agreements, in no contingency or event whatsoever shall the aggregate of all amounts that are contracted for, charged or received pursuant to the terms of this Agreement or any of the other Financing Agreements and that are deemed interest under applicable law exceed the Maximum Rate. No agreements, conditions, provisions or stipulations contained in this Agreement or any of the other Financing Agreements, or any Event of Default, or the exercise by Lender of the right to accelerate the payment or the maturity of all or any portion of the Obligations, or the exercise of any option whatsoever contained in this Agreement or any of the other Financing Agreements, or the prepayment by Borrowers of any of the Obligations, or the occurrence of any event or contingency whatsoever, shall entitle Lender to contract for, charge or receive in any event, interest or any charges, amounts, premiums or fees deemed interest by applicable law (such interest, charges, amounts, premiums and fees referred to herein collectively as "Interest") in excess of the Maximum Rate. In no event shall Borrowers be obligated to pay Interest in amounts which exceed the Maximum Rate. All agreements, conditions or stipulations, if any, which may in any event or contingency whatsoever operate to bind, obligate or compel Borrowers to pay Interest in amounts which exceed the Maximum Rate shall be without binding force or effect, at law or in equity, to the extent of the excess of Interest over such Maximum Rate. (b) Furthermore, notwithstanding anything to the contrary contained in this Agreement or any of the other Financing Agreements, in no contingency or event whatsoever shall the aggregate of all amounts that are contracted for, charged or received pursuant to the terms of this Agreement or any of the other Financing Agreements and that are deemed loan charges under applicable law exceed the maximum amounts collectible under applicable law. No agreements, conditions, provision or stipulations contained in this Agreement or any of the other Financing Agreements, or any Event of Default, or the exercise by Lender of the right to accelerate the payment or the maturity of all or any portion of the Obligations, or the exercise of any option whatsoever contained in this Agreement, or any of the other Financing Agreements, or the prepayment by Borrowers of any of the Obligations, or the occurrence of any event or contingency whatsoever, shall entitle Lender to contract for, charge or receive in any event, any loan charges in excess of the maximum amounts collectible under applicable law. In no event shall Borrowers be obligated to pay loan charges in amounts which exceed the maximum amounts collectible under applicable law. All agreements, conditions or stipulations, if any, which may in any event or contingency whatsoever operate to bind, obligate or compel Borrowers to pay loan charges in amounts which exceed the maximum amount collectible under applicable law shall be without binding force or effect, at law or in equity, to the extent of the excess of such loan charges over the maximum amounts collectible under applicable law. -21- (c) In the event any Interest is charged or received in excess of the Maximum Rate or any loan charges are collected or received in excess of the maximum amounts collectible under applicable law (such excess(es) being referred to herein individually and collectively as "Excess"), Borrowers acknowledge and stipulate that any such charge or receipt shall be the result of an accident and bona fide error, and that any Excess received by Lender shall be applied, first, - ---- ---- to the payment of the then outstanding and unpaid principal hereunder; second, to the payment of the other Obligations then outstanding and unpaid; and third, returned to Borrowers, it being the intent of the parties hereto not to enter into a usurious or otherwise illegal relationship. The right to accelerate the maturity of any of the Obligations does not include the right to accelerate any Interest or loan charges that have not otherwise accrued on the date of such acceleration, and Lender does not intend to collect any unearned Interest or loan charges in the event of any such acceleration. Each Borrower recognizes that, with fluctuations in the rates of interest set forth in Section 3.1 of this Agreement, and the Maximum Rate, such an unintentional result could inadvertently occur. All monies paid to Lender hereunder or under any of the other Financing Agreements, whether at maturity or by prepayment, shall be subject to any rebate of unearned Interest or loan charges as and to the extent required by applicable law. (d) By the execution of this Agreement, each Borrower agrees that (i) the credit or return of any Excess shall constitute the acceptance by such Borrower of such Excess, and (ii) such Borrower shall not seek or pursue any other remedy, legal or equitable, against Lender, based in whole or in part upon contracting for, charging or receiving any Interest in excess of the Maximum Rate or loan charges in excess of the maximum amount collectable under applicable law. For the purpose of determining whether or not any Excess has been contracted for, charged or received by Lender, all Interest and loan charges at any time contracted for, charged or received from Borrowers in connection with this Agreement or any of the other Financing Agreements shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread in equal parts throughout the entire term of this Agreement. (e) Borrowers and Lender shall, to the maximum extent permitted under applicable law, (i) characterize any non-principal payment as an expense, fee or premium rather than as Interest and (ii) exclude voluntary prepayments and the effects thereof. (f) The provisions of this Section 3.5 shall be deemed to be incorporated into each of the other Financing Agreements (whether or not any provision of this Section 3.5 is referred to therein). Each of the Financing Agreements and communications relating to any Interest or loan charges owed by Borrowers and all figures set forth therein shall, for the sole purpose of computing the extent of the Obligations, be automatically recomputed by Borrowers, and by any court considering the same, to give effect to the adjustments or credits required by this Section 3.5. 3.6 Nature and Extent of Each Borrower's Liability. ---------------------------------------------- (a) Joint and Several Liability. Each Borrower shall be liable for, on --------------------------- a joint and several basis, and hereby guarantees the timely payment by all other Borrowers of, all of the Revolving Loans and other Obligations, regardless of which Borrower actually may have received the proceeds of any Revolving Loans or other extensions of credit hereunder or the amount of such Revolving Loans received or the manner in which Lender accounts for such Revolving Loans or other extensions of credit on its books and records, it being acknowledged and agreed that Revolving Loans to any Borrower inure to the mutual benefit of all Borrowers and that Lender is relying on the joint and several liability of Borrowers in extending the Revolving Loans and other financial accommodations hereunder. Each Borrower hereby unconditionally and irrevocably agrees that upon an Event of Default resulting from the non-payment when due (whether -22- at stated maturity, by acceleration or otherwise) of any principal of, or interest owed on, any of the Revolving Loans or other Obligations, such Borrower shall forthwith pay the same, without notice or demand. (b) Unconditional Nature of Liability. Each Borrower's joint and --------------------------------- several liability hereunder with respect to, and guaranty of, the Revolving Loans and other Obligations shall, to the fullest extent permitted by applicable law, be unconditional irrespective of (i) the validity, enforceability, avoidance or subordination of any of the Obligations or of any promissory note or other document evidencing all or any part of the Obligations, (ii) the absence of any attempt to collect any of the Obligations from any other Obligor or any Collateral or other security therefor, or the absence of any other action to enforce the same, (iii) the waiver, consent, extension, forbearance or granting of any indulgence by Lender with respect to any provision of any instrument evidencing or securing the payment of any of the Obligations, or any other agreement now or hereafter executed by any other Borrower and delivered to Lender, (iv) the failure by Lender to take any steps to perfect or maintain the perfected status of its security interest in or Lien upon, or to preserve its rights to, any of the Collateral or other security for the payment or performance of any of the Obligations or Lender's release of any Collateral or of Lender's Liens upon any Collateral, (v) Lender's election, in any proceeding instituted under the Bankruptcy Code, for the application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a security interest by any other Obligor, as debtor-in-possession under Section 364 of the Bankruptcy Code, (vii) the release or compromise, in whole or in part, of the liability of any other Obligor for the payment of any of the Obligations, (ix) any amendment or modification of any of the Financing Agreements or waiver of any Default or Event of Default thereunder, (x) any increase in the amount of the Obligations beyond any limits imposed herein or in the amount of any interest, fees or other charges payable in connection therewith, or any decrease in the same, (xi) the disallowance of all or any portion of Lender's claims for the repayment of any of the Obligations under Section 502 of the Bankruptcy Code, or (viii) any other circumstance that might constitute a legal or equitable discharge or defense of any Borrower. After the occurrence and during the continuance of any Event of Default, Lender may proceed directly and at once, without notice to any other Obligor, against any or all of Obligors to collect and recover all or any part of the Obligations, without first proceeding against any other Obligor or against any Collateral or other security for the payment or performance of any of the Obligations, and each Borrower waives any provision that might otherwise require Lender under applicable law to pursue or exhaust their remedies against any Collateral or Obligor before pursuing another Obligor. Each Borrower consents and agrees that Lender shall be under no obligation to marshal any assets in favor of any Obligor or against or in payment of any or all of the Obligations. (c) No Reduction in Liability for Obligations. No payment or payments ----------------------------------------- made by an Obligor or received or collected by Lender from an Obligor or any other person by virtue of any action or proceeding or any setoff or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Borrower under this Agreement, each of whom shall remain jointly and severally liable for the payment and performance of all Revolving Loans and other Obligations until the Obligations are paid in full and this Agreement is terminated. (d) Contribution. Each Borrower is unconditionally obligated to repay ------------ the Obligations as a joint and several Obligor under this Agreement. If, as of any date, the aggregate amount of payments made by a Borrower on account of the Obligations and proceeds of such Borrower's Collateral that are applied to the Obligations exceeds the aggregate amount of Revolving Loan proceeds actually ------- used by such Borrower in its business (such excess amount being referred to as an "Accommodation Payment"), then each of the other Borrowers (each such Borrower being referred to as a "Contributing Borrower") shall be obligated to make contribution to such Borrower (the "Paying Borrower") in an amount equal to (A) the product derived by multiplying the sum of each Accommodation Payment of each Borrower by the Allocable Percentage of -23- the Borrower from whom contribution is sought less (B) the amount, if any, of ---- the then outstanding Accommodation Payment of such Contributing Borrower (such last mentioned amount which is to be subtracted from the aforesaid product to be increased by any amounts theretofore paid by such Contributing Borrower by way of contribution hereunder, and to be decreased by any amounts theretofore received by such Contributing Borrower by way of contribution hereunder); provided, however, that a Paying Borrower's recovery of contribution hereunder - -------- ------- from the other Borrowers shall be limited to that amount paid by the Paying Borrower in excess of its Allocable Percentage of all Accommodation Payments then outstanding of all Borrowers. As used herein, the term "Allocable Percentage" shall mean, on any date of determination thereof, a fraction the denominator of which shall be equal to the number of Borrowers who are parties to this Agreement on such date and the numerator of which shall be one (1); provided, however, that such percentages shall be modified in the event that - -------- ------- contribution from a Borrower is not possible by reason of insolvency, bankruptcy or otherwise by reducing such Borrower's Allocable Percentage equitably and by adjusting the Allocable Percentage of the other Borrowers proportionately so that the Allocable Percentages of all Borrowers at all times equals 100%. (e) Subordination. Each Borrower hereby subordinates any claims, ------------- including any right of payment, subrogation, contribution and indemnity, that it may have from or against any other Obligor, and any successor or assign of any other Obligor, including any trustee, receiver or debtor-in-possession, howsoever arising, due or owing or whether heretofore, now or hereafter existing, to the payment in full of all of the Obligations. SECTION 4. CONDITIONS PRECEDENT -------------------- 4.1 Conditions Precedent to Initial Loans and Letter of Credit ---------------------------------------------------------- Accommodations. Each of the following is a condition precedent to Lender making - -------------- the initial Revolving Loans and providing the initial Letter of Credit Accommodations hereunder: (a) Lender shall have received, in form and substance satisfactory to Lender, (i) the duly executed Intercreditor Agreement and related documents, including UCC subordination statements with respect to the subordination by Term Lenders of their interest in the Congress Primary Collateral (as defined in the Intercreditor Agreement) for all UCC financing statements previously filed by the Term Lenders or their predecessors, as secured party and Borrowers or any other Obligor, as debtor, and (ii) terminations and releases by any other Person who has a Lien upon any of the Collateral; (b) all requisite corporate and limited liability company action and proceedings in connection with this Agreement and the other Financing Agreements shall be satisfactory in form and substance to Lender, and Lender shall have received all information and copies of all documents, including records of requisite corporate action and proceedings which Lender may have requested in connection therewith, such documents where requested by Lender or its counsel to be certified by appropriate corporate officers or Governmental Authority; (c) Lender has received certificates from the appropriate state officials to the effect that each Obligor is in good standing and fully qualified to own its Properties and to carry on its business in each state in which such qualification is necessary; (d) all Indebtedness (other than the Obligations, the Term Lender Debt and any Indebtedness owing to Equipment Lessors listed on Schedule 4.1(d)) has been expressly subordinated in right of payment to the prior payment and satisfaction in full of all of the Obligations, all in a manner and pursuant to -24- such written agreements binding on the holders of such Indebtedness (other than the Obligations and the Term Lender Debt) as will be satisfactory to Lender and its counsel; (e) no material adverse change shall have occurred in the assets, business or prospects of any Borrowers since the date of Lender's latest field examination and no change or event shall have occurred which would impair the ability of any Borrower or any other Obligor to perform its obligations hereunder or under any of the other Financing Agreements to which it is a party or of Lender to enforce the Obligations or realize upon the Collateral; (f) Lender shall have completed a field review of the Records and such other information with respect to the Collateral as Lender may require to determine the amount of Revolving Loans available to Borrowers (including roll- forwards of Accounts through the Closing Date, together with such supporting documentation as may be necessary or appropriate, and other documents and information that will enable Lender to accurately identify and verify the Collateral), the results of which shall be satisfactory to Lender, not more than three (3) Business Days prior to the Closing Date; (g) Lender shall have received, in form and substance satisfactory to Lender, all consents, waivers, acknowledgments and other agreements from third Persons which Lender may deem necessary or desirable in order to permit, protect and perfect its security interests in and Liens upon the Collateral or to effectuate the provisions or purposes of this Agreement and the other Financing Agreements, including, without limitation, Collateral Access Agreements by owners and lessors of leased premises of each Borrower and by warehouses at which Collateral is located; (h) Lender shall have received, in form and substance satisfactory to Lender, all agreements with the depository banks and Borrowers with respect to the Blocked Accounts as Lender may require pursuant to Section 6.3 hereof, duly authorized, executed and delivered by such depository banks and Borrowers; (i) Lender shall have received evidence, in form and substance satisfactory to Lender, that Lender has a valid perfected first priority security interest in and Lien upon all of the Collateral (except to the extent otherwise provided in the Intercreditor Agreement); (j) Lender shall have received and reviewed UCC search results for all jurisdictions in which assets of any Borrower are located, which search results shall be in form and substance satisfactory to Lender; (k) Lender shall have received evidence of insurance and loss payee endorsements required hereunder and under the other Financing Agreements, in form and substance satisfactory to Lender, and certificates of insurance policies and/or endorsements naming Lender as lender's loss payee and additional insured; (l) Lender shall have received, in form and substance satisfactory to Lender, such opinion letters of counsel to Borrowers and each other Obligor with respect to the Financing Agreements and such other matters as Lender may request; (m) the other Financing Agreements and all instruments and documents hereunder and thereunder shall have been duly executed and delivered to Lender, in form and substance satisfactory to Lender and its counsel; -25- (n) the Excess Availability as determined by Lender, as of the Closing Date, shall not be less than $6,500,000 after giving effect to the initial Revolving Loans made or to be made and Letter of Credit Accommodations issued or to be issued in connection with the initial transactions on the Closing Date and the payment of all closing costs; (o) Lender shall have satisfied itself that Borrowers are in compliance with all Environmental Laws (except to the extent that any non-compliance could not be reasonably expected to have a Material Adverse Effect); (p) There shall be no order or injunction or other pending litigation in which there is a reasonable possibility of a decision which could have a Material Adverse Effect; (q) Wayne Davis, General Electric Capital Corporation and other Persons affiliated with Borrowers shall have made a cash equity investment of at least $7,000,000 in Transit Group and Lender shall have received and found acceptable in all respects all agreements evidencing the new preferred stock to be issued to such investors; (r) Lender shall have reviewed and found acceptable in all respects the Term Lender Documents; (s) Borrowers shall have restructured the General Electric Capital Redeemable Preferred Stock on terms and conditions satisfactory in all respects to Lender, including provisions for non-payment in cash of all accrued dividends (t) Lender shall have reviewed and found acceptable in all respects the restructuring agreements with the Equipment Lessors listed on Schedule 4.1(d). 