-----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, V5zoFnVTyd/JNMLJwewYqOhi2O/2IaT06d7To9d03iEya7B9nKyivbux2L3yB5Df nzKwpC1TnyZxyfGKj/wgrg== 0000950147-97-000183.txt : 19970329 0000950147-97-000183.hdr.sgml : 19970329 ACCESSION NUMBER: 0000950147-97-000183 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SWIFT TRANSPORTATION CO INC CENTRAL INDEX KEY: 0000863557 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 860666860 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-18605 FILM NUMBER: 97566835 BUSINESS ADDRESS: STREET 1: 1455 HUDA WAY CITY: SPARKS STATE: NV ZIP: 89431 BUSINESS PHONE: 6022699700 MAIL ADDRESS: STREET 1: 2200 SOUTH 75TH AVENUE CITY: PHOENIX STATE: AZ ZIP: 85043 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ____________ Commission File No. 0-18605 SWIFT TRANSPORTATION CO., INC. (Exact name of registrant as specified in its charter) Nevada 86-0666860 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1455 Hulda Way, Sparks, Nevada 89431 (Address of principal executive offices) (Zip Code) (702) 359-9031 (Registrant's telephone number, including area code) Securities Registered Pursuant to Section 12(b) of the Act: None Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, $.001 par value Nasdaq National Market Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] At March 14, 1997, the aggregate market value of common stock held by non-affiliates of the Registrant was $342,070,987. The number of shares outstanding of the Registrant's common stock on March 14, 1997 was 27,973,284. DOCUMENTS INCORPORATED BY REFERENCE Materials from the Registrant's Information Statement relating to the 1997 Annual Meeting of Stockholders to be held on May 22, 1997 have been incorporated by reference into Part III, Items 10, 11, 12 and 13. Exhibit Index at page 53 Total pages 149 2 TABLE OF CONTENTS
Page ---- PART I ......................................................................................................... Item 1. Business............................................................................... 4 Item 2. Properties.............................................................................14 Item 3. Legal Proceedings......................................................................15 Item 4. Submission of Matters to a Vote of Security Holders....................................15 PART II ......................................................................................................... Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters................................................................................16 Item 6. Selected Financial and Operating Data..................................................17 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................................19 Item 8. Financial Statements and Supplementary Data............................................28 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures..................................................................51 PART III ......................................................................................................... Item 10. Directors and Executive Officers of the Registrant.....................................52 Item 11. Executive Compensation.................................................................52 Item 12. Security Ownership of Certain Beneficial Owners and Management.........................52 Item 13. Certain Relationships and Related Transactions.........................................52 PART IV ......................................................................................................... Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...............................................................................53 SIGNATURES........................................................................................................S-1
3 PART I Item 1. Business General Swift Transportation Co., Inc. (with its subsidiaries, "Swift" or the "Company") is the fourth largest publicly-held, national truckload carrier in the United States. Swift operates primarily throughout the continental United States, combining strong regional operations with a transcontinental van operation. The principal types of freight transported by Swift include retail and discount department store merchandise, paper products, non-perishable food, tires, beverages and beverage containers and building materials. By meeting its customers' specific needs for both regional and transcontinental service and through selective acquisitions, Swift has been able to achieve significant growth in revenues over the past five years. Operating revenue has grown at a compound annual growth rate of 24.6% from $233.4 million in 1992 to $562.3 million in 1996. During that same period, net earnings have grown at a compound annual growth rate of 29.3% from $9.8 million to $27.4 million. Swift Transportation Co., Inc., a Nevada corporation headquartered in Sparks, Nevada, is a holding company for the Arizona operating corporation also named Swift Transportation Co., Inc. These companies are collectively referred to herein as the "Company." The Company's headquarters is located at 2200 South 75th Avenue, Phoenix, Arizona 85043, and its telephone number is (602) 269-9700. This Annual Report on Form 10-K contains forward-looking statements. Additional written or oral forward-looking statements may be made by the Company from time to time in filings with the Securities and Exchange Commission or otherwise. The words "believe," "expect," "anticipate," and "project," and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Such forward-looking statements are withing the meaning of that term in Section 27A of the Securities Act of 1993, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements may include, but are not limited to, projections of revenues, income, or loss, capital expenditures, plans for future operations, financing needs or plans, the impact of inflation and plans relating to products or services of the Company, as well as assumptions relating to the foregoing. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Statements in this Annual Report, including the Notes to the Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations," 4 describe factors, among others, that could contribute to or cause such differences. Additional factors that could cause actual results to differ materially from those expressed in such forward- looking statements are set forth in "Business" and "Market for the Registrant's Common Stock and Related Stockholder Matters"in this Annual Report. Operating Strategy Swift focuses on achieving high density for service-sensitive customers in short-to-medium haul traffic lanes. Through its network of 23 service terminals, Swift is able to provide regional service on a nationwide basis. Swift's terminal network establishes a local market presence in the regions Swift serves and enables Swift to respond more rapidly to its customers' changing requirements. This regional network also enables Swift to enhance driver recruitment and retention by returning drivers to their homes regularly, reduce its purchases of higher priced fuel at truck stops and expedite lower cost, in-house equipment maintenance. With an average length of haul of 576 miles in 1996, Swift is able to limit its direct competition with railroads, intermodal services and longer-haul, less specialized truckload carriers. Swift seeks to provide premium service with commensurate rates, rather than compete primarily on the basis of price. The principal elements of Swift's premium service include: regional terminals to facilitate single and multiple pick-ups and deliveries and maintain local contact with customers; well-maintained, late model equipment; a fully-integrated computer system to monitor shipment status and variations from schedule; an onboard communications system that enables the Company to dispatch equipment and monitor traffic; timely deliveries; and extra equipment to respond promptly to customers' varying requirements. To manage the higher costs and greater logistical complexity inherent in operating in short- to-medium haul traffic lanes, Swift employs sophisticated computerized management control systems to monitor key aspects of its operations, such as availability of equipment, truck productivity and fuel consumption. Swift has a three-year replacement program for substantially all of its tractors, which allows Swift to maximize equipment utilization and fuel economy by capitalizing on improved engine efficiency and vehicle aerodynamics and to minimize maintenance expense. For 1996 and 1995, Swift maintained an operating ratio of 90.5% and 89.9%, respectively. Growth Strategy Major shippers continue to reduce the number of carriers that they use for their regular freight needs. This has resulted in a relatively small number of financially stable "core carriers" and has contributed to consolidation in the truckload industry in recent years. The truckload industry remains highly fragmented, and management believes that overall growth in the truckload industry and continued industry consolidation will present opportunities for well managed, financially stable carriers such as Swift to expand. The Company intends to take advantage of growth opportunities through a combination of internal growth and selective acquisitions. 5 The key elements of Swift's growth strategy are: o Strengthen Core Carrier Relationships. Swift intends to continue to strengthen its core carrier relationships, expand its services to its existing customers and pursue new customer relationships. By concentrating on expanding its services to its existing customers, Swift's revenues from its top 25 customers increased by 38% from 1994 to 1996. The largest 25, 10 and 5 customers, respectively, accounted for 47%, 33% and 24% of revenues in 1996, with no customer accounting for more than 9% of Swift's gross revenues during that same period. In addition to expanding its services to existing customers, Swift actively pursues new traffic commitments from high volume, financially stable shippers for whom its has not previously provided services. o Pursue Strategic Acquisitions. Swift's revenue growth has been attributable, in significant part, to seven acquisitions completed in the last eight years. These acquisitions have enabled Swift to expand from its historical operations base in the Western United States and develop a strong regional presence in the Midwestern, Eastern and Southeastern United States. Swift generally limits its consideration of acquisitions to those it believes will be accretive to earnings within six months, and historically all of its acquisitions have met this objective. Most recently, in September 1996, Swift augmented its western operations by acquiring the dry freight van division of Navajo Shippers, Inc., Digby Leasing, Inc. and Digby- Ringsby Truck Line, Inc. This acquisition added 287 tractors to Swift's fleet. In April, 1997 the Company expects to acquire approximately 600 tractors and 2,100 trailers from Direct Transit, Inc. ("DTI"), a Debtor In Possession in United States Bankruptcy Court. DTI is a dry van carrier based in North Sioux City, South Dakota and operates predominately in the eastern two-thirds of the United States. o Exploit Private Fleet Outsourcing. A number of large companies maintain their own private trucking fleets to facilitate distribution of their products. Swift believes that nearly 82% of private fleet traffic is short-to-medium haul in nature, traveling an average of 1,000 miles or less per round trip, with 72% of such traffic traveling 500 miles or less. In order to reduce operating costs associated with private fleets, a number of large companies have begun to outsource their transportation and logistics requirements. Swift believes that its strong regional operations and average length of haul of less than 600 miles position it to take advantage of this trend, and Swift already serves as a preferred supplier or "core carrier" to many major shippers who are considering, or may in the future consider, outsourcing their transportation and logistics requirements. Operations In the Western United States, Swift has developed a network of regional terminals and offices strategically located in areas that have strong, diverse economies and provide access to other key Western population centers. In addition to Phoenix, Arizona, Swift's Western terminals 6 are located in the areas of Los Angeles, San Francisco and Willows, California; Portland, Oregon; Salt Lake City, Utah; Lewiston, Idaho; Reno, Nevada and Denver, Colorado. In the Eastern United States, Swift has terminals located in Auburn, New York; Carlisle, Pennsylvania; Richmond, Virginia; Columbus, Ohio; Eden, North Carolina; Greer, South Carolina; Decatur, Alabama; Atlanta and Albany, Georgia. The terminals are located in close proximity to major customers who tender significant traffic volume to Swift. Swift's Midwest terminals are located in Gary and Shoals, Indiana; Dallas and Laredo, Texas; Oklahoma City, Oklahoma; Memphis, Tennessee and Kansas City, Kansas. To minimize competition from long-haul truckload carriers and railroads, Swift operates principally within short-to-medium-haul traffic lanes. Although the Company's transcontinental division allows it to serve a broad spectrum of shipper needs, the primary regions in which Swift operates are ideally suited to short-to-medium-haul lanes because of the distribution of population and economic centers. During 1996 and 1995, Swift's average length of haul was 576 and 591 miles, respectively. Swift focuses the marketing of its services to large, service-sensitive customers that regularly ship over established routes within Swift's regional service areas. Swift's service includes the availability of specialized equipment suitable for the requirements of certain industries; high cubic capacity trailers; computerized tracking of and frequent reporting on customer shipments; onboard communications that enable instant re-routing or modification of traffic; well-maintained, late-model equipment that enhances on-time deliveries; multiple drops, appointment pick-ups and deliveries; assistance in loading and unloading; extra trailers that can be placed for the convenience of customers; and sufficient equipment to respond promptly to customers' varying requirements. The achievement of significant regular freight volumes on high-density routes and consistent shipment scheduling over these routes are key elements of Swift's operations. As a result, Swift's terminal managers are better able to match available equipment to available loads and schedule regular maintenance and fueling at Company terminals, thereby improving productivity and asset utilization and minimizing empty miles and expensive over-the-road fueling and repair costs. Consistent scheduling also allows Swift to be more responsive to its customers' needs. Swift's regular scheduling and relatively short length of haul enable drivers to return to their homes regularly, which has helped Swift minimize driver turnover and improve recruitment. In order to reduce the higher operating costs traditionally associated with medium-length hauls and specialized equipment, Swift has installed sophisticated computerized management control systems to monitor key aspects of its operations. Swift has a significant investment in its computer hardware and utilizes state-of-the-art software specially designed for the trucking industry. The Company's fully integrated computer network allows its managers to coordinate available equipment with the transportation needs of its customers, monitor truck productivity and 7 fuel consumption and schedule regular equipment maintenance. Dispatchers based in Phoenix, Arizona and in each regional terminal monitor the location and delivery schedules of all shipments and equipment to coordinate routes and increase equipment utilization. The Company's computer system provides immediate access to current information regarding driver and equipment status and location, special load and equipment instructions, routing and dispatching. Swift's larger terminals are staffed with terminal managers, fleet managers and customer service representatives. Terminal managers work with both the fleet managers and the customer service representatives, as well as all other operations personnel, to coordinate the needs of both customers and drivers. Terminal managers are also responsible for soliciting new customers and serving existing customers in their areas. Each fleet manager is responsible for the general operation of approximately 45 trucks and their drivers, including driver retention, productivity per truck, routing, fuel consumption, safety and scheduled maintenance. Customer service representatives are assigned specific customers to ensure specialized, high-quality service and frequent customer contact. Acquisitions The growth of the Company has been, and will continue to be, dependent in significant part upon the acquisition of small-to-medium sized trucking companies throughout the United States. In 1988, the Company acquired Cooper Motor Lines ("Cooper"), which established the Company's operations in the Eastern United States. In September 1991, Swift further expanded its eastern operations by acquiring Arthur H. Fulton, Inc. ("Fulton"). In June 1993, the Company strengthened its presence in the Northwestern United States with the acquisition of West's Best Freight Systems, Inc. ("West's Best"). During 1994, the Company completed the acquisition of both East-West Transportation, Inc. ("East-West") and Missouri-Nebraska Express, Inc. ("MNX"). The MNX acquisition was the largest acquisition to date and established a significant regional operation in the Midwest United States. In September 1996, the Company acquired the dry freight van division of Navajo Shippers, Inc., Digby Leasing, Inc. and Digby-Ringsby Truck Line, Inc. (collectively, "Navajo Shippers"). This acquisition added 287 tractors to the Company's fleet. On March 20, 1997 the United States Bankruptcy Court approved the Company's purchase agreement with Direct Transit, Inc. ("DTI"), a Debtor In Possession in United States Bankruptcy Court, to purchase certain assets of DTI. DTI is a dry van carrier based in North Sioux City, South Dakota and operates predominately in the eastern two-thirds of the United States. At closing, which is expected to occur in April 1997, the Company will acquire approximately 600 tractors and 2,100 trailers along with the inventory and miscellaneous assets of DTI. To date, the Company has been successful in identifying trucking companies to acquire and in integrating such companies' operations into the Company's operations. The Company generally limits its consideration of acquisitions to those it believes will be accretive to earnings within six months, and historically all of its acquisitions have met this objective. The Company may face competition from transportation companies or other third parties for acquisition opportunities that become available. There can be no assurance that the Company will identify acquisition candidates that will result in successful combinations in the future. Any future acquisitions by the Company may result in the incurrence of additional debt and amortization of expenses related to 8 goodwill and intangible assets, which could adversely affect the Company's profitability, or could involve the potentially dilutive issuance of additional equity securities. In addition, acquisitions involve numerous risks, including difficulties in assimilation of the acquired company's operations particularly in the period immediately following the consummation of such transactions, the diversion of the attention of the Company's management from other business, and the potential loss of customers, key employees and drivers of the acquired company, all of which could have a material adverse effect on the Company's business and operating results. Revenue Equipment Swift acquires premium tractors to help attract and retain drivers, promote safe operations and minimize maintenance and repair costs. Management believes the higher initial investment is recovered through improved resale value. The following table shows the type and age of Company-owned and leased equipment at December 31, 1996.
57', 53' and Sets of Flatbed Specialized Model Year Tractors(1) 48' Vans Double Vans Trailers Trailers - -------------------- --------------- ----------------- ---------------- ------------ --------------- 1997 1,102 1,573 -- 150 -- 1996 764 2,085 -- 185 -- 1995 1,580 660 170 94 -- 1994 597 1,162 -- 40 -- 1993 11 1,107 40 105 1 1992 70 1,010 69 -- -- 1991 and prior 42 2,547 822 128 203 - -------------------- --------------- ----------------- ---------------- ------------ --------------- Total 4,166 10,144 1,101 702 204
- ---------------------------- (1) Excludes 665 owner-operator tractors. When purchasing new revenue equipment, Swift acquires standardized tractors and trailers manufactured to the Company's specifications. Since 1990, Swift has acquired predominantly tractors manufactured by Freightliner powered by Series 60 Detroit Diesel engines. Standardization of drive-line components allows Swift to operate with a minimum spare parts inventory, enhances Swift's maintenance program and simplifies driver training. Swift adheres to a comprehensive maintenance program that minimizes downtime and enhances the resale value of its equipment. In addition to its primary maintenance facility in Phoenix, Arizona, Swift performs routine servicing and maintenance of its equipment at most of its regional terminal 9 facilities, thus avoiding costly on-road repairs and out-of-route trips. Swift has adopted a three-year replacement program on the majority of its line-haul tractors. This replacement policy allows Swift to attract drivers, maximize its fuel economy by capitalizing on improvement in both engine efficiency and vehicle aerodynamics, stabilize maintenance expense and maximize equipment utilization. In 1996, the Company began replacing its fleet of double van trailers with 13 1/2 foot high 53 foot trailers to be used in the Eastern United States and 14 foot high 53 foot trailers to be used in the Western United States. Management believes that this conversion to a standardized fleet of 53 foot trailers will provide cost reductions, such as decreasing licensing costs, simplifying driver training and increasing equipment utilization. The conversion to a standardized fleet of 53 foot trailers will result in the sale of substantially all of the Company's fleet of double van trailers. While the Company believes that the market value of its double van trailer fleet is currently greater than the book value, there can be no assurance that the market value of such equipment will not decline or that the sale of such equipment will result in gains. The sale of the Company's double van trailer fleet may result in significant fluctuations in the amount of gains or losses recorded in any given quarter. The amount of such gains or losses recorded in a particular quarter will be dependent upon the quantity of trailers sold and the prevailing market prices for used trailer equipment. The Company intends to retain an adequate inventory of specialized equipment to continue to provide service to those existing and prospective customers that require such equipment. In 1996, the Company implemented new trailer configurations designed for railroad intermodal services that has allowed it to achieve greater operating efficiencies in certain high-density balanced traffic lanes. Swift has installed Qualcomm onboard, two-way vehicle satellite communication systems in the majority of its tractors. The communications system links drivers to regional terminals, allowing Swift to alter rapidly its routes in response to customer requirements and eliminating the need for driver stops to report problems or delays. The system employs code buttons that allow drivers to inform dispatchers and fleet managers of the status of routing, loading and unloading or the need for emergency repairs. Swift believes the communications system improves fleet control, the quality of customer service and driver retention. Swift intends to continue to install the communication system in substantially all tractors acquired in the future. Swift has adopted a speed limit of 57 miles per hour for Company tractors and 62 miles per hour for owner-operator tractors to reduce accidents, enhance fuel mileage and minimize maintenance expense. Substantially all of Swift's Company tractors are equipped with electronically controlled engines that are set to limit the speed of the vehicle to 57 mph. Marketing and Customers Swift has targeted the service-sensitive segment of the truckload market, both common and contract, rather than that segment that uses price as its primary consideration. The Company has chosen to provide premium service with commensurate rates rather than compete primarily on the 10 basis of price. The principal elements of Swift's premium service include: regional terminals to facilitate single and multiple pick-ups and deliveries and to maintain local contact with customers; a fully-integrated computer system to monitor shipment location and variations from schedule; an onboard communication system that enables the Company to reroute traffic; well-maintained, late model equipment; timely deliveries; extra equipment for the convenience of customers, which enables Swift to respond promptly to customers' varying requirements; assistance in loading and unloading; and Company ownership and control of revenue equipment rather than significant reliance upon owner-operators. By concentrating on expanding its services to its existing customers, the Company's revenues from its top 25 customers increased 38% from 1994 to 1996. Swift maintains a strong commitment to marketing. Swift has assigned a member of senior management to each of its largest customers to ensure a high level of customer support. Swift solicits new customers from its Phoenix headquarters and each of its regional terminals through a marketing staff of approximately 20 persons. Once a customer relationship has been established, regional customer service representatives maintain contact and solicit additional business. Swift concentrates on attracting non-cyclical customers that regularly ship multiple loads from locations that complement existing traffic flows. Customer shipping point locations are regularly monitored and, as shipping patterns of existing customers expand or change, Swift attempts to obtain additional customers that will complement the new traffic flow. This strategy enables Swift to maximize equipment utilization. The largest 25, 10 and 5 customers accounted for approximately 47%, 33% and 24% respectively, of Swift's revenues during 1996, 51%, 37% and 26%, respectively, of Swift's revenues during 1995 and 52%, 35% and 22%, respectively, of Swift's revenues during 1994. No customer accounted for more than 9% of Swift's gross revenues during any of the three most recent fiscal years. Swift's largest customers include retail and discount department store chains, tire manufacturers, paper manufacturers, non-perishable food companies, beverage and beverage container producers, manufacturers and building materials companies. Drivers and Employees All Swift drivers must meet or exceed specific guidelines relating primarily to safety records, driving experience and personal evaluations, including a physical examination and mandatory drug testing. Upon being hired, a driver is trained in all phases of Swift's policies and operations, safety techniques, and fuel efficient operation of the equipment. All new drivers must pass a safety test and have a current Commercial Drivers License. In addition, Swift has ongoing driver efficiency and safety programs to ensure that its drivers comply with its safety procedures. Senior management is actively involved with the development and retention of drivers. Recognizing the need for qualified drivers, Swift established its own driver-training school in Phoenix, Arizona in 1987, which is certified by the Arizona Department of Transportation. Swift also has contracted with driver-training schools that are managed by outside organizations as well as local community colleges throughout the country. Candidates for the schools must be at least 11 23 years old, possess a high school education or equivalent, pass a basic skills test and pass the U.S. Department of Transportation ("DOT") physical examination, which includes drug and alcohol screening. Students are required to complete three weeks of classroom study and driving range time and a six-week, on-the-road training program. To take advantage of the large number of displaced military personnel, the Company has established a military employment program to recruit both qualified drivers and student trainees being furloughed from the armed forces. Swift bases its drivers at the regional terminals and monitors each driver's location on its computer system. Swift uses this information to schedule the routing for its drivers so that they can return home frequently. In order to attract and retain highly qualified drivers and promote safe operations, the Company purchases premium quality tractors equipped with optional comfort and safety features, such as air ride suspension, air conditioning, high quality interiors, power steering, engine brakes and raised roof double sleeper cabs. Company drivers are compensated on the basis of miles driven and number of stops or deliveries, plus bonuses. Base pay for miles driven increases with a driver's length of service. The Company maintains a bonus system for its drivers based upon months of service, safety and driving performance. Drivers employed by Swift participate in company-sponsored health, life and dental insurance plans and are eligible to participate in Swift's 401(k) Profit Sharing Plan and Employee Stock Purchase Plan. Swift believes its innovative driver-training programs, driver compensation, regionalized operations, driver tracking and late-model equipment provide important incentives to attract and retain qualified drivers. Although Swift has had no significant downtime due to inability to secure qualified drivers, no assurance can be given that a shortage of qualified drivers will not adversely affect the Company in the future. As of December 31, 1996, Swift employed approximately 6,700 full-time persons, of whom approximately 5,360 were drivers (including driver trainees), 450 were mechanics and other equipment maintenance personnel and the balance were support personnel, such as sales personnel, corporate managers and administration. None of Swift's drivers or other employees is represented by a collective bargaining unit. In the opinion of management, Swift's relationship with its drivers and employees is excellent. Safety The Company has an active safety and loss prevention program at each of its terminals. Safety supervisors engage in ongoing training of drivers regarding safe vehicle operations and loading procedures. The Company has adopted a maximum speed limit of 57 miles per hour for Company tractors and rewards drivers with bonuses for complying with the Company's safety policies. The Company believes that its insurance and claims expense as a percentage of operating revenue is one of the best in the industry, which is attributable to its overall strong safety program. 12 Fuel In order to reduce fuel costs, the Company purchases approximately 73% of its fuel in bulk at 20 of its 25 terminals. Swift stores fuel in underground storage tanks at two of its bulk fueling terminals and in above ground storage tanks at its other bulk fueling terminals. The Company believes that it is in substantial compliance with applicable environmental laws and regulations. Shortages of fuel, increases in fuel prices or rationing of petroleum products could have a materially adverse effect on the operations and profitability of the Company. From time to time, the Company, in response to sudden, large increases in fuel costs, has implemented fuel surcharges to pass on to its customers all or substantially all of such costs. For example, in April 1996, the Company implemented a fuel surcharge program in response to a significant increase in fuel cost. This fuel surcharge program recovered more than half of the increase in the Company's fuel prices. However, there can be no assurance that such fuel surcharges could be used to offset future increases in fuel prices. The Company believes that its most effective protection against fuel cost increases is to maintain a fuel efficient fleet and to implement fuel surcharges when such option is necessary and available. The Company has not used derivative- type products as a hedge against higher fuel costs. Competition The trucking industry is extremely competitive and fragmented. The Company competes primarily with regional, medium-haul truckload carriers. Management believes, because of its cost efficiencies, productive equipment utilization and financial resources, that the Company has a competitive advantage over most regional truckload carriers. The Company believes that competition for the freight transported by the Company is based, in the long term, as much upon service and efficiency as on freight rates. Some of the trucking companies with which the Company competes have greater financial resources, own more revenue equipment and carry a larger volume of freight than the Company. Long-haul truckload carriers and railroads also provide competition, but to a lesser degree. The Company also competes with other motor carriers for the services of drivers. Regulation Prior to December 29, 1995 the Company was regulated by the Interstate Commerce Commission ("ICC"). On December 29, 1995, the ICC ceased operations. However, substantially all of the jurisdiction over motor carriers was transferred to the United States Department of Transportation, and most of the regulatory requirements remain essentially unchanged. The Company is also regulated by various state agencies. These regulatory authorities have broad powers, generally governing matters such as authority to engage in motor carrier operations, rates and charges, certain mergers, consolidations and acquisitions and periodic financial reporting. The trucking industry is subject to regulatory and legislative changes which can affect the economics of the industry. 13 The Company's operations also are subject to various federal, state and local environmental laws and regulations dealing with transportation, storage, presence, use, disposal and handling of hazardous materials, discharge of stormwater and underground fuel storage tanks. The Company believes that its operations are in material compliance with current laws and regulations and does not know of any existing condition that would cause compliance with applicable environmental regulations to have a material adverse effect on the Company's business or operating results. Seasonality In the transportation industry, results of operations generally show a seasonal pattern as customers reduce shipments after the winter holiday season. The Company's operating expenses also tend to be higher in the winter months primarily due to increased operating costs in colder weather and higher fuel consumption due to increased idle time. Item 2. Properties The following table provides information regarding the Company's regional terminals and/or offices. Company Owned Location or Leased ------------------------- Albany, Georgia Leased Atlanta, Georgia Leased Auburn, New York Owned Carlisle, Pennsylvania Leased Columbus, Ohio Leased Decatur, Alabama Leased Denver, Colorado Leased Eden, North Carolina Owned Edwardsville, Kansas Owned Fontana, California Owned Gary, Indiana Owned Greer, South Carolina Owned Hutchins, Texas Leased 14 Laredo, Texas Leased Lewiston, Idaho Owned/Leased Memphis, Tennessee Leased Oklahoma City, Oklahoma Owned Phoenix, Arizona Owned/Leased Richmond, Virginia Owned Salt Lake City, Utah Owned Shoals, Indiana Owned Sparks, Nevada Owned Stockton, California Leased Troutdale, Oregon Owned Willows, California Owned Wilmington, California Leased Swift's new headquarters, which the Company moved into in June 1996, are located on approximately 153 acres in Phoenix, Arizona, and contains 83,000 square feet of office space, 74,000 square feet of shop and maintenance facilities, 27,000 square feet of a drivers' center, a recruiting and training center, a warehouse facility, a two-bay truck wash and an eight lane fueling center. The Company's prior headquarters are held for sale. As of December 31, 1996, the Company's aggregate monthly rent for all leased properties was $136,000. Item 3. Legal Proceedings The Company is a party to routine litigation incidental to its business, primarily involving claims for personal injury or property damage incurred in the transportation of freight. The Company's insurance program for liability, workers' compensation, physical damage and cargo damage involves self-insurance with varying risk retention levels. Claims in excess of these risk retention levels are covered by insurance in amounts which management considers to be adequate. The Company is not aware of any claims or threatened claims that might have a material adverse effect upon the Company's financial condition. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of the Company's security holders during the fourth quarter of 1996. 15 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters General The Company's common stock is publicly traded on the Nasdaq National Market ("Nasdaq") under the symbol "SWFT." The following table sets forth the high and low closing sales prices, adjusted for stock splits, of the common stock, as reported by Nasdaq, for the periods indicated below. 1996 High Low ---- --- First Quarter $21.25 $15.00 Second Quarter 21.125 17.25 Third Quarter 22.5 18.625 Fourth Quarter 24.5 20.25 1995 First Quarter $25.75 $15.25 Second Quarter 17.75 13.00 Third Quarter 20.75 14.50 Fourth Quarter 17.75 14.75 On March 14, 1997, the last reported sales price of the Company's common stock was $25.625 per share. At that date, the number of stockholder accounts of record of the Company's common stock was 946. The Company estimates that these are approximately 4,100 beneficial holders of the Company's common stock. The Company has not paid cash dividends on its common stock in either of the two preceding fiscal years, and one of the Company's notes payable includes limitations on the payment of cash dividends. It is the current intention of management to retain earnings to finance the growth of the Company's business. Future payment of cash dividends will depend upon the financial condition, results of operations, and capital requirements of the Company, as well as other factors deemed relevant by the Board of Directors. Factors That May Affect Future Stock Performance The performance of the Company's common stock is dependent upon several factors, including those set forth below and in "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Factors That May Affect Future Results and Financial Condition." 16 Influence by Principal Stockholder. Trusts established for the benefit of Jerry C. Moyes and his family beneficially own approximately 42% of the Company's common stock. Accordingly, Mr. Moyes will have a significant influence upon the activities of the Company, as well as on all matters requiring approval of the stockholders, including electing members of the Company's Board of Directors and causing or restricting the sale or merger of the Company. This concentration of ownership, as well as the ability of the Board to establish the terms of and issue preferred stock of the Company without stockholder approval, may have the effect of delaying or preventing changes in control or management of the Company, including transactions in which stockholders might otherwise receive a premium for their shares over their current market prices. Possible Volatility of Stock Price. The market price of the Company's common stock could be subject to significant fluctuations in response to certain factors, such as, among others, variations in the anticipated or actual results of operations of the Company or other companies in the transportation industry, changes in conditions affecting the economy generally, analysts' reports or general trends in the industry, as well as other factors unrelated to the Company's operating results. Item 6. Selected Financial and Operating Data The selected consolidated financial data presented below for, and as of the end of, each of the years in the five-year period ended December 31, 1996 are derived from the Company's Consolidated Financial Statements. The Consolidated Financial Statements as of December 31, 1996 and 1995, and for each of the years in the three-year period ended December 31, 1996 and the independent auditors' report thereon, are included in Item 8 of this Form 10-K. This data should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 8 of this Form 10-K. 17
