-----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, HGnO4ABEXBeoDOcqcM1V0kX5ronc4CZBkZOfUvERgIf2d31MfwlEV4StY5lP0e3x pUIQsDyR7CvguwpeDrVMYw== 0000950144-99-003862.txt : 19990403 0000950144-99-003862.hdr.sgml : 19990403 ACCESSION NUMBER: 0000950144-99-003862 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOYD BROS TRANSPORTATION INC CENTRAL INDEX KEY: 0000920907 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 636006515 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-23948 FILM NUMBER: 99583562 BUSINESS ADDRESS: STREET 1: 3275 HIGHWAY 30 CITY: CLAYTON STATE: AL ZIP: 36016 BUSINESS PHONE: 3347753261 MAIL ADDRESS: STREET 1: 3275 HWY 30 CITY: CLAYTON STATE: AL ZIP: 36016 10-K 1 BOYD BROS. TRANPORTATION INC. 1 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, 1998 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Act of 1934 For the transition period from _______ to _______ COMMISSION FILE NO. 0-23948 BOYD BROS. TRANSPORTATION INC. - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 63-6006515 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 3275 HIGHWAY 30 36016 CLAYTON, ALABAMA (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (334) 775-1400 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------- ---------------- NONE NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, PAR VALUE $.001 PER SHARE (TITLE OF CLASS) 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 ---- ---- AGGREGATE MARKET VALUE OF THE VOTING AND NON-VOTING COMMON EQUITY HELD BY NON-AFFILIATES OF THE REGISTRANT: $9,997,184 AS OF MARCH 19, 1999 INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE. 3,552,887 SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE, OUTSTANDING AS OF MARCH 19, 1999. DOCUMENTS INCORPORATED BY REFERENCE DOCUMENTS INCORPORATED BY REFERENCE IN THIS ANNUAL REPORT ON FORM 10-K ARE AS FOLLOWS: PORTIONS OF THE DEFINITIVE PROXY STATEMENT RELATING TO THE 1999 ANNUAL MEETING OF STOCKHOLDERS IN PART III, ITEMS 10 (AS RELATED TO DIRECTORS), 11, 12 AND 13. PORTIONS OF THE ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1998 IN PARTS II AND IV. 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. [ ] 2 TABLE OF CONTENTS
PAGE ---- PART I.............................................................................................................1 ITEM 1. BUSINESS........................................................................................1 ITEM 2. PROPERTIES......................................................................................6 ITEM 3. LEGAL PROCEEDINGS...............................................................................7 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................................7 PART II............................................................................................................7 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...........................7 ITEM 6. SELECTED FINANCIAL DATA.........................................................................8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........................................................................8 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......................................8 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.....................................................8 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE........................................................................8 PART III...........................................................................................................8 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT..................................................8 ITEM 11. EXECUTIVE COMPENSATION..........................................................................9 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..................................9 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................................................9 PART IV............................................................................................................9 ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.....................................................................................9
3 PART I ITEM 1. BUSINESS THE COMPANY Boyd Bros. Transportation Inc. ("Boyd" or the "Company") is a truckload carrier that operates exclusively in the flatbed segment of the industry and hauls primarily steel products and building materials. Since its founding in 1956, Boyd has grown into what management believes is one of the largest exclusively flatbed carriers in the United States. The Company owns and operates a total of over 1,032 tractors and 1,337 flatbed trailers. On December 8, 1997, Boyd acquired Welborn Transport, Inc. ("Welborn") located in Tuscaloosa, Alabama (the "Welborn Acquisition"). The acquisition was accounted for using the purchase method of accounting and, accordingly, the purchase price was allocated to the assets acquired, and liabilities assumed, based upon their estimated fair market values at the acquisition date. Welborn is operated by Boyd as a stand-alone subsidiary. References to the "Company" contained herein refer to the combined operations of Boyd and Welborn. References hereinafter to "Boyd" or "Welborn" describe the distinct operations of the parent and subsidiary, respectively. The Company's strategy is to offer high-quality flatbed transportation services to high-volume, time-sensitive shippers. Because much of the freight hauled by the Company consists of steel products and building materials, time-definite delivery is required. A late delivery can result in a shutdown of a production line at a plant or a delay in a construction project. Management focuses its marketing efforts on those shippers who require time-definite delivery because it believes that service, rather than price, generally will be the primary factor that will dictate their choice of carrier. Management believes that its ability to recruit and retain drivers has been critical to its success, and Boyd has sought to attract and retain drivers by using only high-quality, late-model tractors equipped with its two-way satellite communication equipment, and offering financial and other incentives to drivers. Management recognizes that getting drivers home frequently is critical to driver retention. Accordingly, Boyd makes load assignments to drivers that enable each driver to attain his or her goals with respect to both miles driven as well as time at home. Additionally, in June 1997, Boyd began contracting with independent owner-operators to provide service to its customers. Boyd has also implemented a lease-purchase program, providing Boyd's drivers with both career opportunities at Boyd and the opportunity to own their own tractor. Under the program, the driver leases the tractor from Boyd, along with an option to purchase the tractor. In turn, the driver leases the use of the tractor and the driver's services back to Boyd. In 1998, Boyd added another option under the owner-operator program. Owner-operators are able to lease a new tractor for three and one-half years. Boyd will retain ownership of the tractor at the end of the lease, but this will enable the owner-operator to operate a new tractor and maintain its status as independent contractor. Management believes that Boyd's owner-operator program, along with the owner-operator program already in place at Welborn, will aid in reducing driver turnover and better enable the Company to meet its growth projections. Welborn provides transportation services over shorter routes than traditionally provided by Boyd. Welborn operates primarily in the southeastern United States, with an average length of haul of less than 400 miles. Management believes this enhances Welborn's ability to retain quality drivers, as drivers' time away from home is thereby minimized. Welborn operates approximately 342 tractors and 355 flatbed trailers. Owner-operators own 310 of the 342 tractors utilized by Welborn, while Welborn owns the rest. The owner-operators of these units are compensated by Welborn based upon a percentage of revenue. Over 50% of Welborn's loads are booked through commissioned agents, whereas Boyd has traditionally developed direct relationships with its customers. STRATEGY As discussed above, the Company's business strategy is to offer high-quality flatbed transportation services in the truckload carrier market primarily to high-volume, time-sensitive customers. The key components of the Company's strategy are as follows: Time-Sensitive Shippers. The Company focuses its marketing efforts on high-volume, time-sensitive shippers that are involved primarily in the steel and building materials businesses and require time-definite delivery. Management believes that many large volume shippers in this segment of the industry have reduced the number of carriers they use so as to use only those "core carriers" that offer consistently superior service. The Company 4 intends to continue its focus on developing relationships as a core-carrier for high-volume, time-sensitive shippers. Technology. Boyd's strategy has been to utilize technology to provide better service to its customers and to improve operating efficiency. Boyd became the first major flatbed carrier in the country to install a satellite tracking system, manufactured by QUALCOMM, in its tractors. The tracking system enables Boyd to monitor equipment locations and schedules more effectively and to communicate with both drivers and customers. Currently, Welborn does not utilize satellite tracking technology. Boyd has also installed computers on board each of its tractors to monitor fuel efficiency and other operational data. Boyd will continue to monitor and implement technological developments that will enable Boyd to improve customer service and operating efficiency. Premium Quality Tractors. Boyd continuously upgrades its fleet of tractors. Maintaining a young, high-quality fleet of tractors facilitates Boyd's ability to recruit and retain drivers, achieve maximum on-time reliability, maximize fuel economy and convey an image of quality to existing and potential customers. While Welborn maintains a fleet of high-quality tractors, the shorter routes over which its vehicles are dispatched enables these units to be serviced more frequently. Accordingly, it has not been necessary for Welborn to replace its fleet as frequently as Boyd. CUSTOMERS AND MARKETING The Company markets itself on the basis of quality service and employees, its satellite communication system, the capabilities of its information system to interface with the information systems of its customers, its record of on-time deliveries, and its efficient and well-maintained tractors and trailers. The Company's marketing efforts concentrate on attracting customers that require time-definite delivery and ship multiple loads to and from locations that complement the Company's existing traffic flows. Boyd has written contracts with most of its customers. The contracts generally require the customer to use Boyd for a specified minimum amount of shipments each year and may be terminated by either party upon 30 to 60 days' written notice. The Company's largest 20, 10 and 5 customers accounted for approximately 57.7%, 43.4% and 31.1%, respectively, of the Company's revenues during 1998. Many of the Company's largest 20 customers are publicly-held companies. No single customer accounted for more than 10% of the Company's revenues during 1998. OPERATIONS The Company's operations are designed to maximize efficiency and provide quality service to customers. All of Boyd's fleet operations, routing and scheduling are centrally coordinated through a satellite tracking system from its corporate headquarters in Clayton, Alabama. Through the use of Boyd's satellite-based communication system, which is complemented by its fully-integrated mainframe computer system, dispatchers monitor the location and delivery schedules of all shipments and equipment to coordinate routes and maximize utilization of Boyd's drivers and equipment. See "Transportation Technology." Boyd conducts its operations through a network of 10 regional and satellite service centers in strategic locations in the eastern two-thirds of the United States. See "Item 2 - Properties." Boyd operates regional service centers in Clayton and Birmingham, Alabama; Springfield, Ohio; and Greenville, Mississippi. These regional service centers are supported by smaller satellite service centers, each having between one to three employees, located in Calvert City, Kentucky; Danville, Virginia; Lisbon Falls, Maine; Blytheville, Arkansas; Baltimore, Maryland; and Walworth, Wisconsin. These service centers allow Boyd to re-dispatch equipment terminating in a given area, enhance driver recruiting and return drivers to their homes more regularly. Boyd also has arrangements to deposit trailers near various major customers or shipping locations to facilitate pre-loading of shipments and thereby increase efficiency. Welborn's corporate offices are located in Tuscaloosa, Alabama. Welborn's terminal locations include Memphis, TN; Decatur, AL; and Columbia, SC. Welborn utilizes independent agents located in Atlanta, GA and Jackson, MS. All of Welborn's terminal locations are utilized for dispatching purposes, including the home office in Tuscaloosa. Welborn currently does not use satellite tracking systems in its operations. DRIVERS AND EMPLOYEES Recruiting and retaining professional, well-trained drivers is critical to the Company's success, and all of the Company's drivers must meet specific guidelines relating primarily to safety record, driving experience and 2 5 personal evaluation, including drug testing. To maintain high-equipment utilization, particularly during periods of growth, the Company strongly emphasizes continuous driver and owner-operator recruiting and training. Drivers are recruited at all regional terminal locations and at the Company's corporate headquarters. Drivers are trained in Company policies and operations, safety techniques and fuel efficient operation of equipment, and must pass a rigorous road test prior to assignment to a vehicle. The Company's training programs range from two to eight weeks of concentrated schooling, depending on a driver's level of experience. In addition, all drivers are required to participate in annual safety training and defensive driving courses for recertification by the Company. Recognizing the importance of driver contact while drivers are on the road for extended periods, the Company maintains toll-free telephone lines and publishes a newsletter containing Company information, in addition to maintaining daily contact between dispatchers and drivers. Competition for qualified drivers is intense. The short- to medium-haul truckload segment of the trucking industry, including the Company, experiences significant driver and owner-operator turnover, and the Company anticipates that the intense competition for qualified drivers in the trucking industry will continue. In order to attract quality drivers, management is actively pursuing the services of independent owner-operators to complement the fleet. At December 31, 1998, the Company had 1,015 employees, of whom approximately 793 were drivers and driver-trainees, and the balance of whom were mechanics, other equipment maintenance personnel and support personnel, including management and administration. In addition, owner-operators accounted for the operation of approximately 460 tractors. None of the Company's employees is subject to a collective bargaining agreement, and the Company has never experienced a work stoppage. Management believes that its relationship with its employees is good. REVENUE EQUIPMENT The Company's philosophy is to purchase premium quality tractors to help attract and retain drivers and to promote safe operations, and management believes the higher initial cost of such equipment is recovered through better resale marketability. Each of the Company's tractors are equipped with a sleeper cab to permit all drivers to comply conveniently and cost-effectively with the United States Department of Transportation ("DOT") hours of service guidelines and to facilitate team operations when necessary. At December 31, 1998, the Company owned and operated 1,032 tractors and 1,337 flatbed trailers. The tractors are manufactured by Freightliner, Kenworth and International, and the trailers are manufactured by Utility, Dorsey, Fruehauf, Fontaines, Wabash and Great Dane. TRANSPORTATION TECHNOLOGY Management believes that the application of technology is an ongoing part of providing high-quality service at competitive prices, and further believes that Boyd has enhanced its strong reputation for customer satisfaction through the early, fleet-wide implementation of two computer systems. 3 6 Boyd was the first major flatbed carrier to be fully equipped with the two-way satellite communication system produced by QUALCOMM. The satellite-based OMNITRACS(C) system ("Omnitracs") was installed and operational in the entire Boyd fleet by the end of 1990. Omnitracs has improved the quality and efficiency of Boyd's operations by allowing drivers and dispatchers to have instant, on-the-road communication ability and by enabling Boyd to provide its customers with accurate information on the status and estimated delivery time of cargo shipments. Omnitracs permits more efficient transmission of load assignments to drivers, as well as an enhanced capability to monitor loads in transit and rapidly bill customers for completed deliveries. Once a load is assigned by a load planner, the assignment is transmitted to Boyd's operations department where it is reviewed by a dispatcher who then relays the assignment to the appropriate driver through the Omnitracs display unit in each of Boyd's vehicles. The driver can respond to the dispatcher through Omnitracs in a matter of seconds, thereby eliminating waiting time and inefficient dependence on truck stop telephones or other methods of communication between drivers and dispatchers. Through Omnitracs, Boyd can electronically record a load assignment, report the load to the billing department and generate customer invoices. In addition, Boyd uses Omnitracs to automatically transmit location and equipment information and other data to the dispatcher, thereby reducing the need for drivers to stop to communicate with dispatchers in the event of a problem. The system continually tracks every cargo load with accuracy within one-tenth of a mile. This information, along with information concerning available loads, is constantly updated on Boyd's on-line computer. Load planners use this information to match available equipment with available loads, meet delivery schedules and respond more quickly to customer inquiries. 4 7 Boyd has also equipped its entire fleet of tractors with the SENSORTRACS(C) on-board computer system ("Sensortracs"), which is also produced by QUALCOMM and which monitors fuel efficiency and other operational data. Information from Sensortracs is periodically processed by one of Boyd's computers, which generates reports on vehicle efficiency and driver performance. Reports generated by this system enhance Boyd's ability to counsel its drivers on strengths and deficiencies in their driving habits and fuel efficiency and to monitor the effectiveness of driver training programs. Based on information provided by QUALCOMM, Boyd believes the on-board computer systems are year 2000 compliant. During 1998, Boyd developed load tendering and tracking capabilities. Customers are able to track the progress of their loads during transport using their own personal computer. Additionally, customers are able to book loads over the internet. Customers submit potential loads to the appropriate regional load planner, and the load planner will then contact the customer via the internet e-mail system to acknowledge acceptance of the load. This technological advancement enables customers to book loads routinely without having to complete the same paperwork again. Additionally, in 1998, Boyd implemented a new software program by The SABRE Group that enables Boyd to review each shipping lane to determine overall profitability and also to determine which customers are the most profitable within the lane. The end result will be that Boyd will be in a position to direct the movement of the fleet in a way that will yield the most results to the bottom line and not affecting the quality of the service. SAFETY AND INSURANCE The Company's safety department is responsible for training and supervising personnel to keep safety awareness at its highest level. The Company has implemented an active safety and loss prevention program. The emphasis on safety begins in the hiring and training process, where prospective employees and owner-operators are given physical examinations and drug tests, and newly hired drivers and owner-operators, regardless of experience level, must participate in an intensive training program. See "Drivers and Employees." The directors of safety for the Company continuously monitor driver performance and have final authority regarding employment and retention of drivers. The Company is committed to securing appropriate insurance coverage at cost-effective rates. The primary claims that arise in the trucking industry consist of cargo loss and damage, personal injury, property damage and workers' compensation. The Company currently retains liability up to $100,000 for each claim for personal injury and property damage, $100,000 for each claim for employee medical and hospitalization, and $10,000 for each claim for cargo damage. The Company also maintains full coverage for workers' compensation claims. The Company currently purchases excess primary and umbrella insurance coverage in amounts that management believes are adequate to supplement its retained liabilities. FUEL Motor carrier service is dependent upon the availability of diesel fuel. The Company's fuel expense comprised 9.0% and 15.0% of revenues in 1998 and 1997, respectively. Through on-board computers, the Company continually monitors fuel usage, miles per gallon, cost per mile and cost per gallon. The Company has not experienced any difficulty in maintaining fuel supplies sufficient to support its operations. Shortages of fuel, increases in fuel prices or fuel tax rates or rationing of petroleum products could have a material adverse effect on the operations and profitability of the Company. COMPETITION The trucking industry is highly competitive and fragmented. The Company competes primarily with other short- to medium-haul, flatbed truckload carriers, internal shipping conducted by existing and potential customers and, to a lesser extent, railroads. Deregulation of the trucking industry during the 1980s created an influx of new truckload carriers which, along with certain other factors, continues to create substantial downward pressure on the industry's rate structure. Competition for the freight transported by the Company is based primarily on service and efficiency and, to a lesser degree, on freight rates. There are other trucking companies, including truckload carriers that have flatbed divisions, that have substantially greater financial resources, operate more equipment or carry a larger volume of freight than the Company. The existence of these other motor carriers has also resulted in increased competition for qualified drivers. REGULATION The trucking industry is subject to regulatory oversight and legislative changes that can affect the economics of the industry by requiring certain operating practices or influencing the demand for, and the costs of 5 8 providing, services to shippers. The Intermodal Surface Transportation Board (the "ISTB"), as well as various state agencies that have jurisdiction over the Company, have broad powers, generally governing such matters as authority to engage in motor carrier operations, rates and charges, accounting systems, certain mergers, consolidations and acquisitions, and periodic financial reporting. The Federal Motor Carrier Act of 1980 commenced a program to increase competition among motor carriers and to diminish the level of regulation in the industry. Following this deregulation, applicants have more easily been able to obtain operating authority, and interstate motor carriers such as the Company have been able to implement certain rate changes without federal approval. The Motor Carrier Act also removed many route and commodity restrictions on transportation of freight. In 1995, the Interstate Commerce Commission (the "ICC") was eliminated, and the ISTB was established within the Department of Transportation (the "DOT"). The ISTB performs all functions previously performed by the ICC. Since 1981, the Company has held authority to carry general commodities throughout the 48 contiguous states, as both a common and contract carrier. Interstate motor carrier operations are subject to safety requirements prescribed by the DOT. Such matters as weight and dimensions of equipment are also subject to federal and state regulation. All of the Company's drivers were required to obtain national commercial driver's licenses by April 1, 1992 pursuant to the regulations promulgated by the DOT. Also, effective in 1989, DOT regulations imposed mandatory drug testing of drivers. In addition, the Company has completed the implementation of its own ongoing drug-testing program. The DOT's national commercial driver's license and drug testing requirements have not to date adversely affected the availability of qualified drivers to the Company. DOT alcohol testing rules require certain tests, random and otherwise, for alcohol levels in drivers and other safety personnel. See "Safety and Insurance." ENVIRONMENTAL MATTERS The Company's operations are subject to federal, state and local laws and regulations concerning the environment. Certain of the Company's facilities are located in historically industrial areas and, therefore, there is the possibility of environmental liability as a result of operations by prior owners as well as the Company's use of fuels and underground storage tanks at its regional service centers. The Company's consolidated balance sheets as of December 31, 1998 and 1997 include reserves for environmental remediation of $46,000 and $75,000, respectively, to cover final costs related to contamination caused by underground storage tanks. The tanks were replaced and clean-up was substantially complete in 1995. Currently, management knows of no other environmental remediation issues or liabilities. There can be no assurance that material liabilities or expenditures will not arise from these or additional environmental matters that may be discovered, or from future requirements of law. Management does not believe these expenditures will have a material adverse effect on the Company's financial condition. FORWARD LOOKING STATEMENTS Certain statements incorporated by reference from the information under the caption "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in the Company's Annual Report to Stockholders for the year ended December 31, 1998 contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, business conditions and growth in the economy, including the transportation and construction sectors in particular, competitive factors, including price pressures and the ability to recruit and retain qualified drivers, the ability to control internal costs as well as fuel costs, that are not passed on to the Company's customers, and other factors referenced elsewhere herein. ITEM 2. PROPERTIES The Company's corporate headquarters and principal service center are located on a 17.9 acre tract in Clayton, Alabama. Such facilities consist of approximately 22,000 square feet of office space, 12,000 square feet of equipment repair facilities and approximately 3 acres of parking space. The Company is in the process of constructing a new "super terminal", containing several maintenance and safety bays in Birmingham. The super terminal is estimated to be completed in late 1999 or early 2000. 6 9 The following table sets forth information regarding the location and ownership of each of Boyd's service centers and shuttle facilities: Clayton, AL........................................................ Owned Springfield, OH.................................................... Owned Birmingham, AL..................................................... Owned Greenville, MS..................................................... Owned Calvert City, KY................................................... Leased Danville, VA....................................................... Leased Lisbon Falls, ME................................................... Leased Baltimore, MD...................................................... Leased Walworth, WI....................................................... Leased Blytheville, AR.................................................... Leased
Additionally, Welborn owns its corporate offices in Tuscaloosa, Alabama and leases service centers located as follows: Birmingham, Al..................................................... Leased Memphis, TN........................................................ Leased Decatur, AL........................................................ Leased Columbia, SC....................................................... Leased
ITEM 3. LEGAL PROCEEDINGS The Company is routinely a party to litigation incidental to its business, primarily involving claims for personal injury and property damage incurred in the transportation of freight. The Company maintains insurance that it believes is adequate to cover its liability risks. See "Item 1 - Business -- Safety and Insurance." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the year ended December 31, 1998, either through the solicitation of proxies or otherwise. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Common Stock of the Company is listed on the Nasdaq National Market under the symbol "BOYD." As of March 12, 1999, the Common Stock was held by approximately 100 holders of record. The table below sets forth the reported high and low sales price per share for the Common Stock as reported by the Nasdaq National Market for each fiscal quarter during 1998 and 1997.
Price Range --------------- 1998 High Low - ---- ---- --- First Quarter.................................................... $10-3/8 $ 8-4/7 Second Quarter................................................... 12 8-1/2 Third Quarter.................................................... 10-1/8 5-7/8 Fourth Quarter................................................... 8 5-5/8
Price Range --------------- 1997 High Low - ---- ---- --- First Quarter.................................................... $ 8 $ 4-1/4 Second Quarter................................................... 7-3/4 4-3/8 Third Quarter.................................................... 10-3/8 6-3/4 Fourth Quarter................................................... 10-3/4 6
Management currently anticipates that all of its earnings will be retained for development of the Company's business and does not anticipate paying any cash dividends in the foreseeable future. Any future cash dividends, if any, will be at the discretion of the Company's Board of Directors and will depend upon, among other things, the 7 10 Company's future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions, and other factors as the Board of Directors may deem relevant. In January 1999, the Company repurchased 500,000 shares of the Company's Common Stock from the Company's former Chief Executive Officer, Donald G. Johnston for an aggregate purchase price of $3,660,000. The repurchase of the shares, representing about 12% of the Company's outstanding Common Stock, was funded by available cash and the Company's bank line of credit. Additionally, the Board of Directors has authorized a program under which the Company may purchase up to 500,000 shares of its Common Stock in open market or negotiated transactions at such times and at such prices as management may from time to time decide. ITEM 6. SELECTED FINANCIAL DATA The information required by this item is incorporated by reference from the information under the caption "Selected Financial Data" in the Company's Annual Report to Stockholders for the year ended December 31, 1998. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is incorporated by reference from the information under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report to Stockholders for the year ended December 31, 1998. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE RISK The Company is exposed to interest rate risk due to its long-term debt, which at December 31, 1998, bore interest at rates ranging from 1.00% to 1.75% above the bank's LIBOR rate. Under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 107, Disclosures about Fair Value of Financial Instruments, the Company has estimated the fair value of its long-term debt approximates its carrying value, using a discounted cash flow analysis based on borrowing rates available to the Company. The effect of a hypothetical ten percent increase in interest rates would increase the estimated fair value of the Company's long-term debt by approximately $300,000. Management believes that current working capital funds are sufficient to offset any adverse effects caused by changes in the interest rates. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is incorporated by reference from the Consolidated Financial Statements contained in the Company's Annual Report to Stockholders for the year ended December 31, 1998. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Set forth below is information concerning the Directors and Executive Officers of the Company as of March 12, 1999. Dempsey Boyd, age 71, founded Boyd in 1956, and has been Chairman of the Board since April 1980. Mr. Boyd served as President of Boyd from December 1962 until April 1980. Mr. Boyd is the father of Gail B. Cooper and Ginger B. Tibbs. Miller Welborn, age 40, has served as President and Chief Executive Officer of the Company since July 17, 1998. Mr Welborn co-founded Welborn in 1989. Richard C. Bailey, age 48, has served as Executive Vice President and Chief Financial Officer since joining Boyd in August 1992, and has served as a Director since February 1995. He served as President and Director of Eastern Inter-Trans Services, Inc., a dry van truckload carrier based in Columbus, Georgia, from December 1989 to August 1992. Mr. Bailey is a certified public accountant with a B.S. in accounting from Georgia 8 11 State University. He was previously employed in various financial positions by Ernst & Young, Intermet Corporation and Snapper Products (a division of The Actava Group Inc.). Mr. Bailey has served on the Advisory Board of the University of Georgia Trucking Profitability Strategies Conference. Gail B. Cooper, age 48, has been the Secretary of Boyd since December 1969, and served as a Director of Boyd from December 1969 until March 1994. Ms. Cooper received a B.S. in business administration from Troy State University. She has served Boyd in numerous administrative and accounting positions since joining Boyd full-time in June 1972. Ms. Cooper is the daughter of Mr. Boyd and the sister of Ms. Tibbs. Ginger B. Tibbs, age 45, has been the Treasurer of Boyd since December 1979, and served as a Director from December 1978 until March 1994. Ms. Tibbs is primarily responsible for collection of Boyd's accounts receivable and has served as Credit Manager since September 1980. Ms. Tibbs received a degree in elementary education from Auburn University. She is the daughter of Mr. Boyd and the sister of Ms. Cooper. Gary Robinson, age 50, has been the Vice President of Operations of Boyd since May 1997. From February of 1989 to April 1997, Mr. Robinson served as Director of Sales and Marketing for the flatbed division of Prime, Inc., a truckload carrier based in Springfield, Missouri. Steven Rumsey, age 35, co-founded Welborn in 1989 and has served as its President since such date. He holds a B.A. in communications from the University of Alabama. With the exception of information relating to the executive officers of the Company, which is provided in Item 10 hereof, all information required by Part III (Items 11, 12 and 13) is incorporated by reference to the Company's definitive Proxy Statement relating to the 1999 Annual Meeting of Stockholders, which is scheduled to be filed on or before April 9, 1999. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND CURRENT REPORTS ON FORM 8-K (a) Exhibits, Financial Statements and Schedules. 1. Financial Statements. The following financial statements for the Company and Independent Auditors' Report are incorporated by reference from the Company's Annual Report to Stockholders for the year ended December 31, 1998: Independent Auditors' Report Consolidated Balance Sheets at December 31, 1998 and 1997 Consolidated Statements of Income for the years ended December 31, 1998, 1997 and 1996 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1997 and 1996 Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996 Notes to Consolidated Financial Statements 2. Financial Statement Schedules. The schedule listed below is included herein immediately after the signature pages hereto. Schedules not listed below have been omitted because of the absence of conditions under which they are required or because the information is included in the financial statements or notes thereto. SCHEDULE NUMBER DESCRIPTION ------ ----------- II Valuation and Qualifying Accounts and Reserves for the Three Fiscal Years Ended December 31, 1998 9 12 3. Exhibits required by Item 601 of Regulation S-K. The following exhibits are included in this Form 10-K:
Exhibit No. Description -------- ----------- 10.1 Credit and Security Agreement dated February 28, 1996 between the Company and Compass Bank in the amount of $5,000,000 for truck equipment 10.2 Credit and Security Agreement dated May 29, 1998 between the Company and Compass Bank in the amount of $4,500,000 for truck equipment 10.3* Agreement and General Release between the Company and Donald Johnston dated July 16, 1998 10.4 Consulting Agreement between the Company and Donald Johnston dated July 16, 1998 10.5 Stock Repurchase Agreement between the Company and Donald Johnston dated January 7, 1999 13 Those portions of the Company's Annual Report to Stockholders for the year ended December 31, 1997 that are specifically incorporated herein by reference 21 Subsidiaries of the Registrant 23 Consent of Deloitte & Touche LLP 27 Financial Data Schedule (for SEC use only)
The following exhibits are incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1997 (File no. 000-23948):
Exhibit No. Description - ------- ----------- 10.1* First Amendment to Boyd Bros. Transportation Inc. 1994 Stock Option Plan 10.2* Employment Agreement between the Company and Miller Welborn dated December 8, 1997 10.3* Employment Agreement between the Company and Steven Rumsey dated December 8, 1997
The following exhibits are incorporated by reference to the Company's Registration Statement on Form S-1 (File No. 33-76756), declared effective on May 9, 1994:
Exhibit No. Description - ------- ----------- 3.1 Certificate of Incorporation of the Company 3.2 By-laws of the Company
- -------- * Identifies each exhibit that is a "management contract or compensatory plan or arrangement" required to be filed as an exhibit to this Annual Report on Form 10-K pursuant to Item 14(c) of Form 10-K. 10 13
Exhibit No. Description - ------- ----------- 10.1* Boyd Bros. Transportation Inc. 1994 Stock Option Plan 10.2* Form of the Company's Nonstatutory Stock Option Agreement 10.3* Form of the Company's Nonstatutory Stock Option Agreement for Nonemployee Directors 10.11 Master Note for Business and Commercial Loans dated July 22, 1992 providing for a $1,500,000 line of credit from AmSouth Bank N.A. to the Company 10.13 Note for Business and Commercial Loans dated August 2, 1993 by the Company in favor of AmSouth Bank N.A. in the principal amount of $5,122,702.70 10.14 Security Agreement for Tangible Personal Property dated February 15, 1994 by the Company in favor of AmSouth Bank N.A. 10.15 Note for Business and Commercial Loans dated February 15, 1994 for a $5,000,000 non-revolving draw note by the Company in favor of AmSouth Bank N.A. 10.22 Modification of the Continuation of Credit and Security Agreement and Loan Modification Agreement dated March 4, 1994 by and between the Company and Compass Bank 10.26 Credit and Security Agreement dated February 1, 1994 by and between the Company and Compass Bank 10.27 Security Agreement dated February 1, 1994 by the Company in favor of Compass Bank 10.37 Credit Agreement dated April 1, 1994 by and between the Company and AmSouth Bank N.A.
