================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the quarterly period ended September 30, 2002 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________ to ________
Commission file number: 0-27754
HUB GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-4007085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
377 EAST BUTTERFIELD ROAD, SUITE 700
LOMBARD, ILLINOIS 60148
(Address, including zip code, of principal executive offices)
(630) 271-3600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
On November 5, 2002, the registrant had 7,046,250 outstanding shares of
Class A common stock, par value $.01 per share, and 662,296 outstanding shares
of Class B common stock, par value $.01 per share.
================================================================================
HUB GROUP, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION:
HUB GROUP, INC. - REGISTRANT
Unaudited Condensed Consolidated Balance Sheets - September 30, 2002 and
December 31, 2001 3
Unaudited Condensed Consolidated Statements of Operations - Three Months
and Nine Months Ended September 30, 2002 and 2001 4
Unaudited Condensed Consolidated Statement of Stockholders' Equity - Nine
Months Ended September 30, 2002 5
Unaudited Condensed Consolidated Statements of Cash Flows - Nine
Months Ended September 30, 2002 and 2001 6
Notes to Unaudited Condensed Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
PART II. OTHER INFORMATION 17
2
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
SEPTEMBER 30, DECEMBER 31,
--------------- ---------------
2002 2001
--------------- ---------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ -
Accounts receivable, net 153,070 149,765
Deferred taxes 12,081 11,147
Prepaid expenses and other current assets 4,629 3,840
---------------- --------------
TOTAL CURRENT ASSETS 169,780 164,752
PROPERTY AND EQUIPMENT, net 35,826 39,098
GOODWILL, net 215,190 208,166
OTHER ASSETS 1,448 1,507
MINORITY INTEREST - 2,501
---------------- --------------
TOTAL ASSETS $ 422,244 $ 416,024
================ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable
Trade $ 136,772 $ 135,588
Other 3,632 1,275
Accrued expenses
Payroll 11,478 11,195
Other 9,632 14,020
Current portion of long-term debt 8,046 8,054
---------------- --------------
TOTAL CURRENT LIABILITIES 169,560 170,132
LONG-TERM DEBT, EXCLUDING CURRENT PORTION 101,027 96,059
DEFERRED TAXES 18,723 17,380
CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 2,000,000 shares authorized; no shares
issued or outstanding in 2002 and 2001 - -
Common stock,
Class A: $.01 par value; 12,337,700 shares authorized; 7,046,250
shares issued and outstanding in 2002 and 2001 70 70
Class B: $.01 par value; 662,300 shares authorized; 662,296 shares
issued and outstanding in 2002 and 2001 7 7
Additional paid-in capital
Purchase price in excess of predecessor basis, net of tax benefit 110,819 110,819
of $10,306 (15,458) (15,458)
Retained earnings 37,496 37,404
Accumulated other comprehensive loss - (389)
---------------- --------------
TOTAL STOCKHOLDERS' EQUITY 132,934 132,453
---------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 422,244 $ 416,024
================ ==============
See notes to unaudited condensed consolidated financial statements.
3
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
--------------------------- --------------------------
2002 2001 2002 2001
------------ -------------- ----------- --------------
(NOT REVIEWED) (NOT REVIEWED)
Revenue $ 356,666 $ 323,046 $ 989,560 $ 987,004
Transportation costs 314,385 278,475 869,674 851,066
------------ -------------- ----------- --------------
Gross margin 42,281 44,571 119,886 135,938
Costs and expenses:
Salaries and benefits 23,294 23,461 70,239 71,663
Selling, general and administrative 11,822 16,989 34,945 41,541
Depreciation and amortization of property and equipment 2,652 2,147 7,859 8,117
Amortization of goodwill - 1,435 - 4,305
Impairment of property and equipment - - - 3,401
------------ -------------- ----------- --------------
Total costs and expenses 37,768 44,032 113,043 129,027
Operating income 4,513 539 6,843 6,911
------------ -------------- ----------- --------------
Other income (expense):
Interest expense (2,539) (2,426) (7,307) (7,793)
Interest income 45 189 166 522
Other, net 153 93 275 (185)
------------ -------------- ----------- --------------
Total other expense (2,341) (2,144) (6,866) (7,456)
Income (loss) before minority interest and provision for income taxes 2,172 (1,605) (23) (545)
------------ -------------- ----------- --------------
Minority interest - 280 (524) 680
------------ -------------- ----------- --------------
Income (loss) before provision for (benefit from) income taxes 2,172 (1,885) 501 (1,225)
Provision for (benefit from) income taxes 793 (773) 409 (502)
------------ -------------- ----------- --------------
Net income (loss) $ 1,379 $ (1,112) $ 92 $ (723)
============ ============== =========== ==============
Basic earnings (loss) per common share $ 0.18 $ (0.14) $ 0.01 $ (0.09)
============ ============== =========== ==============
Diluted earnings (loss) per common share $ 0.18 $ (0.14) $ 0.01 $ (0.09)
============ ============== =========== ==============
See notes to unaudited condensed consolidated financial statements.