Years Ended December 31, (dollar amounts in thousands, except per share amounts and operating data) -------------------------------------------------------------------- 1996(1) 1995 1994(2) 1993(3) 1992 ------- ---- ------- ------- ---- Consolidated Statements of Earnings Data: Operating revenue $562,259 $458,165 $365,889 $276,982 $233,409 Earnings before income taxes $47,212 $40,070 $39,309 $21,409 $16,414 Net earnings $27,422 $23,040 $22,629 $12,274 $9,834 Net earnings per common and equivalent share $1.07 $.91 $0.89 $.48 $.43 Consolidated Balance Sheet Data (at end of year): Working capital $36,938 $6,735 $14,012 $14,156 $13,862 Total assets $380,605 $311,308 $275,991 $172,220 $119,009 Long-term obligations, less current portion $ 40,284 $68,954 $77,715 $23,379 $8,997 Stockholders' equity $226,666 $134,835 $111,342 $88,973 $71,842 Operating Statistics (at end of year): Operating ratio 90.5% 89.9% 88.8% 92.1% 92.2% Pre-tax margin(4) 8.4% 8.7% 10.7% 7.7% 7.0% Average line haul revenue per mile $1.11 $1.11 $1.12 $1.10 $1.07 Empty mile percentage 14.0% 13.9% 13.2% 13.4% 13.6% Average length of haul (in miles) 576 591 590 608 711 Total tractors at end of period: Company-operated 4,166 3,472 3,286 2,338 1,882 Owner-operator 665 477 188 44 29 Trailers at end of period 12,151 8,788 8,957 5,215 4,235
(1) Includes the results of operations from the asset acquisition of the dry freight van division of Navajo Shippers, Inc., Digby Leasing, Inc. and Digby-Ringsby Truck Line, Inc. beginning on September 12, 1996. (2) Includes the results of operations from the asset acquisitions of East-West Transportation, Inc. beginning on July 1, 1994 and Missouri-Nebraska Express, Inc. beginning October 2, 1994. (3) Includes the results of operations from the acquisition of West's Best Freight Systems, Inc. beginning June 1, 1993. (4) Pre-tax margin represents earnings before income taxes as a percentage of operating revenue. Because of the impact that equipment financing methods can have on the operating ratio (operating expenses as a percentage of operating revenue), the Company believes that the most meaningful comparative measure of its operating efficiency is its pre-tax margin, which takes into consideration both the Company's total operating expenses and net interest expense as a percentage of operating revenue. 18 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview During 1996, 1995 and 1994, Swift's fleet has been predominantly comprised of Company-owned and leased tractors. The Company's decisions whether to buy or lease new and replacement revenue equipment are based upon the overall economic impact of the alternative financing methods, including market prices available and income tax considerations. Depending on whether revenue equipment is purchased or leased, several categories of the Company's operating expenses have varied, and will continue to vary, as a percentage of the Company's revenues. Because of the impact that equipment financing methods can have on the operating ratio (operating expenses as a percentage of operating revenue), the Company believes that the most meaningful comparative measure of its operating efficiency is its pre-tax margin (earnings before income taxes as a percentage of operating revenue), which takes into consideration both the Company's total operating expenses and net interest expense as a percentage of operating revenue. Accordingly, in the discussion and analysis below, the Company has focused on the factors contributing to operating revenue increases and to the increase or decrease in its pre-tax margin during the periods presented. The trend of shippers in the truckload segment of the motor carrier industry over the past several years has been towards use of a relatively small number of financially stable "core carriers." This trend has resulted in consolidation of the truckload industry. However, the truckload industry remains highly fragmented. Management believes that the industry trend towards core carriers will continue and will result in continued industry consolidation. In response to this trend, the Company has nearly doubled the size of its fleet to 4,166 tractors as of December 31, 1996 from 2,338 as of December 31, 1993. This fleet growth was accomplished through a combination of internal growth and through strategic acquisitions. See "Business -- General." During this same period, the Company's owner operator fleet has expanded to 665 as of December 31, 1996 from 44 as of December 31, 1993. As discussed in "Business-Acquisitions," the Company expects to acquire certain assets of Direct Transit, Inc. The Company will pay approximately $54 million, which includes $43 million in cash and the assumption of lease obligations on approximately $11 million of revenue equipment, to acquire approximately 600 tractors and 2,100 trailers along with inventory and miscellaneous assets. 19 Results of Operations The following table sets forth for the periods indicated certain statements of earnings data as a percentage of operating revenue:
December 31, ----------------------------------------------- 1996 1995 1994 ---- ---- ---- Operating revenue....................................... 100.0 100.0 100.0 Operating expenses: Salaries, wages and employee benefits................ 34.2 37.1 37.4 Operating supplies and expenses...................... 9.3 8.9 8.6 Fuel................................................. 13.8 13.2 13.8 Purchased transportation............................. 12.8 9.3 5.4 Rental expense....................................... 5.8 5.8 6.9 Insurance and claims................................. 3.6 2.9 4.2 Depreciation and amortization........................ 6.0 6.9 6.7 Communications and utilities......................... 1.5 1.6 1.1 Operating taxes and licenses......................... 3.5 4.2 4.7 ----- ----- ---- Total operating expenses............................. 90.5 89.9 88.8 Net interest expense.................................... 1.2 1.5 0.9 Other (income) expense, net............................. (0.1) (0.1) (0.4) ----- ----- ---- Earnings before income taxes............................ 8.4 8.7 10.7 Income taxes............................................ 3.5 3.7 4.5 ----- ----- ---- Net earnings............................................ 4.9% 5.0% 6.2% ===== ===== ====
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 Operating revenue increased $104.1 million, or 22.7%, to $562.3 million for the year ended December 31, 1996 from $458.2 million for the previous year. The increase in operating revenue is due primarily to the expansion of the Company's fleet to 4,831 tractors at December 31, 1996 from 3,949 at December 31, 1995, an increase of 882 tractors. The acquisition of Navajo Shippers in September 1996 accounted for 287 of this increase in tractors. There were no significant changes in the Company's freight rates in 1996 and 1995. The Company's operating ratio was 90.5% and 89.9% in 1996 and 1995, respectively. The Company's operating revenue and operating ratio for 1996 were impacted by overall soft shipper demand in the first four months of 1996, harsh winter conditions and an increase in fuel costs. This resulted in slightly lower equipment utilization and a slightly higher revenue per mile. The Company's empty mile factor was 14.0% and 13.9% and the average rate per mile was $1.114 and $1.110 for the years ended December 31, 1996 and 1995, respectively. 20 Salaries, wages and employee benefits represented 34.2% of operating revenue for the year ended December 31, 1996 compared with 37.1% for 1995. The improvement is due primarily to the increase in owner operators. Effective January 1, 1997, the Company will pay its Company drivers a bonus of two cents per mile, payable quarterly, provided the driver is still employed at the end of the quarter. The Company anticipates receiving rate increases from its customers to substantially offset the additional cost associated with the pay increase. Fuel expenses represented 13.8% and 13.2% of operating revenue in 1996 and 1995, respectively. The increase in fuel as a percentage of revenue is due primarily to increased fuel prices partially offset by the increase in the owner operator fleet. Increases in fuel costs (including fuel taxes), to the extent not offset by rate increases or fuel surcharges, could have an adverse effect on the operations and profitability of the Company. Management believes that the most effective protection against fuel cost increases is to maintain a fuel efficient fleet and to implement fuel surcharges when such option is necessary and available. The Company has not used derivative-type hedging products as a hedge against higher fuel costs. Purchased transportation represented 12.8% and 9.3% of operating revenue for the years ended December 31, 1996 and 1995, respectively. This increase is the result of the growth of the Company's owner operator fleet from 477 at December 31, 1995 to 665 at December 31, 1996. Rental expense as a percentage of operating revenue was 5.8% for the years ended December 31, 1996 and 1995. When it is economically feasible to do so, the Company will purchase then sell tractors it leases by exercising the purchase option contained in the lease. Gains on these activities are recorded as a reduction of rent expense. During the year ended December 31,1996 and 1995, respectively, the Company recorded gains of approximately $3.3 million and $2.1 million from the sale of leased tractors. During 1996 and 1995, leased tractors represented approximately 62% and 46%, respectively of the fleet (exclusive of owner operators). Depreciation and amortization expense was 6.0% of operating revenue for the year ended December 31, 1996 versus 6.9% for 1995. This decrease is a result of the higher percentage of tractors which are leased rather than purchased in 1996 versus 1995. During the year ended December 31, 1996 the Company recorded gains on the sale of revenue equipment of approximately $2.2 million compared with approximately $2.7 million in 1995. Exclusive of gains, which reduced depreciation and amortization expense, the percentage of depreciation and amortization to operating revenue in 1996 and 1995 was 6.4% and 7.7%, respectively. In 1996, the Company began replacing its fleet of double van trailers with 13 1/2 foot high 53 foot trailers to be used in the Eastern United States and 14 foot high 53 foot trailers to be used in the Western United States. Management believes that this conversion to a standardized fleet of 53 foot trailers will provide cost reductions, such as decreasing licensing costs, simplifying driver training and increasing equipment utilization. 21 The conversion to a standardized fleet of 53 foot trailers will result in the sale of substantially all of the Company's fleet of double van trailers. While the Company believes that the market value of its double van trailer fleet is currently greater than the book value, there can be no assurance that the market value of such equipment will not decline or that the sale of such equipment will result in gains. The sale of the Company's double van trailer fleet may result in significant fluctuations in the amount of gains or losses recorded in any given quarter. The amount of such gains or losses recorded in a particular quarter will be dependent upon the quantity of trailers sold and the prevailing market prices for used trailer equipment. Insurance and claims expense represented 3.6% and 2.9% of operating revenue in the year ended December 31,1996 and 1995, respectively. The Company's insurance program for liability, physical damage and cargo damage involves self-insurance with varying risk retention levels. Claims in excess of these risk retention levels are covered by insurance in amounts which management considers adequate. The Company accrues the estimated cost of the uninsured portion of pending claims. These accruals are estimated based on management's evaluation of the nature and severity of individual claims and an estimate of future claims development based on historical claims development trends. Insurance and claims expense will vary as a percentage of operating revenue from period to period based on the frequency and severity of claims incurred in a given period as well as changes in claims development trends. Interest expense increased to $7.1 million in 1996 from $6.7 million in 1995. Higher interest expense is a result of higher outstanding balances of interest-bearing debt throughout 1996, offset by lower interest rates. The higher average balance of interest-bearing debt in 1996 is due to borrowings to fund capital expenditures such as the new corporate headquarters facility and the Edwardsville, Kansas terminal. The Company's weighted average interest rate on borrowings under its revolving line of credit in 1996 and 1995 was 5.89% and 6.65%, respectively. As of December 31, 1996, approximately $15 million of the Company's outstanding debt had floating interest rates, the majority of which is based upon the London Interbank Offered Rate ("LIBOR"). Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 Operating revenue increased by $92.3 million or 25.2% to $458.2 million in 1995 from $365.9 million in 1994. This increase is primarily attributable to expansion of the Company fleet to 3,949 tractors as of December 31, 1995 from 3,474 as of December 31, 1994, a net growth of 475 tractors. The net fleet growth corresponds with the increase in transportation demands from the Company's major customers. On July 1, 1994, the Company completed asset acquisitions of East-West Transportation, Inc. ("East-West") which added approximately, 190 tractors, and Missouri Nebraska Express ("MNX") on October 2, 1994 which added approximately 550 tractors. In 1995, the revenue increase is also attributable to the availability of this additional revenue equipment for a full year. There were no significant changes in the Company's freight rates during 1995 and 1994. 22 The Company's operating ratio was 89.9% and 88.8% in 1995 and 1994, respectively. The Company's operating revenue and operating ratio in 1995 was impacted by overall soft economic conditions as compared to 1994. This resulted in lower equipment utilization and a slightly lower revenue per mile. The Company's empty mile factor was 13.9% and 13.2% and the average rate per mile was $1.110 and $1.123 in 1995 and 1994, respectively. The impact of the soft economic conditions in 1995 was partially offset by the fact the Company's fixed costs have not grown as rapidly as the tractor fleet. Therefore, fixed costs were more fully absorbed by operations. Salaries, wages and employee benefits represented 37.1% and 37.4% of operating revenue in 1995 and 1994, respectively. The improvement in 1995, as a percentage of operating revenue, is due to an increase in the owner operator fleet to 477 as of December 31, 1995 from 188 as of December 31, 1994, a reduction in driver bonuses and a smaller contribution to the 401(k) Retirement Plan. Fuel expenses represented 13.2% and 13.8% of operating revenue in 1995 and 1994, respectively. The decrease in fuel as a percentage of revenue is due primarily to the increase in the owner operator fleet. Purchased transportation as a percentage of operating revenue was 9.3% in 1995 versus 5.4% in 1994. The increase is due to the increase in owner operators to 477 at December 31, 1995 from 188 at December 31, 1994. Rental expense represented 5.8% and 6.9% of operating revenue in 1995 and 1994, respectively. The reduction in rental expense as a percentage of operating revenue is attributable to the increasing percentage of owned versus leased revenue equipment. During 1995 and 1994, leased tractors represented approximately 46% and 49%, respectively of the fleet (exclusive of owner operators). When it is economically advantageous to do so, the Company will purchase then sell tractors that it currently leases by exercising the purchase option contained in the lease. Gains in these activities are recorded as a reduction of rent expense. During 1995, the Company recorded gains of approximately $2.1 million. The increase in the percentage of owned versus leased revenue equipment has resulted in an increase in depreciation and amortization expense. Depreciation and amortization expense increased as a percentage of operating revenue to 6.9% in 1995 from 6.7% in 1994. Depreciation and amortization expense in 1995 also includes higher amortization attributable to a full year amortization of goodwill attributable to the MNX acquisition on October 2, 1994. The increase in depreciation and amortization expense was partially offset by increased net gains from the sale of owned revenue equipment which totaled approximately $2.7 million in 1995 compared to $590,000 in 1994. 23 Insurance and claims expense represented 2.9% and 4.2% of operating revenue in 1995 and 1994, respectively. The Company accrues the estimated cost of the uninsured portion of the pending claims. These accruals are estimated based on management's evaluation of the nature and severity of individual claims and an estimate of future claims development based on historical claims development trends. Interest expense increased to $6.7 million in 1995 from $3.1 million in 1994. Higher interest expense is a result of higher outstanding balances of interest-bearing debt throughout 1995, together with higher interest rates. The higher average balances of interest-bearing debt in 1995 are due to borrowings to finance the East-West and MNX acquisitions which were completed in 1994 and affect the full year 1995. In addition, in 1994 and 1995 the Company increased the percentage of owned revenue equipment versus financing such equipment through operating leases. The Company's weighted average interest rate on borrowings under its revolving line of credit in 1995 and 1994 was 6.65% and 5.41%, respectively. As of December 31, 1995, approximately $75.6 million of the Company's outstanding debt had floating interest rates, the majority of which is based upon the London Interbank Offered Rate ("LIBOR"). Liquidity and Capital Resources The growth in the Company's business has required significant investment in new revenue equipment, upgraded and expanded facilities, and enhanced computer hardware and software. The funding for this expansion has been from cash provided by operating activities, proceeds from the sale of revenue equipment, long-term debt, borrowings on the Company's line of credit, the use of operating leases to finance the acquisition of revenue equipment and from public offerings of common stock. Net cash provided by operating activities was $58.8 million for each of the years ended December 31, 1996 and 1995. An increase in accounts receivable was offset primarily by an increase in net earnings, increases in accounts payable, accrued liabilities and claims accruals and a decrease in prepaid expenses. Net cash used in investing activities increased to $80.2 million for the year ended December 31,1996 from $21.7 million for 1995. The increase is due primarily to greater expenditures for revenue equipment and for facilities and improvements, which were offset in part by fewer proceeds from the sale of property and equipment. Cash expended for investment activities also includes $5.1 million expended for the purchase of Navajo Shippers. As of December 31, 1996, the Company had commitments outstanding to acquire replacement and additional revenue equipment for approximately $132 million. The Company has the option to cancel such commitments upon 60 days notice. The Company believes it has the ability to obtain debt and lease financing and generate sufficient cash flows from operating activities to support these acquisitions of revenue equipment. 24 During the year ended December 31, 1996, the Company incurred approximately $25 million of non-revenue equipment capital expenditures. These expenditures were primarily for the completion of the construction of the Company's facility in Edwardsville, Kansas and for construction of the Company's new corporate headquarters facility in Phoenix, Arizona. In the second quarter of 1996, the Company relocated its corporate headquarters facility to the newly constructed facility. The former headquarters facility is currently held for sale and the net assets are reflected as such on the accompanying consolidated balance sheet. The Company anticipates that it will expend approximately $24 million in 1997 for various facilities upgrades and acquisitions of terminal facilities. Factors such as costs and opportunities for future terminal expansions may change the amount of such expenditures. The funding for capital expenditures has been and will be from a combination of cash provided by operating activities, long-term debt including $15 million borrowed to finance the new Phoenix, Arizona headquarters facility, amounts available under the Company's $110 million line of credit, lease financing and equity offerings. The availability of capital for revenue equipment and other capital expenditures will be affected by prevailing market conditions and the Company's financial condition and results of operations. Net cash provided by financing activities was $20.0 million in 1996 compared to net cash used in financing activities of $38.5 million in 1995. The increase in cash provided by financing activities is due to proceeds from the sale of common stock primarily through the public offering in December 1996 and proceeds from issuance of long-term debt offset in part by repayments of long-term debt. The net use of cash in financing activities in 1995 was primarily the result of repayments of long-term debt of $24.1 million and reductions in borrowings under the revolving line of credit of $2.4 million. On January 17, 1997, the Company entered into an agreement for a line of credit with maximum borrowings of $110 million. The Company anticipates that a portion of the line of credit will be used to pay off existing secured revenue equipment debt with current interest rates exceeding the line of credit rate. The new line will also be used for funding letters of credit. Management believes that it will be able to finance its needs for working capital, facilities improvements and expansion, as well as anticipated fleet growth through additional revenue equipment acquisitions and additional strategic acquisitions as opportunities become available, through cash flows from operations, borrowings available under the line of credit and through long-term debt and operating lease financing believed to be available to finance revenue equipment acquisitions. Over the long term, the Company will continue to have significant capital requirements, which may require the Company to seek additional borrowings or equity capital. The availability of debt financing or equity capital will depend upon the Company's financial conditions and results of operations as well as prevailing market conditions, the market price of the Company's common stock and other factors over which the Company has little or no control. 25 Inflation Inflation can be expected to have an impact on the Company's operating costs. A prolonged period of inflation would cause interest rates, fuel, wages and other costs to increase and would adversely affect the Company's results of operations unless freight rates could be increased correspondingly. However, the effect of inflation has been minimal over the past three years. Seasonality In the transportation industry, results of operations generally show a seasonal pattern as customers reduce shipments after the winter holiday season. The Company's operating expenses also tend to be higher in the winter months primarily due to increased operating costs in colder weather and higher fuel consumption due to increased idle time. Factors That May Affect Future Results and Financial Condition The Company's future operating results and financial condition are dependent on the Company's ability to continue to successfully provide truckload carrier services to meet shipper demand patterns. Inherent in this process are a number of factors that the Company must successfully manage in order to achieve favorable future operating results and financial condition. Potential risks and uncertainties that could affect the Company's future operating results and financial condition include, without limitation, the factors discussed below. General Economic and Business Factors. The Company's business is dependent upon a number of factors that may have a material adverse effect on its results of operations, many of which are beyond the Company's control. These factors include excess capacity in the trucking industry, significant increases or rapid fluctuations in fuel prices, interest rates, fuel taxes, tolls, license and registration fees and insurance premiums, to the extent not offset by increases in freight rates or fuel surcharges, and difficulty in attracting and retaining qualified drivers and owner operators. The Company's results of operations also are affected by recessionary economic cycles and downturns in customers' business cycles, particularly in market segments and industries (such as retail and paper products) in which the Company has a significant concentration of customers. In addition, the Company's results of operations are affected by seasonal factors. Customers tend to reduce shipments after the winter holiday season and the Company's operating expenses tend to be higher in the winter months primarily due to increased operating costs in colder weather and higher fuel consumption due to increased idle time. Competition. The trucking industry is extremely competitive and fragmented. The Company competes with many other truckload carriers of varying sizes and, to a lesser extent, with railroads. Competition has created downward pressure on the truckload industry's pricing structure. Some of the trucking companies with which the Company competes have 26 greater financial resources than the Company, own more revenue equipment and carry a larger volume of freight than the Company. Capital Requirements. The trucking industry is very capital intensive. The Company depends on cash from operations, operating leases and debt financing for funds to expand the size of its fleet and maintain modern revenue equipment. If the Company were unable in the future to enter into acceptable financing arrangements, it would have to limit its growth and might be required to operate its revenue equipment for longer periods, which could have a material adverse effect on the Company's operating results. Acquisitions. The growth of the Company has been, and will continue to be, dependent in significant part upon the acquisition of small-to-medium sized trucking companies throughout the United States. To date, the Company has been successful in identifying trucking companies to acquire and in integrating such companies' operations into the Company's operations. The Company may face competition from transportation companies or other third parties for acquisition opportunities that become available. There can be no assurance that the Company will identify acquisition candidates that will result in successful combinations in the future. Any future acquisitions by the Company may result in the incurrence of additional debt and amortization of expenses related to goodwill and intangible assets, which could adversely affect the Company's profitability, or could involve the potentially dilutive issuance of additional equity securities. In addition, acquisitions involve numerous risks, including difficulties in assimilation of the acquired company's operations particularly in the period immediately following the consummation of such transactions, the diversion of the attention of the Company's management from other business, and the potential loss of customers, key employees and drivers of the acquired company, all of which could have a material adverse effect on the Company's business and operating results. Dependence on Key Personnel. The Company is highly dependent upon the services of Mr. Jerry Moyes, Chairman of the Board, President and Chief Executive Officer, Mr. William F. Riley, III, Executive Vice President and Chief Financial Officer, Mr. Robert W. Cunningham, Executive Vice President, and Mr. Rodney K. Sartor, Executive Vice President. Although the Company believes it has an experienced and talented management group, the loss of the services of Mr. Moyes, Mr. Riley, Mr. Cunningham or Mr. Sartor could have a material adverse effect on the Company's operations and future profitability. The Company does not have employment agreements with nor does it maintain key man life insurance on Messrs. Moyes, Riley, Cunningham or Sartor. Regulation. The Company is regulated by the United States Department of Transportation and by various state agencies. These regulatory authorities exercise broad powers, generally governing activities such as authorization to engage in motor carrier operations, rates and charges, operations, safety, financial reporting, and certain mergers, consolidations and acquisitions. In addition, the Company's operations are subject to various environmental laws and regulations dealing with the transportation, storage, presence, use, disposal and handling of hazardous materials, discharge of stormwater and underground fuel storage tanks. If the Company should 27 be involved in a spill or other accident involving hazardous substances or if the Company were found to be in violation of applicable laws or regulations, it could have a material adverse effect on the Company's business and operating results. Claims Exposure; Insurance. The Company currently self-insures for liability resulting from cargo loss, personal injury and property damage and for worker's compensation, and maintains insurance with licensed insurance companies above its limits on such self-insurance. To the extent the Company were to experience an increase in the number of claims for which it is self-insured, the Company's operating results would be materially adversely affected. In addition, significant increases in insurance costs, to the extent not offset by freight rate increases, would reduce the Company's profitability. Dependence on Key Customers. A significant portion of the Company's revenue is generated from key customers. During 1996, the Company's top 25, 10 and 5 customers accounted for 47%, 33% and 24% of revenues, respectively. The Company does not have long-term contractual relationships with many of its key customers, and there can be no assurance that the Company's relationships with its key customers will continue as presently in effect. A reduction in or termination of the Company's services by a key customer could have a material adverse effect on the Company's business and operating results. Item 8. Financial Statements and Supplementary Data Consolidated Financial Statements of the Company as of December 31, 1996 and for each of the years in the three-year period ending December 31, 1996, together with related notes and the report of KPMG Peat Marwick LLP, independent auditors, are set forth on the following pages. Other required financial information set forth herein is more fully described in Item 14 of this Form 10-K. 28 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Swift Transportation Co., Inc.: We have audited the accompanying consolidated balance sheets of Swift Transportation Co., Inc. and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Swift Transportation Co., Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of their operations, and their cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Phoenix, Arizona February 14, 1997 29 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except share and per share amounts)
December 31, --------------------------------------- Assets 1996 1995 ------ ------------------ ------------------ Current assets: Cash $ 1,210 $ 2,627 Accounts receivable, net 78,280 56,477 Current portion of contracts receivable -- 16 Inventories and supplies 3,997 3,223 Prepaid taxes, licenses and insurance 3,274 4,964 Assets held for sale 5,453 -- Deferred income taxes 3,690 1,250 ------------------ ------------------ Total current assets 95,904 68,557 ------------------ ------------------ Property and equipment, at cost: Revenue and service equipment 297,744 259,362 Land 7,351 10,226 Facilities and improvements 53,109 35,936 Furniture and office equipment 12,242 10,295 ------------------ ------------------ Total property and equipment 370,446 315,819 Less accumulated depreciation and amortization 95,597 82,946 ------------------ ------------------ Net property and equipment 274,849 232,873 Contracts receivable, less current portion 243 349 Other assets 174 590 Goodwill 9,435 8,939 ------------------ ------------------ $ 380,605 $ 311,308 ================== ==================
See accompanying notes to consolidated financial statements. 30 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Consolidated Balance Sheets, Continued (In thousands, except share and per share amounts)
December 31, --------------------------------------- Liabilities and Stockholders' Equity 1996 1995 ------------------------------------ ------------------ ------------------ Current liabilities: Accounts payable $ 16,779 $ 13,089 Accrued liabilities 17,202 15,508 Claims accruals 14,668 10,457 Current portion of long-term debt 10,317 22,768 ------------------ ------------------ Total current liabilities 58,966 61,822 ------------------ ------------------ Borrowings under revolving line of credit 16,500 11,750 Long-term debt, less current portion 23,784 57,204 Claims accruals 16,689 13,647 Deferred income taxes 38,000 32,050 Stockholders' equity: Preferred stock, par value $.001 per share. Authorized 1,000,000 shares; none issued -- -- Common stock, par value $.001 per share. Authorized 75,000,000 shares; issued 28,134,684 and 24,877,534 shares in 1996 and 1995, respectively 28 25 Additional paid-in capital 110,291 45,885 Retained earnings 119,763 92,341 ------------------ ------------------ 230,082 138,251 Less treasury stock, at cost (220,700 shares) 3,416 3,416 ------------------ ------------------ Net stockholders' equity 226,666 134,835 Commitments, contingencies and subsequent events ------------------ ------------------ $ 380,605 $ 311,308 ================== ==================
See accompanying notes to consolidated financial statements. 31 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Consolidated Statements of Earnings (In thousands, except per share amounts)