The following exhibit is incorporated by reference to the Company's Amendment to Report on Form 10-Q filed on August 5, 1997:
Exhibit No. Description - ------- ----------- 10.33 OMNITRACS contract dated February 5, 1997, between the Company and QUALCOMM, Inc.
The following exhibit is incorporated by reference to the Company's Report on Form 8-K filed on December 19, 1997:
Exhibit No. Description - ------- ----------- 2.1 Acquisition Agreement dated December 8, 1997, by and among the Company, W-T Acquisition Company, Welborn Transport, Inc., Miller Welborn and Steven Rumsey
(b) Reports on Form 8-K 1. None. 11 14 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 to be signed on its behalf by the undersigned, thereunto duly authorized. BOYD BROS. TRANSPORTATION INC. By: /s/ W. MILLER WELBORN ------------------------------------- W. Miller Welborn President and Chief Executive Officer Date: March 30, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURES TITLE DATE ---------- ----- ---- /s/ W. MILLER WELBORN President, Chief Executive March 30, 1999 - ------------------------------------------- Officer and Director (Principal W. Miller Welborn Executive Officer) /s/ RICHARD C. BAILEY Executive Vice President, - ------------------------------------------- Chief Financial Officer and Richard C. Bailey Director (Principal Financial March 30, 1999 and Accounting Officer) /s/ DEMPSEY BOYD Chairman and Director March 30, 1999 - ------------------------------------------- Dempsey Boyd /s/ W. WYATT SHORTER Director March 30, 1999 - ------------------------------------------- W. Wyatt Shorter /s/ BOYD WHIGHAM Director March 30, 1999 - ------------------------------------------- Boyd Whigham /s/ STEPHEN J. SILVERMAN Director March 30, 1999 - ------------------------------------------- Stephen J. Silverman
15 SCHEDULE II BOYD BROS. TRANSPORTATION INC. VALUATION AND QUALIFYING ACCOUNTS AND RESERVES For the Three Years Ended December 31, 1998
ADDITIONS ADDITIONS BALANCE AT CHARGED TO CHARGED TO BEGINNING OF COSTS AND OTHER BALANCE AT DESCRIPTION YEAR EXPENSES ACCOUNTS(b) DEDUCTIONS(a) END OF YEAR - ----------- ------------ ---------- ----------- ------------- ----------- Allowance for doubtful accounts--deducted from trade receivables in the balance sheet Year ended December 31, 1996 $ 125,108 $ -- $ -- $ 108 $ 125,000 ========== ========== =========== ========== ========== Year ended December 31, 1997 $ 125,000 $ -- $ 112,000 $ -- $ 237,000 ========== ========== =========== ========== ========== Year ended December 31, 1998 $ 237,000 $ 150,400 $ -- $ 115,400 $ 272,000 ========== ========== =========== ========== ==========
ADDITIONS BALANCE AT CHARGED TO BEGINNING OF COSTS AND BALANCE AT DESCRIPTION YEAR EXPENSES DEDUCTIONS(a) END OF YEAR - ----------- ------------ ---------- ------------ ----------- Allowance for uncollectible receivables related to sales-type leases--deducted from investment in sales-type leases in the balance sheet Year ended December 31, 1996 $ -- $ -- $ -- $ -- ========== =========== ========== ========== Year ended December 31, 1997 $ -- $ 380,000 $ -- $ 380,000 ========== =========== ========== ========== Year ended December 31, 1998 $ 380,000 $ 1,627,506 $ 806,261 $1,201,245 ========== =========== ========== ==========
Page 1 (a) Uncollectible accounts written off (b) Addition of Welborn Transport, Inc., acquired on December 8, 1997 EX-10.1 2 CREDIT AND SECURITY AGREEMENT 1 EXHIBIT 10.1 CREDIT AND SECURITY AGREEMENT THIS CREDIT AND SECURITY AGREEMENT is being executed and entered into as of the 28th day of February, 1996, by and among BOYD BROTHERS TRANSPORTATION COMPANY, INC., an Alabama corporation, which conducts its business at Route 1, Box 40, Clayton, Alabama 36016 ("BORROWER", whether one or more) and COMPASS BANK, an Alabama state banking corporation, 223 E. Broad Street, Eufaula, Alabama 36027 ("BANK"). PREAMBLE BORROWER has applied to BANK for, and BANK has agreed, upon the terms and subject to the conditions herein set forth, to extend to BORROWER, a loan in the amount of up to FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00) (the "LOAN") the proceeds of which are to be made available to Borrower for use between the date hereof and February 28, 1997 (the "ADVANCE PERIOD") for BORROWER to finance the purchase of tractors and flatbed trailers to be used in BORROWER'S trucking business (collectively, the "TRUCK EQUIPMENT"), including sixty-eight (68) tractors and _______________________ (_____) new 1996 Utility 45 foot flatbed trailers to be purchased with the initial advance hereunder. AGREEMENT NOW, THEREFORE, in consideration of the premises, the mutual obligations of the parties as contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound hereby, agree as follows: 2 ARTICLE I DEFINITIONS Section 1.01 "BORROWER'S LOAN ACCOUNT" means the account on the books of BANK in which will be recorded loans and advances made by BANK to BORROWER pursuant to this Agreement, payments made on such loans and other appropriate debits and credits as provided by this Agreement. Section 1.02 "COLLATERAL" means any and all property of BORROWER in which BANK now has, by this Agreement, or by any other Loan Document acquires, or hereafter acquires, a security interest. Section 1.03 "EQUIPMENT" means all tangible personal property including, without limitation, machinery, furniture and furnishings now owned or hereafter acquired for use primarily in the business of BORROWER. Section 1.04 "INDEBTEDNESS" means all indebtedness, liabilities and obligations, matured or unmatured, liquidated or unliquidated, direct or indirect, primary, secondary, absolute or contingent, and whether arising by contract, operation of law or otherwise, including without limitation, obligations to creditors (including without limitation BANK), for borrowed money or the deferred purchase price of property or services, and all obligations under real property leases and under leases of personal property. Section 1.05 "INSOLVENCY" of BORROWER or any other person means that there shall have occurred with respect to that person one or more of the following events: dissolution, termination of existence, insolvency, business failure, appointment of a 2 3 receiver of any part of the property of, assignment for the benefit of creditors by, or the filing of a petition in bankruptcy or the commencement of any proceedings under any bankruptcy or insolvency laws, or any laws relating to the relief of debtors, readjustment of indebtedness, reorganization, composition or extension, by or against such person, or if any action shall be taken for the purpose of effecting any of the foregoing. Section 1.06 "LIABILITIES" means any and all liabilities of BORROWER to BANK of every kind and description, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, regardless of how they arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument. "Liabilities" includes obligations to perform acts and refrain from taking action as well as obligations to pay money. Section 1.07 "LOAN DOCUMENTS" means this Agreement, the Note (as defined in Section 2.04 hereof), the Security Agreement from BORROWER to BANK dated as of the date hereof, and all other documents and instruments evidencing, securing, guaranteeing, relating to, or executed or delivered in connection with the Loan. Section 1.08 UNDEFINED TERMS. Except as otherwise defined in this Agreement, whether in this Article I, or in a parenthetical or other reference in this Agreement, accounting terms used herein shall have the meanings given to them under generally accepted accounting principles, and terms defined in the Alabama Uniform Commercial Code, as the same may be amended from time to time, shall have the meanings given them in the Code. 3 4 ARTICLE II THE LOAN Section 2.01 LOAN. Subject to the terms and conditions hereof, from and after the date hereof and until February 28, 1997, and so long as BANK has not demanded payment in full under the Note and BORROWER shall not be in default hereunder or with respect to any other Liability to BANK, the BANK will make advances under the Loan to BORROWER, or directly to BORROWER'S suppliers, up to a maximum aggregate principal amount of $5,000,000 to pay for BORROWER'S purchase of the Truck Equipment to be used as Equipment in BORROWER'S business ("ADVANCES"). BANK may, but shall not have any obligation to, make any Advances hereunder at any time after or during which an Event of Default (as defined herein) shall have occurred or exists. Section 2.02 BORROWER'S LOAN ACCOUNT. All such Advances shall be entered as debits in the BORROWER'S Loan Account. BANK may, if it so elects, require each request for any Advance pursuant to this Agreement to be accompanied by certification of the number, identity and continued use of Truck Equipment purchased with the proceeds of the Loan, in form and substance satisfactory to BANK. BANK shall also record in the BORROWER'S Loan Account, in accordance with customary accounting practice, all other charges, expenses and other items properly chargeable to BORROWER; all payments made by BORROWER on account of indebtedness evidenced by BORROWER'S Loan Account; and other appropriate debits and credits. 4 5 The debit balance of BORROWER'S Loan Account shall reflect the amount of BORROWER'S Indebtedness to BANK from time to time by reason of Advances and other appropriate charges hereunder. Section 2.03 USE OF LOAN PROCEEDS. The Loan proceeds shall be used by BORROWER to finance its purchase of the Truck Equipment. Section 2.04 NOTE. Each Advance under the loan shall be evidenced by a separate promissory note (collectively, the "NOTE"), in form and substance acceptable to BANK. Each Note shall bear interest from the date of the Advance thereunder at the rate and calculated in the manner provided therein, and shall be otherwise payable as set forth therein; provided, however, that in the event that Borrower's demand deposit balances at Bank shall be less than $200,000.00 at any time, the applicable rate under each Note shall be increased by one-fourth of one percentage point (1/4%) over the applicable rate stated therein. Dates and amounts of Advances, and payments received by BANK, shall be evidenced by entries upon the books and records of BANK, and shall be reflected in monthly statements, which shall be conclusive evidence of such dates and amounts of Advances, and payments. Section 2.05 DURATION; EXTENSION. Availability of funds under the Loan shall terminate on February 28, 1997; provided, however, that the parties recognize that they may wish to extend the expiration date by mutual agreement to be negotiated prior to such expiration date. It is understood that any extension may require a revision of certain provisions of this Agreement. 5 6 ARTICLE III SECURITY FOR LOAN Section 3.01 SECURITY INTEREST OF BANK IN COLLATERAL. As security for the payment and performance of all Liabilities, BANK shall have, and is hereby granted a continuing security interest in the following Collateral, whether now owned or existing or hereafter created, acquired or arising and wheresoever located: (a) (i) The Truck Equipment described on Exhibit "A" hereto and (ii) all Truck Equipment or other Equipment and other personal property of BORROWER purchased with the proceeds of the Loan; (b) All goods, instruments, certificates or other documents of title, policies and certificates of insurance, securities, chattel paper, deposits, cash or other property owned by BORROWER or in which BORROWER has an interest which are now or may hereafter be in the possession of BANK or as to which BANK may now or hereafter control possession by documents of title or otherwise; (c) Proceeds and products (including tort and insurance claims) of all of the foregoing. Section 3.02 AFTER-ACQUIRED PROPERTY. No submission by BORROWER is necessary to vest in BANK a security interest in hereafter created or acquired Collateral, but, rather such title and security interest shall vest in BANK immediately upon the creation or acquisition of any item of Collateral, without the necessity for any other or further action by BORROWER or BANK. 6 7 Section 3.03 OTHER APPLICABLE LAW. If, by reason of location of Collateral or otherwise, the creation, validity or perfection of security interests provided for herein are governed by the law of a jurisdiction other than Alabama, BORROWER shall take such steps and execute and deliver such papers as BANK may from time to time request to comply with the Uniform Commercial Code, the Uniform Trust Receipts Act, the Factors Lien Act or other laws of another state or states. ARTICLE IV REPRESENTATIONS AND WARRANTIES To induce BANK to enter into this Agreement, BORROWER represents and warrants as follows: Section 4.01 ORGANIZATION AND AUTHORITY. Each BORROWER (a) is an Alabama corporation which is duly organized, validly existing and in good standing under the laws of the State of Alabama; (b) has all necessary corporate power and authority, and possesses all licenses and permits as are required for BORROWER to own its assets and conduct its business as now conducted or presently proposed to be conducted; (c) has no subsidiaries other than Boyd Brothers Truck and Tractor; and (d) is duly qualified and in good standing in the State of Alabama and in every other jurisdiction wherein its ownership or leasing of assets or conduct of its business makes such qualification necessary. Section 4.02 BORROWER'S AUTHORIZATION. The execution, delivery and performance of this Agreement, the Note, the Security Agreement, and the other Loan 7 8 Documents, the granting of the power of attorney under Section 8.03 hereof, and the borrowing hereunder and under the Note, are within BORROWER'S corporate powers and authority, have been duly and validly authorized by all necessary corporate and other action including, without limitation, any necessary shareholder action, are not in contravention of law or the terms of BORROWER'S Articles of Incorporation, By-Laws or other incorporation documents, or of any indenture, agreement or undertaking or any law, regulation, or order to which BORROWER is a party or by which it is bound. Section 4.03 ENFORCEABILITY. Upon execution and delivery hereof and thereof, this Agreement, the Note, the Security Agreement, and the other Loan Documents will constitute valid and binding obligations of the respective parties thereto, enforceable in accordance with their respective terms. Section 4.04 OWNERSHIP OF COLLATERAL. Except for the security interests granted in connection herewith, or heretofore granted to BANK, BORROWER is, and as to assets to be acquired after the date hereof, shall be, the owner of all Collateral with respect to which it grants a security interest hereunder, free from any lien, security interest or encumbrance, and BORROWER shall defend its assets against all claims and demands of all persons at any time claiming the same or any interest therein. Section 4.05 OTHER COLLATERAL. At the time BORROWER pledges, sells, assigns, or transfers to BANK any instrument, document of title, security, chattel paper or other property or any interest therein, BORROWER shall be the lawful owner thereof and shall have good right to pledge, sell, assign or transfer the same; none of such 8 9 property shall have been pledged, sold, assigned or transferred to any person other than BANK or in any way encumbered; and BORROWER shall defend the same against the lawful claims and demands of all persons. Section 4.06 FINANCIAL INFORMATION. Subject to any limitations stated therein or in connection therewith, all financial statements which have been or may hereafter be furnished to BANK to induce it to enter into this Agreement, to extend credit from time to time hereunder, or otherwise in connection herewith, do or shall fairly represent the financial condition of BORROWER or other person or entity reported on therein, as of the dates and, in the case of BORROWER, the results of its operations for the periods for which the same are furnished, in accordance with generally accepted accounting principles consistently applied, and all other information, reports and other papers and dates furnished to BANK are or shall be, at the time the same are so furnished, accurate and correct in all material respects and complete insofar as completeness may be necessary to give BANK a true and accurate knowledge of the subject matter. There has been no material adverse change in the business, properties, prospects, or condition (financial or otherwise) of the BORROWER since the dates of the most recent financial statements provided to the BANK. BORROWER has good and marketable title to all the properties and assets reflected on its balance sheet furnished to BANK, free and clear of mortgages, pledges, liens, charges and other encumbrances, other than encumbrances in favor of BANK and encumbrances securing indebtedness reflected on such balance sheet. 9 10 Section 4.07 NO VIOLATIONS. BORROWER is not now in default under any agreement evidencing an obligation for the payment of money, performance of a service or delivery of goods, the demand for performance under which, or acceleration of the maturity of which, would render BORROWER insolvent or unable to meet its other debts as they become due or conduct its business as usual. Section 4.08 LITIGATION. There is no action, suit, or proceeding 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 or in prospect against or affecting the BORROWER or any properties or rights of the BORROWER, which, if adversely determined, would (i) materially impair the right of the BORROWER to carry on business substantially as now conducted or (ii) materially and adversely affect the financial condition of the BORROWER. BORROWER is not currently affected by any strike or other labor disturbance nor is BORROWER in default in any material respect under any judgment, order, injunction, rule, ruling, of any court or governmental commission, agency, or instrumentality. ARTICLE V AFFIRMATIVE COVENANTS Section 5.01 FINANCIAL STATEMENTS. BORROWER shall furnish or cause to be furnished to BANK, (a) on a quarterly basis, within sixty (60) days after the end of each quarter, internally prepared profit and loss statements for BORROWER; and (b) on an annual basis, audited year-end financial statements prepared by a certified public 10 11 accountant acceptable to BANK. Statements required under Section 5.01(b) immediately preceding shall be provided as soon as available after the end of the fiscal period reported on therein, but no later than ninety (90) days after the end of such period. In addition, BORROWER shall furnish BANK, on an annual basis, year-end financial statements on any guarantor of the Loan in a form acceptable to BANK, as soon as available, but no later than 60 days after the end of each year. Section 5.02 CERTIFICATIONS. All statements and reports required by this Article V shall be certified as true and correct by the President or a Vice-President of BORROWER, or in the case of Guarantor, by or on behalf of the Guarantor. Section 5.03 EXPENSES. BORROWER shall pay any and all taxes, charges and expenses of every kind or description paid or incurred by BANK under or with respect to the Loan or any Collateral therefor or the collection of or realization upon the same. BORROWER hereby authorizes BANK to charge interest, charges, taxes and expenses provided for herein to BORROWER'S Loan Account. Section 5.04 INSURANCE. BORROWER shall have and maintain at all times liability insurance and, with respect to the Collateral and other assets of BORROWER, insurance against risks of fire, so-called extended coverage, and other risks customarily insured against by companies engaged in similar business to that of BORROWER, in amounts, containing such terms, in such form, for such periods and written by such companies as may be satisfactory to BANK. Where insurance covers Collateral for loans to BORROWER from BANK, such insurance shall be payable to BANK and to BORROWER as their interests may appear, pursuant to a long-form New 11 12 York standard non-contributory mortgagee clause or endorsement. All policies of insurance shall provide for ten (10) days' written minimum cancellation notice to BANK. In the event of BORROWER'S failure to provide and maintain insurance as herein provided, BANK may, at its option, provide such insurance and charge the amount thereof to the BORROWER'S Loan Account or add the same to the principal balance of the Loan. BORROWER shall furnish to BANK certificates or other evidence satisfactory to BANK of compliance with the foregoing insurance provisions. Notwithstanding anything to the contrary contained or implied herein, BORROWER may self-insure its fleet of vehicles (including the Collateral) as to physical damage, but shall obtain insurance against catastrophic loss (in excess of an aggregate of $500,000) of Collateral and other assets. BORROWER shall provide BANK evidence satisfactory to BANK the existence of such catastrophic insurance, which policy of insurance shall name BANK as loss payee pursuant to a New York standard non-contributory endorsement or clause. In the event of any loss with respect to any item of Collateral, BORROWER will make an additional payment under the Loan in an amount equal to the portion of the outstanding Loan balance representing the purchase money advanced against the Collateral with respect to which such loss has occurred. Section 5.05 INFORMATION REGARDING COLLATERAL. BORROWER shall furnish to BANK information adequate to identify and evaluate the Collateral at times and in form and substance as may be requested by BANK. 12 13 Section 5.06 REGISTRATION AND TITLING. BORROWER shall cause all Collateral that is required to be registered, to be properly registered in BORROWER'S name, and will cause the title certificates for all Collateral to reflect BORROWER'S ownership and BANK'S lien. Section 5.07 RECORDS REGARDING COLLATERAL. BORROWER shall give BANK written notice of each location at which Collateral and records regarding Collateral are or will be kept other than for temporary processing, storage or like purposes. Except as such notice is given, and except as Collateral is moved from place to place in the ordinary course of BORROWER'S trucking business, all Collateral and records are and shall be kept at BORROWER'S address as it appears in Section 10.04 of this Agreement. Section 5.08 INSPECTION. BORROWER shall at all reasonable times and from time to time allow BANK, by or through any of its officers, agents, attorneys, or accountants, to examine, inspect or make extracts from BORROWER'S books and records and to arrange for verification of Collateral, under reasonable procedures and by reasonable methods, and shall do, make, execute and deliver all such additional and further acts, things, deeds, assurances and instruments as the BANK may require more completely to vest in and assure to the BANK its rights hereunder or in any Collateral. Section 5.09 TAXES. BORROWER will promptly pay or cause to be paid all taxes, customs fees, and freight charges on the Collateral and will at all times keep the Collateral free and clear of all liens and claims whatsoever, other than the security 13 14 interests granted hereby. BORROWER agrees to do and cause to be done all things that the BANK may request to establish and maintain a valid title and security interest in the Collateral, free of all other liens and claims whatsoever, to secure the payment of the Liabilities. If such taxes or other assessments remain unpaid after the date fixed for the payment of the same, or if any lien shall be claimed which, in the opinion of the BANK, could create a valid obligation having priority over the rights of the BANK in the Collateral, the BANK may, without notice to the BORROWER, pay such taxes, assessments, charges or claims, and the BORROWER unconditionally promises to reimburse BANK for any amounts so paid upon demand. Section 5.10 CONTINUED EXISTENCE, PROTECTION OF PROPERTY, INSURANCE. BORROWER shall do or cause to be done all that is necessary (a) to preserve its existence and in keep in full force and effect all of its governmental permits, licenses, charters, consents and franchises, and to comply with all applicable laws; (b) to conduct and operate its business in a prudent and careful manner; (c) to preserve its properties; and (d) subject to the limitation regarding self-insurance in Section 6.04 hereof, to maintain adequate insurance with insurance companies of recognized responsibility, including without limitation, (i) insurance coverage to such extent and against such risks, including fire, casualty, and theft, as is customary in BORROWER'S business, (ii) necessary workmen's compensation insurance; (iii) such other insurance or bonds as may be required by law or reasonably requested in writing by BANK; and (iv) pay all taxes applicable to it or levied against any of its properties as and when the same shall become due and payable. 14 15 Section 5.11 RECORDS. BORROWER shall keep or cause to be kept accurate records concerning its business and shall maintain or cause to be maintained a system of accounting and proper books of record and account in accordance with general accepted accounting principles applicable to the particular entity, and will set aside on its books all proper and adequate reserves for taxes, depreciation, depletion, obsolescence, loan losses, amortization, contract cancellations, defaults, or other breaches of contract, and otherwise as may be appropriate in accordance with said principles. Section 5.12 CERTIFICATES. On a quarterly basis, and at such other times as BANK shall request, BORROWER shall supply to BANK a written certificate as to the following: (i) that there does not exist any default or Event of Default, or any condition or event which, with the giving of notice or the passage of time, or both, would constitute such an Event of Default, under the Agreement, the Note, or any other Loan Documents; (ii) that all representations, warranties and covenants contained in this Agreement and the other Loan Documents remain true and accurate through the date of such certificate, except as may be noted and acceptable to BANK; (iii) that all conditions precedent to BANK'S obligation to make advances under the Loan have been and remain fully satisfied; and 15 16 (iv) that all of the Collateral is in good repair and useful in BORROWER'S business. Section 5.13 NOTICE OF ADVERSE EVENTS. BORROWER shall promptly notify BANK of the filing of any notice, suit, claim, action, proceeding, or investigation in or by any court or by any governmental authority in which an adverse decision reasonably could be expected to have a material adverse effect upon the BORROWER, and shall promptly notify BANK of the occurrence of any material adverse order, judgment, settlement, determination, or other adverse event, or of any default or Event of Default or any condition or event which, with the giving of notice or the passage of time, or both, would constitute such an Event of Default, under this Agreement or under any of the other Loan Documents. BORROWER also shall promptly notify BANK of the occurrence of any other condition or event which could have a material adverse effect upon it. ARTICLE VI NEGATIVE COVENANTS BORROWER covenants and agrees that from the date hereof until payment in full of the Loan, and any other indebtedness and Liabilities, and the termination of this Agreement, unless BANK shall otherwise consent in writing, BORROWER will not either directly or indirectly: Section 6.01 CASH FLOWS-TO-CURRENT MATURITIES OF LONG-TERM DEBT. Cause or allow the ratio of BORROWER'S cash flows-to-current maturities of long-term debt to 16 17 be less than 1.3:1 at any time after December 31, 1996. As used in this Section, "CASH FLOWS" means net profits less dividends, plus lease expense and depreciation and any other expenses which would be classified as non-cash expenses in accordance with generally accepted accounting principles and "CURRENT MATURITIES OF LONG TERM DEBT" means the outstanding principal balance of indebtedness and lease expense due within twelve (12) months. Section 6.02 CONSOLIDATED NET WORTH. Cause or allow BORROWER'S Consolidated Tangible Net Worth to be less than $14,800,000. As used herein, "CONSOLIDATED TANGIBLE NET WORTH" means an amount equal to the Shareholders' equity of the BORROWER (including capital stock, capital surplus and retained earnings, but excluding any unpaid amounts due for sale of stock) less (i) the book value of any shares of common stock of the BORROWER held by the BORROWER and treated as an asset in computing such stockholder's equity, (ii) all unamortized debt costs, patents, tradenames, licenses, franchises, good will and other intangible assets, (iii) the aggregate balance of loans, notes receivable, accounts receivable and other advances to and or owing from BORROWER'S affiliates, subsidiaries, shareholders, employees officers, directors or any other related entity, and (iv) taxes, the payment of which has been deferred. All financial ratios in this Agreement shall be determined on a combined basis in accordance with generally accepted accounting principles applied on a consistent basis. 17 18 Section 6.03 NO ENCUMBRANCES ON COLLATERAL. BORROWER shall not pledge, mortgage, sell, assign or create, or suffer to exist a security interest in Collateral in favor of any person other than BANK. Section 6.04 MANAGEMENT; OWNERSHIP. Cause or allow any material change in the ownership or senior management of BORROWER, including without limitation any change in the officers of the BORROWER at or above the level of its vice president. Section 6.05 DEBT-TO-TANGIBLE NET WORTH. Cause or allow the BORROWER'S ratio of total debt (defined as all of BORROWER'S Indebtedness and Liabilities to whomsoever the same may be owing, whether now or hereafter existing, created or arising, absolute or contingent, direct or indirect, joint or several, including without limitation, all indebtedness under the Loan)-to- Consolidated Tangible Net Worth (as defined in Section 6.02 hereof) to be greater than 2:1. Section 6.06 LOANS TO RELATED PARTIES. Cause or allow BORROWER'S loans or other advances to BORROWER'S shareholders, officers, partnerships, subsidiaries, affiliates, directors or other related entities to exceed $2,000,000 at any time outstanding. 18 19 ARTICLE VII CONDITIONS BANK'S obligation to make the Loan available to BORROWER, and to make any advance thereunder, is subject to the full satisfaction of the following conditions precedent: Section 7.01 NO DEFAULT. There shall not exist any default or Event of Default, or any condition or event which, after notice or lapse of time or both, would constitute such an Event of Default hereunder or under any other Loan Documents. Section 7.02 OPINION OF COUNSEL. BANK shall have received from counsel to BORROWER a favorable opinion in satisfactory scope and form as to all matters reasonably requested by BANK. Section 7.03 DELIVERY OF DOCUMENTS. Delivery to BANK of the purchase orders and Certificates of Title for the Collateral to be purchased with the proceeds of the requested advance, the duly-executed Note and Guaranty, and all other documents or instruments which BANK shall require in connection with making the Loan. Section 7.04 TERMS AND CONDITIONS. Continued fulfillment and satisfaction through the date hereof and as of the date of any requested advance of all the terms, representations, warranties, conditions and covenants hereof. Section 7.05 OFFICER'S CERTIFICATE. BANK shall have received a certificate of the President or other officer authorized by resolution of BORROWER stating that all representations and warranties contained in this Agreement and all other Loan Documents are and remain true and accurate as of the date of such advance and that 19 20 there exists no default or Event of Default hereunder or under any other Loan Document, or any condition or event which, with the giving of notice or the passage of time, or both, would become an Event of Default hereunder or under any other Loan Document. ARTICLE VIII DEFAULT AND REMEDIES ON DEFAULT Section 8.01 EVENTS OF DEFAULT; ACCELERATION. At the option of BANK and notwithstanding any time or credit allowed by any instrument evidencing any of the Liabilities, any or all of the Liabilities of BORROWER or any other person to BANK hereunder shall immediately become due and payable upon the occurrence of any of the following events of default ("EVENTS OF DEFAULT"), without notice or demand to BORROWER, Guarantor, or any other person: (a) default in the payment or performance, when due or payable, of any of the Liabilities of BORROWER or any other person or entity, or of any endorser or Guarantor for any of the Liabilities of BORROWER or any other person or entity to BANK or the occurrence of any Event of Default under any Loan Document; (b) failure of BORROWER to pay any tax; (c) if any representation or warranty contained herein is or becomes inaccurate or if BORROWER or Guarantor have made, or hereafter make any misrepresentation to BANK for the purpose of obtaining credit or an extension of credit, (d) failure of BORROWER to furnish or cause to be furnished financial information or to permit or cause to be permitted the inspection of books or records; (e) issuance of an injunction or 20 21 attachment against property of BORROWER or any Guarantor; (f) calling of a meeting of creditors, appointment of a committee of creditors or liquidating agents, or offering of a composition or extension to creditors by, for or of BORROWER or any endorser or Guarantor of any of the Liabilities of BORROWER to BANK; (g) insolvency of BORROWER or any endorser or Guarantor of any of the Liabilities of BORROWER to BANK; (h) such a material change in the condition or affairs (financial or otherwise) of BORROWER or of any endorser or Guarantor of any of the Liabilities of BORROWER to BANK as in the opinion of BANK impairs BANK'S security or increases its risk; (i) failure by BORROWER or any Guarantor to comply with any of the provisions of this Agreement; (j) failure to make any payments required by this Agreement; (k) default shall be made with respect to any Indebtedness (other than the Note) of the BORROWER or the Guarantor, when due, or the performance of the other obligation incurred in connection with any Indebtedness for borrowed money of the BORROWER, or the Guarantor, if the effect of such default is to accelerate the maturity of such Indebtedness or to permit the holder thereof to cause such Indebtedness to become due prior to its stated maturity, or any such Indebtedness shall not be paid when due; or (l) if there shall occur any default or Event of Default, or any condition or event which with the giving of notice or the passage of time, or both, would become an Event of Default, under, pursuant to or with respect to any Indebtedness or loan transaction or any document or instrument evidencing, securing, guaranteeing, or relating to any Indebtedness or loan transaction of BORROWER. 