4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations. --------------------------------------------------------------------- Each of the following is an additional condition precedent to Lender making Loans and/or providing Letter of Credit Accommodations to Borrowers, including the initial Revolving Loans and Letter of Credit Accommodations and any future Revolving Loans and Letter of Credit Accommodations: (a) all representations and warranties contained herein and in the other Financing Agreements shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of the making of each such Revolving Loan or providing each such Letter of Credit Accommodation and after giving effect thereto, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date); (b) no law, regulation, order, judgment or decree of any Governmental Authority shall exist, and no action, suit, investigation, litigation or proceeding shall be pending or threatened in any court or before any arbitrator or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or otherwise affect (A) the making of the Loans or providing the Letter of Credit Accommodations, or (B) the consummation of the transactions contemplated pursuant to the terms hereof or the other Financing Agreements or (ii) has or could reasonably be expected to have a Material Adverse Effect; and (c) no Event of Default shall exist or have occurred and be continuing on and as of the date of the making of such Revolving Loan or providing each such Letter of Credit Accommodation and after giving effect thereto. -26- SECTION 5. SECURITY INTEREST ----------------- To secure payment and performance of all Obligations, each Borrower hereby grants to Lender a continuing security interest in, a Lien upon, and a right of set off against, and hereby assigns to Lender as security, the following property and interests in Property of such Borrower, whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the Obligations at any time granted to or held or acquired by Lender, collectively, the "Collateral"): (a) Receivables; (b) all other present and future general intangibles (including Intellectual Property and existing and future leasehold interests in equipment, real estate and fixtures), chattel paper, documents, instruments, letters of credit, bankers' acceptances and guaranties; (c) all present and future monies, securities and other Investment Property, credit balances, deposits, Deposit Accounts and other Property of such Borrower now or hereafter held or received by or in transit to Lender or its Affiliates or at any other depository or other institution from or for the account of any Borrower, whether for safekeeping, pledge, custody, transmission, collection or otherwise, and all present and future Liens, security interests, rights, remedies, title and interest in, to and in respect of Receivables and other Collateral, including (i) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (ii) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (iii) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Receivables or other Collateral, including returned, repossessed and reclaimed goods, and (iv) deposits by and Property of account debtors or other Persons securing the obligations of account debtors; (d) Inventory; (e) Deposit Accounts; (f) Investment Property; (g) Letter of Credit Rights; (h) Records; and (i) all products and proceeds of the foregoing, in any form, including insurance proceeds and all claims against third parties for loss or damage to or destruction of any or all of the foregoing. -27- SECTION 6. COLLECTION AND ADMINISTRATION ----------------------------- 6.1 Borrowers' Loan Account. Lender shall maintain one or more loan ----------------------- account(s) on its books in which shall be recorded (a) all Revolving Loans, Letter of Credit Accommodations and other Obligations and the Collateral, (b) all payments made by or on behalf of Borrowers and (c) all other appropriate debits and credits as provided in this Agreement, including fees, charges, costs, expenses and interest. All entries in the loan account(s) shall be made in accordance with Lender's customary practices as in effect from time to time. 6.2 Statements. Lender shall render to Borrowers each month a statement ---------- setting forth the balance in Borrowers' loan account(s) maintained by Lender for Borrowers pursuant to the provisions of this Agreement, including principal, interest, fees, costs and expenses. Each such statement shall be subject to subsequent adjustment by Lender but shall, absent manifest errors or omissions, be considered correct and deemed accepted by Borrowers and conclusively binding upon Borrowers as an account stated except to the extent that Lender receives a written notice from Borrowers of any specific exceptions of Borrowers thereto within forty-five (45) days after the date such statement has been mailed by Lender. Until such time as Lender shall have rendered to Borrowers a written statement as provided above, the balance in Borrowers' loan account(s) shall be presumptive evidence of the amounts due and owing to Lender by Borrowers. 6.3 Collection of Accounts. ---------------------- (a) Borrowers shall establish and maintain, at their joint and several expense, blocked accounts or lockboxes and related blocked accounts (in either case, "Blocked Accounts"), as Lender may specify, with such banks as are acceptable to Lender into which Borrowers shall promptly deposit and direct their account debtors to directly remit all payments on Receivables and all payments constituting proceeds of other Collateral in the identical form in which such payments are made, whether by cash, check or other manner. The banks at which the Blocked Accounts are established shall enter into an agreement, in form and substance satisfactory to Lender, providing that all items received or deposited in the Blocked Accounts are the Property of Lender, that the depository bank has no Lien upon, or right to setoff against, the Blocked Accounts, the items received for deposit therein, or the funds from time to time on deposit therein and that the depository bank will wire, or otherwise transfer, in immediately available funds, on a daily basis, all funds received or deposited into the Blocked Accounts to such bank account of Lender as Lender may from time to time designate for such purpose ("Payment Account"). Borrowers agree that all payments made to such Blocked Accounts or other funds received and collected by Lender, whether in respect of the Receivables, or as proceeds of other Collateral or otherwise shall be treated as payments to Lender in respect of the Obligations and therefore shall constitute the Property of Lender to the extent of the then outstanding Obligations. (b) For purposes of calculating the amount of the Revolving Loans available to Borrowers, such payments will be applied (conditional upon final collection) to the Obligations on the Business Day of receipt by Lender of immediately available funds in the Payment Account provided such payments and notice thereof are received in accordance with Lender's usual and customary practices as in effect from time to time and within sufficient time to credit Borrowers' loan account on such day, and if not, then on the next Business Day. For the purposes of calculating interest on the Obligations, such payments or other funds received will be applied (conditional upon final collection) to the Obligations one (1) Business Day following the date of receipt of immediately available funds by Lender in the Payment Account provided such payments or other funds and notice thereof are received in accordance with Lender's usual and customary practices as in effect from time to time and within sufficient time to credit Borrowers' loan account on such day, and if not, then on the next Business Day. -28- (c) Borrowers and all of their shareholders, directors, employees, agents, Subsidiaries or other Affiliates shall, acting as trustee for Lender, receive, as the Property of Lender, any monies, checks, notes, drafts or any other payment relating to and/or proceeds of Accounts or other Collateral which come into their possession or under their control and immediately upon receipt thereof, shall deposit or cause the same to be deposited in the Blocked Accounts, or remit the same or cause the same to be remitted, in kind, to Lender. In no event shall the same be commingled with Borrowers' own funds. Borrowers agree to jointly and severally reimburse Lender on demand for any amounts owed or paid to any bank at which a Blocked Account is established or any other bank or Person involved in the transfer of funds to or from the Blocked Accounts arising out of Lender's payments to or indemnification of such bank or Person. The obligation of Borrowers to reimburse Lender for such amounts pursuant to this Section 6.3 shall survive the termination or non- renewal of this Agreement. 6.4 Payments. All Obligations shall be payable to the Payment Account as -------- provided in Section 6.3 or such other place as Lender may designate from time to time. Lender shall apply payments received or collected from Borrowers or for the account of Borrowers (including the monetary proceeds of collections or of realization upon any Collateral) as follows: first, to pay any fees, ----- indemnities or expense reimbursements then due to Lender from Borrowers; second, ------ to pay interest due in respect of any Revolving Loans; third, to pay principal ----- due in respect of the Revolving Loans; fourth, to pay or prepay any other ------ Obligations whether or not then due, in such order and manner as Lender determines. At Lender's option, all principal, interest, fees, costs, expenses and other charges provided for in this Agreement or the other Financing Agreements may be charged directly to the loan account(s) of Borrowers. As an administrative convenience to Borrowers and to ensure the timely payment of interest owing by Borrowers each month hereunder or under any of the other Financing Agreements, each Borrower hereby requests and authorizes Lender, in its discretion, to make a Revolving Loan the proceeds of which shall be applied to the payment of the interest accrued on the principal amount of the Obligations during the immediately preceding month as and when such interest becomes due and payable by Borrowers to Lender in accordance with this Agreement and the other Financing Agreements. Borrowers shall make all payments to Lender on the Obligations free and clear of, and without deduction or withholding for or on account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions, withholding, restrictions or conditions of any kind. If after receipt of any payment of, or proceeds of Collateral applied to the payment of, any of the Obligations, Lender is required to surrender or return such payment or proceeds to any Person for any reason, then the Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Agreement shall continue in full force and effect as if such payment or proceeds had not been received by Lender. Borrowers shall be jointly and severally liable to pay to Lender, and do hereby indemnify and hold Lender harmless for the amount of any payments or proceeds surrendered or returned. This Section 6.4 shall remain effective notwithstanding any contrary action which may be taken by Lender in reliance upon such payment or proceeds. This Section 6.4 shall survive the payment of the Obligations and the termination or non-renewal of this Agreement. 6.5 Authorization to Make Loans. Lender is authorized to make the --------------------------- Revolving Loans and provide the Letter of Credit Accommodations based upon telephonic or other instructions received from anyone purporting to be an officer of any Borrower or other authorized Person or, at the discretion of Lender, if such Revolving Loans are necessary to satisfy any Obligations. All requests for Revolving Loans or Letter of Credit Accommodations hereunder shall specify the date on which the requested advance is to be made or Letter of Credit Accommodations established (which day shall be a Business Day) and the amount of the requested Revolving Loan. Requests received after 11:00 a.m. on any day shall be deemed to have been made as of the opening of business on the immediately following Business Day. All Revolving Loans and Letter of Credit Accommodations under this Agreement shall be conclusively presumed to have been made -29- to, and at the request of and for the benefit of, Borrowers when deposited to the credit of Borrowers or otherwise disbursed or established in accordance with the instructions of Borrowers or in accordance with the terms and conditions of this Agreement. 6.6 Use of Proceeds. The initial Revolving Loan under this Agreement shall --------------- be in an amount that is not less than $250,000. Borrowers shall use the initial proceeds of the Revolving Loans provided by Lender to Borrowers hereunder only for: (a) payments to each of the Persons listed in the disbursement direction letter furnished by Borrowers to Lender on or about the Closing Date and (b) costs, expenses and fees in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Financing Agreements. All other Revolving Loans made or Letter of Credit Accommodations provided by Lender to Borrowers pursuant to the provisions hereof shall be used by Borrowers only for general operating, working capital and other proper corporate purposes of Borrowers not otherwise prohibited by the terms hereof. None of the proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security or for the purposes of reducing or retiring any Indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Revolving Loans to be considered a "purpose credit" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System. SECTION 7. COLLATERAL REPORTING AND COVENANTS ---------------------------------- 7.1 Collateral Reporting. -------------------- (a) Borrowers shall provide Lender with the following documents in a form satisfactory to Lender: (i) on a regular basis as required by Lender, a schedule of sales made, credits issued and cash received; (ii) as soon as possible after the end of each month (but in any event within ten (10) days after the end thereof), on a monthly basis or more frequently as Lender may request, (A) agings of accounts payable (and including information indicating the status of payments to owners and lessors of the leased premises of Borrowers) and (B) agings of accounts receivables (together with a reconciliation to the previous month's aging and general ledger); (iii) upon Lender's request, (A) copies of customer statements and credit memos, remittance advices and reports, and copies of deposit slips and bank statements, (B) copies of shipping and delivery documents, and (C) copies of purchase orders, invoices and delivery documents for Inventory and Equipment acquired by Borrowers; and (iv) such other reports as to the Collateral as Lender shall reasonably request from time to time. (b) If any of Borrowers' records or reports of the Collateral are prepared or maintained by an accounting service, contractor, shipper or other agent, each Borrower hereby irrevocably authorizes such service, contractor, shipper or agent to deliver such records, reports, and related documents to Lender and to follow Lender's instructions with respect to further services at any time that an Event of Default exists or has occurred and is continuing. 7.2 Accounts Covenants. ------------------ -30- (a) Borrowers shall notify Lender promptly of: (i) any material delay in any Borrower's performance of any of its obligations to any account debtor or the assertion of any claims, offsets, defenses or counterclaims by any account debtor, or any disputes with account debtors, or any settlement, adjustment or compromise thereof, (ii) all material adverse information relating to the financial condition of any account debtor having an account balance in excess of $50,000 and (iii) any event or circumstance which, to any Borrower's knowledge would cause Lender to consider any then existing Accounts as no longer constituting Eligible Accounts. No credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor without Lender's consent, except in the ordinary course of business of Borrowers. So long as no Event of Default exists or has occurred and is continuing, Borrowers shall settle, adjust or compromise any claim, offset, counterclaim or dispute with any account debtor. At any time that an Event of Default exists or has occurred and is continuing, Lender shall, at its option, have the exclusive right to settle, adjust or compromise any claim, offset, counterclaim or dispute with account debtors or grant any credits, discounts or allowances. (b) Reserved. -------- (c) With respect to each Account: (i) the amounts shown on any invoice delivered to Lender or schedule thereof delivered to Lender shall be true and complete, (ii) no payments shall be made thereon except payments immediately delivered to Lender pursuant to the terms of this Agreement, (iii) no credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor except as reported to Lender in accordance with this Agreement and except for credits, discounts, allowances or extensions made or given in the ordinary course of business of Borrowers, (iv) there shall be no setoffs, deductions, contras, defenses, counterclaims or disputes existing or asserted with respect thereto except as reported to Lender in accordance with the terms of this Agreement, (v) none of the transactions giving rise thereto will violate any applicable foreign, Federal, State or local laws or regulations, all documentation relating thereto will be legally sufficient under such laws and regulations and all such documentation will be legally enforceable in accordance with its terms. (d) Lender shall have the right at any time or times, in Lender's name or in the name of a nominee of Lender, to verify the validity, amount or any other matter relating to any Account or other Collateral, by mail, telephone, facsimile transmission or otherwise. (e) Borrowers shall deliver or cause to be delivered to Lender, with appropriate endorsement and assignment, with full recourse to Borrowers, all chattel paper and instruments which any Borrower now owns or may at any time acquire immediately upon any Borrower's receipt thereof, except as Lender may otherwise agree. (f) Lender may, at any time or times that an Event of Default exists or has occurred and is continuing, (i) notify any or all account debtors and other obligors in respect thereof that the Receivables have been assigned to Lender and that Lender has a security interest therein and Lender may direct any or all accounts debtors and other obligors to make payment of Receivables directly to Lender, (ii) extend the time of payment of, compromise, settle or adjust for cash, credit, return of merchandise or otherwise, and upon any terms or conditions, any and all Receivables or other obligations included in the Collateral and thereby discharge or release the account debtor or any other party or parties in any way liable for payment thereof without affecting any of the Obligations, (iii) demand, collect or enforce payment of any Receivables or such other obligations, but without any duty to do so, and Lender shall not be liable for its failure to collect or enforce the payment thereof nor for the negligence of its agents or attorneys with respect thereto and (iv) take whatever other action Lender may deem necessary or desirable for the protection of its interests. -31- At any time that an Event of Default exists or has occurred and is continuing, at Lender's request, all invoices and statements sent to any account debtor shall state that the Accounts and such other obligations have been assigned to Lender and are payable directly and only to Lender and Borrower shall deliver to Lender such originals of documents evidencing the sale and delivery of goods or the performance of services giving rise to any Accounts as Lender may require. 7.3 Equipment and Real Property Covenants. With respect to the Equipment ------------------------------------- and Real Property: (a) Borrowers shall keep the Equipment in good order, repair, running and marketable condition (ordinary wear and tear excepted); (b) Borrowers shall use the Equipment and Real Property with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with all applicable laws; (c) the Equipment is and shall be used in Borrowers' business and not for personal, family, household or farming use; (d) the Equipment is now and shall remain personal property and Borrowers shall not permit any of the Equipment to be or become a part of or affixed to real property; and (e) Borrowers assume all responsibility and liability arising from the use of the Equipment and Real Property. 