Years ended December 31, ------------------------------------------------------------ 1996 1995 1994 ----------------- ----------------- ------------------ Operating revenue $ 562,259 $ 458,165 $ 365,889 ----------------- ----------------- ------------------ Operating expenses: Salaries, wages and employee benefits 192,572 169,805 136,997 Operating supplies and expenses 52,362 40,582 31,630 Fuel 77,063 60,697 50,434 Purchased transportation 72,040 42,592 19,809 Rental expense 32,599 26,633 25,166 Insurance and claims 20,358 13,121 15,273 Depreciation and amortization 33,883 31,726 24,649 Communications and utilities 8,219 7,547 4,014 Operating taxes and licenses 19,584 19,377 17,069 ----------------- ----------------- ------------------ Total operating expenses 508,680 412,080 325,041 ----------------- ----------------- ------------------ Operating income 53,579 46,085 40,848 ----------------- ----------------- ------------------ Other (income) expenses: Interest expense 7,106 6,728 3,101 Interest income (107) (75) (78) Other (632) (638) (1,484) ----------------- ----------------- ------------------ Other (income) expenses, net 6,367 6,015 1,539 ----------------- ----------------- ------------------ Earnings before income taxes 47,212 40,070 39,309 Income taxes 19,790 17,030 16,680 ----------------- ----------------- ------------------ Net earnings $ 27,422 $ 23,040 $ 22,629 ================= ================= ================== Net earnings per common and equivalent share $ 1.07 $ .91 $ .89 ================= ================= ================== Shares used in per share calculations 25,669 25,348 25,325 ================= ================= ==================
See accompanying notes to consolidated financial statements. 32 SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES Consolidated Statements of Stockholders' Equity (dollars in thousands)
Common stock Additional Totsl ------------------------- paid-in Retained Treasury stockholders' Shares Par value capital earnings stock equity ----------- ------------ ------------ ----------- ----------- ----------- Balance, January 1, 1994 24,528,583 $ 25 $ 42,704 $ 46,672 $ (428) $ 88,973 Issuance of common stock under employee stock purchase plan 24,073 -- 315 -- -- 315 Amortization of deferred com- pensation -- -- 42 -- -- 42 Purchase of 33,500 shares of treasury stock -- -- -- -- (617) (617) Net earnings -- -- -- 22,629 -- 22,629 ----------- ------------ ------------ ----------- ----------- ----------- Balance, December 31, 1994 24,552,656 25 43,061 69,301 (1,045) 111,342 Issuance of common stock under stock option and employee stock purchase plans 324,878 -- 1,720 -- -- 1,720 Income tax benefit arising from the exercise of stock options -- -- 1,056 -- -- 1,056 Amortization of deferred compensation -- -- 48 -- -- 48 Purchase of 142,300 shares of treasury stock -- -- -- -- (2,371) (2,371) Net earnings -- -- -- 23,040 -- 23,040 ----------- ------------ ------------ ----------- ----------- ----------- Balance, December 31, 1995 24,877,534 25 45,885 92,341 (3,416) 134,835 Issuance of common stock under stock option and employee stock purchase plans 292,150 -- 1,676 -- -- 1,676 Issuance of common stock upon public offering, net of issuance costs of $300 2,875,000 3 59,411 -- -- 59,414 Issuance of common stock for Navajo Shippers acquisition 90,000 -- 1,918 -- -- 1,918 Income tax benefit arising from the exercise of stock options -- -- 1,330 -- -- 1,330 Amortization of deferred compensation -- -- 71 -- -- 71 Net earnings -- -- -- 27,422 -- 27,422 ----------- ------------ ------------ ----------- ----------- ----------- Balance, December 31, 1996 28,134,684 $ 28 $ 110,291 $ 119,763 $ (3,416) $ 226,666 =========== ============ ============ =========== =========== ===========
See accompanying notes to consolidated financial statements. 33 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (in thousands)
Years ended December 31, ------------------------------------------------------------ 1996 1995 1994 ----------------- ----------------- ------------------ Cash flows from operating activities: Net earnings $ 27,422 $ 23,040 $ 22,629 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 33,883 31,726 24,649 Deferred income taxes 3,510 5,250 9,265 Income tax benefit arising from the exercise of stock options 1,330 1,056 -- Provision for losses on accounts receivable 616 870 500 Amortization of deferred compensation 71 48 42 Change in assets and liabilities (net of effects of acquisitions in 1996 and 1994): Increase in accounts receivable (22,637) (12,519) (8,935) Decrease (increase) in inventories and supplies (774) 574 (1,268) Decrease (increase) in prepaid expenses and other current assets 1,912 54 (908) Decrease (increase) in other assets 416 (15) 346 Increase in accounts payable, accrued liabilities and claims accruals 13,035 8,703 12,562 ----------------- ----------------- ------------------ Net cash provided by operating activities 58,784 58,787 58,882 ----------------- ----------------- ------------------ Cash flows from investing activities: Proceeds from sale of property and equipment 36,692 43,944 9,027 Capital expenditures (111,820) (65,726) (65,840) Payments received on contracts receivable 106 120 338 Disbursements for contracts receivable -- (40) (133) Business acquisitions (5,148) -- (12,242) ----------------- ----------------- ------------------ Net cash used in investing activities (80,170) (21,702) (68,850) ----------------- ----------------- ------------------
34 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows, Continued (in thousands)
Years ended December 31, ------------------------------------------------------------ 1996 1995 1994 ----------------- ----------------- ------------------ Cash flows from financing activities: Repayments of long-term debt $ (60,897) $ (24,113) $ (11,741) Proceeds from issuance of long-term debt 15,026 -- -- Increase (decrease) in borrowings under line of credit 4,750 (13,727) 20,477 Proceeds from sale of common stock, net of issuance costs 61,090 1,720 315 Purchase of treasury stock -- (2,371) (617) ----------------- ----------------- ------------------ Net cash provided by (used in) financing activities 19,969 (38,491) 8,434 ----------------- ----------------- ------------------ Net decrease in cash (1,417) (1,406) (1,534) Cash at beginning of year 2,627 4,033 5,567 ----------------- ----------------- ------------------ Cash at end of year $ 1,210 $ 2,627 $ 4,033 ================= ================= ================== Supplemental disclosure of cash flow information: Cash paid during the year for: Interest $ 7,112 $ 6,919 $ 3,009 ================= ================= ================== Income taxes $ 14,163 $ 12,225 $ 6,978 ================= ================= ================== Supplemental schedule of noncash investing and financing activities: Equipment sales contracts receivable $ 362 $ 596 $ 5,233 ================= ================= ================== Direct financing for purchase of equipment $ -- $ 35,911 $ 14,022 ================= ================= ================== Assumption of loan upon purchase of land $ -- $ -- $ 615 ================= ================= ==================
35 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows, Continued (in thousands)
Years ended December 31, ------------------------------------------------------------ 1996 1995 1994 ----------------- ----------------- ------------------ During 1996 and 1994, in connection with business acquisitions, assets were acquired and liabilities were incurred as follows: Current assets $ 222 $ 1,340 Current liabilities -- (602) Property and equipment 5,644 40,379 Goodwill 1,200 6,671 Long-term debt -- (35,546) Issuance of common stock (1,918) -- ----------------- ------------------ Cash paid $ 5,148 $ 12,242 ================= ==================
See accompanying notes to consolidated financial statements. 36 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1996, 1995 and 1994 (1) Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Swift Transportation Co., Inc., a Nevada holding company, and its wholly-owned subsidiaries (the Company). All significant intercompany balances and transactions have been eliminated in consolidation. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with original maturities of three months or less to be cash equivalents. Inventories and Supplies Inventories and supplies consist primarily of spare parts, tires, fuel and supplies and are stated at cost. Cost is determined using the first-in, first-out (FIFO) method. Property and Equipment Property and equipment are stated at cost. Gains and losses from the sale of revenue equipment are included as a component of depreciation expense. Net gains in 1996, 1995 and 1994 were $2,185,000, $2,663,000 and $590,000, respectively. To obtain certain tax incentives, the Company financed the construction of its Edwardsville, Kansas terminal with municipal bonds issued by the city. Subsequently, the Company purchased 100% of the bonds and intends to hold them to maturity, effectively financing the construction with internal cash flow. The Company has offset the investment in the bonds against the related liability and neither is reflected on the consolidated balance sheet. For the years ended December 31, 1996, 1995 and 1994 the Company capitalized interest related to self-constructed assets totaling $428,000, $357,000 and $135,000, respectively. Depreciation on property and equipment is calculated on the straight-line method over the estimated useful lives of 10 to 40 years for facilities and improvements, 5 to 12 years for revenue and service equipment and 3 to 5 years for furniture and office equipment. Tires on revenue equipment purchased are capitalized as a component of the related equipment cost when the vehicle is placed in service and depreciated over the life of the vehicle. Replacement tires are expensed when placed in service. 37 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Goodwill Goodwill represents the excess of purchase price over fair value of net assets acquired. Such goodwill is being amortized on the straight-line method over periods ranging from 15 to 20 years. Accumulated amortization was $2,144,000 and $1,440,000 at December 31, 1996 and 1995, respectively. The Company continually evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of goodwill may warrant revision or that the remaining balance may not be recoverable. When factors indicate that the asset should be evaluated for possible impairment, the Company uses an estimate of the undiscounted net cash flows over the remaining life of the asset in measuring whether the asset is impaired. Revenue Recognition Operating revenues and related direct costs are recognized as of the date the freight is picked up for shipment. Income Taxes The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. Net Earnings Per Common and Equivalent Share Net earnings per common and equivalent share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during each period. Dilutive common equivalent shares consist of stock options (using the treasury stock method). Use of Estimates Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and revenues and expenses and the disclosure of contingent liabilities to prepare these consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. Recent Accounting Pronouncements In 1996, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS No. 121). This adoption resulted in no adjustments to recorded amounts of long-lived assets in the accompanying financial statements. 38 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (2) Accounts Receivable Accounts receivable consists of:
December 31, -------------------------------------- 1996 1995 ----------------- ----------------- (in thousands) Trade customers $ 76,762 $ 54,318 Equipment manufacturers 362 596 Income tax refund receivable -- 1,004 Other 1,709 1,486 ----------------- ----------------- 78,833 57,404 Less allowance for doubtful accounts 553 927 ----------------- ----------------- $ 78,280 $ 56,477 ================= =================
The schedule of allowance for doubtful accounts is as follows:
Beginning Ending balance Additions Deductions balance ---------------- ------------------- ----------------- ---------------- (in thousands) Year ended December 31: 1996 $ 927 $ 616 $ (990) $ 553 ================ =================== ================= ================ 1995 $ 387 $ 870 $ (330) $ 927 ================ =================== ================= ================ 1994 $ 787 $ 500 $ (900) $ 387 ================ =================== ================= ================
(3) Assets Held for Sale Assets held for sale consist of land, land improvements, building and equipment related to the Company's former corporate headquarters and terminal located in Phoenix, Arizona and is stated at the lower of carrying amount or fair value less costs to sell. 39 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (4) Accrued Liabilities Accrued liabilities consists of: December 31, -------------------------------------- 1996 1995 ----------------- ----------------- (in thousands) Employee compensation $ 10,741 $ 9,684 Fuel and mileage taxes 2,002 4,128 Income taxes payable 1,113 -- Other 3,346 1,696 ----------------- ----------------- $ 17,202 $ 15,508 ================= ================= (5) Borrowings Under Revolving Line of Credit The Company has a $110 million unsecured revolving line of credit (the line of credit) under an agreement with four major banks (the Credit Agreement) which matures on January 16, 2001. This line of credit, signed on January 17, 1997, replaces the Company's previous line of credit of $36 million. Interest on outstanding borrowings is based upon one of two options which the Company selects at the time of borrowing: the bank's prime rate or the London Interbank Offered Rate (LIBOR) plus applicable margins, as defined in the Credit Agreement. The unused portion of the line of credit is subject to a commitment fee. The weighted average interest rate on outstanding borrowings was 5.89% and 6.65% at December 31, 1996 and 1995, respectively. The Credit Agreement requires the Company to meet certain covenants with respect to debt to equity and debt coverage ratios. The Credit Agreement also requires the Company to maintain unencumbered assets of not less than 120% of unsecured indebtedness (as defined). The Credit Agreement includes financing for letters of credit. The Company has outstanding letters of credit primarily for workers' compensation and liability self-insurance purposes totaling $11.3 million at December 31, 1996. 40 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (6) Long-Term Debt Long-term debt consists of the following:
December 31, --------------------------------------- 1996 1995 ------------------ ------------------ (in thousands) Notes payable to commercial lending institutions with varying payments through the year 2006, secured by revenue equipment with a net book value of approximately $26.1 million at December 31, 1996: Fixed interest rates ranging from 2.8% to 7.3% $ 3,986 $ 16,123 Floating interest rate based on LIBOR plus .45% to 1.25% (effective rates ranging from 5.95% to 6.52% at December 31, 1996) 15,115 63,849 Note payable to insurance company bearing interest at 6.78% payable monthly with principal payments of $3,000,000 due in 2002 through 2006 secured by deed of trust on Phoenix facilities. Covenant requirements include minimum debt to equity and debt coverage ratios and tangible net worth. The covenants include limitations on dividends and treasury stock purchases. 15,000 -- ------------------ ------------------ Total long-term debt 34,101 79,972 Less current portion 10,317 22,768 ------------------ ------------------ Long-term debt, less current portion $ 23,784 $ 57,204 ================== ==================
The aggregate annual maturities of long-term debt exclusive of amounts due under the revolving line of credit (see note 5) as of December 31, 1996 are as follows: Year ending December 31 (in thousands) 1997 $ 10,317 1998 6,823 1999 1,961 2000 -- 2001 -- Thereafter 15,000 ----------------- $ 34,101 ================= 41 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (7) Commitments Leases The Company leases various revenue equipment and terminal facilities under operating leases. At December 31, 1996, the future minimum lease payments under noncancelable operating leases are as follows:
Year ending Revenue December 31 Equipment Facilities Total ----------- ----------------- ----------------- ----------------- (in thousands) 1997 $ 35,888 $ 386 $ 36,274 1998 25,831 184 26,015 1999 12,542 133 12,675 2000 2,013 96 2,109 2001 1,889 19 1,908 Thereafter 1,324 333 1,657 ----------------- ----------------- ----------------- Total minimum lease payments $ 79,487 $ 1,151 $ 80,638 ================= ================= =================
The revenue equipment leases generally include purchase options exercisable at the completion of the lease. Purchase Commitments The Company had commitments outstanding to acquire revenue equipment for approximately $132 million at December 31, 1996. These purchases are expected to be financed by operating leases, debt, proceeds from sales of existing equipment and cash flows from operations. The Company has the option to cancel such commitments with 60 days notice. (8) Stockholders' Equity Stock Compensation Plans At December 31, 1996, the Company has three stock-based compensation plans, which are described below. The Company applies APB Opinion No. 25 and related interpretations in accounting for its plans. 42 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Had compensation cost for the Company's three stock-based compensation plans been determined consistent with FASB Statement No. 123, the Company's net earnings and earnings per share would have been reduced to the pro forma amounts indicated below:
1996 1995 ----------------- ----------------- Net earnings As Reported $27,422 $23,040 ================= ================= Pro forma $27,154 $22,795 ================= ================= Net earnings per common and equivalent share As Reported $1.07 $0.91 ================= ================= Pro forma $1.06 $0.90 ================= =================
Pro forma net earnings reflect only options granted in 1996 and 1995. Therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the pro forma net earnings amounts presented above because compensation cost is reflected over the options' vesting period of 9 years and compensation cost for options granted prior to January 1, 1995 is not considered under SFAS No. 123. Fixed Stock Option Plans The Company has two fixed stock option plans. Under the 1990 Employee Stock Option Plan, the Company may grant options to employees for up to 2.3 million shares of common stock. Under the 1994 Non-Employee Directors Plan, the Company may grant options to non-employee directors for up to 60,000 shares of common stock. Under both plans, the exercise price of each option equals 85 percent of the market price of the Company's stock on the date of the grant, and an option's maximum term is ten years. Options under the Employees Plan vest 20 percent after five years and 20 percent each succeeding year. Options under the non-employee Directors Plan vest on the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1996 and 1995: Dividend yield 0% Expected volatility 46.49% Risk free interest rate 6.50% Expected lives 42 days after vesting date 43 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued A summary of the status of the Company's two fixed stock option plans as of December 31, 1996 and 1995, and changes during the years then ended on those dates is presented below:
1996 1995 -------------------------------------- -------------------------------------- Weighted- Weighted- Average Average Shares Exercise Shares Exercise (000) Price (000) Price ----------------- ----------------- ----------------- ----------------- Outstanding at beginning of year 1,853,050 $6.01 1,901,300 $4.50 Granted 50,000 $16.55 270,550 $14.80 Exercised (222,700) $3.17 (252,500) $2.91 Forfeited (47,550) $11.97 (66,300) $10.52 ----------------- ----------------- Outstanding at end of year 1,632,800 $6.54 1,853,050 $6.01 ================= ================= Options exercisable at year-end 81,300 16,000 ================= ================= Weighted-average fair value of options granted during the year $18.92 $17.41 ================= =================
The following table summarizes information about fixed stock options outstanding at December 31, 1996:
Options Outstanding Options Exercisable ----------------------------------- ----------------------------------- Weighted- Number Average Weighted- Number Weighted- Outstanding Remaining Average Exercisable Average at Contractual Exercise at Exercise 12/31/96 Life Price 12/31/96 Price ---------------- --------------- ---------------- ---------------- --------------- $2.79 to $3.47 959,300 4.0 $2.91 74,300 $3.05 $6.85 to $7.08 173,250 6.0 $7.08 3,000 $6.85 $10.94 to $17.22 222,200 7.2 $11.14 2,000 $12.22 $12.64 to $19.76 278,050 8.7 $15.07 2,000 $14.93 ---------------- ---------------- 1,632,800 5.4 $6.54 81,300 $3.70 ================ ================
44 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Employee Stock Purchase Plan Under the 1994 Employee Stock Purchase Plan, the Company is authorized to issue up to 2 million shares of common stock to full-time employees, nearly all of whom are eligible to participate. Under the terms of the Plan, employees can choose each year to have up to 15 percent of their annual base earnings ($25,000 maximum) withheld to purchase the Company's common stock. The purchase price of the stock is 85 percent of the lower of the beginning-of-period or end-of-period (each period being the first and second six calendar months) market price. Approximately two percent of eligible employees have participated in the plan in the last 3 years. Under the Plan, the Company sold 68,183 shares and 73,660 shares to employees in 1996 and 1995, respectively. Compensation cost is calculated as the fair value of the employees' purchase rights, which was estimated using the Black-Scholes model with the following assumptions: Dividend yield 0.00% Expected volatility 46.49% Risk free interest rate 5.00% The weighted-average fair value of those purchase rights granted in 1996 and 1995 was $5.68 and $5.34, respectively. (9) Income Taxes Income tax expense consists of:
1996 1995 1994 ----------------- ------------------ ------------------ (in thousands) Current expense: Federal $ 13,610 $ 9,800 $ 6,335 State 2,670 1,980 1,080 ----------------- ------------------ ------------------ 16,280 11,780 7,415 ----------------- ------------------ ------------------ Deferred expense: Federal 2,980 4,370 7,545 State 530 880 1,720 ----------------- ------------------ ------------------ 3,510 5,250 9,265 ----------------- ------------------ ------------------ $ 19,790 $ 17,030 $ 16,680 ================= ================== ==================
45 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The Company's effective tax rate was 42.0%, 42.5% and 42.4% in 1996, 1995 and 1994, respectively. The actual tax expense differs from the "expected" tax expense (computed by applying the U.S. Federal corporate income tax rate of 35% to earnings before income taxes) as follows:
Years ended December 31, ------------------------------------------------------------ 1996 1995 1994 ----------------- ------------------ ------------------ (in thousands) Computed "expected" tax expense $ 16,524 $ 14,025 $ 13,758 Increase in income taxes resulting from: State income taxes, net of federal income tax benefit 2,080 1,859 1,820 Other, net 1,186 1,146 1,102 ----------------- ------------------ ------------------ $ 19,790 $ 17,030 $ 16,680 ================= ================== ==================
The net effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:
December 31, -------------------------------------- 1996 1995 ----------------- ----------------- (in thousands) Deferred tax assets: Claims accruals $ 12,320 $ 9,470 Accounts receivable due to allowance for doubtful accounts 210 360 Alternative minimum tax credits -- 1,870 Other 170 130 ----------------- ----------------- Total deferred tax assets 12,700 11,830 ----------------- ----------------- Deferred tax liabilities: Property and equipment, principally due to differences in depreciation (45,160) (39,410) Revenues deferred for income tax purposes -- (1,420) Prepaid taxes, licenses and permits deducted for tax purposes (1,850) (1,800) ----------------- ----------------- Total deferred tax liabilities (47,010) (42,630) ----------------- ----------------- Net deferred tax liabilities $ 34,310 $ 30,800 ================= =================
46 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued These amounts are presented in the accompanying consolidated balance sheets as follows:
December 31, -------------------------------------- 1996 1995 ----------------- ----------------- (in thousands) Current deferred income taxes $ 3,690 $ 1,250 Noncurrent deferred income taxes (38,000) (32,050) ----------------- ----------------- Net deferred tax liabilities $ (34,310) $ (30,800) ================= =================
(10) Claims Accruals The Company's insurance program for liability, workers' compensation, physical damage and cargo damage involves self-insurance, with varying risk retention levels. Claims in excess of these risk retention levels are covered by insurance in amounts which management considers adequate. Claims accruals represent accruals for the uninsured portion of pending claims at December 31, 1996 and 1995. The current portion reflects the amounts of claims expected to be paid in the following year. These accruals are estimated based on management's evaluation of the nature and severity of individual claims and an estimate of future claims development based on the Company's past claims experience. Claims accruals also include accrued medical expenses under the Company's group medical insurance program. (11) Fair Value of Financial Instruments Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," requires that the Company disclose estimated fair values for its financial instruments. The following summary presents a description of the methodologies and assumptions used to determine such amounts. Cash The carrying amount is assumed to be the fair value because of the liquidity of these instruments. Accounts Receivables and Payables Fair value is considered to be equal to the carrying value of the accounts receivable and accounts payable and accrued liabilities, as they are generally short-term in nature and the related amounts approximate fair value or are receivable or payable on demand. Long-term Debt and Borrowings Under Revolving Line of Credit The fair value of all of these instruments is assumed to approximate their respective carrying values given the duration of the notes, their interest rates and underlying collateral. 47 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Limitations Fair value estimates are made at a specific point in time and are based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Changes in assumptions could significantly affect these estimates. Since the fair value is estimated as of December 31, 1996, the amounts that will actually be realized or paid at settlement or maturity of the instruments could be significantly different. (12) Employee Benefit Plans The Company maintains a 401(k) profit sharing plan for all employees who are 19 years of age or older and have completed one year of service. The Plan provides for a mandatory matching contribution equal to the amount of the employee's salary reduction, but not to exceed 1% of the employee's compensation. Also, the plan provides for a discretionary matching contribution not to exceed 4% of the employee's compensation, limited to the amount permitted under the Internal Revenue Code as deductible expenses. The Company may also make voluntary profit sharing contributions. Employees' rights to employer contributions vest after five years from their date of employment. The Company's contribution totaled approximately $2.9 million, $2.4 million and $3.3 million for 1996, 1995 and 1994, respectively. (13) Related Party Transactions The Company leases various properties from entities owned by the principal stockholder. Rents paid under these leases totaled $1.0 million, $1.1 million and $1.1 million for the years ended December 31, 1996, 1995 and 1994, respectively. During 1994, the Company acquired land used in its Phoenix operation from one of these entities for a purchase price of $840,000 including the assumption of the underlying land loan with a balance of $615,000. The Company provided transportation services to entities owned by its principal stockholder. For the years ended December 31, 1996, 1995 and 1994, the Company recognized $213,000, $79,000 and $87,000, respectively, in operating revenue from this entity. At December 31, 1996, $22,000 was owed to the Company for these services. A company owned by the Company's principal stockholder leases tractors to some of the Company's owner operators. In connection with this program in 1996, 1995 and 1994, the Company acquired new tractors and sold them to this entity for $13.2 million, $7.5 million and $4.1 million, respectively, and recognized fee income of $855,000, $495,000 and $280,000, respectively. During 1996, 1995, and 1994, the Company also sold used revenue equipment to this entity totaling $700,000, $3.7 million and $1.9 million, respectively, and recognized gains of $114,000 in 1996, $765,000 in 1995 and $260,000 in 1994. A Company owned by the principal stockholder provides aircraft services to the Company. Payments for such services totaled $450,000, $338,000 and $175,000 for the years ended December 31, 1996, 1995 and 1994, respectively. At December 31, 1996, $40,000 was owed to this entity for such services. 48 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued During 1996, 1995 and 1994, the Company purchased parts and maintenance services from an entity owned by one of the Company's outside directors totaling $2,379,000, $1,222,000 and $340,000, respectively. The Company believes that the terms of the foregoing related party transactions were as favorable to the Company as those which would have been available from an independent third party. All of the above related party arrangements were approved by the independent members of the Company's Board of Directors. (14) Acquisitions On September 12, 1996, the Company acquired substantially all of the operating assets utilized in the dry freight van division of Navajo Shippers, Inc. and two of its wholly-owned subsidiaries, Digby Leasing and Digby-Ringsby Truck Lines, Inc. (collectively, "Navajo Shippers"). The acquisition was accounted for as a purchase and the results of operations of Navajo Shippers have been included in the consolidated financial statements beginning on September 12, 1996. The Company acquired 287 tractors and 417 trailers and related on-board communication equipment. The Company assumed Navajo Shipper's position on operating leases for 257 tractors and acquired 30 owner operators. Total consideration for the assets purchased and goodwill was $7,066,000 consisting of cash of $5,148,000 and 90,000 shares of the Company's common stock valued at $1,918,000. The Company will pay the sellers approximately $1.2 million for commissions on revenues expected to be generated by the Company in the 12 months following the date of acquisition. The excess of cost over net book value has been accounted for as goodwill. Goodwill will be amortized on a straight-line basis over 15 years. On July 1, 1994, the Company acquired certain assets of East-West Transportation, Inc. (East-West). The acquisition was accounted for as a purchase and the results of operations of East-West have been included in the consolidated financial statements beginning on July 1, 1994. The Company acquired 150 tractors and 239 van trailers and assumed leases on an additional 40 tractors and 55 trailers. Total consideration for the assets was approximately $11.2 million consisting of cash of approximately $2.7 million and assumption of debt. On October 3, 1994, the Company acquired the tractors, trailers and other selected assets of Missouri-Nebraska Express (MNX), a subsidiary of Mark VII, Inc. The purchase price of approximately $40.7 million was financed through equipment loans of $27.0 million, conversion of assumed capital lease obligations of $4.2 million to operating leases, and cash of $9.5 million. Additionally, the Company assumed various operating leases for revenue equipment. The acquired and leased assets include approximately 550 tractors and 1,800 trailers. The acquisition was accounted for as a purchase in the fourth quarter of 1994. Prior to the acquisition, the Company managed the assets and business of MNX from July 3, 1994 through October 1, 1994 (the Management Period). Included in other income is $1.0 million which represents the management fee earned by the Company during the Management Period. The revenues and expenses of the operations acquired from MNX have been included in the Company's consolidated financial statements since October 2, 1994. 49 SWIFT TRANSPORTATION CO., INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued On January 10, 1997 the Company signed a letter of intent to acquire certain assets of Direct Transit, Inc. ("DTI"), a Debtor In Possession in United States Bankurptcy Court. On March 20, 1997 the United States Bankruptcy Court approved the Company's purchase agreement with DTI. DTI is a dry van carrier based in North Sioux City, South Dakota and operates predominately in the eastern two-thirds of the United States. At closing, the Company will acquire approximately 600 tractors and 2,100 trailers from various lessors along with the inventory and miscellaneous assets of DTI. The purchase price of approximately $54 million, which includes $43 million in cash and the assumption of lease obligations on approximately $11 million of revenue equipment, will be paid to DTI, DTI's principal shareholder and DTI's lessors of revenue equipment. The acquisition which is expected to close in April 1997 is subject to the satisfaction of certain closing conditions. (15) Commitments and Contingencies The Company is involved in certain claims and pending litigation arising in the normal course of business. Based on the knowledge of the facts and, in certain cases, opinions of outside counsel, management believes the resolution of claims and pending litigation will not have a material adverse effect on the financial condition of the Company. (16) Industry Segment Information The Company operates predominantly in one industry, road transportation, as a truckload motor carrier subject to regulation by the Department of Transportation and various state regulatory authorities. (17) Quarterly Results of Operations (Unaudited)
First Second Third Fourth Quarter Quarter Quarter Quarter ---------------- --------------- ---------------- ---------------- (in thousands, except per share amounts) Year ended December 31, 1996 Operating revenue $ 124,524 $ 137,210 $ 146,739 $ 153,786 Operating income 5,716 13,961 17,728 16,174 Net earnings 2,571 6,772 9,451 8,628 Net earnings per common and equivalent share $ .10 $ .27 $ .37 $ .33 Year ended December 31, 1995 Operating revenue $ 106,715 $ 111,940 $ 118,463 $ 121,047 Operating income 8,536 15,221 12,133 10,195 Net earnings 3,986 7,764 6,014 5,276 Net earnings per common and equivalent share $ .16 $ .31 $ .24 $ .21
50 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures The Company has never filed a Current Report on Form 8-K to report a change in accountants because of a disagreement over accounting principles or procedures, financial statement disclosure, or otherwise. 51 PART III Item 10. Directors and Executive Officers of the Registrant Information with respect to continuing directors and nominees of the Company is set forth under the captions "Information Concerning Directors, Nominees and Officers,""Meetings and Compensation," and "Section 16(a) Beneficial Ownership Reporting Compliance," in the Registrant's Notice and Proxy Statement relating to its 1997 Annual Meeting of Stockholders ("the 1997 Proxy Statement") to be held on May 22, 1997, which is incorporated by reference into this Form 10-K. With the exception of the foregoing information and other information specifically incorporated by reference into this Form 10-K, the 1997 Proxy Statement is not being filed as a part hereof. Item 11. Executive Compensation Information with respect to executive compensation is set forth under the captions "Executive Compensation," "Compensation Committee Interlocks and Insider Participation," "Meetings and Compensation,""Employment Agreements" and "Change of Control Arrangements" in the 1997 Proxy Statement and is incorporated herein by reference; provided, however, that the information set forth under the captions "Compensation Committee Report on Executive Compensation" and "Stock Price Performance Graph" contained in the 1997 Proxy Statement are not incorporated by reference herein. Item 12. Security Ownership of Certain Beneficial Owners and Management Information with respect to security ownership of certain beneficial owners and management is included under the caption "Security Ownership of Principal Stockholders and Management" in the 1997 Proxy Statement and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Information with respect to certain relationships and transactions of management is set forth under the caption "Certain Transactions and Relationships" and "Compensation Committee Interlocks and Insider Participation" in the 1997 Proxy Statement and is incorporated herein by reference. 52 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) Financial Statements and Schedules.