21 22 Section 8.02 RIGHTS UPON DEFAULT. Upon the occurrence of any one or more of the above Events of Default and at any time thereafter, such default not having previously been cured, BANK shall have, in addition to all other rights and remedies, the remedies of a secured party under the Alabama Uniform Commercial Code, regardless whether the Code has been enacted in the jurisdiction where rights or remedies are asserted, including without limitation, the right to take possession of the Collateral, and for that purpose BANK may, so far as BORROWER or Guarantor can give authority therefor, enter upon any premises on which the Collateral may be situated and remove the same therefrom or store the same on the premises pending disposition. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, BANK shall give to BORROWER at least five (5) days' prior written notice of the time and place of any public sale of Collateral or of the time after which any private sale or any other intended disposition is to be made. Upon fifteen (15) days' prior written notice to BORROWER, BANK may at any time in its discretion transfer any securities or other property constituting Collateral into its own name or that of its nominee and receive the income thereon and hold the same as security for Liabilities or apply it on principal or interest due on Liabilities. Insofar as Collateral shall consist of insurance policies, instruments, chattel paper, choses in action or the like, BANK may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose or realize upon Collateral, as BANK may determine, whether or not Liabilities or Collateral are then due, and for the purpose of realizing BANK'S rights therein, BANK may receive, open and dispose of 22 23 mail addressed to BORROWER and endorse notes, checks, drafts, money orders, documents of title or other evidences of payment, shipment or storage or any form of Collateral on behalf of and in the name of BORROWER. The enumeration of the foregoing rights is not intended to be exhaustive, and the exercise of any right shall not preclude the exercise of any other rights, all of which shall be cumulative. As against the obligations secured hereby, BORROWER hereby expressly waives all claims and all rights to claim any exemptions, both as to personal and real property, allowed or allowable under the Constitution or laws of the United States, the State of Alabama or any other jurisdiction. Any notice to BORROWER of sale, disposition or other intended action by BANK, required by law to be given to BORROWER, sent to BORROWER at the address of BORROWER shown hereinabove or at such other address of BORROWER as may from time to time be shown on BANK'S records, at least five days prior to such action, shall constitute reasonable notice to BORROWER. Section 8.03 POWER OF ATTORNEY. BORROWER hereby requests, authorizes and empowers Billy V. Houston, or any other officer or employee of BANK who may be designated by BANK for that purpose to make, execute and file, any financing statements, documents or certificates of title, or other documents, and to take any and all such other steps as BANK deems necessary or desirable to perfect and continue the perfection of BANK'S security interest in the Collateral. No failure by BANK to exercise for any period the powers herein granted shall operate or be construed as a waiver of BANK'S rights thereafter to exercise such authorizations and powers. The foregoing power of attorney is coupled with an interest and shall be irrevocable so 23 24 long as any Liabilities or Indebtedness hereunder, under the Note, or under the other Loan Documents remain outstanding. Section 8.04 SET OFF. BANK hereby is given a continuing lien as security for BORROWER'S obligations hereunder upon any and all moneys, securities and other property of BORROWER, and the proceeds thereof, now or hereafter held or received by or in transit to BANK from or for BORROWER, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and also upon any and all deposit balances, general or special, and credits of BORROWER with, and any and all claims of BORROWER against BANK at any time existing, and upon an Event of Default hereunder, BANK may apply or set off the same against the Liabilities hereby secured. ARTICLE IX MISCELLANEOUS Section 9.01 WAIVERS. BORROWER hereby waives demand, notice, protest, notice of acceptance of this Agreement, notice of loans made, credit extended, Collateral received or delivered or other action taken in reliance hereon and all other demands and notices of any description. With respect both to Liabilities and Collateral, BORROWER assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of any Collateral which may now or hereafter secure Liabilities, to the addition or release of any party or person primarily or secondarily liable, to the acceptance of partial payments hereon and to the settlement, compromise or adjustment of any thereof, all 24 25 in such manner and at such time or times as BANK may in its sole discretion deem advisable. BANK shall have no duty as to the collection or protection of any Collateral or any income thereon, nor as to the preservation of rights against prior parties, nor as to the preservation of any rights pertaining thereto beyond the safe custody thereof. BANK may exercise its rights with respect to any Collateral without resorting or regard to other Collateral or sources of reimbursement for Liabilities. BANK shall not be deemed to have waived any of its rights upon or under Liabilities or Collateral unless such waiver is in writing and signed by BANK. No delay or omission on the part of BANK in exercising any right shall operate as a waiver of such right or any other right. A waiver on any one occasion shall not be construed as a bar to or waiver of any right on any future occasion. All rights and remedies of BANK with respect to Liabilities or Collateral, whether evidenced hereby or by any other instrument, shall be cumulative and may be exercised separately or concurrently. Section 9.02 EXPENSES; PROCEEDS OF COLLATERAL. BORROWER shall pay to BANK on demand any and all expenses, including reasonable attorneys' fees, incurred or paid by BANK in collecting or otherwise protecting or enforcing or attempting to collect, protect or enforce its rights upon or under Liabilities or Collateral. After deducting all of said expenses, the residue of any proceeds of collection or sale of Liabilities or Collateral shall be applied to the payment of principal or interest on Liabilities, in such order of preference as BANK may determine with proper allowance for interest on Liabilities not then due being made, and any excess shall be returned to BORROWER and BORROWER shall remain liable for any deficiency. 25 26 Section 9.03 AMENDMENT. No modification or amendment of this Agreement shall be effective unless placed in writing and duly executed by the BORROWER and the BANK. By guaranteeing the Liabilities described herein, Guarantor expressly agrees that BORROWER and BANK may, without notice to or consent by Guarantor, modify or amend this Agreement. Neither party shall be obligated in any respect to extend the termination date hereof. Section 9.04 GENERAL. Any demand upon or notice that BANK may elect to give to BORROWER and any notice required to be given to BANK shall be effective three (3) days after the same has been deposited in the United States mail, first class with postage prepaid and addressed to such party at the following addresses, as applicable, if such party has notified BANK in writing of a change of address, to the last address so notified: IF TO BORROWER: Boyd Brothers Transportation Company, Inc. Route 1, Box 40 Clayton, Alabama 36016 IF TO BANK: Compass Bank 223 E. Broad Street Eufaula, Alabama 36027 Attention: City Executive with a copy to: Don Owens Vice President - Loan Administration Compass Bank P. O. Box 10566 Birmingham, Alabama 35296 Demands or notices addressed to BORROWER'S address at which BANK customarily communicates with BORROWER, shall also be effective. If at any time or times by 26 27 assignment or otherwise BANK transfers any of the Liabilities or Collateral therefor, such transfer shall include BANK'S power and rights under this Agreement with respect to the Liabilities or Collateral transferred, and the transferee shall become vested with said powers and rights whether or not they are specifically referred to in the transfer. If and to the extent BANK retains any of the Liabilities or Collateral, BANK will continue to have the rights and powers herein set forth with respect thereto. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors, assigns, heirs, personal representatives, and estates; provided, however, that BORROWER shall not assign or delegate any of its rights or obligations hereunder without the express written consent of BANK. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but when taken together shall constitute one agreement. This Agreement is being executed under the seal of the parties hereto and is intended to constitute and have effect as a sealed instrument according to law. Section 9.05 GOVERNING LAW; JURISDICTION. This Agreement, the Note, the Security Agreement and the other Loan Documents, and the rights and the obligations of the parties hereunder and thereunder, shall be governed by and be construed in accordance with the laws of the State of Alabama. BORROWER acknowledges that the negotiation of the provisions of the Note, this Agreement, the Security Agreement, and all other Loan Documents took place in the State of Alabama; that all of such documents were executed in Jefferson County, Alabama, or if executed elsewhere, will be or were delivered to BANK in said county and state subject to BANK'S 27 28 acceptance thereof in Birmingham, Jefferson County, Alabama, and that all of such documents were or will be executed and delivered to BANK to induce BANK to extend the Loan to BORROWER. BANK shall be under no obligation to give BORROWER notice of acceptance of any Loan Documents for said documents and instruments to become effective. BORROWER acknowledges further that the negotiation, execution and delivery of this Agreement, the Note, the Security Agreement and the other Loan Documents constitutes the transaction of business within the State of Alabama and that any cause of action arising under any of said documents will be a cause of action arising from such transaction of business. BORROWER hereby submits itself to jurisdiction in the State of Alabama for any cause of action or action arising out of or in connection with this Agreement, the Note, or any of the other Loan Documents, and agrees that venue for any such action shall be in Jefferson County, Alabama, and waives any and all rights under the laws of any state to object to jurisdiction or venue within Jefferson County, Alabama. Notwithstanding the foregoing, nothing contained in this Section 9.05 shall prevent BANK from bringing any action or exercising any rights against BORROWER, any security for the Loan or against any of BORROWER'S properties in any other state or jurisdiction. Initiating any such action or proceeding or taking any such action in any other state shall in no event constitute a waiver by BANK of any of the foregoing. Section 9.06 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All covenants, agreements, representations, and warranties made herein and in the certificates delivered pursuant hereto shall survive the making by the BANK of the Loan herein 28 29 contemplated and the execution and delivery to the BANK of the Note evidencing such Loan and shall continue in full force and effect so long as the Note is outstanding and unpaid. 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 which are contained in this Agreement shall bind the successors and assigns of BORROWER and inure to the benefit of the successors and assigns of the BANK; provided, however, that BORROWER shall not assign or delegate this Agreement, the Loan, or its rights, duties, or obligations hereunder without the written consent of BANK. Section 9.07 NO CONFLICT, ETC. No provision of this Agreement or of the Note or the other Loan Documents shall be deemed in conflict with any other provision thereof, and the BORROWER acknowledges that no such provisions or any interpretation thereof shall be deemed to diminish the rights of the BANK, any assignee, or the holder or holders of the Note under the terms and conditions or any other provisions thereof. BANK may at its option exhaust its remedies hereunder, under the Note, and under the other Loan Documents, either concurrently or independently, and in such order as it may determine. Section 9.08 HEADINGS; UNDER SEAL; ENTIRE AGREEMENT; NO THIRD PARTY, BENEFICIARY. Article and section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement or be used to construe any provision hereof or for any other purpose. This Agreement is intended to be under the seal of all parties hereto and to have the effect of a sealed 29 30 instrument in accordance with the law. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding between the parties, supersedes all prior agreements and understandings related to the Loan, and may not be amended except by written agreement between BORROWER and BANK. This Agreement shall not benefit, and may not be relied upon by, any person other than the persons who sign this Agreement. There are no third party beneficiaries to this Agreement or any negotiations, statements, or representations related to this Agreement. Section 9.09 NO PARTNERSHIP OR JOINT VENTURE. Notwithstanding anything to the contrary herein contained or implied, BANK, by this Agreement, or by any action pursuant thereto or hereto, shall not be deemed a partner, joint venturer, or participant in the venture with BORROWER, and BORROWER hereby indemnifies and agrees to defend and hold BANK harmless (including the payment of reasonable attorneys' fees) from any and all damages resulting from such a construction of the parties' relationship. The requirements herein, and the restrictions imposed in this Agreement, are for the sole protection and benefit of BANK. Section 9.10 INDEMNIFICATION. BORROWER shall indemnify and hold harmless BANK from and against any and all claims, charges, losses, expenses and costs, including reasonable attorneys' fees, resulting from any claims, actions or proceedings in connection with the execution, delivery and performance of this Agreement, the Note, and other Loan Documents. The indemnification provided in this section shall survive the payment in full of the Loan. 30 31 IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement to be duly executed by their duly authorized officers as of the date first set forth above. BORROWER: WITNESS: BOYD BROTHERS TRANSPORTATION COMPANY, INC. /s/ Jeanette Wilson By: /s/ Richard Bailey - -------------------------------- ----------------------------------- Its: CFO ------------------------------- WITNESS: BANK: COMPASS BANK /s/ Jeanette Wilson By: /s/ Billy V. Houston - -------------------------------- ----------------------------------- Its: Billy V. Houston - CEO ------------------------------- 31 32 COMPASS BANK SECURITY AGREEMENT KNOW ALL MEN BY THESE PRESENTS: That WHEREAS, BOYD BROTHERS TRANSPORTATION COMPANY, INC., an Alabama corporation ("DEBTOR") is, contemporaneously with the execution hereof, becoming indebted to COMPASS BANK (the "BANK"), on loan in the principal amount of FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00), or so much thereof as may be advanced under the Note as hereafter defined (the "LOAN"), as evidenced by a Promissory Note of even date herewith and by additional Promissory Notes executed subsequent to the date hereof, payable to Bank with interest thereon and as provided therein (each a "NOTE" and collectively, the "NOTES"), and as secured by a Credit and Security Agreement from Debtor to Bank (the "LOAN AGREEMENT") and the other Loan Documents defined therein (the "LOAN DOCUMENTS"); and WHEREAS, Debtor may hereafter become indebted to Bank or a subsequent holder of this Security Agreement on loans or otherwise (said Bank and any subsequent holder of this Security Agreement being referred to herein as "SECURED PARTY"); and WHEREAS, Debtor agrees to make this Security Agreement (the "AGREEMENT") to further secure said Notes and any and all other future or additional Liabilities of Debtor to Secured Party (said Liabilities, as defined in paragraph 5, being referred to herein as "LIABILITIES"). NOW, THEREFORE, the undersigned Debtor, in consideration of making the Loan, and to secure the prompt payment of same, with the interest thereon, and any extensions, modifications, or renewals of same, and any and all Liabilities of Debtor to Secured Party, and further to secure the performance of the covenants, conditions, and agreements hereinafter set forth and set forth in the Note, and as may be set forth in the Loan Agreement and other Loan Documents or other instruments evidencing or securing other Liabilities of Debtor to Secured Party, and further to secure any and all charges incurred by Secured Party on account of Debtor, including but not limited to attorney's fees, does hereby agree as follows: 1. DEFINITIONS. All terms used herein which are defined in the Alabama Uniform Commercial Code (the "CODE") shall have the same meaning herein as in the Code unless otherwise indicated herein. 2. INCORPORATION BY REFERENCE. All of the terms and provisions of the Note are hereby incorporated by reference as though set forth in full herein. 33 3. SECURITY INTERESTS. Debtor hereby grants to Secured Party title to and a security interest in the Collateral described in paragraph 4 hereof to secure the performance and payment of the Liabilities described in paragraph 5 hereof. 4. COLLATERAL. As security for the payment and performance of all Liabilities of the Debtor, Debtor grants Secured Party title to and a security interest in the following described property of the Debtor (herein collectively referred to as the "COLLATERAL"): 4.01 EQUIPMENT. The items of personal property described on Exhibit "A" hereto and all equipment and other personal property of every nature whatsoever now or hereafter owned by the Debtor and purchased with the proceeds of the Loan, wheresoever the same may be located. 4.02 PROCEEDS. Proceeds (including insurance, contract and tort claims) and products of all of the foregoing Collateral. 5. LIABILITIES: "LIABILITIES" of Debtor, as used herein, shall mean: 5.01 NOTES. The Notes, with interest as therein provided, and all extensions, modifications, or renewals thereof. 5.02 OTHER INDEBTEDNESS. Any and all other obligations, indebtedness, and liabilities of the Debtor to the Secured Party, whether joint or several, due or to become due, liquidated or unliquidated, now existing or hereafter arising, absolute or contingent, direct or indirect, and all extensions, modifications, and renewals thereof, and whether incurred or given as maker, endorser, guarantor, surety, or otherwise. 6. REPRESENTATIONS, WARRANTIES, AND COVENANTS. The Debtor hereby represents, warrants, and covenants as follows: 6.01 NO ADVERSE LIENS. Except for any security interest specifically set forth on an addendum attached hereto, and except for the security interest granted hereby, the Debtor is or (with respect to Collateral not presently owned by Debtor will be) the lawful owner of all Collateral free from any adverse lien, security interest, or encumbrance, and shall have full right to pledge, sell, assign, or transfer the same to Secured Party. Debtor will defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest therein. 2 34 6.02 FINANCING STATEMENTS. No financing statement covering any Collateral or any proceeds thereof is on file in any public office, except for financing statements specifically set forth on an addendum attached hereto, if any, and except for the financing statements executed by Debtor and Secured Party. At the Secured Party's request, the Debtor will join with Secured Party in executing one or more financing statements pursuant to the Code in form satisfactory to the Secured Party, and will pay the cost of filing the same in all public offices wherever filing is deemed by the Secured Party to be necessary or desirable. The Debtor authorizes the Secured Party to prepare and to file financing statements covering the Collateral signed only by the Secured Party and to sign the Debtor's signature to such financing statements in jurisdictions where Debtor's signature is required. The Debtor promises to pay the Secured Party the fees incurred in filing the financing statements, which fees shall become part of the Liabilities secured by this Agreement. 6.03 INSPECTION OF COLLATERAL AND RECORDS. The Secured Party may examine and inspect the Collateral and records and documents related to the Collateral at any time, wherever located. 6.04 ASSIGNMENT OR SALE. Debtor, its agents, servants, or employees will not sell, assign, or offer to sell or assign or otherwise transfer the Collateral, either in whole or in part, or any interest therein without the written consent of the Secured Party. 6.05 PAYMENT OF TAXES AND INSURANCE. Debtor will pay promptly all taxes and assessments upon or with respect to the Collateral. Debtor hereby authorizes Secured Party to discharge taxes, assessments, liens, security interests, or other encumbrances at any time levied or placed on the Collateral, to pay for any insurance on the Collateral required to be maintained by Debtor hereunder, and to pay for, make, or provide for any maintenance, repair, or preservation of the Collateral as the Secured Party shall deem reasonably necessary to preserve its interests; provided, however, that Secured Party shall be under no obligation to do so. Debtor agrees to reimburse Secured Party on demand with interest at the rate set forth in the Note for any payment made or any expense incurred by Secured Party pursuant to the foregoing authorization. Payments made or expenses incurred by Secured Party pursuant to the foregoing authorization shall be included in the Liabilities secured hereunder. 3 35 6.06 ADDITIONAL REPRESENTATIONS OF DEBTOR (COLLATERAL). With respect to all of the Collateral: 6.06(a) Such Collateral is used or bought primarily for business purposes. 6.06(b) Such Collateral is being acquired with the proceeds of the Note. 6.06(c) All such Collateral will be kept at the address of Debtor shown below Debtor's signature. Debtor will promptly notify Secured Party of any change in the location of the Collateral. Except for transactions in the ordinary course of Debtor's trucking business, Debtor, its agents or employees will not remove such Collateral from said location without the prior written consent of the Secured Party. 6.06(d) If certificates of title are issued or outstanding with respect to such Collateral, the Debtor will cause the Secured Party's interest to be properly noted thereon. 6.06(e) Debtor has and will maintain insurance on such Collateral to the extent and against such hazards and liabilities as is commonly done by companies of like nature, similarly situated, including but not limited to public liability, theft, fire (with extended coverage) insurance, and in the case of motor vehicles, collision insurance, all containing such terms and for such periods as may be reasonably satisfactory to the Secured Party; provided, however, that Debtor may self-insure the Collateral against physical damage up to an aggregate of $500,000 and provide insurance against catastrophic loss thereof in excess of such self-insurance amount. All such insurance will be maintained with insurance companies reasonably acceptable to the Secured Party and will be payable to the Secured Party and to the Debtor as their interests may appear. All insurance policies shall provide for a minimum of ten (10) days' written cancellation notice to the Secured Party and, at the Secured Party's request, all policies shall be delivered to and held by the Secured Party. If at any time the Secured Party is of the opinion that the Debtor's insurance coverage is inadequate, the Debtor will, within ten (10) 4 36 days after written request by the Second Party, obtain such insurance as the Secured Party shall reasonably request. Secured Party is hereby made attorney-in-fact for Debtor to obtain, adjust, and settle, in its sole discretion, such insurance and to endorse any drafts or checks issued in connection with such insurance. 6.06(f) Debtor agrees to prevent and protect against any waste, damage, or destruction of such Collateral, and Debtor will maintain the same in as good condition as it now is in, ordinary and reasonable wear and tear excepted. 6.07 NAME OF DEBTOR. Debtor's name has always been as set forth on the first page of this Agreement, except as otherwise disclosed in writing to the Secured Party. Debtor will promptly advise the Secured Party in writing of any change in Debtor's name. 7. SET OFF. The Secured Party is hereby given a continuing lien as additional security for the Liabilities hereunder upon any and all monies, securities, and other property of Debtor, and the proceeds thereof, now or hereafter held or received by or in transit to the Secured Party from or for Debtor, whether for safekeeping, custody, pledge, transmission, collection, or otherwise, and also upon any and all deposit balances (general or special) and credits of Debtor with, and any and all claims of Debtor against, the Secured Party at any time existing, and upon an event of default hereunder, the Secured Party may apply or set off the same against the Liabilities hereby secured. 8. EVENTS OF DEFAULT. Debtor shall be in default under this Agreement upon the happening of any of the following events or conditions which is not completely cured within any specific time period provided in any Loan Document: 8.01 Any Event of Default or failure to perform any obligation, covenant, or liability contained or referred to herein, in the Notes, the Loan Agreement, or any other Loan Document. 8.02 Assignment, transfer, or encumbrance or any unreimbursed loss, theft, damage or destruction to or of any part of the Collateral (except for sales or encumbrances of Collateral expressly authorized by the terms of this Agreement), or any levy, seizure, injunction, or attachment thereon. 9. RIGHTS AND REMEDIES UPON DEFAULT. Upon occurrence of any of the above events of default, the Secured Party shall have the following rights which shall be cumulative with all other rights and remedies of Secured Party: 5 37 9.01 ACCELERATION AND OTHER RIGHTS. The right to declare all Liabilities secured hereby to be immediately due and payable without notice to or demand upon the Debtor or any other person. The Secured Party, in addition to any remedies it may exercise under this Security Agreement, the Note, under other documents executed in connection with the Liabilities secured hereby, or under applicable law, may immediately and without demand, exercise any and all of the rights of a secured party upon default under the Alabama Uniform Commercial Code, all of which shall be cumulative. Such rights shall include, without limitation: 9.01(a) The right to take possession of the Collateral without judicial process and to enter upon any premises where the Collateral may be located for the purposes of taking possession of, securing, removing, and/or disposing of the Collateral without interference from the Debtor and without any liability for rent, storage, utilities or other sums. 9.01(b) The right to sell, lease, or otherwise dispose of any or all of the Collateral, whether in its then condition or after further processing or preparation, at public or private sale. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Secured Party shall give the Debtor at least five (5) days' prior notice of the time and place of any public sale of the Collateral or of the time after which any private sale or other intended disposition of the Collateral is to be made, all of which the Debtor agrees shall be reasonable notice of any sale or disposition of the Collateral. 9.01(c) Upon request of Secured Party, Debtor shall assemble and make the Collateral available to Secured Party at a place reasonably convenient to Debtor and Secured Party. 9.02 ATTORNEY-IN-FACT . To effectuate the rights and remedies of the Secured Party upon default, Debtor does hereby irrevocably appoint Secured Party attorney-in-fact for the Debtor, with full power of substitution to, after default of Debtor, sign, execute, and deliver any and all instruments and documents and do all acts and things to the same extent as Debtor could do, and to sell, assign, and transfer any Collateral to Secured Party or any other party. 6 38 9.03 RECEIVER. Secured Party shall have the right to apply for and have a receiver appointed by a court of competent jurisdiction, in connection with any action taken by the Secured Party to enforce its rights and remedies hereunder, to manage, protect, and preserve the Collateral and continue the business of the Debtor, to collect all revenues and profits thereof, and to apply the same to the payment of all expenses and other charges of such receivership, including but not limited to the compensation of the receiver, and to the payment of Liabilities secured hereby, until a sale or other disposition of such Collateral shall be finally made and consummated, or until all Liabilities secured hereby shall have been paid. 9.04 PROCEEDS OF SALE; DEFICIENCY. The proceeds of any sale or other disposition of Collateral by the Secured Party shall be applied first to the expenses (including, but not limited to legal expenses and reasonable attorneys' fees) of retaking, holding, storing, and processing the Collateral and preparing the Collateral for sale, selling and the like and collecting or attempting to collect the Liabilities secured by this Agreement; then to the satisfaction of the Liabilities secured hereby with the application of such proceeds to particular Liabilities or to interest or principal as the Secured Party, in its sole discretion, shall determine; and the balance, if any, to be paid to Debtor or to be paid as otherwise provided by Law. The enumeration of the foregoing rights is not intended to be exhaustive, and the exercise of any right shall not preclude the exercise of any other rights, all of which shall be cumulative. Debtor agrees that any delay by the Secured Party in exercising any right or remedy hereby granted shall not be construed as a waiver by the Secured Party of any of its rights or remedies hereunder. Secured Party may permit the Debtor to remedy any default, but such shall not be a waiver of the default so remedied, and Secured Party's waiver of any default shall not be a waiver of any subsequent or prior defaults. 10. WAIVERS. In addition to any other waivers, as set forth herein or in the Note, against the Liabilities secured hereby, Debtor expressly waives, to the extent allowed by law, all claims and rights to claim any exemptions allowed or allowable under the Constitution or laws of the United States, the State of Alabama, or any other jurisdiction. All rights and remedies of Secured Party hereunder or with respect to Liabilities or Collateral shall be cumulative, and in addition to any other right available to Secured Party by statute or at law or in equity, and may be exercised singularly or concurrently. In the event that any one or more of the terms or provisions of this Agreement or of the Note shall be invalid, illegal, or unenforceable in any respect, the validity of the remaining terms or provisions shall in no way be affected, prejudiced or disturbed thereby. 