BOYD BROS. TRANSPORTATION, INC.

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) Yes x No o, and (2) has been subject to such filing requirements for the past 90 days.Yes x No o

Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Exchange Act. Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of May 14, 2003.

The accompanying consolidated financial statements have been prepared in compliance with Form 10-Q instructions and, thus, do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the statements reflect all adjustments, including those of normal recurring nature, necessary to present fairly the results of the reported interim periods. Interim results are not necessarily indicative of results for a full year. The statements should be read in conjunction with the summary of accounting policies and notes to financial statements included in the Company’s latest annual report on Form 10-K.

The consolidated financial statements include the accounts of Boyd Bros. Transportation and its wholly owned subsidiary, WTI Transport, Inc. (“WTI”). The Boyd division (“Boyd”) also operates a logistics division (“Logistics”) that provides logistical support to the Company, and brokers freight by identifying external shipping needs and matching available carrier resources to those needs. Boyd, Logistics, and WTI are referred to herein collectively as the “Company”. All significant inter-company balances, transactions and stockholdings have been eliminated. Certain reclassifications have been made to prior periods to conform to the current period presented.

The Company’s operations are subject to certain 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.

Earnings Per Share – Basic and diluted earnings per share were $0.00 for the three months ended March 31, 2003. Stock options of 132,074 were included in the computation of diluted earnings per share for the period ending March 31, 2003. No options were included in the diluted net income calculation for the comparative period in 2002 because to do so would have been anti-dilutive as the exercise prices of all stock options were above the average market price of the Company’s common stock for the period presented.

Stock Options — The Company adopted the disclosure provisions of Statement of Financial Accounting Standards (“SFAS” or “Statement”) No. 148, “Accounting for Stock-Based Compensation Transition and Disclosure”, which amends SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation, which was originally provided under SFAS No. 123. The Statement also improves the timeliness of disclosures by requiring the information be included in interim, as well as annual, financial statements. The adoption of these disclosure provisions did not have a material affect on the Company’s consolidated results of operations, financial position, or cash flows.

The Company has a stock option plan (the “Plan”) that provides for the granting of stock options to key employees, executive officers and directors. An aggregate of 500,000 shares of the Company’s common stock are reserved for this Plan. 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 2003 or 2002.

SFAS No. 123 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 awards under the Plan consistent with the methodology prescribed under SFAS No. 123, the Company’s pro forma net income (loss) and net income (loss) per share would have differed from the amounts reported as follows:

The Company entered into a consulting agreement with its Chairman Emeritus, Dempsey Boyd, effective January 1, 2002 through December 31, 2003. Mr. Boyd will be paid $145,000 annually under this consulting agreement. Mr. Boyd provides advice and expertise, and performs such duties and services from time to time, during the term of the agreement, as the Company shall reasonably request. The services provided include, without limitation, negotiating equipment and tire agreements, reviewing equipment requirements, researching and investigating equipment, advising the Company regarding certain ongoing litigation matters, and providing the Company with an experienced perspective on the trucking industry.

In June 2001, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 141, “Business Combinations,” and SFAS No.142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. SFAS No.142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually.

The Company adopted SFAS Nos. 141 and 142 on January 1, 2002 and, accordingly, ceased amortization of goodwill at that time. As of June 30, 2002, the Company completed the first phase of transitional testing for the potential impairment of goodwill relating to its WTI subsidiary. As a result of such testing, the Company determined there was no impairment. No events have occurred since the assessment date to cause a significant change in the values used for computation. Thus, another impairment test was not performed during the first quarter of 2003.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure”. SFAS No. 148 amends Statement No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), to provide alternative methods for voluntary transition to SFAS No. 123’s fair value method of accounting for stock-based employee compensation (“the fair value method”). SFAS No. 148 also requires disclosure of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income (loss)

and earnings (loss) per share in annual and interim financial statements. The transition provisions of SFAS No. 148 are effective in fiscal years beginning after December 15, 2002. The Company is currently evaluating the transition provisions of SFAS No. 148, but expects that it will not have a material adverse impact on the Company’s consolidated financial position and results of operations upon adoption since the Company has not adopted the fair value method. The Company adopted the required disclosure provisions of SFAS No. 148. See Note 1 to the Consolidated Financial Statements.

In November 2002, the FASB issued FASB Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees and Indebtedness of Others.” FIN 45 elaborates on the disclosures to be made by the guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, while the provisions of the disclosure requirements are effective for financial statements of interim or annual reports ending after December 15, 2002. The Company adopted the disclosure provisions of FIN 45 during the fourth quarter of fiscal 2002 and such adoption did not have a material impact on the Company’s consolidated financial statements. The Company did not issue nor modify any guarantees during the first quarter of 2003.

In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities.” In general, a variable interest entity is a corporation, partnership, trust, or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. The Company currently has identified no variable interest entities, thus, the adoption of the provisions of FIN 46 did not have a material impact on the Company’s consolidated results of operations or financial position.

There were no other recently issued accounting pronouncements with delayed effective dates that would currently have a material impact on the Company’s consolidated financial position and results of operations.

The Company has three reportable segments: the Boyd division (“Boyd”), the Logistics division (“Logistics”), and the WTI division (“WTI”). Boyd is a flatbed carrier that hauls primarily steel and building products throughout most of the continental United States, and operated an average of 700 trucks during the first quarter of 2003. Boyd had an average of 540 company drivers and 160 owner-operators as of March 31, 2003. Logistics brokers freight by identifying external shipping needs and matching available external carrier resources to those needs. This division requires minimal overhead and capital resources and provides a service through logistically coordinating needs for carriers to available carriers and scheduling the service to be provided. All carriers brokered through Logistics are responsible for maintaining proper insurance coverage and are required to provide proof of such coverage prior to brokerage of a load. WTI is a flatbed carrier that hauls steel and roofing products, primarily in the eastern two-thirds of the United States, and operated an average of 212 trucks during the first quarter of 2003. WTI had 35 company drivers and 177 owner-operators as of March 31, 2003. Due to the significant growth of Logistics, and the operating characteristics that differentiate it from the Boyd and WTI divisions, management now views Logistics as a separate reportable segment. Unaudited segment reporting information for the periods ended March 31, 2003 and 2002 is as follows:

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the attached interim consolidated financial statements and with the Company’s 2002 Annual Report to Stockholders, which included audited financial statements and notes thereto for the fiscal year ended December 31, 2002, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Company, headquartered in Clayton, Alabama, is a flatbed truckload carrier that has three reportable segments: Boyd, Logistics, and WTI. Boyd operates throughout most of the continental United States, hauling primarily steel and building products. Logistics provides logistical support to the Company and brokers freight by identifying external shipping needs and matching available external carrier resources to those needs. WTI hauls steel and roofing products, primarily in the eastern two-thirds of the United States. The Company typically serves high-volume, time-sensitive shippers that demand time definite delivery.

Historically, the Company has owned its revenue equipment and operated through employee-operators. The Company’s expansion in the past, therefore, required significant capital expenditures that have been funded through secured borrowings. In the last six years, the Company began adding owner-operators to its fleet as a strategy to expand its potential for growth without the concomitant increase in capital expenditures typically related to owned equipment. The Company accelerated the implementation of this strategy in December 1997 with the acquisition of WTI, which specializes in short-haul routes using a largely owner-operator fleet.

The Company continues to focus on marketing efforts and is broadening its customer base outside of the steel and building products industries, as well as stressing best-in-business service to its customers. The Company remains committed to its emphasis on safety while working to reduce insurance claims and costs. See “Factors That May Affect Future Results”, below.

The methods, estimates and judgments the Company’s management uses in applying Company accounting policies may have a significant effect on the results the Company reports in its financial statements. The estimates and judgments in applying those accounting policies which may have the most significant effect on the Company’s financial statements and operating results include: estimates of useful lives and salvage values for the depreciation of tractors and trailers; estimates of accrued liabilities for insurance claims for liability and both physical and property damage and workers’ compensation; allowance for doubtful accounts for tractors leased to owner-operators; determinations of impairment of long-lived assets; allowance for doubtful accounts receivable; and evaluation of impairment of goodwill. Please refer to “Management’s Discussion and Analysis of Financial Condition – Critical Accounting Policies” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, for a more complete description of the Company’s critical accounting policies.

The following tables set forth, by segment, the percentage relationship of expense items to operating revenues and certain other operating statistics for the periods indicated:

The Company’s total operating revenues increased $1,957,158 or 6.4% to $32,577,476 for the quarter ended March 31, 2003, compared with $30,620,318 for the same period in 2002. The change in revenue reflected an increase of $128,450 or 0.5% in the Boyd division, an increase of $1,128,442 or 70.1% in the Logistics division, and an increase of $700,266 or 14.5% in the WTI division. These changes are reflective of diversification outside of the steel and building materials industries and are also reflective of an increase in revenue resulting from the growth of the Logistics division and its brokerage of freight onto outside carriers. Included in revenues are fuel surcharges in the amount of $991,564 and $27,349 for the quarters ended March 31, 2003 and 2002, respectively. Average revenue per mile for the first quarter of 2003 was $1.20 while average revenue per mile was $1.15 for the same period in

2002. Operating conditions during the first quarter of 2003 were affected by inclement weather in February in many of the areas the Company serves and skyrocketing fuel costs due to growing anxieties about war in Iraq. However, the industry is showing improvement as weather conditions improve, fuel costs decline, and the war draws to an end. Revenues for the month of March 2003 were up 8.7% to $11,559,123 from $10,637,615 for the month of March 2002.

Total operating expenses increased $1,564,516 or 5.1% to $32,239,487 for the first quarter of 2003, compared to $30,674,971 for the same three months last year. Of this net increase, a decrease of $493,622 was attributable to the Boyd division. The Logistics division accounted for an increase of $1,053,772, and the WTI division accounted for $967,909 of the net increase. These increases are directly proportional to the increases in operating revenues. In the Logistics division, there was a 70.1% increase in revenue and 68.5% increase in operating expenses over 2002 figures.

The following operating expenses decreased: salaries, wages and employee benefits, operating supplies, and taxes and licenses. There was a net decrease of $822,838 in these accounts for the Company. Expenses related to Company drivers are included in these accounts. The change was primarily attributable to the Boyd division. The Boyd division accounted for a decrease of $542,173 in these accounts primarily due to a 5.4% decrease in total miles for the Boyd division from 21,035,236 for the first quarter of 2002 to 19,912,968 for the first quarter of 2003.

Fuel expense, also associated with Company drivers and included in the line item “operating supplies” in the consolidated statement of operations, increased $1,251,197 or 37.4% from 2002. This sharp increase was a result of the tensions in the Middle East, as well as reduced fuel supplies from Venezuela. Fuel prices began rising in the fourth quarter of 2002 and continued to rise during the first quarter of 2003. Average fuel cost per gallon during the first quarter of 2003 increased approximately $0.30 per gallon over prices in the first quarter of 2002. The Boyd division hauled 19,912,968 miles during the first quarter of 2003 with an average mile-per-gallon amount of 5.82. An average $0.30 per gallon increase would account for an approximate $1,026,000 increase in fuel expense for the Boyd division alone. Average fuel prices began to decline during March 2003. The Company generally has been able to partially offset significant increases in fuel costs through increased freight rates and through a fuel surcharge which increases incrementally as the price of fuel increases. The increases in freight rates and fuel surcharges are included in revenues, as discussed above.

Included in cost of independent contractors are costs for which owner-operators are responsible. These costs include fuel, operating supplies, and taxes and licenses, which are incurred by the owner-operators, while the Company incurs these costs on behalf of its Company drivers. Cost of independent contractors for the Company increased $1,566,389 or 17.4% for the quarter ended March 31, 2003 compared to the same period last year. The Logistics division accounted for $867,902 of the increase. The most significant costs associated with operating the Logistics division are included in this account. These costs include expenses related to payment of the outside carriers contracted to haul brokered loads. The Logistics division requires minimal overhead and capital resources and provides a service through logistically coordinating needs for carriers to available carriers and scheduling the service to be provided. All carriers brokered through Logistics are responsible for maintaining proper insurance coverage and are required to provide proof of such coverage prior to brokerage of a load. The WTI division accounted for $525,098 of the increase in cost of independent contractors. The average number of owner-operators throughout the first quarter of 2003 for WTI was 179 compared to an average of 170 during the first quarter of 2002, though, as shown above, the actual number of owner-operators as of the last day of the quarter was down in comparison to the same period in 2002. As an enticement for drivers to enter into and remain in leases, the Company began decreasing monthly lease payments on lease-purchased tractors in September of 2002. Beginning in September, payments were reduced by $25 to $30 per month until December, at which time, they were reduced again by another $15 to $30 per month.

Insurance and claims expense decreased $876,109 or 40.6% for the first quarter of 2003 as compared to the first quarter of 2002. The Company was involved in two accidents resulting in third party fatalities during the first quarter of 2002 and one

accident during the first quarter of 2003, which accounts for the higher expense amounts in 2002.

Depreciation expense decreased $217,895 or 7.5% to $2,694,053 in the first quarter of 2003 from $2,911,948 in the same period last year. The decrease in depreciation for the quarter was primarily due to a decrease in the number of tractors in the Company fleet.

Other operating expenses increased by $227,844 for the quarter ended March 31, 2003 over the comparable period of 2002. The increase was primarily due to payment for professional services including the consulting agreement with Dempsey Boyd (see Note 5 “Related Party Transactions” in the notes to the consolidated financial statements) and expenses of approximately $20,000 related to bad debts.

Income tax expense for the three-month period ended March 31, 2003 was $2,665 resulting in an effective tax rate of 38.9%. This rate is greater than the Federal statutory rate primarily due to the effect of state taxes and the permanent non-deductibility of certain expenses for tax purposes.

The Company’s primary cash requirements are for capital expenditures and operating expenses, including labor costs, fuel costs and operating supplies, and the payment of current debt maturities. Historically, the Company’s primary sources of cash have been continuing operations, bank borrowings and, in the last two years, dealer financings.

Cash flow from operations provided $2.8 million for the first quarter of 2003 and $3.8 million for the first quarter of 2002. Net income (loss) adjusted for non-cash income and expense items provided cash of $2.5 million and $2.0 million for the first quarter of 2003 and 2002, respectively. Non-cash income and expense items include depreciation and amortization, provisions for bad debt losses, gains on disposals of property and equipment, income related to owner-operator sales-type leases, and deferred income taxes. Working capital items provided cash of $0.4 million and $1.8 million in the first quarter of 2003 and 2002, respectively. The cash flow from operations enabled the Company to repay current maturities of debt and make capital expenditures as discussed below.

The increase in net income (loss) adjusted for non-cash items from 2002 to 2003 of $0.5 million was due primarily to increased net income during 2003. Reduced gains on sales of assets related to lease purchases, shown in deduction from income of the net effect of sales-type leases, were due to the reduced number of owner-operators in 2003. The decrease in depreciation during 2003 was due to the decrease in the total number of tractors in the Company fleet.

The changes in working capital items provided $0.4 million in cash flows in the first quarter of 2003 as a result of increasing trade and interline payables by $3.5 million, since December 31, 2002, increases in accrued expenses of $0.4 million and decreases in other assets of $0.4, which were offset by payments for income taxes of $1.6 million during the first quarter, and an increase in accounts receivable balances of $2.4 million.