7.4 Power of Attorney. Each Borrower hereby irrevocably designates and ----------------- appoints Lender (and all Persons designated by Lender) as such Borrower's true and lawful attorney-in-fact, and authorizes Lender, in such Borrower's or Lender's name, to: (a) at any time a Default or Event of Default exists or has occurred and is continuing (i) demand payment on Receivables or other Collateral, (ii) enforce payment of Receivables by legal proceedings or otherwise, (iii) exercise all of such Borrower's rights and remedies to collect any Receivable or other Collateral, (iv) sell or assign any Receivable upon such terms, for such amount and at such time or times as Lender deems advisable, (v) settle, adjust, compromise, extend or renew a Receivable, (vi) discharge and release any Receivable, (vii) prepare, file and sign such Borrower's name on any proof of claim in bankruptcy or other similar document against an account debtor or other obligor in respect of any Receivable or other Collateral, (viii) notify the post office authorities to change the address for delivery of remittances from account debtors or other obligors in respect of Receivables or other proceeds of Collateral to an address designated by Lender, and open and dispose of all mail addressed to such Borrower and handle and store all mail relating to the Collateral, and (ix) do all acts and things which are necessary, in Lender's determination, to fulfill Borrowers' obligations under this Agreement and the other Financing Agreements and (b) at any time to (i) take control in any manner of any item of payment in respect of Receivables or constituting Collateral or otherwise received in or for deposit in the Blocked Accounts or otherwise received by Lender, (ii) have access to any lockbox or postal box into which remittances from account debtors or other obligors in respect of Receivables or other proceeds of Collateral are sent or received, (iii) endorse such Borrower's name upon any items of payment in respect of Receivables or constituting Collateral or otherwise received by Lender and deposit the same in Lender's account for application to the Obligations, (iv) endorse such Borrower's name upon any chattel paper, document, instrument, invoice, or similar document or agreement relating to any Receivable or any goods pertaining thereto or any other Collateral, including any warehouse or other receipts, or bills of lading and other negotiable or non-negotiable documents, (v) clear Inventory the purchase of which was financed with Letter of Credit Accommodations through U.S. Customs in such Borrower's name, Lender's name or the name of Lender's designee, and to sign and deliver to customs officials powers of attorney in such Borrower's name for such purpose, and to complete in such Borrower's or Lender's name, any order, sale or transaction, obtain the necessary documents in connection therewith and collect the proceeds thereof, (vi) sign such Borrower's name on any verification of Receivables and notices thereof to account debtors or other obligors in respect thereof and (vii) execute in such Borrower's name and file any UCC financing statements or amendments thereto. Each Borrower hereby releases Lender and its officers, employees and designees from any liabilities arising from any act or acts under this power of attorney and in furtherance thereof, whether of omission or commission, except as a result of Lender's own gross negligence or wilful misconduct as determined pursuant to a final non-appealable order of a court of competent jurisdiction. -32- 7.5 Right to Cure. Lender may, at its option, (a) upon notice to Borrower ------------- Agent, cure any default by any Borrower under any material agreement with a third party which affects the Collateral, its value or the ability of Lender to collect, sell or otherwise dispose of the Collateral or the rights and remedies of Lender therein or the ability of any Borrower to perform its obligations under the other Financing Agreements, (b) pay or bond on appeal any judgment entered against any Borrower, (c) discharge taxes, Liens or other encumbrances at any time levied on or existing with respect to the Collateral and (d) pay any amount, incur any expense or perform any act which, in Lender's judgment, is necessary or appropriate to preserve, protect, insure or maintain the Collateral and the rights of Lender with respect thereto. Lender may add any amounts so expended to the Obligations and charge Borrowers' account therefor, such amounts to be repayable by Borrowers on demand. Lender shall be under no obligation to effect such cure, payment or bonding and shall not, by doing so, be deemed to have assumed any obligation or liability of Borrowers. Any payment made or other action taken by Lender under this Section 7.5 shall be without prejudice to any right to assert an Event of Default hereunder and to proceed accordingly. 7.6 Access to Premises. From time to time as requested by Lender, at the ------------------ cost and expense of Borrowers, (a) Lender or its designee shall have complete access to all of Borrowers' premises during normal business hours and after notice to Borrower Agent, or at any time and without notice to Borrower Agent or any Borrower if an Event of Default exists or has occurred and is continuing, for the purposes of inspecting, verifying and auditing the Collateral and all of Borrowers' books and records, including the Records, and (b) Borrowers shall promptly furnish to Lender such copies of such books and records or extracts therefrom as Lender may request, and (c) Lender or its designee may use during normal business hours such of Borrowers' personnel, equipment, supplies and premises as may be reasonably necessary for the foregoing and if an Event of Default exists or has occurred and is continuing for the collection of Accounts and realization of other Collateral. SECTION 8. REPRESENTATIONS AND WARRANTIES ------------------------------ Borrowers hereby represent and warrant to Lender the following (which shall survive the execution and delivery of this Agreement), the truth and accuracy of which are a continuing condition of the making of Revolving Loans and providing Letter of Credit Accommodations by Lender to Borrowers: 8.1 Corporate Existence, Power and Authority; Subsidiaries. Each Borrower ------------------------------------------------------ is a corporation or limited liability company duly organized and in good standing under the laws of its state of incorporation or organization and is duly qualified as a foreign corporation or company and in good standing in all states or other jurisdictions where the nature and extent of the business transacted by it or the ownership of assets makes such qualification necessary, except for those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect. The execution, delivery and performance of this Agreement, the other Financing Agreements and the transactions contemplated hereunder and thereunder (a) are all within each Borrower's corporate or company powers (b) have been duly authorized (c) are not in contravention of law or the terms of such Borrower's certificate of incorporation, by-laws, or other organizational documentation, or any indenture, agreement or undertaking to which such Borrower is a party or by which such Borrower or its Property are bound and (d) will not result in the creation or imposition of, or require or give rise to any obligation to grant, any Lien, security interest, charge or other encumbrance upon any Property of any Borrower. This Agreement and the other Financing Agreements constitute legal, valid and binding obligations of Borrowers enforceable in accordance with their respective terms. No Borrower has any Subsidiaries except as set forth in the Information Certificates. -33- 8.2 Financial Statements; No Material Adverse Change. All financial ------------------------------------------------ statements relating to Borrowers which have been or may hereafter be delivered by Borrowers to Lender have been prepared in accordance with GAAP and fairly present the financial condition and the results of operation of Borrowers as at the dates and for the periods set forth therein. Except as disclosed in any interim financial statements furnished by Borrowers to Lender prior to the date of this Agreement, there has been no material adverse change in the assets, liabilities, properties and condition, financial or otherwise, of Borrowers, since the date of the most recent audited financial statements furnished by Borrowers to Lender prior to the date of this Agreement. 8.3 Chief Executive Office; Collateral Locations. The chief executive -------------------------------------------- office of each Borrower and each Borrower's Records concerning Accounts are located only at the address set forth on the signature pages hereto and its only other places of business and the only other locations of Collateral, if any, are the addresses set forth in its Information Certificate, subject to the right of Borrowers to establish new locations in accordance with Section 9.2 below. The Information Certificates correctly identify any of such locations that are not owned by Borrowers and set forth the owners and/or operators thereof and to the best of Borrowers' knowledge, the holders of any mortgages on such locations. 8.4 Priority of Liens; Title to Properties. The security interests and -------------------------------------- Liens granted to Lender under this Agreement and the other Financing Agreements constitute valid and perfected first priority Liens and security interests in and upon the Collateral subject only to the Liens indicated on Schedule 8.4 hereto and the other Liens permitted under Section 9.8 hereof. Each Borrower has good and marketable title to all of its properties and assets subject to no Liens of any kind, except the Permitted Liens. 8.5 Tax Returns. Each Borrower has filed, or caused to be filed, in a ----------- timely manner all tax returns, reports and declarations which are required to be filed by it. All information in such tax returns, reports and declarations is complete and accurate in all material respects. Each Borrower has paid or caused to be paid all taxes due and payable or claimed due and payable in any assessment received by it, except taxes the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to Borrower and with respect to which adequate reserves have been set aside on its books. Adequate provision has been made for the payment of all accrued and unpaid Federal, State, county, local, foreign and other taxes whether or not yet due and payable and whether or not disputed. 8.6 Litigation. Except as set forth on the Information Certificates, there ---------- is no present investigation by any Governmental Authority pending, or to the best of any Borrower's knowledge threatened, against or affecting any Borrower, its assets or business and there is no action, suit, proceeding or claim by any Person pending, or to the best of any Borrower's knowledge threatened, against any Borrower or its assets or goodwill, or against or affecting any transactions contemplated by this Agreement, which, in any such case, if adversely determined against such Borrower would have a Material Adverse Effect. 8.7 Compliance with Other Agreements and Applicable Laws. No Borrower is ---------------------------------------------------- in default under, or in violation in any material respect of any of the terms of, any agreement, contract, instrument, lease or other commitment to which it is a party or by which it or any of its assets are bound, the breach of which could have a Material Adverse Effect, and each Borrower is in compliance in all respects with all applicable provisions of laws, rules, regulations, licenses, permits, approvals and orders of any foreign, Federal, State or local Governmental Authority. 8.8 Environmental Matters. --------------------- -34- (a) Except as set forth on Schedule 8.8 hereto, no Borrower nor any Subsidiary of any Borrower has generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on or off its premises (whether or not owned by it) in any manner which at any time violates any applicable Environmental Law or any license, permit, certificate, approval or similar authorization thereunder and the operations of such Borrower and each such Subsidiary complies in all material respects with all Environmental Laws and all licenses, permits, certificates, approvals and similar authorizations thereunder. (b) Except as set forth on Schedule 8.8 hereto, there has been no investigation, proceeding, complaint, order, directive, claim, citation or notice by any Governmental Authority or any other person nor is any pending or to the best of such Borrower's knowledge threatened, with respect to any non- compliance with or violation of the requirements of any Environmental Law by such Borrower and each such Subsidiary or the release, spill or discharge, threatened or actual, of any Hazardous Material or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter, which affects such Borrower or its business, operations or assets or any properties at which such Borrower has transported, stored or disposed of any Hazardous Materials. (c) No Borrower nor any of its Subsidiaries has material liability (contingent or otherwise) in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials. (d) Each Borrower and each of its Subsidiaries have all licenses, permits, certificates, approvals or similar authorizations required to be obtained or filed in connection with the operations of such Borrower under any Environmental Law and all of such licenses, permits, certificates, approvals or similar authorizations are valid and in full force and effect. 8.9 Employee Benefits. ----------------- (a) Each Plan is in compliance 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 Internal Revenue Service and to the best of each Borrower's knowledge, nothing has occurred which would cause the loss of such qualification. Each Borrower and its ERISA Affiliates have 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 of each Borrower's knowledge, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan. (c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) the current value of each Plan's assets (determined in accordance with the assumptions used for funding such Plan pursuant to Section 412 of the Code) are not less than such Plan's liabilities under Section 4001(a)(16) of ERISA; (iii) Borrower and its ERISA Affiliates have not incurred and do not reasonably expect to incur, any liability under Title IV of ERISA with respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) no Borrower nor any of its ERISA Affiliates has incurred and do not reasonably expect 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 -35- to a Multiemployer Plan; and (v) no Borrower nor any of its ERISA Affiliates have engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA. 8.10 Bank Accounts. All of the Deposit Accounts, investment accounts or ------------- other accounts in the name of or used by any Borrower maintained at any bank or other financial institution are set forth on Schedule 8.10 hereto, subject to the right of Borrowers to establish new accounts in accordance with Section 9.13 below. 8.11 Intellectual Property. Each Borrower owns or licenses or otherwise --------------------- has the right to use all Intellectual Property necessary for the operation of its business as presently conducted or proposed to be conducted. As of the date hereof, no Borrower has any Intellectual Property registered, or subject to pending applications, in the United States Patent and Trademark Office or any similar office or agency in the United States, any State thereof, any political subdivision thereof or in any other country, other than those described in Schedule 8.11 hereto and has not granted any licenses with respect thereto other than as set forth in Schedule 8.11 hereto. No event has occurred which permits or would permit after notice or passage of time or both, the revocation, suspension or termination of such rights. To the best of each Borrower's knowledge, no slogan or other advertising device, product, process, method, substance or other Intellectual Property or goods bearing or using any Intellectual Property presently contemplated to be sold by or employed by such Borrower infringes any patent, trademark, servicemark, tradename, copyright, license or other Intellectual Property owned by any other Person presently and no claim or litigation is pending or threatened against or affecting such Borrower contesting its right to sell or use any such Intellectual Property. Schedule 8.11 sets forth all of the agreements or other arrangements of each Borrower pursuant to which such Borrower has a license or other right to use any trademarks, logos, designs, representations or other Intellectual Property owned by another Person as in effect on the date hereof and the dates of the expiration of such agreements or other arrangements of such Borrower as in effect on the date hereof (collectively, together with such agreements or other arrangements as may be entered into by such Borrower after the date hereof, collectively, the "License Agreements" and individually, a "License Agreement"). No trademark, servicemark or other Intellectual Property at any time used by any Borrower which is owned by another Person, or owned by a Borrower subject to any security interest, Lien, collateral assignment, pledge or other encumbrance in favor of any Person other than Lender, is affixed to any Inventory, except to the extent permitted under the term of the license agreements listed on Schedule 8.11 hereto. 8.12 Capitalization. -------------- (a) The issued and outstanding shares of Capital Stock of each Borrower are duly authorized and are fully paid and non-assessable, free and clear of all claims, Liens, pledges and encumbrances of any kind, except as disclosed in writing to Lender. (b) Each Borrower is Solvent and will continue to be Solvent after the creation of the Obligations and the security interests and Liens of Lender and the other transaction contemplated hereunder. 8.13 Labor Disputes. -------------- (a) Set forth on Schedule 8.13 hereto is a list (including dates of termination) of all collective bargaining or similar agreements between or applicable to a Borrower and any union, labor organization or other bargaining agent in respect of the employees of a Borrower on the date hereof. (b) There is (i) no significant unfair labor practice complaint pending against any Borrower or, to the best of each Borrower's knowledge, threatened against it, before the National Labor Relations Board, and no significant grievance or significant arbitration proceeding arising out of or under any -36- collective bargaining agreement is pending on the date hereof against any Borrower or, to best of each Borrower's knowledge, threatened against it, and (ii) no significant strike, labor dispute, slowdown or stoppage is pending against any Borrower or, to the best of each Borrower's knowledge, threatened against any Borrower. 8.14 Corporate Name; Prior Transactions. No Borrower has, during the past ---------------------------------- five years, been known by or used by 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 or assets out of the ordinary course of business, except as set forth in the Information Certificates. 8.15 Restrictions on Subsidiaries. Except for restrictions contained in ---------------------------- this Agreement or any other agreement with respect to Indebtedness of Borrower permitted hereunder as in effect on the date hereof, there are no contractual or consensual restrictions on any Borrower or any of its Subsidiaries which prohibit or otherwise restrict (a) the transfer of cash or other assets (i) between a Borrower and any of its Subsidiaries or (ii) between any Subsidiaries of a Borrower or (b) the ability of any Borrower or any of its Subsidiaries to incur Indebtedness or grant security interests to Lender in the Collateral. 8.16 Material Contracts. Schedule 8.16 hereto sets forth all Material ------------------ Contracts to which a Borrower is a party or is bound as of the date hereof. Each Borrower has delivered true, correct and complete copies of such Material Contracts to Lender on or before the date hereof. No Borrower is in breach of or in default under any Material Contract and has not received any notice of the intention of any other party thereto to terminate any Material Contract. 8.17 Payable Practices. No Borrower has made any material change in the ----------------- historical accounts payable practices from those in effect immediately prior to the date hereof. 8.18 Accuracy and Completeness of Information. All information furnished ---------------------------------------- by or on behalf of any Borrower in writing to Lender in connection with this Agreement or any of the other Financing Agreements or any transaction contemplated hereby or thereby, including all information on the Information Certificates is true and correct in all material respects on the date as of which such information is dated or certified and does not omit any material fact necessary in order to make such information not misleading. No event or circumstance has occurred which has had or could reasonably be expected to have a Material Adverse Effect, which has not been fully and accurately disclosed to Lender in writing. 