7 39 11. ASSIGNMENT OF LIABILITIES. If at any time or times by sale, assignment, negotiation, pledge, or otherwise, Secured Party transfers any or all of the Liabilities, such transfer shall, unless otherwise specified in writing, carry with it Secured Party's rights and remedies under this Agreement with respect to such Liabilities transferred, and the transferee shall become vested with such rights and remedies whether or not they are specifically referred to in the transfer. If and to the extent Secured Party retains any of the Liabilities, Secured Party shall continue to have the rights and remedies herein set forth with respect thereto. 12. NOTICES. Any demand upon or notice to Debtor that the Secured Party may elect to give shall be effective if hand delivered to Debtor, deposited in the United States mail, postage prepaid, return receipt requested, or delivered to a telegraph company addressed to Debtor at the address shown below Debtor's signature, or if Debtor has notified the Secured Party in writing of a change of address, to Debtor's last address so notified. Demands or notices addressed to Debtor's address at which the Secured Party customarily communicates with Debtor shall also be effective. 13. AGREEMENT UNDER SEAL. This Agreement is given under the seal of all persons signing as and for the Debtor. It is intended by Debtor and all persons signing for Debtor that this instrument is and shall constitute a sealed instrument according to law. 14. HEADINGS. The headings of the sections, paragraphs, and subdivisions of this Agreement are for convenience of reference only, are not to be considered a part hereof, and shall not limit or otherwise affect any of the terms hereof. 15. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall inure to and bind not only the parties hereto, but also their respective heirs, executors, administrators, successors, and assigns. 16. APPLICABLE LAW. This Agreement, the Note, and the Loan Documents, except as may otherwise be provided therein, shall be construed and governed, and their validity determined, according to the laws of the State of Alabama. 8 40 IN WITNESS WHEREOF, the undersigned Debtor and Secured Party have caused this Agreement to be duly executed and delivered effective on the 28 day of February ___, 1996. DEBTOR: ATTEST: BOYD BROTHERS TRANSPORTATION COMPANY, INC. By: /s/ Gail Cooper By: /s/ Richard Bailey - -------------------------------- ----------------------------------- Its: Secretary Its: CFO ------------------------- ------------------------------- Debtor's address: Route 1, Box 40 Clayton, Alabama 36016 WITNESS: SECURED PARTY: COMPASS BANK /s/ Jeanette Wilson By: /s/ Billy V. Houston - -------------------------------- ----------------------------------- Mary Williams Its: Billy V. Houston - CEO ------------------------------- Secured Party's address: 223 E. Broad Street Eufaula, Alabama 36027 9 41 STATE OF ALABAMA ) COUNTY OF Barbour ) I, the undersigned, a Notary Public in and for said County in said State, hereby certify that Richard Bailey, whose name as CFO of BOYD BROTHERS TRANSPORTATION COMPANY, INC., an Alabama corporation, is signed to the foregoing instrument, and who is known to me, acknowledged before me on this day that, being informed of the contents of the above and foregoing instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. Given under my hand and official seal of office this 28 day of February, 1996. /s/ Elaine Gray ---------------------------------- Notary Public [NOTARIAL SEAL] My commission expires: 4-27-98 ----------- STATE OF ALABAMA ) COUNTY OF Barbour ) I, the undersigned, a Notary Public in and for said County in said State, hereby certify that Billy V. Houston, whose name as CEO of COMPASS BANK, an Alabama banking corporation, is signed to the foregoing instrument, and who is known to me, acknowledged before me on this day that, being informed of the contents of the above and foregoing instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. Given under my hand and official seal of office this 28 day of February, 1996. /s/ Jeanette Wilson ---------------------------------- Notary Public [NOTARIAL SEAL] My commission expires: 7-23-96 ------- 10 EX-10.2 3 CREDIT AND SECURITY AGREEMENT 1 EXHIBIT 10.2 CREDIT AND SECURITY AGREEMENT THIS CREDIT AND SECURITY AGREEMENT is being executed and entered into as of the 29th day of May, 1998, by and among BOYD BROTHERS TRANSPORTATION COMPANY, INC., an Alabama corporation, which conducts its business at Route 1, Box 40, Clayton, Alabama 36016 ("BORROWER", whether one or more) and COMPASS BANK, an Alabama state banking corporation, 223 E. Broad Street, Eufaula, Alabama 36027 ("BANK"). PREAMBLE BORROWER has applied to BANK for, and BANK has agreed, upon the terms and subject to the conditions herein set forth, to extend to BORROWER, a loan in the amount of up to FOUR MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($4,500,000.00) (the "LOAN") the proceeds of which are to be made available to Borrower for use between the date hereof and May 29th, 1999 (the "ADVANCE PERIOD") for BORROWER to finance the purchase of tractors and flatbed trailers to be used in BORROWER'S trucking business (collectively, the "TRUCK EQUIPMENT"), including Forty Five (45) tractors and Fifty Five (55 ) new 1998 Utility 45-foot flatbed trailers. AGREEMENT NOW, THEREFORE, in consideration of the premises, the mutual obligations of the parties as contained herein, and for other good and valuable consideration, the 2 receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound hereby, agree as follows: ARTICLE I DEFINITIONS Section 1.01 "BORROWER'S LOAN ACCOUNT" means the account on the books of BANK in which will be recorded loans and advances made by BANK to BORROWER pursuant to this Agreement, payments made on such loans and other appropriate debits and credits as provided by this Agreement. Section 1.02 "COLLATERAL" means any and all property of BORROWER in which BANK now has, by this Agreement, or by any other Loan Document acquires, or hereafter acquires, a security interest. Section 1.03 "EQUIPMENT" means all tangible personal property including, without limitation, machinery, furniture and furnishings now owned or hereafter acquired for use primarily in the business of BORROWER. Section 1.04 "INDEBTEDNESS" means all indebtedness, liabilities and obligations, matured or unmatured, liquidated or unliquidated, direct or indirect, primary, secondary, absolute or contingent, and whether arising by contract, operation of law or otherwise, including without limitation, obligations to creditors (including without limitation BANK), for borrowed money or the deferred purchase price of property or services, and all obligations under real property leases and under leases of personal property. 2 3 Section 1.05 "INSOLVENCY" of BORROWER or any other person means that there shall have occurred with respect to that person one or more of the following events: dissolution, termination of existence, insolvency, business failure, appointment of a receiver of any part of the property of, assignment for the benefit of creditors by, or the filing of a petition in bankruptcy or the commencement of any proceedings under any bankruptcy or insolvency laws, or any laws relating to the relief of debtors, readjustment of indebtedness, reorganization, composition or extension, by or against such person, or if any action shall be taken for the purpose of effecting any of the foregoing. Section 1.06 "LIABILITIES" means any and all liabilities of BORROWER to BANK of every kind and description, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, regardless of how they arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument. "Liabilities" includes obligations to perform acts and refrain from taking action as well as obligations to pay money. Section 1.07 "LOAN DOCUMENTS" means this Agreement, the Note (as defined in Section 2.04 hereof), the Security Agreement from BORROWER to BANK dated as of the date hereof, and all other documents and instruments evidencing, securing, guaranteeing, relating to, or executed or delivered in connection with the Loan. Section 1.08 UNDEFINED TERMS. Except as otherwise defined in this Agreement, whether in this Article I, or in a parenthetical or other reference in this 3 4 Agreement, accounting terms used herein shall have the meanings given to them under generally accepted accounting principles, and terms defined in the Alabama Uniform Commercial Code, as the same may be amended from time to time, shall have the meanings given them in the Code. ARTICLE II THE LOAN Section 2.01 LOAN. Subject to the terms and conditions hereof, from and after the date hereof and until May 29th, 1999, and so long as BANK has not demanded payment in full under the Note and BORROWER shall not be in default hereunder or with respect to any other Liability to BANK, the BANK will make advances under the Loan to BORROWER, or directly to BORROWER'S suppliers, up to a maximum aggregate principal amount of $4,500,000 to pay for BORROWER'S purchase of the Truck Equipment to be used as Equipment in BORROWER'S business ("ADVANCES"). BANK may, but shall not have any obligation to, make any Advances hereunder at any time after or during which an Event of Default (as defined herein) shall have occurred or exists. Section 2.02 BORROWER'S LOAN ACCOUNT. All such Advances shall be entered as debits in the BORROWER'S Loan Account. BANK may, if it so elects, require each request for any Advance pursuant to this Agreement to be accompanied by certification of the number, identity and continued use of Truck Equipment purchased with the proceeds of the Loan, in form and substance satisfactory to BANK. 4 5 BANK shall also record in the BORROWER'S Loan Account, in accordance with customary accounting practice, all other charges, expenses and other items properly chargeable to BORROWER; all payments made by BORROWER on account of Indebtedness evidenced by BORROWER'S Loan Account; and other appropriate debits and credits. The debit balance of BORROWER'S Loan Account shall reflect the amount of BORROWER'S Indebtedness to BANK from time to time by reason of Advances and other appropriate charges hereunder. Section 2.03 USE OF LOAN PROCEEDS. The Loan proceeds shall be used by BORROWER to finance its purchase of the Truck Equipment. Section 2.04 NOTE. Each Advance under the Loan shall be evidenced by a separate promissory note (collectively, the "NOTE"), in form and substance acceptable to BANK. Each Note shall bear interest from the date of the Advance thereunder at the rate and calculated in the manner provided therein, and shall be otherwise payable as set forth therein; provided, however, that in the event that Borrower's demand deposit balances at Bank shall be less than $200,000.00 at any time, the applicable rate under each Note shall be increased by one-fourth of one percentage point (1/4%) over the applicable rate stated therein. Dates and amounts of Advances, and payments received by BANK, shall be evidenced by entries upon the books and records of BANK, and shall be reflected in monthly statements, which shall be conclusive evidence of such dates and amounts of Advances, and payments. Section 2.05 DURATION; EXTENSION. Availability of funds under the Loan shall terminate on May 29, 1999; provided, however, that the parties recognize that 5 6 they may wish to extend the expiration date by mutual agreement to be negotiated prior to such expiration date. It is understood that any extension may require a revision of certain provisions of this Agreement. ARTICLE III SECURITY FOR LOAN Section 3.01 SECURITY INTEREST OF BANK IN COLLATERAL. As security for the payment and performance of all Liabilities, BANK shall have, and is hereby granted a continuing security interest in the following Collateral, whether now owned or existing or hereafter created, acquired or arising and wheresoever located: (a) (i) The Truck Equipment described on Exhibit "A" hereto and (ii) all Truck Equipment or other Equipment and other personal property of BORROWER purchased with the proceeds of the Loan; (b) All goods, instruments, certificates or other documents of title, policies and certificates of insurance, securities, chattel paper, deposits, cash or other property owned by BORROWER or in which BORROWER has an interest which are now or may hereafter be in the possession of BANK or as to which BANK may now or hereafter control possession by documents of title or otherwise; (c) Proceeds and products (including tort and insurance claims) of all of the foregoing. Section 3.02 AFTER-ACQUIRED PROPERTY. No submission by BORROWER is necessary to vest in BANK a security interest in hereafter created or acquired 6 7 Collateral, but, rather such title and security interest shall vest in BANK immediately upon the creation or acquisition of any item of Collateral, without the necessity for any other or further action by BORROWER or BANK. Section 3.03 OTHER APPLICABLE LAW. If, by reason of location of Collateral or otherwise, the creation, validity or perfection of security interests provided for herein are governed by the law of a jurisdiction other than Alabama, BORROWER shall take such steps and execute and deliver such papers as BANK may from time to time request to comply with the Uniform Commercial Code, the Uniform Trust Receipts Act, the Factors Lien Act or other laws of another state or states. ARTICLE IV REPRESENTATIONS AND WARRANTIES To induce BANK to enter into this Agreement, BORROWER represents and warrants as follows: Section 4.01 ORGANIZATION AND AUTHORITY. Each BORROWER (a) is an Alabama corporation which is duly organized, validly existing and in good standing under the laws of the State of Alabama; (b) has all necessary corporate power and authority, and possesses all licenses and permits as are required for BORROWER to own its assets and conduct its business as now conducted or presently proposed to be conducted; (c) has no subsidiaries other than Boyd Brothers Truck and Tractor; and (d) is duly qualified and in good standing in the State of Alabama and in every other 7 8 jurisdiction wherein its ownership or leasing of assets or conduct of its business makes such qualification necessary. Section 4.02 BORROWER'S AUTHORIZATION. The execution, delivery and performance of this Agreement, the Note, the Security Agreement, and the other Loan Documents, the granting of the power of attorney under Section 8.03 hereof, and the borrowing hereunder and under the Note, are within BORROWER'S corporate powers and authority, have been duly and validly authorized by all necessary corporate and other action including, without limitation, any necessary shareholder action, are not in contravention of law or the terms of BORROWER'S Articles of Incorporation, ByLaws or other incorporation documents, or of any indenture, agreement or undertaking or any law, regulation, or order to which BORROWER is a party or by which it is bound. Section 4.03 ENFORCEABILITY. Upon execution and delivery hereof and thereof, this Agreement, the Note, the Security Agreement, and the other Loan Documents will constitute valid and binding obligations of the respective parties thereto, enforceable in accordance with their respective terms. Section 4.04 OWNERSHIP OF COLLATERAL. Except for the security interests granted in connection herewith, or heretofore granted to BANK, BORROWER is, and as to assets to be acquired after the date hereof, shall be, the owner of all Collateral with respect to which it grants a security interest hereunder, free from any lien, security interest or encumbrance, and BORROWER shall defend its assets against all 8 9 claims and demands of all persons at any time claiming the same or any interest therein. Section 4.05 OTHER COLLATERAL. At the time BORROWER pledges, sells, assigns, or transfers to BANK any instrument, document of title, security, chattel paper or other property or any interest therein, BORROWER shall be the lawful owner thereof and shall have good right to pledge, sell, assign or transfer the same; none of such property shall have been pledged, sold, assigned or transferred to any person other than BANK or in any way encumbered; and BORROWER shall defend the same against the lawful claims and demands of all persons. Section 4.06 FINANCIAL INFORMATION. Subject to any limitations stated therein or in connection therewith, all financial statements which have been or may hereafter be furnished to BANK to induce it to enter into this Agreement, to extend credit from time to time hereunder, or otherwise in connection herewith, do or shall fairly represent the financial condition of BORROWER or other person or entity reported on therein, as of the dates and, in the case of BORROWER, the results of its operations for the periods for which the same are furnished, in accordance with generally accepted accounting principles consistently applied, and all other information, reports and other papers and dates furnished to BANK are or shall be, at the time the same are so furnished, accurate and correct in all material respects and complete insofar as completeness may be necessary to give BANK a true and accurate knowledge of the subject matter. There has been no material adverse change in the business, properties, prospects, or condition (financial or otherwise) of the 9 10 BORROWER since the dates of the most recent financial statements provided to the BANK. BORROWER has good and marketable title to all the properties and assets reflected on its balance sheet furnished to BANK, free and clear of mortgages, pledges, liens, charges and other encumbrances, other than encumbrances in favor of BANK and encumbrances securing indebtedness reflected on such balance sheet. Section 4.07 NO VIOLATIONS. BORROWER is not now in default under any agreement evidencing an obligation for the payment of money, performance of a service or delivery of goods, the demand for performance under which, or acceleration of the maturity of which, would render BORROWER insolvent or unable to meet its other debts as they become due or conduct its business as usual. Section 4.08 LITIGATION. There is no action, suit, or proceeding 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 or in prospect against or affecting the BORROWER or any properties or rights of the BORROWER, which, if adversely determined, would (i) materially impair the right of the BORROWER to carry on business substantially as now conducted or (ii) materially and adversely affect the financial condition of the BORROWER. BORROWER is not currently affected by any strike or other labor disturbance nor is BORROWER in default in any material respect under any judgment, order, injunction, rule, ruling, of any court or governmental commission, agency, or instrumentality. 10 11 ARTICLE V AFFIRMATIVE COVENANTS Section 5.01 FINANCIAL STATEMENTS. BORROWER shall furnish or cause to be furnished to BANK, (a) on a quarterly basis, within sixty (60) days after the end of each quarter, internally prepared profit and loss statements for BORROWER; and (b) on an annual basis, audited year-end financial statements prepared by a certified public accountant acceptable to BANK. Statements required under Section 5.01(b) immediately preceding shall be provided as soon as available after the end of the fiscal period reported on therein, but no later than ninety (90) days after the end of such period. In addition, BORROWER shall furnish BANK, on an annual basis, year-end financial statements on any guarantor of the Loan in a form acceptable to BANK, as soon as available, but no later than 60 days after the end of each year. Section 5.02 CERTIFICATIONS. All statements and reports required by this Article V shall be certified as true and correct by the President or a Vice-President of BORROWER, or in the case of Guarantor, by or on behalf of the Guarantor. Section 5.03 EXPENSES. BORROWER shall pay any and all taxes, charges and expenses of every kind or description paid or incurred by BANK under or with respect to the Loan or any Collateral therefor or the collection of or realization upon the same. BORROWER hereby authorizes BANK to charge interest, charges, taxes and expenses provided for herein to BORROWER'S Loan Account. Section 5.04 INSURANCE. BORROWER shall have and maintain at all times liability insurance and, with respect to the Collateral and other assets of BORROWER, 11 12 insurance against risks of fire, so-called extended coverage, and other risks customarily insured against by companies engaged in similar business to that of BORROWER, in amounts, containing such terms, in such form, for such periods and written by such companies as may be satisfactory to BANK. Where insurance covers Collateral for loans to BORROWER from BANK, such insurance shall be payable to BANK and to BORROWER as their interests may appear, pursuant to a long-form New York standard non-contributory mortgagee clause or endorsement. All policies of insurance shall provide for ten (10) days' written minimum cancellation notice to BANK. In the event of BORROWER'S failure to provide and maintain insurance as herein provided, BANK may, at its option, provide such insurance and charge the amount thereof to the BORROWER'S Loan Account or add the same to the principal balance of the Loan. BORROWER shall furnish to BANK certificates or other evidence satisfactory to BANK of compliance with the foregoing insurance provisions. Notwithstanding anything to the contrary contained or implied herein, BORROWER may self-insure its fleet of vehicles (including the Collateral) as to physical damage, but shall obtain insurance against catastrophic loss (in excess of an aggregate of $500,000) of Collateral and other assets. BORROWER shall provide BANK evidence satisfactory to BANK the existence of such catastrophic insurance, which policy of insurance shall name BANK as loss payee pursuant to a New York standard non-contributory endorsement or clause. In the event of any loss with respect to any item of Collateral, BORROWER will make an additional payment under the Loan in an amount equal to the portion of the outstanding Loan balance representing the 12 13 purchase money advanced against the Collateral with respect to which such loss has occurred. Section 5.05 INFORMATION REGARDING COLLATERAL. BORROWER shall furnish to BANK information adequate to identify and evaluate the Collateral at times and in form and substance as may be requested by BANK. Section 5.06 REGISTRATION AND TITLING. BORROWER shall cause all Collateral that is required to be registered, to be properly registered in BORROWER'S name, and will cause the title certificates for all Collateral to reflect BORROWER'S ownership and BANK'S lien. Section 5.07 RECORDS REGARDING COLLATERAL. BORROWER shall give BANK written notice of each location at which Collateral and records regarding Collateral are or will be kept other than for temporary processing, storage or like purposes. Except as such notice is given, and except as Collateral is moved from place to place in the ordinary course of BORROWER'S trucking business, all Collateral and records are and shall be kept at BORROWER'S address as it appears in Section 10.04 of this Agreement. Section 5.08 INSPECTION. BORROWER shall at all reasonable times and from time to time allow BANK, by or through any of its officers, agents, attorneys, or accountants, to examine, inspect or make extracts from BORROWER'S books and records and to arrange for verification of Collateral, under reasonable procedures and by reasonable methods, and shall do, make, execute and deliver all such additional and further acts, things, deeds, assurances and instruments as the BANK may require 13 14 more completely to vest in and assure to the BANK its rights hereunder or in any Collateral. Section 5.09 TAXES. BORROWER will promptly pay or cause to be paid all taxes, customs fees, and freight charges on the Collateral and will at all times keep the Collateral free and clear of all liens and claims whatsoever, other than the security interests granted hereby. BORROWER agrees to do and cause to be done all things that the BANK may request to establish and maintain a valid title and security interest in the Collateral, free of all other liens and claims whatsoever, to secure the payment of the Liabilities. If such taxes or other assessments remain unpaid after the date fixed for the payment of the same, or if any lien shall be claimed which, in the opinion of the BANK, could create a valid obligation having priority over the rights of the BANK in the Collateral, the BANK may, without notice to the BORROWER, pay such taxes, assessments, charges or claims, and the BORROWER unconditionally promises to reimburse BANK for any amounts so paid upon demand. Section 5.10 CONTINUED EXISTENCE. Protection of Property. Insurance. BORROWER shall do or cause to be done all that is necessary (a) to preserve its existence and in keep in full force and effect all of its governmental permits, licenses, charters, consents and franchises, and to comply with all applicable laws; (b) to conduct and operate its business in a prudent and careful manner; (c) to preserve its properties; and (d) subject to the limitation regarding self-insurance in Section 6.04 hereof, to maintain adequate insurance with insurance companies of recognized responsibility, including without limitation, (i) insurance coverage to such extent and 14 15 against such risks, including fire, casualty, and theft, as is customary in BORROWER'S business, (ii) necessary workmen's compensation insurance; (iii) such other insurance or bonds as may be required by law or reasonably requested in writing by BANK; and (iv) pay all taxes applicable to it or levied against any of its properties as and when the same shall become due and payable. Section 5.11 RECORDS. BORROWER shall keep or cause to be kept accurate records concerning its business and shall maintain or cause to be maintained a system of accounting and proper books of record and account in accordance with general accepted accounting principles applicable to the particular entity, and will set aside on its books all proper and adequate reserves for taxes, depreciation, depletion, obsolescence, loan losses, amortization, contract cancellations, defaults, or other breaches of contract, and otherwise as may be appropriate in accordance with said principles. Section 5.12 CERTIFICATES. On a quarterly basis, and at such other times as BANK shall request, BORROWER shall supply to BANK a written certificate as to the following: (i) that there does not exist any default or Event of Default, or any condition or event which, with the giving of notice or the passage of time, or both, would constitute such an Event of Default, under the Agreement, the Note, or any other Loan Documents; (ii) that all representations, warranties and covenants contained in this Agreement and the other Loan Documents remain true and 15 16 accurate through the date of such certificate, except as may be noted and acceptable to BANK; (iii) that all conditions precedent to BANK'S obligation to make advances under the Loan have been and remain fully satisfied; and (iv) that all of the Collateral is in good repair and useful in BORROWER'S business. Section 5.13 NOTICE OF ADVERSE EVENTS. BORROWER shall promptly notify BANK of the filing of any notice, suit, claim, action, proceeding, or investigation in or by any court or by any governmental authority in which an adverse decision reasonably could be expected to have a material adverse effect upon the BORROWER, and shall promptly notify BANK of the occurrence of any material adverse order, judgment, settlement, determination, or other adverse event, or of any default or Event of Default or any condition or event which, with the giving of notice or the passage of time, or both, would constitute such an Event of Default, under this Agreement or under any of the other Loan Documents. BORROWER also shall promptly notify BANK of the occurrence of any other condition or event which could have a material adverse effect upon it. ARTICLE VI NEGATIVE COVENANTS BORROWER covenants and agrees that from the date hereof until payment in full of the Loan, and any other indebtedness and Liabilities, and the termination of this 16 17 Agreement, unless BANK shall otherwise consent in writing, BORROWER will not either directly or indirectly: Section 6.01 CASH FLOWS-TO-CURRENT MATURITIES OF LONG-TERM DEBT. Cause or allow the ratio of BORROWER'S cash flows-to-current maturities of long-term debt to be less than 1,3:1. As used in this Section, "CASH FLOWS" means net profits less dividends, plus lease expense and depreciation and any other expenses which would be classified as non-cash expenses in accordance with generally accepted accounting principles and "CURRENT MATURITIES OF LONG TERM DEBT" means the outstanding principal balance of indebtedness and lease expense due within twelve (12) months. Section 6.02 CONSOLIDATED NET WORTH. Cause or allow BORROWER'S Consolidated Tangible Net Worth to be less than $14,800,000. As used herein, "CONSOLIDATED TANGIBLE NET WORTH" means an amount equal to the Shareholders' equity of the BORROWER (including capital stock, capital surplus and retained earnings, but excluding any unpaid amounts due for sale of stock) less (i) the book value of any shares of common stock of the BORROWER held by the BORROWER and treated as an asset in computing such stockholder's equity, (ii) all unamortized debt costs, patents, trade names, licenses, franchises, good will and other intangible assets, (iii) the aggregate balance of loans, notes receivable, accounts receivable and other advances to and or owing from BORROWER'S affiliates, subsidiaries, shareholders, employees officers, directors or any other related entity, and (iv) taxes, the payment of which has been deferred. All financial ratios in this Agreement shall be determined 17 18 on a combined basis in accordance with generally accepted accounting principles applied on a consistent basis. Section 6.03 NO ENCUMBRANCES ON COLLATERAL. BORROWER shall not pledge, mortgage, sell, assign or create, or suffer to exist a security interest in Collateral in favor of any person other than BANK. Section 6.04 MANAGEMENT: OWNERSHIP. Cause or allow any material change in the ownership or senior management of BORROWER, including without limitation any change in the officers of the BORROWER at or above the level of its vice president. Section 6.05 DEBT-TO-TANGIBLE NET WORTH. Cause or allow the BORROWER'S ratio of total debt (defined as all of BORROWER'S Indebtedness and Liabilities to whomsoever the same may be owing, whether now or hereafter existing, created or arising, absolute or contingent, direct or indirect, joint or several, including without limitation, all indebtedness under the Loan)-to-Consolidated Tangible Net Worth (as defined in Section 6.02 hereof) to be greater than 2:1. Section 6.06 LOANS TO RELATED PARTIES. Cause or allow BORROWER'S loans or other advances to BORROWER'S shareholders, officers, partnerships, subsidiaries, affiliates, directors or other related entities to exceed $2,000,000 at any time outstanding. 