The increase in accounts receivable is attributable to improved freight conditions during the latter part of the quarter of 2003 over the same period of 2002, generating additional line-haul revenue and fuel surcharge increases. Revenues for the month of March 2003 were up 31% to $11.6 million from $8.8 million for the month of December 2002, thus, resulting in a significant increase in accounts receivable and accounts payable at March 31, 2003. Revenues for the month of March 2003 were up 8.7% from $10.6 million for the month of March 2002. Additionally, average revenue per mile for the first quarter of 2003 was $1.20 compared to $1.15 per mile in the same period of 2002.

In 2002, accruals for accrued claims and other accrued liabilities increased due to two fatal accidents involving Company drivers. Included in these accruals are amounts estimated by management that are necessary to account for

The growth of the Company’s business and maintenance of its modern fleet has required significant investments in new tractors and trailers, which has been financed largely through long-term debt, including dealer-financed purchases of revenue equipment in the past two years. Historically, the Company financed its major capital equipment purchases consisting primarily of revenue equipment and, to a lesser extent, construction of terminals, through bank financings. The Company invested $0.8 million and $0.9 million for revenue equipment and other property and equipment during the first quarter of 2003 and 2002, respectively. As the Company began financing with dealers, the proceeds from property dispositions began decreasing as the Company began trading in more tractors to the dealers rather than selling them for cash. Dealer financed purchases in the first quarter of 2002 amounted to $3.6 million.

During the first quarter of 2003, the Company paid $3.8 million towards the reduction of its long-term debt. At March 31, 2003, the Company had debt (including current maturities) of $30.3 million. Similar debt payment amounts were made during the first quarters of 2003 and 2002. In the first quarter of 2003, new debt of approximately $0.4 million was incurred by the WTI division to purchase revenue equipment. During the first quarter of 2002, $3.6 million of revenue equipment was acquired by the Company through dealer financing rather than securing additional financing through existing lenders. These financing activities supported the Company’s investing activities.

As of March 31, 2003, the Company was not in compliance with certain financial covenant ratio requirements imposed by one of its major lenders. The Company has received a waiver executed by this lender due to non-compliance with its debt service coverage ratio. The Company is currently negotiating with its lenders to adjust certain covenant requirements including its debt service coverage ratio. There can be no assurance that the Company will be able to comply with these covenants in the future. If the Company is unable to comply with these covenants in the future, there can be no assurance that the Company’s lenders will provide waivers with respect to any such noncompliance.

The Company drew approximately $0.5 million, net, from its line of credit during the first quarter of 2003. Proceeds were used primarily to reduce accrued liabilities, including income taxes.

The Company anticipates generating sufficient cash from operations in 2003 to cover planned capital expenditures and servicing current maturities of long-term debt. The Company anticipates purchasing 92 new tractors and trading or selling 82 used tractors for the remainder of 2003 at a net cost of approximately $5.7 million. Historically, the Company has relied on cash generated from operations to fund its working capital requirements. Over the long term, the Company will continue to have significant capital needs that may require it to seek additional borrowings or equity capital. The availability of debt financing or equity capital will depend on prevailing market conditions, the market price of its common stock, and other factors over which the Company has no control, as well as the Company’s financial condition and results of operations.

The Company’s future results may be affected by a number of factors over which the Company has little or no control. Fuel prices, insurance and claims costs, liability claims, interest rates, the availability of qualified drivers, fluctuations in the resale value of revenue equipment, economic and customer business cycles, and shipping demands are economic factors over which the Company has little or no control. Significant increases or rapid fluctuations in fuel prices, interest rates, insurance costs or liability claims, to the extent not offset by increases in freight rates, and the resale value of revenue equipment could result in Company losses. Weakness in the general economy, including a weakness in consumer demand for goods and services, could adversely affect customers and result in customers reducing their demand for transportation services, which, in turn, could adversely affect the Company’s growth and revenues. Weakness in customer demand for the Company’s services or in the general rate environment also may restrain the Company’s ability to increase rates or obtain fuel surcharges.

The following issues and uncertainties, among other things, should be considered in evaluating the Company’s outlook:

Many of the Company’s operating expenses, including fuel costs and fuel taxes, are sensitive to the effects of inflation, which could result in higher operating costs. Throughout the first quarter of 2003, the Company experienced fluctuations in fuel costs as a result of conditions in the petroleum industry. The Company also has periodically experienced some wage increases for drivers. Increases in fuel costs and driver compensation may affect operating income, unless the Company is able to pass those increased costs to customers through rate increases and fuel surcharges. The Company has initiated a program to obtain rate increases and fuel surcharges from customers in order to cover increased costs due to these increases in fuel prices, driver compensation, and other expenses and has been successful in implementing some fuel surcharges and certain rate increases. Competitive conditions in the transportation industry, including lower demand for transportation services, could limit the Company’s ability to obtain rate increases or fuel surcharges in the future. As of March 31, 2003, the Company had no derivative financial instruments to reduce its exposure to fuel price fluctuations. The motor carrier industry depends upon the availability of diesel fuel. Fuel shortages or increases in fuel taxes or fuel costs have adversely affected, and may in the future adversely affect, the financial condition and results of operations of the Company. Fuel prices have fluctuated greatly, and fuel taxes have generally increased in recent years. The tensions in the Middle East, as well as reduced fuel supplies from Venezuela, caused an increase in oil and fuel prices during the first quarter of 2003. The Company has not experienced difficulty in maintaining necessary fuel supplies and, in the past, the Company generally has been able to partially offset significant increases in fuel costs and fuel taxes through increased freight rates and through a fuel surcharge which increases incrementally as the price of fuel increases. However, there can be no assurance that the Company will be able to recover any future increases in fuel costs and fuel taxes through increased rates. If fuel prices continue to increase or are sustained at these higher levels for a continuing period of time, the higher fuel costs may have a materially adverse effect on the financial condition and business operations of the Company. Additionally, the increased fuel costs may continue to have a materially adverse effect on the Company’s efforts to attract and retain owner-operators, expand its pool of available trucks, and diversify its operations.

The Company’s future insurance and claims expenses could exceed historical levels, which could have a material adverse effect on earnings. The Company currently self-insures for a portion of the claims exposure resulting from cargo loss, personal injury, and property damage, combined up to $750,000 per occurrence, effective July 1, 2002. In addition, costs above the $750,000 self-insured amount, up to the Company’s coverage amount of two million dollars, will be shared by the Company at a rate of fifty percent. Costs and claims in excess of the Company’s coverage amount of two million dollars will be borne solely by the Company. Also, effective July 1, 2002, the workers’ compensation self-insurance level increased to a maximum of $500,000, and the health insurance self-insurance level is $175,000 per person per year. If the number or dollar amount of claims for which the Company is self-insured increases, operating results could be adversely affected.

The Company was involved in two accidents in the first quarter and two accidents in the third quarter of 2002 that resulted in third-party fatalities. The Company was involved in another accident resulting in a fatality during the first quarter of 2003. During the first quarter of 2002, the self-insured amount for cargo loss, personal injury, and property damage, combined was $500,000 per occurrence, which would be the amount applicable to the two accidents during the first quarter of 2002. The self-insured amount for the two accidents in the third quarter of 2002 and the accident in the first quarter of 2003 was $750,000, with the Company also responsible for its shared amount of the $2 million insurance coverage and amounts in excess of the insured amount. Each of these accidents, taken separately, has the potential to cause the Company to reach its total per occurrence retention amount for insurance purposes. To date, four lawsuits have been filed against the Company with respect to these accidents. If the Company is ultimately found to have some liability for one or more of these accidents, the Company believes that its operating cash flows and, if needed, additional bank financing would be sufficient to cover any amounts payable. The terrorist attacks in the United States on September 11, 2001, and subsequent events, have resulted in additional increases in the Company’s insurance expenses. If these expenses continue to increase, and the Company is unable to offset the increase with higher freight rates, the Company’s operations and financial condition could be adversely affected.

In the past the Company has acquired new tractors and trailers at favorable prices and has entered into agreements with the manufacturers to repurchase the tractors from the Company at agreed prices. Current developments in the secondary tractor and trailer resale market have resulted in a large supply of used tractors and trailers on the market. This has depressed the market value of used equipment to levels significantly below the prices at which the manufacturers have agreed to repurchase the equipment. Accordingly, some manufacturers may refuse or be financially unable to keep their commitments to repurchase equipment according to their repurchase agreement terms.

The Company has experienced significant growth in revenue since the initial public offering of the Company’s stock in May 1994. There can be no assurance that the Company’s business will continue to grow in a similar fashion in the future or that the Company can effectively adapt its management, administrative, and operational systems to respond to any future growth. Further, there can be no assurance that the Company’s operating margins will not be adversely affected by future changes in and expansion of the Company’s business or by changes in economic conditions.

With the exception of historical information, the matters discussed and statements made in this report constitute forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Specifically, this report contains forward-looking statements regarding the Company’s marketing efforts and initiative to broaden its customer base; the Company’s emphasis on safety and efforts to reduce insurance claims and costs; the Company’s belief that the availability of credit under its line of credit, together with internally generated cash, will be adequate to finance its operations through fiscal year 2003 and will also be adequate to cover any liability with respect to the accidents that occurred during 2002 and the first quarter of 2003; expectations regarding the freight business and the economy; and results in future quarters and for the year. Whenever possible, the Company has identified these forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934) by words such as “anticipates,” “may,” “believes,” “estimates,” “projects,” “expects,” “intends,” and words of similar import. Forward-looking statements contained in this report involve certain assumptions, risks and uncertainties that could cause actual results to differ materially from those included in or contemplated by the statements. In particular, there can be no assurance that the Company’s marketing efforts and initiatives to broaden its customer base will be successful; that the Company’s emphasis on safety and efforts to reduce insurance claims and costs will be successful; that business conditions and the economy will improve, including the transportation and construction sectors in particular; that costs associated with increased insurance and claims costs, and liability claims for which the Company is self-insured will not have a material adverse affect on the Company; that the Company will be able to recruit and retain qualified drivers; that the Company will be able to control internal costs, particularly rising fuel costs that may or may not be passed on to the Company’s customers; that departures and defaults by owner-operators will not have a material adverse affect on the Company; or that the cost of complying with governmental regulations that are applicable to the Company will not have a material adverse affect on the Company. These assumptions, risks and uncertainties include, but are not limited to, those discussed or indicated in all documents filed by the Company with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. The Company expressly disclaims any obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

The Company is exposed to interest rate risk due to its long-term debt, which at March 31, 2003 bore interest at rates ranging from 1.25% to 2.50% above the applicable bank’s LIBOR rate. Under the provisions of 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 one percent increase in interest rates would decrease pre-tax income by approximately $168,000. Management believes that current working capital funds are sufficient to offset any adverse effects caused by changes in these interest rates.

The price and availability of diesel fuel are subject to fluctuations due to changes in the level of global oil production, seasonality, weather, and other market factors. The geopolitical situation in the Middle East caused oil prices to rise dramatically in the first quarter of 2003. Historically, the Company has been able to recover a majority of fuel price increases from customers in the form of fuel surcharges. The Company cannot predict the extent to which high fuel price levels will continue in the future or the extent to which fuel surcharges could be collected to offset such increases. As of March 31, 2003, the Company had no derivative financial instruments to reduce its exposure to fuel price fluctuations. The Company will consider possible opportunities to hedge fuel costs in the future.

	(a)		Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of a date within ninety days prior to the filing date of this quarterly report (the “Evaluation Date”)). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to our Company (including our consolidated subsidiaries) required to be included in our reports filed or submitted under the Exchange Act.

	(b)		Changes in Internal Controls. Since the Evaluation Date, there have not been any significant changes in our internal controls or in other factors that could significantly affect such controls.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	1.		I have reviewed this quarterly report on Form 10-Q of Boyd Bros. Transportation Inc.;

	2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

	4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


	a.	Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c.	Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):


	a.	All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and


	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

	1.		I have reviewed this quarterly report on Form 10-Q of Boyd Bros. Transportation Inc.;

	2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

	4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


	a.	Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c.	Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;