4
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the nine months ended September 30, 2002
(in thousands, except shares)
SEPTEMBER 30,
2002
-----------------
Class A & B Common Shares
Beginning of year 7,708,546
-----------------
Ending balance 7,708,546
-----------------
Class A & B Common Stock Amount
Beginning of year $ 77
-----------------
Ending balance 77
-----------------
Additional Paid-in Capital
Beginning of year 110,819
-----------------
Ending balance 110,819
-----------------
Purchase Price in Excess of Predecessor Basis, Net of Tax
Beginning of year (15,458)
-----------------
Ending balance (15,458)
-----------------
Retained Earnings
Beginning of year 37,404
Net income 92
-----------------
Ending balance 37,496
-----------------
Accumulated Other Comprehensive (Loss) Income
Beginning of year (389)
Other comprehensive income 389
-----------------
Ending balance -
-----------------
TOTAL STOCKHOLDERS' EQUITY $ 132,934
=================
Comprehensive Income
Net income $ 92
Unrealized interest rate swap income net of tax expense of $153 389
-----------------
Total comprehensive income $ 481
=================
See notes to unaudited condensed consolidated financial statements.
5
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------
2002 2001
---------------- ---------------
(NOT REVIEWED)
Cash flows from operating activities:
Net income (loss) $ 92 $ (723)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization of property and equipment 7,952 8,612
Amortization of goodwill - 4,305
Impairment of property and equipment - 3,401
Deferred taxes 409 (502)
Minority interest (524) 680
(Gain) loss on sale of assets (39) 410
Other assets 59 440
Changes in working capital:
Accounts receivable, net (3,305) 450
Prepaid expenses and other current assets (789) (942)
Accounts payable 3,541 (11,762)
Accrued expenses (3,716) 2,397
---------------- ---------------
Net cash provided by operating activities 3,680 6,766
---------------- ---------------
Cash flows from investing activities:
Purchase of minority interest (4,000) -
Purchases of property and equipment, net (4,640) (8,469)
---------------- ---------------
Net cash used in investing activities (8,640) (8,469)
---------------- ---------------
Cash flows from financing activity:
Net borrowings on long-term debt 4,960 1,703
---------------- ---------------
Net cash provided by financing activity 4,960 1,703
---------------- ---------------
Net increase (decrease) in cash and cash equivalents - -
Cash and cash equivalents, beginning of period - -
---------------- ---------------
Cash and cash equivalents, end of period $ - $ -
================ ===============
Supplemental disclosures of cash flow information Cash paid for:
Interest $ 6,333 $ 7,488
Income taxes - 60
Non-cash activity:
Unrealized income (loss) on derivative instrument $ 389 $ (440)
See notes to unaudited condensed consolidated financial statements.
6
HUB GROUP, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements
of Hub Group, Inc. (the "Company") have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in annual financial statements have been
condensed or omitted pursuant to those rules and regulations. However, the
Company believes that the disclosures contained herein are adequate to make the
information presented not misleading.
As previously reported in the Company's Form 10-K for the year ended
December 31, 2001, the Company's independent auditors were unable to review the
quarterly financial data from 2001 in accordance with standards established by
the American Institute of Certified Public Accountants because the Company did
not restate its results on a quarterly basis.
The financial statements reflect, in the opinion of management, all
material adjustments (which include only normal recurring adjustments) necessary
to present fairly the Company's financial position and results of operations for
the three months and nine months ended September 30, 2002. In the fourth quarter
of 2001, the Company recorded adjustments which resulted in a decline of $0.7
million in net income to properly report the annual results for the year as a
result of accounting irregularities at the Company's 65% owned subsidiary, Hub
Group Distribution Services (HGDS). The Company was unable to determine in which
quarters in 2001 the adjustments should have been made and the amount to be
recorded in each quarter. Consequently, the results for the three and nine
months ended September 30, 2002 are not comparable to the results for the three
months and nine months ended September 30, 2001.