(i) Financial Statements Page or Method of Filing ---------------- (1) Report of KPMG Peat Marwick LLP Page 29 (2) Consolidated Financial Statements and Notes to Page 30-50 Consolidated Financial Statements of the Company, including Consolidated Balance Sheets as of December 31, 1996 and 1995 and related Consolidated Statements of Earnings, Stockholders' Equity and Cash Flows for each of the years in the three-year period ended December 31, 1996 (ii) Financial Statement Schedules Schedules have been omitted because of the absence of conditions under which they are required or because the required material information is included in the Consolidated Financial Statements or Notes to the Consolidated Financial Statements included herein. (b) Reports on Form 8-K No Current Reports on Form 8-K were filed during the fourth quarter of 1996. (c) Exhibits. Exhibit Page or Number Description Method of Filing ------ ----------- ---------------- 3.1 Articles of Incorporation of the Company Incorporated by reference to Exhibit 3.1 of the Company's Form S-3 Registration Statement No. 33-66034 ("S-3 #33-66034") 3.2 Bylaws of the Company Incorporated by reference to Exhibit 3.2 of S-3 #33-66034
53
Exhibit Page or Number Description Method of Filing ------ ----------- ---------------- 4 Specimen of Common Stock Certificate Incorporated be reference to Exhibit 4 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992 (the "1992 Form 10-K") 10.1 Lease Agreement between Jerry and Vickie Incorporated by reference to Moyes and the Company relating to Stockton, Exhibit 10-E(1) of the California property, dated April 10, 1990 Company's Form S-1 Registration Statement No. #33-34983 ("S-1 #33-34983") 10.2 Lease Agreement between Jerry and Vickie Incorporated by reference to Moyes, the Company and Common Market Exhibit 10-E(3) of S-1 Distributing Corp., relating to Wilmington, #33-34983 California property, dated April 10, 1990 10.3 Lease Agreement between Mohave Properties Incorporated by reference to of the Southwest, Inc. and Swift Leasing, Exhibit 10-E(5) of S-1 #33- Inc., relating to the Phoenix, Arizona Body 34983 Repair Shop, dated July 1, 1991 10.4.1 Asset Purchase Agreement dated June 17, Incorporated by reference to 1994 by and among Swift Transportation Co., Exhibit 1 of the Company's Inc., a Nevada corporation; Swift Current Report on Form 8-K Transportation Co., Inc., an Arizona dated October 6, 1994 (the corporation; Mark VII, Inc., a Missouri "10/6/94 8-K") corporation; MNX Carriers, Inc., a Delaware corporation; and Missouri-Nebraska Express, Inc., an Iowa corporation 10.4.2 Amendment No. 1, dated September 30, Incorporated by reference to 1994, to the Asset Purchase Agreement Exhibit 2 of the 10/6/94 8-K 10.5 Stock Option Plan, as amended through Incorporated by reference to November 18, 1994* Exhibit 10.7 of the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (the "1994 Form 10-K") 10.6 Non-Employee Directors Stock Option Plan, Incorporated by reference to as amended through November 18, 1994* Exhibit 10.8 of the 1994 Form 10-K
54
Exhibit Page or Number Description Method of Filing ------ ----------- ---------------- 10.7 Employee Stock Purchase Plan, as amended Incorporated by reference to through November 18, 1994* Exhibit 10.9 of the 1994 Form 10-K 10.8 Swift Transportation Co., Inc. Retirement Incorporated by reference to (401(k)) Plan dated January 1, 1992* Exhibit 10.14 of the Company's Form S-1 Registration Statement No. #33-52454 10.9 Note Agreement dated February 26, 1996 by Incorporated by reference to and between Swift Transportation Co., Inc. Exhibit 10.12 of the and Great-West Life & Annuity Insurance Company's Annual Report on Company Form 10-K for the year ended December 31, 1995 (the "1995 Form 10-K") 10.10 Construction Contract dated November 14, Incorporated by reference to 1994 by and between Swift Transportation Exhibit 10.13 of the 1995 Co., Inc. and Opus Southwest Corporation Form 10-K 10.11 Note Agreement dated January 16, 1997 by Filed herewith and between Swift Transportation Co., Inc. and Wells Fargo Bank, N.A., ABN Amro Bank N.V., The Chase Manhattan Bank and The First National Bank of Chicago. 11 Schedule of computation of net earnings per Filed herewith share 22 Subsidiaries of Registrant Incorporated by reference to Exhibit 22 to the 1995 Form 10-K 23 Consent of KPMG Peat Marwick LLP Filed herewith 24.1 Power of Attorney of Robert W. Cunningham Filed herewith 24.2 Power of Attorney of Rodney K. Sartor Filed herewith 24.3 Power of Attorney of Alphonse E. Frei Filed herewith 24.4 Power of Attorney of Lou A. Edwards Filed herewith 24.5 Power of Attorney of Earl H. Scudder, Jr. Filed herewith 27 Financial Data Schedule Filed herewith
- ------------------------------------ * Indicates a compensation plan. 55 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, this 28th day of March, 1997. SWIFT TRANSPORTATION CO., INC., a Delaware corporation By /s/Jerry C. Moyes ------------------------------------------------ Jerry C. Moyes Chairman of the Board, President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jerry C. Moyes and William F. Riley III, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Form 10-K Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he might or could do in person hereby ratifying and confirming all that said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date - --------- ----- ---- /s/Jerry C. Moyes Chairman of the Board, March 28, 1997 - ------------------------ President and Chief Executive Jerry C. Moyes Officer (Principal Executive Officer) S-1 Signature Title Date * Executive Vice President and March 28, 1997 - ----------------------- Director Robert W. Cunningham /s/William F. Riley III Executive Vice President, March 28, 1997 - ----------------------- Secretary, Chief Financial William F. Riley III Officer (Principal Accounting Officer) and Director * Director March 28, 1997 - ----------------------- Rodney K. Sartor * Director March 28, 1997 - ----------------------- Alphonse E. Frei * Director March 28, 1997 - ----------------------- Lou A. Edwards * Director March 28, 1997 - ----------------------- Earl H. Scudder, Jr. *By: /s/ Jerry C. Moyes ----------------------- Jerry C. Moyes Attorney-in-fact S-2 EX-10.11 2 CREDIT AGREEMENT ================================================================================ CREDIT AGREEMENT among SWIFT TRANSPORTATION CO., INC. THE BANKS NAMED HEREIN WELLS FARGO BANK, N.A. as Administrative Agent and as Issuing Bank and ABN AMRO BANK N.V. as Co-Agent Dated as of January 16, 1997 ================================================================================ TABLE OF CONTENTS ----------------- Page ---- ARTICLE I DEFINITIONS.......................................................2 SECTION 1.1 Defined Terms............................................2 SECTION 1.2 Terms Generally.........................................11 ARTICLE II THE REVOLVING CREDIT FACILITY....................................12 SECTION 2.1 The Commitment..........................................12 SECTION 2.2 [Intentionally left blank]..............................12 SECTION 2.3 Procedures for Borrowings Under the Revolving Loans.....12 SECTION 2.4 Loans...................................................13 SECTION 2.5 Refinancings............................................14 SECTION 2.6 Fees....................................................14 SECTION 2.7 Notes; Repayment of Revolving Loans.....................15 SECTION 2.8 Interest on Revolving Loans.............................15 SECTION 2.9 Default Interest........................................16 SECTION 2.10 Termination and Reduction of Commitments................16 SECTION 2.11 Conversion and Continuation of Borrowings...............16 SECTION 2.12 Prepayment..............................................17 SECTION 2.13 Reserve Requirements; Change in Circumstances...........18 SECTION 2.14 Change in Legality......................................20 SECTION 2.15 Redeployment Loss.......................................20 SECTION 2.16 Pro Rata Treatment......................................21 SECTION 2.17 Sharing of Setoffs......................................21 SECTION 2.18 Payments................................................22 SECTION 2.19 Taxes...................................................22 SECTION 2.20 Termination or Assignment of Commitments Under Certain Circumstances...........................................25 ARTICLE IIA LETTERS OF CREDIT................................................26 SECTION 2A.1 Standby Letters of Credit...............................26 SECTION 2A.2 Notice..................................................26 SECTION 2A.3 Letter of Credit Participations.........................26 SECTION 2A.4 Disbursement and Reimbursement..........................27 -i- ARTICLE III REPRESENTATIONS AND WARRANTIES...................................29 SECTION 3.1 Organization; Corporate Powers; Etc.....................29 SECTION 3.2 Authorization; Etc......................................29 SECTION 3.3 Enforceability..........................................29 SECTION 3.4 Financial Condition and Information.....................30 SECTION 3.5 No Material Adverse Change..............................30 SECTION 3.6 Litigation..............................................30 SECTION 3.7 Federal Reserve Regulations.............................30 SECTION 3.8 Investment Company Act..................................31 SECTION 3.9 Public Utility Holding Company Act......................31 SECTION 3.10 Tax Returns.............................................31 SECTION 3.11 ERISA...................................................31 SECTION 3.12 Title to Properties: Possession.........................31 SECTION 3.13 Use of Proceeds.........................................31 SECTION 3.14 Environmental and Safety Matters........................31 SECTION 3.15 Subsidiaries............................................31 ARTICLE IV CONDITIONS TO CREDIT EVENTS......................................32 SECTION 4.1 Credit Events...........................................32 SECTION 4.2 First Credit Event......................................32 ARTICLE V AFFIRMATIVE COVENANTS............................................34 SECTION 5.1 Corporate Existence.....................................34 SECTION 5.2 Insurance...............................................34 SECTION 5.3 Taxes...................................................34 SECTION 5.4 Financial Statements; Reports, etc......................34 SECTION 5.5 Litigation and Other Notices............................36 SECTION 5.6 Maintaining Records: Access to Premises and Records.....36 SECTION 5.7 Use of Proceeds.........................................36 SECTION 5.8 Unencumbered Assets.....................................36 ARTICLE VI NEGATIVE COVENANTS...............................................37 SECTION 6.1 [Intentionally left blank]..............................37 SECTION 6.2 Mergers, Consolidations, Sales of Assets................37 SECTION 6.3 Accounting Change.......................................37 SECTION 6.4 Guarantee...............................................37 SECTION 6.5 ERISA Liabilities.......................................37 SECTION 6.6 Funded Debt/EBITDA Ratio................................37 SECTION 6.7 Debt Service Coverage Ratio.............................38 -ii- ARTICLE VII EVENTS OF DEFAULT................................................39 SECTION 7.1 Events of Default.......................................39 SECTION 7.2 Remedies................................................41 SECTION 7.3 Occurrence and Declaration of an Event of Default.......41 ARTICLE VIII THE ADMINISTRATIVE AGENT.........................................42 SECTION 8.1 Appointment.............................................42 SECTION 8.2 Liability...............................................42 SECTION 8.3 Action by Administrative Agent..........................43 SECTION 8.4 Resignation.............................................44 SECTION 8.5 Agent as Bank...........................................44 SECTION 8.6 Ownership and Possession of Loan Documents..............45 SECTION 8.7 Indemnification.........................................45 SECTION 8.8 Independent Credit Analysis.............................45 SECTION 8.9 Process for Obtaining Approval of the Banks.............45 SECTION 8.10 Communications to the Banks.............................46 SECTION 8.11 Relationship with the Borrower..........................46 SECTION 8.12 Payments to or by the Banks.............................47 SECTION 8.13 Application of Payments.................................48 SECTION 8.14 Defaulting Banks........................................48 SECTION 8.15 Purchase of Defaulting Bank's Interest After Default....49 SECTION 8.16 Purchase Price and Payment for Defaulting Bank's Interest................................................50 ARTICLE IX MISCELLANEOUS....................................................51 SECTION 9.1 Notices.................................................51 SECTION 9.2 Survival of Agreement...................................51 SECTION 9.3 Binding Effect..........................................52 SECTION 9.4 Successors and Assigns..................................52 SECTION 9.5 Expenses; Indemnity.....................................55 SECTION 9.6 Right of Setoff.........................................56 SECTION 9.7 Applicable Law..........................................56 SECTION 9.8 Waivers; Amendment......................................56 SECTION 9.9 Interest Rate Limitation................................57 SECTION 9.10 Entire Agreement........................................57 SECTION 9.11 Severability............................................57 SECTION 9.12 Counterparts and Signature Pages........................57 SECTION 9.13 Headings................................................58 SECTION 9.14 Arbitration.............................................58 SECTION 9.15 Jurisdiction............................................60 SECTION 9.16 Waiver of Jury Trial....................................60 SECTION 9.17 Confidentiality.........................................60 -iii- LIST OF EXHIBITS AND SCHEDULES Exhibit "A" - Form of Assignment and Acceptance Exhibit "B" - Form of Borrowing Notice Exhibit "C" - Revolving Credit Note (Facility) Exhibit "D" - Administrative Details Reply Form Exhibit "E" - Matters to be Covered by the Legal Opinion of Counsel Exhibit "F" - Form of Quarterly Compliance Certificate Schedule 2.1 - Commitments of Banks Schedule 3.5 - Material Adverse Change Since September 30, 1996 Schedule 3.15 - Borrower's and Guarantor's Significant Subsidiaries -iv- CREDIT AGREEMENT BY THIS CREDIT AGREEMENT (together with any amendments or modifications, the "Agreement"), entered into as of January 16, 1997 by and among SWIFT TRANSPORTATION CO, INC., an Arizona corporation (the "Borrower"), the banks listed in Schedule 2.1 (the "Banks"), WELLS FARGO BANK, N.A., as administrative agent for the Banks (in such capacity, together with any successor agent appointed hereunder, the "Administrative Agent") and as Issuing Bank (as hereinafter defined), and ABN AMRO BANK N.V. as Co-Agent, in consideration of the mutual promises herein contained and for other valuable consideration, the parties hereto do agree as follows: RECITALS -------- A. The Borrower has asked that the Banks provide a revolving credit facility (the "Facility") in the maximum principal amount of $110,000,000.00 to Borrower for general corporate purposes, including without limitation working capital and the issuance of one or more Letters of Credit. B. The Banks are willing to extend such credits to the Borrower on the terms and subject to the conditions herein set forth. Effective as of the delivery of this Agreement, the Loan Agreement dated September 30, 1993 between the Borrower and Wells Fargo Bank, N.A. (formerly known as First Interstate Bank of Arizona, N.A.) (the "1993 Agreement") will be terminated and replaced by this Agreement. Accordingly, the Borrower, the Banks, the Administrative Agent and the Issuing Bank agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 Defined Terms. Although terms may be defined elsewhere in this Agreement, as used in this Agreement, the following terms shall have the meanings specified below: "Administrative Agent" shall have the meaning assigned to such term in the Preamble, and any successor thereto. "Administrative Details Reply Form" shall mean an Administrative Details Reply Form in the form of Exhibit "D". "Affiliate" shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified. "Agency Fee" shall have the meaning assigned to such term in Section 2.6(c). "Agreement" shall mean this Credit Agreement. "Anniversary Date" shall mean January 16 of each year. "Applicable Interest Rate" with respect to a given Borrowing shall mean the interest rate in effect for that Borrowing as determined pursuant to Section 2.8 herein. "Applicable Margin" shall mean on any date, with respect to the Loans and the Commitment Fee, the lowest applicable factor set forth below based upon Borrower's achievement of all of the conditions for that factor category:
Unused LIBOR Base Rate Commitment Letter of Borrowing Borrowing Fee Credit Fee --------- --------- ---------- ---------- Level 1: Conditions - ------------------- Funded Debt/EBITDA Ratio less than 1.0:1 32.0 basis 0 basis 10.0 basis 40.0 basis points points points points Level 2: Conditions - ------------------- Funded Debt/EBITDA Ratio less than 2.25:1 37.5 basis 0 basis 12.5 basis 45.0 basis points points points points Level 3: Conditions - ------------------- Funded Debt/EBITDA Ratio equal to or 45.0 basis 0 basis 15.0 basis 50.0 basis greater than 2.25:1 points points points points
-2- For purposes of the foregoing, the Applicable Margin shall be determined for, and as to future LIBOR Borrowings and as to existing and future Base Rate Borrowings shall be effective as of the first day of, each fiscal quarter of Borrower by reference to the above-specified financial ratios calculated as of the end of the immediately preceding fiscal quarter. In the event that Borrower fails to deliver to the Banks its Quarterly Certificate by the 65th day of a fiscal quarter, the Level 3 Applicable Margin shall be effective until such Quarterly Certificate shall have been delivered to the Banks. "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Bank and an assignee, accepted by the Administrative Agent, in the form of Exhibit "A". "Average Adjusted Daily Undrawn Balance" shall equal the average daily unused amount of the Total Commitment during the preceding calendar quarter; to the extent the result is negative, the Balance shall be deemed to be zero. For this purpose, the Letter of Credit Balance shall be deemed to be a use of the Total Commitment. "Banks," each a "Bank": See the Preamble. "Base Rate" shall mean the Prime Rate and shall change on each day that the Prime Rate changes. "Base Rate Borrowing" shall mean a Borrowing bearing interest at a rate determined by reference to the Base Rate. "Board" shall mean the Board of Governors of the Federal Reserve System of the United States. "Borrower": See the Preamble. "Borrowing" shall mean an outstanding principal amount of one of the Revolving Loans as to which a single Interest Period is in effect and with respect to which a single Applicable Interest Rate applies. "Borrowing Notice" shall mean a notice given pursuant to Section 2.3, as therein described. "Business Day" shall mean any day (other than a day which is a Saturday, Sunday or legal holiday in the State of Arizona) on which commercial banks are open for business in Phoenix, Arizona, Los Angeles, California, San Francisco, California, Detroit Michigan, and New York, New York; provided, however, that, when used in connection with a LIBOR Borrowing, the term "Business Day" shall exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Capital Lease" shall mean any lease of any property (whether real, personal or mixed) required by GAAP to be accounted for as a capital lease on the balance sheet of the lessee. -3- "Capital Lease Obligations" of any Person shall mean the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. A "Change in Control" shall be deemed to have occurred if, after the date hereof, (a) any person or group (within the meaning of Rule 13d-3, as in effect on the date hereof, promulgated by the SEC under the 1934 Act), shall acquire, directly or indirectly, beneficially or of record, shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Borrower; (b) a majority of the seats (other than vacant seats) on the board of directors become occupied by persons not members of said board on the date hereof that were neither (i) nominated by the board of directors of the Borrower, nor (ii) appointed by directors so nominated; or (c) any person or group shall otherwise directly or indirectly Control the Borrower. "Closing Date" shall mean the date of the first Credit Event hereunder. "Co-Agent" shall mean ABN AMRO BANK N.V. The Co-Agent shall have no rights, duties or responsibilities under the Loan Documents beyond those of a Bank. "Code" shall mean the Internal Revenue Code of 1986, as the same may be amended from time to time. "Commitment" shall mean, with respect to each Bank, the commitment of such Bank as to the Facility hereunder as set forth in Schedule 2.1, as such Bank's Commitment may be permanently terminated or reduced from time to time pursuant to Section 2.10 or 2.20. Each Bank's Commitment shall fully, automatically and permanently terminate on the Maturity Date. "Commitment Fee" shall have the meaning assigned to such term in Section 2.6(a). "Control" shall mean the power to direct or cause the direction of the management or policies of a person, whether through rights of ownership under voting securities, under contract or otherwise, and "Controlling" and "Controlled" shall have meanings correlative thereto. "Credit Event" shall have the meaning given such term in Article IV. "Debt Service Coverage Ratio" shall have the meaning assigned to such term in Section 6.7. "Default Rate" shall mean a rate per annum (computed as provided in Section 2.8(b)) equal to the Base Rate plus three percent (3%) and changing in conformity with each change in the Base Rate. -4- "Designated Officer" shall mean any of the Chairman of the Board, President, the Chief Financial Officer, and the Chief Accounting Officer of the Borrower. "Dollars" or "$" shall mean lawful money of the United States of America. "Equipment" shall mean tangible personalty that is not "inventory," "farm equipment" or "fixtures," as the immediately preceding terms in quotations are defined in Article Nine of the Uniform Commercial Code as in effect in and for the State of Arizona. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. "ERISA Affiliate" shall mean any trade or business (whether or not incorporated) that is a member of a group of which the Borrower is a member and which is treated as a single employer under Section 414 of the Code. "ERISA Liabilities" shall mean at any time the minimum liability with respect to Plans that would be required to be reflected at such time as a liability on the consolidated balance sheet of the Borrower under GAAP. "Eurodollar Lending Office," with respect to any Bank (or transferee) or the Administrative Agent, shall mean such office or branch as such Bank (or transferee) or the Administrative Agent has designated to the Borrower herein in Schedule "2.1" as the office or branch of such Bank (or transferee) or the Administrative Agent which shall constitute the Lending Office thereof for LIBOR Borrowings. "Event of Default" shall have the meaning assigned to such term in Article VII. "Facility": See Recital A, which Facility consists of the Revolving Loans and the Letters of Credit. "Federal Funds Rate" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of San Francisco, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Fee Letter" shall mean that letter agreement between the Borrower and the Administrative Agent with respect to the payment of the Agency Fee. "Fees" shall mean the Commitment Fees and all other fees and charges, if any, (other than interest) payable hereunder or otherwise payable in connection with the Facility. -5- "Financial Officer" of any corporation shall mean the chief financial officer and chief accounting officer of such corporation. "Funded Debt/EBITDA Ratio" shall have the meaning assigned to such term in Section 6.6. "GAAP" shall mean generally-accepted accounting principles in the United States. "Governmental Authority" shall mean any federal, state, tribal, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "Guarantee" of or by any Person shall mean any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person (the "Primary Obligor") in any manner, whether directly or indirectly, and including without limitation any obligation of such Person, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (b) to purchase property, securities or services for the purpose of assuring the owner of such Indebtedness of the payment of such Indebtedness or (c) to maintain working capital, equity capital or other financial statement condition or liquidity of the Primary Obligor so as to enable the Primary Obligor to pay such Indebtedness; provided, however, that the term Guarantee shall not include endorsements for collection or deposit, in either case in the ordinary course of business. "Guaranties" means those Continuing Guarantees of even date herewith from the Guarantor and Swift Leasing. "Guarantor" means SWIFT TRANSPORTATION CO, INC., a Nevada corporation. "Indebtedness" of a Person shall mean each of the following (without duplication) that, individually, is in excess of $100,000.00 in outstanding amount (in Dollars or the equivalent at market exchange rates) on the date such obligation is incurred: (a) obligations of that Person to any other Person for payment of borrowed money, (b) Capital Lease Obligations, (c) notes and drafts drawn or accepted by that Person payable to any other Person, whether or not representing obligations for borrowed money (but without duplication of indebtedness for borrowed money), (d) any obligation for the purchase price of property the payment of which is deferred for more than one year or evidenced by a note or equivalent instrument, (e) Guarantees of Indebtedness of third parties, and (f) a recourse or non-recourse payment obligation of any other Person that is secured by a Lien on any property of the first Person, whether or not assumed by the first person, up to the fair market value (from time to time) of such property (absent manifest evidence to the contrary, the fair market value of such property shall be the amount determined under GAAP for financial reporting purposes). "Information" shall have the meaning defined in Section 9.17 hereof. "Interest Payment Date" shall mean (a) with respect to a Base Rate Borrowing, the first day of each month in arrears, and (b) with respect to any LIBOR Borrowing, the last day of the Interest -6- Period applicable thereto and, in the case of a LIBOR Borrowing with an Interest Period of more than three months' duration (if at any time made available under this Agreement), each day that would have been an Interest Payment Date for such Borrowing had successive Interest Periods of three months' duration been applicable to such Borrowing and, in addition, (c) each of (i) the date of any refinancing or conversion of a Borrowing with or to a Borrowing of a different Type, (ii) the date of prepayment of a Borrowing and (iii) the Maturity Date. "Interest Period" shall mean (a) as to any LIBOR Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is one month, two months, three months or six months thereafter, as the Borrower may elect, or, if earlier, on the Maturity Date and (b) as to any Base Rate Borrowing, the period commencing on the date of such Borrowing and ending on the Maturity Date, the date such Borrowing is converted to a Borrowing of a different Type in accordance with Section 2.11 or the date of repayment or prepayment of such Borrowing in accordance with Section 2.5 or 2.12; provided, however, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of LIBOR Borrowings only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. "Issuing Bank" shall have the meaning assigned to such term in the Preamble, and any successor thereto. "Lending Office," with respect to any Bank or any transferee of the Loans or the Administrative Agent, shall mean such office or branch as such Bank or such transferee or the Administrative Agent has designated to the Borrower herein as the office or branch of that Bank or such transferee or the Administrative Agent from which Loans are to be made. "Letter of Credit Balance" shall mean, at any time, the sum of (a) the aggregate undrawn amount of all Letters of Credit outstanding at such time plus (b) the aggregate amount which has been drawn under Letters of Credit but for which the Issuing Bank or the Banks, as the case may be, have not been reimbursed by the Borrower. "Letter of Credit Fee" shall have the meaning defined in Section 2A.1(a) hereof. "Letter of Credit Disbursement" shall mean any payment or disbursement made by the Issuing Bank under or pursuant to a Letter of Credit. "Letters of Credit" shall mean letters of credit issued by the Issuing Bank for the account of the Borrower pursuant to Article IIA. "LIBOR Rate" shall mean, with respect to any LIBOR Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/10th of 1%) for United States -7- dollar deposits quoted by the Administrative Agent as the "Inter-Bank Market Offered Rate," with the understanding that such rate is quoted by the Administrative Agent for the purpose of calculating effective rates of interest for loans making reference thereto, on the first day of an Interest Period for delivery of funds on said date for a period of time approximately equal to the number of days in such Interest Period and in an amount approximately equal to the principal amount to which such Interest Period applies. Borrower understands and agrees that the Administrative Agent may base its quotation of the Inter-Bank Market Offered Rate upon such offers or other market indicators of the Inter-Bank Market as the Administrative Agent in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market two Business Days prior to the commencement of such Interest Period. "LIBOR Borrowing" shall mean a Borrowing bearing interest at a rate determined by reference to the LIBOR Rate. "Lien" shall mean any mortgage, pledge, security interest or similar lien. "Loans" shall mean the loans made available by the Banks to Borrower, in the form of Revolving Loans under the Facility. "Loan Documents" shall mean this Agreement, the Notes, the Fee Letter, the Guaranties and all other documents, instruments and agreements of every kind and description at any time undertaken by any Person for the benefit of the Banks in connection with the Loans. "Margin Stock" shall have the meaning given such term under Regulation U. "Material Adverse Change" means any circumstance or event which results in an adverse change in the tangible net worth of a Person in excess of five percent (5%). "Maturity Date" shall mean January 16, 2001. "Maximum Commitment" shall mean $110,000,000.00. "Multiemployer Plan" shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate (other than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Code) is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "1934 Act" shall mean the United States Securities Exchange Act of 1934, as amended. "1993 Agreement": See the Recitals. -8- "Note" and "Notes" shall mean, severally and collectively, revolving credit notes of the Borrower executed and delivered as provided in Section 2.7 as such Notes might be amended, modified, extended and restated from time to time. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA. "Permitted Lien" shall mean a Lien permitted under Section 6.1. "Person" shall mean any natural person (whether or not acting in a representative capacity), corporation, limited liability company, business trust, joint venture, association, sole proprietorship, partnership or government, or any agency or political subdivision thereof. "Plan" shall mean any pension plan (other than a Multiemployer Plan) that is (1) a qualified plan under Section 401(a) of the Code, (ii) subject to the provisions of Title IV of ERISA or Section 412 of the Code and (iii) maintained for employees of the Borrower or any ERISA Affiliate. "Potential Default" shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default. "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in Phoenix, Arizona; each change in the Prime Rate shall be effective on the date such change is publicly announced as effective. "Quarterly Certificate" shall mean that Quarterly Compliance Certificate in the form of Exhibit F. "Redeployment Loss": See Section 2.15. "Register": See Section 9.4(d). "Regulation D" shall mean Regulation D of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Regulation G" shall mean Regulation G of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Regulation T" shall mean Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Regulation U" shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. -9- "Regulation X" shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Reportable Event" shall mean any reportable event as defined in Section 4043(b) of ERISA or the regulations issued thereunder with respect to a Plan (other than a Plan maintained by an ERISA Affiliate which is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Code). "Required Banks" shall mean, at any time, Banks having Commitments representing at least 66 and 2/3% of the Total Commitment. "Revolving Loans" shall mean the revolving lines of credit loans made available by the Banks to the Borrower pursuant to Article II. Each Revolving Loan shall be composed of one or more LIBOR Borrowings and/or Base Rate Borrowings. "SEC" shall mean the United States Securities and Exchange Commission. "Significant Subsidiary" shall have the meaning given such term under SEC Regulation S-X, 17 C.F.R. ss.210.1-02 and shall apply to the Guarantor and the Borrower. "Subsidiary" of a Person shall mean any corporation, association or other business entity of which more than 50% of the total voting power of shares of stock entitled to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person, by one or more of the other Subsidiaries of that Person, or by any combination thereof and shall apply to the Guarantor and the Borrower. "Swift Leasing" means Swift Leasing Co., Inc., an Arizona corporation. "Termination" shall mean the payment in full of the principal amount of all Loans, all accrued interest thereon, all fees with respect thereto and all costs and expenses owing to the Administrative Agent and the Banks, coupled with termination of the Facility and all other obligations (if any) of all of the Banks to advance funds or extend credit to or for the benefit of Borrower pursuant to this Agreement. "Termination Date" shall mean the date of the occurrence of the last event to occur required for Termination to occur. "Total Commitment" shall mean at any time the aggregate amount of the Banks' Commitments, as in effect from time to time, which amount shall not exceed the Maximum Commitment. "Type," when used in respect of any Borrowing, shall refer to the rate by reference to which interest on such Borrowing is determined. For purposes hereof, "rate" shall mean the LIBOR Rate or the Base Rate. -10- SECTION 1.2 Terms Generally. The definitions in Section 1.1 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of this Agreement, and Exhibits and Schedules to this Agreement, unless the context shall otherwise require. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP as in effect in the United States of America from time to time; provided, however, that, for purposes of determining compliance with any covenant set forth in Article VI, such terms shall be construed in accordance with GAAP as in effect on the date of execution of this Agreement. -11- ARTICLE II THE REVOLVING CREDIT FACILITY SECTION 2.1 The Commitment. --------------- (a) Subject to the terms and conditions herein set forth, each Bank, severally and not jointly, agrees to make advances of its Revolving Loans to the Borrower, at any time and from time to time on and after the date hereof and until the earlier of (i) the Maturity Date or (ii) the termination of the Commitment of said Bank, in an aggregate principal amount at any time outstanding not to exceed such Bank's Commitment, subject, however, to the conditions that (A) at no time shall the outstanding aggregate principal amount of all Borrowings made by all Banks pursuant to their Revolving Loans, together with the Letter of Credit Balance, exceed the Maximum Commitment, and (B) at all times the outstanding aggregate principal amount of all Borrowings advanced by each Bank pursuant to its Revolving Loans shall equal the product of (y) the percentage which its Commitment represents of the Maximum Commitment times (z) the outstanding aggregate principal amount of all Borrowings advanced by all Banks pursuant to their Revolving Loans. Such Commitments may be terminated or reduced from time to time pursuant to Sections 2.10 and 2.20. Within the foregoing limits, the Borrower may borrow, pay or prepay and reborrow hereunder, on and after the date hereof and prior to the Maturity Date, subject to the terms, conditions and limitations set forth herein. (b) Each advance of the proceeds of the Revolving Loans shall constitute a single Borrowing. Each such Borrowing shall be in a principal amount which is an integral multiple of $100,000.00 and not less than $1,000,000.00 (or, if less, a principal amount equal to the remaining balance of the available Commitments). SECTION 2.2 [Intentionally left blank] SECTION 2.3 Procedures for Borrowings Under the Revolving Loans. ---------------------------------------------------- (a) Each advance under the Revolving Loans shall be a single LIBOR Borrowing or a single Base Rate Borrowing, as the Borrower may request. Borrowings of more than one Type may be outstanding at the same time; provided, however, that (i) the Borrower shall not be entitled to request any Borrowing which, if made, would result in an aggregate of more than ten separate Borrowings being outstanding collectively under the Revolving Loans at any one time and (ii) each LIBOR Borrowing shall be in a principal amount which is an integral multiple of $100,000.00 and not less than $1,000,000.00. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings. (b) In order to request a Borrowing, the Borrower shall give to the Administrative Agent written or telecopy notice (or telephone notice promptly confirmed in writing or by telecopy) in the form of Exhibit "B" (a "Borrowing Notice") not later than 9:00 a.m., Arizona time, (a) in the -12- case of a LIBOR Borrowing, three Business days before a proposed Borrowing and (b) in the case of a Base Rate Borrowing, on the day of a proposed Borrowing. Each Borrowing Notice shall be irrevocable and shall in each case specify (i) whether the Borrowing then being requested is to be a LIBOR Borrowing or a Base Rate Borrowing; (ii) the date of such Borrowing (which shall be a Business Day) and the amount thereof; (iii) if such Borrowing is to be a LIBOR Borrowing, the Interest Period with respect thereto; and (iv) if such Borrowing is to refinance all or any part of any outstanding Borrowing, the identity and amount of such Borrowing that the Borrower requests to be refinanced. If no election as to the Type of Borrowing is specified in any Borrowing Notice, then the requested Borrowing shall be a Base Rate Borrowing. If no Interest Period with respect to any LIBOR Borrowing is specified in any Borrowing Notice, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Subject to Section 2.11, if the Borrower shall not have given notice in accordance with this Section of its election to refinance a LIBOR Borrowing prior to the end of the Interest Period in effect for such Borrowing, then the Borrower (unless such Borrowing is repaid at the end of such Interest Period) shall be deemed to have given notice of an election to refinance such Borrowing with a Base Rate Borrowing. SECTION 2.4 Loans. ------ (a) Each Loan shall be made as part of a Borrowing made by the Banks ratably in accordance with their Commitments; provided, however, that the failure of any Bank to make any Loan shall not in itself relieve any other Bank of its obligation to lend hereunder (it being understood, however, that no Bank shall be responsible for the failure of any other Bank to make any Loan required to be made by such other Bank). (b) Each Bank shall make any LIBOR Borrowing by causing either at its option any domestic branch or the Eurodollar Lending Office of such Bank to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement and the Note. (c) Subject to Section 2.3, each Bank shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to the Administrative Agent in Phoenix, Arizona, not later than 11:30 a.m., Arizona time, and the Administrative Agent shall by 12:00 noon, Arizona time, credit the amounts so received to the general deposit account of the Borrower with the Administrative Agent (or such other account as the Borrower may designate) or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Banks. Loans shall be made by the Banks pro rata in accordance with Section 2.16. Unless the Administrative Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Administrative Agent such Bank's portion of any future Borrowing, the Administrative Agent may assume that such Bank has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with this paragraph (c) and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have made such portion available to the Administrative Agent, such Bank and the Borrower severally agree to repay -13- to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of the Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Bank's Loan as part of such Borrowing for purposes of this Agreement. (d) In the event a Bank fails to make its portion of a Borrowing, Borrower may request in writing to the Administrative Agent that such portion be advanced by the remaining Banks. So long as no Event of Default shall have occurred and be continuing and so long as the aggregate principal amount of each Bank's Revolving Loans after giving effect to the additional Loan would not exceed its Commitment, the remaining Banks shall make Loans in the amount of such portion pro rata in accordance with Section 2.16. SECTION 2.5 Refinancings. Subject to Section 2.11, the Borrower may refinance all or any part of any Borrowing with a Borrowing of the same or a different Type made pursuant to Section 2.3, and at any time may combine all Base Rate Borrowings into a single Borrowing, subject to the conditions and limitations set forth herein and elsewhere in this Agreement. Any Borrowing or part thereof so refinanced or combined shall be deemed to have been repaid in accordance with Section 2.7 with the proceeds of a new Borrowing hereunder, and the proceeds of the new Borrowing (except to the extent, if any, they exceed the principal amount of the Borrowing(s) being refinanced) shall not be disbursed to the Borrower pursuant to Section 2.4(c). SECTION 2.6 Fees. ----- (a) The Borrower agrees to pay to each Bank, through the Administrative Agent, (i) quarterly in arrears for each calendar quarter ending each March 31, June 30, September 30 and December 31, on a date not later than five Business Days after such calendar quarter has ended, commencing December 31, 1996 and (ii) on the date on which the respective Commitment of such Bank shall be terminated as provided herein, for the period from the end of the preceding calendar quarter to the date of such termination, a commitment fee (each a "Commitment Fee") on a prorated basis at a rate per annum equal to the Applicable Margin as to the Commitment Fee on the Average Adjusted Daily Undrawn Balance during the preceding calendar quarter (or shorter period (1) commencing with the date hereof or (2) ending with the Maturity Date or any other date on which the respective Commitment of such Bank shall be terminated). All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. The Commitment Fees due to each Bank shall commence to accrue on the date hereof and shall cease to accrue on the earlier of the Maturity Date and the termination of the respective Commitment of Bank as provided herein. (b) All Fees shall be paid to each Bank on the dates due, in Dollars in immediately available funds to the Administrative Agent for distribution, if and or appropriate, among the Banks. -14- Once paid, any Fees paid to any Bank in advance shall only be refundable by a Bank if such Bank fails to make any Loan in accordance with its Commitment. (c) The Borrower agrees to pay to the Administrative Agent, for its own account, any fee provided for in the Fee Letter (the "Agency Fee") at the times provided therein. (d) Of the Letter Credit Fee paid to the Issuing Bank, an amount equal to the LIBOR Borrowing Applicable Margin shall be paid to each Bank, through the Administrative Agent on a prorated basis. SECTION 2.7 Notes; Repayment of Revolving Loans. The Revolving Loan made by each Bank shall be evidenced by a separate Note duly completed and executed on behalf of the Borrower, dated the date of said Bank's Commitment, in the form of Exhibit C hereto, payable to the order of such Bank in a principal amount equal to said Bank's Commitment. Each Note shall bear interest from the date thereof on the outstanding principal balance thereof as set forth in Section 2.8. Each Bank may (and is hereby authorized by the Borrower, at said Bank's discretion, to) endorse on a schedule attached to the Note held by such Bank (or on a continuation of such schedule attached to each such Note and made a part thereof), or otherwise to record in such Bank's internal records, an appropriate notation evidencing the date and amount of each Borrowing under the Revolving Loan of such Bank, each payment or prepayment of principal of any such Borrowing and the other information provided for on such schedule; provided, however, that the failure of any Bank to make such a notation or any error therein shall not in any manner affect the obligation of the Borrower to repay each Borrowing under the Revolving Loans in accordance with the terms of the Notes. SECTION 2.8 Interest on Revolving Loans. ---------------------------- (a) Subject to the provisions of Sections 2.9 and 2.11, each LIBOR Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to, the LIBOR Rate for the Interest Period in effect for such LIBOR Borrowing plus the Applicable Margin. Interest on each LIBOR Borrowing shall be payable on each applicable Interest Payment Date. The LIBOR Rate for each Interest Period shall be determined by the Administrative Agent, and such determination shall be made in accordance with the provisions of this Agreement. The Administrative Agent shall promptly advise the Borrower and each Bank of such determination. (b) Subject to the provisions of Sections 2.9 and 2.11, each Base Rate Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days, as the case may be) at a rate per annum equal to the Base Rate plus the Applicable Margin. Interest on each Base Rate Borrowing shall be payable on each applicable Interest Payment Date. The Base Rate shall be determined by the Administrative Agent and such determination shall be made in accordance with the provisions of this Agreement. The Administrative Agent shall promptly advise the Borrower and each Bank of such determination. -15- SECTION 2.9 Default Interest. If the Borrower shall default in the payment of the principal of or interest on any Revolving Loan or any other amount becoming due hereunder, whether by scheduled maturity, notice of prepayment, acceleration or otherwise, the Borrower shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount up to (but not including the date of actual payment (after as well as before judgment) at the Default Rate. SECTION 2.10 Termination and Reduction of Commitments. ----------------------------------------- (a) The Commitment shall be automatically terminated on the Maturity Date. The Borrower, however, has the right to request, upon at least sixty (60) days written notice to each Bank prior to each Anniversary Date, the extension of the Maturity Date for an additional one year period; provided, however, that approval of any such extension shall be at the sole and absolute discretion of the Banks and any such approval shall require the affirmative consent of all Banks. (b) Upon at least three Business Days' prior irrevocable written or telecopy notice to the Administrative Agent, Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce, each such Commitment; provided, however, that each partial reduction of the Maximum Commitment shall be in an integral multiple of $100,000.00 and in a minimum principal amount of $1,000,000.00; and provided further, that the Borrower shall not be permitted to terminate or reduce the Maximum Commitment if, as a result respectively, the aggregate principal amount of the Revolving Loans together with the Letter of Credit Balance outstanding hereunder would exceed such reduced amount of the Maximum Commitment. SECTION 2.11 Conversion and Continuation of Borrowings. The Borrower shall have the right at any time upon prior irrevocable notice to the Administrative Agent not later than 10:00 a.m., Arizona time, (i) on the day of conversion, to convert any LIBOR Borrowing into a Base Rate Borrowing, (ii) three Business Days prior to conversion or continuation, to convert any Base Rate Borrowing into a LIBOR Borrowing or to continue any LIBOR Borrowing as a LIBOR Borrowing for an additional Interest Period, and (iii) three Business Days prior to conversion, to convert the Interest Period with respect to any LIBOR Borrowing to another permissible Interest Period, subject in each case to the following: (a) if less than all the outstanding principal amount of any Borrowing shall be converted or continued, the aggregate principal amount of such Borrowing converted or continued shall be an integral multiple of $100,000.00 and not less than $1,000,000.00; (b) each conversion shall be effected by the Banks by applying the proceeds of the new Borrowing resulting from such conversion to the Borrowing (or portion thereof) being converted; accrued interest on a Borrowing (or portion thereof) being converted shall be paid by the Borrower at the time of conversion; (c) any LIBOR Borrowing may be converted only at the end of the Interest Period applicable thereto; -16- (d) any portion of a Borrowing maturing or required to be repaid in less than one month may not be converted into or continued as a LIBOR Borrowing; (e) any portion of a LIBOR Borrowing which cannot be continued as a LIBOR Borrowing by reason of clauses (c) and (d) above shall be automatically converted at the end of the Interest Period in effect for such Borrowing into a Base Rate Borrowing; and (f) each conversion or continuation shall be made pro rata among the Banks in accordance with the respective principal amounts of the converted or continued Borrowings. Each notice pursuant to this Section shall be irrevocable and shall refer to this Agreement and specify (i) the identity and amount of the Borrowing that the Borrower requests be converted or continued, (ii) whether such Borrowing is to be converted to or continued as a LIBOR Borrowing or a Base Rate Borrowing, (iii) if such notice requests a conversion, the date of such conversion (which shall be a Business Day) and (iv) if such Borrowing is to be converted to or continued as a LIBOR Borrowing, the Interest Period with respect thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a LIBOR Borrowing, the Borrower shall be deemed to have selected an Interest Period of one month's duration. The Administrative Agent shall advise the other Banks of any notice given pursuant to this Section and of each Bank's portion of any converted or continued Borrowing. If the Borrower shall not have given notice in accordance with this Section to continue any LIBOR Borrowing into a subsequent Interest Period (and shall not otherwise have given notice in accordance with this Section to convert such Borrowing), such Borrowing shall, at the end of the Interest Period applicable thereto (unless repaid pursuant to the terms hereof), automatically be continued as a Base Rate Borrowing. SECTION 2.12 Prepayment. ----------- (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, upon written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) to the Administrative Agent, such notice to be three Business Days with respect to a LIBOR Borrowing and one Business Day with respect to a Base Rate Borrowing; provided, however, that each partial prepayment shall be in an amount which is an integral multiple of $100,000.00 and not less than $1,000,000.00. (b) On the date of any termination or reduction of the Maximum Commitment pursuant to Section 2.10, the Borrower shall pay or prepay an amount of the Revolving Loan such that the sum of the aggregate principal amount of such Loan outstanding together with the Letter of Credit Balance will not exceed the respective Commitment after giving effect to such termination or reduction. (c) Each notice of prepayment shall specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid, shall be irrevocable and shall commit the Borrower to prepay such Borrowing (or portion thereof) by the amount stated therein on the date stated therein. All prepayments under this Section shall be subject to Section 2.15 but otherwise -17- without premium or penalty. All prepayments under this Section shall be accompanied by a payment of accrued interest on the amount being prepaid to the date of payment. SECTION 2.13 Reserve Requirements; Change in Circumstances. ---------------------------------------------- (a) If any Bank shall have determined that the adoption after the date hereof of any law, rule, regulation or guideline regarding capital adequacy, or any change after the date hereof in any of the foregoing or in the interpretation or administration of any of the foregoing by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or any Lending Office of such Bank) or any Bank's holding company with any request or directive promulgated after the date hereof regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Bank's or on the capital of such Bank's holding company, if any, as a consequence of this Agreement, the issuance of a Letter of Credit or the Revolving Loan made by such Bank to a level below that which such Bank or such Bank's holding company could have achieved but for such adoption, change or compliance (taking into consideration such Bank's policies and the policies of such Bank's holding company with respect to capital adequacy) by an amount deemed by such Bank in good faith to be material, then from time to time the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank or such Bank's holding company for any such reduction suffered, except that Borrower shall not be obligated to compensate any Bank for any costs associated with an increase in its administrative burden resulting from any such adoption, change or compliance. (b) Notwithstanding any other provision herein, if after the date of this Agreement any change in applicable law or regulation (either by way of changes in existing laws or regulations or the introductions of new laws or regulations) or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof (whether or not having the force of law) shall change the basis of taxation of payments to any Bank of the principal of or interest on any LIBOR Borrowing made by such Bank, Fees or other amounts payable hereunder (other than changes in respect of taxes imposed on the net income of such Bank), or shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended by such Bank, including without limitation any reserve requirement that may be applicable to "eurocurrency liabilities" under and as defined in Regulation D, or shall impose on such Bank or the London interbank market any other condition affecting this Agreement or any LIBOR Borrowing made by such Bank, and the result of any of the foregoing shall be to increase the cost to such Bank of making or maintaining any LIBOR Borrowing or to reduce the amount of any sum received or receivable by such Bank hereunder or under the Note (in respect of LIBOR Borrowing only), whether of principal, interest or otherwise, by an amount deemed by such Bank in good faith to be material, then, the Borrower will pay to such Bank upon demand such additional amount or amounts as will compensate such Bank for such additional costs incurred or reduction suffered. -18- (c) A certificate of a Bank setting forth such amount or amounts as shall be necessary to compensate such Bank or its holding company as specified in paragraph (a) or (b) above, as the case may be, and setting forth in reasonable detail the manner in which such amount or amounts shall have been determined shall be delivered to the Borrower and shall be made on a reasonable basis. The Borrower shall pay each Bank the amount shown as due on any such certificate delivered by it within 10 days after its receipt of the same. (d) Failure on the part of any Bank to demand compensation for any increased costs or reduction in amounts received or receivable with respect to any period shall not constitute a waiver of said Bank's right to demand compensation with respect to such period or any other period. The protection of this Section shall be available to any Bank regardless of any possible contention of the invalidity or inapplicability of the law, rule, regulation, guideline or other change or condition which shall have occurred or been imposed, provided that if such Bank is compensated for such increased costs or reduction by any Governmental Authority or third party in the event such invalidity or inapplicability is finally determined, then such Bank shall return to Borrower the respective compensation paid by Borrower, up to the lesser of such amount as is received by such Bank or such amount as was paid by Borrower. (e) Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section shall survive Termination, provided that Borrower shall have no further obligation to the Banks under this Section unless a certificate setting forth the amount of such obligation shall have been delivered by the Banks pursuant to paragraph (c) above within ninety (90) calendar days after the Termination Date. (f) Each Bank or the Administrative Agent on behalf of the Banks shall give notification to the Borrower of any event or prospective event which will give rise to the operation of paragraphs (a) or (b) of this Section, such notification to be sent within thirty (30) days of the date of the public promulgation of the effective date of any such law, rule, regulation, guidelines or change therein. (g) Notwithstanding any other provisions herein to the contrary, if after receipt of any notice from a Bank that the Borrower is obligated to pay additional amounts to the Bank pursuant to any change arising under Section 2.13(a) or (b), Borrower shall have the option to prepay or convert any Borrowing adversely affected by any change described in Paragraph (a) or (b) of this section within seven (7) days of receipt of any such notice from a Bank, without the obligation to pay to such Bank with respect to such prepayment or conversion any amount or amounts otherwise payable to such Bank by Borrower pursuant to this Section 2.13 SECTION 2.14 Change in Legality. ------------------- (a) Notwithstanding any other provision herein, if any change in any law or regulation or in the interpretation thereof by any Governmental Authority charged with the administration or interpretation thereof shall make it unlawful for any Bank to make or maintain any LIBOR Borrowing or to give effect to its obligations as contemplated hereby with respect to any -19- LIBOR Borrowing, then by written notice to the Borrower setting forth in reasonable detail the relevant circumstances and the effect thereof, such Bank may: (i) declare that LIBOR Borrowings will not thereafter be made by such Bank hereunder, whereupon any request by the Borrower for a LIBOR Borrowing shall be deemed a request for a Base Rate Borrowing unless such declaration shall be subsequently withdrawn; and (ii) require that all outstanding LIBOR Borrowings made by it be converted to Base Rate Borrowings, in which event all such LIBOR Borrowings shall be automatically converted to Base Rate Borrowings as of the effective date of such notice as provided in paragraph (b) below. In the event any Bank shall exercise its rights under (i) or (ii) above, all payments and prepayments of principal which would otherwise have been applied to repay the LIBOR Borrowings that would have been made by such Bank or the converted LIBOR Borrowings of such Bank shall instead be applied to repay the Base Rate Borrowings made by such Bank in lieu of, or resulting from the conversion of, such LIBOR Borrowings. (b) For purposes of this Section, a notice to the Borrower by any Bank shall be effective as to each LIBOR Borrowing, if lawful, on the last day of the Interest Period currently applicable to such LIBOR Borrowing; in all other cases such notice shall be effective on the date of receipt by the Borrower. (c) Each Bank shall use its best efforts to give prompt notification to the Borrower of any event or prospective event which will give rise to the operation of paragraph (a) of this Section. SECTION 2.15 Redeployment Loss. The Borrower shall pay to each Bank on demand against any Redeployment Loss (defined below) arising as a consequence of any payment, prepayment, failure to borrow or convert to a LIBOR Borrowing after giving notice of its intent to so borrow or convert pursuant to Sections 2.3(b) or 2.11, or conversion of a LIBOR Borrowing required by any other provision of this Agreement or otherwise made or deemed made on a date other than the last day of the Interest Period applicable thereto. "Redeployment Loss" shall mean, in each circumstance, the amount which is the sum of the discounted monthly differences for each month from the month of prepayment through the month in which such LIBOR Borrowing matures, calculated as follows for each such month: (a) Determine the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the LIBOR Borrowing applicable thereto. (b) Subtract from the amount determined in (a) above the amount of interest which would have accrued for the same month on the amount prepaid for -20- the remaining term of such LIBOR Borrowing at the LIBOR Rate in effect on the date of prepayment for new loans in a principal amount equal to the amount prepaid made for such term. (c) If the result obtained in (b) for any month is greater than zero, discount that difference by the LIBOR Rate used in (b) above. A certificate of any Bank setting forth in reasonable detail any amount or amounts which Bank is entitled to receive pursuant to this Section and setting forth in reasonable detail the manner in which such amounts shall have been determined shall be delivered to the Borrower and shall be reasonably made. Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section shall survive Termination provided that Borrower shall have no further obligation to any Bank under this Section unless a certificate setting forth the amount of such obligation shall have been delivered by such Bank pursuant to the preceding sentence within ninety (90) calendar days after the Termination Date. SECTION 2.16 Pro Rata Treatment. Except as required under Section 2.14 or permitted by Section 2.20, each Borrowing, each payment or prepayment of principal of any Borrowing, each payment of interest on the Loans, each payment of the Fees, each reduction of the Commitments and each refinancing of any Borrowing with a Borrowing of any Type, shall be allocated pro rata among the Banks in accordance with their respective Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their outstanding Loans). Each Bank agrees that in computing such Bank's portion of any Borrowing to be made hereunder, the Administrative Agent may, in its discretion, round each Bank's percentage of such Borrowing to the next higher or lower whole dollar amount. SECTION 2.17 Sharing of Setoffs. Each Bank agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim against the Borrower, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Bank under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain payment (voluntary or involuntary) in respect of any Loan or Loans as a result of which the unpaid principal portion of the Loans of such Bank shall be proportionately less than the unpaid principal portion of the Loans of any other Bank, it shall be deemed simultaneously to have purchased from such other Bank at face value, and shall promptly pay to such other Bank the purchase price for, a participation in the Loans of such other Bank, so that the aggregate unpaid principal amount of the Loans and participations in the Loans held by each Bank shall be in the same proportion to the aggregate unpaid principal amount of all Loans then outstanding as the principal amount of its Loans prior to such exercise of banker's lien, setoff or counterclaim or other event was to the principal amount of all Loans outstanding prior to such exercise of banker's lien, setoff or counterclaim or other event; provided, however, that, if any such purchase or purchases or adjustments shall be made pursuant to this Section and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest. The Borrower expressly consents to the foregoing arrangements and agrees that -21- any Bank holding a participation in a Loan deemed to have been so purchased may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing by the Borrower to such Bank by reason thereof as fully as if such Bank had made a Loan directly to the Borrower in the amount of such participation. SECTION 2.18 Payments. --------- (a) The Borrower shall make each payment (including without limitation principal of or interest on any Borrowing or any Fees or other amounts) hereunder and under any other Loan Document no later than 12:00 noon, Arizona time, on the date when due in Dollars to the Administrative Agent at its offices at 201 Third Street, San Francisco, California 94103, Attention: Agency Department, or at such other location as it may direct the Borrower in writing to use, in immediately available funds. Any payment received by the Administrative Agent after 12:00 noon, Arizona time, shall be deemed to have been received by Administrative Agent on the next Business Day. (b) Whenever any payment (including without limitation principal of or interest on any Borrowing or any Fees or other amounts) hereunder or under any other Loan Document shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Fees, if applicable. SECTION 2.19 Taxes. ------ (a) All payments by the Borrower under this Agreement shall be made without setoff or counterclaim and in such amounts as may be necessary in order that all such payments after deduction or withholding for or on account of any present or future taxes, levies, imposts, duties, withholdings or other charges of whatsoever nature and all liabilities with respect thereto, other than any taxes on or measured by the gross or net income of a Bank pursuant to (i) the income and/or franchise tax laws of the jurisdictions in which such Bank is incorporated or organized or in which the principal office of such Bank or the branch that is a party to this Agreement of that Bank is located, and (ii) the income and/or franchise tax laws of the jurisdictions in which the Lending Office or the Eurodollar Lending Office of that Bank are then located (all such nonexcluded taxes, levies, imposts, duties, withholdings and liabilities being hereinafter referred to as "Taxes"), shall not be less than the amounts otherwise specified to be paid by the Borrower to or for the account of the Administrative Agent or Bank (or any transferee or assignee (each, a "Transferee")) under this Agreement. Upon request of the Borrower in writing, each Bank shall designate a different Lending Office or Eurodollar Lending Office, as the case may be, if such designation will avoid the imposition of Taxes and if such designation will not, in the sole judgment of such Bank, be otherwise disadvantageous to such Bank. With respect to each deduction or withholding for or on account of any Taxes of the Administrative Agent or any Bank (or Transferee), Borrower shall promptly (and in any event not later than 45 days thereafter) furnish to such Administrative Agent or Bank (or Transferee) a receipt evidencing payment thereof. -22- (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as "Stamp Taxes"). Each Bank that is organized outside the United States represents and warrants that as of the Closing Date, it is not aware of any Stamp Tax imposed by the jurisdiction in which it is incorporated that applies to this Agreement or any payment made to such Bank hereunder. (c) The Borrower will indemnify each Bank (or Transferee) and the Administrative Agent for the full amount of Taxes and Stamp Taxes (including without limitation any Taxes or Stamp Taxes imposed by any jurisdiction on amounts payable under this Section) paid by such Bank (or Transferee) or the Administrative Agent, as the case may be, and any liability (including without limitation penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Stamp Taxes were correctly or legally asserted by the relevant taxing authority or other Governmental Authority. Such indemnification shall be made within 30 days after the date any Bank (or Transferee) or the Administrative Agent, as the case may be, makes written demand therefor. If a Bank, as the result of any Tax with respect to which the Borrower is required to make a payment pursuant to this Section shall realize a tax credit or refund in its country or other jurisdiction of incorporation or organization or in the jurisdiction in which its principal office or Lending Office or Eurodollar Lending Office is then located, which tax credit or refund would not have been realized but for the Borrower's payment of such Tax, such Bank shall pay to the Borrower an amount equal to such tax credit or refund (to the extent of amounts that have been paid by the Borrower under this Section with respect to such credit or refund) net of all out-of-pocket expenses of such Bank; provided that the Borrower, upon the request of the Bank, agrees to return such credit or refund (plus penalties, interest or other charges) to such Bank in the event such Bank is required to repay such credit or refund to the relevant taxing authority. Any amount required to be calculated pursuant to this Section shall be calculated in good faith by the Bank (or Transferee) or the Administrative Agent, and such calculation shall be conclusive and binding upon the parties hereto. (d) Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section shall survive Termination, provided that Borrower shall have no further obligation to the Banks under this Section unless a certificate setting forth the amount of such obligation shall have been delivered by the Banks to the Borrower within ninety (90) calendar days after the Termination Date. (e) Each Bank (or Transferee) that is organized outside the United States (i) on or before the date it becomes a party to this Agreement and (ii) with respect to each Lending Office or Eurodollar Lending Office located outside the United States of such Bank (or Transferee), on or before the date such office or branch becomes a Lending Office or Eurodollar Lending Office, shall deliver to the Borrower and the Administrative Agent such certificates, documents or other evidence, as required by the Code or Treasury Regulations issued pursuant thereto, including Internal Revenue Service Form 1001 or Form 4224, properly completed and duly executed by such Bank (or Transferee) establishing that payments received hereunder are (i) not subject to withholding under the Code because such payment is effectively connected with the conduct by such Bank (or -23- Transferee) of a trade or business in the United States or (ii) totally exempt from United States Federal withholding tax under a provision of an applicable tax treaty. In addition, each such Bank (or Transferee) shall, if legally able to do so, thereafter deliver such certificates, documents or other evidence from time to time establishing that payments received hereunder are not subject to such withholding upon receipt of a written request therefor from the Borrower or the Administrative Agent. Unless the Borrower and the Administrative Agent have received forms or other documents satisfactory to them indicating that payments hereunder or under the Notes are not subject to United States Federal withholding tax, the Borrower or the Administrative Agent shall withhold such taxes from such payments at the applicable statutory rate. (f) The Borrower shall not be required to pay any additional amounts to any Bank (or Transferee) or the Administrative Agent in respect to United States Federal withholding tax pursuant to paragraph (a) above if the obligation to pay such additional amounts would not have arisen but for a failure by such Bank (or Transferee) or the Administrative Agent to deliver the certificates, documents or other evidence specified in the preceding paragraph (e) unless such failure is attributable to (i) a change in applicable law, regulation or official interpretation thereof or (ii) an amendment or modification to or a revocation of any applicable tax treaty or a change in official position regarding the application or interpretation thereof, in each case on or after the date such Bank (or Transferee) or the Administrative Agent becomes a party to this Agreement (or, if applicable, on or after the date a Lending Office or Eurodollar Lending Office of such Bank (or Transferee) or Administrative Agent became a Lending Office or Eurodollar Lending Office hereunder). (g) Nothing contained in this Section shall require any Bank (or Transferee) or the Administrative Agent to make available any of its tax returns (or any other information relating to its taxes) which it deems to be confidential. (h) Each Bank or the Administrative Agent on behalf of the Banks shall give notification to the Borrower of any event or prospective event which will give rise to the operation of paragraphs (a), (b) or (c) of this Section, such notification to be sent within thirty (30) days of the date of the public promulgation of the effective date of any such Taxes or Stamp Taxes. SECTION 2.20 Termination or Assignment of Commitments Under Certain ------------------------------------------------------ Circumstances. - -------------- (a) If any Bank (or Transferee) or the Administrative Agent claims any additional amounts payable pursuant to Section 2.13 or Section 2.19 or exercises its rights under Section 2.14, it shall (consistent with legal and regulatory restrictions) (i) promptly notify the Borrower (through the Administrative Agent) of the circumstances giving rise to such additional amounts or the exercise of such rights and (ii) file any certificate or document requested by the Borrower or change the jurisdiction of its applicable Lending Office or take any other action if the making of such a filing or change or the taking of such action would avoid the need for or reduce the amount of any such additional amounts which may thereafter accrue or avoid the circumstances giving rise to such exercise and would not, in the sole determination of such Bank (or Transferee), be otherwise disadvantageous to such Bank (or Transferee). -24- (b) In the event that any Bank shall have delivered a notice or certificate pursuant to Section 2.13 or 2.14, or the Borrower shall be required to make additional payments to any Bank under Section 2.19, the Borrower shall have the right, at its option and own expense, upon notice to such Bank and the Administrative Agent, (i) in the case of Sections 2.13, 2.14 or 2.19 only, to terminate the Commitment of such Bank or (ii) in all cases described in this paragraph, to require such Bank to transfer and assign without recourse (in accordance with and subject to the restrictions contained in Section 9.4) all its interests, rights and obligations under this Agreement to another financial institution reasonably acceptable to the Administrative Agent which shall assume such obligations; provided that (i) no such termination or assignment shall conflict with any law, rule or regulation or order of any Governmental Authority and (ii) the Borrower or the assignee, as the case may be, shall pay to the affected Bank in immediately available funds on the date of such termination or assignment the principal of and interest accrued to the date of payment on the Loans made by it hereunder and all other amounts accrued for its account or owed to it hereunder, including without limitation amounts payable and owed to it pursuant to Sections 2.13, 2.14 and 2.19, if any. (c) Each Bank represents and warrants to the Borrower that as of the date hereof it is not aware of any claims available to it under Section 2.13, 2.14 or 2.19 or any circumstances which it has determined will enable it to make any such claims. -25- ARTICLE IIA LETTERS OF CREDIT SECTION 2A.1 Standby Letters of Credit. -------------------------- (a) Provided that the Borrower has satisfied the conditions precedent contained in Section 2A.1(b) hereof, the Issuing Bank agrees, from time to time, to issue and/or renew Letters of Credit on behalf of the Borrower so long as (i) upon such issuance or renewal, an issuance fee (the "Letter of Credit Fee") is paid by Borrower