8.19 Brokerage Receivables. All Brokerage Receivables are owned solely by --------------------- a Borrower and such Borrower has the lawful right to collect each such Brokerage Receivable. No Person other than a Borrower has any right, title or interest in any such Brokerage Receivable. 8.20 Survival of Warranties; Cumulative. All representations and ---------------------------------- warranties contained in this Agreement or any of the other Financing Agreements shall survive the execution and delivery of this Agreement and shall be deemed to have been made again to Lender on the date of each additional borrowing or other credit accommodation hereunder and shall be conclusively presumed to have been relied on by Lender regardless of any investigation made or information possessed by Lender. The representations and warranties set forth herein shall be cumulative and in addition to any other representations or warranties which Borrower shall now or hereafter give, or cause to be given, to Lender. SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS ---------------------------------- -37- 9.1 Maintenance of Existence. Each Borrower shall at all times preserve, ------------------------ renew and keep in full, force and effect its corporate or limited liability company existence and rights and franchises with respect thereto and maintain in full force and effect all permits, licenses, trademarks, tradenames, approvals, authorizations, leases and contracts necessary to carry on the business as presently or proposed to be conducted. A Borrower shall give Lender at least thirty (30) days prior written notice of any proposed change in its corporate or limited liability company name, which notice shall set forth the new name and such Borrower shall deliver to Lender a copy of the amendment to the Certificate of Incorporation or Certification of Organization/Formation of such Borrower providing for the name change certified by the Secretary of State of the jurisdiction of incorporation or organization of such Borrower as soon as it is available and shall deliver to Lender at least ten (10) days prior to such name change any and all UCC-1 financing statements or UCC amendments required by Lender to reflect such name change. 9.2 New Collateral Locations. A Borrower may open a new location within ------------------------ the continental United States provided such Borrower (a) gives Lender thirty (30) days prior written notice of the intended opening of any such new location and (b) executes and delivers, or causes to be executed and delivered, to Lender such agreements, documents, and instruments as Lender may deem reasonably necessary or desirable to protect its interests in the Collateral at such location, including UCC financing statements. 9.3 Compliance with Laws, Regulations, Etc. --------------------------------------- (a) Each Borrower shall, and shall cause each of its Subsidiaries to, at all times, comply in all material respects with all laws, rules, regulations, licenses, permits, approvals and orders applicable to it and duly observe all requirements of any foreign, Federal, State or local Governmental Authority, including ERISA, the Code, the Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, and all statutes, rules, regulations, orders, permits and stipulations relating to environmental pollution and employee health and safety, including all of the Environmental Laws. (b) Each Borrower shall establish and maintain, at its expense, a system to assure and monitor its continued compliance with all Environmental Laws in all of its operations, which system shall include annual reviews of such compliance by employees or agents of such Borrower who are familiar with the requirements of the Environmental Laws upon request of Lender, copies of all environmental surveys, audits, assessments, feasibility studies and results of remedial investigations shall be promptly furnished, or caused to be furnished, by each Borrower to Lender. Each Borrower shall take prompt and appropriate action to respond to any non-compliance with any of the Environmental Laws and shall regularly report to Lender on such response. (c) Each Borrower shall give both oral and written notice to Lender immediately upon such Borrower's receipt of any notice of, or such Borrower's otherwise obtaining knowledge of, (i) the occurrence of any event involving the release, spill or discharge, threatened or actual, of any Hazardous Material or (ii) any investigation, proceeding, complaint, order, directive, claims, citation or notice with respect to: (A) any non-compliance with or violation of any Environmental Law by such Borrower or (B) the release, spill or discharge, threatened or actual, of any Hazardous Material or (C) the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials or (D) any other environmental, health or safety matter, which affects such Borrower or its business, operations or assets or any Properties at which such Borrower transported, stored or disposed of any Hazardous Materials. -38- (d) Without limiting the generality of the foregoing, whenever Lender reasonably determines that there is non-compliance, or any condition which requires any action by or on behalf of any Borrower in order to avoid any material non-compliance, with any Environmental Law, such Borrower shall, at Lender's request and such Borrower's expense: (i) cause an independent environmental engineer acceptable to Lender to conduct such tests of the site where such Borrower's non-compliance or alleged non-compliance with such Environmental Laws has occurred as to such non-compliance and prepare and deliver to Lender a report as to such non-compliance setting forth the results of such tests, a proposed plan for responding to any environmental problems described therein, and an estimate of the costs thereof and (ii) provide to Lender a supplemental report of such engineer whenever the scope of such non- compliance, or such Borrower's response thereto or the estimated costs thereof, shall change in any material respect. (e) Each Borrower shall indemnify, defend and hold harmless Lender, its directors, officers, employees, agents, invitees, representatives, successors and assigns, from and against any and all losses, claims, damages, liabilities, costs, and expenses (including reasonable attorneys' fees actually incurred and legal expenses) directly or indirectly arising out of or attributable to the use, generation, manufacture, reproduction, storage, release, threatened release, spill, discharge, disposal or presence of a Hazardous Material, including the costs of any required or necessary repair, cleanup or other remedial work with respect to any Property of such Borrower and the preparation and implementation of any closure, remedial or other required plans. All representations, warranties, covenants and indemnifications in this Section 9.3 shall survive the payment of the Obligations and the termination or non-renewal of this Agreement. 9.4 Payment of Taxes and Claims. Each Borrower shall, and shall cause each --------------------------- of its Subsidiaries to, duly pay and discharge all taxes, assessments, contributions and governmental charges upon or against it or its Properties or assets, except for taxes the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower or such Subsidiary, as the case may be, and with respect to which adequate reserves have been set aside on its books. Borrowers shall be liable for any tax or penalties imposed on Lender as a result of the financing arrangements provided for herein, and Borrowers agree to jointly and severally indemnify and hold Lender harmless with respect to the foregoing, and to repay to Lender on demand the amount thereof, and until paid by Borrowers such amount shall be added and deemed part of the Revolving Loans, provided, that, nothing contained herein -------- ---- shall be construed to require Borrowers to pay any income or franchise taxes attributable to the income of Lender from any amounts charged or paid hereunder to Lender. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement. 9.5 Insurance. Each Borrower shall, and shall cause each of its --------- Subsidiaries to, at all times, maintain with financially sound and reputable insurers insurance with respect to the tangible Collateral against loss or damage and all other insurance of the kinds and in the amounts customarily insured against or carried by corporations of established reputation engaged in the same or similar businesses and similarly situated. Said policies of insurance shall be satisfactory to Lender as to form, amount and insurer. Borrowers shall furnish certificates, policies or endorsements to Lender as Lender shall require as proof of such insurance, and, if Borrowers fail to do so, Lender is authorized, but not required, to obtain such insurance at the expense of Borrowers. All policies shall provide for at least thirty (30) days prior written notice to Lender of any cancellation or reduction of coverage and that Lender may act as attorney for Borrowers in obtaining, and at any time an Event of Default exists or has occurred and is continuing, adjusting, settling, amending and canceling such insurance. Borrowers shall cause Lender to be named as a Lender's loss payee and an additional insured (but without any liability for any premiums) under such insurance policies and Borrowers shall obtain non- contributory lender's loss payable endorsements to all insurance policies in form and substance satisfactory to Lender. Such lender's loss payable endorsements shall specify that the proceeds of such insurance shall be payable to Lender as its interests may appear and -39- further specify that Lender shall be paid regardless of any act or omission by Borrowers or any of their Affiliates. At its option, Lender may apply any insurance proceeds received by Lender at any time to the cost of repairs or replacement of Collateral and/or to payment of the Obligations, whether or not then due, in any order and in such manner as Lender may determine or hold such proceeds as cash collateral for the Obligations. 9.6 Financial Statements and Other Information. ------------------------------------------ (a) Each Borrower shall, and shall cause each of its Subsidiaries to, keep proper books and records in which true and complete entries shall be made of all dealings or transactions of or in relation to the Collateral and the business of such Borrower and its Subsidiaries in accordance with GAAP. Each Borrower shall promptly furnish to Lender all such financial and other information as Lender shall reasonably request relating to the Collateral and the assets, business and operations of such Borrower, and to notify the auditors and accountants of such Borrower that Lender is authorized to obtain such information directly from them. Without limiting the foregoing, Borrowers shall furnish or cause to be furnished to Lender, the following: (i) within thirty (30) days after the end of each fiscal month, monthly unaudited consolidated financial statements and unaudited consolidating financial statements (including in each case balance sheets, statements of income and loss, statements of cash flow, and statements of shareholders' equity), all in reasonable detail, fairly presenting the financial position and the results of the operations of Borrowers and their Subsidiaries as of the end of and through such fiscal month, certified to be correct by the chief financial officer of Borrowers, subject to normal year-end adjustments and accompanied by a compliance certificate substantially in the form of Exhibit B hereto, along with a schedule in form reasonably satisfactory to Lender of the calculations used in determining, as of the end of such month, whether Borrowers were in compliance with the covenants set forth in Sections 9.18 of this Agreement for such month and (ii) within ninety (90) days after the end of each fiscal year (other than the fiscal year of Borrowers ending December 31, 2000, which statements shall be furnished on or before June 30, 2001), audited consolidated financial statements and audited consolidating financial statements of Borrowers and their Subsidiaries (including in each case balance sheets, statements of income and loss, statements of cash flow and statements of shareholders' equity), and the accompanying notes thereto, all in reasonable detail, fairly presenting the financial position and the results of the operations of Borrowers and their Subsidiaries as of the end of and for such fiscal year, together with the unqualified opinion of independent certified public accountants, which accountants shall be an independent accounting firm selected by Borrowers and reasonably acceptable to Lender, that such consolidated financial statements have been prepared in accordance with GAAP, and present fairly the results of operations and financial condition of Borrowers and their Subsidiaries as of the end of and for the fiscal year then ended. (b) Borrowers shall promptly notify Lender in writing of the details of (i) any loss, damage, investigation, action, suit, proceeding or claim relating to the Collateral or any other property which is security for the Obligations or which would result in any Material Adverse Effect, (ii) any Material Contract of a Borrower being terminated or amended or any new Material Contract entered into (in which event such Borrower shall provide Lender with a copy of such Material Contract), (iii) any order, judgment or decree in excess of $100,000 shall have been entered against any Borrower or any of its Properties or assets, (iv) any notification of violation of laws or regulations received by any Borrower involving an amount in excess of $50,000, (v) any ERISA Event, and (vi) the occurrence of Event of Default. (c) Borrowers shall promptly after the sending or filing thereof furnish or cause to be furnished to Lender copies of all reports which Borrowers send to their stockholders generally and copies of all reports and registration statements which Borrowers file with the Securities and Exchange Commission, any national securities exchange or the National Association of Securities Dealers, Inc. -40- (d) Borrowers shall furnish or cause to be furnished to Lender such budgets, forecasts, projections and other information respecting the Collateral and the business of Borrowers, as Lender may, from time to time, reasonably request. Lender is hereby authorized to deliver a copy of any financial statement or any other information relating to the business of Borrowers to any court or other Government Authority or to any participant or assignee or prospective participant or assignee. Each Borrower hereby irrevocably authorizes and directs all accountants or auditors to deliver to Lender, at Borrowers' expense, copies of the financial statements of such Borrower and any reports or management letters prepared by such accountants or auditors on behalf of such Borrower and to disclose to Lender such information as they may have regarding the business of such Borrower. Any documents, schedules, invoices or other papers delivered to Lender may be destroyed or otherwise disposed of by Lender one (1) year after the same are delivered to Lender, except as otherwise designated by Borrowers to Lender in writing. 9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Without -------------------------------------------------------- Lender's prior written consent, no Borrower shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, (a) merge into or with or consolidate with any other Person or permit any other Person to merge into or with or consolidate with it; (b) sell, assign, lease, transfer, abandon or otherwise dispose of any Capital Stock or Indebtedness to any other Person or any of its assets to any other Person, except for (i) sales of Inventory in the ordinary course of business, (ii) the disposition of worn-out, obsolete or excess Equipment, and (iii) the issuance and sale by Borrowers of Capital Stock of Borrowers after the date hereof; provided, that, (A) Lender shall have received not less than ten -------- ---- (10) Business Days prior written notice of such issuance and sale by Borrowers, which notice shall specify the parties to whom such shares are to be sold, the terms of such sale, the total amount which it is anticipated will be realized from the issuance and sale of such stock and the net cash proceeds which it is anticipated will be received by Borrowers from such sale, (B) Borrowers shall not be required to pay any cash dividends or repurchase or redeem such Capital Stock or make any other payments in respect thereof, (C) the terms of such Capital Stock, and the terms and conditions of the purchase and sale thereof, shall not include any terms that include any limitation on the right of Borrowers to request or receive Revolving Loans or Letter of Credit Accommodations or the right of Borrowers to amend or modify any of the terms and conditions of this Agreement or any of the other Financing Agreements or otherwise in any way relate to or affect the arrangements of Borrowers with Lender or are more restrictive or burdensome to Borrowers than the terms of any Capital Stock in effect on the date hereof, and (D) as of the date of such issuance and sale and after giving effect thereto, no Default or Event of Default shall exist or have occurred; (c) wind up, liquidate or dissolve; or (d) agree to do any of the foregoing. 9.8 Encumbrances. No Borrower shall, nor shall it permit any of its ------------ Subsidiaries to, create, incur, assume, suffer or permit to exist any security interest, Lien or other encumbrance of any nature whatsoever on any of its assets or Properties, including the Collateral, except: (a) Liens and security ------ interests of Lender; (b) Liens securing the payment of taxes, either not yet overdue or the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to Borrowers or their Subsidiaries, as the case may be, and with respect to which adequate reserves have been set aside on its books; (c) non-consensual statutory Liens (other than liens securing the payment of taxes) arising in the ordinary course of business of such Borrower or such Subsidiary, as the case may be, to the extent: (i) such Liens secure -41- Indebtedness which is not overdue or (ii) such Liens secure Indebtedness relating to claims or liabilities which are fully insured and being defended at the sole cost and expense and at the sole risk of the insurer or being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower or such Subsidiary, as the case may be, in each case prior to the commencement of foreclosure or other similar proceedings and with respect to which adequate reserves have been set aside on its books; (d) zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of Real Property which do not interfere in any material respect with the use of such Real Property or ordinary course of business of such Borrower or such Subsidiary as presently conducted thereon or materially impair the value of the Real Property which may be subject thereto; (e) purchase money security interests in Equipment (including Capital Leases) and purchase money mortgages on Real Property to secure Indebtedness permitted under Section 9.9(b) hereof; and (f) the security interests and Liens set forth on Schedule 8.4 hereto. 