	a.	All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

22 EX-10.1 3 g82840exv10w1.txt EX-10.1 COMMERCIAL LOAN AND SECURITY AGREEMENT . . . EXHIBIT 10.1 PROMISSORY NOTE

Borrower: WELBORN TRANSPORT, INC Lender: Compass Bank P.O. BOX 020908 Alabama Processing Center TUSCALOOSA, AL 35403 701 South 32nd Street Birmingham, AL 35233 (800) 239-1996 - -------------------------------------------------------------------------------- Principal Amount: $382,060.00 Date of Note: January 16, 2003 PROMISE TO PAY. WELBORN TRANSPORT, INC ("Borrower") promises to pay to Compass Bank ("Lender"), or order, in lawful money of the United States of America, the principal amount of Three Hundred Eighty-two Thousand Sixty & 00/100 Dollars ($382,060.00), together with interest on the unpaid principal balance from January 16, 2003, until paid in full. The interest rate will not increase above 18.000%. PAYMENT. Subject to any payment changes resulting from changes in the Index, Borrower will pay this loan in 60 payments of $6,969.05 each payment. Borrower's first payment is due March 1, 2003, and all subsequent payments are due on the same day of each month after that. Borrower's final payment will be due on February 1, 2008, and will be for all principal and all accrued interest not yet paid. Payments include principal and interest. Unless otherwise agreed or required by applicable law, payments will be applied first to interest, then to principal due, then to any unpaid collection costs and other charges due under this Note, with any remaining amount to the outstanding principal balance. The annual interest rate for this Note is computed on a 365/380 basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing. VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an independent index which is the "LIBOR Rate" refers to the London Interbank Offered Rate for the 30-day Libor Reference Period as quoted on the Telerate Information System, page 3750, on the first day of each Interest Period (or in the event no such quotation is available on such date, as quoted on the day most immediately preceding the date of determination on which such a quotation was available) (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notice to Borrower. Lender will tell Borrower the current Index rate upon Borrower's request. The interest rate change will not occur more often than each month. Borrower understands that Lender may make loans based on other rates as well. The interest rate to be applied to the unpaid principal balance of this Note will be at a rate of 1.750 percentage points over the Index. Notwithstanding the foregoing, the variable interest rate or rates provided for in this Note will be subject to the following minimum and maximum rates. NOTICE: Under no circumstances will the interest rate on this Note be less than 3.500% per annum or more than (except for any higher default rate shown below) the lesser of 18.000% per annum or the maximum rate allowed by applicable law. Whenever increases occur in the interest rate, Lender, at its option, may do one or more of the following: (A) increase Borrower's payments to ensure Borrower's loan will pay off by its original final maturity date, (B) increase Borrower's payments to cover accruing interest, (C) increase the number of Borrower's payments, and (D) continue Borrower's payments at the same amount and increase Borrower's final payment. PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments under the payment schedule. Rather, early payments will reduce the principal balance due and may result in Borrower's making fewer payments. Borrower agrees not to send Lender payments marked "paid in full", "without recourse", or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts,including any check or other payment instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Compass Bank, Alabama Processing Center, 701 South 32nd Street, Birmingham, AL 35233. LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment. INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, Lender, at its option, may, if permitted under applicable law, increase the variable interest rate on this Note to 18.000% per annum. The interest rate will not exceed the maximum rate permitted by applicable law. DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note: Payment Default. Borrower fails to make any payment when due under this Note. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower. Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's ability to repay this Note or perform Borrower's obligations under this Note or any of the related documents. False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter. Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note. Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of this Note is impaired. Insecurity. Lender in good faith believes itself insecure. LENDER'S RIGHTS. Upon the occurrence of any default described in the "Death or Insolvency" or "Taking of the Property" clauses, to the extent that any such default by a guarantor relates to the matters described in the clause "Death or Insolvency" of the paragraph entitled "DEFAULT", the entire unpaid principal balance on this Note and all accrued unpaid interest shall become immediately due, without notice, declaration or other action by Lender, and then Borrower will pay that amount. Upon the occurrence of any other default described in that paragraph, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, without notice, and then Borrower will pay that amount. ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses whether or not there is a lawsuit, including attorneys' fees and expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law. GOVERNING LAW. This Note will be governed by, construed and enforced in accordance with federal law and the laws of the State of Alabama. This Note has been accepted by Lender in the State of Alabama. PROMISSORY NOTE CONTINUED PAGE 2 ================================================================================ RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts. COLLATERAL. Borrower acknowledges this Note is secured by the following collateral described in the security instrument listed herein, all the terms and conditions of which are hereby incorporated and made a part of this Note: titled collateral described in a Commercial Security Agreement dated January 16, 2003. FEE TO WAIVE VIOLATION OF COVENANT. Lender reserves the right to access and collect a fee in connection with any agreement by Lender to waive the violation of any covenant contained in the Note or any other document or agreement signed in connection with the Note or to waive or forego its rights and remedies upon the occurrence of a default. The foregoing statement shall not in any respect obligate the Lender to waive the violation of any covenant or to forego its rights and remedies upon the occurrence of a default, which it may not do in its sole discretion. AMENDMENTS. This Note constitutes the entire understanding and agreements of the parties as to the matters set forth in this Note. No alteration or amendment of this Note shall be effective unless given in writing and signed by the party or parties sought to be bound by the alteration or amendment. SEVERABILITY. If a court of competent jurisdiction finds any provision of this Note to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Note. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Note shall not affect the legality, validity or enforceability of any other provision of this Note. ADDITIONAL PROVISIONS. Notwithstanding any other provisions of this Note to the contrary: 1. Lender's Remedies. Lender also may exercise any and all remedies available to it. Lender's rights are cumulative and may be exercised together, separately, and in any order. 2. No Assignment. Borrower agrees not to assign any of Borrower's rights or obligations under this Note. 3. Prepayments. The terms "prepayment" and "early payment" mean any payment that exceeds the combined amount of interest, principal due, and charges due as of the date Lender receives that payment. The amount of this excess will be applied to the outstanding principal balance. 4. Final Payment. Borrower agrees that, if Borrower owes any late charges, collection costs or other amounts under this Note or any related documents, Borrower's final payment under this Note will include all of these amounts, as well as all unpaid principal and accrued interest. 5. Loan Fees. Borrower agrees that all loan fees and other prepaid finance charges are fully earned as of the date of the loan and will not be subject to refund upon early payment (whether voluntary or as a result of default). ADDITIONAL EVENTS OF DEFAULT. Notwithstanding any other provisions herein to the contrary, each of the following also shall be an Event of Default hereunder: (i) If the Borrower is an LLC, any change in the ownership of twenty-five percent (25%) or more of the membership interests in Borrower. (ii) Any material adverse change in the financial condition of any guarantor. JURISDICTION. Any legal action or proceeding brought by Lender or Borrower against the other arising out of or relating to the loan evidenced by this Note (a "Proceeding") shall be instituted in the federal court for or the state court sitting in the county where Lender's office that made this loan is located. With respect to any Proceeding, each Borrower, to the fullest extent permitted by law: (i) waives any objections that Borrower may now or hereafter have based on venue and/or forum non convenience of any Proceeding in such court; and (ii) irrevocably submits to the jurisdiction of any such court in any Proceeding. Notwithstanding anything to the contrary herein, Lender may commence legal proceedings or otherwise proceed against Borrower in any other jurisdiction if determined by Lender to be necessary in order to fully enforce or exercise any right or remedy of Lender relating to this loan including without limitation realization upon collateral that secures this loan. BUSINESS PURPOSE. I agree to use the proceeds of this Note solely for business purposes and not any personal, family or household purpose. INTEREST RATE PROTECTION. If Borrower enters into a separate agreement with Lender for an interest rate swap product designed to allow Borrower effectively to pay a fixed rate on all or any portion of this variable rate Note (a "Swap Agreement"), then, for any payment period under this Note, Lender will waive any minimum interest rate provided in the Note, but only: (1) for as long as the Swap Agreement remains in effect; and (2) with respect to that portion of the outstanding principal balance of this Note that is equal to the amount used to calculate the payment due under the Swap Agreement for the same payment period. OTHER COLLATERAL. Collateral securing other loans with Lender may also secure this loan. To the extent collateral previously has been given to lender by any person which may secure this loan, whether directly or indirectly, it is specifically agreed that, to the extent prohibited by law, all such collateral consisting of household goods will not secure this loan. In addition, if any collateral requires the giving of a right of rescission under Truth in Lending for this loan, such collateral also will not secure this loan unless and until all required notices of that right have been given. CHANGE IN INITIAL INTEREST RATE. If this Note evidences an extension of credit with a variable rate and an initial interest rate is stated, the initial rate stated on the Note when it is signed may differ from the actual rate due to changes in the index before closing. SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower's heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns. GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE. BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE. THIS NOTE IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS NOTE IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW. BORROWER: WELBORN TRANSPORT, INC. By: /s/ Richard Bailey (Seal) --------------------------------------------- RICHARD BAILEY, CFO of WELBORN TRANSPORT, INC AGREEMENT TO PROVIDE INSURANCE - ----------------------------------------------------------------------------------------------------------------------------------- Principal Loan Date Maturity Loan No. Call / Call Account Officer Initials $382,060.00 01-16-2003 02-01-2008 *** - ----------------------------------------------------------------------------------------------------------------------------------- References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing "***" has been omitted due to text length limitations. - ----------------------------------------------------------------------------------------------------------------------------------- Grantor: WELBORN TRANSPORT, INC. Lender: Compass Bank P.O. BOX 020968 Alabama Processing Center TUSCALOOSA, AL 35403 701 South 32nd Street Birmingham, AL 35233 (800) 239-1996 - -----------------------------------------------------------------------------------------------------------------------------------