18 19 ARTICLE VII CONDITIONS BANK'S obligation to make the Loan available to BORROWER, and to make any advance thereunder, is subject to the full satisfaction of the following conditions precedent: Section 7.01 NO DEFAULT. There shall not exist any default or Event of Default, or any condition or event which, after notice or lapse of time or both, would constitute such an Event of Default hereunder or under any other Loan Documents. Section 7.02 OPINION OF COUNSEL. BANK shall have received from counsel to BORROWER a favorable opinion in satisfactory scope and form as to all matters reasonably requested by BANK. Section 7.03 DELIVERY OF DOCUMENTS. Delivery to BANK of the purchase orders and Certificates of Title for the Collateral to be purchased with the proceeds of the requested advance, the duly-executed Note and Guaranty, and all other documents or instruments which BANK shall require in connection with making the Loan. Section 7.04 TERMS AND CONDITIONS. Continued fulfillment and satisfaction through the date hereof and as of the date of any requested advance of all the terms, representations, warranties, conditions and covenants hereof. Section 7.05 OFFICER'S CERTIFICATE. BANK shall have received a certificate of the President or other officer authorized by resolution of BORROWER stating that all representations and warranties contained in this Agreement and all other Loan Documents are and remain true and accurate as of the date of such advance and that there exists no default or Event of Default hereunder or under any other Loan Document, or any condition or event which, with the giving of notice or the passage 19 20 of time, or both, would become an Event of Default hereunder or under any other Loan Document. ARTICLE VIII DEFAULT AND REMEDIES ON DEFAULT Section 8.01 EVENTS OF DEFAULT: ACCELERATION. At the option of BANK and notwithstanding any time or credit allowed by any instrument evidencing any of the Liabilities, any or all of the Liabilities of BORROWER or any other person to BANK hereunder shall immediately become due and payable upon the occurrence of any of the following events of default ("EVENTS OF DEFAULT"), without notice or demand to BORROWER, Guarantor, or any other person: (a) default in the payment or performance, when due or payable, of any of the Liabilities of BORROWER or any other person or entity, or of any endorser or Guarantor for any of the Liabilities of BORROWER or any other person or entity to BANK or the occurrence of any Event of Default under any Loan Document; (b) failure of BORROWER to pay any tax; (c) if any representation or warranty contained herein is or becomes inaccurate or if BORROWER or Guarantor have made, or hereafter make any misrepresentation to BANK for the purpose of obtaining credit or an extension of credit; (d) failure of BORROWER to furnish or cause to be furnished financial information or to permit or cause to be permitted the inspection of books or records; (e) issuance of an injunction or attachment against property of BORROWER or any Guarantor; (f) calling of a meeting of creditors, appointment of a committee of creditors or liquidating agents, or offering 20 21 of a composition or extension to creditors by, for or of BORROWER or any endorser or Guarantor of any of the Liabilities of BORROWER to BANK; (g) insolvency of BORROWER or any endorser or Guarantor of any of the Liabilities of BORROWER to BANK; (h) such a material change in the condition or affairs (financial or otherwise) of BORROWER or of any endorser or Guarantor of any of the Liabilities of BORROWER to BANK as in the opinion of BANK impairs BANK'S security or increases its risk; (i) failure by BORROWER or any Guarantor to comply with any of the provisions of this Agreement; (j) failure to make any payments required by this Agreement; (k) default shall be made with respect to any Indebtedness (other than the Note) of the BORROWER or the Guarantor, when due, or the performance of the other obligation incurred in connection with any Indebtedness for borrowed money of the BORROWER, or the Guarantor, if the effect of such default is to accelerate the maturity of such Indebtedness or to permit the holder thereof to cause such Indebtedness to become due prior to its stated maturity, or any such Indebtedness shall not be paid when due; or (i) if there shall occur any default or Event of Default, or any condition or event which with the giving of notice or the passage of time, or both, would become an Event of Default, under, pursuant to or with respect to any Indebtedness or loan transaction or any document or instrument evidencing, securing, guaranteeing, or relating to any Indebtedness or loan transaction of BORROWER. Section 8.02 RIGHTS UPON DEFAULT. Upon the occurrence of any one or more of the above Events of Default and at any time thereafter, such default not having previously been cured, BANK shall have, in addition to all other rights and 21 22 remedies, the remedies of a secured party under the Alabama Uniform Commercial Code, regardless whether the Code has been enacted in the jurisdiction where rights or remedies are asserted, including without limitation, the right to take possession of the Collateral, and for that purpose BANK may, so far as BORROWER or Guarantor can give authority therefor, enter upon any premises on which the Collateral may be situated and remove the same therefrom or store the same on the premises pending disposition. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, BANK shall give to BORROWER at least five (5) days' prior written notice of the time and place of any public sale of Collateral or of the time after which any private sale or any other intended disposition is to be made. Upon fifteen (15) days' prior written notice to BORROWER, BANK may at any time in its discretion transfer any securities or other property constituting Collateral into its own name or that of its nominee and receive the income thereon and hold the same as security for Liabilities or apply it on principal or interest due on Liabilities. Insofar as Collateral shall consist of insurance policies, instruments, chattel paper, choses in action or the like, BANK may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose or realize upon Collateral, as BANK may determine, whether or not Liabilities or Collateral are then due, and for the purpose of realizing BANK'S rights therein, BANK may receive, open and dispose of mail addressed to BORROWER and endorse notes, checks, drafts, money orders, documents of title or other evidences of payment, shipment or storage or any form of Collateral on behalf of and in the name of BORROWER. The enumeration of the 22 23 foregoing rights is not intended to be exhaustive, and the exercise of any right shall not preclude the exercise of any other rights, all of which shall be cumulative. As against the obligations secured hereby, BORROWER hereby expressly waives all claims and all rights to claim any exemptions, both as to personal and real property, allowed or allowable under the Constitution or laws of the United States, the State of Alabama or any other jurisdiction. Any notice to BORROWER of sale, disposition or other intended action by BANK, required by law to be given to BORROWER, sent to BORROWER at the address of BORROWER shown hereinabove or at such other address of BORROWER as may from time to time be shown on BANK'S records, at least five days prior to such action, shall constitute reasonable notice to BORROWER. Section 8.03 POWER OF ATTORNEY. BORROWER hereby requests, authorizes and empowers Billy V. Houston, or any other officer or employee of BANK who may be designated by BANK for that purpose to make, execute and file, any financing statements, documents or certificates of title, or other documents, and to take any and all such other steps as BANK deems necessary or desirable to perfect and continue the perfection of BANK'S security interest in the Collateral. No failure by BANK to exercise for any period the powers herein granted shall operate or be construed as a waiver of BANK'S rights thereafter to exercise such authorizations and powers. The foregoing power of attorney is coupled with an interest and shall be irrevocable so long as any Liabilities or Indebtedness hereunder, under the Note, or under the other Loan Documents remain outstanding. 23 24 Section 8.04 SET OFF. BANK hereby is given a continuing lien as security for BORROWER'S obligations hereunder upon any and all moneys, securities and other property of BORROWER, and the proceeds thereof, now or hereafter held or received by or in transit to BANK from or for BORROWER, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and also upon any and all deposit balances, general or special, and credits of BORROWER with, and any and all claims of BORROWER against BANK at any time existing, and upon an Event of Default hereunder, BANK may apply or set off the same against the Liabilities hereby secured. ARTICLE IX MISCELLANEOUS Section 9.01 WAIVERS. BORROWER hereby waives demand, notice, protest, notice of acceptance of this Agreement, notice of loans made, credit extended, Collateral received or delivered or other action taken in reliance hereon and all other demands and notices of any description. With respect both to Liabilities and Collateral, BORROWER assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of any Collateral which may now or hereafter secure Liabilities, to the addition or release of any party or person primarily or secondarily liable, to the acceptance of partial payments hereon and to the settlement, compromise or adjustment of any thereof, all in such manner and at such time or times as BANK may in its sole discretion deem advisable. BANK shall have no duty as to the collection or protection of any Collateral 24 25 or any income thereon, nor as to the preservation of rights against prior parties, nor as to the preservation of any rights pertaining thereto beyond the safe custody thereof. BANK may exercise its rights with respect to any Collateral without resorting or regard to other Collateral or sources of reimbursement for Liabilities. BANK shall not be deemed to have waived any of its rights upon or under Liabilities or Collateral unless such waiver is in writing and signed by BANK. No delay or omission on the part of BANK in exercising any right shall operate as a waiver of such right or any other right. A waiver on any one occasion shall not be construed as a bar to or waiver of any right on any future occasion. All rights and remedies of BANK with respect to Liabilities or Collateral, whether evidenced hereby or by any other instrument, shall be cumulative and may be exercised separately or concurrently. Section 9.02 EXPENSES; PROCEEDS OF COLLATERAL. BORROWER shall pay to BANK on demand any and all expenses, including reasonable attorneys' fees, incurred or paid by BANK in collecting or otherwise protecting or enforcing or attempting to collect, protect or enforce its rights upon or under Liabilities or Collateral. After deducting all of said expenses, the residue of any proceeds of collection or sale of Liabilities or Collateral shall be applied to the payment of principal or interest on Liabilities, in such order of preference as BANK may determine with proper allowance for interest on Liabilities not then due being made, and any excess shall be returned to BORROWER and BORROWER shall remain liable for any deficiency. Section 9.03 AMENDMENT. No modification or amendment of this Agreement shall be effective unless placed in writing and duly executed by the 25 26 BORROWER and the BANK. By guaranteeing the Liabilities described herein, Guarantor expressly agrees that BORROWER and BANK may, without notice to or consent by Guarantor, modify or amend this Agreement. Neither party shall be obligated in any respect to extend the termination date hereof. Section 9.04 GENERAL. Any demand upon or notice that BANK may elect to give to BORROWER and any notice required to be given to BANK shall be effective three (3) days after the same has been deposited in the United States mail, first class with postage prepaid and addressed to such party at the following addresses, as applicable, if such party has notified BANK in writing of a change of address, to the last address so notified: IF TO BORROWER: Boyd Brothers Transportation Company, Inc. Route 1, Box 40 Clayton, Alabama 36016 IF TO BANK: Compass Bank 223 E. Broad Street Eufaula, Alabama 36027 Attention: City Executive with a copy to: Don Owens Vice President - Loan Administration Compass Bank P. O. Box 10566 Birmingham, Alabama 35296 Demands or notices addressed to BORROWER'S address at which BANK customarily communicates with BORROWER, shall also be effective. If at any time or times by assignment or otherwise BANK transfers any of the Liabilities or Collateral therefor, such transfer shall include BANK'S power and rights under this Agreement with 26 27 respect to the Liabilities or Collateral transferred, and the transferee shall become vested with said powers and rights whether or not they are specifically referred to in the transfer. If and to the extent BANK retains any of the Liabilities or Collateral, BANK will continue to have the rights and powers herein set forth with respect thereto. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors, assigns, heirs, personal representatives, and estates; provided, however, that BORROWER shall not assign or delegate any of its rights or obligations hereunder without the express written consent of BANK. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but when taken together shall constitute one agreement. This Agreement is being executed under the seal of the parties hereto and is intended to constitute and have effect as a sealed instrument according to law. Section 9.05 GOVERNING LAW; JURISDICTION. This Agreement, the Note, the Security Agreement and the other Loan Documents, and the rights and the obligations of the parties hereunder and thereunder, shall be governed by and be construed in accordance with the laws of the State of Alabama. BORROWER acknowledges that the negotiation of the provisions of the Note, this Agreement, the Security Agreement, and all other Loan Documents took place in the State of Alabama; that all of such documents were executed in Jefferson County, Alabama, or if executed elsewhere, will be or were delivered to BANK in said county and state subject to BANK'S acceptance thereof in Birmingham, Jefferson County, Alabama, and that all of such documents were or will be executed and delivered to BANK to induce BANK to extend 27 28 the Loan to BORROWER. BANK shall be under no obligation to give BORROWER notice of acceptance of any Loan Documents for said documents and instruments to become effective. BORROWER acknowledges further that the negotiation, execution and delivery of this Agreement, the Note, the Security Agreement and the other Loan Documents constitutes the transaction of business within the State of Alabama and that any cause of action arising under any of said documents will be a cause of action arising from such transaction of business. BORROWER hereby submits itself to jurisdiction in the State of Alabama for any cause of action or action arising out of or in connection with this Agreement, the Note, or any of the other Loan Documents, and agrees that venue for any such action shall be in Jefferson County, Alabama, and waives any and all rights under the laws of any state to object to jurisdiction or venue within Jefferson County, Alabama. Notwithstanding the foregoing, nothing contained in this Section 9.05 shall prevent BANK from bringing any action or exercising any rights against BORROWER, any security for the Loan or against any of BORROWER'S properties in any other State or jurisdiction. Initiating any such action or proceeding or taking any such action in any other state shall in no event constitute a waiver by BANK of any of the foregoing. Section 9.06 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All covenants, agreements, representations, and warranties made herein and in the certificates delivered pursuant hereto shall survive the making by the BANK of the Loan herein contemplated and the execution and delivery to the BANK of the Note evidencing such Loan and shall continue in full force and effect so long as the Note 28 29 is outstanding and unpaid. 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 which are contained in this Agreement shall bind the successors and assigns of BORROWER and inure to the benefit of the successors and assigns of the BANK; provided, however, that BORROWER shall not assign or delegate this Agreement, the Loan, or its rights, duties, or obligations hereunder without the written consent of BANK. Section 9.07 NO CONFLICT, ETC. No provision of this Agreement or of the Note or the other Loan Documents shall be deemed in conflict with any other provision thereof, and the BORROWER acknowledges that no such provisions or any interpretation thereof shall be deemed to diminish the rights of the BANK, any assignee, or the holder or holders of the Note under the terms and conditions or any other provisions thereof. BANK may at its option exhaust its remedies hereunder, under the Note, and under the other Loan Documents, either concurrently or independently, and in such order as it may determine. Section 9.08 HEADINGS; UNDER SEAL; ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARY. Article and section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement or be used to construe any provision hereof or for any other purpose. This Agreement is intended to be under the seal of all parties hereto and to have the effect of a sealed instrument in accordance with the law. This Agreement, together with the other Loan 29 30 Documents, embodies the entire agreement and understanding between the parties, supersedes all prior agreements and understandings related to the Loan, and may not be amended except by written agreement between BORROWER and BANK. This Agreement shall not benefit, and may not be relied upon by, any person other than the persons who sign this Agreement. There are no third party beneficiaries to this Agreement or any negotiations, statements, or representations related to this Agreement. Section 9.09 NO PARTNERSHIP OR JOINT VENTURE. Notwithstanding anything to the contrary herein contained or implied, BANK, by this Agreement, or by any action pursuant thereto or hereto, shall not be deemed a partner, joint venturer, or participant in the venture with BORROWER, and BORROWER hereby indemnifies and agrees to defend and hold BANK harmless (including the payment of reasonable attorneys' fees) from any and all damages resulting from such a construction of the parties' relationship. The requirements herein, and the restrictions imposed in this Agreement, are for the sole protection and benefit of BANK. Section 9.10 INDEMNIFICATION. BORROWER shall indemnify and hold harmless BANK from and against any and all claims, charges, losses, expenses and costs, including reasonable attorneys' fees, resulting from any claims, actions or proceedings in connection with the execution, delivery and performance of this Agreement, the Note, and other Loan Documents. The indemnification provided in this section shall survive the payment in full of the Loan. 30 31 IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement to be duly executed by their duly authorized officers as of the date first set forth above. BORROWER: WITNESS BOYD BROTHERS TRANSPORTATION COMPANY, INC. /s/ Elaine Gray By: /s/ Richard Bailey - -------------------------------- ------------------------------------ Its: CFO -------------------------------- BANK: WITNESS: COMPASS BANK /s/ Tonya W. Henderson By: /s/ Billy V. Houston - -------------------------------- ------------------------------------ Its: City President -------------------------------- 31 32 COMPASS BANK SECURITY AGREEMENT KNOW ALL MEN BY THESE PRESENTS: That WHEREAS, BOYD BROTHERS TRANSPORTATION COMPANY, INC., an Alabama corporation ("DEBTOR") is, contemporaneously with the execution hereof, becoming indebted to COMPASS BANK (the "BANK"), on loan in the principal amount of FOUR MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($4,500,000.00), or so much thereof as may be advanced under the Note as hereafter defined (the "LOAN"), as evidenced by one or more Promissory Notes of various dates, payable to Bank with interest thereon and as provided therein (each a "NOTE" and collectively, the "NOTES"), and as secured by a Credit and Security Agreement from Debtor to Bank (the "LOAN AGREEMENT") and the other Loan Documents defined therein (the "LOAN DOCUMENTS"); and WHEREAS, Debtor may hereafter become indebted to Bank or a subsequent holder of this Security Agreement on loans or otherwise (said Bank and any subsequent holder of this Security Agreement being referred to herein as "SECURED PARTY"); and WHEREAS, Debtor agrees to make this Security Agreement (the "AGREEMENT") to further secure said Notes and any and all other future or additional Liabilities of Debtor to Secured Party (said Liabilities, as defined in paragraph 5, being referred to herein as "LIABILITIES"). NOW, THEREFORE, the undersigned Debtor, in consideration of making the Loan, and to secure the prompt payment of same, with the interest thereon, and any extensions, modifications, or renewals of same, and any and all Liabilities of Debtor to Secured Party, and further to secure the performance of the covenants, conditions, and agreements hereinafter set forth and set forth in the Note, and as may be set forth in the Loan Agreement and other Loan Documents or other instruments evidencing or securing other Liabilities of Debtor to Secured Party, and further to secure any and all charges incurred by Secured Party on account of Debtor, including but not limited to attorney's fees, does hereby agree as follows: 1. DEFINITIONS. All terms used herein which are defined in the Alabama Uniform Commercial Code (the "CODE") shall have the same meaning herein as in the Code unless otherwise indicated herein. 2. INCORPORATION BY REFERENCE. All of the terms and provisions of the Note are hereby incorporated by reference as though set forth in full herein. 33 3. SECURITY INTERESTS. Debtor hereby grants to Secured Party title to and a security interest in the Collateral described in paragraph 4 hereof to secure the performance and payment of the Liabilities described in paragraph 5 hereof. 4. COLLATERAL. As security for the payment and performance of all Liabilities of the Debtor, Debtor grants Secured Party title to and a security interest in the following described property of the Debtor (herein collectively referred to as the "COLLATERAL"): 4.01 EQUIPMENT. The items of personal property described on Exhibit "A" hereto and all equipment and other personal property of every nature whatsoever now or hereafter owned by the Debtor and purchased with the proceeds of the Loan, wheresoever the same may be located. 4.02 PROCEEDS. Proceeds (including insurance, contract and tort claims) and products of all of the foregoing Collateral. 5. LIABILITIES: "LIABILITIES" of Debtor, as used herein, shall mean: 5.01 NOTES. The Notes, with interest as therein provided, and all extensions, modifications, or renewals thereof. 5.02 OTHER INDEBTEDNESS. Any and all other obligations, indebtedness, and liabilities of the Debtor to the Secured Party, whether joint or several, due or to become due, liquidated or unliquidated, now existing or hereafter arising, absolute or contingent, direct or indirect, and all extensions, modifications, and renewals thereof, and whether incurred or given as maker, endorser, guarantor, surety, or otherwise. 6. REPRESENTATIONS, WARRANTIES, AND COVENANTS. The Debtor hereby represents, warrants, and covenants as follows: 6.01 NO ADVERSE LIENS. Except for any security interest specifically set forth on an addendum attached hereto, and except for the security interest granted hereby, the Debtor is or (with respect to Collateral not presently owned by Debtor will be) the lawful owner of all Collateral free from any adverse lien, security interest, or encumbrance, and shall have full right to pledge, sell, assign, or transfer the same to Secured Party. Debtor will defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest therein. 2 34 6.02 FINANCING STATEMENTS. No financing statement covering any Collateral or any proceeds thereof is on file in any public office, except for financing statements specifically set forth on an addendum attached hereto, if any, and except for the financing statements executed by Debtor and Secured Party. At the Secured Party's request, the Debtor will join with Secured Party in executing one or more financing statements pursuant to the Code in form satisfactory to the Secured Party, and will pay the cost of filing the same in all public offices wherever filing is deemed by the Secured Party to be necessary or desirable. The Debtor authorizes the Secured Party to prepare and to file financing statements covering the Collateral signed only by the Secured Party and to sign the Debtor's signature to such financing statements in jurisdictions where Debtor's signature is required. The Debtor promises to pay the Secured Party the fees incurred in filing the financing statements, which fees shall become part of the Liabilities secured by this Agreement. 6.03 INSPECTION OF COLLATERAL AND RECORDS. The Secured Party may examine and inspect the Collateral and records and documents related to the Collateral at any time, wherever located. 6.04 ASSIGNMENT OR SALE. Debtor, its agents, servants, or employees will not sell, assign, or offer to sell or assign or otherwise transfer the Collateral, either in whole or in part, or any interest therein without the written consent of the Secured Party. 6.05 PAYMENT OF TAXES AND INSURANCE. Debtor will pay promptly all taxes and assessments upon or with respect to the Collateral. Debtor hereby authorizes Secured Party to discharge taxes, assessments, liens, security interests, or other encumbrances at any time levied or placed on the Collateral, to pay for any insurance on the Collateral required to be maintained by Debtor hereunder, and to pay for, make, or provide for any maintenance, repair, or preservation of the Collateral as the Secured Party shall deem reasonably necessary to preserve its interests; provided, however, that Secured Party shall be under no obligation to do so. Debtor agrees to reimburse Secured Party on demand with interest at the rate set forth in the Note for any payment made or any expense incurred by Secured Party pursuant to the foregoing authorization. Payments made or expenses incurred by Secured Party pursuant to the foregoing authorization shall be included in the Liabilities secured hereunder. 3 35 6.06 ADDITIONAL REPRESENTATIONS OF DEBTOR (COLLATERAL). With respect to all of the Collateral: 6.06(a) Such Collateral is used or bought primarily for business purposes. 6.06(b) Such Collateral is being acquired with the proceeds of the Note. 6.06(c) All such Collateral will be kept at the address of Debtor shown below Debtor's signature. Debtor will promptly notify Secured Party of any change in the location of the Collateral. Except for transactions in the ordinary course of Debtor's trucking business, Debtor, its agents or employees will not remove such Collateral from said location without the prior written consent of the Secured Party. 6.06(d) If certificates of title are issued or outstanding with respect to such Collateral, the Debtor will cause the Secured Party's interest to be properly noted thereon. 6.06(e) Debtor has and will maintain insurance on such Collateral to the extent and against such hazards and liabilities as is commonly done by companies of like nature, similarly situated, including but not limited to public liability, theft, fire (with extended coverage) insurance, and in the case of motor vehicles, collision insurance, all containing such terms and for such periods as may be reasonably satisfactory to the Secured Party; provided, however, that Debtor may self-insure the Collateral against physical damage up to an aggregate of $500,000 and provide insurance against catastrophic loss thereof in excess of such self-insurance amount. All such insurance will be maintained with insurance companies reasonably acceptable to the Secured Party and will be payable to the Secured Party and to the Debtor as their interests may appear. All insurance policies shall provide for a minimum of ten (10) days' written cancellation notice to the Secured Party and, at the Secured Party's request, all policies shall be delivered to and held by the Secured Party. If at any time the Secured Party is of the opinion that the Debtor's insurance coverage is inadequate, the Debtor will, within ten (10) 4 36 days after written request by the Secured Party, obtain such insurance as the Secured Party shall reasonably request. Secured Party is hereby made attorney-in-fact for Debtor to obtain, adjust, and settle, in its sole discretion, such insurance and to endorse any drafts or checks issued in connection with such insurance. 6.06(f) Debtor agrees to prevent and protect against any waste, damage, or destruction of such Collateral, and Debtor will maintain the same in as good condition as it now is in, ordinary and reasonable wear and tear excepted. 6.07 NAME OF DEBTOR. Debtor's name has always been as set forth on the first page of this Agreement, except as otherwise disclosed in writing to the Secured Party. Debtor will promptly advise the Secured Party in writing of any change in Debtor's name. 7. SET OFF. The Secured Party is hereby given a continuing lien as additional security for the Liabilities hereunder upon any and all monies, securities, and other property of Debtor, and the proceeds thereof, now or hereafter held or received by or in transit to the Secured Party from or for Debtor, whether for safekeeping, custody, pledge, transmission, collection, or otherwise, and also upon any and all deposit balances (general or special) and credits of Debtor with, and any and all claims of Debtor against, the Secured Party at any time existing, and upon an event of default hereunder, the Secured Party may apply or set off the same against the Liabilities hereby secured. 8. EVENTS OF DEFAULT. Debtor shall be in default under this Agreement upon the happening of any of the following events or conditions which is not completely cured within any specific time period provided in any Loan Document: 8.01 Any Event of Default or failure to perform any obligation, covenant, or liability contained or referred to herein, in the Notes, the Loan Agreement, or any other Loan Document. 8.02 Assignment, transfer, or encumbrance or any unreimbursed loss, theft, damage or destruction to or of any part of the Collateral (except for sales or encumbrances of Collateral expressly authorized by the terms of this Agreement), or any levy, seizure, injunction, or attachment thereon. 9. RIGHTS AND REMEDIES UPON DEFAULT. Upon occurrence of any of the above events of default, the Secured Party shall have the following rights which shall be cumulative with all other rights and remedies of Secured Party: 5 37 9.01 ACCELERATION AND OTHER RIGHTS. The right to declare all Liabilities secured hereby to be immediately due and payable without notice to or demand upon the Debtor or any other person. The Secured Party, in addition to any remedies it may exercise under this Security Agreement, the Note, under other documents executed in connection with the Liabilities secured hereby, or under applicable law, may immediately and without demand, exercise any and all of the rights of a secured party upon default under the Alabama Uniform Commercial Code, all of which shall be cumulative. Such rights shall include, without limitation: 9.01(a) The right to take possession of the Collateral without judicial process and to enter upon any premises where the Collateral may be located for the purposes of taking possession of, securing, removing, and/or disposing of the Collateral without interference from the Debtor and without any liability for rent, storage, utilities or other sums. 9.01(b) The right to sell, lease, or otherwise dispose of any or all of the Collateral, whether in its then condition or after further processing or preparation, at public or private sale. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Secured Party shall give the Debtor at least five (5) days' prior notice of the time and place of any public sale of the Collateral or of the time after which any private sale or other intended disposition of the Collateral is to be made, all of which the Debtor agrees shall be reasonable notice of any sale or disposition of the Collateral. 9.01(c) Upon request of Secured Party, Debtor shall assemble and make the Collateral available to Secured Party at a place reasonably convenient to Debtor and Secured Party. 9.02 ATTORNEY-IN-FACT. To effectuate the rights and remedies of the Secured Party upon default, Debtor does hereby irrevocably appoint Secured Party attorney-in-fact for the Debtor, with full power of substitution to, after default of Debtor, sign, execute, and deliver any and all instruments and documents and do all acts and things to the same extent as Debtor could do, and to sell, assign, and transfer any Collateral to Secured Party or any other party. 6 38 9.03 RECEIVER. Secured Party shall have the right to apply for and have a receiver appointed by a court of competent jurisdiction, in connection with any action taken by the Secured Party to enforce its rights and remedies hereunder, to manage, protect, and preserve the Collateral and continue the business of the Debtor, to collect all revenues and profits thereof, and to apply the same to the payment of all expenses and other charges of such receivership, including but not limited to the compensation of the receiver, and to the payment of Liabilities secured hereby, until a sale or other disposition of such Collateral shall be finally made and consummated, or until all Liabilities secured hereby shall have been paid. 9.04 PROCEEDS OF SALE; DEFICIENCY. The proceeds of any sale or other disposition of Collateral by the Secured Party shall be applied first to the expenses (including, but not limited to legal expenses and reasonable attorneys' fees) of retaking, holding, storing, and processing the Collateral and preparing the Collateral for sale, selling and the like and collecting or attempting to collect the Liabilities secured by this Agreement; then to the satisfaction of the Liabilities secured hereby with the application of such proceeds to particular Liabilities or to interest or principal as the Secured Party, in its sole discretion, shall determine; and the balance, if any, to be paid to Debtor or to be paid as otherwise provided by Law. The enumeration of the foregoing rights is not intended to be exhaustive, and the exercise of any right shall not preclude the exercise of any other rights, all of which shall be cumulative. Debtor agrees that any delay by the Secured Party in exercising any right or remedy hereby granted shall not be construed as a waiver by the Secured Party of any of its rights or remedies hereunder. Secured Party may permit the Debtor to remedy any default, but such shall not be a waiver of the default so remedied, and Secured Party's waiver of any default shall not be a waiver of any subsequent or prior defaults. 10. WAIVERS. In addition to any other waivers, as set forth herein or in the Note, against the Liabilities secured hereby, Debtor expressly waives, to the extent allowed by law, all claims and rights to claim any exemptions allowed or allowable under the Constitution or laws of the United States, the State of Alabama, or any other jurisdiction. All rights and remedies of Secured Party hereunder or with respect to Liabilities or Collateral shall be cumulative, and in addition to any other right available to Secured Party by statute or at law or in equity, and may be exercised singularly or concurrently. In the event that any one or more of the terms or provisions of this Agreement or of the Note shall be invalid, illegal, or unenforceable in any respect, the validity of the remaining terms or provisions shall in no way be affected, prejudiced or disturbed thereby. 