9.9 Indebtedness. No Borrower shall, nor shall it permit any of its ------------ Subsidiaries to, incur, create, assume, become or be liable in any manner with respect to, or suffer or permit to exist, any Indebtedness or guarantee, assume, endorse, or otherwise become responsible for (directly or indirectly) the performance, dividends or other obligations of any Person, except: ------ (a) the Obligations; (b) purchase money Indebtedness (including Capital Leases) arising after the date hereof to the extent secured by purchase money security interests in Equipment (including Capital Leases) and purchase money mortgages on real estate not to exceed $20,000,000 in the aggregate at any time outstanding so long as such security interests and mortgages do not apply to any property of such Borrower other than the Equipment or real estate so acquired, and the Indebtedness secured thereby does not exceed the cost of the Equipment or real estate so acquired, as the case may be; (c) guarantees by any Subsidiaries of such Borrower of the Obligations in favor of Lenders; (d) Indebtedness of such Borrower under interest swap agreements, interest rate cap agreements, interest rate collar agreements, interest rate exchange agreements and similar contractual agreements entered into for the purpose of protecting a Person against fluctuations in interest rates; provided, -------- that, such arrangements are with banks or other financial institutions that have - ---- combined capital and surplus and undivided profits of not less than $250,000,000 and are not for speculative purposes and such Indebtedness shall be unsecured; (e) unsecured Indebtedness of such Borrower arising after the date hereof to any third Person (other than Indebtedness otherwise permitted under this Section 9.9), provided, that, each of the following conditions is satisfied -------- ---- as determined by Lender: (i) such Indebtedness is subject and subordinate in right of payment to the right of Lender to receive the prior indefeasible payment and satisfaction in full payment of all of the Obligations, (ii) Lender shall have received not less than ten (10) days prior written notice of the intention of such Borrower to incur such Indebtedness, which notice shall set forth in reasonable detail satisfactory to Lender the amount of such Indebtedness, the Person or Persons to whom such Indebtedness will be owed, the interest rate, the schedule of repayments and maturity date with respect hereto and such other information as Lender may reasonably request with respect thereto, (iii) Lender shall have received true, correct and complete copies of all agreements, documents and instruments evidencing or otherwise related to such Indebtedness, (iv) on and before the date of incurring such Indebtedness and after giving effect thereto, no Default or Event of Default shall exist or have occurred, (v) Lender shall have received, in form and substance satisfactory to Lender, an intercreditor agreement or intercreditor agreements between Lender and each of the holders of such Indebtedness, as acknowledged and agreed to by such Borrower, -42- providing for the terms of the subordination in right of payment of the Indebtedness of such Borrower to such holders to the payment of the Obligations and related matters, duly authorized, executed and delivered by each of the holders of such Indebtedness and such Borrower, (vi) such Indebtedness shall be incurred by such Borrower at commercially reasonable rates and terms in an arm's length transaction or with an Affiliate, but if with an Affiliate at rates and on terms no less favorable to such Borrower than such Borrower would obtain in a comparable arm's length transaction with a Person who is not an Affiliate, (vii) such Indebtedness shall not at any time include any terms that include any limitation on the right of such Borrower to request or receive Revolving Loans or Letter of Credit Accommodations or the right of such Borrower to amend, modify, supplement, replace, renew or extend any of the terms or conditions of this Agreement or any of the other Financing Agreements or otherwise in any way relate to or adversely affect the arrangements of such Borrower with Lender and such Indebtedness shall not at any time include terms and conditions which in any manner adversely affect Lender or any rights of Lender as determined in good faith by Lender and confirmed by Lender to such Borrower in writing, (viii) such Borrower shall not, directly or indirectly, make, or be required to make, any payments in respect of such Indebtedness, including, but not limited to, any prepayments or other non-mandatory payments, except as Lender may otherwise agree in writing, (ix) such Borrower shall not, directly or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or any agreement, document or instrument related thereto, except, that, such Borrower may, ------ ---- after prior written notice to Lender, amend, modify, alter or change the terms thereof so as to extend the maturity thereof, or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness (other than pursuant to payments thereof), or to reduce the interest rate or any fees in connection therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness (except pursuant to regularly scheduled payments permitted herein), or set aside or otherwise deposit or invest any sums for such purpose, and (x) such Borrower shall furnish to Lender all notices or demands in connection with such Indebtedness either received by such Borrower or on its behalf promptly after the receipt thereof, or sent by such Borrower or on its behalf concurrently with the sending thereof, as the case may be; (f) the Indebtedness set forth on Schedule 9.9 hereto; provided, that, -------- ---- (i) such Borrower may only make regularly scheduled payments of principal and interest in respect of such Indebtedness in accordance with the terms of the agreement or instrument evidencing or giving rise to such Indebtedness as in effect on the date hereof, (ii) such Borrower shall not, directly or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or any agreement, document or instrument related thereto as in effect on the date hereof except, that, such Borrower may, after prior written notice to Lender, ------ ---- amend, modify, alter or change the terms thereof so as to extend the maturity thereof, or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness (other than pursuant to payments thereof), or to reduce the interest rate or any fees in connection therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or set aside or otherwise deposit or invest any sums for such purpose, and (iii) such Borrower shall furnish to Lender all notices or demands in connection with such Indebtedness either received by such Borrower or on its behalf, promptly after the receipt thereof, or sent by such Borrower or on its behalf, concurrently with the sending thereof, as the case may be. (g) the Indebtedness owing on the Closing Date by Borrowers to Term Lenders and the Equipment Lessors, and mandatory prepayments of the Indebtedness owing to the Term Lenders pursuant to Section 2.2 of the Term Lender Loan Agreement, as such agreement is in effect on the date hereof. 9.10 Loans, Investments, Guarantees, Etc. No Borrower shall, and shall not ------------------------------------ permit any of its Subsidiaries to, directly or indirectly, make, or suffer or permit to exist, any loans or advance money or property to any person, or any investment in (by capital contribution, dividend or otherwise) or purchase or repurchase the Capital Stock or Indebtedness or all or a substantial part of the assets or Property of any Person, or form or acquire any Subsidiaries, or agree to do any of the foregoing, except: ------ -43- (a) Accommodation Payments; (b) the endorsement of instruments for collection or deposit in the ordinary course of business; (c) investments in cash or Cash Equivalents, provided, that, (i) no -------- ---- Revolving Loans are then outstanding and (ii) as to any of the foregoing, unless waived in writing by Lender, such Borrower shall take such actions as are deemed necessary by Lender to perfect the security interest of Lender in such investments; (d) the existing equity investments of such Borrower as of the date hereof in its Subsidiaries, provided, that, such Borrower shall have no -------- ---- obligation to make any other investment in, or loans to, or other payments in respect of, any such Subsidiaries; (e) equity investments of such Borrower in any wholly-owned Subsidiary incorporated under the laws of any State of the United States of America formed or acquired after the date hereof, provided, that, (i) promptly upon such -------- ---- formation or acquisition, such Borrower shall cause any such Subsidiary to execute and deliver to Lender, in form and substance satisfactory to Lender, (A) an absolute and unconditional guarantee of payment of any and all present and future Obligations of such Borrower to Lender, (B) a security agreement granting to Lender a first security interest and Lien (except as otherwise consented to in writing by Lender) upon all of the assets of such Subsidiary, (C) related UCC Financing Statements, and (D) such other agreements, documents and instruments as Lender may require, including supplements and amendments hereto and other loan agreements or instruments evidencing indebtedness of such new Subsidiary to Lender, (ii) promptly upon Lender's request: (A) such Borrower shall execute and deliver to Lender in form and substance satisfactory to Lender, a pledge and security agreement granting to Lender a first pledge of and Lien on all of the issued and outstanding shares of Capital Stock of such Subsidiary, and (B) such Borrower shall deliver the original stock certificates evidencing such shares of Capital Stock (or such other evidence as may be issued in the case of a limited liability company) together with stock powers with respect thereto duly executed in blank (or the equivalent thereof in the case of a limited liability company), (iii) as of the date of such investment and after giving effect thereto, no Default or Event of Default shall exist or have occurred, (iv) in no event shall the aggregate amount of all capital contributions or other amounts paid by such Borrower to any Subsidiary formed or acquired after the date hereof or for the acquisition thereof exceed $5,000,000, (v) as of the date of any such payment and after giving effect thereto, Excess Availability for each of the immediately preceding thirty (30) consecutive days shall have been not less than $16,000,000, and (vi) as of the date of any such payment and after giving effect thereto, the Excess Availability shall be not less than $16,000,000; (f) stock or obligations issued to such Borrower by any Person (or the representative of such Person) in respect of Indebtedness of such Person owing to such Borrower in connection with the insolvency, bankruptcy, receivership or reorganization of such Person or a composition or readjustment of the debts of such Person; provided, that, the original of any such stock or instrument -------- ---- evidencing such obligations shall be promptly delivered to Lender, upon Lender's request, together with such stock power, assignment or endorsement by such Borrower as Lender may request; (g) obligations or account debtors to such Borrower arising from Accounts which are past due evidenced by a promissory note made by such account debtor payable to such Borrower; provided, that, promptly upon the receipt of -------- ---- the original of any such promissory note by such Borrower, such promissory -44- note shall be endorsed to the order of Lender by such Borrower and promptly delivered to Lender as so endorsed; (h) the loans and advances set forth on Schedule 9.10 hereto; provided, -------- that, as to such loans and advances, (i) such Borrower shall not, directly or - ---- indirectly, amend, modify, alter or change the terms of such loans and advances or any agreement, document or instrument related thereto and (ii) such Borrower shall furnish to Lender all notices or demands in connection with such loans and advances either received by such Borrower or on its behalf, promptly after the receipt thereof, or sent by such Borrower or on its behalf, concurrently with the sending thereof, as the case may be. 9.11 Dividends and Redemptions. No Borrower shall, directly or indirectly, ------------------------- pay any dividends on account of any shares of class of capital stock of such Borrower now or hereafter outstanding, or set aside or otherwise deposit or invest any sums for such purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of any class of capital stock (or set aside or otherwise deposit or invest any sums for such purpose) for any consideration other than common stock or apply or set apart any sum, or make any other distribution (by reduction of capital or otherwise) in respect of any such shares or agree to do any of the foregoing; provided, that, so long as no -------- ---- Default or Event of Default exists a Borrower may (i) make payments not to exceed $100,000 during any month with respect to Indebtedness of Transit Group or any Subsidiary arising under the Stock Purchase Agreement dated as of April __, 2001, among Transit Group, T. Wayne Davis, Cynthia F. Turner, Philip R. Fulmer, Timothy A. Fulmer, Barbara Fulmer and Carroll A. Fulmer (the "Fulmer Debt"), and (ii) prepay the Fulmer Debt from any proceeds of any equity offerings after the Closing Date. 9.12 Transactions with Affiliates. No Borrower shall, directly or ---------------------------- indirectly, (a) purchase, acquire or lease any Property from, or sell, transfer or lease any Property to, any officer, director, agent or other Person affiliated with such Borrower, except in the ordinary course of business of such Borrower and upon fair and reasonable terms no less favorable to such Borrower than such Borrower would obtain in a comparable arm's length transaction with an unaffiliated Person or (b) make any payments of management, consulting or other fees for management or similar services, or of any Indebtedness owing to any officer, employee, shareholder, director or other Affiliate of such Borrower except reasonable compensation to officers, employees and directors for services rendered to such Borrower in the ordinary course of business. 9.13 Additional Bank Accounts. No Borrower shall, directly or indirectly, ------------------------ open, establish or maintain any Deposit Account, investment account or any other account with any bank or other financial institution, other than the Blocked Accounts and the accounts set forth in Schedule 8.10 hereto, except: (a) as to any new or additional Blocked Accounts and other such new or additional accounts which contain any Collateral or proceeds thereof, with the prior written consent of Lender and subject to such conditions thereto as Lender may establish and (b) as to any accounts used by Borrowers to make payments of payroll, taxes or other obligations to third parties, after prior written notice to Lender. 9.14 Compliance with ERISA. Each 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 and State law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; (c) not terminate any of such Plans so as to incur any liability to the Pension Benefit Guaranty Corporation; (d) not allow or suffer to exist any prohibited transaction involving any of such Plans or any trust created thereunder which would subject such Borrower or such ERISA Affiliate to a tax or penalty or other liability on prohibited transactions imposed under Section 4975 of the Code or ERISA; (e) make all required contributions to any Plan which it is obligated to pay under Section 302 of ERISA, Section 412 of the Code or the terms of such Plan; (f) not allow or suffer to exist any -45- accumulated funding deficiency, whether or not waived, with respect to any such Plan; or (g) not allow or suffer to exist any occurrence of a reportable event or any other event or condition which presents a material risk of termination by the Pension Benefit Guaranty Corporation of any such Plan that is a single employer plan, which termination could result in any liability to the Pension Benefit Guaranty Corporation. 9.15 End of Fiscal Years: Fiscal Quarters. Each Borrower shall, for ------------------------------------ financial reporting purposes, cause its, and each of its Subsidiaries' (a) fiscal years to end on December 31 of each year and (b) fiscal quarters to end on March 31, June 30, September 30 and December 31 of each year. 9.16 Change in Business. No Borrower shall engage in any business other ------------------ than the business of such Borrower on the date hereof and any business reasonably related, ancillary or complimentary to the business in which such Borrower is engaged on the date hereof. 9.17 Limitation of Restrictions Affecting Subsidiaries. No Borrower shall, ------------------------------------------------- directly, or indirectly, create or otherwise cause or suffer to exist any encumbrance or restriction which prohibits or limits the ability of any Subsidiary of such Borrower to (a) pay dividends or make other distributions or pay any Indebtedness owed to such Borrower or any Subsidiary of such Borrower; (b) make loans or advances to such Borrower or any Subsidiary of such Borrower, (c) transfer any of its Properties or assets to such Borrower or any Subsidiary of such Borrower; or (d) create, incur, assume or suffer to exist any Lien upon any of its Property, assets or revenues, whether now owned or hereafter acquired, other than encumbrances and restrictions arising under (i) applicable law, (ii) this Agreement, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of such Borrower or any of its Subsidiaries, (iv) customary restrictions on dispositions of real property interests found in reciprocal easement agreements of such Borrower or its Subsidiary, (v) any agreement relating to permitted Indebtedness incurred by a Subsidiary of such Borrower prior to the date on which such Subsidiary was acquired by such Borrower and outstanding on such acquisition date, and (vi) the extension or continuation of contractual obligations in existence on the date hereof; provided, that, any such encumbrances or restrictions contained in such -------- ---- extension or continuation are no less favorable to Lender than those encumbrances and restrictions under or pursuant to the contractual obligations so extended or continued. 9.18 Tangible Net Worth. Borrowers shall, at all times that Average ------------------ Availability for the immediately preceding thirty (30) day period is less than $12,000,000 or for each of the last three (3) Business Days of the prior thirty (30) day period is less than $9,000,000, maintain Tangible Net Worth of not less than the amounts shown below as of the last day of the applicable month. For purposes of this covenant, Average Availability shall be determined without giving effect to any Reserves. Period Amount ------ ------ April 30, 2001 ($63,000,000) May 31, 2001 ($63,000,000) June 30, 2001 ($63,000,000) July 31, 2001 ($65,000,000) August, 31, 2001 ($65,000,000) September 30, 2001 ($65,000,000) October 31, 2001 ($68,000,000) November 30, 2001 ($68,000,000) December 31, 2001 ($68,000,000) January 31, 2002 ($71,000,000) February 28, 2002 ($71,000,000) -46- March 31, 2002 ($71,000,000) April 30, 2002 ($74,000,000) May 31, 2002 ($74,000,000) June 30, 2002 ($74,000,000) July 31, 2002 ($77,000,000) August 31, 2002 ($77,000,000) September 30, 2002 ($77,000,000) October 31, 2002 ($80,000,000) November 30, 2002 ($80,000,000) December 31, 2002 ($80,000,000) January 31, 2003 ($84,000,000) February 28, 2003 ($84,000,000) March 31, 2003 ($84,000,000) 9.19 License Agreements. ------------------ (a) Each Borrower shall (i) promptly and faithfully observe and perform all of the material terms, covenants, conditions and provisions of the material License Agreements to be observed and performed by it, at the times set forth therein, if any, (ii) not do, permit, suffer or refrain from doing anything could reasonably be expected to result in a default under or breach of any of the terms of any material License Agreement, (iii) not cancel, surrender, modify, amend, waive or release any material License Agreement in any material respect or any term, provision or right of the licensee thereunder in any material respect, or consent to or permit to occur any of the foregoing; except, ------ that, subject to Section 9.20(b) below, a Borrower may cancel, surrender or - ---- release any material License Agreement in the ordinary course of the business of such Borrower; provided, that, such Borrower shall give Lender not less than -------- ---- thirty (30) days prior written notice of its intention to so cancel, surrender and release any such material License Agreement, (iv) give Lender prompt written notice of any material License Agreement entered into by such Borrower after the date hereof, together with a true, correct and complete copy thereof and such other information with respect thereto as Lender may request, (v) give Lender prompt written notice of any material breach of any obligation, or any default, by any party under any material License Agreement, and deliver to Lender (promptly upon the receipt thereof by such Borrower in the case of a notice to such Borrower, and concurrently with the sending thereof in the case of a notice from such Borrower) a copy of each notice of default and every other notice and other communication received or delivered by such Borrower in connection with any material License Agreement which relates to the right of such Borrower to continue to use the Property subject to such License Agreement, and (vi) furnish to Lender, promptly upon the request of Lender, such information and evidence as Lender may require from time to time concerning the observance, performance and compliance by such Borrower or the other party or parties thereto with the terms, covenants or provisions of any material License Agreement. (b) Each Borrower will either exercise any option to renew or extend the term of each material License Agreement in such manner as will cause the term of such material License Agreement to be effectively renewed or extended for the period provided by such option and give prompt written notice thereof to Lender or give Lender prior written notice that such Borrower does not intend to renew or extend the term of any such material License Agreement or that the term thereof shall otherwise be expiring, not less than sixty (60) days prior to the date of any such non-renewal or expiration. In the event of the failure of any Borrower to extend or renew any material License Agreement, Lender shall have, and is hereby granted, the irrevocable right and authority, at its option, to renew or extend the term of such material License Agreement, whether in its own name and behalf, or in the name and behalf of a designee or nominee of Lender or in the name and behalf of such Borrower, as Lender shall determine at any time that an Event -47- of Default shall exist or have occurred and be continuing. Lender may, but shall not be required to, perform any or all of such obligations of any Borrower under any of the License Agreements, including, but not limited to, the payment of any or all sums due from such Borrower thereunder. Any sums so paid by Lender shall constitute part of the Obligations. 