INSURANCE REQUIREMENTS. Grantor, WELBORN TRANSPORT, INC. ("Grantor"), understands that insurance coverage is required in connection with the extending of a loan or the providing of other financial accommodations to Grantor by Lender. These requirements are set forth in the security documents for the loan. The following minimum insurance coverages must be provided on the following described collateral (the "Collateral"): COLLATERAL: 2003 INTERNATIONAL 9400 SBA 6X4 DETROIT S-60 DSL (Serial Number 3HSCNAMR03N065978). Type: Comprehensive and collision. Amount: Loan Amount. Basis: Replacement value. Endorsements: Loss Payee -- Compass Bank or It's Successors and/or Assigns; and further stipulating that coverage will not be cancelled or diminished without a minimum of 30 days prior written notice to Lender. Deductibles: $500.00 Latest Delivery Date: By the loan closing date. COLLATERAL: 2003 INTERNATIONAL 9400 SBA 6X4 DETROIT S-60 DSL (Serial Number 3HSCNAMR23N06579). Type: Comprehensive and collision. Amount: Loan Amount. Basis: Replacement value. Endorsements: Loss Payee -- Compass Bank or It's Successors and/or Assigns; and further stipulating that coverage will not be cancelled or diminished without a minimum of 30 days prior written notice to Lender. Deductibles: $500.00 Latest Delivery Date: By the loan closing date. COLLATERAL: 2003 INTERNATIONAL 9400 SBA 6X4 DETROIT S-60 DSL (Serial Number 3HSCHAMR93N065980). Type: Comprehensive and collision. Amount: Loan Amount. Basis: Replacement value. Endorsements: Loss Payee -- Compass Bank or It's Successors and/or Assigns; and further stipulating that coverage will not be cancelled or diminished without a minimum of 30 days prior written notice to Lender. Deductibles: $500.00 Latest Delivery Date: By the loan closing date. COLLATERAL: 2003 INTERNATIONAL 9400 SBA 6X4 DETROIT S-60 DSL (Serial Number 3HSCNAMR03N065981). Type: Comprehensive and collision. Amount: Loan Amount. Basis: Replacement value. Endorsements: Loss Payee -- Compass Bank or It's Successors and/or Assigns; and further stipulating that coverage will not be cancelled or diminished without a minimum of 30 days prior written notice to Lender. Deductibles: $500.00 Latest Delivery Date: By the loan closing date. COLLATERAL: 2003 INTERNATIONAL 9400 SBA 6X4 DETROIT S-60 DSL (Serial Number 3HSCNAMR23N065982). Type: Comprehensive and collision. Amount: Loan Amount. Basis: Replacement value. Endorsements: Loss Payee -- Compass Bank or It's Successors and/or Assigns; and further stipulating that coverage will not be cancelled or diminished without a minimum of 30 days prior written notice to Lender. Deductibles: $500.00 Latest Delivery Date: By the loan closing date. INSURANCE COMPANY. Grantor may obtain insurance from any insurance company Grantor may choose that is reasonably acceptable to Lender. Grantor understands that credit may not be denied solely because insurance was not purchased through Lender. INSURANCE MAILING ADDRESS. All documents and other materials relating to insurance for this loan should be mailed, delivered or directed to the following address: Compass Bank Commercial Loan Hub 701 32nd Street South Birmingham, AL 35233 ADDITIONAL REQUIRED COVERAGE. Notwithstanding any other provisions of this Agreement to the contrary, the description of any minimum insurance coverage above in no way limits Lender's right to require additional insurance coverage. ADDITIONAL AUTHORIZATION. Notwithstanding any provisions of this Assignment to the contrary, Lender may, but is not required to, act as attorney-in-fact for Grantor in making and settling claims under these and any other insurance policies on the Collateral, canceling any policy or endorsing Grantor's name on any draft or negotiable instrument drawn by any insurer. Grantor shall cooperate with Lender in obtaining the benefits of any insurance on the Collateral or the other proceeds of that insurance, and shall reimburse Lender for any expense incurred in connection with such insurance, including the expense of an independent appraisal in case of fire or other casualty affecting the Collateral. FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Lender, on the latest delivery date stated above, evidence of the required insurance as provided above, with an effective date of January 16, 2003, or earlier. Grantor acknowledges and agrees that if Grantor fails to provide any required insurance or fails to continue such insurance in force, Lender may do so at Grantor's expense as provided in the applicable security document. The cost of any such insurance, at the option of Lender, shall be added to the indebtedness as provided in the security document. GRANTOR ACKNOWLEDGES THAT IF LENDER SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO AN AMOUNT EQUAL TO THE LESSER OF (1) THE UNPAID BALANCE OF THE DEBT, EXCLUDING ANY UNEARNED FINANCE CHARGES, OR (2) THE VALUE OF THE COLLATERAL; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS. AUTHORIZATION. For purposes of insurance coverage on the Collateral, Grantor authorizes Lender to provide to any person (including any insurance agent or company) all information Lender deems appropriate, whether regarding the Collateral, the loan or other financial accommodations, or both. AGREEMENT TO PROVIDE INSURANCE (Continued) Page 2 ================================================================================ GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JANUARY 16, 2003. THIS AGREEMENT IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS AGREEMENT IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW. GRANTOR: WELBORN TRANSPORT, INC. By: /s/ Richard Bailey (Seal) ------------------------------------ RICHARD BAILEY, CEO of WELBORN TRANSPORT, INC ================================================================================ FOR LENDER USE ONLY INSURANCE VERIFICATION DATE: PHONE ------------------------------ ------------------------- ------------------------------ AGENT'S NAME: -------------------------------- AGENCY: -------------------------------------- INSURANCE COMPANY: --------------------------- POLICY NUMBER: EFFECTIVE DATES: ---------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMENTS: ----------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ FOR LENDER USE ONLY INSURANCE VERIFICATION DATE: PHONE ------------------------------ ------------------------- ------------------------------ AGENT'S NAME: -------------------------------- AGENCY: -------------------------------------- INSURANCE COMPANY: --------------------------- POLICY NUMBER: EFFECTIVE DATES: ---------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMENTS: ----------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ FOR LENDER USE ONLY INSURANCE VERIFICATION DATE: PHONE ------------------------------ ------------------------- ------------------------------ AGENT'S NAME: -------------------------------- AGENCY: -------------------------------------- INSURANCE COMPANY: --------------------------- POLICY NUMBER: EFFECTIVE DATES: ---------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMENTS: ----------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ FOR LENDER USE ONLY INSURANCE VERIFICATION DATE: PHONE ------------------------------ ------------------------- ------------------------------ AGENT'S NAME: -------------------------------- AGENCY: -------------------------------------- INSURANCE COMPANY: --------------------------- POLICY NUMBER: EFFECTIVE DATES: ---------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMENTS: ----------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ COMMERCIAL SECURITY AGREEMENT - ----------------------------------------------------------------------------------------------------------------------------------- Principal Loan Date Maturity Loan No. Call / Call Account Officer Initials $382,060.00 01-06-2003 02-1-2008 *** - ----------------------------------------------------------------------------------------------------------------------------------- References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing "***" has been omitted due to text length limitations. - ----------------------------------------------------------------------------------------------------------------------------------- Grantor: WELBORN TRANSPORT, INC. Lender: Compass Bank P.O. BOX 020968 Alabama Processing Center TUSCALOOSA, AL 35403 701 South 32nd Street Birmingham, AL 35233 (800) 239-1996 ===================================================================================================================================
THIS COMMERCIAL SECURITY AGREEMENT dated January 16, 2003, is made and executed between WELBORN TRANSPORT, INC ("Grantor") and Compass Bank ("Lender"). GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender a security interest in the Collateral to secure the Indebtedness and agrees that Lender shall have the rights stated in this Agreement with respect to the Collateral, in addition to all other rights which Lender may have by law. COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means the following described property in which Grantor is giving to Lander a security interest for the payment of the indebtedness and performance of all other obligations under the Note and this Agreement: 2003 INTERNATIONAL 9400 SBA 6X4 DETROIT S-60 DSL (Serial Number 3HSCNAMR03N066978) 2003 INTERNATIONAL 9400 SBA 6X4 DETROIT S-60 DSL (Serial Number 3HSCNAMR23N06679) 2003 INTERNATIONAL 9400 SBA 6x4 DETROIT S-60 DSL (Serial Number 3HSCHAMR93N065980) 2003 INTERNATIONAL 9400 SBA 6X4 DETROIT S-60 DSL (Serial Number 3HSCNAMR03N065981) 2003 INTERNATIONAL 9400 SBA 6X4 DETROIT S-60 DSL (Serial Number 3HSCNAMR23N065982) In addition, the word "Collateral" also includes all the following: (A) All accessions, attachments, accessories, replacements of the additions to any of the collateral described herein, whether added now or later. (B) All products and produce of any of the property described in this Collateral section. (C) All accounts, general intangibles, instruments, rents, monies, payments, and all other rights, arising out of a sale, lease, or other disposition of any of the property described in this Collateral section. (D) All proceeds (including insurance proceeds) from the sale, destruction, loss, or other disposition of any of the property described in this Collateral section, and sums due from a third party who has damaged or destroyed the Collateral or from that party's insurer, whether due to judgment, settlement or other process. (E) All records and data relating to any of the property described in this Collateral section, whether in the form of a writing, photograph, microfilm, microfiche, or electronic media, together with all of Grantor's right, title, and interest in and to all computer software required to utilize, create, maintain, and process any such records or data on electronic media. Despite any other provision of this Agreement, Lender is not granted, and will not have, a nonpurchase money security interest in household goods, to the extent such a security interest would be prohibited by applicable law. In addition, if because of the type of any Property, Lender is required to give a notice of the right to cancel under Truth in Lending for the Indebtedness, then Lender will not have a security interest in such Collateral unless and until such a notice is given. CROSS-COLLATERALIZATION. In addition to the Note, this Agreement secures all obligations, debts and liabilities, plus interest thereon, of Grantor to Lender, or any one or more of them, as well as all claims by Lender against Grantor or any one or more of them, whether now existing or hereafter arising, whether related or unrelated to the purpose of the Note, whether voluntary or otherwise, whether due or not due, direct or indirect, determined or undetermined, absolute or contingent, liquidated or unliquidated whether Grantor may be liable individually or jointly with others, whether obligated as guarantor, surety, accommodation party or otherwise, and whether recovery upon such amounts may be or hereafter may become barred by any statute of limitations, and whether the obligation to repay such amounts may be or hereafter may become otherwise unenforceable. RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Grantor's accounts with Lender (whether checking, savings, or some other account). This includes all accounts Grantor holds jointly with someone else and all accounts Grantor may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Grantor authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts. GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With respect to the Collateral, Grantor represents and promises to Lender that: ORGANIZATION. Grantor is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Alabama. Grantor is duly authorized to transact business in all other states in which Grantor is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which Grantor is doing business. Specifically, Grantor is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. Grantor has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. Grantor maintains an office at P.O. BOX 020968, TUSCALOOSA, AL 35403. Unless Grantor has designated otherwise in writing, the principal office is the office at which Grantor keeps its books and records including its records concerning the Collateral. Grantor will notify Lender prior to any change in the location of Grantor's state of organization or any change in Grantor's name. Grantor shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to Grantor and Grantor's business activities. AUTHORIZATION. Grantor's execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by Grantor, do not require the consent or approval of any other person, regulatory authority, or governmental body, and do not conflict with, result in a violation of, or constitute a default under (1) any provision of Grantor's articles or incorporation or organization, or bylaws, or any agreement or other instrument binding upon Grantor or (2) any law, governmental regulation, court degree, or order applicable to Grantor or to Grantor's properties. Grantor has the power and authority to enter into the Note and the Related Documents and to grant collateral as security of the indebtedness. Grantor has the further power and authority to own and to hold all of Grantor's assets and properties, and to carry on Grantor's business as presently conducted. PERFECTION OF SECURITY INTEREST. Grantor agrees to execute financial statements and to take whatever other actions are requested by Lender to perfect and continue Lender's security interest in the Collateral. Upon request of Lender, Grantor will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Grantor will note Lender's interest upon any and all chattel paper if not delivered to Lender for possession by Lender. NOTICE TO LENDER. Grantor will promptly notify Lender in writing at Lender's address shown above (or such other addresses as Lender may designate from time to time) prior to any (1) change in Grantor's name; (2) change in Grantor's assumed business names(s); (3) change in the management of the Corporation Grantor; (4) change in the authorized signer(s); (5) change in Grantor's principal office address; (6) change in Grantor's state of organization; (7) conversion of Grantor to a new or different type of business entity; or (8) change in any other aspect of Grantor that directly or indirectly relates to any agreements between Grantor and Lender. No change in Grantor's name or state of organization will take effect until after Lender has received notice. Grantor represents and warrants to Lender that Grantor has provided Lender with Grantor's correct Employer Identification Number. Grantor promptly shall notify Lender should Grantor apply for or obtain a new Employer Identification Number. NO VIOLATION. The execution and delivery of this Agreement will not violate any law or agreement governing Grantor or to which Grantor is a party, and its certificate or articles or incorporation and bylaws do not prohibit any term or condition of this Agreement. ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of accounts, chatter paper, or general intangibles, as defined by the Uniform Commercial Code, the Collateral is enforceable in accordance with its terms, is genuine, and fully complies with all applicable laws and regulations concerning form, content and manner of preparation and execution, and all persons appearing to be obligated on the COMMERCIAL SECURITY AGREEMENT (Continued) Page 2 ================================================================================ Collateral have authority and capacity to contract and are in fact obligated as they appear to be on the Collateral. There shall be no setoffs or counterclaims against any of the Collateral, and no agreement shall have been made under which any deductions or discounts may be claimed concerning the Collateral except those disclosed to Lender in writing. LOCATION OF THE COLLATERAL. Except in the ordinary course of Grantor's business, Grantor agrees to keep the Collateral at Grantor's address shown above or at such other locations as are acceptable to Lender. Upon Lender's request, Grantor will deliver to Lender in form satisfactory to Lender a schedule of real properties and Collateral locations relating to Grantor's operations, including without limitation the following: (1) all real property Grantor owns or is purchasing; (2) all real property Grantor is renting or leasing; (3) all storage facilities Grantor owns, rents, leases, or uses; and (4) all other properties where Collateral is or may be located. REMOVAL OF THE COLLATERAL. Except in the ordinary course of Grantor's business, Grantor shall not remove the Collateral from its existing location without Lender's prior written consent. To the extent that the Collateral consists of vehicles, or other titled property, Grantor shall not take or permit any action which would require application for certificates of title for the vehicles outside the State of Alabama, without Lender's prior written consent. If Grantor moves from Grantor's address shown above to another location within the same state, Grantor may move the Collateral to Grantor's new address, but only if Grantor gives Lender the new address in writing prior to Grantor's moving. In any event, Grantor agrees to keep Lender informed at all times of Grantor's current address. Grantor shall, whenever requested, advise Lender of the exact location of the Collateral. TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts collected in the ordinary course of Grantor's business, or as otherwise provided for in this Agreement, Grantor shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral. Grantor shall not pledge, mortgage, encumber or otherwise permit the Collateral to be subject to any lien, security interest, encumbrance, or charge, other than the security interest provided for in this Agreement, without the prior written consent of Lender. This includes security interests even if junior in right to the security interests granted under this Agreement. Unless waived by Lender, all proceeds from any disposition of the Collateral (for whatever reason) shall be held in trust for Lender and shall not be commingled with any other funds; provided however, this requirement shall not constitute consent by Lender to any sale or other disposition. Upon receipt, Grantor shall immediately deliver any such proceeds to Lender. TITLE. Grantor represents and warrants to Lender that Grantor holds good and marketable title to the Collateral, free and clear of all liens and encumbrances except for the lien of this Agreement. No financing statement covering any of the Collateral is on file in any public office other than those which reflect the security interest created by this Agreement or to which Lender has specifically consented. Grantor shall defend Lender's rights in the Collateral against the claims and demands of all other persons. REPAIRS AND MAINTENANCE. Grantor agrees to keep and maintain, and to cause others to keep and maintain, the Collateral in good order, repair and condition at all times while this Agreement remains in effect. Grantor further agrees to pay when due all claims for work done on, or services rendered or material furnished in connection with the Collateral so that no lien or encumbrance may ever attach to or be filed against the Collateral. INSPECTION OF COLLATERAL. Lender and Lender's designated representatives and agents shall have the right at all reasonable times to examine and inspect the Collateral wherever located. TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes, assessments and liens upon the Collateral, its use or operation, upon this Agreement, upon any promissory note or notes evidencing the indebtedness, or upon any of the other Related