These condensed consolidated financial statements and notes thereto
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2001. Results of operations in interim periods are not
necessarily indicative of results to be expected for a full year.
NOTE 2. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant estimates include the
allowance for doubtful accounts, costs of purchased transportation and services
and reserves for pricing and billing adjustments. Actual results could differ
from those estimates. During the three months ended March 31, 2002, the Company
revised its estimate of accrued transportation costs resulting in an increase in
pretax income of approximately $2.8 million.
NOTE 3. PURCHASE OF MINORITY INTEREST
HGDS was a 65% owned partnership until August of 2002 when Hub
purchased the minority partners' interest in HGDS. Pursuant to the HGDS
Partnership Agreement, each of the partners had a legal obligation to the
partnership for any deficit balance in their respective capital accounts.
Accordingly, there was a debit balance reflected in minority interest in the
accompanying condensed consolidated balance sheets related to the minority
partner's deficit capital account balance of approximately $2.5 million at
December 31, 2001. Management believed that the balance in the minority account
was collectable at December 31, 2001. Hub had a legal right to pursue the
minority partner for the deficit balance in the capital account. In August of
2002, the Company entered into a settlement agreement and release with the
minority partner that resulted in the relinquishment of the minority partner's
35% interest in HGDS and release of the minority partner's claims against the
7
Company in exchange for $4.0 million in cash and release of Hub's claims against
the minority partner including the $3.0 million balance in minority interest.
The acquisition resulted in goodwill of approximately $7.0 million which was
recorded in the three months ended September 30, 2002.
NOTE 4. EARNINGS (LOSS) PER SHARE
The following is a reconciliation of the Company's Earnings (Loss) per
Share (in thousands except per share amounts):
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2002 SEPTEMBER 30, 2001
----------------------------- -----------------------------
Per-Share Per-Share
INCOME SHARES AMOUNT LOSS SHARES AMOUNT
-------- -------- ----------- -------- --------- ----------
BASIC EARNINGS (LOSS) PER SHARE
Income (loss) available to
common stockholders $1,379 7,709 $0.18 $(1,112) 7,709 $(0.14)
------ ----- ----- -------- ----- ---------
EFFECT OF DILUTIVE SECURITIES
Stock options - - - - - -
------ ----- ----- -------- ----- ---------
DILUTED EARNINGS (LOSS) PER SHARE
Income (loss) available to
common stockholders
plus assumed exercises $1,379 7,709 $0.18 $(1,112) 7,709 $(0.14)
------ ----- ----- -------- ----- ---------
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2002 SEPTEMBER 30, 2001
----------------------------- ----------------------------
Per-Share Per-Share
INCOME SHARES AMOUNT LOSS SHARES AMOUNT
-------- -------- ----------- -------- -------- ----------
BASIC EARNINGS (LOSS) PER SHARE
Income (loss) available to
common stockholders $ 92 7,709 $0.01 $ (723) 7,709 $(0.09)
-------- ----- ----- ------- ----- -------
EFFECT OF DILUTIVE SECURITIES
Stock options - 5 - - - -
-------- ----- ----- ------- ----- -------
DILUTED EARNINGS (LOSS) PER SHARE
Income (loss) available to
common stockholders
plus assumed exercises $ 92 7,714 $0.01 $ (723) 7,709 $(0.09)
-------- ----- ----- ------- ----- -------
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
SEPTEMBER 30, DECEMBER 31,
------------------- ------------------
2002 2001
------------------- ------------------
Building and improvements $ 57 $ 57
Leasehold improvements 1,306 2,126
Computer equipment and software 53,234 49,373
Furniture and equipment 7,692 7,542
Transportation equipment and automobiles 2,135 3,690
-------------------- ------------------
64,424 62,788
Less: Accumulated depreciation and amortization (28,598) (23,690)
-------------------- ------------------
PROPERTY AND EQUIPMENT, net $ 35,826 $ 39,098
==================== ==================
8
NOTE 6. DEBT
The Company's outstanding debt is as follows (in thousands):
SEPTEMBER 30, DECEMBER 31,
---------------- ----------------
2002 2001
---------------- ----------------
Bank line of credit $ 30,000 $ 19,000
Term notes, with quarterly payments of $2,000,000 with a balloon payment
payment of $19,000,000 due March 31, 2004; interest is due quarterly at a
floating rate based upon LIBOR (London Interbank Offered Rate) or Prime rate.