7 39 11. ASSIGNMENT OF LIABILITIES. If at any time or times by sale, assignment, negotiation, pledge, or otherwise, Secured Party transfers any or all of the Liabilities, such transfer shall, unless otherwise specified in writing, carry with it Secured Party's rights and remedies under this Agreement with respect to such Liabilities transferred, and the transferee shall become vested with such rights and remedies whether or not they are specifically referred to in the transfer. If and to the extent Secured Party retains any of the Liabilities, Secured Party shall continue to have the rights and remedies herein set forth with respect thereto. 12. NOTICES. Any demand upon or notice to Debtor that the Secured Party may elect to give shall be effective if hand delivered to Debtor, deposited in the United States mail, postage prepaid, return receipt requested, or delivered to a telegraph company addressed to Debtor at the address shown below Debtor's signature, or if Debtor has notified the Secured Party in writing of a change of address, to Debtor's last address so notified. Demands or notices addressed to Debtor's address at which the Secured Party customarily communicates with Debtor shall also be effective. 13. AGREEMENT UNDER SEAL. This Agreement is given under the seal of all persons signing as and for the Debtor. It is intended by Debtor and all persons signing for Debtor that this instrument is and shall constitute a sealed instrument according to law. 14. HEADINGS. The headings of the sections, paragraphs, and subdivisions of this Agreement are for convenience of reference only, are not to be considered a part hereof, and shall not limit or otherwise affect any of the terms hereof. 15. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall inure to and bind not only the parties hereto, but also their respective heirs, executors, administrators, successors, and assigns. 16. APPLICABLE LAW. This Agreement, the Note, and the Loan Documents, except as may otherwise be provided therein, shall be construed and governed, and their validity determined, according to the laws of the State of Alabama. 8 40 STATE OF ALABAMA ) COUNTY OF ) I, the undersigned, a Notary Public in and for said County in said State, hereby certify that Richard Bailey, whose name as CFO of BOYD BROTHERS TRANSPORTATION COMPANY, INC., an Alabama corporation, is signed to the foregoing instrument, and who is known to me, acknowledged before me on this day that, being informed of the contents of the above and foregoing instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. Given under my hand and official seal of office this 2nd day of June, 1998. /s/ Elaine Gray -------------------------------------- Notary Public [NOTARIAL SEAL] My commission expires: 4-27-2002 --------------- STATE OF ALABAMA ) COUNTY OF ) I, the undersigned, a Notary Public in and for said County in said State, hereby certify that Billy V. Houston, whose name as City President of COMPASS BANK, an Alabama banking corporation, is signed to the foregoing instrument, and who is known to me, acknowledged before me on this day that, being informed of the contents of the above and foregoing instrument, he, as such officer and with full authority, executed the same voluntarily for and as the act of said corporation. Given under my hand and official seal of office this 29th day of May, 1998. /s/ Renee S. Gibson -------------------------------------- Notary Public [NOTARIAL SEAL] My commission expires: 03-02-2000 --------------- 41 EXHIBIT A DESCRIPTION OF COLLATERAL DEBTOR: Boyd Brothers Transportation Company, Inc. All of Debtor's trucks, tractors, trailers and other equipment and other personal property financed with the proceeds of any loan from Secured Party, whether now owned or existing or hereafter created or acquired; all goods, instruments, documents of title, policies and certificates of insurance, securities, chattel paper, deposits, cash or other property owned by Debtor or in which Debtor has an interest which are now or may hereafter be in the possession of Secured Party or as to which Secured Party may now or hereafter control by possession, by documents of tile or otherwise; and proceeds and products (including tort and insurance claims) of the foregoing: Without limiting the generality of the foregoing, the collateral shall include: Fifteen New 1999 International 9300 Tractors 2HSFBASR5X0080041 2HSFBASR7X0080042 2HSFBASR9X0080043 2HSFBASR0X0080044 2HSFBASR2X0080045 2HSFBASR4X0080046 2HSFBASR6X0080047 2HSFBASR8X0080048 2HSFBASRXX0080049 2HSFBASR6X0080050 2HSFBASR8X0080051 2HSFBASRXX0080052 2HSFBASR1X0080053 2HSFBASR3X0080054 2HSFBASR5X0080055 FOR VALUE RECEIVED, Debtor hereby grants to Secured Party a security interest in all of the foregoing property. EX-10.3 4 AGREEMENT AND GENERAL RELEASE 1 EXHIBIT 10.3 AGREEMENT AND GENERAL RELEASE THIS AGREEMENT AND GENERAL RELEASE ("Agreement") is made and entered into by and between DONALD G. JOHNSTON ("Johnston") and BOYD BROS. TRANSPORTATION INC. ("Boyd"). W I T N E S S E T H: WHEREAS, Johnston agrees that he will voluntarily retire all of his positions with Boyd, whether as officer, director or employee, on July 16, 1998; and WHEREAS, Johnston and Boyd desire to settle fully and finally all differences between them, including, but in no way limited to, any differences that might arise out of Johnston's employment with Boyd, and his resignation thereof; NOW, THEREFORE, in consideration of the premises and mutual promises herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Johnston and Boyd agree as follows: 1. BENEFITS. On or after the Effective Date of this Agreement, Boyd shall provide Johnston with the following benefits: a. Johnston shall be paid, as and when they become due, all of Johnston's retirement benefits, if any, which were vested as to Johnston on July 31, 1998 in accordance with the terms of any such underlying plan(s); b. Johnston shall be paid on or before August 31, 1998 all accrued and earned vacation pay to which Johnston is entitled; c. Johnston shall be paid his current salary through July 31, 1998 in accordance with normal payroll practices and $91,875 in lieu of any annual performance bonus that would otherwise have been due him, which amount will be paid on or before August 31, 1998; d. Boyd shall continue to fund (through the month in which Johnston reaches age 65) Johnston's life insurance policies at the current rate as of the date hereof and to the extent such policies so permit; e. Johnston and his spouse shall be permitted to participate in Boyd's general health care and other welfare benefit programs at Boyd's expense through the month in which Johnston attains the age of 65, after which Johnston may continue to participate in Boyd's general health care and other welfare benefit programs at his own expense, in both circumstances solely to the extent such programs permit continued participation by former employees at no additional expense of the Company; 1 2 f. Johnston shall have continued use of his current office until July 17, 1998; g. Johnston shall be transferred title to the automobile currently provided to him by the Company; and h. Johnston and Boyd shall have entered into that certain Consulting Agreement of even date herewith, which shall include consulting payments under such agreement. These payments and benefits shall be in lieu of and discharge any obligations of Boyd to Johnston for any rights or claims, including, but not limited to, any and all rights that Johnston may have under any plans, programs or agreements with Boyd, any and all rights that Johnston may have for lost compensation, lost wages, lost benefits, pain and suffering, or any other expectation of remuneration or benefit on the part of Johnston. Other than the obligations specifically set forth in this paragraph, Boyd shall have no other obligations to Johnston under this Agreement. Johnston understands and agrees that the payments and benefits described herein are greater than those to which Johnston is otherwise entitled under Boyd's policies and procedures. 2. NON-ADMISSION OF LIABILITY. This Agreement shall not in any way be construed as an admission by Boyd that it has acted wrongfully with respect to Johnston or any other person, or that Johnston has any rights whatsoever against Boyd, and Boyd specifically disclaims any liability to or wrongful acts against Johnston or any other person, on the part of itself, its employees, or its agents. 3. RETIREMENT; NO REEMPLOYMENT. Johnston and Boyd agree that active employment with Boyd has been terminated by Johnston's voluntary retirement, effective July 16, 1998. Johnston and Boyd further agree that he will not be reemployed by Boyd, and that he will not apply for or otherwise seek employment with Boyd at any time. A breach of this paragraph by Johnston will constitute a basis for refusal to employ Johnston or to terminate him if already employed, and he shall have no cause of action against Boyd for such refusal or termination. 4. NON-DISPARAGEMENT. Johnston agrees that he will not act in any manner that might damage the business or reputation of Boyd and/or any of its subsidiaries, successors, assigns, officers, or directors. Johnston further agrees that he will not counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third-party against Boyd and/or any officer, director, employee, agent, representative, shareholder, or attorney of Boyd, unless under a subpoena or other court order to do so. 5. FUTURE COOPERATION. Johnston agrees that he will, upon request by Boyd, assist and cooperate with Boyd in any lawsuits, disputes, differences, grievances, claims, charges, or complaints brought or threatened by any party against Boyd or brought by Boyd against any party, subject to reimbursement by Boyd of all reasonable expenses actually incurred by him. 2 3 Johnston further agrees that he will, upon Boyd's reasonable request, assist and cooperate with Boyd in the preparation and dissemination of any press releases or other disclosures that Boyd deems necessary. 6. CESSATION OF AUTHORITY; RESIGNATION FROM BOARD(S). Johnston understands and agrees that as of the Effective Date, he was and is no longer authorized to incur any expenses, obligations, or liabilities on behalf of Boyd. Johnston further agrees that as of the Effective Date, he has hereby irrevocably resigned any all directorships and/or other positions with Boyd or any Boyd subsidiary or affiliate. 7. RETURN OF COMPANY MATERIALS AND PROPERTY. Johnston understands and agrees that he will immediately turn over to Boyd all files, memoranda, records, credit cards, and other documents, physical or personal property that Johnston received from Boyd and that are the property of Boyd. 8. NON-DISCLOSURE AND TRADE SECRETS. Johnston understands and agrees that in the course of employment with Boyd, he has acquired confidential and proprietary information and trade secrets concerning Boyd's operations, its future plans for sales and expansion, its methods of doing business, it financial situation, which information Johnston understands and agrees would be extremely damaging to Boyd if disclosed to a competitor or made available to any other person or corporation. Johnston understands and agrees that such information has been divulged to Johnston in confidence and Johnston understands and agrees that he will keep such information secret and confidential. Johnston further agrees that he will not solicit or participate in or assist in any way in the solicitation of any other employees or customers of Boyd or of any of its affiliated companies. In view of the nature of Johnston's employment and the information and trade secrets which Johnston has received during the course of his employment, Johnston likewise agrees that Boyd would be irreparably harmed by any violation, or threatened violation of this Agreement and that, therefore, Boyd shall be entitled to an injunction prohibiting Johnston from any violation or threatened violation of this Agreement. The undertakings set forth in this paragraph shall survive the termination of other arrangements contained in this Agreement. 9. COMPLETE RELEASE. a. As a material inducement to Boyd to enter into this Agreement, Johnston hereby irrevocably and unconditionally releases, acquits, and forever discharges Boyd and each of Boyd's owners, predecessors, successors, assigns, agents, directors, officers, employees, representatives, attorneys, and all persons acting by, through, under or in concert with any of them (collectively "Releases"), or any of them, from any and all charges, complaints, claims, promises, and agreements, damages, (including attorneys' fees and costs actually incurred) of any nature whatsoever, known or unknown, suspected or unsuspected, including, but not limited to, rights arising out of alleged violations of any contracts, express or implied, any covenant of good faith and fair dealing, express or implied, or any tort, including, but not limited to, fraudulent inducement, promissory estoppel, or detrimental reliance, or any legal restrictions on Boyd's right to terminate employees, or any federal, state or other governmental statute, regulation, or ordinance, including, without limitation: the Age Discrimination in Employment Act, U.S.C. ss.ss. 621-634 ("Claim" or "Claims"), which Johnston 3 4 now has, owns or holds, or claims to have, own or hold, or which Johnston at any time heretofore had, owned or held, or claimed to have, own or hold, against each or any of the Releases. b. Boyd hereby irrevocably and unconditionally releases, acquits, and forever discharges Johnston from any and all charges, complaints, claims, promises, and agreements, damages, (including attorneys' fees and costs actually incurred) of any nature whatsoever, known or unknown, suspected or unsuspected, including, but not limited to, rights arising out of alleged violations of any contracts, express or implied, any covenant of good faith and fair dealing, express or implied, or any tort, including, but not limited to, fraudulent inducement, promissory estoppel, or detrimental reliance, or any federal, state or other governmental statute, regulation, or ordinance ("Claim" or "Claims"), which Boyd now has, owns or holds, or claims to have, own or hold, or which Boyd at any time heretofore had, owned or held, or claimed to have, own or hold, against Johnston, except for acts of intentional misconduct, intentional violation of law or for fraudulent acts knowingly taken to the detriment of Boyd. 10. NO CLAIMS. Johnston and Boyd each represent that they have not filed any complaints, charges, or lawsuits against one another or any of Boyd's employees with any governmental agency or any court, or that any such complaints, charges, or lawsuits filed prior to execution of this Agreement will be withdrawn by them immediately after this Agreement becomes effective; provided, however, this shall not limit either party from filing a lawsuit for the sole purpose of enforcing its rights under this Agreement. 11. CONFIDENTIALITY. Johnston represents and agrees that he will keep the terms, amount, and fact of this Agreement completely confidential, and that he will not hereafter disclose any information concerning this Agreement to anyone other than Johnston's immediate family and professional representatives who will be informed of and bound by this confidentiality clause. 12. CONSULTATION WITH COUNSEL. Johnston represents and agrees that he fully understands his right to discuss all aspects of this Agreement with his private attorney, that to the extent, if any, that Johnston desired, Johnston has availed himself of this right, that Johnston has carefully read and fully understands all of the provisions of this Agreement, and that Johnston is voluntarily entering into this Agreement. 13. KNOWING AND VOLUNTARY WAIVER. For the purpose of implementing a full and complete release and discharge of Boyd, Johnston expressly acknowledges that this Agreement is intended to include in its effect, without limitation, all Claims which Johnston does not know or suspect to exist in his favor at the time of execution hereof, and that this Agreement contemplates the extinguishment of any such Claim or Claims. Johnston further expressly acknowledges he is freely and voluntarily executing this Agreement, and that he has had sufficient and reasonable time to consider this Agreement and its terms before executing it. 14. NO REPRESENTATIONS. Johnston represents and acknowledges that in executing this Agreement Johnston does not rely and has not relied upon any representation or statement 4 5 not set forth herein made by any of the Releases or by any of the Releases' agents, representatives, or attorneys with regard to the subject matter, basis, or effect of this Agreement or otherwise. 15. EFFECTIVE DATE. This Agreement shall become effective upon Johnston's execution of this Agreement and such date shall be the "Effective Date" of this Agreement. 16. SOLE AND ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. The Agreement sets forth the entire agreement between the parties hereto, and fully supersedes any and all prior agreements or understandings between the parties hereto pertaining to the subject matter hereof. The Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and, in the case of Johnston, shall be binding upon and inure to the benefit of, his heirs, legatees, executors, administrators and guardians. 17. SEVERABILITY. The provisions of this Agreement are severable, and if any part of it is found to be unenforceable, the other paragraphs shall remain fully valid and enforceable. This Agreement shall survive the termination of any arrangements contained herein. 18. ATTORNEYS' FEES. In the event either party finds it necessary to institute litigation to enforce the terms of this Agreement, the prevailing party in such litigation shall be entitled to recover its reasonable attorneys' fees, costs and expenses in connection with such litigation. 19. BREACH OF AGREEMENT. Consultant agrees that in the event Consultant materially breaches any provisions of this Agreement, Boyd shall be entitled, in addition to any other remedies it may have under this Agreement, to offset to the extent of any liability, loss, damage or injury from such breach any payments due to Consultant pursuant to this or any other agreement to which Consultant and Boyd are parties, which notice of offset shall include an indication of the reasons therefor. 5 6 PLEASE READ AND CONSIDER THIS AGREEMENT CAREFULLY BEFORE EXECUTING. THIS SETTLEMENT AGREEMENT AND GENERAL RELEASE INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS. Executed at _________________, Alabama, this 16th day of July, 1998. /s/ Donald G. Johnston ----------------------------------------- DONALD G. JOHNSTON Executed at __________________, Alabama, this 16th day of July, 1998. BOYD BROS. TRANSPORTATION INC. [SEAL] By: /s/ Miller Welborn ------------------------------------- Name: Miller Welborn ---------------------------------- Title: Chief Executive Officer 6 EX-10.4 5 CONSULTING AGREEMENT 1 EXHIBIT 10.4 CONSULTING AGREEMENT THIS CONSULTING AGREEMENT ("Agreement") is made and entered into this 16th day of July, 1998 by and between DONALD G. JOHNSTON, an individual resident of Alabama (hereinafter referred to as "Consultant") and BOYD BROS. TRANSPORTATION INC., a Delaware corporation (hereinafter referred to as the "Company"). W I T N E S S E T H: WHEREAS, Consultant has heretofore been employed by the Company as President and Chief Executive Officer; WHEREAS, Consultant has retired from his employment with the Company; WHEREAS, Company desires for Consultant to provide certain consulting services for the Company and to agree to certain restrictions concerning confidential information and noncompetition as set forth herein and to make certain payments to Consultant in consideration therefor; NOW, THEREFORE, in consideration of the premises and mutual promises herein contained, it is agreed as follows: 1. CONSULTING. 1.1 The Company hereby engages the Consultant to perform and the Consultant hereby agrees to perform the consulting services in Section 1.2 below to commence August 1, 1998 and terminate on July 31, 2001 (the "Term"). Consultant shall make himself available to perform consulting services for the Company for up to eight (8) working days per month, on such days, at such times, and in such locations as the Chief Executive Officer of the Company shall reasonably request. 1.2 The consulting services to be performed by Consultant shall include advice on marketing, sales, driver recruitment and retention and such other consulting services as may be agreed upon from time to time by Consultant and the Company ("Consulting Services"). Consultant shall report to the Chief Executive Officer of the Company only, or to the Chief Executive Officer's designee. 2. COMPENSATION. 2.1 In consideration for the Consulting Services to be performed by Consultant described in Section 1.2 hereof, Consultant's undertakings concerning Confidential Information set forth in Section 3 hereof, and Consultant's undertakings concerning noncompetition set forth in Section 5 hereof, the Company shall pay Consultant a consultant 2 fee of $12,500 per month (less applicable taxes and withholdings as required by law) in accordance with Boyd's normal payroll procedures (the "Consulting Fee") through and including January 31, 2001. The Consulting Fee shall not exceed $375,000 in the aggregate through the end of the Term of this Agreement. 2.2 Consultant shall be entitled to reimbursement of all reasonable expenses incurred in performance of his duties hereunder, including without limitation, reimbursement of mileage expenses when on business of the Company. 2.3 Except as explicitly set forth in this Section 2, Consultant shall not be entitled to any compensation or benefits from the Company or any of its affiliates for services under this Agreement. 2.4 In the event of Consultant's death or disability, the payments contemplated in Section 2.1 shall be paid to his estate or to Consultant, as the case may be, in accordance with the terms thereof regardless of the provisions of Section 1 hereof. 3. CONFIDENTIAL INFORMATION. 3.1 Subject to the provisions of Subsection 3.3 hereof, Consultant shall keep confidential and not directly or indirectly disclose or divulge to any person nor use or otherwise appropriate for Consultant's own benefit, pricing information, marketing information, sales techniques of the Company or any other of the following confidential information or documents of or relating to the Company: confidential records, client and customer lists, information about client requirements, terms of contracts with clients and customers, and planning and financial information of the Company (hereinafter referred to as the "Confidential Information"). Consultant hereby acknowledges and agrees that the prohibitions against disclosure of Confidential Information recited herein are in addition to, and not in lieu of, any rights or remedies which the Company may have available pursuant to the laws of any jurisdiction or at common law to prevent the disclosure of trade secrets or proprietary information, and the enforcement by the Company of its rights and remedies pursuant to this Agreement shall not be construed as a waiver of any other rights or available remedies which it may possess in law or equity absent this Agreement. 3.2 Consultant shall not utilize the Confidential Information for any purpose except the purpose for which the Confidential Information is being disclosed to the Consultant. 3.3 The obligation of nondisclosure and nonuse set forth in this Section 3 shall expire two (2) years after the last date on which the Consultant performs consulting services hereunder and shall not apply to any Confidential Information that was: (a) in the public domain at the time it was disclosed to the Consultant or subsequently came into the public domain through no fault of the Consultant; (b) rightfully known by the Consultant prior to its disclosure to him or independently developed by the Consultant outside of his employment or consulting engagement with the Company; or (c) received by the Consultant as a matter of 2 3 right from a source other than the Company or another person subject to a confidentiality obligation to Company. 4. DISCLOSURE UNDER LEGAL COMPULSION. In the event that Consultant or any of Consultant's representatives become legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigative demand, any similar process or otherwise) to disclose any of the Confidential Information, Consultant shall provide the Company with prompt prior written notice of such requirement so that the Company may seek a protective order or other appropriate remedy and/or waive compliance with the terms of this Agreement. In the event that such protective order or other remedy is not obtained, or that the Company waives compliance with the provisions hereof, Consultant agrees to furnish only that portion of the Confidential Information which is required to be disclosed in the written opinion of Consultant's counsel, and to use reasonable efforts to obtain confidential treatment of such of the disclosed information which the Company so designates. 5. NONCOMPETITION. 5.1 The Consultant recognizes that he has acquired and will continue to acquire and develop unique contacts, skills and talents during his relationship with the Company. The Consultant will have many opportunities to develop on the Company's behalf the loyalty and goodwill of the Company's customers, prospective customers and suppliers in the commercial trucking industry. The Consultant realizes and agrees that the Company has a protectible interest in such relationships the Consultant establishes or nurtures with the Company's customers, prospective customers and suppliers while engaged by the Company. Accordingly, the Consultant agrees that the Company should be allowed to prevent Consultant, before and after termination of his consulting relationship with the Company hereunder, from unfairly competing with the Company or benefiting from the expenditures made by the Company in establishing or nurturing its relationships with customers and prospective customers. The Consultant acknowledges that such conduct on his part would harm and damage the legitimate business interests of the Company. 5.2 During the term of the Consultant's consulting relationship with the Company hereunder, the Consultant covenants that he will not, within the territories listed on Exhibit A hereto ("Territories"), directly or indirectly compete with the Company by carrying on Business (as defined in Section 5.5 below) which is substantially similar to the Business of the Company. The Consultant acknowledges that he has, and will continue to have, substantial direct or indirect contact with customers, prospective customers, and suppliers in the Territories. 5.3 For the purposes of this Agreement, the term "compete" shall mean with respect to the Business: (i) managing, supervising, or otherwise participating in a management or supervisory capacity in flatbed and related non-enclosed truckload carrier for hire operations; (ii) calling on, soliciting, taking away, accepting as a customer or attempting to call on, 3 4 solicit, take away or accept as a customer any individual, partnership, corporation, limited liability company or association that is or was a customer of the Company during the twelve calendar month period immediately preceding such act with whom the Consultant had contact; (iii) soliciting, taking away or attempting to solicit or take away any employee of the Business, either on the Consultant's behalf or on behalf of any other person or entity, who was an employee of the Company during the twelve calendar month period immediately preceding such act, or (iv) entering into or attempting to enter into any business substantially similar to the Business, either alone or with any individual, partnership, corporation, limited liability company or association. It is expressly acknowledged that Johnston may hire Becky Ryland, David Johnston, Scott Schell and Rosie Clark. 5.4 For the purposes of this Agreement, the words "directly or indirectly" as used herein shall mean (i) acting as an agent, representative, consultant, officer, director, member, independent contractor, or employee of any entity or enterprise which is competing with the Business, (ii) participating in any such competing entity or enterprise as an owner, partner, limited partner, joint venturer, member, creditor or stockholder (except as a stockholder holding less than one percent (1%) interest in a corporation whose shares are actively traded on a regional or national securities exchange or in the over-the-counter market), and (iii) communicating to any such competing entity or enterprise the names or addresses or any other information concerning any past, present, or identified prospective customer of the Company. 5.5 For purposes of this Agreement, the term "Business" shall mean the flatbed or related non-enclosed truckload carrier for hire operations, in which the Company now or hereafter engages, or has an immediate intention to engage. 5.6 During the term of the Consultant's consulting relationship with the Company hereunder, the Consultant also covenants and agrees not to hire or attempt to hire for himself or another employer any employee of the Company or directly or indirectly cause any such employee to leave his employment in order to work for another. 5.7 In the event the Company shall have failed to make any payments called for under this Agreement which shall remain uncured for more than ninety (90) days, Consultant shall not be obligated under this Section 5, but only for such time as the Company's payment defaults shall remain uncured. 6. INJUNCTION. 6.1 It is the understanding of the parties that the obligations of the Consultant set forth in Sections 3 and 5 of this Agreement relating to Confidential Information and noncompetition will be enforced to the fullest extent permissible under the laws and public policies in any jurisdiction in which enforcement is sought, and shall survive the termination of this Agreement and/or Consultant's engagement with the Company. 4 5 6.2 If there is a breach or threatened breach of any provision of this Agreement, the Company shall be entitled to seek and obtain an injunction restraining the Consultant from such breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach. 6.3 If any court shall determine that the duration, geographical limit or any other aspect of any restriction contained in this Agreement is unenforceable, it is the intention of the parties that any restrictive covenants set forth herein shall not thereby be terminated, but shall be deemed amended to the extent required to render them valid and enforceable. 6.4 The Consultant acknowledges and agrees that the prohibition against disclosure of Confidential Information recited in Section 3 hereof is in addition to, and not in lieu of, any rights or remedies which the Company may have available pursuant to the laws of any jurisdiction or at common law to prevent the disclosure of trade secrets and that the enforcement by the Company of its rights and remedies pursuant to this Agreement shall not be construed as a waiver of any other rights or remedies which it may possess in law or at equity absent this Agreement. 7. SEVERABILITY. If any particular provision of this Agreement shall be adjudicated to be invalid or unenforceable (subject to Subsection 6.3 above), such provision shall be deemed amended to delete therefrom the portion adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of this Section in the particular jurisdiction in which such adjudication is made. 8. NOTICES. Any notice required or permitted to be given under this Agreement shall be given in writing and sent by certified mail, postage prepaid, return receipt requested, to the last known residence in the case of the Consultant or to the Company's principal office in the case of the Company. 9. AMENDMENT; SUCCESSORS AND ASSIGNS. This Agreement may not be changed orally, but only by an agreement in writing, duly signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors or assigns, and, in the case of Consultant, shall inure to the benefit of his heirs, legatees, executors, administrators and guardians. 10. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Alabama. 5 6 11. BREACH OF AGREEMENT. Consultant agrees that in the event Consultant breaches any material provisions of this Agreement, the Company shall be entitled, in addition to any other remedies the Company may have under this Agreement, to offset to the extent of any liability, loss, damage or injury from such breach any payments due to Consultant pursuant to this or any other agreement to which Consultant and the Company are parties, which notice of offset shall include an indication of the reasons therefor. 