Documents. Grantor may withhold any such payment or may elect to contest any lien if Grantor is in good faith conducting an appropriate proceeding to contest the obligation to pay and so long as Lender's interest in the Collateral is not jeopardized in Lender's sole opinion, If the Collateral is subjected to a lien which is not discharged within fifteen (15) days, Grantor shall deposit with Lender each, a sufficient corporate surety bond or other security satisfactory to Lender in an amount adequate to provide for the discharge of the lien plus any interest, costs, attorneys' fees or other charges that could accrue as a result of foreclosure or sale of the Collateral. In any contest Grantor shall defend itself and Lender and shall satisfy any final adverse judgment before enforcement against the Collateral. Grantor shall name Lender as an additional obligee under any surety bond furnished in the contest proceedings. REPAIRS AND MAINTENANCE. Grantor shall keep and maintain and shall cause others to keep and maintain the Collateral in good order, repair and merchantable condition. Grantor shall further make and/or cause all necessary repairs to be made to the Collateral, including the repair and restoration of any portion of the Collateral that may be damaged, lost or destroyed. In addition, Grantor shall not, without the prior written consent of Lender, make or permit to be made any alterations to any of the Collateral that may reduce or impair the Collateral's use, value or marketability. Furthermore, Grantor shall not, nor shall Grantor permit others to abandon, commit waste, or destroy the Collateral or any part or parts thereof. Grantor further agrees to furnish Lender with evidence that such taxes, assessments, and governmental and other charges have been paid in full and in a timely manner. Grantor may withhold any such payment or may elect to contest any lien if Grantor is in good faith conducting an appropriate proceeding to contest the obligation to pay and so long as Lender's interest in the Collateral is not jeopardized. COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly with all laws, ordinances, rules and regulations of all governmental authorities, now or hereafter in effect, applicable to the ownership, production, disposition, or use of the Collateral, including all laws or regulations relating to the undue erosion of highly-erodible land or relating to the conversion of wetlands for the production of an agricultural product or commodity. Grantor may contest in good faith any such law, ordinance or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Lender's interest in the Collateral, in Lender's opinion, is not jeopardized. HAZARDOUS SUBSTANCES. Grantor represents and warrants that the Collateral never has been, and never will be so long as this Agreement remains a lien on the Collateral, used in violation of any Environmental Laws or for the generation, manufacture, storage, transportation, treatment, disposal, release or threatened release of any Hazardous Substance. The representations and warranties contained herein are based on Grantor's due diligence in investigating the Collateral for Hazardous Substances. Grantor hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Grantor becomes liable for cleanup or other costs under any Environmental Laws, and (2) agrees to indemnity and hold harmless Lender against any and all claims and losses resulting from a breach of this provision of this Agreement. This obligation to indemnify shall survive the payment of the indebtedness and the satisfaction of this Agreement. MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all risks insurance, including without limitation fire, theft and liability coverage together with such other insurance as Lender may require with respect to the Collateral, in form, amounts, coverages and basis reasonably acceptable to Lender and issued by a company or companies reasonably acceptable to Lender. Grantor, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least thirty (30) days' prior written notice to Lender and not including any disclaimer of the insurer's liability for failure to give such a notice. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Grantor or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest, Grantor will provide Lender with such loss payable or other endorsements as Lender may require. If Grantor at any time fails to obtain or maintain any insurance as required under this Agreement, Lender may (but shall not be obligated to) obtain such insurance as Lender deems appropriate, including if Lender so chooses "single interest insurance," which will cover only Lender's interest in the Collateral. APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender of any loss or damage to the Collateral. Lender may make proof of loss if Grantor fails to do so within fifteen (15) days of the casualty. All proceeds of any insurance on the Collateral, including accrued proceeds thereon, shall be held by Lender as part of the Collateral. If Lender consents to repair or replacement of the damaged or destroyed Collateral, Lender shall, upon satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost of repair or restoration. If Lender does not consent to repair or replacement of the Collateral, Lender shall retain a sufficient amount of the proceeds to pay all of the indebtedness, and shall pay the balance to Grantor. Any proceeds which have not been disbursed within six (6) months after their receipt and which Grantor has not committed to the repair or restoration of the Collateral shall be used to prepay the indebtedness. REQUIRED INSURANCE. So long as this Agreement remains in effect, Grantor shall, at its sole cost, keep and/or cause others, at their expense, to keep the Collateral constantly insured against loss by fire, by hazards included within the term "extended coverage," and by such other hazards (including flood insurance where applicable) as may be required by Lender. INSURANCE PROCEEDS. Lender shall have the right to directly receive the proceeds of all insurance protecting the Collateral. In the event that Grantor should receive any such insurance proceeds, Grantor agrees to immediately turn over and to pay such proceeds directly to Lender. All insurance proceeds may be applied, at its sole option and discretion, and in such a manner as Lender may determine (after payment of all reasonable costs, expenses and attorneys' fees necessarily paid or fees necessarily paid or incurred by Lender in this connection), for the purpose of: (1) repairing or restoring the lost, damaged or destroyed Collateral; or (2) reducing the then outstanding balance of Grantor's indebtedness. Lender's receipt of such insurance proceeds and the application of such proceeds as provided herein shall not, however, affect the lien of this Agreement. Nothing under this section shall be deemed to excuse Grantor from its obligations promptly to repair, replace or restore any lost or damaged Collateral, whether or not the same may be covered by insurance, and whether or not such proceeds of insurance are COMMERCIAL SECURITY AGREEMENT (CONTINUED) PAGE 3 ================================================================================ available, and whether such proceeds are sufficient in amount to complete such repair, replacement or restoration to the satisfaction of Lender. Furthermore, unless otherwise confirmed by Lender in writing, the application or release of any insurance proceeds by Lender shall not be deemed to cure or waive any Event of Default under this Agreement. Any proceeds which have not been disbursed within six (6) months after their receipt and which Grantor has not committed to the repair or restoration of the Collateral shall be used to prepay the Indebtedness. INSURANCE RESERVES. Lender may require Grantor to maintain with Lender reserves for payment of insurance premiums, which reserves shall be created by monthly payments from Grantor of a sum estimated by Lender to be sufficient to produce, at least fifteen (15) days before the premium due date, amounts at least equal to the insurance premiums to be paid. If fifteen (15) days before payment is due, the reserve funds are insufficient, Grantor shall upon demand pay any deficiency to Lender. The reserve funds shall be held by Lender as a general deposit and shall constitute a non-interest-bearing account which Lender may satisfy by payment of the insurance premiums required to be paid by Grantor as they become due. Lender does not hold the reserve funds in trust for Grantor, and Lender is not the agent of Grantor for payment of the insurance premiums required to be paid by Grantor. The responsibility for the payment of premiums shall remain Grantor's sole responsibility. INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to Lender reports on each existing policy of insurance showing such information as Lender may reasonably request including the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the property insured; (5) the then current value on the basis of which insurance has been obtained and the manner of determining that value; and (6) the expiration date of the policy. In addition, Grantor shall upon request by Lender (however not more often than annually) have an independent appraiser satisfactory to Lender determine, as applicable, the cash value or replacement cost of the Collateral. PRIOR ENCUMBRANCES. To the extent applicable, Grantor shall fully and timely perform any and all of Grantor's obligations under any prior Encumbrances affecting the Collateral. Without limiting the foregoing, Grantor shall not commit or permit to exist any breach of or default under any such prior Encumbrances. Grantor shall further promptly notify Lender in writing upon the occurrence of any event or circumstances that would, or that might, result in a breach of or default under any such prior Encumbrance. Grantor shall further not modify or extend any of the terms of any prior Encumbrance or any indebtedness secured thereby, or request or obtain any additional loans or other extensions of credit from any third party creditor or creditors whenever such additional loan advances or other extensions of credit may be directly or indirectly secured, whether by cross-collateralization or otherwise, by the Collateral, or any part or parts thereof, with possible preference and priority over Lender's security interest. Grantor additionally agrees to obtain, upon Lender's request, and in form and substance as may then be satisfactory to Lender, appropriate waivers and subordinations of any lessor's liens or privileges, vendor's liens or privileges, purchase money security interests, and any other Encumbrances that may affect the Collateral at any time. FUTURE ENCUMBRANCES. Grantor shall not, without the prior written consent of Lender, grant any Encumbrance that may affect the Collateral, or any part or parts thereof, nor shall Grantor permit or consent to any Encumbrance attaching to or being filed against any of the Collateral in favor of anyone other than Lender. Grantor shall further promptly pay when due all statements and charges of mechanics, materialmen, laborers and others incurred in connection with the alteration, improvement, repair and maintenance of the Collateral, or otherwise furnish appropriate security or bond, so that no future Encumbrance amy ever attach to or be filed against any Collateral. In the event that the Collateral or any part or parts thereof is and/or may be located in and/or on leased premises, Grantor shall promptly pay the full amount of such rental or lease payments whenever the same shall be due so that no lessor's lien or privilege may ever attach to or affect any of the Collateral with possible preference and priority over the lien of this Agreement. In the event that any of the Collateral is purchased or otherwise acquired by Grantor on a credit or deferred payment sales basis, Grantor shall promptly pay the full amount of the purchase or acquisition price of such Collateral so that no vendor's lien or privilege, or purchase money security interest, may ever attach to or be asserted against any of the Collateral with possible preference and priority over the lien of this agreement. Grantor additionally agrees to obtain, upon request by Lender, and in form and substance as may then be satisfactory to Lender, appropriate waivers and/or subordinations of any lessor's liens or privileges, vendor's liens or privileges, purchase money security interests, and any other Encumbrances that may affect the Collateral at any time. As long as this Agreement remains in effect, Grantor will not permit any levy, attachment or restraint to be made affecting any of the Collateral, or permit any notice of lien to be filed with respect to the Collateral or any part or parts thereof, or permit any receiver, trustee, custodian or assignee for the benefit of creditors to be appointed to take possession of any of the Collateral. Notwithstanding the foregoing, Grantor may, at its sole expense, contest in good faith by appropriate proceedings the validity or amount of any levy, attachment, restraint or lien filed against or affecting the Collateral, or any part or parts thereof; provided that (1) Grantor notifies Lender in advance of Grantor's intent to contest such a levy, attachment, restraint or lien, and (2) Grantor provides additional security to Lender, in form and amount satisfactory to Lender. NOTICE OF ENCUMBRANCES. Grantor shall immediately notify Lender in writing upon the filing of any attachment, lien, judicial process, claim, or other Encumbrance. Grantor additionally agrees to notify Lender immediately in writing upon the occurrence of any default, or event that with the passage of time, failure to cure, or giving of notice, might result in a default under any of Grantor's obligations that may be secured by any presently existing or future Encumbrance, or that might result in an Encumbrance affecting the Collateral, or should any of the Collateral be seized or attached or levied upon, or threatened by seizure or attachment of levy, by any person other than Lender. BOOKS AND RECORDS. Grantor will keep proper books and records with regard to Grantor's business activities and the Collateral in which a security interest is granted hereunder, in accordance with GAAP, applied on a consistent basis throughout, which books and records shall at all reasonable times be open to inspection and copying by Lender or Lender's designated agents. Lender shall also have the right to inspect Grantor's books and records, and to discuss Grantor's affairs and finances with Grantor's officers and representatives, at such reasonable times as Lender may designates. FINANCING STATEMENTS. Grantor authorizes Lender to file a UCC-1 financing statement, or alternatively, a copy of this Agreement to perfect Lender's security interest. At Lender's request, Grantor additionally agrees to sign all other documents that are necessary to perfect, protect, and continue Lender's security interest in the Property. Grantor will pay all filing fees, title transfer fees, and other fees and costs involved unless prohibited by law or unless Lender is required by law to pay such fees and costs. Grantor irrevocably appoints Lender to execute financing statements and documents of title in Grantor's name and to execute all documents necessary to transfer title if there is a default. Lender may file a copy of this Agreement as a financing statement. If Grantor changes Grantor's name or address, or the name or address of any person granting a security interest under this Agreement changes, Grantor will promptly notify the Lender of such change. GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have possession of the tangible personal property and beneficial use of all the Collateral and may use it in any lawful manner not inconsistent with this Agreement or the Related Documents, provided that Grantor's right to possession and beneficial use shall not apply to any Collateral where possession of the Collateral by Lender is required by law to perfect Lender's security interest in such Collateral. If Lender at any time has possession of any Collateral, whether before or after an Event of Default, Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral if Lender takes such action for that purpose as Grantor shall request or as Lender, in Lender's sole discretion, shall deem appropriate under the circumstances, but failure to honor any request by Grantor shall not of itself be deemed to be a failure to exercise reasonable care. Lender shall not be required to take any steps necessary to preserve any rights in the Collateral against prior parties, nor to protect, preserve or maintain any security interest given to secure the indebtedness. LENDER'S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender's interest in the Collateral or if Grantor fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Grantor's failure to discharge or pay when due any amounts Grantor is required to discharge or pay under this Agreement or any Related Documents, Lender on Grantor's behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on the Collateral and paying all costs for insuring, maintaining and preserving the Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note, or the maximum rate permitted by law, whichever is less, from the date incurred or paid by Lender to the date of repayment by Grantor. All such expenses will become a part of the indebtedness and, at Lender's option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note's maturity. The Agreement also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon Default. DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: PAYMENT DEFAULT. Grantor fails to make any payment when due under the indebtedness. OTHER DEFAULTS. Grantor fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Grantor. DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Grantor's property or COMMERCIAL SECURITY AGREEMENT (CONTINUED) PAGE 4 =============================================================================== Grantor's or any Grantor's ability to repay the Indebtedness or perform their respective obligations under this Agreement or any of the Related Documents. FALSE STATEMENTS. Any warranty, representation or statement made or furnished to Lender by Grantor or on Grantor's behalf, or made by Guarantor, or any other guarantor, endorser, surety, or accommodation party, under this Agreement or the Related Documents in connection with the obtaining of the indebtedness evidenced by the Note or any security document directly or indirectly securing repayment of the Note is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter. DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason. INSOLVENCY. The dissolution or termination of Grantor's existence as a going business, the insolvency of Grantor, the appointment of a receiver for any part of Grantor's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Grantor. CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Grantor or by any governmental agency against any collateral securing the indebtedness. This includes a garnishment of any of Grantor's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Grantor as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Grantor gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. EXECUTION; ATTACHMENT. Any execution or attachment is levied against the Collateral, and such execution or attachment is not set aside, discharged or stayed within thirty (30) days after the same is levied. CHANGE IN ZONING OR PUBLIC RESTRICTION. Any change in any zoning ordinance or regulation or any other public restriction is enacted, adopted or implemented, that limits or defines the uses which may be made of the Collateral such that the present or intended use of the Collateral, as specified in the Related Documents, would be in violation of such zoning ordinance or regulation or public restriction, as changed. DEFAULT UNDER OTHER LIEN DOCUMENTS. A default occurs under any other mortgage, deed of trust or security agreement covering all or any portion of the Collateral. JUDGMENT. Unless adequately covered by insurance in the opinion of Lender, the entry of a final judgment for the payment of money involving more than ten thousand dollars ($10,000.00) against Grantor and the failure by Grantor to discharge the same, or cause it to be discharged, or bonded off to Lender's satisfaction, within thirty (30) days from the date of the order, decree or process under which or pursuant to which such judgment was entered. EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect to Guarantor, or any other guarantor, endorser, surety, or accommodation party of any of the Indebtedness or Guarantor, or any other guarantor, endorser, surety, or accommodation party dies or becomes incompetent or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness. ADVERSE CHANGE. A material adverse change occurs in Grantor's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired. INSECURITY. Lender in good faith believes itself insecure. RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this Agreement, at any time thereafter, Lender shall have all the rights of a secured party under the Alabama Uniform Commercial Code. In addition and without limitation, Lender may exercise any one or more of the following rights and remedies: ACCELERATE INDEBTEDNESS. Lender may declare the entire indebtedness, including any prepayment penalty which Grantor would be required to pay, immediately due and payable, without notice of any kind to Grantor. ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all or any portion of the Collateral and any and all certificates of title and other documents relating to the Collateral. Lender may require Grantor to assemble the Collateral and make it available to Lender at a place to be designated by Lender. Lender also shall have full power to enter upon the property of Grantor to take possession of and remove the Collateral. If the Collateral contains other goods not covered by this Agreement at the time of repossession, Grantor agrees Lender may take such other goods, provided that Lender makes reasonable efforts to return them to Grantor after repossession. SELL THE COLLATERAL. Lender shall have full power to sell, lease, transfer, or otherwise deal with the Collateral or proceeds thereof in Lender's own name or that of Grantor. Lender may sell the Collateral at public auction or private sale. Unless the Collateral threatens to decline speedily in value or is of a type customarily sold on a recognized market, Lender will give Grantor, and other persons as required by law, reasonable notice of the time and place of any public sale, or the time after which any private sale or any other disposition of the Collateral is to be made. However, no notice need be provided to any person who, after Event of Default occurs, enters into and authenticates an agreement waiving that person's right to notification of sale. The requirements of reasonable notice shall be met if such notice is given at least ten (10) days before the time of the sale or disposition. All expenses relating to the disposition of the Collateral, including without limitation the expenses of retaking, holding, insuring, preparing for sale and selling the Collateral, shall become a part of the Indebtedness secured by this Agreement and shall be payable on demand, with interest at the Note rate from date of expenditure until repaid. APPOINT RECEIVER. Lender shall have the right to have a receiver appointed to take possession of all or any part of the Collateral, with the power to protect and preserve the Collateral, to operate the Collateral preceding foreclosure or sale, and to collect the Rents from the Collateral and apply the proceeds, over and above the cost of the receivership, against the indebtedness. The receiver may serve without bond if permitted by law. Lender's right to the appointment of a receiver shall exist whether or not the apparent value of the Collateral exceeds the Indebtedness by a substantial amount. Employment by Lender shall not disqualify a person from serving as a receiver. COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a receiver, may collect the payments, rents, income, and revenues from the Collateral. Lender may at any time in Lender's discretion transfer any Collateral into Lender's own name or that of Lender's nominee and receive the payments, rents, income, and revenues therefrom and hold the same as security for the Indebtedness or apply it to payment of the Indebtedness in such order of preference as Lender may determine. Insofar as the Collateral consists of accounts, general intangibles, insurance policies, instruments, chattel paper, choses in action, or similar property, Lender may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as Lender may determine, whether or not Indebtedness or Collateral is then due. For these purposes, Lender may, on behalf of and in the name of Grantor, receive, open and dispose of mail addressed to Grantor; change any address to which mail and payments are to be sent; and endorse notes, checks, drafts, money orders, documents of title, instruments and items pertaining to payment, shipment, or storage of any Collateral. To facilitate collection, Lender may notify account debtors and obligors on any Collateral to make payments directly to Lender. OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the Collateral, Lender may obtain a judgment against Grantor for any deficiency remaining on the Indebtedness due to Lender after application of all amounts received from the exercise of the rights provided in this Agreement. Grantor shall be liable for a deficiency even if the transaction described in this subsection is a sale of accounts or chattel paper. OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies of a secured creditor under the provisions of the Uniform Commercial Code, as may be amended from time to time. In addition, Lender shall have and may exercise any or all other rights end remedies it may have available at law, in equity, or otherwise. ELECTION OF REMEDIES. Except as may be prohibited by applicable law, all of Lender's rights and remedies, whether evidenced by this Agreement, the Related Documents, or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation or Grantor under this Agreement, after Grantor's failure to perform, shall not affect Lender's right to declare a default and exercise its remedies. NON-LIABILITY OF LENDER. The relationship between Borrower and Lender created by this Agreement is strictly a debtor and creditor relationship and not fiduciary in nature, nor is the relationship to be construed as creating any partnership or joint venture between Lender and Borrower. Borrower is exercising Borrower's own judgment with respect to Borrower's business. All information supplied to Lender is for Lender's protection only and no other party is entitled to rely on such information. There is no duty for Lender to review, inspect, supervise or inform Borrower of any matter with respect to Borrower's business. Lender and Borrower intend that Lender may reasonably rely on all information supplied by Borrower and any investigation or failure to investigate will not diminish Lender's right to so rely. ADDITIONAL EVENTS OF DEFAULT. Notwithstanding any other provisions herein to the contrary, each of the following also shall be an Event of Default hereunder: (1) If the Borrower is an LLC, any change in the ownership of twenty-five percent (25%) or more of the membership interests in Borrower. COMMERCIAL SECURITY AGREEMENT (CONTINUED) PAGE 5 =============================================================================== (ii) Any material adverse change in the financial condition of any guarantor. ACCOUNTS. Notwithstanding any other provisions of this Agreement to the contrary, the word " Account" also includes the meaning provided in the Uniform Commercial Code, as amended from time to time. NO ASSIGNMENT BY GRANTOR. Notwithstanding any other provisions of this Agreement to the contrary, Grantor agrees not to assign any of Grantor's rights or obligations under this Agreement. AUTHENTICATED DEMANDS AND REQUESTS. If Grantor makes an authenticated demand or a request for an accounting, a request regarding the Collateral, a request regarding a statement of Grantor's account or a request for a termination statement under the Uniform Commercial Code, Grantor agrees to address the demand or request to Lender at the following address: Compass Bank Loan Research Dept., P. 0. Box 11830, Birmingham, Alabama 35202, Grantor agrees that, to the extent permitted by applicable law, Lender has no duty or obligation to respond to the demand or request until Lender receives it or notice of it at this address. JURISDICTION. Any legal action or proceeding brought by Lender or Borrower against the other arising out of or relating to the loan evidenced by this Note (a "Proceeding") shall be instituted in the federal court for or the state court sitting in the county where Lender's office that made this loan is located. With respect to any Proceeding, each Borrower, to the fullest extent permitted by law; (i) waives any objections that Borrower may now or hereafter have based on venue and/or forum non conveniens of any Proceeding in such court; and (ii) irrevocably submits to the jurisdiction of any such court in any Proceeding. Notwithstanding anything to the contrary herein, Lander may commence legal proceedings or otherwise proceed against Borrower in any other jurisdiction if determined by Lender to be necessary in order to fully enforce or exercise any right or remedy of Lander relating to this loan including without limitation realization upon Collateral that secures this loan. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: AMENDMENTS. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of Lender's costs end expenses, including Lender's attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Grantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Grantor also shall pay all court costs and such additional fees as may be directed by the court. CAPTION HEADINGS. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement. GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF ALABAMA. THIS AGREEMENT HAS BEEN ACCEPTED BY LENDER IN THE STATE OF ALABAMA. NON-LIABILITY OF LENDER. The relationship between Grantor and Lender created by this Agreement is strictly a debtor and creditor relationship and not fiduciary in nature, nor is the relationship to be construed as creating any partnership or joint venture between Lender and Grantor. Grantor is exercising Grantor's own judgment with respect to Grantor's business. All information supplied to Lender is for Lender's protection only and no other party is entitled to rely on such information. There is no duty for Lender to review, inspect, supervise or inform Grantor of any matter with respect to Grantor's business. Lender and Grantor intend that Lender may reasonably rely on all information supplied by Grantor to Lender, together with all representations and warranties given by Grantor to Lender, without investigation or confirmation by Lender and that any investigation or failure to investigate will not diminish Lender's right to so rely. NOTICE OF LENDER'S BREACH. Grantor must notify Lender in writing of any breach of this Agreement or the Related Documents by Lender and any other claim, cause of action or offset against Lender within thirty (30) days after the occurrence of such breach or after the accrual of such claim, cause of action or offset. Grantor waives any claim, cause of action or offset for which notice is not given in accordance with this paragraph. Lender is entitled to rely on any failure to give such notice. INDEMNIFICATION OF LENDER. Grantor agrees to indemnify, to defend and to save and hold Lender harmless from any and all claims, suits, obligations, damages, losses, costs and expenses (including, without limitation, Lender's attorneys' fees), demands, liabilities, penalties, fines and forfeitures of any nature whatsoever that may be asserted against or incurred by Lender, its officers, directors, employees, and agents arising out of, relating to, or in any manner occasioned by this Agreement and the exercise of the rights and remedies granted Lender under this, as well as by: (1) the ownership, use, operation, construction, renovation, demolition, preservation, management, repair, condition, or maintenance of any part of the Collateral; (2) the exercise of any of Grantor's rights collaterally assigned and pledged to Lender hereunder; (3) any failure of Grantor to perform any of its obligations hereunder; and/or (4) any failure of Grantor to comply with the environmental and ERISA obligations, representations and warranties set forth herein. The foregoing indemnity provisions shall survive the cancellation of this Agreement as to all matters arising or accruing prior to such cancellation and the foregoing Indemnity shall survive in the event that Lender elects to exercise any of the remedies as provided under this Agreement following default hereunder. Grantor's indemnity obligations under this section shall not in any way be affected by the presence or absence of covering insurance, or by the amount of such insurance or by the failure or refusal of any insurance carrier to perform any obligation on Its pan under any insurance policy or policies affecting the Collateral and/or Grantor's business activities. Should any claim, action or proceeding be made or brought against Lender by reason of any event as to which Grantor's indemnification obligations apply, then, upon Lender's demand, Grantor, at its sole cost and expense, shall defend such claim, action or proceeding in Grantor's name, if necessary, by the attorneys for Grantor's insurance carrier (if such claim, action or proceeding is covered by insurance), or otherwise by such attorneys as Lender shall approve. Lender may also engage its own attorneys at its reasonable discretion to defend Grantor and to assist in its defense and Grantor agrees to pay the fees end disbursements of such attorneys. NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver to Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Grantor, shall constitute a waiver of any of Lender's rights or of any of Grantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender. NOTICES. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes, Grantor agrees to keep Lender informed at all times of Grantor's current address. Unless otherwise provided or required by law, if there is more than one Grantor, any notice given by Lender to any Grantor is deemed to be notice given to all Grantors. POWER OF ATTORNEY. Grantor hereby appoints Lender as Grantor's irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect, amend, or to continue the security interest granted in this Agreement or to demand termination of filings of other secured parties. Lender may at any time, and without further authorization from Grantor, file a carbon, photographic or other reproduction of any financing statement or of this Agreement for use as a financing statement. Grantor will reimburse Lender for all expenses for the perfection and the continuation of the perfection of Lender's security interest in the Collateral. SEVERABILITY. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other provision of this Agreement. SOLE DISCRETION OF LENDER. Whenever Lender's consent or approval is required under this Agreement, the decision as to whether or not to consent or approve shall be in the sole and exclusive discretion of Lender and Lender's decision shall be final and conclusive. SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Agreement on transfer of Grantor's interest, this Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than Grantor, Lender, without notice to Grantor, may deal with Grantor's successors with reference to this Agreement and the Indebtedness without releasing Grantor from the obligations of this Agreement or liability under the Indebtedness. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations, warranties, and agreements made by Grantor in this Agreement shall COMMERCIAL SECURITY AGREEMENT (CONTINUED) PAGE 6 =============================================================================== survive the execution and delivery of this Agreement, shall be continuing in nature, and shall remain in full force and effect until such time as Grantor's Indebtedness shall be paid in full. TIME IS OF THE ESSENCE. Time is of the essence in the performance of this Agreement. DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall moon amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code: AGREEMENT. The word "Agreement" means this Commercial Security Agreement, as this Commercial Security Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Commercial Security Agreement from time to time. BORROWER. The word "Borrower" means WELBORN TRANSPORT, INC, and all other persons and entities signing the Note in whatever capacity. COLLATERAL. The word "Collateral" means all of Grantor's right, title and interest in and to all the Collateral as described in the Collateral Description section of this Agreement. DEFAULT. The word "Default" means the Default set forth in this Agreement in the section titled "Default". ENCUMBRANCE. The word "Encumbrance" means any and all presently existing or future mortgages, liens, privileges and other contractual and statutory security interests and rights, of every nature and kind, whether in admiralty, at law, or in equity, that now and/or in the future may affect the Collateral or any part or parts thereof. ENVIRONMENTAL LAWS. The words "Environmental Laws" mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq, ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1988, Pub. L. No, 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto. EVENT OF DEFAULT. The words "Event of Default" mean individually, collectively, and interchangeably any of the events of default set forth in this Agreement in the default section of this Agreement. GAAP. The word "GAAP" means generally accepted accounting principles. GRANTOR. The word "Grantor" means WELBORN TRANSPORT, INC. GUARANTOR. The word "Guarantor" means any guarantor, surety, or accommodation party of any or all of the Indebtedness, and, in each case, Grantor's successors, assigns, heirs, personal representatives, executors and administrators of any guarantor, surety, or accommodation party. GUARANTY. The word "Guaranty" means the guaranty from Guarantor, or any other guarantor, endorser, surety, or accommodation party to Lender, including without limitation a guaranty of all or part of the Note. HAZARDOUS SUBSTANCES. The words "Hazardous Substances" mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words "Hazardous Substances" are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term "Hazardous Substances" also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos. INDEBTEDNESS. The word "indebtedness" means the indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other indebtedness and costs and expenses for which Grantor is responsible under this Agreement or under any of the Related Documents. LENDER. The word "Lender" means Compass Bank, its successors and assigns. NOTE. The word "Note" means the note or credit agreement executed by Borrower(s) in the principal amount of $382,080.00, dated JANUARY 16, 2003, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or agreement. PROPERTY. The word "Property" means all of Grantor's right, title and interest in and to all the Property as described in the "Collateral Description" section of this Agreement. RELATED DOCUMENT. The words "Related Documents" mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other Instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness. GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JANUARY 16, 2003. THIS AGREEMENT IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS AGREEMENT IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW. GRANTOR; WELBORN TRANSPORT INC. By: /s/ Richard Bailey (SEAL) ---------------------------------------------- Richard Bailey, CFO of WELBORN TRANSPORT, INC. =============================================================================== DISBURSEMENT REQUEST AND AUTHORIZATION
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL / CALL ACCOUNT OFFICER INITIALS --------- --------- -------- -------- ----------- ------- ------- -------- $382,060.00 01-16-2003 02-01-2008 ***
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing "***" has been omitted due to text length limitations. BORROWER: WELBORN TRANSPORT, INC LENDER: COMPASS BANK P.O. BOX 020968 ALABAMA PROCESSING CENTER TUSCALOOSA, AL 35403 701 SOUTH 32ND STREET BIRMINGHAM, AL 35233 (800) 239-1996 =============================================================================== PRIMARY PURPOSE OF LOAN, The primary purpose of the loan is for: [ ] Personal, Family, or Household Purposes or Personal Investment. [X] Business (Including Real Estate Investment). SPECIFIC PURPOSE. The specific purpose of this loan is: TO PURCHASE TRACTORS. DISBURSEMENT INSTRUCTIONS. Please disburse the loan proceeds of $382,080.00 as follows: =============================================================================== AMOUNT FINANCED ITEMIZATION AMOUNT PAID TO BORROWER DIRECTLY: $381,810.00 LENDER'S CHECK # $381,810.00 OTHER CHARGES FINANCED: $250.00 LOAN PROCESSING FEE $ 250.00 ----------- NOTE PRINCIPAL: $382,060.00 PREPAID FINANCE CHARGES: $ 0.00 IN CASH: $0,00 AMOUNT FINANCED: $382,060.00