to the Issuing Bank in an amount equal to the Applicable Margin as to the Letter of Credit Fee times the amount of each Letter of Credit, and (ii) the outstanding aggregate principal amount of all Borrowings made by all Banks pursuant to their Revolving Credit Loan, together with the Letter of Credit Balance, after giving effect to such Letter of Credit, will not exceed the Maximum Commitment. (b) The obligation of the Issuing Bank to issue and/or renew any Letters of Credit on behalf of the Borrower shall be subject to the following conditions precedent on the date of issuance or renewal of each such Letter of Credit: (i) The Borrower shall execute and deliver to the Issuing Bank an application for letter of credit, specifying the amount of the requested letter of credit, the requested term thereof, which term may not exceed one year, and the beneficiary thereof; and (ii) No Event of Default shall exist and no event or condition shall exist that after notice or lapse of time, or both would constitute an Event of Default. SECTION 2A.2 Notice. The Issuing Bank shall give the Administrative Agent, which shall in turn give to each Bank, prompt written or telecopy advice of any notice received from the Borrower pursuant to this paragraph. SECTION 2A.3 Letter of Credit Participations. -------------------------------- (a) By the issuance of a Letter of Credit and without any further action on the part of the Issuing Bank or the Banks in respect thereof, the Issuing Bank hereby grants to each Bank, and each Bank hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Bank's Commitment percentage, based upon the Commitments in effect at the time of any drawing thereunder (or, if the Commitments shall have been terminated pursuant to Article VII, the Commitments in effect immediately prior to such termination), of the face amount of such Letter of Credit, effective upon the issuance of such Letter of Credit; provided, however, that no Bank shall be required to acquire participations in Letters of Credit that would result in its pro rata percentage, based upon its Commitment, of the Letter of Credit Balance exceeding its Commitment. In consideration and in furtherance of the foregoing, each Bank hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, in accordance with -26- Section 2A.4 below, such Bank's pro rata percentage of each unreimbursed Letter of Credit Disbursement made by the Issuing Bank. (b) Each Bank acknowledges and agrees that its acquisition of participations pursuant to paragraph (a) above in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including without limitation the occurrence and continuance of any Event of Default hereunder, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever; provided that nothing herein shall constitute a waiver of any rights a Bank may have by reason of the gross negligence or wilful misconduct of the Issuing Bank. SECTION 2A.4 Disbursement and Reimbursement. ------------------------------- (a) Promptly after it shall have ascertained that any draft and any accompanying documents presented under a Letter of Credit appear to be in strict conformity with the terms and conditions of such Letter of Credit, the Issuing Bank shall give telephone and telecopy notice to the Borrower (separately to Mr. Riley and to Mr. Lyding) and the Administrative Agent of the receipt and amount of such draft and the date on which payment thereon will be made. If the Administrative Agent shall not have received from the Borrower the payment required pursuant to paragraph (b) below by 10:00 a.m., Arizona time, one Business Day after the date on which payment of a draft presented under any Letter of Credit has been made, the Administrative Agent shall promptly so notify the Issuing Bank and each Bank, specifying in the notice to each Bank such Bank's pro rata percentage, based upon the Commitments, of such Letter of Credit Disbursement. Each Bank shall pay to the Administrative Agent, not later than 1:00 p.m., Arizona time, on such date, such Bank's percentage of such Letter of Credit Disbursement, which the Administrative Agent shall promptly pay to the Issuing Bank. The Administrative Agent will promptly remit to each Bank such Bank's percentage of any amounts subsequently received by the Administrative Agent from the Borrower in respect of such Letter of Credit Disbursement; provided that (i) amounts so received for the account of any Bank prior to payment by such Bank of amounts required to be paid by it hereunder in respect of any Letter of Credit Disbursement and (ii) amounts representing interest on any Letter of Credit Disbursement for the period prior to the payment by such Bank of such amounts shall in each case be remitted to the Issuing Bank. (b) If the Issuing Bank shall pay any draft presented under a Letter of Credit, the Borrower shall pay to the Issuing Bank or to the administrative Agent for the account of the Issuing Bank or, if the Administrative Agent shall have received the payments provided in paragraph (a) above with respect to such drawing, for the accounts of the Banks, an amount equal to the amount of such draft before 10:00 a.m., Arizona time, on the Business Day immediately following the date of payment of such draft, together with interest on such amount at a rate per annum equal to the interest rate in effect for Base Rate Borrowings from (and including) the date of payment of such draft to (but excluding) the date of such payment by the Borrower. The obligation of the Borrower to pay the amounts referred to above in this paragraph (b) shall be absolute, unconditional and irrevocable and shall be satisfied strictly in accordance with their terms irrespective of: -27- (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, setoff, defense or other right which the Borrower or any other Person may at any time have against the beneficiary under any Letter of Credit, the Administrative Agent, any Issuing Bank or any Bank (other than the defense of payment in accordance with the terms of this Agreement or a defense based on the gross negligence or wilful misconduct of the Issuing Bank) or any other Person in connection with this Agreement or any other transaction; (iii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect; provided that payment by the Issuing Bank under such Letter of Credit against presentation of such draft or document shall not have constituted gross negligence or wilful misconduct; (iv) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document which does not comply in any immaterial respect with the terms of such Letter of Credit; provided that such payment shall not have constituted gross negligence or wilful misconduct; or (v) any other circumstance or event whatsoever, whether or not similar to any of the foregoing; provided that such other circumstance or event shall not have been the result of gross negligence or wilful misconduct of the Issuing Bank. It is understood that in making any payment under a Letter of Credit (1) the Issuing Bank's exclusive reliance on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including without limitation, reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be forged, fraudulent or invalid in any respect, if such document on its face appears to be in order, and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever, and (2) any noncompliance in any immaterial respect of the documents presented under a Letter of Credit with the terms thereof shall, in either case, not be deemed wilful misconduct or gross negligence of the Issuing Bank. -28- ARTICLE III REPRESENTATIONS AND WARRANTIES The Borrower and the Guarantor each hereby represents and warrants to the Administrative Agent and the Banks as follows: SECTION 3.1 Organization; Corporate Powers; Etc. (a) The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (b) the Borrower has the corporate power and authority to own its property and assets and to carry on its business as now conducted and is qualified to do business in every jurisdiction where such qualification is required except where the failure to so qualify would not result in a material adverse effect on the business, assets, operations or condition (financial or otherwise) of the Borrower; and (c) the Borrower has the corporate power to execute, deliver and perform this Agreement and the other Loan Documents and to borrow hereunder. SECTION 3.2 Authorization; Etc. The execution, delivery and performance by the Borrower of this Agreement, the Borrowings hereunder, and the issuance, execution and delivery of the Notes: (a) have been duly authorized by all requisite corporate action; (b) will not violate (i) any provision of law, any order of any court, or any rule, regulation or order of any other agency of government, (ii) the Articles of Incorporation or By-laws of the Borrower or (iii) any provision of any material indenture, agreement or other instrument to which the Borrower is a party, or by which the Borrower or any of its properties or assets are or may be bound; (c) will not be in conflict with, result in a breach of or constitute (alone, with notice, with lapse of time, or with any combination of these factors) a default under any indenture, agreement or other instrument referred to in (b)(iii) above; and (d) will not result in the creation or imposition of any Lien upon any property or assets of the Borrower that is not a Permitted Lien. Except for filings which may be required under the 1934 Act, no registration with or consent or approval of, or other action by, any Governmental Authority is required in connection with the execution, delivery and performance of this Agreement, the execution and delivery of the Notes or the Borrowings hereunder. SECTION 3.3 Enforceability. (a) This Agreement constitutes, and each other Loan Document when duly executed and delivered by the Borrower will constitute, the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and other laws of general applicability relating to or affecting creditors' rights from time to time in effect and to general principles of equity (regardless of whether such enforcement is considered in a proceeding at law or in equity). (b) The Guaranties constitute the legal, valid and binding obligations of the Guarantor and Swift Leasing, respectively. SECTION 3.4 Financial Condition and Information. ------------------------------------ -29- (a) The Borrower has heretofore furnished to the Banks copies of (i) the consolidated balance sheets of the Borrower as of September 30, 1996, and the related consolidated statements of income and shareholder's equity of the Borrower for the year ended December 31, 1995, and for the fiscal period ended December 31, 1995, including without limitation the related notes, audited by and including the opinion the independent public accountants of the Borrower, and (ii) the Annual Report on Form 10-K for the fiscal year ended December 31, 1995 of the Borrower. Such financial statements fairly state the consolidated financial condition of the Borrower as of the respective dates thereof and the consolidated results of the operations and changes in financial position of the Borrower for the periods covered thereby. All such financial statements, including related schedules and notes thereto, have been prepared in accordance with GAAP. (b) Borrower (both before and after giving effect to the transactions contemplated hereby) is solvent, has assets having a fair value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured, and has, and will have, access to adequate capital for the conduct of its business and the ability to pay its debts from time to time incurred in connection therewith as such debts mature. SECTION 3.5 No Material Adverse Change. There has been no Material Adverse Change in the business, operations, assets or condition (financial or otherwise) of the Guarantor, the Borrower and its Significant Subsidiaries, taken as a whole (except as disclosed in the financial statements referred to in Section 3.4 or as otherwise disclosed on Schedule 3.5 attached hereto). SECTION 3.6 Litigation. There are no actions, suits or proceedings at law or in equity or by or before any governmental instrumentality or other agency now pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any property or rights of the Borrower which would be reasonably likely in the aggregate to (i) materially impair the ability of the Borrower to perform its obligations under this Agreement or the Notes or materially impair the ability of the Borrower to carry on business substantially as now being conducted or (ii) result in any material adverse change in the business, assets, operations, or condition (financial or otherwise) of the Borrower. SECTION 3.7 Federal Reserve Regulations. ---------------------------- (a) The Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. (b) No part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, (i) to purchase or carry Margin Stock or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund indebtedness originally incurred for such purpose, or (ii) for any purpose which entails a violation of, or which is inconsistent with, the provisions of the Regulations of the Board, including Regulation G, U or X. -30- SECTION 3.8 Investment Company Act. The Borrower is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 3.9 Public Utility Holding Company Act. The Borrower is not 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. SECTION 3.10 Tax Returns. As of the filing date of the Borrower's Form 10-K, Form 10-Q or Form 8-K most recently filed with the SEC, the Borrower has duly filed or caused to be filed all federal, state and local tax returns which are required to have been filed and has paid or caused to be paid all material taxes required to be paid by it, except taxes the validity of which is being contested in good faith by appropriate proceedings and with respect to which the Borrower has set aside on its books such reserves as are required by GAAP. SECTION 3.11 ERISA. As of the filing date of the Borrower's Form 10-K, Form 10-Q or Form 8-K most recently filed with the SEC, the Borrower had no material undisclosed ERISA Liabilities under any Plans. SECTION 3.12 Title to Properties: Possession. The Borrower has good and indefeasible title to, or valid leasehold interests in, all its material properties and assets, subject only to encumbrances, adverse claims and defects in title which do not involve any risk of loss that is material to the Borrower and the Subsidiaries taken as a whole. All such assets and properties are free and clear of all Liens other than those permitted by Section 6.1. The Borrower has all licenses and rights necessary to enable it to use all material technology used by it in its operations. SECTION 3.13 Use of Proceeds. The Borrower will use the proceeds of any borrowing hereunder solely for the purposes set forth in the Recitals to this Agreement. SECTION 3.14 Environmental and Safety Matters. As of the filing date of the Borrower's Form 10-K, Form 10-Q or Form 8-K most recently filed with the SEC, the Borrower and the Subsidiaries had no material undisclosed environmental liabilities. SECTION 3.15 Subsidiaries. All Significant Subsidiaries are correctly identified on Schedule "3.15" hereto. -31- ARTICLE IV CONDITIONS TO CREDIT EVENTS The obligations of the Banks to make each and every Loan, and to make each and every advance of the proceeds thereof (each of the foregoing events being called a "Credit Event") are subject to the prior or contemporaneous satisfaction of the following conditions: SECTION 4.1 Credit Events. On the date of each Credit Event, including the date of each refinancing of a Borrowing as contemplated by Section 2.5: (a) The Administrative Agent shall have received in respect of such advance or refinancing a Borrowing Notice as required by Section 2.3. (b) The representations and warranties set forth in Article III hereof shall have been true and correct in all material respects both (i) on the date hereof and (ii) as of such date, except to the extent such representations and warranties expressly relate and are limited to a different date. (c) At the time of and immediately after such advance or refinancing no Event of Default or Potential Default shall have occurred and be continuing. Each advance or refinancing hereunder shall be deemed to constitute a representation and warranty by the Borrower on the date of such Credit Event as to the satisfaction of the conditions specified in paragraphs (b) and (c) of this Section 4.1. SECTION 4.2 First Credit Event. On the Closing Date: ------------------- (a) Each Bank shall have received a duly executed copy of this Agreement. (b) The Administrative Agent shall have received the Fee Letter and payment of all expenses owed to the Banks pursuant to Section 9.5(a) and of all Fees that are then due and payable. (c) Each Bank shall have received a duly executed Revolving Note complying with the provisions of Section 2.7. (d) The Administrative Agent shall have received a favorable written opinion of legal counsel to the Borrower, the Guarantor and Swift Leasing, dated the Closing Date and addressed to the Administrative Agent and the Banks, to the effect set forth in Exhibit "E" hereto. -32- (e) All legal matters incident to this Agreement and the first Credit Event hereunder shall be reasonably satisfactory to the Banks and to the legal counsel for the Administrative Agent. (f) The Administrative Agent shall have received as to each of the Borrower, the Guarantor and Swift Leasing (i) a copy of its Certificate or Articles of Incorporation, including all amendments thereto, certified as of a recent date by the Secretary of State of the state of its organization, and a certificate from such Secretary of State as of a recent date, as to its good standing; (ii) a certificate of its Secretary or Assistant Secretary dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of its By-Laws as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in the next clause of this sentence, (B) that attached thereto is a true and complete copy of resolutions duly adopted by its Board of Directors, authorizing the execution, delivery and performance of the Loan Documents and the Credit Events hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that its Certificate or Articles of Incorporation have not been amended since the date of the last amendment thereto shown on its certificate of good standing furnished pursuant to clause (i) above, and (D) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on its behalf; and (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to (ii) above. (g) The Administrative Agent shall have received a certificate, dated the Closing Date and signed on behalf of the Borrower by a Financial Officer of the Borrower, confirming compliance with the conditions precedent set forth in paragraphs (b) and (c) of Section 4.1. (h) The Administrative Agent shall have received all amounts due and payable hereunder or under the other Loan Documents on or prior to the Closing Date. (i) The Administrative Agent shall have received evidence satisfactory to it that the 1993 Agreement has been or will be terminated and all loans and other amounts and letters of credit outstanding thereunder have been or will be paid in full or assumed hereunder, on or prior to the Closing Date. (j) The Administrative Agent shall have received duly executed copies of the Guaranties. -33- ARTICLE V AFFIRMATIVE COVENANTS The Borrower and the Guarantor each covenants and agrees that, at all times prior to Termination, unless the Required Banks shall otherwise consent in writing, it will: SECTION 5.1 Corporate Existence. Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its corporate existence, material rights, licenses, permits and franchises material to the conduct of its business; comply in all material respects with all applicable laws, rules, regulations, and orders (except that force majeure events will excuse noncompliance so long as noncompliance would not materially impair the creditworthiness of the Borrower) whether now in effect or hereafter enacted where the failure to so comply would be reasonably likely to have a material adverse effect on the business, assets, operations or condition (financial or otherwise) of the Borrower; and, at all times maintain and preserve all material property required for the conduct of its business as presently or hereafter conducted. SECTION 5.2 Insurance. Maintain adequate insurance by financially sound and reputable insurers of all properties of a character usually insured by companies engaged in the same or a similar business operating on a similar economic scale in the same vicinity against loss or damage resulting from fire or other risks insured against by extended coverage and of the kind customarily insured against by such companies, and maintain in full force and effect public liability insurance against claims for personal injury, death or property damage occurring upon, in, about or in connection with the use of any properties occupied or controlled by it in such amounts as shall be customary among companies engaged in the same or similar businesses and similarly situated and maintain such other insurance as may be required by law; provided, however, that nothing in this Section 5.2 shall preclude the Borrower from being self-insured to the extent customary with companies in the same or similar business. SECTION 5.3 Taxes. Pay and discharge promptly any taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its material property (real or personal), before the same shall become delinquent; provided, however, that neither the Borrower nor any of the Subsidiaries shall be required to pay and discharge or to cause to be paid and discharged any such obligation, tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Borrower or such Subsidiary, as appropriate, shall set aside on its books such reserves as are required by GAAP with respect thereto. SECTION 5.4 Financial Statements; Reports, etc. ----------------------------------- (a) In the case of the Guarantor, cause to be furnished to each Bank (as Information subject to the applicable requirements of Section 9.17 herein, if any): -34- (i) within 120 days after the end of each fiscal year, consolidated (and if requested by the Banks consolidating), (A) a balance sheet, (B) a statement of income and (C) a statement of cash flow, each showing the financial condition of the Guarantor and its Subsidiaries as of the close of such fiscal year and the results of operations during such fiscal year, all the foregoing financial statements to be prepared in accordance with GAAP, audited by an accounting firm of nationally recognized standing with an unqualified opinion from such firm; (ii) within five days of filing with the SEC, but in no event later than 65 days after the end of each fiscal quarter of each fiscal year of the Guarantor, Guarantor's Form 10-Q for such fiscal quarter together with consolidating (if applicable and if requested by the Banks) and fully consolidated company-prepared financial statements including, without limitation, consolidating (if applicable and if requested by the Banks and fully consolidated balance sheets as of the end of that fiscal quarter, and consolidating (if applicable and if requested by the Banks) and fully consolidated statements of income for the fiscal quarter; (iii) concurrently with each delivery of the statements referred to in (i) and (ii) above, the Quarterly Certificate certifying that to the best of its, his or her knowledge no Event of Default or Potential Default has occurred, or, if such an Event of Default or Potential Default has occurred, specifying the nature and extent thereof and accompanied by a statement of a Financial Officer of the Guarantor specifying any corrective action taken or proposed to be taken with respect thereto, and setting forth in reasonable detail in the form of Exhibit F the calculation of financial measures and ratios required to demonstrate compliance with the covenants, conditions and agreements contained herein, all determined as of the end of the period covered by said statements; (iv) within 45 days of their being filed, in addition to those delivered by Guarantor to Bank pursuant to (ii) above, copies of all reports (other than preliminary proxy statements) filed by the Guarantor with the SEC (or any Governmental Authority succeeding to any or all of the functions of the SEC) under the requirements of the 1934 Act, or any successor statute; and (v) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Guarantor as the Administrative Agent may reasonably request. (b) In the case of the Borrower, furnish to each Bank (as Information subject to the applicable requirements of Section 9.17 herein, if any): (i) within ninety (90) days after the end of each fiscal year, (i) a consolidated balance sheet, (ii) a consolidated statement of income and (iii) a consolidated statement of cash flow, each showing the financial condition of the -35- Borrower as of the close of such fiscal year and the results of operations during such fiscal year; (ii) concurrently with each delivery of the statement above, a statement by a Financial Officer certifying that to the best of its, his or her knowledge no Event of Default or Potential Default has occurred, or, if such an Event of Default or Potential Default has occurred, specifying the nature and extent thereof and accompanied by a statement of a Financial Officer of the Borrower specifying any corrective action taken or proposed to be taken with respect thereto; and (iii) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Borrower as the Administrative Agent may reasonably request. SECTION 5.5 Litigation and Other Notices. Give the Administrative Agent prompt written or telecopy notice of the following: (a) any Event of Default or Potential Default and the steps, if any, proposed to be taken by the Borrower with respect thereto; (b) the filing or commencement of any action, suit or formal proceeding at law or in equity or by or before any court or hearing officer of any Governmental Authority, or any other event or condition, which has resulted in, or which is reasonably likely to result in, a material adverse change in the business, operations or condition (financial or otherwise) of the Borrower and the Subsidiaries taken as a whole and which has not been reported in the Borrower's most recent SEC filings on Form 10-K, 10-Q or 8-K. SECTION 5.6 Maintaining Records: Access to Premises and Records. Maintain all financial records in accordance with GAAP, and upon reasonable notice permit representatives of the Administrative Agent and each Bank to have access to such financial records and the premises of the Borrower at reasonable times and to make such excerpts from such records as such representatives may deem necessary, provided that each person obtaining information shall hold all confidential information obtained in accordance with the restrictions set forth in Section 9.17. SECTION 5.7 Use of Proceeds. Use the proceeds of the Loans solely for the purposes set forth in Recitals hereto. SECTION 5.8 Unencumbered Assets. Cause Guarantor to maintain at all times assets (as so reported on its consolidated financial statements) consisting of cash, net accounts receivables, real estate at net book value (which may consist of no more than $50,000,000.00) and rolling stock (such as trucks and trailers) at net book value which are free and clear of any and all Liens, in an amount of not less than 120% of the sum of its accounts payable (as so described on its consolidated financial statements) and its total outstanding unsecured Indebtedness, including without limitation both funded and unfunded but committed Indebtedness. -36- ARTICLE VI NEGATIVE COVENANTS The Borrower and the Guarantor each covenants and agrees that, at all times prior to Termination, it will not, and will not permit any Subsidiary to: SECTION 6.1 [Intentionally left blank]. SECTION 6.2 Mergers, Consolidations, Sales of Assets. Dissolve or liquidate, or merge or consolidate with or into any corporation or entity, or turn over the management or operation of its property, assets or businesses to any other person, firm or corporation, or make any material change in its ownership, management structure or management personnel. Nothing herein shall preclude Guarantor or Borrower from acquiring other companies in the same, or a related type, of business currently engaged in by Borrower, its Affiliates or its Subsidiaries, including but not limited to transportation, leasing, truck repair, logistics, consulting, brokerage, warehousing, packaging, material handling and related services, which other companies may be merged into Guarantor or Borrower or into one of Guarantor's or Borrower's subsidiaries nor shall it preclude any of Borrower's subsidiaries from merging into any such acquired company. SECTION 6.3 Accounting Change. Change the times of commencement or termination of its fiscal year or other accounting periods, or change its methods of accounting unless any such change conforms to GAAP and does not result in a violation of Section 6.6 or Section 6.7. SECTION 6.4 Guarantee. Guarantee, directly or indirectly, or otherwise become contingently liable or obligated for, any indebtedness or obligations of any other person or entity except for the endorsement in the ordinary course of business of negotiable instruments for deposit or collection. SECTION 6.5 ERISA Liabilities. Create or suffer to exist ERISA Liabilities in an aggregate amount for all Plans in excess of $10,000,000.00; provided, however, that this Section shall not apply to normal contributions made to its Plans in the normal course of its business which contributions are not delinquent. SECTION 6.6 Funded Debt/EBITDA Ratio. Permit Guarantor's Funded Debt/EBITDA Ratio to exceed 2.75 to 1 at the end of any fiscal quarter, where "Funded Debt/EBITDA Ratio" is defined as the ratio of Funded Debt to EBITDA. "Funded Debt" is defined as the sum of Borrower's outstanding current portions of its long-term debt, noncurrent portions of its long-term debt, letters of credit, surety bonds, Guarantees and Capital Lease Obligations. "EBITDA" is defined as the sum of Borrower's net earnings, interest expense, tax expenses, depreciation expense and amortization of intangibles expense for the prior four quarters, all as reported by Guarantor in its financial statements. With respect to Funded Debt, if a new equity offering occurs and funds from the equity offering are used to repay the current portion of long-term debt ("CPLTD"), the CPLTD from the prior relevant period shall be restated to reduce CPLTD by the like amount that was repaid by the proceeds from the equity offering. -37- SECTION 6.7 Debt Service Coverage Ratio. Permit Guarantor's Debt Service Coverage Ratio to be less than 1.25 to 1 at the end of any fiscal quarter, calculated on a rolling four (4) quarter basis, where "Debt Service Coverage Ratio" is defined as the ratio of (A) the sum of its net earnings, depreciation expense, amortization of intangibles expenses, interest expense, operating lease expense and net change in deferred taxes, to (B) the sum of current portions of its long-term debt and Capital Lease Obligations plus interest expense and operating lease expense in the prior period, all as reported by Guarantor in its financial statements. With respect to the denominator, if a new equity offering occurs and funds from the equity offering are used to repay the current portion of long-term debt ("CPLTD"), the CPLTD from the prior relevant period shall be restated to reduce CPLTD by the like amount that was repaid by the proceeds from the equity offering. -38- ARTICLE VII EVENTS OF DEFAULT SECTION 7.1 Events of Default. In case of the happening of any of the following events (herein called "Events of Default"): (a) default shall be made in the payment of any principal of any Loan, when and as the same shall become due and payable, whether at the due date thereof or by acceleration thereof or otherwise which shall not have been cured after receipt of written notice thereof from the Administrative Agent to the Borrower and the expiration of a period of three Business Days thereafter; (b) default shall be made in the payment of any interest on any Loan or any Fee, indemnification amount or any other amount due from the Borrower under the Loan Documents (other than an amount referred to in (a) above), when and as the same shall become due and payable which shall not have been cured after receipt of written notice thereof from the Administrative Agent to the Borrower and the expiration of a period of three Business Days thereafter; (c) any material representation or warranty made or deemed made by the Borrower in connection with the Loan Documents or in any report, certificate or other instrument furnished by the Borrower pursuant to the Loan Documents or with the Borrowings hereunder shall prove to have been false or misleading in any material respect when made or delivered or when deemed made in accordance with the terms hereof; provided that if any such breach of representation or warranty has been subsequently remedied (such that if made or given as of the date of remedy it is no longer false or misleading in any material respect) and such breach has caused no material adverse effect on the rights or interests of any Bank under this Agreement, such breach shall no longer constitute a Potential Default or Event of Default hereunder. (d) the Borrower, the Guarantor or any Subsidiary shall fail to make when due any payment (of whatever amount) on Indebtedness aggregating in excess of $7,500,000.00 (whether due by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness, or any failure by the Borrower or the Guarantor to perform any covenant or agreement on its part to be performed under any agreement or instrument evidencing or security relating to any Indebtedness in excess of $7,500,000.00 may result in the acceleration of the maturity of a portion of such Indebtedness; (e) the Borrower or the Guarantor or Swift Leasing shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 -39- of the United States Code or any other Federal, state or foreign bankruptcy, insolvency or similar law, (ii) consent to the institution of, or fail to controvert in a timely and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for such corporation or for a substantial part of its property, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due, or (vii) take corporate action for the purpose of effecting any of the foregoing; (f) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Borrower or the Guarantor or Swift Leasing or of a substantial part of the property of any of them under Title 11 of the United States Code or any other Federal, state or foreign bankruptcy, insolvency or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar official for the Borrower or the Guarantor or Swift Leasing or for a substantial part of the property of any of them, or (iii) the winding-up or liquidation of the Borrower or the Guarantor or Swift Leasing; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (g) either of (A) the occurrence of any one or more Reportable Events or (B) a failure to make a "required payment" under the provisions of Section 412(n)(1) of the Code shall have occurred with respect to any Plan or Plans and the occurrence of either (A) or (B) above shall have resulted in any of (1) liability of the Borrower to the PBGC or to one or more Plans in an aggregate amount exceeding $10,000,000.00 (excluding normal contributions made to the Plans in the normal course of its business, which contributions are not delinquent), (2) the termination of the respective Plan or Plans by the PBGC, (3) the appointment by the appropriate United States District Court of a trustee to administer such Plan or Plans, or (4) for the imposition of a Lien in favor of such Plan or Plans; (h) any material provision of the Loan Documents ceases to be valid and binding on or enforceable against the Borrower or the Guarantor; (i) there shall have occurred a Change in Control; (j) the liquidation, termination or dissolution of Borrower or any such endorser or Guarantor or Swift Leasing; or (k) the occurrence of any Material Adverse Change in the financial condition of Borrower, any endorser of the Notes or the Guarantor or Swift Leasing. -40- SECTION 7.2 Remedies. Upon the occurrence of any Event of Default, and at any time thereafter during the continuance of such event, the Administrative Agent, shall, at the sole option of the Required Banks and if so directed by the Required Banks, by written or telecopy notice to the Borrower, take either or both of the following actions at the same or different times: (i) terminate forthwith any or all Commitments of the Banks, (ii) declare any or all of the Loans to be forthwith due and payable, whereupon the principal of such Loans, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under the Notes, shall become forthwith due and payable together with interest thereon as provided in Section 2.9, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any Note to the contrary notwithstanding, and (iii) require that the Borrower deposit cash with the Administrative Agent in an amount equal to the Letter of Credit Balance as collateral (under its sole dominion and control) for the repayment of drawings under outstanding Letters of Credit; provided, however, that in the case of an Event of Default specified in paragraph (g) or (h) above involving the Borrower, without notice to the Borrower or any other act by the Administrative Agent or the Banks, the Commitments shall automatically terminate and all Loans together with all such interest, Fees and other amounts, shall become immediately due and payable, all without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any Note to the contrary notwithstanding. SECTION 7.3 Occurrence and Declaration of an Event of Default. If the Administrative Agent obtains actual knowledge of the occurrence of an Event of Default, the Administrative Agent shall, within three (3) Business Days of obtaining of such knowledge, give written notice of such occurrence to each of the Banks. In addition, if any Bank obtains actual knowledge of the occurrence of an Event of Default, that Bank shall, within three (3) Business Days of obtaining such knowledge, give written notice of such occurrence to the Administrative Agent and the Administrative Agent shall give written notice of such occurrence to each of the Banks. -41- ARTICLE VIII THE ADMINISTRATIVE AGENT SECTION 8.1 Appointment. In order to expedite the transactions contemplated by this Agreement, Wells Fargo Bank, N.A. is hereby appointed to act as Administrative Agent on behalf of the Banks. Each of the Banks, and each subsequent holder of any Note by its acceptance thereof, hereby irrevocably authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are specifically delegated to the Administrative Agent by the terms and provisions hereof and of the other Loan Documents, together with such actions and powers as are reasonably incidental thereto. The Administrative Agent is hereby expressly authorized by the Banks, without hereby limiting any implied authority, (a) to receive on behalf of the Banks all payments of principal of and interest on the Loans and all other amounts due to the Banks hereunder, and promptly to distribute to each Bank its proper share of each payment so received; (b) to give notice on behalf of each of the Banks to the Borrower of any Default or Event of Default specified in this Agreement of which the Administrative Agent has actual knowledge acquired in connection with its agency hereunder; and (c) to distribute to each Bank copies of all notices, financial statements and other materials delivered by the Borrower pursuant to this Agreement as received by the Administrative Agent. SECTION 8.2 Liability. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall be liable as such for any action taken or omitted by any of them except for its or his own gross negligence or wilful misconduct, or be responsible for any statement, warranty or representation herein or the contents of any document delivered in connection herewith, or be required to ascertain or to make any inquiry concerning the performance or observance by the Borrower of any of the terms, conditions, covenants or agreements contained in any Loan Document. The Administrative Agent shall not be responsible to the Banks or the holders of the Notes for the due execution, genuineness, validity, enforceability or effectiveness of this Agreement, the Notes or any other Loan Documents or other instruments or agreements. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof until it shall have received from the payee of such Note notice, given as provided herein, of the transfer thereof. The Administrative Agent shall in all cases be fully protected in acting, or refraining from acting, in accordance with written instructions signed by either the Required Banks (if the consent of only the Required Banks is required by the provisions of this Agreement with respect to an issue) or all the Banks (if the consent of all the Banks is required by the provisions of this Agreement with respect to an issue), as applicable, and, except as otherwise specifically provided herein, such instructions and any action or inaction pursuant thereto shall be binding on all the Banks and each subsequent holder of any Note. The Administrative Agent shall, in the absence of knowledge to the contrary, be entitled to rely on any instrument or document believed by it in good faith to be genuine and correct and to have been signed or sent by the proper Person or Persons. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall have any responsibility to the Borrower on account of the failure of or delay in performance or breach by any Bank of any of its obligations hereunder or to any Bank on account of the failure of or delay in performance or breach by any other Bank or the Borrower of any of their respective obligations hereunder or under any other Loan Document or -42- in connection herewith or therewith. The Administrative Agent may execute any and all duties hereunder by or through agents or employees and shall be entitled to rely upon the advice of legal counsel selected by it with respect to all matters arising hereunder and shall not be liable for any action taken or suffered in good faith by it in accordance with the advice of such counsel. SECTION 8.3 Action by Administrative Agent. ------------------------------- (a) The Banks hereby acknowledge that the Administrative Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement unless it shall be requested in writing to do so by the Required Banks. (b) Except as hereinafter provided, the Administrative Agent may, with the consent of the Required Banks, (i) agree to the modification of or waiver of any of the terms of any of the Loan Documents, or (ii) consent to any act or omission by the Borrower, or (iii) exercise any rights which the Administrative Agent may have with respect to the Loans, the Notes or any of the other Loan Documents. Unless in each case consented to in writing by all the Banks, the Administrative Agent, however, shall not (i) agree to the modification or waiver of any of the terms of any of the Loan Documents, or (ii) consent to any act or omission by the Borrower, or (iii) exercise any rights which the Administrative Agent may have with respect to the Loans, the Notes, or any of the other Loan Documents, if any such agreement, modification, waiver, consent or exercise would: (i) change or modify the interest rate and repayment provisions set forth in the Loan Documents; (ii) increase the Maximum Commitment; (iii) extend the Maturity Date; (iv) postpone any date for payment or forgive the payment of principal of, or interest on, the Loans or the payment of any other sum due under the Loan Documents; (v) change or modify the Fees, other than the Agency Fee, or the payment of such Fees; (vi) release the Guarantor; or (vii) amend or modify the provisions of Section 2.13, 2.14, 2.16, 2.19, 9.5, 9.6, 9.8(b) or this Section 8.3(b), the definition of "Required Banks," or Section 6.6 or Section 6.7. (c) Upon receipt of a Borrowing Notice from the Borrower, the Administrative Agent shall provide to each Bank a telecopy notice of such Borrowing (or telephone notice promptly -43- confirmed by telecopy) (i) in the case of a LIBOR Borrowing, not later than 9:30 a.m., Arizona time, three Business Days before a proposed LIBOR Borrowing, and (b) in the case of a Base Rate Borrowing, not later than 9:30 a.m., Arizona time, on the Business Day of a proposed Base Rate Borrowing. (d) The Administrative Agent agrees to distribute to each Bank by 4:00 p.m., Arizona time, its pro rata share of each payment or prepayment of principal of any Loan, each payment of interest on the Loans, and each payment of the Commitment Fee and Facility Fee that is received from the Borrower prior to 12:00 noon, Arizona time. Any such payments received after 12:00 noon, Arizona time, on any Business Day shall be made available to the Banks on or before 4:00 p.m., Arizona time, on the immediately following Business Day. (e) The Administrative Agent agrees to distribute promptly to each Bank a copy of all Information received from the Borrower and all amendments and modifications of the Loan Documents. (f) The Administrative Agent agrees to distribute or cause to be distributed no later than thirty (30) days after the Closing Date to each Bank a copy of the Loan Documents. SECTION 8.4 Resignation. The Administrative Agent may not, without the consent of the Borrower, resign at any time. Upon receiving such consent, and subject to giving 30 days' prior written notice to the Banks, the Administrative Agent may resign as Administrative Agent hereunder. Upon any such resignation, the Required Banks, with the consent of the Borrower (which consent shall not be unreasonably withheld), shall have the right to appoint from the Banks a successor. If no successor shall have been so appointed by the Required Banks and shall have accepted such appointment within 30 days after the Administrative Agent gives notice of its resignation, then the Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent which shall be a bank with an office in Phoenix, Arizona, having a combined capital and surplus of at least $50,000,000.00 or an Affiliate of any such bank. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor bank, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent and such retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 9.5 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as an Administrative Agent. SECTION 8.5 Agent as Bank. With respect to the Loans made by it hereunder and the Notes issued to it, the Administrative Agent in its individual capacity and not as an Administrative Agent shall have the same rights and powers as any other Bank and may exercise the same as though it were not the Administrative Agent, and the Administrative Agent and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent. -44- SECTION 8.6 Ownership and Possession of Loan Documents. Each Bank shall own an undivided interest in the Borrowings and the Loan Documents equal to its pro rata Commitment from time to time. The Administrative Agent shall hold the Loan Documents in its possession, as agent, at its office at 100 West Washington, Phoenix, Arizona 85003, or at such other location as the Administrative Agent shall designate in writing to the Banks, for the pro rata benefit of itself as one of the Banks and each of the other Banks; provided, however, that the Administrative Agent shall deliver to each Bank an original promissory note executed by the Borrower and evidencing such Bank's Commitment. The Administrative Agent shall keep and maintain complete and accurate files and records of all matters pertaining to the Borrowings. Upon reasonable prior notice to the Administrative Agent by a Bank, the files and records shall be made available to such Bank and its respective representatives and agents for inspection and copying during normal business hours. SECTION 8.7 Indemnification. Each Bank agrees (i) to reimburse the Administrative Agent, on demand, in the amount of its pro rata share (based on its Commitment hereunder) of any expenses incurred for the benefit of the Banks by the Administrative Agent, including counsel fees and compensation of agents and employees paid for services rendered on behalf of the Banks, which shall not have been reimbursed by the Borrower and (ii) to indemnify and hold harmless the Administrative Agent and any of its directors, officers, employees or agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against it in its capacity as the Administrative Agent or any of them in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted by it or any of them under this Agreement or any other Loan Document, to the extent the same shall not have been reimbursed by the Borrower; provided that no Person shall be liable to the Administrative Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or wilful misconduct of the Administrative Agent or any of its directors, officers, employees or agents. SECTION 8.8 Independent Credit Analysis. Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any other Loan Document, any related agreement or any document furnished hereunder or thereunder. SECTION 8.9 Process for Obtaining Approval of the Banks. -------------------------------------------- (a) With respect to obtaining the consent, approval, or determination of all of the Banks or of the Required Banks, the Administrative Agent or any Bank may request that the Banks make a determination pursuant to this Agreement. In the case of a request by any such Bank, the request shall be made through the Administrative Agent and the Administrative Agent shall request -45- a determination of the Banks in accordance with this Section 8.9. All communications from the Administrative Agent to the Banks requesting the Banks' determination, consent, approval, disapproval and/or joinder shall: (i) Be given in the form of a written notice to each of the Banks; (ii) Be accompanied by a description of the matter or thing as to which such determination, approval, consent, disapproval or joinder is requested, and shall advise each of the Banks where such matter or thing may be inspected, or shall otherwise adequately describe the matter or issue to be resolved; (iii) Include, to the extent not previously provided to the Banks, all written materials (to the extent necessary to make an informed decision) and a description of all oral information (to the extent necessary to make an informed decision) provided to the Administrative Agent in respect of the matter or issue to be resolved; and (iv) Include such other information and recommendations as the Administrative Agent may reasonably deem appropriate. (b) Subject to Paragraph (c) of this Section 8.9, the Banks shall reply within seven (7) calendar days after such written notice is given by the Administrative Agent; provided, however, that if the Administrative Agent notifies the Banks that, pursuant to the Loan Documents, the matter with respect to which such consent, approval, disapproval or joinder is sought requires that the Administrative Agent respond within a certain time period and/or provides that if a response is not given within a certain time period such approval or consent shall be deemed given, the Banks shall reply by the earlier of (i) two (2) Business Days before such time period expires (as designated by the Administrative Agent) or (ii) three (3) Business Days after such written notice is given by the Administrative Agent. (c) With respect to each Bank, unless a Bank shall give written notice to the Administrative Agent that such Bank does consent to or approve any matter as to which such Bank's consent or approval is sought within the applicable time frame, such Bank shall be deemed to have disapproved of and not consented to such recommendation or determination. SECTION 8.10 Communications to the Banks. All communications from the Borrower to the Banks relating to the Loan Documents and the Borrowings shall be sent by or through the Administrative Agent. SECTION 8.11 Relationship with the Borrower. Consistent with the agency established hereunder, the Banks acknowledge and agree that the Administrative Agent, in accordance with its respective rights and duties under the Loan Documents, shall have the sole and exclusive authority to bind the Administrative Agent and the Banks with respect to matters relating to the Loan Documents. To the extent that any matter has been approved by all of the Banks or by the Required -46- Banks in accordance with the provisions of this Agreement, the Administrative Agent is authorized to execute such documents and instruments as the Administrative Agent may deem prudent to evidence and confirm such approval. SECTION 8.12 Payments to or by the Banks. ---------------------------- (a) The Banks shall be entitled to interest on the amount of Borrowings held by each Bank for the period of time such Borrowings are outstanding at the rates set forth in this Agreement, to the extent that such payments are actually received from the Borrower. If permitted pursuant to Section 2.9 of this Agreement, the Administrative Agent shall charge and collect interest at the Default Rate unless the Required Banks otherwise agree. (b) Other Fees to the extent applicable shall be paid to the Banks in accordance with Section 2.6. (c) Amounts paid by the Borrower pursuant to any provision of the Loan Documents providing for payment, compensation, or reimbursement to one or more, but not necessarily all, of the Banks, shall be paid to the Bank or Banks incurring such expenses or otherwise entitled to compensation under any of those provisions, with each Bank entitled to receive any payment, reimbursement, or compensation pursuant to any of such Sections or other provisions being obligated to provide to the Administrative Agent and the Borrower a certificate setting forth in reasonable detail the basis for the amount of any request for compensation, payment or reimbursement under any of those Sections or other provisions. (d) Regular monthly payments of interest and any other payments to the Administrative Agent on behalf of the Banks (other than payments to be applied to the outstanding principal amount of Borrowings, which payments will be applied as provided in Section 8.13), received by the Administrative Agent shall be made available to the Banks entitled thereto in accordance with Section 8.3(d). (e) If and to the extent any Bank shall not have made any payment required pursuant to Section 2.4, such Bank agrees to pay the Administrative Agent, forthwith on demand, such amount, together with interest thereon at the Federal Funds Rate, for each day from such date until the date such amount is paid to the Administrative Agent as provided in Section 2.4(c). The failure of any Bank to make available to the Administrative Agent any amount required pursuant to Section 2.4 shall not relieve any other Bank of its obligation hereunder to make available as aforesaid such payment, as specified above, nor shall any Bank be relieved of its obligations to make such payments for any other reason. (f) Funds shall be transferred to the Banks in accordance with the funds transfer instructions given to the Administrative Agent and by the Administrative Agent to the Banks from time to time on or before the times specified in Section 8.3(d). -47- (g) If and to the extent the Administrative Agent shall not have made any payment required pursuant to Section 8.3(d) to a Bank, the Administrative Agent agrees to pay such Bank forthwith on demand, such amount, together with interest thereon at the Federal Funds Rate, for each day from such date until the date such amount is paid pursuant to Section 8.3(d). SECTION 8.13 Application of Payments. All monies collected or received by the Administrative Agent on account of the Loans or in respect of security for the Loans, directly or indirectly, shall be applied in the following order of priority, except to the extent otherwise required by Article II of this Agreement, in which case the provisions of Article II shall control: (a) To the payment of all costs and expenses due to the Administrative Agent and/or the Banks pursuant to the Loan Documents, including costs incurred in collection of such monies, including, without limitation, the payment to the Banks of the amounts described in Section 8.12(d); (b) To outstanding interest on the Loans, which amount shall be allocated between the Banks in accordance with the actual principal amount of Loans held by each Bank throughout the period in question as determined by the Administrative Agent on a daily basis; provided, however, that if amounts received by the Administrative Agent are not sufficient to pay in full all such outstanding interest on the Loans, such amount shall be allocated among the Banks pro rata in accordance with the amount of Loans held by each Bank during the period in question; and (c) To the payment of principal on the Loans in accordance with the principal amount of Loans held by each Bank. SECTION 8.14 Defaulting Banks. ----------------- (a) If for any reason any of the Banks shall fail or refuse to abide by its obligations under the Loan Documents (each a "Defaulting Bank"), then, in addition to the rights and remedies that may be available to the Administrative Agent and the other Banks at law and in equity, but subject to the notice and cure periods hereinafter set forth, such Defaulting Bank's right to participate in the administration of the Loans and the Loan Documents, including without limitation, any rights to consent to or direct any action or inaction of the Administrative Agent, all of the Banks, or to be taken into account in the calculation of the Required Banks (other than the right to vote with respect to a decision as to its Loans to extend the Maturity Date thereof, or to amend the interest rate and repayment provisions thereof or to modify such Bank's Commitment), shall be suspended during the pendency of such failure or refusal. A Bank shall be deemed to be a Defaulting Bank if (i) such Bank shall have failed to pay to the Administrative Agent any amount due pursuant to this Agreement within five (5) Business Days after written notice by the Administrative Agent to such Bank stating such payment is due from such Bank to the Administrative Agent; (ii) such Bank shall have failed to perform any of its other obligations under this Agreement or the Loan Documents in any material respect. and such failure shall not have been cured within 30 days after written notice by the Administrative Agent to such Bank of such failure, or if such failure cannot reasonably be cured within such 30 day period, within such longer period of time as may be necessary to complete such -48- cure, so long as such Bank commences such cure within such 30-day period and thereafter diligently pursues such cure to completion within not more than 120 days after such written notice; or (iii) such Bank shall institute or be subject to any bankruptcy, insolvency, receivership, conservatorship, reorganization, liquidation or similar proceedings under state or federal law; provided, however, in the case of a failure described in clause (i) or clause (ii) of this sentence, if within the 5-Business Day period described in clause (i) or the 30 day period described in clause (ii), as applicable, the Bank in question in good faith disputes such default asserting that such default has not occurred (and provided that such Bank has satisfied its funding obligations pursuant to the provisions of Section 2.4), such Bank shall not be deemed to be a Defaulting Bank until such Bank is found to be in default pursuant to a final judicial or arbitration determination and such Bank does not thereafter take the action necessary to cure the default within 10 Business Days following the date of the final determination. (b) With respect to each Defaulting Bank, any Current Bank shall, in addition to any other rights or remedies available at law or equity, be entitled, in the case of the failure of a Defaulting Bank to pay its pro rata share (the "Defaulting Bank's Share") in a Loan made pursuant to Section 2.4, to pay to the Administrative Agent the Defaulting Bank's Share (pro rata if made by more than one Current Bank, based on the pro rata shares of the Current Banks making the payment). If one or more of the Current Banks pays the Defaulting Banks' Share, in addition to any other rights and remedies available to the Banks, each Current Bank making such payment may elect to do either of the following with respect to the payment made by such Current Bank: (i) Notify the Administrative Agent to adjust the pro rata shares of the Defaulting Bank and the Current Bank making payment of the Defaulting Bank's Share, allocating the Defaulting Bank's Share to the Current Bank as of the date the Loan was made; or (ii) Receive all amounts which the Defaulting Bank would otherwise be entitled to receive pursuant to this Agreement with respect to the Defaulting Bank's Share (including interest accruing under the Loan Documents on the Loan, to the extent of the Defaulting Bank's Share of such Loan), pro rata according to the portion of the Defaulting Bank's Share paid by such Current Bank, until such Current Bank has been repaid the full amount of the Defaulting Bank's Share, together with accrued interest paid by the Borrower under the Agreement with respect thereto. SECTION 8.15 Purchase of Defaulting Bank's Interest After Default. If a Bank becomes a Defaulting Bank under Section 8.14, each Bank which is not a Defaulting Bank (a "Current Bank") shall have the right, but not the obligation, in its sole discretion to acquire (or if more than one Current Bank exercises such right, each such Current Bank shall have the right to acquire, pro rata according to its pro rata shares, or in such other proportions as they may mutually agree), the interest in the Commitment and the Loans of a Defaulting Bank. Upon any such purchase, the Defaulting Bank's interest in the Commitment and the Loans and its rights hereunder as a Bank (but not its liability in respect thereof or under the Loan Documents or this Agreement for events occurring prior to such purchase) shall terminate at the date of purchase, and the Defaulting Bank shall promptly -49- execute all documents reasonably requested to surrender and transfer such interest including an Assignment and Acceptance agreement and the canceled Note shall be returned to the Borrower. Current Banks exercising purchase rights under this Agreement must, as a precondition to the exercise of such rights, concurrently exercise their corresponding purchase rights under this Agreement. SECTION 8.16 Purchase Price and Payment for Defaulting Bank's Interest. The purchase price for the interest in the Commitment and the Loans of a Defaulting Bank shall be equal to the total outstanding Loans owed by the Borrower to the Defaulting Bank as of the date of such purchase, including without limitation any outstanding interest related thereto up to the date of such purchase, together with any accrued but unpaid Fees payable to the Defaulting Bank through such date. Payment of the purchase price for the Defaulting Bank's interest in the Commitment and the Loans so acquired shall be made on the date of such purchase. -50- ARTICLE IX MISCELLANEOUS SECTION 9.1 Notices. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed or sent by telecopy, graphic scanning or other telegraphic communications equipment of the sending party, as follows: (a) if to the Borrower, to it at Post Office Box 29243, Phoenix, Arizona 85038-9243, Attention: William F. Riley (Telecopy No. 602/907-7503, Telephone No. 602/907-7406) and separately Attention: Stephen J. Lyding (Telecopy No. 602/907-7503, Telephone No. 602/907-7554). with a copy to: Lane & Ehrlich, Ltd., 4001 North Third Street, Phoenix, Arizona 85012, Attention: Gerald F. Ehrlich (Telecopy No. 602/ 264-5006); (b) if to the Administrative Agent, to it at the following: (i) as to Borrowing Notices and as to payments, 201 Third Street, San Francisco, California 94103, Attention: Agency Department (Telecopy No. 415/512-9408); and (ii) as to all other notices and communications, 100 West Washington, Phoenix, Arizona 85003, Attention: Kathleen P. Sowa #4101-251 (Telecopy No. 602/229-4409); (c) if to a Bank, to it at its address (or telecopy number) set forth in Schedule 2.1 or in the Assignment and Acceptance pursuant to which such Bank shall have become a party hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or other telegraphic communications equipment of the sender, or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section or in accordance with the latest unrevoked direction from such party given in accordance with this Section. SECTION 9.2 Survival of Agreement. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Banks and shall survive the making by the Banks of the Loans, and the execution and delivery to the Banks of the Notes evidencing such Loans, regardless -51- of any investigation made by the Banks or on their behalf, and shall continue in full force and effect until Termination has occurred. SECTION 9.3 Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower and the Administrative Agent and when the Administrative Agent shall have received copies hereof which, when taken together, bear the signatures of each Bank, and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent and each Bank and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior consent of all the Banks and the Administrative Agent. SECTION 9.4 Successors and Assigns. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Borrower, the Administrative Agent or the Banks that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. (b) Each Bank at its own expense may assign to one or more assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment, and the Loans at the time owing to it and the Notes held by it); provided, however, that (i) except in the case of an assignment to a Bank or an Affiliate of any Bank, the Administrative Agent and, so long as there is no Event of Default outstanding, the Borrower must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Bank's rights and obligations under this Agreement, (iii) except in the case of an assignment to a Bank or an Affiliate of any Bank, the amount of the Commitment of the assigning Bank subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $10,000,000.00 or such lesser amount if such amount is the entire Commitment of the assigning Bank, (iv) the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with the Note or Notes subject to such assignment and, except in the case of an assignment to a Bank or an Affiliate of any Bank, a processing and recordation fee of $2,500 (which fee shall not in any way be the responsibility of the Borrower), (v) the assignee, if it shall not be a Bank, shall deliver to the Administrative Agent an Administrative Details Reply Form and (vi) any increased costs by reason of any such assignment will not be borne by the Borrower. Upon acceptance and recording pursuant to paragraph (e) of this Section 9.4, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have all the rights and obligations of a Bank under this Agreement and (B) the assigning Bank thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Bank's rights -52- and obligations under this Agreement, such Bank shall cease to be a party hereto (but shall continue to be entitled to the benefits of Sections 2.13, 2.15, 2.19 and 9.5, as well as to any Fees accrued for its account hereunder and not yet paid)). (c) By executing and delivering an Assignment and Acceptance, the assigning Bank thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Bank warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim and that its Commitment and the outstanding balances of its Loans, without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Acceptance, (ii) except as set forth in (i) above, such assigning Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto or the financial condition of the Borrower or any Subsidiary or the performance or observance by the Borrower or any Subsidiary of any of its obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.4 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, such assigning Bank or any other Bank 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; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Bank. (d) The Administrative Agent shall maintain at one of its offices in Phoenix, Arizona, a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Banks, and the Commitment of, and principal amount of the Loans owing to, each Bank pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive in the absence of manifest error and the Borrower, the Administrative Agent and the Banks may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Bank hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and any Bank, at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Bank and an assignee together with the Note or Notes subject to such assignment, an Administrative Details Reply Form completed in respect of the assignee (unless the assignee shall -53- already be a Bank hereunder), the processing and recordation fee referred to in paragraph (b) above and, if required, the written consent of the Borrower and the Administrative Agent to such assignment, the Administrative Agent shall (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower and the Banks. Within five Business Days after receipt of notice, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent, in exchange for the surrendered Note or Notes, a new Note or Notes to the order of such assigning Bank in a principal amount equal to the applicable Commitment retained by it. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes; such new Notes shall be dated the date of the surrendered Notes which they replace and shall otherwise be in substantially the form of Exhibit C. Canceled Notes shall be returned to the Borrower. (f) Each Bank may without the consent of the Borrower or the Administrative Agent sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it and the Notes held by it); provided, however, that (i) such Bank's obligations under this Agreement shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other entities shall be entitled to the benefit of the cost protection provisions contained in Sections 2.13, 2.15 and 2.19 to the same extent as if they were Banks (however no participating bank or entity shall be entitled to claim a greater amount than could have been claimed by the Bank from whom the participation was acquired) and (iv) the Borrower, the Administrative Agent and the other Banks shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement, and such Bank shall retain the sole right to enforce the obligations of the Borrower relating to the Loans and to approve any amendment, modification or waiver of any provision of this Agreement. No entity acquiring a participation pursuant to this paragraph (f) shall by virtue of such participation have any direct voting rights under this Agreement. (g) Any Bank or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.4, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Bank by or on behalf of the Borrower; provided that, prior to any such disclosure of such information, each such assignee or participant or proposed assignee or participant shall execute an agreement whereby such assignee or participant shall agree to preserve the confidentiality of such information on terms no less restrictive than those applicable to Banks pursuant to Section 9.17. (h) Any Bank may at any time assign all or any portion of its rights under this Agreement and the Notes issued to it to a Federal Reserve Bank; provided that no such assignment shall release a Bank from any of its obligations hereunder. (i) The Borrower shall not assign or delegate any of its rights or duties hereunder without the prior written consent of the Banks. -54- SECTION 9.5 Expenses; Indemnity. -------------------- (a) The Borrower agrees to pay all out-of-pocket expenses reasonably incurred by the Administrative Agent and any Bank in connection with the preparation of this Agreement and the other Loan Documents or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions hereby contemplated shall be consummated) or reasonably incurred by the Administrative Agent and any Bank in connection with the enforcement or protection of their rights in connection with this Agreement and the other Loan Documents or in connection with the Loans made or the Notes issued hereunder, including without limitation the reasonable fees, charges and disbursements of the counsel for the Administrative Agent and any Bank, and, in connection with any such enforcement or protection, the reasonable fees, charges and disbursements of counsel for the Administrative Agent and any Bank. The Borrower further agrees that it shall indemnify the Administrative Agent and any Bank from and hold them harmless against any documentary taxes, assessments or charges made by any Governmental Authority by reason of the execution and delivery of this Agreement or any of the other Loan Documents. (b) The Borrower agrees to indemnify the Administrative Agent, each Bank and each of their respective affiliates, directors, officers, employees and agents (each such person being called an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including without limitation reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated thereby, the performance by the parties thereto of their respective obligations thereunder or the consummation of the transactions contemplated thereby, (ii) the use of the proceeds of the Loans pursuant to the request of the Borrower or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee. (c) The provisions of this Section shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent and any Bank. All amounts due under this Section shall be payable on written demand therefor. SECTION 9.6 Right of Setoff. Subject to the provisions of Section 2.17, if an Event of Default shall have occurred and be continuing and any Bank shall have requested the Administrative Agent to declare the Loans immediately due and payable pursuant to Article VII, each Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held -55- and other indebtedness at any time owing by such Bank to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement and any other Loan Documents held by such Bank, irrespective of whether or not such Bank shall have made any demand under this Agreement or such other Loan Document and although such obligations may be unmatured; provided that such right of setoff shall not apply to amounts which may be held in (i) trust accounts or (ii) asset management accounts, including without limitation brokerage accounts, cash management accounts or other money management or investment accounts of a non-depository nature with any Bank. The rights of each Bank under this Section are in addition to other rights and remedies (including other rights of setoff) which such Bank may have. SECTION 9.7 Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF ARIZONA APPLICABLE TO CONTRACTS MADE AND TO BE ENFORCED ENTIRELY WITHIN THAT STATE. SECTION 9.8 Waivers; Amendment. ------------------- (a) No failure or delay of a party hereto in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies which they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by a party therefrom shall in any event be effective unless the same shall be permitted by Paragraph (b) of this Section and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on a party in any case shall entitle that party to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Banks; provided, however, that any such agreement shall have been consented to by all the Banks to the extent required pursuant to the provisions of Section 8.3(b); provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent. Each Bank and each holder of a Note shall be bound by any waiver, amendment or modification authorized by this Section regardless of whether its Note shall have been marked to make reference thereto, and any consent by any Bank or holder of a Note pursuant to this Section shall bind any Person subsequently acquiring a Note from it, whether or not such Note shall have been so marked. SECTION 9.9 Interest Rate Limitation. Notwithstanding anything herein or in the Notes to the contrary, if at any time the applicable interest rate, together with all fees and charges which are treated as interest under applicable law (collectively, the "Charges"), as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, received, -56- taken or reserved by any Bank, shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by such Bank in accordance with applicable law, the rate of interest payable under the Notes held by such Bank, together with all Charges payable to such Bank, shall be limited to the Maximum Rate. Borrower hereby agrees to the payment of interest with respect to the Loans and Borrowings under the Loans at the respective applicable rates determined pursuant to this Agreement, in each case as increased by any rate of interest resulting from any charges in the nature of interest paid or payable in connection with the Loans, the Notes and/or this Agreement. SECTION 9.10 Entire Agreement. This Agreement and the other Loan Documents constitute the entire contract between the parties relating to the subject matter hereof. Any previous agreement among any of the parties with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents. SECTION 9.11 Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 9.12 Counterparts and Signature Pages. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Agreement. All parties hereto authorize the Administrative Agent to gather and attach manually executed counterpart signature pages to counterpart copies of this Agreement in order to constitute one or more counterparts bearing evidence of manual execution by all parties. SECTION 9.13 Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 9.14 Arbitration. ------------ (a) Arbitration. Upon the demand of any party, any Dispute shall be resolved by binding arbitration (except as set forth in (e) below) in accordance with the terms of this Agreement. A "Dispute" shall mean any action, dispute, claim or controversy of any kind, whether in contract or tort, statutory or common law, legal or equitable, now existing or hereafter arising under or in connection with, or in any way pertaining to, any of the Loan Documents, or any past, present or -57- future extensions of credit and other activities, transactions or obligations of any kind related directly or indirectly to any of the Loan Documents, including without limitation, any of the foregoing arising in connection with the exercise of any self-help, ancillary or other remedies pursuant to any of the Loan Documents. Any party may by summary proceedings bring an action in court to compel arbitration of a Dispute. Any party who fails or refuses to submit to arbitration following a lawful demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any Dispute. (b) Governing Rules. Arbitration proceedings shall be administered by the American Arbitration Association ("AAA") or such other administrator as the parties shall mutually agree upon in accordance with the AAA Commercial Arbitration Rules. All Disputes submitted to arbitration shall be resolved in accordance with the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the Loan Documents. The arbitration shall be conducted at a location in Arizona selected by the AAA or other administrator. If there is any inconsistency between the terms hereof and any such rules, the terms and procedures set forth herein shall control. All statutes of limitation applicable to any Dispute shall apply to any arbitration proceeding. All discovery activities shall be expressly limited to matters directly relevant to the Dispute being arbitrated. Judgment upon any award rendered in any arbitration may be entered in any court having jurisdiction; provided however, that nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. ss. 91 or any similar applicable state law. (c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No provision hereof shall limit the right of any party to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or to obtain provisional or ancillary remedies, including without limitation injunctive relief, sequestration, attachment, garnishment or the appointment of a receiver, from a court of competent jurisdiction before, after or during the pendency of any arbitration or other proceeding. The exercise of any such remedy shall not waive the right of any party to compel arbitration hereunder. (d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be active members of the Arizona State Bar or retired judges of the state or federal judiciary of Arizona with expertise in the substantive law applicable to the subject matter of the Dispute. Arbitrators are empowered to resolve Disputes by summary rulings in response to motions filed prior to the final arbitration hearing. Arbitrators (i) shall resolve all Disputes in accordance with the substantive law of the state of Arizona, (ii) may grant any remedy or relief that a court of the state of Arizona could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award, and (iii) shall have the power to award recovery of all costs and fees, to impose sanctions and to take such other actions as they deem necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Arizona Rules of Civil Procedure or other applicable law. Any Dispute in which the amount in controversy is $5,000,000 or less shall be decided by a single arbitrator who shall not render an award of greater than $5,000,000 (including damages, costs, fees and expenses). By submission to a single arbitrator, each party expressly waives any right or claim to recover more than $5,000,000. Any Dispute in which the amount in controversy exceeds -58- $5,000,000 shall be decided by a majority vote of a panel of three arbitrators one of whom shall have experience representing borrowers; provided however, that all three arbitrators must actively participate in all hearings and deliberations. (e) Judicial Review. Notwithstanding anything herein to the contrary, in any arbitration in which the amount in controversy exceeds $25,000,000, the arbitrators shall be required to make specific, written findings of fact and conclusions of law. In such arbitrations (i) the arbitrators shall not have the power to make any award which is not supported by substantial evidence or which is based on legal error, (ii) an award shall not be binding upon the parties unless the findings of fact are supported by substantial evidence and the conclusions of law are not erroneous under the substantive law of the State of Arizona, and (iii) the parties shall have in addition to the grounds referred to in the Federal Arbitration Act for vacating, modifying or correcting an award the right to judicial review of (A) whether the findings of fact rendered by the arbitrators are supported by substantial evidence, and (B) whether the conclusions of law are erroneous under the substantive law of the State of Arizona. Judgment confirming an award in such a proceeding may be entered only if a court determines the award is supported by substantial evidence and not based on legal error under the substantive law of the State of Arizona. (f) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the Dispute with the AAA. No arbitrator or other party to any arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business, by applicable law or regulation, or to the extent necessary to exercise any judicial review rights set forth herein. If more than one agreement for arbitration by or between the parties potentially applies to a Dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the Dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties. SECTION 9.15 Jurisdiction. ------------- (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of Arizona State court or Federal court of the United States of America sitting in Phoenix, Arizona, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Arizona State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any Bank may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against the Borrower or its properties in the courts of any jurisdiction. -59- (b) Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any Arizona State or Federal court sitting in Phoenix, Arizona. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. SECTION 9.16 Waiver of Jury Trial. Each party hereto hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any litigation directly or indirectly arising out of, under or in connection with this Agreement or any of the other Loan Documents. Each party hereto (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it and the other parties hereto have been induced to enter into this Agreement and the other Loan Documents, as applicable, by (among other things) the mutual waivers and certifications in this Section. SECTION 9.17 Confidentiality. Each Bank agrees to keep confidential (and to cause its officers, directors, employees, agents and representatives to keep confidential) the Information (as defined below), except that any Bank shall be permitted to disclose Information (i) to such of its officers, directors, employees, agents and representatives (including outside counsel) as need to know such Information; (ii) to the extent required by applicable laws and regulations or by any subpoena or similar legal process, or requested by any bank regulatory authority (provided that such Bank shall, except for Information requested by any such bank regulatory authority, promptly notify Borrower (to the extent practicable and lawful, notice shall be given to the Borrower before such disclosure is made so as to permit Borrower to seek a protective order) of the circumstances and content of each such disclosure and shall request confidential treatment of any Information so disclosed); (iii) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Agreement, (B) becomes available to such Bank on a non confidential basis from a source other than the Borrower or its Affiliates or (C) was available to such Bank on a nonconfidential basis prior to its disclosure to such Bank by the Borrower or its Affiliates; or (iv) to the extent the Borrower shall have consented to such disclosure in writing. As used in this Section 9.17, as to any Bank, "Information" shall mean any financial statements, materials, documents and other information that the Borrower or any of its Affiliates may have furnished or may hereafter furnish to such Bank in -60- connection with this Agreement or any other materials prepared by any such person from any of the foregoing. IN WITNESS WHEREOF, the Borrower, the Administrative Agent and the Banks have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. SWIFT TRANSPORTATION CO., INC., an Arizona corporation By: /s/ William F. Riley, III ------------------------------------- Name: William F. Riley, III ----------------------------------- Its:Executive Vice President and CFO ------------------------------------ "Borrower" WELLS FARGO BANK, N.A. By: /s/ K. Sowa ------------------------------------- Name:Kathleen P. Sowa ----------------------------------- Its: Vice President ------------------------------------ "Administrative Agent and Issuing Bank" WELLS FARGO BANK, N.A. By: /s/ K. Sowa ------------------------------------- Name: Kathleen P. Sowa ----------------------------------- Its: Vice President ------------------------------------ "Bank" ABN AMRO BANK N.V. BY: ABN AMRO NORTH AMERICA, INC., as -61- agent By: /s/ Ellen M. Coleman ------------------------------------- Name: Ellen M. Coleman ----------------------------------- Its: Vice President/Director ------------------------------------ By: /s/ Paul K. Stimpfl ------------------------------------- Name: Paul K. Stimpfl ----------------------------------- Its: Vice President/Director ------------------------------------ "Co-Agent and Bank" THE CHASE MANHATTAN BANK, a New York banking corporation By: /s/ Andris G. Kalnins ------------------------------------- Name: Andris G. Kalnins ----------------------------------- Its: Vice President ------------------------------------ "Bank" THE FIRST NATIONAL BANK OF CHICAGO, a national banking association By: /s/ James B. Junker ------------------------------------- Name: James B. Junker ----------------------------------- Its: Vice President/Authorized Agent ------------------------------------ "Bank" -62- The undersigned Guarantor acknowledges and accepts this Agreement and joins as a party as to its obligations hereunder. SWIFT TRANSPORTATION CO., INC. a Nevada corporation By: /s/ William F. Riley, III ------------------------------------- Name: William F. Riley, III ----------------------------------- Title: Executive Vice President and CFO ------------------------------------ "Guarantor" -63- EXHIBIT "A" FORM OF ASSIGNMENT AND ACCEPTANCE --------------------------------- ______________, 19___ Reference is made to the Credit Agreement dated as of January 16, 1997 (the "Credit Agreement"), among SWIFT TRANSPORTATION CO., INC., an Arizona corporation (the "Borrower"), the lenders named therein (the "Banks"), WELLS FARGO BANK, N.A., as Administrative Agent for the Banks (in such capacity, the "Administrative Agent") and ABN AMRO BANK N.V., as Co-Agent. Terms defined in the Credit Agreement and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. 1. The Assignor hereby sells and assigns, without recourse, to the Assignee, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Effective Date set forth on the reverse hereof, the interests set forth on the reverse hereof (the "Assigned Interest") in the Assignor's rights and obligations under the Credit Agreement, including, without limitation, the interests set forth on the reverse hereof in the Commitment of the Assignor on the Effective Date and the Loans owing to the Assignor which are outstanding on the Effective Date, together with unpaid interest accrued on the assigned Loans to the Effective Date and the amount, if any, set forth on the reverse hereof of the Fees accrued to the Effective Date for the account of the Assignor. Each of the Assignor and the Assignee hereby makes and agrees to be bound by all the representations, warranties and agreements set forth in Section 9.4(c) of the Credit Agreement, a copy of which has been received by each such party. From and after the Effective Date (i) the Assignee shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the interests assigned by this Assignment and Acceptance, have the rights and obligations of a Bank thereunder and under the Loan Documents and (ii) the Assignor shall, to the extent of the interests assigned by this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 2. This Assignment and Acceptance is being delivered to the Administrative Agent together with (i) the Notes evidencing the Loans included in the Assigned Interest, (ii) the appropriate forms specified in Section 2.19(e) of the Credit Agreement, duly completed and executed by such Assignee, (iii) if the Assignee is not already a Bank under the Credit Agreement, an Administrative Details Reply Form in the form of Exhibit "D" to the Credit Agreement and (iv) a processing fee of $2,500.00. 3. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of Arizona. Date of Assignment: Legal Name of Assignor: Legal Name of Assignee: Assignee's Address for Notice: Effective Date of Assignment (may not be fewer than 5 Business Days after the Date of Assignment): Percentage Assigned of Facility/Commitment (set forth, to at least 8 decimals, as a percentage of the Facility and the aggregate Commitments of all Banks thereunder) Principal Amount Assigned Facility Commitment $________________ ______________% Assigned: Loans: Fees Assigned (if any): The terms set forth above and on the reverse side hereof are hereby agreed to: Accepted __________________, as Assignor _________________________________ By__________________________ By__________________________ Its___________________ Its___________________ __________________, as Assignor By__________________________ By__________________________ Its___________________ Its___________________ -2- EXHIBIT "B" FORM OF BORROWING NOTICE ------------------------ WELLS FARGO BANK, N.A. 201 Third Street San Francisco, California 94103 Attention: Agency Department Date:______________ (Telecopy No. 415/512-9408) Time:______________ Dear Sir or Madam: The undersigned, SWIFT TRANSPORTATION CO., INC., an Arizona corporation ("Borrower"), refers to the Credit Agreement dated as of January 16, 1997 (as it may hereafter be amended, modified, extended or restated from time to time, the "Credit Agreement"), among Borrower, the Banks named therein, WELLS FARGO BANK, N.A. as Administrative Agent for the Banks, and ABN AMRO BANK N.V., as Co-Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Borrower hereby gives notice that it requests a Borrowing pursuant to Section 2.3 of the Credit Agreement and sets forth below the terms of such requested Borrowing: A. Type of Borrowing1 ____________________ B. Advance date of Borrowing ____________________ C. Principal Amount of Borrowing2 ____________________ D. LIBOR Borrowing Interest Period and last day thereof3 ____________________ - ------------------------------ 1 LIBOR Borrowing or Base Rate Borrowing. 2 Each Borrowing under the Revolving Loan shall be a principal amount which is an integral multiple of $100,000.00 and not less than $1,000,000.00. 3 Which shall be subject to the definition of "Interest Period" and end not later than the Maturity Date. E. Refinancing Election (Identity of Borrowing to be refinanced)4 Date ____________________ Type ____________________ Amount ____________________ Last Day of Interest Period ____________________ Upon acceptance of the Borrowing to be made by the Banks in response to this request, Borrower shall be deemed to have represented and warranted to the Banks that, as of the date of such Credit Event, the conditions specified in Section 4.1 of the Credit Agreement are satisfied. Sincerely, SWIFT TRANSPORTATION CO., INC., an Arizona corporation By -------------------------------------- Its ------------------------------- An officer of Borrower duly authorized to request Borrowings under the Credit Agreement - ------------------------- 4 Identity shall include the date and amount of Borrowing, the Type and, with respect to LIBOR Borrowings, the last day of Interest Period. -2- EXHIBIT "C" REVOLVING CREDIT NOTE (Facility) $_____________ ______________, 19___ Phoenix, Arizona FOR VALUE RECEIVED, SWIFT TRANSPORTATION CO., INC., an Arizona corporation (hereinafter called "Maker"), hereby promises to pay to the order of _____________________________________ (the "Bank"), at the main office of WELLS FARGO BANK, N.A. (the "Administrative Agent"), at 201 Third Street, San Francisco, California 94103, Attention: Agency Department or at such other location as the Administrative Agent may notify the Maker in writing, in Dollars in immediately available funds, the principal sum of ____________________________________ AND ____/100 DOLLARS ($_________________) or the aggregate unpaid principal amount of all Borrowings of the Revolving Loans (as such terms and each other capitalized term used herein are defined in the Credit Agreement hereinafter referred to) made by the Bank pursuant to the Credit Agreement, whichever is less, and to pay interest in like funds from the date hereof on the unpaid balance thereof at the rates of interest per annum and at the times specified in the Credit Agreement. Principal hereof shall be payable in the amounts and at the times set forth in the Credit Agreement. This Note is one of the revolving credit notes referred to in Section 2.7 of the Credit Agreement dated as of January 16, 1997 by and among Maker, the Banks named therein, the Administrative Agent and ABN AMRO BANK N.V. as Co-Agent (as the same may be amended, modified or restated from time to time, the "Credit Agreement"). All of the terms, conditions and covenants of the Credit Agreement are expressly made a part of this Note by reference in the same manner and with the same effect as if set forth herein at length and Bank or any transferee of this Note (sequentially, the "Holder") is entitled to the benefits of and remedies provided in the Credit Agreement and any other agreements by and between Maker and Bank. Reference is made to the Credit Agreement for provisions regarding the maturity, payment, prepayment and acceleration of the indebtedness evidenced hereby. After maturity, including maturity upon acceleration, all unpaid amounts of this Note shall bear interest at the Default Rate. Maker agrees to pay all collection expenses, including reasonable attorneys' fees and court costs, incurred in the collection or enforcement of all or any part of this Note in which the Holder is the prevailing party. In the event of any court proceedings, court costs and attorneys' fees shall be set by the court and not by jury and shall be included in any judgment obtained by the Holder. Maker agrees to an effective rate of interest that is the rate stated above plus any additional rate of interest resulting from any other charges in the nature of interest paid or to be paid by or on behalf of Maker, or any benefit receivable to be received by holder hereof in connection with this Note. Failure of the Holder to exercise any option hereunder shall not constitute a waiver of the right to exercise same in the event of any subsequent default, or in the event of continuance of any existing default after demand for strict performance hereof. This Note is entitled to the benefit of the Credit Agreement and the other Loan Documents. This Note shall be binding upon Maker and its successors and assigns and shall inure to the benefit of the payee hereof, and any subsequent transferees of this Note, and their successors and assigns. This Note shall be governed by and construed according to the laws of the State of Arizona. IN WITNESS WHEREOF, Maker has caused this Note to be executed by its duly authorized corporate agent as of the day and year first above written. SWIFT TRANSPORTATION CO., INC., an Arizona corporation By -------------------------------------- Its ------------------------------- "MAKER" -2- EXHIBIT "D" ADMINISTRATIVE DETAILS REPLY FORM --------------------------------- Re: $110,000,000.00 Facility for SWIFT TRANSPORTATION CO., INC. 1. Name of Entity For Signature Page:___________________________________ 2. Name of Entity as it Should Appear in Any Publicity: ______________________________ (if different than above) 3. Name of Person to Receive Draft Credit Agreement at Bank: ________________________________________ 4. Name of Person to Sign Credit Agreement: ______________________________
5. Contacts: Credit Contact Operations Contact Legal Counsel -------------- ------------------ ------------- Name: ____________________ _____________________ _____________________ Title: ____________________ _____________________ _____________________ Address: ____________________ _____________________ _____________________ -------------------- --------------------- --------------------- -------------------- --------------------- --------------------- Telephone: ____________________ _____________________ _____________________ Facsimile #: ____________________ _____________________ _____________________ Telex #: ____________________ _____________________ _____________________ Answerback: ____________________ _____________________ _____________________
6. Payment Instructions: Method of Payment: Fedwire _________________ Chips _________________ Pay to: __________________________________________________________ Name of Bank: __________________________________________________________ City, State, Zip: __________________________________________________________ ABA Number: _______________________ Reference: ________________ Account Number: _______________________ Account Name:_________________ Attention: __________________________________________________________
-2- EXHIBIT "E" MATTERS TO BE COVERED BY THE LEGAL OPINION OF COUNSEL 1. The _________________ is a corporation duly incorporated, validly existing and in good standing under the laws of the State of ____________, and has all corporate power and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. 2. Each Subsidiary identified in Schedule "3.15" of the Credit Agreement is a corporation duly incorporated, validly existing, and in good standing under the laws of the jurisdiction of its incorporation, and has all corporate power and all material governmental licenses, authorizations, consents and approvals to carry on its business as now conducted. 3. The execution, delivery and performance by the ___________ of the Loan Documents are within ____________'s corporate power, have been duly authorized by all necessary corporate action, and require no action by or in respect of, or filing with, any Governmental Authority and neither the execution and delivery thereof nor the consummation of the transactions contemplated thereby nor compliance by the ____________ with any, nor the ____________'s performance of all, of the terms and provisions of the Loan Documents will contravene any law applicable to it or conflict with, result in any breach of, or constitute any default under, its certificate of incorporation or by-laws (both as amended to date) or conflict with, result in any breach of, or constitute default under, or result in the creation of a Lien under, or require the consent of any trustee or creditor pursuant to, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, lease, bank loan or credit agreement to which the ____________ is a party or by which it or its assets are bound, known to us. 4. Each Loan Document has been duly authorized and delivered by the _________, and is the legal, valid and binding obligation of the _____________, enforceable against it in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy, insolvency or other laws or equitable principles of general application relating to the enforcement of creditors' rights. 5. To the best knowledge of such counsel after due inquiry, there are no actions, suits or proceedings pending or threatened in any court or before any regulatory commission, board or other administrative or other governmental entity against or affecting the Borrower which could reasonably be expected to have a material adverse effect on its ability to enter into or perform its obligations under any of the Loan Documents or on the condition (financial or otherwise), operations, business or prospects of the ____________, except those described in the Borrower's report on Form 10-K for its most recently completed fiscal year ended ___________, _______, delivered to the Bank. 6. No consent, approval, waiver, license or authorization or other action by or filing with any governmental authority is required in connection with the execution and delivery by the ____________ of the Loan Documents except for those which have already been obtained and are in full force and effect. 7. The ____________ is not an "investment company" nor a company "controlled" by an "investment company," within the meaning of the Investment Company Action of 1940, as amended. -2- EXHIBIT "F" QUARTERLY COMPLIANCE CERTIFICATE FOR FISCAL QUARTER ENDING ________________, 19__ WELLS FARGO BANK, N.A. 100 West Washington Phoenix, Arizona 85003 Attn: Kathleen P. Sowa Date:___________________ #4101-251 Dear Ladies and Gentlemen: This Quarterly Compliance Certificate refers to the Credit Agreement dated as of January 16, 1997 (as it may hereafter be amended, modified, extended or restated from time to time, the "Credit Agreement"), among SWIFT TRANSPORTATION CO., INC., an Arizona corporation ("Borrower"), the Banks named therein, WELLS FARGO BANK, N.A. as Administrative Agent for the Banks and ABN AMRO BANK N.V. as Co-Agent. Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. Pursuant to Section 5.4 of the Credit Agreement, the undersigned, a Financial Officer of Guarantor, certifies that: 1. Enclosed are the required financial statements for the [quarter] [fiscal year] ending for Guarantor as required under Section 5.4 of the Credit Agreement. 2. To the best of the undersigned's knowledge, no "Event of Default" or Potential Default has occurred [or if so, specifying the nature and extent thereof and any corrective actions taken or to be taken]. 3. As of the last day of the Reporting Quarter, the computations below were true and correct:
I. Section 5.8 Unencumbered Assets Numerator: Cash ___________________ + Net Accounts Receivable ___________________ + Real Estate at net book value ___________________ (not to exceed $50,000,000.00) ___________________ + Rolling Stock at net book value ___________________ = Unencumbered Assets __________________A Divided by Denominator: Accounts Payable + Facility $110,000,000 + Other (funded and nonfunded, but committed) outstanding unsecured Indebtedness ___________________ = Total __________________B Percentage: Equals (A/B): __________________% Minimum Permitted: _______________120% II. Section 6.6 Funded Debt/EBITDA Ratio Calculated on a rolling 4 quarter basis Numerator: Current Funded Debt + Noncurrent Funded Debt ___________________ + Letters of Credit ___________________ + Surety Bonds ___________________ + Guarantees ___________________ + Capital Lease Obligations ___________________ = Funded Debt __________________A Divided by Denominator: Net Earnings + Depreciation & Amortization Exp. ___________________ + Interest Expense ___________________ + Tax Expenses ___________________ = EBITDA __________________B ________________A/B Maximum Permitted: ______________2.75x III. Section 6.7 Debt Service Coverage Ratio Calculated on a rolling 4 quarter basis Numerator: Net Earnings + Depreciation & Amortization Exp. ___________________ + Interest Expense ___________________ + Operating Lease Expense ___________________ +/- Change in Deferred Taxes ___________________ Equals: __________________A Divided by Denominator: Current portion of long-term debt + Current portion of Capital Lease Obligations ___________________ + Interest Expense ___________________ + Operating Lease Expense ___________________ Equals: __________________B Equals: ________________A/B Minimum Required: ______________1.25x
-2- SWIFT TRANSPORTATION CO., INC., a Nevada corporation By: ------------------------------------- Name: ----------------------------------- Its: ------------------------------------ -3- SCHEDULE 2.1 COMMITMENTS OF BANKS as to the Facility as of January 16, 1997
Euro Dollar Bank % $ ------------ --------- --------- Lending Office -------------- 1. Wells Fargo Bank, N.A. 31.8182% $ 35,000,000.00 _________________ 2. ABN AMRO BANK N.V. 27.2727% $ 30,000,000.00 _________________ 3. The Chase Manhattan Bank 22.7273% $ 25,000,000.00 _________________ 4. The First National Bank of 18.1818% $ 20,000,000.00 _________________ Chicago Maximum Commitment 100% $110,000,000.00 _________________
Addresses - --------- 1. 100 West Washington Phoenix, Arizona 85003 Attention: Kathleen P. Sowa #4101-251 (602) 528-1133 (fax 602/229-4409) 2. 300 South Grand Avenue, Suite 1115 Los Angeles, California 90071 Attention: Ellen M. Coleman (213) 687-2306 (fax 213/687-2061) 3. 270 Park Avenue, 10th Floor New York, New York 10017 Attention: Andris Kalnins (212) 270-5732 (fax 212/270-5127) 4. One First National Plaza Chicago, Illinois 60670 Attention: James B. Junker SCHEDULE 3.5 MATERIAL ADVERSE CHANGE SINCE SEPTEMBER 30, 1996 None. -2- SCHEDULE 3.15 SUBSIDIARIES OF SWIFT TRANSPORTATION CO., INC., A NEVADA CORPORATION 1. Swift Transportation Co., Inc., an Arizona corporation 2. Swift Leasing Co., Inc., an Arizona corporation 3. Common Market Distributing Co., Inc., an Arizona corporation 4. Sparks Finance Co., Inc., a Nevada corporation 5. Cooper Motor Lines, Inc., a South Carolina corporation 6. West's Best Freight System, Inc., a Wyoming corporation 7. A & S Shop Facility, Inc., a Montana corporation 8. Common Market Equipment Co., Inc., an Arizona corporation 9. Swift Transportation Co. of Virginia, Inc., a Virginia corporation 10. Swift Logistics Co., Inc., an Arizona corporation 11. Swift of Texas Co., Inc., a Texas corporation EX-11 3 COMPUTATION OF NET EARNINGS PER SHARE SWIFT TRANSPORTATION CO., INC. & SUBSIDIARIES Schedule of Computation of Net Earnings Per Share (in thousands, except per share amounts)
Year Ended December 31 ---------------------- 1996 1995 1994 ---- ---- ---- Net Earnings $27,422 $23,040 $22,629 ====== ====== ====== Weighted average shares: Common shares outstanding 24,956 24,578 24,480 Common equivalent shares issuable upon exercise of employee stock options (1) 713 770 845 ------ ------ ------ Total weighted average shares - primary 25,669 25,348 25,325 Incremental common equivalent shares (calculated using the higher of period or average fair market values) (2) 47 -- 59 ------ ------ ------ Total weighted average shares - fully diluted 25,716 25,348 25,384 ====== ====== ====== Primary net earnings per common and equivalent share $ 1.07 $ .91 $ .89 ======== ======== ======== Fully diluted net earnings per common and equivalent share (2) $ 1.07 $ .91 $ .89 ======== ======== ========
- -------------------- Notes: (1) Amount calculated using the treasury stock method and fair market values. (2) The calculation is submitted in accordance with regulation S-K Item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%. EX-23 4 INDEPENDENT AUDITORS' CONSENT Exhibit 23 ---------- INDEPENDENT AUDITORS' CONSENT The Board of Directors Swift Transportation Co., Inc.: We consent to incorporation by reference in the Registration Statements No. 33-66034, 333-16865 and 333-20651 on form S-3 and in the Registration Statements No. 33-85940 and 33-85944 on Form S-8 of Swift Transportation Co., Inc. of our report dated February 14, 1997, relating to the consolidated balance sheets of Swift Transportation Co., Inc. and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1996, which report appears in the December 31, 1996 annual report on Form 10-K of Swift Transportation Co., Inc. KPMG Peat Marwick LLP Phoenix, Arizona March 27, 1997 EX-24.1 5 SPECIAL POWER OF ATTORNEY (CUNNINGHAM) SPECIAL POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Jerry C. Moyes and William F. Riley, III, and each of them, his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the fiscal year ended December 31, 1996, for filing with the Securities and Exchange Commission by Swift Transportation Co., Inc., a Nevada corporation, together with any and all amendments to such Form 10-K, and to file the same with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents, or each of them, may lawfully do or cause to be done by virtue hereof. DATED: March 21, 1997 /s/ Robert W. Cunningham ---------------------------------------- Robert W. Cunningham STATE OF ARIZONA ) ) ss. County of Maricopa ) On this 21st day of March, 1997, before me, the undersigned Notary Public, personally appeared Robert W. Cunningham, known to me to be the person whose name is subscribed to the within instrument and acknowledged that he executed the same for the purposes therein contained. IN WITNESS WHEREOF, I hereunto set my hand and official seal. /s/ Anne Tanner ----------------------------------------- Notary Public My commission expires: April 30, 1999 EX-24.2 6 SPECIAL POWER OF ATTORNEY (SARTOR) SPECIAL POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Jerry C. Moyes and William F. Riley, III, and each of them, his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the fiscal year ended December 31, 1996, for filing with the Securities and Exchange Commission by Swift Transportation Co., Inc., a Nevada corporation, together with any and all amendments to such Form 10-K, and to file the same with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents, or each of them, may lawfully do or cause to be done by virtue hereof. DATED: March 14, 1997 /s/ Rodney K. Sartor ----------------------------------------- Rodney K. Sartor STATE OF ARIZONA ) ) ss. County of Maricopa ) On this 14th day of March, 1997, before me, the undersigned Notary Public, personally appeared Rodney K. Sartor, known to me to be the person whose name is subscribed to the within instrument and acknowledged that he executed the same for the purposes therein contained. IN WITNESS WHEREOF, I hereunto set my hand and official seal. /s/ Anne Tanner ----------------------------------------- Notary Public My commission expires: April 30, 1999 EX-24.3 7 SPECIAL POWER OF ATTORNEY (FREI) SPECIAL POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Jerry C. Moyes and William F. Riley, III, and each of them, her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for her and in her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the fiscal year ended December 31, 1996, for filing with the Securities and Exchange Commission by Swift Transportation Co., Inc., a Nevada corporation, together with any and all amendments to such Form 10-K, and to file the same with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as she might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents, or each of them, may lawfully do or cause to be done by virtue hereof. DATED: February 17, 1997 /s/ A. E. Frei ----------------------------------------- Alphonse E. Frei STATE OF ARIZONA ) ) ss. County of Maricopa ) On this 7th day of March, 1997, before me, the undersigned Notary Public, personally appeared Alphonse E. Frei, known to me to be the person whose name is subscribed to the within instrument and acknowledged that he executed the same for the purposes therein contained. IN WITNESS WHEREOF, I hereunto set my hand and official seal. /s/ Anne Tanner ----------------------------------------- Notary Public My commission expires: April 30, 1999 EX-24.4 8 SPECIAL POWER OF ATTORNEY (EDWARDS) SPECIAL POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Jerry C. Moyes and William F. Riley, III, and each of them, his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the fiscal year ended December 31, 1996, for filing with the Securities and Exchange Commission by Swift Transportation Co., Inc., a Nevada corporation, together with any and all amendments to such Form 10-K, and to file the same with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents, or each of them, may lawfully do or cause to be done by virtue hereof. DATED: February 14, 1997 /s/ L. A. Edwards ----------------------------------------- Lou A. Edwards STATE OF ARIZONA ) ) ss. County of Maricopa ) On this 14th day of February, 1997, before me, the undersigned Notary Public, personally appeared Lou A. Edwards, known to me to be the person whose name is subscribed to the within instrument and acknowledged that he executed the same for the purposes therein contained. IN WITNESS WHEREOF, I hereunto set my hand and official seal. /s/ Nancy C. Andersen ----------------------------------------- Notary Public My commission expires: March 26, 1997 EX-24.5 9 SPECIAL POWER OF ATTORNEY (SCUDDER) SPECIAL POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Jerry C. Moyes and William F. Riley, III, and each of them, his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the fiscal year ended December 31, 1996, for filing with the Securities and Exchange Commission by Swift Transportation Co., Inc., a Nevada corporation, together with any and all amendments to such Form 10-K, and to file the same with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully and to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents, or each of them, may lawfully do or cause to be done by virtue hereof. DATED: February 17, 1997 /s/ Earl H. Scudder, Jr. ----------------------------------------- Earl H. Scudder, Jr. STATE OF NEBRASKA ) ) ss. County of Lancaster ) On this 17th day of February, 1997, before me, the undersigned Notary Public, personally appeared Earl H. Scudder, Jr., known to me to be the person whose name is subscribed to the within instrument and acknowledged that he executed the same for the purposes therein contained. IN WITNESS WHEREOF, I hereunto set my hand and official seal. Laura J. Carlson ----------------------------------------- Notary Public My commission expires: September 23, 2000 EX-27 10 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS. 863557 SWIFT TRANSPORTATION CO., INC. 1,000 US DOLLARS 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 1 1,210 0 78,280 0 3,997 95,904 370,446 95,597 380,605 58,966 0 0 0 28 226,638 380,605 562,259 562,259 0 508,680 (739) 0 7,106 47,212 19,790 27,422 0 0 0 27,422 1.07 1.07
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