At September 30, 2002 and December 31, 2001, the
weighted average interest rate was 4.80% and 4.66%, respectively 29,000 35,000
Notes, mature on June 25, 2009 with annual payments of $10,000,000 commencing on
June 25, 2005; interest is paid quarterly at a fixed rate
of 9.14% during 2002 and 2001 50,000 50,000
Capital lease obligations, collateralized by certain equipment
73 113
---------------- ----------------
Total long-term debt 109,073 104,113
Less current portion (8,046) (8,054)
---------------- ----------------
$ 101,027 $ 96,059
---------------- ----------------
Fair value approximates book value at the balance sheet dates.
On October 15, 2002, amendments to the Company's credit and note
agreements were executed to modify the fixed charge coverage ratio, minimum
earnings before interest, taxes, depreciation, amortization and minority
interest and the cash flow leverage ratio for all periods subsequent to December
31, 2002. In addition, the capital expenditure limitation was reduced from $15.0
million to $9.0 million for the year ended December 31, 2003. Further, effective
October 15, 2002, the loans are secured by substantially all assets of the
Company. The Company was in compliance with its debt covenants, as amended, as
of September 30, 2002.
NOTE 7. RENT EXPENSE AND USER CHARGES
Rent expense included in selling, general and administrative expense is
$3.8, $3.8, $11.4 and $11.2 million for the three months ended September 30,
2002 and 2001 and the nine months ended September 30, 2002 and 2001,
respectively. Hub also incurs user charges for its use of a fleet of dedicated
containers which are included in transportation costs. Such charges included in
transportation costs are $6.9, $7.3, $20.8 and $23.1 million for the three
months ended September 30, 2002 and 2001 and the nine months ended September 30,
2002 and 2001, respectively.
NOTE 8. RECENT ACCOUNTING PRONOUNCEMENT
On June 30, 2001, the Financial Accounting Standards Board issued
Statement 142. Under Statement 142, goodwill and intangible assets that have
indefinite useful lives will not be amortized but rather will be tested at least
annually for impairment. Intangible assets that have finite useful lives will
continue to be amortized over their useful lives. The Company adopted Statement
142 as of January 1, 2002.
In connection with SFAS 142, the Company completed the first step of
transitional goodwill impairment testing. This transitional testing used
discounted cash flow and market capitalization methodologies to determine a fair
market value for the reporting unit. The results of the transitional testing
indicated no impairment.
The transitional impairment testing is based upon the Company's
estimates of the value of the reporting unit, future operating performance and
discount rates. Should the estimates differ materially from actual results, the
Company may be required to record impairment charges in future periods. The
9
Company will continue to test the value of its goodwill for any impairment at
least annually and impairment, if any, will be recorded as expense in the period
of impairment.
The following table presents net income (loss) for 2002 in comparison
to 2001 exclusive of amortization expense recognized in the previous year
related to goodwill which will no longer be amortized. Amounts are in thousands
except per share information:
THREE MONTHS ENDED SEPTEMBER 30,
------------------------------------
2002 2001
----------------- ----------------
Net income (loss) as reported $ 1,379 $ (1,112)
Add back amortization of goodwill, net of tax - 846
----------------- ----------------
Adjusted net income (loss) 1,379 (266)
================= ================
Basic and diluted earnings (loss) per share, as reported 0.18 (0.14)
Add back amortization of goodwill, net of tax - 0.10
----------------- ----------------
Adjusted basic and diluted earnings (loss) per share $ 0.18 $ (0.04)
================= ================
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------
2002 2001
----------------- ----------------
Net income (loss) as reported $ 92 $ (723)
Add back amortization of goodwill, net of tax - 2,540
----------------- ----------------
Adjusted net income 92 1,817
================= ================
Basic and diluted earnings (loss) per share, as reported 0.01 (0.09)
Add back amortization of goodwill, net of tax - 0.33
----------------- ----------------
Adjusted basic and diluted earnings per share $ 0.01 $ 0.24
================= ================
NOTE 9. CONTINGENCIES
On February 19, 2002, a purported class action lawsuit was filed by
Riggs Partners, LLC in the United States District Court for the Northern
District of Illinois, Eastern Division. The complaint names as defendants the
Company, the Company's officers and former officers that signed the Company's
periodic reports filed with the Securities and Exchange Commission and the
Company's former auditors. The complaint alleges that the defendants violated
Section 10 (b) and Rule 10b-5 there under and section 20 (a) of the Securities
Exchange Act of 1934 by filing or causing to be filed with the Securities and
Exchange Commission periodic reports that contained inaccurate financial
statements. The complaint seeks unspecified compensatory damages, reimbursement
of reasonable costs and expenses, including counsel fees and expert fees, and
such other relief as the court deems proper. On June 7, 2002, the plaintiffs
filed a consolidated amended complaint. On July 18, 2002, the Company and is
officers and former officers filed a motion to dismiss the amended complaint in
its entirety. The Company's former auditors also filed a motion to dismiss the
amended complaint. On October 23, 2002, the federal district court granted the
Company's motion to dismiss the complaint in its entirety for failing to allege
facts sufficient to state a claim. The court also granted the motion of the
Company's former auditors. The Court's order requires plaintiffs to file any
amended complaint by November 22, 2002. If no further claims are filed, the
lawsuit will terminate. If any further claims are filed, the Company will
continue to vigorously defend itself and its officers. An adverse judgment based
on comparable claims, if filed, could have a material adverse effect on the
Company's financial position and results of operations.