=============================================================================== AMOUNT FINANCED ITEMIZATION CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the following charges: ~~Prepaid Finance Charges Paid In Cash: $0.00~~

FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS AUTHORIZATION IS DATED JANUARY 16, 2003, THIS AGREEMENT IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS AGREEMENT IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW. BORROWER: WELBORN TRANSPORT, INC. By: /s/ Richard Bailey (SEAL) ----------------------------------------------- Richard Bailey, CFO of WELBORN TRANSPORT, INC. =============================================================================== CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL - ---------------------------------------------------------------------------------------------------- Principal Loan Date Maturity Loan No. Call/Call Account Officer Initials $382,060.00 01-16-2003 02-01-2008 *** - ----------------------------------------------------------------------------------------------------

References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing "***" has been omitted due to text length limitations. - ------------------------------------------------------------------------------- CORPORATION: WELBORN TRANSPORT, INC LENDER: COMPASS BANK P.O. BOX 020968 ALABAMA PROCESSING CENTER TUSCALOOSA, AL 35403 701 SOUTH 32ND STREET BIRMINGHAM, AL 35233 (800) 239-1996 WE, THE UNDERSIGNED, DO HEREBY CERTIFY THAT: THE CORPORATION'S EXISTENCE. The complete and correct name of the Corporation is WELBORN TRANSPORT, INC ("Corporation"). The Corporation is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Alabama. The Corporation is duly authorized to transact business in all other states in which the Corporation is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which the Corporation is doing business. Specifically, the Corporation is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. The Corporation has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. The Corporation maintains an office at P.O. BOX 020968, TUSCALOOSA, AL 35403. Unless the Corporation has designated otherwise in writing, the principal office is the office at which the Corporation keeps its books and records. The Corporation will notify Lender prior to any change in the location of the Corporation's state of organization or any change in the Corporation's name, The Corporation shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to the Corporation and the Corporation's business activities. RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the Corporation is a close corporation having no Board of Directors then at a meeting of the Corporation's shareholders, duly called and held on ________, at which a quorum was present and voting, or by other duly authorized action in lieu of a meeting, the resolutions set forth in this Resolution were adopted. OFFICER. The following named person is an officer of WELBORN TRANSPORT, INC:
NAMES TITLES AUTHORIZED ACTUAL SIGNATURES - ----- ------ ---------- ----------------- ~~RICHARD BAILEY Y /s/ Richard Bailey~~
ACTIONS AUTHORIZED. The authorized person listed above may enter into any agreements of any nature with Lender, and those agreements will bind the Corporation. Specifically, but without limitation, the authorized person is authorized, empowered, and directed to do the following for and on behalf of the Corporation: BORROW MONEY. To borrow, as a cosigner or otherwise, from time to time from Lender, on such terms as may be agreed upon between the Corporation and Lender, such sum or sums of money as in his or her judgment should be borrowed, without limitation. EXECUTE NOTES. To execute, and deliver to Lender the promissory note or notes, or other evidence of the Corporation's credit accommodations, on Lender's forms, at such rates of interest and on such terms as may be agreed upon, evidencing the sums of money so borrowed or any of the Corporation's indebtedness to Lender, and also to execute and deliver to Lender one or more renewals, extensions, modifications, refinancings, consolidations, or substitutions for one or more to the notes, any portion of the notes, or any other evidence of credit accommodations. GRANT SECURITY. To mortgage, pledge, transfer, endorse, hypothecate, or otherwise encumber and deliver to Lender any property now or hereafter belonging to the Corporation or in which the Corporation now or hereafter may have an interest, including without limitation all real property and all personal property (tangible or intangible) of the Corporation, as security for the payment of any loans or credit accommodations so obtained, any promissory notes so executed (including any amendments to or modifications, renewals, and extensions of such promissory notes), or any other or further indebtedness of the Corporation to Lender at any time owing, however the same may be evidenced. Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the time such loans are obtained or such indebtedness is incurred, or at any other time or times, and may be either in addition to or in lieu of any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated or encumbered. EXECUTE SECURITY DOCUMENTS. To execute and deliver to Lender the forms of mortgage, deed of trust, pledge agreement, hypothecation agreement, and other security agreements and financing statements which Lender may require and which shall evidence the terms and conditions under and pursuant to which such liens and encumbrances, or any of them, are given; and also to execute and deliver to Lender any other written instruments, any chattel paper, or any other collateral, of any kind or nature, which Lender may deem necessary or proper in connection with or pertaining to the giving of the liens and encumbrances. NEGOTIATE ITEMS. To draw, endorse, and discount with Lender all drafts, trade acceptances, promissory notes, or other evidences of indebtedness payable to or belonging to the Corporation or in which the Corporation may have an interest, and either to receive cash for the name or to cause such proceeds to be credited to the Corporation's account with Lender, or to cause such other disposition of the proceeds derived therefrom as he or she may deem advisable. FURTHER ACTS. In the case of lines of credit, to designate additional or alternate individuals as being authorized to request advances under such lines, and in all cases, to do and perform such other acts and things, to pay any and all fees and costs, and to execute and deliver such other documents and agreements as the officer may in his or her discretion deem reasonably necessary or proper in order to carry into effect the provisions of this Resolution. ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or filings required by law relating to all assumed business names used by the Corporation. Excluding the name of the Corporation, the following is a complete list of all assumed business names under which the Corporation does business: None. NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at Lender's address shown above (or such other addresses as Lender may designate from time to time) prior to any (A) change in the Corporation's name; (B) change in the Corporation's assumed business name(s); (C) change in the management of the Corporation; (D) change in the authorization signer(s); (E) change in the Corporation's principal office address; (F) change in the Corporation's state of organization; (G) conversion of the Corporation to a new or different type of business entity; or (H) change in any other aspect of the Corporation that directly or indirectly relates to any agreements between the Corporation and Lender. No change in the Corporation's name or state of organization will take effect until after Lender has received notice. OTHER ACTIONS. Open and maintain any safety deposit boxes, lockboxes and escrow, savings, checking, depository, or other accounts with Lender; deposit in and to such boxes and accounts any checks, drafts, notes, and other instruments and funds payable to or belonging to the Company; withdraw any funds or draw, sign and deliver in the name of the Company any check or draft against funds of the Company in such boxes or accounts; and procure additional depository, funds transfer and funds management services (including, but not limited to, facsimile signature authorizations, wire transfer agreements, automated clearinghouse agreements, and payroll deposit programs). CERTIFICATION OF CORPORATE DOCUMENTS. I certify that the Articles of Incorporation and Bylaws of the Company attached hereto are in full force and effect and have not been amended, modified, replaced, or substituted in any manner. CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officer named above is duly elected, appointed, or employed by or for the Corporation as the case may be, and occupies the position set opposite his or her respective name. This Resolution now stands of record on the books of the Corporation, is in full force and effect, and has not been modified or revoked in any manner whatsoever. NO CORPORATE SEAL. The Corporation has no corporate seal, and therefore, no seal is affixed to this Resolution. CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and performed prior to the passage of this Resolution are hereby ratified and approved. This Resolution shall be continuing, shall remain in full force and effect and Lender may rely on it until written notice of its revocation shall have been delivered to and received by Lender at Lender's address shown above (or such addresses as Lender may designate from time to time). Any such notice shall not affect any of the Corporation's agreements or commitments in effect at the time notice is given. IN TESTIMONY WHEREOF. We have hereunto set our hand and attest that the signature set opposite the name listed above is his or her genuine signature. CORPORATE RESOLUTION TO BORROW/GRANT COLLATERAL (CONTINUED) PAGE 2 ================================================================================ We each have read all the provisions of this Resolution, and we each personally and on behalf of the Corporation certify that all statements and representations made in this Resolution are true and correct. This Corporate Resolution to Borrow/Grant Collateral is dated__________________. THIS RESOLUTION IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW. CERTIFIED TO AND ATTESTED BY: By: /s/ Richard Bailey -------------------------(Seal) Authorized Signer for WELBORN TRANSPORT, INC. NOTE: If the officer signing this Resolution is designated by the foregoing document as one of the officers authorized to act on the Corporation's behalf, it is advisable to have this Resolution signed by at least one non-authorized officer of the Corporation. ================================================================================ ?????All Rights Reserved CORPORATE RESOLUTION TO GRANT COLLATERAL
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL / CALL ACCOUNT OFFICER INITIALS --------- --------- -------- -------- ----------- ---------- ------- -------- $382,080.00 01-16-2003 02-01-2008 ***
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing "***" has been omitted due to text length limitations. BORROWER: WELBORN TRANSPORT, INC LENDER: COMPASS BANK P.O. BOX 020968 ALABAMA PROCESSING CENTER TUSCALOOSA, AL 36403 701 SOUTH 32ND STREET BIRMINGHAM, AL 35233 (800) 239-1996 CORPORATION: BOYD BROTHERS TRANSPORTATION CO., INC. 3275 HIGHWAY 30 CLAYTON, AL 36016-3003 =============================================================================== WE, THE UNDERSIGNED, DO HEREBY CERTIFY THAT: THE CORPORATION'S EXISTENCE. The complete and correct name of the Corporation is BOYD BROTHERS TRANSPORTATION CO., INC. ("Corporation"). The Corporation is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Alabama. The Corporation is duly authorized to transact business in all other states in which the Corporation is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which the Corporation is doing business. Specifically, the Corporation is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. The Corporation has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. The Corporation maintains an office at 3275 HIGHWAY 30, CLAYTON, AL 36016-3003. Unless the Corporation has designated otherwise in writing, the principal office is the office at which the Corporation keeps its books and records. The Corporation will notify Lender prior to any change in the location of the Corporation's state of organization or any change in the Corporation's name. The Corporation shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to the Corporation and the Corporation's business activities. RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the Corporation is a close corporation having no Board of Directors then at a meeting of the Corporation's shareholders, duly called and held on__________________, at which a quorum was present and voting, or by other duly authorized action in lieu of a meeting, the resolutions set forth in this Resolution were adopted. OFFICER. The following named person is an officer of BOYD BROTHERS TRANSPORTATION CO., INC.:
NAMES TITLES AUTHORIZED ACTUAL SIGNATURES - ----- ------ ---------- ----------------- ~~RICHARD BAILEY Y /s/ Richard Bailey~~
ACTIONS AUTHORIZED. The authorized person listed above may enter into any agreements of any nature with Lender, and those agreements will bind the Corporation. Specifically, but without limitation, the authorized person is authorized, empowered, and directed to do the following for and on behalf of the Corporation: GRANT SECURITY. To mortgage, pledge, transfer, endorse, hypothecate, or otherwise encumber and deliver to Lender any property now or hereafter belonging to the Corporation or in which the Corporation now or hereafter may have an interest, including without limitation all real property and all personal property (tangible or intangible) of the Corporation, as security for the payment of any loans, any promissory notes, or any other or further indebtedness of WELBORN TRANSPORT, INC to Lender at any time owing, however the same may be evidenced. Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the time such loans are obtained or such indebtedness is incurred, or at any other time or times and may be either in addition to or in lieu of any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated, or encumbered. The provisions of this Resolution authorizing or relating to the pledge, mortgage, transfer, endorsement, hypothecation, granting of a security interest in, or in any way encumbering, the assets of the Corporation shall include, without limitation, doing so in order to lend collateral security for the indebtedness, now or hereafter existing, and of any nature whatsoever, of WELBORN TRANSPORT, INC. to Lender. The Corporation has considered the value to itself of lending collateral in support of such indebtedness, and the Corporation represents to Lender that the Corporation is benefited by doing so. EXECUTE SECURITY DOCUMENTS. To execute and deliver to Lender the forms of mortgage, deed of trust, pledge agreement, hypothecation agreement, and other security agreements and financing statements which Lender may require and which shall evidence the terms and conditions under and pursuant to which such liens and encumbrances, or any of them, are given; and also to execute and deliver to Lender any other written instruments, any chattel paper, or any other collateral, of any kind or nature, which Lender may deem necessary or proper in connection with or pertaining to the giving of the liens and encumbrances. FURTHER ACTS. To do and perform such other acts and things and to execute and deliver such other documents and agreements as the officer may in his or her discretion deem reasonably necessary or proper in order to carry into effect the provisions of this Resolution. ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or filings required by law relating to all assumed business names used by the Corporation. Excluding the name of the Corporation, the following is a complete list of all assumed business names under which the Corporation does business: None. NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at Lender's address shown above (or such other addresses as Lender may designate from time to time) prior to any (A) change in the Corporation's name; (B) change in the Corporation's assumed business name(s); (C) change in the management of the Corporation; (D) change in the authorized signer(s); (E) change in the Corporation's principal office address; (F) change in the Corporation's state of organization; (G) conversion of the Corporation to a new or different type of business entity; or (H) change in any other aspect of the Corporation that directly or indirectly relates to any agreements between the Corporation and Lender. No change in the Corporation's name or state of organization will take effect until after Lender has received notice. OTHER ACTIONS. Open and maintain any safety deposit boxes, lockboxes and escrow, savings, checking, depository, or other accounts with Lender; deposit in and to such boxes and accounts any checks, drafts, notes, and other instruments and funds payable to or belonging to the Company; withdraw any funds or draw, sign and deliver in the name of the Company any check or draft against funds of the Company in such boxes or accounts; and procure additional depository, funds transfer and funds management services (including, but not limited to, facsimile signature authorizations, wire transfer agreements, automated clearinghouse agreements, and payroll deposit programs). CERTIFICATION OF CORPORATE DOCUMENTS. I certify that the Articles of Incorporation and Bylaws of the Company attached hereto are in full force and effect and have not been amended, modified, replaced, or substituted in any manner. CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officer named above is duly elected, appointed, or employed by or for the Corporation, as the case may be, and occupies the position set opposite his or her respective name. This Resolution now stands of record on the books of the Corporation, is in full force and effect, and has not been modified or revoked in any manner whatsoever. NO CORPORATE SEAL. The Corporation has no corporate seal, and therefore, no seal is affixed to this Resolution. CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and performed prior to the passage of this Resolution are hereby ratified and approved. This Resolution shall be continuing, shall remain in full force and effect and Lender may rely on it until written notice of its revocation shall have been delivered to and received by Lender at Lender's address shown above (or such addresses as Lender may designate from time to time). Any such notice shall not affect any of the Corporation's agreements or commitments in effect at the time notice is given. IN TESTIMONY WHEREOF. We have hereunto set our hand and attest that the signature set opposite the name listed above is his or her genuine signature. We each have read all the provisions of this Resolution, and we each personally and on behalf of the Corporation certify that all statements and representations made in this Resolution are true and correct. This Corporate Resolution to Grant Collateral is dated _____________________. THIS RESOLUTION IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW. CORPORATE RESOLUTION TO GRANT COLLATERAL (CONTINUED) PAGE 2 ================================================================================ CERTIFIED TO AND ATTESTED BY: By: /s/ Richard Baily (Seal) __________________________ Authorized Signer for BOYD BROTHERS TRANSPORTATION CO., INC. NOTE: If the officer signing this Resolution is designated by the foregoing document as one of the officers authorized to act on the Corporation's behalf, it is advisable to have this Resolution signed by at least one non-authorized officer of the Corporation. ================================================================================ CONTINUING GUARANTY (Unlimited) FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the undersigned (hereinafter called "Guarantors"), jointly and severally unconditionally guarantee and promise to pay to COMPASS BANK a bank organized under the laws of the State of Alabama (hereinafter called "Bank") or order in lawful money of the United States, any and all Indebtedness of WELBORN TRANSPORT, INC. hereinafter called "Borrowers", whether one or more) to Bank. The word "Indebtedness" is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of Borrowers or any one or more of them to Bank, heretofore, now, or hereafter existing, made, incurred or created, whether voluntary or involuntary and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, not limited to, but including principal, interest, cost of collection, attorney's fees and all other lawful charges, and whether Borrowers may be liable individually or jointly with others, or whether recovery upon such Indebtedness may be or hereafter become barred by any statute of limitations, or whether such Indebtedness may be now or hereafter become otherwise unenforceable. WITHOUT IN ANY MANNER LIMITED THE FOREGOING DEFINITION OF INDEBTEDNESS, AND WITHOUT EXCLUDING ANY KIND OR TYPE OF INDEBTEDNESS NOT SPECIFICALLY IDENTIFIED IN THIS SENTENCE, THE TERM INDEBTEDNESS INCLUDES, BUT IS NOT LIMITED TO, ADVANCES, DEBTS, OBLIGATIONS AND LIABILITIES ARISING FROM LOANS, LETTERS OF CREDIT, ACCOUNT OVERDRAFTS, HOWEVER INCURRED, ELECTRONICALLY INITIATED TRANSACTIONS, WHETHER BY WIRE TRANSFER, AUTOMATED CLEARINGHOUSE OR OTHERWISE, AND WHETHER INITIATED TELEPHONICALLY, BY FACSIMILE, BY TRANSMISSION OVER THE INTERNET, OR OTHERWISE, TRANSACTIONS FOR WHICH BANK SETTLES AN AMOUNT OR NEGOTIATES AN ITEM OR ORDER, TRANSACTIONS UNDER ANY AGREEMENT PROVIDING FOR AN INTEREST RATE SWAP, FLOOR, COLLAR, OPTION OR OTHER TRANSACTION THE PRINCIPAL PURPOSE OF WHICH IS TO TAKE INTO ACCOUNT THE FLUCTUATION OF INTEREST RATES, AND ALL FEES AND CHARGES ASSOCIATED WITH ANY ACCOUNT, LOAN OR OTHER SERVICE RECEIVED BY BORROWER FROM BANK. The liability of Guarantors shall be unlimited and shall cover all Indebtedness of Borrowers to Bank. This is a continuing guaranty relating to any Indebtedness, including Indebtedness arising under successive transactions which shall either continue Indebtedness or from time to time renew Indebtedness after such Indebtedness has been satisfied. This Guaranty shall remain in effect until Bank's written acknowledgement of Bank's receipt of written notice of revocation by one or more Guarantors as to future transactions, and even after Bank's receipt and acknowledgment of revocation, this Guaranty shall remain effective as to Indebtedness then outstanding, and as to all advances, extensions of credit, overdrafts, settlements, fundings or other transactions made to or on behalf of Borrowers subsequent thereto pursuant to any commitment, credit arrangement or agreement relating to any Indebtedness in effect at the time of Bank's acknowledgment of revocation which commitment, credit arrangement or agreement permits, provides for or obligates Bank to make the advance, make the extension of credit, settle or fund any transaction or negotiate any item or order, including any construction loan, line of credit, letter of credit, agreement to negotiate or settle items or fund or settle electronic transactions or any other document governing Borrowers' transactions. A notice of revocation shall be effective only with respect to those of the Guarantors (if more than one) as shall have given notice of revocation as specified herein. Notwithstanding anything to the contrary contained or implied herein or in any other document, this Guaranty may not be revoked or terminated, other than with the prior written consent of the Bank, except upon strict compliance with the conditions and requirements set forth in this Section (2), and this Guaranty will not be revoked or terminated by any action, event or circumstance, including payment in full of all of the Indebtedness. In the event any sums or other things of value that are paid or transferred to or otherwise received by the Bank are rescinded, recovered, required to be returned, set aside, rendered void or otherwise adversely affected in any legal proceeding or for any cause whatsoever, including under any law, rule or regulation relative to bankruptcy, insolvency, fraudulent transfers, preferences or other relief of debtors, then this Guaranty shall continue to be effective or shall be revived and reinstated, as necessary in order to give full effect to the Guarantors' liability hereunder, to the same extent as if such payment, transfer and/or receipt had never occurred. This Guaranty shall not release, modify, revoke or terminate any other guaranty heretofore or hereafter executed by any of the Guarantors; nor shall any other guaranty heretofore or hereafter executed by any Guarantor release, modify, revoke or terminate this Guaranty unless the other guaranty specifically refers to this Guaranty and the release, modification, revocation or termination (as applicable) is accepted by Bank in writing. The obligations of the Guarantors hereunder are joint and several, and independent of the obligations of Borrowers, and a separate action or actions may be brought and prosecuted against any one or more of the Guarantors whether action is brought against Borrowers or any other Guarantor or whether any of the Borrowers or other Guarantors are joined in any such action or actions. It is the intent hereof that this obligation of Guarantors shall be and remain unaffected (a) by the existence or non-existence, validity or invalidity, of any pledge, assignment or conveyance given as security; or (b) by any understanding or agreement that any other person, firm or corporation was or is to execute this or any other guaranty, any notes, instruments, contracts or agreements evidencing, creating or setting forth the terms of the Indebtedness, or any part thereof, or any other document or instrument that was or is to provide collateral for any Indebtedness; or (c) by resort on the part of Bank, or failure of Bank to resort, to any other security or remedy for the collection of the Indebtedness; or (d) by the death, bankruptcy, insolvency, dissolution or incapacitation of any of the Guarantors, any of the Borrowers or any other person, and in case of any death or bankruptcy, the failure of Bank to file a claim against the deceased Guarantor's estate or against the bankrupt's estate, or the failure of Bank otherwise to seek remedies as a consequence of those events. Each of the Guarantors authorizes Bank, without notice or demand and without affecting any Guarantor's liability hereunder, from time to time to (a) renew, compromise, extend, accelerate, restate, consolidate, replace, refinance or otherwise change the time for payment of, or otherwise change the terms of, the Indebtedness or any part thereof, including increasing or decreasing the rate of interest or extending the maturity thereof; (b) take and Page 1 hold security for the payment of this Guaranty or any of the Indebtedness and/or exchange, modify, enforce, waive and release any such security; (c) apply such security and direct the order or manner of sale thereof as Bank in its discretion may determine; and/or (d) release or substitute any one or more of the borrowers or other obligors, endorsers or guarantors of all or any part of the Indebtedness (including, without limitation, any one or more of the Guarantors). Each of the Guarantors waives any right to require Bank (a) to proceed against any one or more of the Borrowers or Guarantors; (b) to protect, preserve, proceed against or exhaust any security held from Borrowers; or (c) to pursue any other remedy in Bank's power whatsoever. Each of the Guarantors waives any defense arising by reason of any disability or other defense of any one or more of the Borrowers or Guarantors (including any defense based on or arising out of the unenforceability of any part of the Indebtedness for any cause whatsoever) or by reason of the cessation from any cause whatsoever of the liability of any one or more of the Borrowers or Guarantors. Until all Indebtedness shall have been paid in full, Guarantors shall not have any rights of subrogation, reimbursement, contribution or indemnity or any right of recourse to any assets or properties of any of the Borrowers or any of the other Guarantors, and each of the Guarantors waives (i) all rights, if any, of subrogation, reimbursement, contribution, indemnity and recourse, (ii) any right to enforce any remedy which Bank now has or may hereafter have against any one or more of the Borrowers or any other Guarantor and (iii) any benefit of, and any right of recourse to or to participate in, any security now or hereafter held by Bank or otherwise constituting collateral for any Indebtedness. Each of the Guarantors waives all presentments, demands for performance, notices of nonperformance, notice of acceleration, notice of intent to accelerate, protests, notices of protest, notices of dishonor, and notices of acceptance of this Guaranty and of the existence, creation, or incurrence of new or additional Indebtedness, and waives any rights or defenses based, in whole or in part, upon an offset by any one or more of the Borrowers or Guarantors against any obligation or Indebtedness now or hereafter owed to any of the Borrowers or any of the Guarantors (including to any Guarantor by any Borrower). Each of the Guarantors waives the benefit of any statute of limitations or other defenses affecting the Borrower's liability for the Indebtedness or the enforcement thereof or such Guarantor's liability hereunder or the enforcement thereof, and each of the Guarantors further agrees that any payment by any of the Borrowers or other circumstances that operate to toll any statute of limitations as to any one or more Borrowers shall operate to toll the statute of limitations as to each of the Guarantors. Each of the Guarantors waives any rights to exemption under the Constitution of the State of Alabama or any other state as to any indebtedness or obligation created hereunder. In addition to all liens upon, and rights of setoff against, money, securities or other property of any one or more of the Guarantors given to Bank by law, Bank shall have and hereby is granted a lien upon, security interest in and a right of setoff against all money, securities and other property of each of the Guarantors now or hereafter in the possession of or on deposit with Bank, whether held in a general or special account or deposit, or for safekeeping or otherwise; and every such lien, security interest and right of setoff may be exercised without demand upon or notice to any of the Guarantors. With respect to any deposit accounts maintained by any of the Guarantors at Bank, the Guarantors agree and acknowledge that (i) Bank has and maintains "control" of those deposit accounts within the meaning of Section 9-104(a)(i) of the Uniform Commercial Code, and (ii) by virtue of the foregoing, Bank's security interest in the deposit accounts is a perfected, first priority security interest. No lien, security interest or right of setoff shall be deemed to have been waived by any act or conduct on the part of Bank, or by any failure to exercise such right of setoff or to enforce such lien or security interest or by any delay in so doing, and every right of setoff and lien shall continue in full force and effect until such right of setoff or lien specifically is waived or released in a written instrument executed by Bank. Any indebtedness of any Borrower to any Guarantor, whether now existing, hereafter arising, secured or unsecured, and if secured, the security for same, hereby is subordinated to the Indebtedness; and the subordinated indebtedness, if Bank so requests, shall be collected, enforced and received by the Guarantor as trustee for Bank and shall be paid over to Bank on account of the Indebtedness without reducing or affecting in any manner the liability of any Guarantor under this Guaranty. Where any one or more of Borrowers or Guarantors are corporations, partnerships, limited partnerships, limited liability partnerships, joint ventures, trusts, limited liability companies, business organizations or enterprises, it shall not be necessary for Bank to inquire into the power or authority of Borrowers or Guarantors or the officers, directors, partners, trustees or agents acting or purporting to act on their behalf. Guarantors shall pay attorney's fees and all other costs and expenses which are incurred by Bank in connection with the enforcement of this Guaranty. No right or power of Bank hereunder shall be deemed to have been waived by any act or conduct or failure or delay to act on the part of Bank or any of its agents, employees or representatives; and the terms and provisions hereof may not be waived, altered, modified, or amended except in writing duly signed by a duly authorized officer of the Bank. In the event that Bank shall waive in writing any provision or requirement hereunder, such waiver shall be effective only for the specific purposes, circumstances and duration stated in the waiver. Bank may without notice assign this Guaranty in whole or in part and each reference herein to Bank shall be deemed to include its successors and assigns. The provisions of the Guaranty are binding upon each of the Guarantors and the heirs, distributees, executors, administrators, legal representatives, personal representatives, successors and assigns thereof and shall inure to the benefit of the Bank and each of its successors and assigns. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE GUARANTORS AND THE BANK HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ALABAMA. Each of the Guarantors acknowledges that any cause of action arising under this Guaranty will be a cause of action arising from an Alabama transaction and that the Indebtedness is owing to a banking organization organized under Alabama law or that has its principal place of business in Alabama, that it is foreseeable that this Guaranty and the performance hereof have and will have significant effects in the State of Alabama, and that Guarantors' execution of this Guaranty will subject Guarantors to judicial jurisdiction in the State of Alabama. If any of the provisions of this Page 2 Guaranty or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of the provisions of this Guaranty, or the application of any provision or provisions to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected thereby, and every provision of this Guaranty shall be valid and enforceable to the fullest extent permitted by law. EXCEPT AS EXPRESSLY SET FORTH IN THIS GUARANTY, THIS GUARANTY IS THE ENTIRE AGREEMENT OF THE GUARANTORS AND THE BANK WITH RESPECT TO THE GUARANTEE OF THE INDEBTEDNESS BY THE GUARANTORS AND NO REPRESENTATION, UNDERSTANDING, PROMISE OR CONDITION CONCERNING THE SUBJECT MATTER HEREOF SHALL BE BINDING UPON THE BANK UNLESS EXPRESSED HEREIN, AND NOTHING IN THIS GUARANTY SHALL BE EFFECTED BY EVIDENCE OF ANY PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN GUARANTORS AND BANK. There are no oral agreements between Guarantors and Bank. Any notice by a Guarantor to the Bank shall be effective only upon the actual receipt thereof by an officer of Bank at the address specified below, and in the event no such address is specified, at Bank's principal corporate office in Birmingham, Alabama, Attention: General Counsel. This Guaranty is given under the seal of all parties hereto, and it is intended that this Guaranty is and shall constitute and have the effect of a sealed instrument according to law. IN WITNESS WHEREOF, the undersigned Guarantors have executed this Guaranty effective the 16TH day of JANUARY, 2003. GUARANTORS: /S/ Richard Bailey -------------------------------------- BOYD BROTHERS TRANSPORTATION CO., INC. BY: RICHARD BAILEY - CFO STATE OF ALABAMA ) COUNTY OF HOUSTON ) I, Ann S. Barfield, a Notary Public in and for said County in said State, hereby certify that Richard Bailey, whose name is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he executed the same voluntarily on the day the same bears date. Given under my hand this 16 day of January, 2003. Notary Public Ann S. Barfield [NOTORIAL SEAL] My commission expires: May 26, 2004 Page 3 EX-99.1 4 g82840exv99w1.txt EX-99.1 SARBANES CEO CERTIFICATION EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Boyd Bros. Transportation Inc. (the "Company") on Form 10-Q for the period ended March 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gail B. Cooper, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. By: /s/ GAIL B. COOPER ------------------------------------------ Gail B. Cooper Chief Executive Officer May 14, 2003 A signed original of this written statement required by Section 906 has been provided to Boyd Bros. Transportation Inc. and will be retained by Boyd Bros. Transportation Inc. and furnished to the Securities and Exchange Commission or its staff upon request. 23 EX-99.2 5 g82840exv99w2.txt EX-99.2 SARBANES CFO CERTIFICATION EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Boyd Bros. Transportation Inc. (the "Company") on Form 10-Q for the period ended March 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard C. Bailey, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (3) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d); and (4) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. By: /s/ RICHARD C. BAILEY ------------------------------------------- Richard C. Bailey Chief Financial Officer May 14, 2003 A signed original of this written statement required by Section 906 has been provided to Boyd Bros. Transportation Inc. and will be retained by Boyd Bros. Transportation Inc. and furnished to the Securities and Exchange Commission or its staff upon request. 24 -----END PRIVACY-ENHANCED MESSAGE-----