9.20 After Acquired Real Property. If a Borrower hereafter acquires any ---------------------------- Real Property, fixtures or any other Property that is of the kind or nature described in the Mortgages and such Real Property, fixtures or other property at any one location has a fair market value in an amount equal to or greater than $500,000 (or if a Default or Event of Default exists, then regardless of the fair market value of such assets), without limiting any other rights of Lender, or duties or obligations of Borrowers, upon Lender's request, such Borrower shall execute and deliver to Lender a mortgage, deed of trust or deed to secure debt, as Lender may determine, in form and substance substantially similar to the Mortgages and as to any provisions relating to specific state laws satisfactory to Lender and in form appropriate for recording in the real estate records of the jurisdiction in which such Real Property or other property is located granting to Lender a first and only Lien and mortgage on and security interest in such Real Property, fixtures or other property (except as such Borrower would otherwise be permitted to incur hereunder or under the Mortgages or as otherwise consented to in writing by Lender) and such other agreements, documents and instruments as Lender may require in connection therewith. 9.21 Costs and Expenses. Borrowers shall jointly and severally pay to ------------------ Lender on demand all costs, expenses, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of the Obligations, Lender's rights in the Collateral, this Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including: (a) all costs and expenses of filing or recording (including UCC financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording taxes and fees, if applicable); (b) all costs and expenses and fees for insurance premiums, environmental audits, surveys, assessments, engineering reports and inspections, appraisal fees and search fees, costs and expenses of remitting loan proceeds, collecting checks and other items of payment, and establishing and maintaining the Blocked Accounts, together with Lender's customary charges and fees with respect thereto; (c) charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations; (d) costs and expenses of preserving and protecting the Collateral; (e) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and Liens of Lender, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Agreement and the other Financing Agreements or defending any claims made or threatened against Lender arising out of the transactions contemplated hereby and thereby (including preparations for and consultations concerning any such matters); (f) all out-of-pocket expenses and costs heretofore and from time to time hereafter incurred by Lender during the course of periodic field examinations of the Collateral and Borrowers' operations, plus a per diem charge at the rate of $750 per person per day for Lender's examiners in the field and office; and (g) the reasonable fees actually incurred and disbursements of counsel (including legal assistants) to Lender in connection with any of the foregoing. 9.22 Further Assurances. At the request of Lender at any time and from ------------------ time to time, Borrowers shall, at their expense, duly execute and deliver, or cause to be duly executed and delivered, such further agreements, documents and instruments, and do or cause to be done such further acts as may be necessary or proper to evidence, perfect, maintain and enforce the Liens and the priority thereof in the Collateral and to otherwise effectuate the provisions or purposes of this Agreement or any of the other Financing Agreements. Lender may at any time and from time to time request a certificate from an officer of -48- Borrowers representing that all conditions precedent to the making of Revolving Loans and providing Letter of Credit Accommodations contained herein are satisfied. In the event of such request by Lender, Lender may, at its option, cease to make any further Revolving Loans or provide any further Letter of Credit Accommodations until Lender has received such certificate and, in addition, Lender has determined that such conditions are satisfied. Where permitted by law, each Borrower hereby authorizes Lender to execute and file one or more UCC financing statements signed only by Lender. 9.23 Capital Expenditures. Borrowers shall not make Capital Expenditures -------------------- which in the aggregate, as to Borrowers and their Subsidiaries, exceed (a) $1,000,000 during fiscal year 2001 of Borrowers, (b) $8,000,000 during fiscal year 2002 of Borrowers, and (c) $12,000,000 during fiscal year 2003 of Borrowers. 9.24 Payments of Existing Indebtedness. Borrowers shall not make payments --------------------------------- of principal, interest and rents on leased rolling stock equipment which, in the aggregate, exceed $19,000,000 during Borrowers' fiscal year 2001 and $30,500,000 in Borrowers' fiscal year 2002 (the "Permitted Payments"); provided, however, -------- ------- that if each of the following conditions is satisfied, Borrowers may sell leased rolling stock equipment of Borrowers from time to time: (i) no Default or Event of Default exists at such time or after giving effect thereto, (ii) Excess Availability (without taking into account any Reserves) is at least $12,000,000 at the time of, and after giving effect to, such sale, and (iii) cumulative losses arising from such sales do not exceed $500,000 per year and any payments made by Borrowers in connection with such permitted sales shall not be included for purposes of determining the Permitted Payments. 9.25 Excess Availability. Borrowers shall maintain Excess Availability at ------------------- all times of at least $4,500,000. 9.26 Brokerage Fees. Borrowers shall pay any and all transportation and -------------- brokerage fees that may now or hereafter be owing to any Person as and when due, and at the request of Lender, shall cause an authorized officer of Borrowers to certify to Lender in writing from time to time that any and all such fees have been paid. 9.27 Consultant. Borrowers shall continue to retain PriceWaterhouseCoopers ---------- LLP as a consultant with respect to Borrowers' businesses. 9.28 License Tag Reserves. If Excess Availability (without taking into -------------------- account any existing Reserves on such date) is less than the amounts shown below for the applicable period, tested on a monthly basis of the last day of each month, then Lender may establish (a) Reserves for the amount of any license tag fees that are due and owing with respect to the Equipment of Borrowers and (b) Reserves in amounts equal to the estimated amounts of license tag fees that are to become due with respect to the Equipment of Borrowers divided by the number of remaining months before such due dates: Period Excess Availability -------------- ------------------- June 2001 $11,300,000 July 2001 $12,500,000 August 2001 $14,000,000 September 2001 $14,300,000 October 2001 $14,200,000 November 2001 $14,400,000 December 2001 $14,300,000 January 2002 $16,100,000 -49- February 2002 $16,600,000 March 2002 $16,100,000 April 2002 $17,100,000 May 2002 $17,100,000 June 2002 $15,100,000 July 2002 $16,500,000 August 2002 $16,800,000 September 2002 $16,400,000 October 2002 $17,700,000 November 2002 $17,000,000 December 2002 $17,900,000 January 2003 $17,900,000 February 2003 $18,400,000 March 2003 $17,800,000 SECTION 10. EVENTS OF DEFAULT AND REMEDIES ------------------------------ 10.1 Events of Default. The occurrence or existence of any one or more of ----------------- the following events are referred to herein individually as an "Event of Default," and collectively as "Events of Default": (a) Any Borrower shall fail to pay any of the Obligations as and when due and payable (whether due at stated maturity, on demand, upon acceleration or otherwise) or any Borrower or any other Obligor shall fail to perform any of the terms, covenants, conditions or provisions contained in this Agreement or any of the other Financing Agreements; (b) any representation, warranty or statement of fact made by any Borrower to Lender in this Agreement, the other Financing Agreements or any other agreement, schedule, confirmatory assignment or otherwise shall when made or deemed made be false or misleading in any material respect; (c) Any Borrower shall fail or neglect to perform, keep or observe (i) any covenant contained in Sections 6.3, 6.6, 7.2, 7.6 or 9.1 through 9.28 hereof on the date that Borrowers are required to perform, keep or observe such covenant, or (ii) any covenant contained in Section 7.1 hereof within two (2) days after the date that Borrowers are required to perform, keep or observe such covenant. (d) Any Obligor shall fail or neglect to perform, keep or observe any covenant contained in this Agreement or in any of the other Financing Agreements (other than a covenant which is dealt with specifically elsewhere in Section 10.1 hereof) and the breach of such other covenant is not cured to Lender's satisfaction within 10 days after the sooner to occur of any Senior Officer's receipt of notice of such breach from Lender or the date on which such failure or neglect first becomes known to any Senior Officer; provided, however, that -------- ------- such notice and opportunity to cure shall not apply in the case of any failure to perform, keep or observe any covenant which is not capable of being cured at all or within such 10-day period or which is a willful and knowing breach by an Obligor; (e) any judgment for the payment of money is rendered against any Borrower or any other Obligor in excess of $100,000 in any one case or in excess of $250,000 in the aggregate and shall remain undischarged or unvacated for a period in excess of thirty (30) days or execution shall at any time not be effectively stayed, or any judgment other than for the payment of money, or injunction, attachment, garnishment or execution is rendered against any Borrower or any other Obligor or any of their assets; -50- (f) any Obligor (being a natural person or a general partner of an Obligor which is a partnership) dies or any Borrower or any other Obligor, which is a partnership, limited liability company, limited liability partnership or a corporation, dissolves or suspends or discontinues doing business; (g) Any Borrower or any other Obligor ceases to be Solvent, makes an assignment for the benefit of creditors, or makes or sends notice of a bulk transfer; (h) a case or proceeding under the Bankruptcy Code or under any insolvency, reorganization, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity) is filed against any Borrower or any other Obligor or all or any part of its Properties and such petition or application is not dismissed within 60 days after the date of its filing or any Borrower or any other Obligor shall file any answer admitting or not contesting such petition or application or indicates its consent to, acquiescence in or approval of, any such action or proceeding or the relief requested is granted sooner; (i) a case or proceeding under the Bankruptcy Code or under any insolvency, reorganization, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at a law or equity) is filed by any Borrower or any other Obligor or for all or any part of its Property; or (j) any default by any Borrower or any other Obligor under any agreement, document or instrument relating to any Indebtedness for borrowed money owing to any Person other than Lender, or any capitalized lease obligations, contingent Indebtedness in connection with any guarantee, letter of credit, indemnity or similar type of instrument in favor of any Person other than Lender, in any case in an amount in excess of $500,000, which default continues for more than the applicable cure period, if any, with respect thereto, or any default by any Borrower or any other Obligor under any Material Contract, lease, license or other obligation to any Person other than Lender, which default continues for more than the applicable cure period, if any, with respect thereto; (k) an ERISA Event shall occur which results in or could reasonably be expected to result in liability of any Borrower in an aggregate amount in excess of $100,000; (l) any Change of Control shall occur; (m) the indictment by any Governmental Authority, or as Lender may reasonably and in good faith determine, the threatened indictment by any Governmental Authority of any Borrower of which such Borrower or Lender receives notice, in either case, as to which there is a reasonable possibility of an adverse determination, in the good faith determination of Lender, under any criminal statute, or commencement or threatened commencement of criminal or civil proceedings against such Borrower, pursuant to which statute or proceedings the penalties or remedies sought or available include forfeiture of (i) any of the Collateral or (ii) any other Property of such Borrower which is necessary or material to the conduct of its business; (n) there shall be a material adverse change in the business, assets or prospects of any Borrower or any other Obligor after the date hereof; (o) there shall be an event of default under any of the other Financing Agreements; or (p) any default or event of default shall occur under any of the Term Lender Documents and shall not be cured within any applicable grace period thereunder. -51- 10.2 Remedies. -------- (a) At any time an Event of Default exists or has occurred and is continuing, Lender shall have all rights and remedies provided in this Agreement, the other Financing Agreements, the UCC and other applicable law, all of which rights and remedies may be exercised without notice to or consent by any Borrower or any other Obligor, except as such notice or consent is expressly provided for hereunder or required by applicable law. All rights, remedies and powers granted to Lender hereunder, under any of the other Financing Agreements, the UCC or other applicable law, are cumulative, not exclusive and enforceable, in Lender's discretion, alternatively, successively, or concurrently on any one or more occasions, and shall include the right to apply to a court of equity for an injunction to restrain a breach or threatened breach by Borrowers of this Agreement or any of the other Financing Agreements. Lender may, at any time or times, proceed directly against any or all Borrowers or any other Obligor to collect the Obligations without prior recourse to any Collateral. (b) Without limiting the foregoing, at any time an Event of Default exists or has occurred and is continuing, Lender may, in its discretion and without limitation, (i) accelerate the payment of all Obligations and demand immediate payment thereof to Lender (provided, that, upon the occurrence of any -------- ---- Event of Default described in Sections 10.1(h) or 10.1(i), all Obligations shall automatically become immediately due and payable), (ii) with or without judicial process or the aid or assistance of others, enter upon any premises on or in which any of the Collateral may be located and take possession of the Collateral or complete processing, manufacturing and repair of all or any portion of the Collateral, (iii) require Borrowers, at Borrowers' expense, to assemble and make available to Lender any part or all of the Collateral at any place and time designated by Lender, (iv) collect, foreclose, receive, appropriate, setoff and realize upon any and all Collateral, (v) remove any or all of the Collateral from any premises on or in which the same may be located for the purpose of effecting the sale, foreclosure or other disposition thereof or for any other purpose, (vi) sell, lease, transfer, assign, deliver or otherwise dispose of any and all Collateral (including entering into contracts with respect thereto, public or private sales at any exchange, broker's board, at any office of Lender or elsewhere) at such prices or terms as Lender may deem reasonable, for cash, upon credit or for future delivery, with Lender having the right to purchase the whole or any part of the Collateral at any such public sale, all of the foregoing being free from any right or equity of redemption of Borrowers, which right or equity of redemption is hereby expressly waived and released by Borrowers and/or (vii) terminate this Agreement. If any of the Collateral is sold or leased by Lender upon credit terms or for future delivery, the Obligations shall not be reduced as a result thereof until payment therefor is finally collected by Lender. If notice of disposition of Collateral is required by law, ten (10) days prior notice by Lender to Borrowers designating the time and place of any public sale or the time after which any private sale or other intended disposition of Collateral is to be made, shall be deemed to be reasonable notice thereof and Borrowers waive any other notice. In the event Lender institutes an action to recover any Collateral or seeks recovery of any Collateral by way of prejudgment remedy, Borrowers waive the posting of any bond which might otherwise be required. (c) For the purpose of enabling Lender to exercise the rights and remedies hereunder, each Borrower hereby grants to Lender, to the extent assignable, an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to such Borrower) to use, assign, license or sublicense any of the trademarks, service-marks, trade names, business names, trade styles, designs, logos and other source of business identifiers and other Intellectual Property and general intangibles now owned or hereafter acquired by such Borrower, wherever the same maybe located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof. -52- (d) Lender may apply the cash proceeds of Collateral actually received by Lender from any sale, lease, foreclosure or other disposition of the Collateral to payment of the Obligations, in whole or in part and in such order as Lender may elect, whether or not then due. Borrowers shall remain liable to Lender for the payment of any deficiency with interest at the highest rate provided for herein and all costs and expenses of collection or enforcement, including reasonable attorneys' fees actually incurred and legal expenses. (e) Without limiting the foregoing, upon the occurrence of an Event of Default, Lender may, at its option, without notice, (i) cease making Revolving Loans or arranging for Letter of Credit Accommodations or reduce the lending formulas or amounts of Revolving Loans and Letter of Credit Accommodations available to Borrowers and/or (ii) terminate any provision of this Agreement providing for any future Revolving Loans or Letter of Credit Accommodations to be made by Lender to Borrowers. SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW -------------------------------- 11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver. --------------------------------------------------------------------- (a) The validity, interpretation and enforcement of this Agreement and the other Financing Agreements (other than the Mortgages to the extent provided therein) and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of Georgia (without giving effect to principles of conflicts of law); provided, however, that if any of the Collateral shall be -------- ------- located in any jurisdiction other than Georgia, the laws of such jurisdiction shall govern the method, manner and procedure for foreclosure of Lender's Lien upon such Collateral and the enforcement of Lender's other remedies of such Collateral to the extent that the laws of such jurisdiction are different from or inconsistent with the laws of the State of Georgia. Notwithstanding the foregoing provision for the notice and sale of Collateral under the law of the situs, it is the parties' intention that Georgia law control the obligations of Borrowers under the Financing Agreements and the enforcement of the same such that, for example, each Borrower agrees and acknowledges that pursuant to Georgia law it shall be liable for a deficiency judgment notwithstanding the sale of Real Property collateral under a power of sale and further that Lender may, at its election, seek a money judgment under the Financing Agreements without first exhausting all Collateral securing the Obligations thereunder. (b) Borrowers and Lender irrevocably consent and submit to the non- exclusive jurisdiction of the Superior Court of Cobb County, Georgia and the United States District Court for the Northern District of Georgia, Atlanta Division, whichever Lender may elect, and waive any objection based on venue or forum non conveniens with respect to any action instituted therein arising under - ----- --- ---------- this Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agree that any dispute with respect to any such matters shall be heard only in the courts described above (except that Lender shall have the right to bring any action or proceeding against Borrowers or their Property in the courts of any other jurisdiction which Lender deems necessary or appropriate in order to realize on the Collateral or to otherwise enforce its rights against Borrowers or their Property). (c) Each Borrower hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth on the signature pages hereof and service so made shall be deemed to be completed -53- five (5) days after the same shall have been so deposited in the U.S. mails, or, at Lender's option, by service upon Borrowers in any other manner provided under the rules of any such courts. Within thirty (30) days after such service, Borrowers shall appear in answer to such process, failing which Borrowers shall be deemed in default and judgment may be entered by Lender against Borrowers for the amount of the claim and other relief requested. (d) EACH BORROWER AND LENDER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH BORROWER AND LENDER HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWERS OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. (e) Lender shall not have any liability to Borrowers (whether in tort, contract, equity or otherwise) for losses suffered by Borrowers in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Lender, that the losses were the result of acts or omissions constituting gross negligence or willful misconduct. In any such litigation, Lender shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of this Agreement. 