6 7 IN WITNESS WHEREOF, the parties have executed this Agreement and set their hands and seals thereto as of the date first above written. BOYD BROS. TRANSPORTATION INC. [SEAL] By: /s/ Miller Welborn ------------------------------------- Name: Miller Welborn ----------------------------------- Title: Chief Executive Officer /s/ Donald G. Johnston ----------------------------------------- DONALD G. JOHNSTON 7 8 EXHIBIT A LIST STATES IN WHICH BOYD IS PRESENTLY CONDUCTING BUSINESS Louisiana Michigan Mississippi Virginia Alabama West Virginia Georgia Pennsylvania Florida New York South Carolina Maryland North Carolina District of Columbia Tennessee Vermont Kentucky New Hampshire Illinois Maine Indiana Massachusetts Ohio Connecticut Wisconsin Rhode Island Texas Oklahoma Arkansas Missouri Kansas Nebraska Iowa Minnesota Delaware New Jersey EX-10.5 6 STOCK PURCHASE AGREEMENT 1 EXHIBIT 10.5 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (this "Agreement"), made and entered into this 7th day of January, 1999, by and between DONALD G. JOHNSTON, an individual resident of the State of Alabama ("Seller") and BOYD BROS. TRANSPORTATION, INC., a Delaware corporation ("Purchaser" or the "Company"); W I T N E S S E T H: WHEREAS, Seller owns an aggregate of 531,114 shares of the outstanding common stock, $.001 par value per share ("Common Stock") of Purchaser; and WHEREAS, Purchaser desires to purchase from Seller and Seller desires to sell to Purchaser Five Hundred (500,000) shares of Common Stock owned by Seller (the "Shares"); NOW, THEREFORE, in consideration of the premises and the mutual promises and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: SECTION 1. PURCHASE OF SHARES. 1.1. TRANSFER OF SHARES. On the terms and subject to the conditions set forth in this Agreement, Seller hereby agrees to sell, assign, transfer and deliver to Purchaser all of his right, title and interest in and to the Shares owned by Seller. 1.2. PURCHASE PRICE. On the terms and subject to the conditions set forth in this Agreement, Purchaser shall pay a total purchase price (the "Purchase Price") of Three Million Six Hundred Sixty Thousand Dollars ($3,660,000), or $7.32 per share, to Seller in the manner described below. Purchaser shall pay the Purchase Price to Seller contemporaneously with the execution and delivery of this Agreement and the Shares. SECTION 2. PAYMENT OF PURCHASE PRICE. Upon delivery of the Shares, Purchaser shall pay to Seller the Purchase Price by delivering to an account or accounts designated by Seller by wire transfer in immediately available funds. Wire transferred funds shall be deemed delivered when dispatched by Buyer or its agents over the Federal Funds Transfer Wire Service and a Federal Funds wire number is obtained in respect thereof from the Federal Reserve System or its agent. 2 SECTION 3. INSTRUMENTS OF CONVEYANCE. 3.1. TRANSFER OF SHARES. Seller shall deliver stock certificates representing all of his right, title and interest in and to the Shares, duly endorsed in blank or accompanied by duly executed assignment documents. 3.2. FURTHER ASSURANCES. Seller shall from time to time at Purchaser's request and without further consideration execute and deliver to Purchaser such instruments of transfer, conveyance and assignment in addition to those delivered pursuant to Section 3.1 hereof as Purchaser shall reasonably request to transfer, convey and assign more effectively all of his right, title and interest in and to the Shares to Purchaser. SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Purchaser as follows: 4.1. AUTHORIZATION. This Agreement has been duly executed and delivered by Seller and constitutes the legal, valid and binding agreement of Seller, enforceable against Seller in accordance with its terms. Seller is not required to give any notice to, make any filing with, or obtain any authorization, consent or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement. 4.2. OWNERSHIP OF SHARES. Seller is the lawful owner of the Shares, free and clear of any liens, charges, claims, security interests or other encumbrances of any nature whatsoever. Seller has the full legal right, power and authority to sell, assign, transfer and deliver his Shares to Purchaser, free and clear of all liens, charges, claims, security interests or other encumbrances of any nature whatsoever, and the sale and delivery of the Shares to Purchaser pursuant to this Agreement will transfer to Purchaser full and legal title to all of the Shares, free and clear of any lien, encumbrance, charge, claim, security interest, equity or restriction whatsoever. Seller is not a party to any option, warrant, purchase right or other contract or commitment that could require Seller to sell, transfer or otherwise dispose of any capital stock of Purchaser (other than this Agreement). Seller is not a party to any voting trust, proxy or other agreement or understanding with respect to the voting of any capital stock of Purchaser. 4.3. NO VIOLATION. Neither the execution or delivery of this Agreement nor the consummation by Seller of the transactions contemplated hereby will (a) constitute a violation of any judgment, decree, order, regulation or rule of any court or governmental authority or any statute or law or (b) conflict with, result in a breach of, constitute a default under, result in the acceleration of, or create in any party the right to accelerate, terminate, modify or cancel any agreement, contract, lease, license, instrument or other arrangement to which Seller is a party or by which he is bound or to which any of his assets are subject. No consent, approval or authorization of any third party is required in connection with the execution, delivery and performance of this Agreement by Seller. 4.4. BROKERS AND FINDERS' FEES. Neither the Seller nor anyone acting on his behalf has done anything to cause or incur any liability to any party for any brokers' or finders' fees or the like in connection with this Agreement or any transaction contemplated hereby. -2- 3 4.5. INVESTMENT. Seller (a) is a sophisticated investor with knowledge and experience in business and financial matters; and (b) has had access to such information, including financial information, of Purchaser as he has desired in order to evaluate the transactions contemplated hereby and has been given the opportunity to ask questions of and receive answers from Purchaser and its representatives concerning Purchaser and to obtain any additional information that Purchaser possesses or can reasonably obtain that is necessary to verify the accuracy of the information furnished by Purchaser in connection herewith. 4.6. DISCLOSURE. No representations or warranties by Seller contained in this Agreement, and no statement, certificate, instrument or other writing furnished or to be furnished by Seller to Purchaser pursuant to the provisions hereof or in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. SECTION 5. REPRESENTATIONS AND WARRANTIES BY PURCHASER. Purchaser represents and warrants to Seller as follows: 5.1. PURCHASER'S EXISTENCE, POWER AND GOOD STANDING. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Purchaser is duly qualified to do business as a foreign corporation and is in good standing in Alabama. 5.2. AUTHORIZATION. This Agreement and its execution, delivery and performance have been duly authorized by all necessary corporate action on the part of Purchaser and are within its corporate power. This Agreement has been duly executed and delivered by Purchaser and constitutes the legal, valid and binding agreement of Purchaser, enforceable against Purchaser in accordance with its terms. 5.3. SEC REPORTS. Since January 1, 1998, Purchaser has filed with the Securities and Exchange Commission (the "Commission") all forms, reports and documents required to be filed by it pursuant to the Securities Exchange Act of 1934 (the "Exchange Act") (the "SEC Filings"), each of which, as of its respective filing date, complied in all material respects with all applicable requirements of the Exchange Act. None of the SEC Filings as of the respective dates on which they were filed with the Commission contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Since September 30,1998, the most recent period for which the Purchaser has filed a Quarterly Report under the Exchange Act, Purchaser has conducted its business in the ordinary course and there has not been any change or changes that, individually or in the aggregate, would have a material adverse effect on the financial condition of the Purchaser. 5.4. BROKERS' AND FINDERS' FEES. Neither Purchaser nor anyone acting on its behalf has done anything to cause or incur any liability to any party for any brokers' or finders' fees or the like in connection with this Agreement or any transaction contemplated hereby. -3- 4 5.5. NO VIOLATION. Neither the execution or delivery of this Agreement nor the consummation by Purchaser of the transactions contemplated hereby will (a) constitute a violation of any judgment, decree, order, regulation or rule of any court or governmental authority or any statute or law or (b) conflict with, result in a breach of, constitute a default under, result in the acceleration of, or create in any party the right to accelerate, terminate, modify or cancel any agreement, contract, lease, license, instrument or other arrangement to which Purchaser is a party or by which it is bound or to which any of its assets are subject. No consent, approval or authorization of any third party is required in connection with the execution, delivery and performance of this Agreement by Purchaser. SECTION 6. COVENANTS OF SELLER. For a period of two years from the date of this Agreement, except in accordance with the terms of a specific written request from the Company, Seller covenants that neither it nor any of its representatives, will (A) propose or publicly announce or otherwise disclose an intent to propose, or enter into or agree to enter into, singly or with any other person or directly or indirectly, (i) any form of business combination, acquisition, or other transaction relating to the Company or any majority-owned affiliate thereof, (ii) any form of restructuring, recapitalization or similar transaction with respect to the Company or any such affiliate, or (iii) any demand, request or proposal to amend, waive or terminate any provision of this Agreement, or (B) (i) acquire, or offer, propose or agree to acquire, by purchase or otherwise, any securities whether debt or equity (the "Securities") of the Company, including any indirect or direct options or other rights to acquire any such Securities, (ii) make, or in any way participate in, any solicitation of proxies with respect to any Securities (including by the execution of action by written consent), become a participant in any election contest with respect to the Company, seek to influence any person with respect to any Securities or demand a copy of the Company's list of its stockholders or other books and records, (iii) participate in or encourage the formation of any partnership, syndicate, or other group which owns or seeks or offers to acquire beneficial ownership of any Securities or which seeks to effect control of the Company or for the purpose of circumventing any provision of this Agreement, or (iv) otherwise act, alone or in concert with others (including by providing financing for another person), to seek or to offer to control or influence, in any manner, the management, Board of Directors, or policies of the Company. SECTION 7. CERTAIN ADDITIONAL COVENANTS. 7.1. TAXES. Seller shall pay any stamp, transfer, real property or other similar taxes attributable to the consummation of the transactions contemplated by this Agreement. 7.2. EXPENSES. Except as provided in Section 7.1 hereof, each party hereto shall bear the legal, accounting and other expenses incurred by such party in connection with this Agreement. 7.3. FURTHER ASSURANCES. From time to time, upon request of any party to this Agreement to any other party or parties and without further consideration, the party or parties to whom the request was made shall execute, acknowledge and deliver all such other instruments and -4- 5 shall take all such other action as may be requested to confirm or perfect or otherwise carry out the intent and purposes of this Agreement. 7.4. DISCLOSURES. Except as may be required by law or the rules of any stock exchange, no party hereto shall publicly disclose any aspect of the Agreement. SECTION 8. INDEMNIFICATION. Each party hereto shall indemnify, defend and hold the other harmless from and against any and all claims and losses, costs, damages and expenses (including reasonable attorneys' fees and expenses) incurred by such party, directly or indirectly, caused by, resulting from or arising out of any misrepresentation by, or breach of any covenant or warranty of, the other contained in this Agreement. SECTION 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made or undertaken by or on behalf of any party hereto shall survive the execution of this Agreement and continue in perpetuity; provided, however, that no party shall be liable to another party hereto with respect to any claims, suits or proceedings arising from a breach of a representation or warranty set forth in this Agreement brought by a third party against such party after ninety (90) days after the expiration of the applicable statute of limitations. SECTION 10. MISCELLANEOUS. 10.1. BINDING EFFECT. This Agreement shall inure to the benefit of and shall be binding upon the parties hereto and their respective successors and assigns. 10.2. GOVERNING LAW. This Agreement shall be deemed to be made in, and in any and all respects shall be interpreted, construed and governed by and in accordance with, the domestic laws of the State of Alabama, without giving effect to any choice or conflict of law provision or rules that would cause the application of the laws of any other jurisdiction. 10.3. AMENDMENT AND MODIFICATION. The parties hereto, by mutual agreement in writing approved on behalf of Purchaser by its Board of Directors or its officers authorized by its Board of Directors, and approved by Seller, may amend, modify and supplement this Agreement in any respect. 10.4. NOTICES. All notices, requests, demands or other communications required or permitted hereunder shall be sufficiently given if delivered in person or sent by registered or certified mail, postage prepaid, addressed: -5- 6 (a) If to Seller, to: Donald G. Johnston 443 Anderson Drive Eufaula, AL 36027 with a copy to: Johnston, Hinesley, Flowers & Clenney, P.C. P. O. Box 2246 Dothan, AL 36302 Attention: G. David Johnston, Esq. (b) If to Purchaser, to: Boyd Bros. Transportation, Inc. 3275 Highway 30 Clayton, Alabama 36016 Attention: Richard C. Bailey With a copy to: Jones, Day, Reavis & Pogue 3500 SunTrust Plaza 303 Peachtree Street, N.E. Atlanta, Georgia 30308 Attention: Lizanne Thomas, Esq. or to such other person or address as shall be furnished in writing by any party to the other prior to the giving of applicable notice or communication, and such notice or communication shall be deemed to have been given when delivered in person or five (5) business days after being so mailed. 10.5. HEADINGS. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 10.6. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. 10.7. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter. -6- 7 10.8. ASSIGNMENT. No party hereto may assign either this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written consent of the other party hereto. 10.9. CONSTRUCTION. Seller, on the one hand, and Purchaser, on the other hand, have participated jointly in the negotiation and drafting of this Agreement. In the event any ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by such parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. -7- 8 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. BOYD BROS. TRANSPORTATION, INC. By: /s/ Miller Welborn -------------------------------------- Title: Chief Executive Officer SELLER: /s/ Donald G. Johnston ------------------------------------------ DONALD G. JOHNSTON -8- EX-13 7 PORTIONS OF THE ANNUAL REPORT 1 Exhibit 13 Boyd Bros. Transportation Inc. and Subsidiary Selected Financial Data The following tables set forth selected financial data and selected pro forma financial data of the Company. The selected financial data presented below for the five-year period ended December 31, 1998, are derived from the Company's audited financial statements. The data presented below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Consolidated Financial Statements and Notes thereto.
Year Ended December 31, - --------------------------------------------------------------------------------------------------------------------------- 1998 1997 1996 1995 1994 (in thousands, except per share data) - --------------------------------------------------------------------------------------------------------------------------- Statement of Operations Data: Operating revenues $ 118,123 $ 77,215 $ 65,523 $ 61,866 $ 59,132 Operating expenses: Salaries, wages and employee benefits 36,608 32,427 28,420 27,573 24,800 Cost of independent contractors 31,818 2,441 -- -- -- Operating supplies 21,429 20,832 19,550 17,156 15,042 Taxes and licenses 2,566 2,306 2,222 1,823 1,922 Insurance and claims 5,393 3,439 3,379 3,210 3,669 Communications and utilities 1,554 1,305 1,186 1,022 927 Depreciation and amortization 10,320 9,181 8,261 7,296 6,451 Rent 348 163 202 154 136 Gain on disposition of property and equipment, net (433) (577) (805) (648) (410) Environmental remediation (1) 24 (23) 19 (294) 800 Other 1,169 558 439 474 523 Total operating expenses 110,796 72,124 62,873 57,765 53,860 - --------------------------------------------------------------------------------------------------------------------------- Operating income 7,327 5,091 2,650 4,101 5,272 Interest income 97 136 164 82 54 Interest expense (1,608) (1,391) (1,408) (781) (806) Other 82 -- -- -- 70 - --------------------------------------------------------------------------------------------------------------------------- Income before income taxes 5,898 3,836 1,406 3,402 4,590 Income taxes 2,326 1,519 579 1,227 6,544 - --------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 3,572 $ 2,317 $ 828 $ 2,125 $ (1,954) Basic and diluted net income (loss) per share $ .87 $ .62 $ .22 $ .56 $ (.55) Dividends paid (2) $ -- $ -- $ -- $ -- $ 2,525 Dividends per share $ -- $ -- $ -- $ -- $ .66 =========================================================================================================================== Pro Forma Income Data (Unaudited) (3): Income before income taxes $ 4,590 Pro forma income taxes 1,762 Pro forma net income 2,828 Pro forma basic and diluted net income per share .80 ===========================================================================================================================
(1) Reflects an operating expense (credit) accrued for environmental remediation during 1995. (2) Distributions primarily to fund tax liabilities resulting from the Company's S Corporation status were made to the Company's stockholders in each year between 1990 and 1994, prior to the termination of the Company's S Corporation status on March 30, 1994. (3) Between January 1, 1987 and March 30, 1994, the Company was treated as an S Corporation for federal and certain state income tax purposes. As a result, the Company's taxable earnings for 1989 through 1993, and the first quarter of 1994, were taxed for federal and certain state income tax purposes directly to the Company's then-existing stockholders. On March 30, 1994, the Company terminated its S Corporation status and became subject to federal and certain additional state income taxes. For informational purposes, unaudited pro forma net income data is provided for 1994 to reflect an adjustment for a provision for federal and state income taxes as if the Company had not been treated as an S Corporation during that period. The pro forma net income data does not give effect to the non-cash charge of approximately $5.5 million in recognition of deferred income taxes that resulted from the termination of the Company's S Corporation status. 4 2 Boyd Bros. Transportation Inc. and Subsidiary Selected Financial Data
December 31, 1998 1997 1996 1995 1994 - -------------------------------------------------------------------------------------------------------------- (in thousands) Balance Sheet Data: Working capital $ 4,360 $ 3,785 $ 2,495 $ 2,676 $ 768 Net property and equipment 48,691 48,859 44,593 37,188 33,184 Total assets 77,047 71,526 57,262 48,892 41,480 Long-term debt, less current maturities 18,049 19,252 15,198 9,228 6,143 Total liabilities 44,186 42,071 33,374 24,903 19,616 Stockholders' equity 32,862 29,455 23,888 23,989 21,864
Selected Operating Data: The following table sets forth certain operating data regarding the Company.
Year Ended December 31, 1998 1997 1996 1995 1994 - --------------------------------------------------------------------------------------------------------- Operating ratio 93.80% 93.41% 95.95% 93.37% 91.08% Average length of haul in miles 576 663 677 694 687 Average number of truckloads per week 3,330 1,908 1,607 1,470 1,457 Average revenues per total mile $1.17 $1.17 $1.14 $1.14 $1.15 Equipment at period end: Tractors 1,032 950 575 522 480 Trailers 1,337 1,227 916 875 830
5 3 Boyd Bros. Transportation Inc. and Subsidiary Management's Discussion and Analysis The following is a discussion of the financial condition and results of operations of the Company for each of the years in the three-year period ended December 31, 1998. This discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included elsewhere herein. General The Company was founded in 1956 by Dempsey Boyd and his brothers as a small regional flatbed trucking operation with three tractors. Since that time, the Company has grown to one with 1,032 tractors and 1,337 trailers operating in the eastern two-thirds of the United States. Historically, the Company has owned its revenue equipment and operated through employee drivers. The Company's expansion in the past, therefore, has required significant capital expenditures which have been funded through secured borrowings. During 1997, as a strategy to expand the Company's potential for growth without the increase in capital expenditures typically related to owned equipment, the Company began adding owner/operators to its fleet. The Company then accelerated the implementation of this strategy in December 1997 with the acquisition of Welborn Transport, Inc., which specializes in short-haul routes using largely an owner/operated fleet. The Company continued to expand its owner-operator program in 1998. At December 31, 1998, owner-operators made up 44.5% of the Company's total fleet. Results of Operations The following table sets forth the percentage relationship of the expense items to operating revenues for the periods indicated.
Percentage of Operating Revenues Year Ended December 31, 1998 1997 1996 Operating revenues 100.00% 100.00% 100.00% ---------------------------------------------------------------------------------------------------- Operating expenses Salaries, wages, and employee benefits 31.00 42.00 43.37 Cost of independent contractors 26.94 3.16 -- Operating supplies 18.14 26.98 29.84 Taxes and licenses 2.17 2.99 3.39 Insurance and claims 4.57 4.45 5.16 Communication and utilities 1.31 1.69 1.81 Depreciation and amortization 8.74 11.89 12.61 Gain on disposition of property and equipment, net (.37) (.47) (1.23) Other 1.30 .72 .66 Total operating expenses 93.80 93.41 95.95 ---------------------------------------------------------------------------------------------------- Operating income 6.20 6.59 4.04 Interest expense, net (1.28) (1.62) (1.90) Other income .07 -- -- ---------------------------------------------------------------------------------------------------- Income before income taxes 4.99 4.97 2.14 Income taxes 1.97 1.97 .88 ---------------------------------------------------------------------------------------------------- Net income 3.02% 3.00% 1.26% ====================================================================================================
6 4 COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31, 1997 Operating revenues for 1998 increased $40.9 million, or 52.9%, to $118.1 million compared with $77.2 million for 1997. The inclusion of Welborn revenues for the entire year accounted for 78.5% of the increase. Revenues also increased due to better equipment utilization and the addition of 70 tractors. Salaries, wages and employee benefits increased $4.2 million, or 12.9%, to $36.6 million compared with $32.4 million in 1997. Salaries increased at a slower rate than revenues, making up 31.0% of operating revenue in 1998 compared to 42.0% in 1997, due to the expansion of the owner/operator program. Cost of independent contractors for 1998 increased $29.4 million to $31.8 million from $2.4 million in 1997, due to a full year of the owner/operator program and the inclusion of Welborn. As of December 31, 1998 Boyd Bros. had an owner/operator fleet of 150 operators compared with 50 operators in 1997. Additionally, Welborn, had 310 owner/operators as of December 31, 1998, which is substantially all of its fleet. Operating supplies expense for 1998 increased $.6 million, or 2.9%, to $21.4 million compared with $20.8 million for 1997. Operating supplies expense increased at a slower rate than revenue because of lower fuel prices and also the increase in the owner/operator fleet. Maintenance costs on a per mile basis decreased $.06, or 16.7%, due to lowering the average age of the fleet. Taxes and licenses expense for 1998 increased $.3 million, or 11.3%, to $2.6 million compared with $2.3 million in 1997. Taxes and licenses increased at a slower rate than revenue due to the greater percentage of owner/operators. Insurance and claims expense increased $2.0 million, or 56.8%, to $5.4 million compared with $3.4 million in 1997. The increase was primarily due to an increase in the accident frequency and the inclusion of Welborn for the entire year. Communications and utilities expense increased $.3 million, or 19.1%, to $1.6 million from $1.3 million in 1997. Improved cost management contributed to the slower rate of increase compared with revenue growth. Depreciation and amortization expense increased $1.1 million, or 12.4%, to $10.3 million from $9.2 million in 1997. The slower rate of growth compared with revenue was due to higher utilization of equipment, a full year of Boyd's owner/ operator program, and Welborn's high percentage of owner/operators. Rent expense increased $.2 million, or 113%, to $.3 million from $.1 million in 1997 due largely to the inclusion of Welborn. Rent expense includes operating leases for both trailers and terminals. Other expenses increased approximately $1.0 million, or 176.7%, to $1.5 million in 1998 from $.6 million in 1997 due largely to Welborn being included for the entire year. Other expenses include, but are not limited to, consulting fees, advertising costs and bank charges. Interest expense (net of interest income) increased $.2 million, or 20.4%, to $1.5 million from $1.3 million in 1997. During 1998, the Company incurred additional indebtedness for the purpose of financing an increase in its fleet of 70 tractors. Net income for 1998 was $3.57 million compared with $2.32 million for 1997. COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996 Operating revenues for 1997 increased $11.7 million, or 17.8%, to $77.2 million compared with $65.5 million for 1996. The increase resulted because of better equipment utilization, the addition of 27 tractors, and the inclusion of Welborn revenues for one month. The Company's operating ratio improved from 95.95% in 1996 to 93.41% in 1997. The lower operating ratio was due primarily to better utilization of equipment and moderating fuel costs. Operating supplies expense for 1997 increased $1.3 million, or 6.6%, to $20.8 million compared with $19.5 million for 1996. Operating supplies expense increased at a slower rate than revenue because of lower fuel prices. Maintenance costs on a per mile basis decreased $.01, or 9.6%, due to lowering the average age of the fleet. Taxes and licenses expense for 1997 increased $.1 million, or 3.8%, to $2.3 million from $2.2 million in 1996. Taxes and licenses increased at a slower rate than revenue because of the addition during 1997 of owner/operators, who pay their own taxes and licenses. Insurance and claims expense increased $.1 million, or only 1.8%, to $3.4 million from $3.3 million in 1996. Lower insurance rates and positive claims experience contributed to the small rate of increase. Communications and utilities expense increased $.1 million, or 10.1%, to $1.3 million from $1.2 million in 1996. Improved cost management contributed to the slower rate of increase compared with revenue growth. 7 5 Depreciation and amortization expense increased $.9 million, or 11.1%, to $9.2 million in 1997 from $8.3 million in 1996. The slower rate of growth compared with revenue was due to higher utilization of equipment and the startup of the owner/operator program. The Company had approximately 50 owner/operators at December 31, 1997. Additionally, approximately 35 of these owner/operators entered into lease-purchase arrangements with the Company, which resulted in these assets being removed from the Company's depreciation records. Gain on disposition of property and equipment decreased $.4 million, or 54.8%, to $.4 million in 1997 from $.8 million in 1996. There were fewer equipment trades in 1997 compared with 1996. Other expenses decreased $.1 million, or 15.7%, to $.6 million in 1997 from $.7 million in 1996. Interest expense (net of interest income) increased $10,510, or 0.8%, a negligible increase considering the Company's revenue growth rate. A significant portion of the Company's debt is LIBOR-rate based, which has been significantly lower during most of 1997. Net income for 1997 was $2.32 million compared with $.83 million for 1996. Liquidity and Capital Resources The growth of the Company's business and maintenance of its modern fleet has required significant investments in new tractors and trailers, and has been financed largely through long-term debt. Capital expenditures, net of proceeds from disposals of property and equipment, were approximately $12.5 million in 1998, compared with $11.4 million in 1997. At December 31, 1998, the Company had long-term debt (including current portions) of $25.9 million, which was primarily incurred to purchase revenue equipment. Management anticipates increasing the Company's fleet by approximately 100 tractors in 1999, net of replacements, at an anticipated cost of approximately $29.3 million. Management expects to finance such equipment purchases through equipment financing arrangements with various lenders. Additionally, the Company will begin construction of a new "super terminal" in Birmingham, Alabama with a cost estimated at $3.5 million. The construction of the terminal will be financed with a financial institution. Net cash flow provided by operating activities was approximately $9.2 million during 1998 compared with approximately $8.2 million in 1997. The Company had a working capital surplus of $4.4 million at December 31, 1998. Historically, the Company has relied on cash generated from operations to fund its working capital requirements. However, the Company has a bank line of credit permitting short-term borrowings of up to $1.5 million. The revolving line of credit is collateralized by accounts receivable and inventory. In January 1996, the Company implemented a stock repurchase program based on management's belief that, at then current market prices, the Common Stock represented a sound investment for the Company's corporate funds. Pursuant to the repurchase program, the Company purchased 25,000 shares of the Common Stock in open market or negotiated transactions during 1998, for an aggregate purchase price of $165,625. The Company funded the purchase using working capital. Additionally, on January 8, 1999, the Company purchased 500,000 shares of its' outstanding Common Stock from the former CEO for $3.6 million. The stock purchase was funded by available cash and bank line of credit. The Company currently has outstanding letters of credit, totaling approximately $2.9 million at December 31, 1998, to cover liability insurance claims and outstanding claims related to its previous self-insured workers' compensation program. Annual commitment fees relating to those letters of credit do not exceed 1.5% of the face amounts thereof. Management believes that cash flow from future operations and borrowings available under its lines of credit will be sufficient to meet its needs for working capital for the foreseeable future. 