(Mark One)
x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended March 31, 2003

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934


Delaware		63-6006515
(State or other jurisdiction of		(IRS Employer Identification
incorporation or organization)		Number)


Common Stock, $.001 Par Value		2,710,667

(Class)	(Number of Shares)


		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
		CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
		NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
	Legal Proceedings
	Changes in Securities and Use of Proceeds
	Defaults Upon Senior Securities
	Submission of Matters to a Vote of Security Holders
	Other Information
	Exhibits and Reports on Form 8-K
SIGNATURES
EX-10.1 COMMERCIAL LOAN AND SECURITY AGREEMENT
EX-99.1 SARBANES CEO CERTIFICATION
EX-99.2 SARBANES CFO CERTIFICATION


			March 31,		DECEMBER 31,
			2003		2002
			(UNAUDITED)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	196,187	$	292,514
	Short-term investments			—		288,000
	Accounts receivable:
		Trade and interline		11,463,054		9,083,921
		Other		586,345		542,963
	Current portion of net investment in sales-type leases			1,470,509		1,427,617
	Parts and supplies inventory			652,453		521,201
	Prepaid licenses and permits			223,455		547,460
	Other prepaid expenses			996,287		965,995
	Deferred income taxes			2,378,688		2,378,688

		Total current assets		17,966,978		16,048,359

PROPERTY AND EQUIPMENT:
	Land and land improvements			2,948,297		2,948,297
	Buildings			7,808,115		7,804,015
	Revenue equipment			64,740,931		64,644,891
	Other equipment			12,655,883		12,466,476
	Leasehold improvements			386,384		386,384

		Total		88,539,610		88,250,063
	Less accumulated depreciation and amortization			35,411,673		33,525,571

		Property and equipment, net		53,127,937		54,724,492

OTHER ASSETS:
	Net investment in sales-type leases			6,019,360		6,706,848
	Goodwill			3,452,446		3,452,446
	Revenue equipment held for lease			135,154		310,405
	Deposits and other assets			339,531		339,531

		Total other assets		9,946,491		10,809,230

TOTAL			$	81,041,406	$	81,582,081

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		Three Months Ended March 31,
		2003			2002

OPERATING REVENUES		$	32,577,476		$	30,620,318

OPERATING EXPENSES:
	Salaries, wages and employee benefits		9,288,776			9,349,145
	Cost of independent contractors		10,545,354			8,978,965
	Operating supplies		6,931,122			5,964,561
	Operating taxes and licenses		601,614			684,968
	Insurance and claims		1,282,399			2,158,508
	Communications and utilities		331,847			325,895
	Depreciation and amortization		2,694,053			2,911,948
	Gain on disposal of property and equipment, net		—			(35,496	)
	Other		564,322			336,477

	Total operating expenses		32,239,487			30,674,971

OPERATING INCOME (LOSS)			337,989			(54,653	)

OTHER INCOME (EXPENSES):
	Interest income		4,798			5,711
	Interest expense		(308,420	)		(401,528	)
	Other expenses		(27,517	)		—

	Other expenses, net		(331,139	)		(395,817	)

INCOME (LOSS) BEFORE PROVISION FOR (BENEFIT OF) INCOME TAXES			6,850			(450,470	)
PROVISION FOR (BENEFIT OF) INCOME TAXES			2,665			(162,373	)

NET INCOME (LOSS)		$	4,185		$	(288,097	)

BASIC EARNINGS PER SHARE		$	0.00		$	(0.11	)

DILUTED EARNINGS PER SHARE		$	0.00		$	(0.11	)

BASIC WEIGHTED AVERAGE SHARES OUTSTANDING			2,710,665			2,709,838

DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING			2,842,739			2,709,838


For the Quarters Ended March 31,		2003			2002

Net income (loss), as reported		$	4,185		$	(288,097	)
Stock-based employee compensation expense determined under fair value basis, net of tax			(55,347	)		(97,223	)

Pro forma net income (loss)		$	(51,162	)	$	(385,320	)

Earnings per share:
	Basic — as reported	$	0.00		$	(0.11	)
	Basic – pro forma	$	(0.02	)	$	(0.14	)
	Diluted — as reported	$	0.00		$	(0.11	)
	Diluted – pro forma	$	(0.02	)	$	(0.14	)


	Boyd			Logistics			WTI			Eliminations	Total
Operating revenues	$	24,311,657		$	2,738,900		$	5,526,919			$	32,577,476
Operating expenses		24,009,483			2,593,347			5,636,657				32,239,487
Operating income		302,174			145,553			(109,738	)			337,989
Operating ratio		98.8	%		94.7	%		102.0	%			99.0	%


		Company						Boyd						Logistics						WTI

		Quarter Ended March 31,

		2003			2002			2003			2002			2003			2002			2003			2002

Operating revenues			100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Operating expenses
	Salaries, wages, and employee benefits		28.5			30.6			34.4			35.3			7.4			8.4			13.0			14.1
	Cost of independent contractors		32.4			29.3			20.2			19.6			81.2			84.2			61.5			59.9
	Fuel		14.1			10.9			17.7			13.0			0.0			0.0			5.2			4.1
Operating supplies			7.2			8.5			8.3			9.5			2.6			2.2			4.4			5.2
	Operating taxes and licenses		1.8			2.2			2.1			2.5			0.0			0.0			1.6			1.7
	Insurance and claims		3.9			7.1			3.7			8.1			0.0			0.0			6.8			4.0
	Communications and utilities		1.0			1.1			1.1			1.1			1.2			0.7			0.8			0.8
	Depreciation and amortization		8.4			9.5			10.1			11.1			0.3			0.0			4.1			4.6
	Gain on disposition of property and equipment, net		(0.0	)		(0.1	)		(0.0	)		(0.1	)		(0.0	)		(0.0	)		0.0			(0.1	)
	Other		1.7			1.1			1.1			0.9			2.0			0.1			4.6			2.4

Total operating expenses			99.0			100.2			98.7			101.0			94.7			95.6			102.0			96.7

Operating income			1.0			(0.2	)		1.3			(1.0	)		5.3			4.4			(2.0	)		3.3
Interest expense, net			(1.0	)		(1.3	)		(1.5	)		(1.5	)		(0.0	)		0.0			0.5			(0.7	)

Income before income taxes			0.0			(1.5	)		(0.2	)		(2.5	)		5.3			4.4			(1.5	)		2.6
	Income taxes		0.0			(0.5	)		(0.1	)		(0.9	)		0.0			0.0			(0.5	)		1.3

Net income			0.0	%		(1.0	)%		(0.3	)%		(1.6	)%		5.3	%		4.4	%		(1.0	)%		1.3	%


Item 1.		Legal Proceedings

		Reference is made to the legal proceedings previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002, under the heading “Item 3 — Legal Proceedings.” The description of legal proceedings in the Company’s Form 10-K remains unchanged.

Item 2.		Changes in Securities and Use of Proceeds

		Not applicable.

Item 3.		Defaults Upon Senior Securities

		None.

Item 4.		Submission of Matters to a Vote of Security Holders

		No matters were submitted to a vote of our security holders during the three months ended March 31, 2003.

Item 5.		Other Information

		None.

Item 6.		Exhibits and Reports on Form 8-K

(a) Exhibits

		10.1 Commercial Loan and Security Agreement dated January 16, 2003 by and between the Company and Compass Bank.
		99.1 Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
		99.2 Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

		On May 6, 2003, the Company furnished a copy of a press release announcing unaudited first quarter 2003 earnings on a Form 8-K dated May 6, 2003.


				Boyd Bros. Transportation Inc. (Registrant)

Date: May 14, 2003				/s/ Richard C. Bailey

				Richard C. Bailey, Chief Financial Officer (Principal Accounting Officer)


Date: May 14, 2003		/s/ Gail B. Cooper Gail B. Cooper President and Chief Executive Officer


Date: May 14, 2003		/s/ Richard C. Bailey Richard C. Bailey Chief Financial Officer


	Company						Boyd						WTI

	As of March 31,

	2003			2002			2003			2002			2003			2002

Company operated tractors		575			568			540			533			35			35
Owner-operated tractors		337			386			160			202			177			184

Total tractors		912			954			700			735			212			219

Company operated tractor %		63	%		60	%		77	%		73	%		17	%		16	%
Owner-operated tractor %		37	%		40	%		23	%		27	%		83	%		84	%

Total %		100	%		100	%		100	%		100	%		100	%		100	%