11.2 Waiver of Notices. Each Borrower hereby expressly waives demand, ----------------- presentment, protest and notice of protest and notice of dishonor with respect to any and all instruments and chattel paper, included in or evidencing any of the Obligations or the Collateral, and any and all other demands and notices of any kind or nature whatsoever with respect to the Obligations, the Collateral and this Agreement, except such as are expressly provided for herein. No notice to or demand on Borrowers which Lender may elect to give shall entitle any Borrower to any other or further notice or demand in the same, similar or other circumstances. 11.3 Amendments and Waivers. Neither this Agreement nor any provision ---------------------- hereof shall be amended, modified, waived or discharged orally or by course of conduct, but only by a written agreement signed by an authorized officer of Lender, and as to amendments, as also signed by an authorized officer of Borrowers. Lender shall not, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of its rights, powers and/or remedies unless such waiver shall be in writing and signed by an authorized officer of Lender. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Lender of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Lender would otherwise have on any future occasion, whether similar in kind or otherwise. 11.4 Waiver of Counterclaims. Each Borrower waives all rights to interpose ----------------------- any claims, deductions, setoffs or counterclaims of any nature (other than compulsory counterclaims) in any action or proceeding -54- with respect to this Agreement, the Obligations, the Collateral or any matter arising therefrom or relating hereto or thereto. 11.5 Indemnification. Borrowers shall jointly and severally indemnify, --------------- defend and hold Lender, and its directors, agents, employees and counsel, harmless from and against any and all losses, claims, damages, liabilities, costs or expenses imposed on, incurred by or asserted against any of them in connection with any litigation, investigation, claim or proceeding commenced or threatened related to the negotiation, preparation, execution, delivery, enforcement, performance or administration of this Agreement, any other Financing Agreements, or any undertaking or proceeding related to any of the transactions contemplated hereby or any act, omission, event or transaction related or attendant thereto, including amounts paid in settlement, court costs, and the fees and expenses of counsel, except to the extent arising from Lender's gross negligence or willful misconduct. To the extent that the undertaking to indemnify, defend, pay and hold harmless set forth in this Section may be unenforceable because it violates any law or public policy, Borrowers shall pay the maximum portion which they are permitted to pay under applicable law to Lender in satisfaction of indemnified matters under this Section. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement and is in addition to all other indemnities set forth herein and in any of the other Financing Agreements. SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS -------------------------------- 12.1 Term. ---- (a) This Agreement and the other Financing Agreements shall become effective as of the date set forth on the first page hereof and shall continue in full force and effect for a term ending on the date two (2) years from the date hereof (the "Renewal Date"), and from year to year thereafter, unless sooner terminated pursuant to the terms hereof. Lender or Borrowers may terminate this Agreement and the other Financing Agreements effective on the Renewal Date or on the anniversary of the Renewal Date in any year by giving to the other party at least sixty (60) days prior written notice; provided, that, -------- ---- this Agreement and all other Financing Agreements must be terminated simultaneously. Upon the effective date of termination or non-renewal of this Agreement, Borrowers shall jointly and severally pay to Lender, in full, all outstanding and unpaid Obligations and shall furnish cash collateral to Lender in such amounts as Lender determines are reasonably necessary to secure Lender from loss, cost, damage or expense, including reasonable attorneys' fees actually incurred and legal expenses, in connection with any contingent Obligations, including issued and outstanding Letter of Credit Accommodations and checks or other payments provisionally credited to the Obligations and/or as to which Lender has not yet received final and indefeasible payment. Such payments in respect of the Obligations and cash collateral shall be remitted by wire transfer in Federal funds to such bank account of Lender, as Lender may, in its discretion, designate in writing to Borrowers for such purpose. Interest shall be due until and including the next Business Day, if the amounts so paid by Borrowers to the bank account designated by Lender are received in such bank account later than 12:00 noon. (b) No termination of this Agreement or the other Financing Agreements shall relieve or discharge Borrowers of their respective duties, obligations and covenants under this Agreement or the other Financing Agreements until all Obligations have been fully and finally discharged and paid, and Lender's continuing security interest in the Collateral and the rights and remedies of Lender hereunder, under the other Financing Agreements and applicable law, shall remain in effect until all such Obligations have been fully and finally discharged and paid. Accordingly, each Borrower waives any rights which it may have under Section 9-404 of the UCC to demand the filing of termination statements with respect to the Collateral, and Lender shall not be required to send such termination statements to such Borrower, or to file them with any -55- filing office, unless and until this Agreement is terminated in accordance with its terms and all of the Obligations paid in immediately available funds. (c) If for any reason this Agreement is terminated prior to the end of the then current term or renewal term of this Agreement, in view of the impracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of Lender's lost profits as a result thereof, Borrowers jointly and severally agree to pay to Lender, upon the effective date of such termination, an early termination fee in the amount set forth below if such termination is effective in the period indicated:
- -------------------------------------------------------------------------------------------- | | Amount | Period | | | ------ | ------ | |-----------|--------------------------------|---------------------------------------------| | (i) | 2.0% of the Maximum Credit | From the date hereof to and including | | | | April 19, 2002 | |-----------|--------------------------------|---------------------------------------------| | (ii) | 1.0% of the Maximum Credit | From April 20, 2002 to and including the | | | | 60th day immediately prior to the end of | | | | the then current term | |-----------|--------------------------------|---------------------------------------------| | (iii) | 0.25% of the Maximum Credit | From the 59th day immediately prior to | | | | the end of the then current term through | | | | the last day of such term | - --------------------------------------------------------------------------------------------
Such early termination fee shall be presumed to be the amount of damages sustained by Lender as a result of such early termination and Borrowers agree that it is reasonable under the circumstances currently existing. In addition, Lender shall be entitled to such early termination fee upon the occurrence of any Event of Default described in Sections 10.1(h) and 10.1(i) hereof, even if Lender does not exercise its right to terminate this Agreement, but elects, at its option, to provide financing to Borrowers or permit the use of cash collateral under the Bankruptcy Code. The early termination fee provided for in this Section 12.1 shall be deemed included in the Obligations. 12.2 Interpretative Provisions. ------------------------- (a) All terms used herein which are defined in Article 1 or Article 9 of the UCC shall have the meanings given therein unless otherwise defined in this Agreement. (b) All references to the plural herein shall also mean the singular and to the singular shall also mean the plural unless the context otherwise requires. (c) All references to a Borrower and Lender pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their respective successors and assigns. (d) The words "hereof", "herein", "hereunder", "this Agreement" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not any particular provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. (e) The word "including" when used in this Agreement shall mean "including, without limitation". -56- (f) An Event of Default shall exist or continue or be continuing until such Event of Default is waived in accordance with Section 11.3 or is cured in a manner satisfactory to Lender, if such Event of Default is capable of being cured as determined by Lender. (g) Any accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given in accordance with GAAP, and all financial computations hereunder shall be computed unless otherwise specifically provided herein, in accordance with GAAP as consistently applied and using the same method for inventory valuation as used in the preparation of the financial statements of Borrowers most recently received by Lender prior to the date hereof. (h) 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". (i) Unless otherwise expressly provided herein, (i) references herein to any agreement, document or instrument shall be deemed to include all subsequent amendments, modifications, supplements, extensions, renewals, restatements or replacements with respect thereto, but only to the extent the same are not prohibited by the terms hereof or of any other Financing Agreement, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, recodifying, supplementing or interpreting the statute or regulation. (j) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (k) This Agreement and other Financing Agreements 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. (l) This Agreement and the other Financing Agreements are the result of negotiations among and have been reviewed by counsel to Lender and the other parties, and are the products of all parties. Accordingly, this Agreement and the other Financing Agreements shall not be construed against Lender merely because of Lender's involvement in their preparation. (m) All references to the time of day shall mean the time of day on the day in question in Atlanta, Georgia, unless otherwise expressly provided in this Agreement. 12.3 Notices. All notices, requests and demands hereunder shall be in ------- writing and (a) made to Lender at its address set forth below and to Borrowers at their chief executive office set forth below, or to such other address as either party may designate by written notice to the other in accordance with this provision, and (b) deemed to have been given or made: if delivered in person, immediately upon delivery; if by telex, telegram or facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next Business Day, one (1) Business Day after sending; and if by certified mail, return receipt requested, five (5) days after mailing. 12.4 Partial Invalidity. If any provision of this Agreement is held to be ------------------ invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole, but this Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law. -57- 12.5 Successors. This Agreement, the other Financing Agreements and any ---------- other document referred to herein or therein shall be binding upon and inure to the benefit of and be enforceable by Lender, Borrowers and their respective successors and assigns, except that Borrowers may not assign their rights under this Agreement, the other Financing Agreements and any other document referred to herein or therein without the prior written consent of Lender. Lender may, after notice to Borrowers, assign its rights and delegate its obligations under this Agreement and the other Financing Agreements and further may assign, or sell participations in, all or any part of the Revolving Loans, the Letter of Credit Accommodations or any other interest herein to another financial institution or other person, in which event, the assignee or participant shall have, to the extent of such assignment or participation, the same rights and benefits as it would have if it were Lender hereunder, except as otherwise provided by the terms of such assignment or participation. 12.6 Counterparts, Etc. This Agreement or any of the other Financing ----------------- Agreements may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Agreement or any of the other Financing Agreements by telefacsimile shall have the same force and effect as the delivery of an original executed counterpart of this Agreement or any of such other Financing Agreements. Any party delivering an executed counterpart of any such agreement by telefacsimile shall also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability or binding effect of such agreement. 12.7 Entire Agreement. This Agreement, the other Financing Agreements, any ---------------- supplements hereto or thereto, and any instruments or documents delivered or to be delivered in connection herewith or therewith represents the entire agreement and understanding concerning the subject matter hereof and thereof between the parties hereto, and supersede all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written. In the event of any inconsistency between the terms of this Agreement and any schedule or exhibit hereto, the terms of this Agreement shall govern. -58- IN WITNESS WHEREOF, Lender and Borrowers have caused these presents to be duly executed, sealed and delivered on the day and year first above written. BORROWERS: --------- TRANSIT GROUP, INC. By: /s/ Philip A. Belyew ---------------------------- Philip A. Belyew, President Attest: /s/ James G. Overley --------------------------- James G. Overley, Secretary [CORPORATE SEAL] Chief Executive Office: ---------------------- 2859 Paces Ferry Road Suite 1740 Atlanta, Georgia 30339 Attention: President Telecopier No.: (404) 444-0246 TRANSIT GROUP TRANSPORTATION, LLC By: /s/ Philip A. Belyew ------------------------- Philip A. Belyew, Manager Chief Executive Office: ---------------------- 2859 Paces Ferry Road Suite 1740 Atlanta, Georgia 30339 Attention: Manager Telecopier No.: (404) 444-0246 [Signatures continued on following page] -59- CARROLL FULMER & COMPANY, INC. By: /s/ Philip A. Belyew ------------------------------- Philip A. Belyew, President Attest: /s/ James G. Overley --------------------------- James G. Overley, Secretary [CORPORATE SEAL] Chief Executive Office: ---------------------- 2859 Paces Ferry Road Suite 1740 Atlanta, Georgia 30339 Attention: President Telecopier No.: (404) 444-0246 LAND TRANSPORTATION, LLC By: /s/ Philip A. Belyew ------------------------- Philip A. Belyew, Manager Chief Executive Office: ---------------------- 2859 Paces Ferry Road Suite 1740 Atlanta, Georgia 30339 Attention: Manager Telecopier No.: (404) 444-0246 [Signatures continued on following page] -60- LENDER: ------ CONGRESS FINANCIAL CORPORATION (SOUTHERN) By: /s/ Virginia L. Kiseljack ------------------------- Virginia L. Kiseljack, Vice President Address: ------- 200 Galleria Parkway Suite 1500 Atlanta, Georgia 30339 Attention: Loan Administration Telecopier No.: (770) 956-8120 EX-10.7 10 dex107.txt AGREEMENT EXHIBIT 10.7 AGREEMENT This Agreement is made as of April 19, 2001 (the "Agreement"), by and between TRANSIT GROUP, INC., a Florida corporation (the "Company"), T. WAYNE DAVIS ("Davis") and the ECD Trust (the "Trust") (Davis and the Trust are herein collectively referred to as the "Lead Investor"). WITNESSETH: WHEREAS, Company desires to issue and sell to the Trust, and the Trust desires to purchase and accept from the Company, upon the terms and conditions hereinafter provided, 700,000 shares of Company's Series B Convertible Preferred Stock, no par value per share, the terms, preferences and limitations of which are set forth in the Certificate of Designations attached as Exhibit "A" hereto (the "Preferred Stock"); WHEREAS, Company desires to issue to the Trust and the Trust desires to accept from Company, 400,000 shares of the Preferred Stock as a placement fee; and WHEREAS, the Company and Davis intend to enter into that certain Stock Purchase Agreement, dated as of April 19, 2001 (the "2001 Stock Purchase Agreement"), with Cynthia F. Turner, Philip R. Fulmer, Timothy A. Fulmer, Barbara B. Fulmer and Carroll A. Fulmer (collectively, the "Sellers"). NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter set forth and in order to induce the Lead Investor to accept the Preferred Stock and enter into the 2001 Stock Purchase Agreement, the parties hereto do hereby agree as follows. 1. Preferred Stock. (a) Subject to the terms and conditions set forth in this Agreement, the Trust herewith purchases from Company, and Company herewith issues and sells to the Trust a total of 700,000 shares of Preferred Stock, for an aggregate purchase price of $3,500,000, payable in full simultaneously herewith. The Company has herewith delivered to the Trust a certificate representing the Preferred Stock purchased by the Trust registered in such names and in such denominations as the Trust has requested against delivery by the Trust of the purchase price therefor by wire transfer of funds to the account of Company. (b) Subject to the terms and conditions set forth in this Agreement, the Company herewith issues to the Trust 400,000 shares of Preferred Stock as a placement fee for no additional cash consideration. The Company has herewith delivered to the Trust a certificate representing the Preferred Stock issued to the Trust by the Company registered in such names and in such denominations as the Trust has requested. (c) In connection with the transactions contemplated hereby, the Company shall deliver or cause to be delivered herewith such certificates or documents reasonably requested by the Lead Investor. 2. Use of Proceeds. Company shall use the proceeds of the sale of the Preferred Stock to provide for its working capital, including repayment of revolving credit indebtedness. 