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 prevailing market conditions, the market price of the Common Stock and other factors over which the Company has no control, as well as the Company's financial condition and results of operations. Interest Rate Risk The Company is exposed to interest rate risk due to its long-term debt, which at December 31, 1998, bore interest at rates ranging from 1.00% to 1.50% above the bank's LIBOR rate. Under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 107, Disclosures about Fair Value of Financial Instruments, the Company has estimated the fair value of its long-term debt approximates its carrying value, using a discounted cash flow analysis based on borrowing rates available to the Company. The effect of a hypothetical 10% increase in interest rates would increase the estimated fair value of the Company's long-term debt by approximately $300,000. Management believes that current working capital funds are sufficient to offset any adverse effects caused by changes in the interest rates. Year 2000 Compliance State of Readiness- The Company is in the process of performing a comprehensive review of its Year 2000 issues. The overall review includes six phases: (1) inventorying Year 2000 items; (2) assigning priorities to identified items; (3) assessing the Year 2000 compliance of items determined to be material to the Company; (4) replacing or updating material items determined 8 6 not to be Year 2000 compliant; (5) testing material items; and (6) designing and implementing contingency and business continuation plans. The Company has grouped its information technology (IT)-Systems and Non-IT Systems into two categories, mission critical and support secondary. The mission critical group includes the IT-Systems and Non-IT Systems that are necessary to execute the Company's basic functions of hauling freight via the Company's flat-bed trucks. The Company has formed a committee to address both the mission critical and support secondary categories. Each of the mission critical and support secondary groups has inventoried Year 2000 items and assigned priorities to identified items. The mission critical group has determined items material to the Company and either has replaced or updated these items. As of December 31, 1998 the testing of mission critical items that were replaced or updated is 80% complete and is expected to be completed by the end of the second quarter of 1999. Based on information provided to the Company by Qualcomm, the Company's supplier of IT-Systems and software that is used to track and communicate with the fleet, the Company believes that all systems provided to it by Qualcomm are Year 2000 compliant. The committee addressing secondary items (systems that increase efficiencies but are not necessary for the provision of services or the receipt of payment), has completed assessment of Year 2000 compliance. The support secondary group is 40% complete as to replacing and updating these items, and is expected to be completed by the end of the second quarter of 1999. The testing is ongoing as the items are replaced or updated. Contingency and Business Continuation Plan- The Company has not developed a contingency plan, but such a plan is scheduled to be completed by the end of the second quarter of 1999. Risks and Reasonably Likely Worst Case Scenarios- As part of the Company's comprehensive review, it is continuing to identify and verify the Year 2000 readiness of third parties (vendors and customers) with whom the Company has material relationships. At present, the Company is not able to determine the effect on results of operations, liquidity and financial condition in the event the Company's material vendors and customers are not Year 2000 compliant. The Company will continue to monitor the progress of its material vendors and customers and formulate a contingency plan at that point in time when it does not believe that a material vendor or customer will be compliant. Costs- The Company expects to spend approximately $105,000 in connection with the Year 2000 remediation. The Company is still evaluating all necessary purchases, but as of December 31, 1998 the Company has spent $75,000. Seasonality In the trucking industry, results of operations show a seasonal pattern because customers generally reduce shipments during the winter season, and the Company does experience some seasonality due to the open, flatbed nature of its trailers. The Company has at times experienced delays in meeting its shipping schedules as a result of severe weather conditions, particularly during the winter months. In addition, the Company's operating expenses have historically been higher in the winter months due to decreased fuel efficiency and increased maintenance costs in colder weather. Recently Issued Accounting Standards In June, 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, which is effective for fiscal years beginning after June 15, 1999. It requires that an entity recognize all derivative financial instruments as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company is currently evaluating this Statement and has not yet determined its impact on the Company's financial statements. 9 7 BOYD BROS. TRANSPORTATION INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------------------------- 1998 1997 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 1,361,664 $ 3,417,174 Short-term investments 250,000 250,000 Accounts receivable (less allowance for doubtful accounts of $272,000 in 1998 and $237,000 in 1997): Trade and interline 12,735,168 9,415,737 Other 170,094 117,034 Current portion of net investment in sales-type leases 1,495,510 508,829 Parts and supplies inventory 263,943 263,352 Prepaid tire expense 838,900 904,381 Other prepaid expenses 2,059,490 1,387,587 Deferred income taxes 644,712 174,587 ----------- ----------- Total current assets 19,819,481 16,438,681 ----------- ----------- PROPERTY AND EQUIPMENT: Land and land improvements 2,262,486 1,046,245 Buildings 2,927,611 3,278,527 Revenue equipment 60,619,648 58,668,742 Other equipment 10,806,777 9,435,642 Leasehold improvements 339,994 339,944 ----------- ----------- Total 76,956,516 72,769,100 Less accumulated depreciation and amortization 28,265,861 23,910,352 ----------- ----------- Property and equipment, net 48,690,655 48,858,748 ----------- ----------- OTHER ASSETS: Net investment in sales-type leases 4,120,787 1,656,490 Goodwill, net of accumulated amortization of $240,578 in 1998 and $16,778 in 1997 4,235,422 4,459,222 Deposits and other assets 181,081 112,861 ----------- ----------- Total other assets 8,537,290 6,228,573 ----------- ----------- TOTAL $77,047,426 $71,526,002 =========== ===========
10 8 BOYD BROS. TRANSPORTATION INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------------------- 1998 1997 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 7,833,286 $ 5,914,785 Revolving line of credit 1,021,849 Accounts payable - trade and interline 1,648,537 1,517,218 Income taxes 1,686,502 230,327 Accrued liabilities: Self-insurance claims 2,132,042 2,122,182 Salaries and wages 957,710 1,069,515 Other 1,200,642 778,148 ----------- ----------- Total current liabilities 15,458,719 12,654,024 LONG-TERM DEBT 18,049,490 19,251,702 DEFERRED INCOME TAXES 10,677,510 10,165,682 ----------- ----------- Total liabilities 44,185,719 42,071,408 ----------- ----------- COMMITMENTS AND CONTINGENCIES (Note 6) STOCKHOLDERS' EQUITY: Preferred stock, $.001 par value - 1,000,000 shares authorized; no shares issued and outstanding Common stock, $.001 par value - 10,000,000 shares authorized; 4,069,640 (1998) and 4,094,640 (1997) shares issued and outstanding 4,070 4,095 Additional paid-in capital 16,864,622 17,030,222 Retained earnings 15,993,015 12,420,277 ----------- ----------- Total stockholders' equity 32,861,707 29,454,594 ----------- ----------- TOTAL $77,047,426 $71,526,002 =========== ===========
See notes to consolidated financial statements. 10 9 BOYD BROS. TRANSPORTATION INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------------------------------- 1998 1997 1996 OPERATING REVENUES $ 118,123,424 $ 77,214,629 $ 65,523,412 ------------- ------------ ------------ OPERATING EXPENSES: Salaries, wages and employee benefits 36,607,732 32,427,094 28,419,881 Cost of independent contractors 31,817,649 2,440,687 Operating supplies 21,429,224 20,831,643 19,549,827 Taxes and licenses 2,565,842 2,305,506 2,221,710 Insurance and claims 5,392,526 3,438,761 3,378,815 Communications and utilities 1,553,511 1,305,448 1,186,131 Depreciation and amortization 10,320,379 9,181,399 8,261,253 Gain on disposition of property and equipment, net (433,023) (363,970) (805,800) Other 1,542,703 557,508 661,110 ------------- ------------ ------------ Total operating expenses 110,796,543 72,124,076 62,872,927 ------------- ------------ ------------ OPERATING INCOME 7,326,881 5,090,553 2,650,485 ------------- ------------ ------------ OTHER INCOME (EXPENSES): Interest income 97,052 135,819 164,363 Interest expense (1,607,482) (1,390,455) (1,408,489) Other income 82,308 ------------- ------------ ------------ Other expenses, net (1,428,122) (1,254,636) (1,244,126) ------------- ------------ ------------ INCOME BEFORE PROVISION FOR INCOME TAXES 5,898,759 3,835,917 1,406,359 ------------- ------------ ------------ PROVISION (BENEFIT) FOR INCOME TAXES: Current 2,284,318 995,000 (602,915) Deferred 41,703 524,070 1,181,657 ------------- ------------ ------------ Total provision for income taxes 2,326,021 1,519,070 578,742 ------------- ------------ ------------ NET INCOME $ 3,572,738 $ 2,316,847 $ 827,617 ============= ============ ============ BASIC AND DILUTED NET INCOME PER SHARE $ 0.87 $ 0.62 $ 0.22 ============= ============ ============ BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 4,090,175 3,726,591 3,726,496 ============= ============ ============
See notes to consolidated financial statements. 11 10 BOYD BROS. TRANSPORTATION INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
- ------------------------------------------------------------------------------------------------------------- ADDITIONAL COMMON PAID-IN RETAINED STOCK CAPITAL EARNINGS TOTAL BALANCE, JANUARY 1, 1996 $3,823 $14,708,994 $ 9,275,813 $23,988,630 Purchase and retirement of common stock (122) (928,378) (928,500) Net income 827,617 827,617 ------ ----------- ----------- ----------- BALANCE, DECEMBER 31, 1996 3,701 13,780,616 10,103,430 23,887,747 Issuance of common stock in connection with acquisition 394 3,249,606 3,250,000 Net income 2,316,847 2,316,847 ------ ----------- ----------- ----------- BALANCE, DECEMBER 31, 1997 4,095 17,030,222 12,420,277 29,454,594 Purchase and retirement of common stock (25) (165,600) (165,625) Net income 3,572,738 3,572,738 ------ ----------- ----------- ----------- BALANCE, DECEMBER 31, 1998 $4,070 $16,864,622 $15,993,015 $32,861,707 ====== =========== =========== ===========
See notes to consolidated financial statements. 12 11 BOYD BROS. TRANSPORTATION INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
- ----------------------------------------------------------------------------------------------------------- 1998 1997 1996 OPERATING ACTIVITIES: Net income $ 3,572,738 $ 2,316,847 $ 827,617 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,320,379 9,181,399 8,261,253 Gain on disposal of property and equipment, net (433,023) (363,970) (805,800) Net effect of sales-type leases on cost of independent contractors (1,800,538) (212,780) Provision for deferred income taxes 41,703 524,070 1,181,657 Changes in assets and liabilities provided (used) cash: Accounts receivable (3,372,491) (3,716,424) 805,570 Refundable income 579,573 581,738 Other current assets (1,001,836) (851,868) (9,950) Deposits and other assets (68,220) 233,189 (30,038) Accounts payable - trade and interline 131,319 (605,343) 1,190,036 Accrued liabilities and other current liabilities 1,776,724 1,119,302 (607,128) ------------ ------------ ------------ Net cash provided by operating activities 9,166,755 8,203,995 11,394,955 ------------ ------------ ------------ INVESTING ACTIVITIES: Purchase of short-term investments (150,000) Payments received on sales-type leases 1,750,705 43,374 Capital expenditures: Revenue equipment (12,117,225) (15,341,667) (20,981,024) Other property and equipment (2,360,188) (1,995,791) (838,881) Proceeds from disposals of property and equipment 1,975,628 5,948,765 6,959,399 ------------ ------------ ------------ Net cash used in investing activities (10,751,080) (11,495,319) (14,860,506) ------------ ------------ ------------ FINANCING ACTIVITIES: Purchase of common stock (165,625) (928,500) Proceeds from line of credit 1,021,849 Proceeds from long-term debt 12,572,123 17,830,191 18,411,485 Principal payments on long-term debt (12,877,683) (15,736,748) (11,906,138) ------------ ------------ ------------ Net cash provided by (used in) financing activities (471,185) 3,115,292 5,576,847 ------------ ------------ ------------
13 12 BOYD BROS. TRANSPORTATION INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------------------- 1998 1997 1996 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $(2,055,510) $ (176,032) $ 2,111,296 CASH AND CASH EQUIVALENTS: BEGINNING OF YEAR 3,417,174 3,593,206 1,481,910 ----------- ----------- ----------- END OF YEAR $ 1,361,664 $ 3,417,174 $ 3,593,206 =========== =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid (received) during the year for: Interest $ 1,612,715 $ 1,254,636 $ 1,350,568 =========== =========== =========== Income taxes, net of refunds $ 816,729 $ 30,469 $ (943,351) =========== =========== =========== SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES: Acquisition of Welborn Transport, Inc. in December 1997 (see Note 2) Net investment in sales-type leases $ 2,177,249 $ 2,165,319 =========== ===========
See notes to consolidated financial statements. 13 13 BOYD BROS. TRANSPORTATION INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS - Boyd Bros. Transportation Inc. and its subsidiary (the "Company") are flatbed carriers, transporting a variety of products, primarily steel and building materials. The Company has authority to operate in the continental United States; however, its market generally encompasses the eastern two-thirds of the United States. The Company is headquartered in Clayton, Alabama and operates regional and satellite terminals in locations near interstate highways or customer facilities. All of the Company's operations (flatbed trucking) constitute only one segment under the requirements of Statement of Financial Accounting Standards ("SFAS") No. 131, Disclosures about Segments of an Enterprise and Related Information. PRINCIPLES OF CONSOLIDATION - The accompanying financial statements include the accounts of the Company and its wholly owned subsidiary, Welborn Transport, Inc. since its acquisition on December 8, 1997 (Note 2). All significant intercompany items have been eliminated in consolidation. ACCOUNTING ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash on hand, cash on deposit and highly liquid investments with a maturity of three months or less at purchase date. SHORT-TERM INVESTMENTS - Short-term investments, which consist of certificates of deposit with maturities of three to twelve months, are stated at cost, which approximates market. TIRES IN SERVICE - Tires placed in service on newly purchased revenue equipment are carried at cost and depreciated over their useful lives, estimated to be eighteen months. The undepreciated cost of tires is included in prepaid tire expense. PROPERTY AND EQUIPMENT - Property and equipment is stated at cost. Depreciation is computed using the straight-line method at rates intended to distribute the cost of the assets over their estimated service lives as follows: Land improvements 15 years Buildings 5 - 25 years Revenue equipment 4 - 7 years Other equipment 3 - 10 years Leasehold improvements 5 - 20 years Expenditures which significantly increase values or extend useful lives of property and equipment are capitalized, whereas those for normal maintenance and repairs are expensed. Gains and losses on disposal of property and equipment are reflected in operations in the year of disposal. GOODWILL - Goodwill is amortized over 20 years using the straight-line method. The Company periodically reviews goodwill to assess recoverability, and impairments would be recognized in operating results if a permanent diminution in value were to occur. CLAIMS - The Company accrues estimates for the uninsured portion of claims relating to the Company's insurance programs (see Note 6). REVENUE RECOGNITION - Operating revenue and related costs are recognized on the date shipments are delivered by the Company. NET INCOME PER SHARE - In accordance with SFAS No. 128, Earnings per Share, the Company is now required to report two separate earnings per share numbers, basic and diluted, on the face of the income statement. For the years ended December 31, 1998, 1997 and 1996, all of the Company's outstanding options, totaling 444,810, 323,350, and 258,400 shares, respectively, were excluded from the computation of weighted average shares as such options would have been anti-dilutive. FAIR VALUE OF FINANCIAL INSTRUMENTS - SFAS No. 107, Disclosures about Fair Value of Financial Instruments (as amended by SFAS No. 119), requires certain disclosures for financial instruments for which it is practicable to estimate the fair value. The Company's financial instruments consist of cash equivalents, short-term investments, trade receivables, trade payables, accrued expenses, and interest-bearing debt. The fair value of the Company's financial instruments, excluding interest-bearing debt, approximates the carrying value reflected in the accompanying consolidated balance sheets at December 31, 1998 and 1997, primarily because of the short-term nature of these instruments. Fair value disclosure for the Company's interest-bearing debt is presented in Note 5. ACCOUNTING STANDARD NOT YET ADOPTED - In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, which is effective for fiscal years beginning after June 15, 1999. It requires that an entity recognize all derivative financial instruments as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company is currently evaluating this Statement and has not yet determined its impact on the Company's financial statements. RECLASSIFICATIONS - Certain reclassifications have been made to the 1997 and 1996 consolidated financial statements to conform to the 1998 presentation. 14 14 2. ACQUISITION On December 8, 1997, the Company acquired Welborn Transport, Inc. ("Welborn") for a total purchase price of $6,631,000, including direct acquisition costs. The acquisition was accounted for using the purchase method of accounting and, accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. Goodwill totaling $4,476,000 was recognized on the acquisition equal to the excess of the purchase price over the estimated fair value of the net assets acquired. The consolidated statements of income include the results of Welborn's operations from its acquisition date forward. The estimated fair value of assets acquired and liabilities assumed in this acquisition is summarized as follows: Fair value of assets acquired $11,985,000 Less liabilities assumed 5,354,000 ----------- $ 6,631,000 =========== Consideration consisted of: Fair value of common stock issued $ 3,250,000 Issuance of notes payable to stockholders (Note 5) 3,250,000 Amounts paid or accrued for acquisition costs 131,000 ----------- Total purchase price $ 6,631,000 ===========
The following unaudited pro forma consolidated results of operations for the years ended December 31, 1997 and 1996 have been prepared as though the acquisition occurred as of January 1, 1996:
1997 1996 Operating revenues $105,551,554 $88,875,373 Net income 2,119,420 1,128,198 Basic and diluted net income per share .52 .27
The unaudited pro forma consolidated results of operations have been prepared for comparative purposes only and do not purport to be indicative of the actual results that would have been achieved had the acquisition taken place as of January 1, 1996 or in the future. 3. EMPLOYEE BENEFIT PLAN The Company has a contributory 401(k) retirement plan, which covers employees who elect to participate and meet certain eligibility requirements. The amounts charged to operations related to this plan for the years ended December 31, 1998, 1997, and 1996 were $246,943, $151,527, and $233,444, respectively. 4. LEASES OPERATING LEASES - The Company leases certain terminal buildings, land and equipment under agreements which expire at various dates through 2001. The lease agreements generally include renewal options and the Company is required to pay taxes, insurance and normal maintenance for the facilities. Future minimum lease payments under all operating leases with an initial or remaining noncancelable lease term of more than one year are as follows:
YEAR 1999 $ 90,441 2000 72,200 2001 22,615 -------- Total $185,256 ========
Total rental expense for all operating leases was $378,961, $112,243, and $98,648 for the years ended December 31, 1998, 1997 and 1996, respectively. SALES-TYPE LEASES - The Company leases revenue equipment to certain of its owner-operators and accounts for these transactions as sales-type leases. These receivables have terms of four years and are collateralized by a security interest in the related revenue equipment. There is no residual value accruing to the Company at the end of the lease term. The components of the net investment in sales-type leases at December 31, 1998 and 1997 are as follows: Minimum lease receivable $ 8,731,437 $ 3,360,117 Allowance for uncollectible receivables (1,201,245) (380,000) ----------- ----------- Net minimum lease receivable 7,530,192 2,980,117 Unearned interest income (1,913,895) (814,798) ----------- ----------- Net investment in sales-type leases 5,616,297 2,165,319 Less current portion (1,495,510) (508,829) ----------- ----------- Net amount due after one year $ 4,120,787 $ 1,656,490 =========== ===========
Future minimum lease rentals are as follows:
YEAR 1999 $2,716,775 2000 2,668,711 2001 2,353,122 2002 992,829 ---------- Total $8,731,437 ==========
Gains on disposition of revenue equipment leased to owner operators, interest income on these leases, and provisions for bad debts related to sales-type leases have been included as components of cost of independent contractors in the accompanying consolidated statements of income. 15 15 5. LONG-TERM DEBT Long-term debt at December 31, 1998 and 1997 is summarized as follows:
1998 1997 Revenue equipment obligations: LIBOR plus 1.00% (6.06% - 1998) note payable in monthly installments through November 2003 $13,380,676 LIBOR plus 1.25% (6.31% - 1998 and 7.06% - 1997) note payable in monthly installments through November 2003 9,023,928 $19,820,760 LIBOR plus 1.50% (6.56% - 1998) note payable in yearly installments through January 2001 1,500,000 LIBOR plus 1.50% (6.56% - 1998) note payable in monthly installments through May 2003 902,632 7.35% note payable in monthly installments through January 2000 763,444 1,549,652 Notes repaid in 1998 512,901 Note payable related to acquisition, paid in 1998 3,250,000 Other 312,096 33,174 ----------- ----------- Total 25,882,776 25,166,487 Less current maturities 7,833,286 5,914,785 ----------- ----------- Long-term debt $18,049,490 $19,251,702 =========== ===========
Revenue equipment obligations are collateralized by revenue equipment. On January 2, 1998, the $3,250,000 note payable to stockholders was refinanced with a bank bearing interest at LIBOR plus 1.50% (see Note 2). Long-term debt is scheduled to mature as follows:
YEAR 1999 $ 7,833,286 2000 6,412,304 2001 5,801,590 2002 4,000,392 2003 1,835,204 ----------- Total $25,882,776 ===========
The Company's borrowings under a line of credit of $1,021,849 at December 31, 1997 were converted in 1998 to a note payable bearing interest at LIBOR plus 1.50%. The Company also has a $1,500,000 line of credit under a commercial revolving note, expiring June 3, 1999, bearing interest at LIBOR plus 1.75%. This line of credit was not utilized at December 31, 1998 and 1997. Covenants under these loan agreements require the Company, among other things, to maintain a tangible net worth of $14,800,000, as defined, and to maintain certain financial ratios. The Company was in compliance with these financial covenants at December 31, 1998. The fair value of long-term debt approximates its carrying value and was estimated using a discounted cash flow analysis, based on the borrowing rate currently available to the Company for bank loans with similar terms and average maturities. 6. COMMITMENTS AND CONTINGENCIES The Company is currently self-insured as follows:
RETENTION AMOUNT PER OCCURRENCE -------------- Liability - bodily injury and property damage $ 100,000 Employee medical and hospitalization 100,000 Cargo loss and damage 10,000 Collision 10,000 Environmental losses No Limit
The above retention amounts represent rates which were negotiated with the Company's insurance carriers at December 31, 1998. Retention amounts under other previous insurance programs may vary from those stated above. At December 31, 1998, the Company has recorded liabilities for retention amounts related to claims under previous insurance coverage. For claims prior to 1997, the Company had a retention amount per occurrence under workers' compensation of $300,000. The Company has excess primary coverage on a per claim and aggregate basis beyond the deductible levels and also maintains umbrella policies to supplement the primary liability coverage. The liabilities for self-insurance are accrued based on claims incurred, with liabilities for unsettled claims and claims incurred but not yet reported being estimated based on management's evaluation of the nature and severity of individual claims and the Company's past claims experience. The Company has outstanding letters of credit at December 31, 1998 totaling $2,913,112 to cover liability insurance claims and claims related to its previous self-insured workers' compensation program, and to purchase revenue equipment. There are sundry claims and suits pending against the Company in the ordinary course of business. In the opinion of the Company's management, any ultimate liability in these matters will have no material adverse effect on the financial position, operations or cash flows of the Company. 16 16 7. STOCKHOLDERS' EQUITY PREFERRED STOCK - The Board of Directors is authorized to issue, at its discretion, up to 1,000,000 shares of preferred stock at par value of $.001. The terms and conditions of the preferred stock are to be determined by the Board of Directors. STOCK OPTION PLAN - The Company has a stock option plan (the "Plan") that provides for the granting of stock options to key employees, executive officers and directors. The options are exercisable in increments over a five-year period beginning on the first anniversary of the grant and will expire ten years after the date of the grant. No options were exercised in 1996, 1997, or 1998. Information regarding the Plan is summarized below:
WEIGHTED WEIGHTED AVERAGE AVERAGE EXERCISE FAIR VALUE SHARES PRICE AT GRANT DATE Outstanding at January 1, 1996 290,950 $ 11.00 Granted 64,500 7.84 $ 6.14 Terminated (97,050) 10.97 ------- Outstanding at December 31, 1996 258,400 10.22 Granted 92,500 7.94 6.12 Terminated (27,550) 9.61 ------- Outstanding at December 31, 1997 323,350 9.62 Granted 174,900 8.84 7.05 Terminated (53,440) 9.22 ------- Outstanding at December 31, 1998 444,810 $ 9.36 =======
The number of stock options exercisable was 171,420, 117,310, and 77,960 at December 31, 1998, 1997 and 1996, respectively. At December 31, 1998, 55,190 shares were available for future grant under the Plan. The following table summarizes information about fixed stock options as of December 31, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ---------------------------------------- ------------------------- Weighted average Weighted Weighted Number remaining average Number average Range of of shares contractual exercise of shares exercise exercise prices outstanding life price exercisable price $6.00 - $11.00 444,810 7.4 years $ 9.36 171,420 $ 10.36
SFAS No. 123, Accounting for Stock-Based Compensation, encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. The option price of all the Company's stock options is equal to the market value of the stock at the grant date. As such, no compensation expense is recorded in the accompanying consolidated financial statements. Had compensation cost been determined based upon the fair value at the grant date for options awarded in 1998, 1997 and 1996 under the Plan consistent with the methodology prescribed under SFAS No. 123, the Company's pro forma net income and net income per share would have differed from the amounts reported as follows:
AS REPORTED PRO FORMA -------------------------------------- ------------------------------------ 1998 1997 1996 1998 1997 1996 Net income $ 3,572,738 $ 2,316,847 $ 827,617 $3,285,544 $ 2,208,410 $ 696,085 Basic and diluted net income per share $ .87 $ .62 $ .22 $ .80 $ .59 $ .19
The fair value for options was estimated at the date of the grant using a Black-Scholes option pricing model with the following weighted-average assumptions:
1998 1997 1996 Risk-free interest rate 6.5 % 6.5 % 6.5 % Dividend yield 0 % 0 % 0 % Expected volatility 82.8 % 81.4 % 82.6 % Weighted average expected life 7 years 7 years 7 years
8. INCOME TAXES The provision (credit) for income taxes for the years ended December 31, 1998, 1997 and 1996 consisted of the following (in thousands):
1998 1997 1996 Current: Federal $1,944 $ 957 $ (545) State 340 38 (58) ------ ------ ------- Total current 2,284 995 (603) ------ ------ ------- Deferred: Federal 31 371 1,019 State 11 153 163 ------ ------ ------- Total deferred 42 524 1,182 ------ ------ ------- Total provision for income taxes $2,326 $1,519 $ 579 ====== ====== =======
Income tax expense for the years ended December 31, 1998, 1997 and 1996 is greater than the amounts computed by applying the federal statutory rate of 35% to income before income taxes primarily due to state income taxes ($185,000 in 1998, $120,000 in 1997 and $80,000 in 1996) and the effect of the non-deductibility of goodwill amortization ($80,000 in 1998). 17 17 At December 31, 1997, the Company had approximately $1,920,000 of state net operating loss carryforwards for tax purposes available to offset future state taxable income through 2011. The Company also had approximately $630,000 of alternative minimum tax credit carryforwards available to offset future federal income tax. These were utilized during 1998. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of December 31, 1998 and 1997 are as follows (in thousands):
1998 1997 Deferred tax liabilities: Tax over book depreciation $10,180 $10,259 Prepaid expenses deductible when paid 590 403 Capitalized tires 292 218 Cash basis to accrual basis adjustment 542 766 Other 16 23 ------- ------- Total deferred tax liabilities 11,620 11,669 ------- ------- Deferred tax assets: Accrued self insurance claims 500 494 Other accrued expenses not deductible until paid 437 145 Allowance for losses on receivables 577 180 State NOL carryforward 96 Alternative minimum tax credit carryforward 630 Other 73 133 ------- ------- Total deferred tax assets 1,587 1,678 ------- ------- Net deferred tax liabilities $10,033 $ 9,991 ======= =======
The above amounts are reflected in the accompanying consolidated balance sheets as:
1998 1997 Current assets $ 645 $ 175 Noncurrent liabilities 10,678 10,166 ------- ------- Net deferred tax liabilities $10,033 $ 9,991 ======= =======
9. MAJOR CUSTOMERS The Company does not believe that it is dependent upon any single customer. Sales to the Company's largest customer amounted to 8%, 12% and 13% of operating revenues during 1998, 1997 and 1996, respectively. 10. SUBSEQUENT EVENT During January 1999, the Company re-purchased 500,000 shares of its outstanding Common Stock for $3,660,000. 11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a summary of the quarterly results of operations for the years ended December 31, 1998 and 1997 (in thousands, except per share data):
1998 ----------------------------------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 Operating revenues $27,888 $30,370 $30,221 $29,644 Operating income 1,157 2,360 2,227 1,583 Net income 459 1,203 1,106 805 Basic and diluted net income per share 0.11 0.29 0.27 0.20 1997 ----------------------------------------------------- MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 Operating revenues $17,197 $19,303 $19,574 $21,141 Operating income 745 1,484 1,711 1,151 Net income 270 673 790 584 Basic and diluted net income per share 0.07 0.20 0.21 0.15
18 18 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Boyd Bros. Transportation Inc.: We have audited the accompanying consolidated balance sheets of Boyd Bros. Transportation Inc. and subsidiary as of December 31, 1998 and 1997, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these 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, such consolidated financial statements present fairly, in all material respects, the financial position of Boyd Bros. Transportation Inc. and subsidiary as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. February 5, 1999 19 EX-21 8 SUBSIDIARIES 1 EXHIBIT 21 Subsidiaries of Boyd Bros. Transportation, Inc. The following companies are subsidiaries of the Registrant: Subsidiary State of Incorporation - ---------- ---------------------- Welborn Transport, Inc. Alabama EX-23 9 CONSENT OF DELOITTE & TOUCHE LLP 1 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33-83768 of Boyd Bros. Transportation Inc. on Form S-8 of our report dated February 5, 1999, appearing in this Annual Report on Form 10-K of Boyd Bros. Transportation Inc. for the year ended December 31, 1998. Birmingham, Alabama March 30, 1999 EX-27 10 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF BOYD BROS. TRANSPORTATION INC. FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 1,361,664 250,000 18,351,465 272,000 263,943 19,819,481 76,956,516 28,265,861 77,047,426 15,458,719 0 0 0 4,070 32,857,637 77,047,426 118,423,424 118,423,424 110,796,543 110,796,543 (179,360) 0 1,607,482 5,898,759 2,326,021 3,572,738 0 0 0 3,572,738 .87 .87
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