3. Company's Representations and Warranties. (a) Except as set forth in the disclosure schedules as set forth on Exhibit "C" hereto, the Company hereby represents and warrants to the Lead Investor that the representations and warranties set forth in Exhibit "B" hereto are true and correct on the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof and such representations and warranties are hereby incorporated by reference herein. Solely for purposes hereof, the term "Convertible Preferred Stock" as used in such representations and warranties shall mean the Preferred Stock and the term "Closing Date" shall mean the date hereof. (b) The Company represents and warrants to the undersigned that the Private Placement Memorandum of the Company dated April 6, 2001, as supplemented April 12, 2001, including all attachments, schedules and appendices thereto, relating to the offering by the Company of up to 4,000,000 shares of its Series B Convertible Preferred Stock (collectively, the "Confidential Offering Memorandum"), or any statement, representation or warranty by the Company in any document entered into by the Company in connection with the issuance of the Preferred Stock to the Trust, does not contain any untrue statement of a material fact or omits to state a material fact necessary to make the statements made therein, in light of the circumstances under which they were made, taken as a whole, not misleading. 4. Company's Covenants. The Company covenants and agrees as follows: (a) The covenants set forth in Section 5.1 (other than 5.1(b)(i)) of the GE Agreement, as defined in Exhibit "B" hereto, are made a part hereof and are hereby incorporated by reference herein as if made on the date hereof. Solely for purposes hereof, all terms defined therein shall have the meanings defined in the GE Agreement, except the term "Purchaser" shall mean the Lead Investor and, for purposes other than the introductory paragraph of Section 5.1 thereof, the term "Convertible Preferred Stock" shall mean the Preferred Stock. (b) The Company will not replace or remove its current Chief Financial Officer without the concurrence of Davis. (c) The Company will deliver to Lead Investor within twenty (20) days of the end of each calendar month (i) a profit and loss statement, (ii) a balance sheet, (iii) a cash flow statement and (iv) a report on the aging of receivables with respect to each such month. (d) The Company shall cause its auditors to complete the audit of the financial statements for the Company's fiscal year ended December 31, 2000 no later than June 15, 2001. (e) The Company will deliver to Lead Investor, by April 30 of each year, audited financial statements for the fiscal year ending immediately prior to such date, certified by a nationally recognized accounting firm. (f) Davis shall have the exclusive right to appoint three (3) members of the Board of Directors of the Company (the "Board"). From and after the date of original issuance of the Preferred Stock, the total number of directors on the Board shall be no more than six (6), unless holders of the Series A Preferred Stock, no par value, of the Company, elect to exercise their right to appoint up to two (2) directors, in which case the total number of directors on the Board shall be six (6) plus such number of directors so appointed by such holders of Series A Preferred Stock. (g) If requested by Lead Investor, Company will deliver to Lead Investor such other information respecting the business, financial condition or prospects of the Company or any of its Subsidiaries (as such term is defined in the GE Agreement) as Lead Investor may from time to time reasonably request. (h) At the closing of the issuance of the Preferred Stock, the Company shall pay the amount of the Lead Investor's reasonable out-of-pocket expenses and reasonable fees and expenses of Lead Investor's counsel relating to this Agreement, the Amendment and Joinder to Amended and Restated Registration Rights Agreement between the Company and certain shareholders of the Company dated as of the date hereof, the Amendment to Stockholders' Agreement between the Company and certain shareholders of the Company dated as of the date hereof, and the 2001 Stock Purchase Agreement (the "Transaction Documents"). In addition, Company shall pay all reasonable out-of-pocket expenses of Lead Investor, including all legal expenses, in connection with (i) any amendment, modification or waiver, or consent with respect to, any of the Transaction Documents and (ii) any attempt to enforce any rights of Lead Investor against Company, any Subsidiary (as such term is defined in the GE Agreement) of Company or any other Person (as such term is defined in the GE Agreement), that may be obligated to the Lead Investor by virtue of any of the Transaction Documents (excluding the 2001 Stock Purchase Agreement, except as provided by Section 8(c) below) (including the reasonable fees and expenses of all of its counsel and consultants retained in connection with such Transaction Documents and the transactions contemplated thereby). (i) The Company shall be responsible for and pay the amount of any stamp, excise, documentation or similar tax on the stock certificates representing the Preferred Stock to be issued to the Lead Investor and any related documents. 5. Restrictions on Transfer. The Lead Investor hereby acknowledges that the shares of Preferred Stock being sold hereby are "restricted securities" within the meaning of Rule 144 of the Securities Act and will be eligible for resale only if registered under the Securities Act or if all the requirements of Rule 144 are complied with fully at the time of the resale. 6. Legends. Each certificate representing the Preferred Stock shall bear a legend substantially in the following form: "THE SERIES B CONVERTIBLE PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED BY THE HOLDER FOR ITS OWN ACCOUNT, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO THE DISTRIBUTION OF SUCH SERIES B CONVERTIBLE PREFERRED STOCK. THE SHARES OF SERIES B CONVERTIBLE PREFERRED STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION THEREFROM." 7. Representations of the Trust. The Trust certifies that the information contained in the following is true and correct: (a) The undersigned is a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Preferred Stock, whose purchase is directed by a sophisticated person who is either alone or with a purchaser representative has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment. (b) The Trust hereby acknowledges receipt of the Confidential Offering Memorandum setting forth the relevant terms and conditions of this offering. (c) The Trust is aware that the Preferred Stock has not been registered, nor has the Company contemplated registration of the Preferred Stock, under the Securities Act of 1933, as amended (the "Securities Act"), or under the securities laws of any state, but are being offered pursuant to exemptions from the registration requirements of federal and state securities laws. (d) The Trust understands that no federal or state agency has recommended or endorsed the purchase of the Preferred Stock or passed upon the adequacy or accuracy of the information set forth in the Confidential Offering Memorandum or any other offering materials. (e) The Trust acknowledges that neither the Company nor any person acting on its behalf offered to sell the undersigned securities to the Trust by means of any form of general solicitation or advertising. (f) The Trust acknowledges that it has been advised to consult with its attorney regarding legal matters concerning the Company and to consult with its tax advisor regarding the tax consequences of investing in the Company. The Trust is aware that there can be no assurances regarding the federal, state, local or other tax consequences of an investment in the Company. 8. Survival; Indemnification. (a) Survival. All of the representations and warranties made by any party in this Agreement shall survive the purchase and sales of the Preferred Stock until the second anniversary of the date hereof; provided, however, that (i) the representations and warranties of the Company under Section 4.10 of the Exhibit "B" shall survive until the fourth anniversary of the date hereof and (ii) the representations and warranties of Company under Sections 4.13 and 4.19 of Exhibit "B" shall survive for their respective statutes of limitations. (b) Indemnification for Breach. The Company hereby agrees to indemnify and hold harmless the Lead Investor, its affiliates and trustees from and against all damages, costs (including without limitation attorneys' fees and expenses) and claims (including third-party claims) for any breach or violation by the Company of any representation, warranty, agreement or covenant set forth herein or contained in any certificate or document delivered pursuant hereto or arising out of any Environmental Law (as defined in the GE Agreement) applicable to the Company or its subsidiaries. Notwithstanding anything to the contrary herein, the Company shall only be liable to the Lead Investor for losses resulting from a breach of representation or warranty (i) if the claim therefor is asserted in writing prior to the end of the applicable survival period as set forth in Section 8(a) hereof; (ii) which exceed an aggregate amount equal to $70,000 and only for such losses in excess thereof, and (iii) up to an aggregate amount of $2,100,000. (c) Indemnification for payments to Sellers. In addition to the indemnification set forth in Section 8(b) above, the Company covenants and agrees to indemnify and hold the Lead Investor and affiliates and trustees thereof harmless (including without limitation attorneys fees and expenses) from and against, and to reimburse Lead Investor for, any and all amounts paid by Lead Investor or affiliates or trustees thereof to the Sellers in the event that the Company fails to perform its obligations (including all or any part of the Purchase Price (as defined in the 2001 Stock Purchase Agreement) or interest accrued thereon) to the Sellers as set forth in the 2001 Stock Purchase Agreement. Such reimbursement shall be made by the Company within five (5) days after Lead Investor or affiliates or trustees thereof has paid any such amount. 9. Payment. The Company has simultaneously with the execution hereof paid to the Lead Investor $225,118, such amount representing all amounts previously paid by Lead Investor to the Sellers or parties to the Reorganization Agreement as interest for the deferral of the exercise of Sellers' or such parties' redemption rights under the Reorganization Agreement (as such term is defined in the 2001 Stock Purchase Agreement) and that certain Stock Purchase Agreement dated as of August 29, 1997 among the Lead Investor and the other signatories thereto, plus an additional amount of $121,217 representing the effect of Lead Investor's marginal tax rate. 10. Sale of Shares to Satisfy Put Obligation. Following the initial issuance of the Preferred Stock, the Company will, at its expense, engage the services of an investment banker to undertake to sell such number of shares of the Company in a private transaction to receive net cash consideration of an amount equal to the Company's remaining put obligation under the 2001 Stock Purchase Agreement and use such consideration to pay such remaining put obligation. In the event that the Company does not do so or such net cash consideration is less than such remaining put obligation, then the Company will, at its expense, engage the services of an investment banker to undertake to sell such number of shares of stock ownership in the Company of the Lead Investor or any affiliate thereof in a private transaction so the net proceeds of such transaction will be at least equal to the then amount that the Sellers have not released the Lead Investor. Such net proceeds will be for the Lead Investor's (or such affiliate's) account. 11. Notices. All notices, requests, demands or other communications which are required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given upon the delivery or mailing thereof, as the case may be, if delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid: (a) if to the Company, mail to the attention of: Transit Group, Inc. Overlook III 2859 Paces Ferry Road Atlanta, GA 30339 (b) if to Lead Investor, mail to the attention of: T. Wayne Davis 1910 San Marco Boulevard Jacksonville, FL 32207 with a copy to: LeBoeuf, Lamb, Greene & MacRae, L.L.P. 50 N. Laura Street, Suite 2800 Jacksonville, FL 32202 (904) 354-8000 Attn: Duncan Mitchell, Esq. 12. Headings. Headings of the sections in this Agreement are for reference only and shall not be deemed to have any substantive effect. 13. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same instrument. 14. Successors and Assigns; Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company. 15. Remedies. Lead Investor, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. In any action or proceeding brought to enforce any provision of this Agreement or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorney's fees in addition to any other available remedy. 16. Severability. In the event that any one or more of the provisions contained in this Agreement shall be determined to be invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision or provisions in every other respect and the remaining provisions of this Agreement shall not be in any way impaired. 17. Publicity. Neither Company nor Lead Investor shall issue any press release or make any public disclosure regarding the transactions contemplated hereby unless such press release or public disclosure is approved by the other party in advance. Notwithstanding the foregoing, each of the parties hereto may, in documents required to be filed by it with the SEC or other regulatory bodies, make such statements with respect to the transactions contemplated hereby as each may be advised by counsel is legally necessary or advisable, and may make such disclosure as it is advised by its counsel is required by law. 18. Entire Agreement. This Agreement, the exhibits and schedules hereto and the Transaction Documents between Company and Lead Investor represent the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supercedes all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written. 19. Governing Law; Waiver of Jury Trial. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Florida without regard to the principles thereof relating to conflict of laws. Each of the parties hereby submits to personal jurisdiction and waives any objection as to venue in the federal or state courts located in the County of Duval, State of Florida. Service of process on the parties in any action arising out of or relating to this Agreement shall be effective if mailed to the parties in accordance with Section 11 hereof. The parties hereto waive all right to trial by jury in any action or proceeding to enforce or defend any rights under this Agreement. 20. Binding Effect; Benefits. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein. 21. Amendment. No amendment or waiver of any provision of this Agreement or any other Transaction Document nor consent to any departure by Company therefrom, shall in any event be effective unless the same shall be in writing and signed by Company and the Lead Investor, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action, of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by either party to exercise any right or privilege hereunder shall be deemed a waiver of such party's rights or privileges hereunder or shall be deemed a waiver of such party's rights to exercise the same at any subsequent time or times hereunder. IN WITNESS WHEREOF, the Company and Lead Investor have caused this Agreement to be duly executed in their respective names, as of the date first written above. TRANSIT GROUP, INC. By: /s/ Philip A. Belyew ----------------------------------- Philip A. Belyew, President and CEO /s/ T. Wayne Davis ----------------------------------- T. Wayne Davis ECD TRUST By: /s/ T. Wayne Davis ----------------------------------- T. Wayne Davis, Trustee EX-99.1 11 dex991.txt PRESS RELEASE EXHIBIT 99.1 Contact: James G. Overley Senior Vice President and Chief Financial Officer TRANSIT GROUP ANNOUNCES FINANCIAL RESTRUCTURING ATLANTA (April 23, 2001) - Transit Group, Inc. (OTC: TRGP) today announced the completion of a series of steps designed to restructure its outstanding debt and recapitalize the Company to integrate its operations and complete the execution of its business plan. Specifically, these steps involved the successful execution of a new, two year, $50 million revolving credit facility with Congress Financial Corporation (Southern), the restructuring of approximately $100 million in existing bank indebtedness, the renegotiation of approximately $115 million in equipment debt and leases, and the modification of $25 million in redeemable preferred stock. Transit Group also announced that it has raised $7 million in proceeds from the issuance of new Series B Preferred Stock. The Company will use a portion of the proceeds from the new revolving credit facility and the issuance of Series B Preferred Stock to repay $26.5 million in existing bank indebtedness. The remaining bank indebtedness will be amortized over a 54-month period. With respect to its equipment debt and leases, the modified terms include the return of certain equipment, reductions in monthly payments, and extensions of maturities. Additionally, the Company successfully modified the terms of its $25 million Series A Preferred Stock to include certain limitations on dividend payments and extensions of redemption features. The new Series B Preferred Stock contains a cumulative dividend accruing at 10.5% per annum; however, certain conditions must be satisfied prior to payment of this dividend. The new Series B Preferred Stock is convertible into common stock on a 100-for-1 basis and is redeemable in part by the holder beginning in October 2005. Commenting on the announcement, Philip A. Belyew, President and Chief Executive Officer, stated, "We are extremely pleased to conclude this lengthy and complex financial restructuring. We thank our customers, drivers, agents, owner/operators, and our employees for their continued support of our Company over the past several months as we have worked to recapitalize the Company in a way that will allow us to continue our ongoing operations and follow our business plan toward what we hope and believe will be a stronger organization in the long term. We also thank our new investors, existing lenders and lessors and our new revolving credit lender for their patience and support during this process." James G. Overley, Senior Vice President and Chief Financial Officer, added, "Each of the various components of this restructuring operate in concert to lower our debt service requirements in the short term, extend the maturities on existing indebtedness, and reduce the Company's leverage. Together, we believe that these steps will help us improve our liquidity and cash flow as we work to integrate our various operations and eventually restore Transit Group to operating profitability. - MORE - TRGP Announces Financial Restructuring Page 2 April 23, 2001 Belyew concluded by pointing out that management continues to focus on operational as well as financial strategies to improve Transit Group's performance. "Since joining Transit Group in October 2000, Jamie Overley has worked diligently with our lenders and equity investors to lay the groundwork through this restructuring for a sounder financial footing going forward. In completing this work, we have established better control over all financial areas of the Company, including the financial reporting that guides the execution of our business plan. With this restructuring behind us, our management team can now focus increased attention to expanding Transit Group's revenue base, including both internal growth and the greater contributions from agents and other non-asset based operations. At the same time, we are maintaining a strong emphasis on cost control and operational efficiencies. Through these ongoing efforts, which are both financially and operationally oriented, we expect to improve Transit Group's performance in all areas." Transit Group, headquartered in Atlanta, is the tenth largest truckload company in the United States with operations covering 48 states. Statements in this release that are not strictly historical are forward- looking and are based upon current expectations that may differ materially from actual results. These forward-looking statements, identified by words such as "intend," "believe," "appears" or "expect," or variations of such words or similar expressions, involve risks and uncertainties which could cause actual results to differ materially from those anticipated by the statements made herein. These risks relate to, among other factors, the challenges of a highly competitive industry, the successful integration of subsidiary operations, and the execution of the Company's financial restructuring. There can be no assurance that, considering these and other risks, the Company's revenues will continue to meet management's current expectations, or that the Company will successfully improve its operating performance and profitability. - END - -----END PRIVACY-ENHANCED MESSAGE-----