10
HUB GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ACCOUNTING ADJUSTMENT
In the fourth quarter of 2001, the Company recorded adjustments which
resulted in a decline of $0.7 million in net income to properly report the
annual results for the year as a result of accounting irregularities at the
Company's 65% owned subsidiary, Hub Group Distribution Services ("Hub
Distribution"). The Company was unable to determine in which quarters in 2001
the adjustments should have been made and the amount to be recorded in each
quarter. Consequently, the results for the three months ended and nine months
ended September 30, 2002 are not comparable to the results for the three months
and nine months ended September 30, 2001.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2001
REVENUE
Revenue for Hub Group, Inc. increased 10.4% to $356.7 million in 2002
from $323.0 million in 2001. Intermodal revenue increased 13.3% and truckload
brokerage revenue increased 6.3% over 2001 due primarily to increased volume.
Supply chain solutions logistics services revenue increased 22.7% to $27.4
million in 2002 from $22.3 million in 2001 as a result of adding new customers
and increased business from existing customers. HGDS's revenue decreased 17.0%
to $20.7 million in 2002 from $25.0 million in 2001. HGDS experienced a
significant revenue decline primarily due to the loss of a large logistics
customer.
GROSS MARGIN
Gross margin decreased to $42.3 million in 2002 from $44.6 million in
2001. As a percent of revenue, gross margin decreased to 11.9% from 13.8% in
2001. The decrease in gross margin as a percent of revenue is due primarily to
lower intermodal margins due to customer mix, price competition and higher
transportation costs than in 2001.
SALARIES AND BENEFITS
Salaries and benefits decreased 0.7% to $23.3 million in 2002 from
$23.5 million in 2001. As a percentage of revenue, salaries and benefits
decreased to 6.5% from 7.3% in 2001. The decrease is attributed primarily to a
decrease in both headcount and incentive compensation, partially offset by
increased costs for health benefits.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses decreased 30.4% to $11.8
million in 2002 from $17.0 million in 2001. As a percentage of revenue, these
expenses decreased to 3.3% in 2002 from 5.3% in 2001. This decrease is primarily
attributed to a $4.7 million write-off of a receivable from a Korean steamship
line customer in 2001.
DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT
Depreciation and amortization of property and equipment increased 23.5%
to $2.7 million in 2002 from $2.1 million in 2001. This expense as a percentage
of revenue remained constant at 0.7%. The increase in depreciation and
amortization is due to the software applications placed into service throughout
2001.
11
AMORTIZATION OF GOODWILL
As of January 1, 2002, the Company adopted Financial Accounting
Standards Board Statement No. 142, "Goodwill and Other Intangible Assets
("Statement 142"). Under Statement 142, goodwill and intangible assets that have
indefinite useful lives are no longer amortized. Accordingly, amortization of
goodwill decreased to $0.0 million in 2002 from $1.4 million in 2001.
OTHER INCOME (EXPENSE)
Interest expense increased 4.7% to $2.5 million in 2002 from $2.4
million in 2001. The increase in interest expense is due primarily to increased
interest relating to the deferred compensation plan.
Interest income decreased 76.2% to $45,000 in 2002 from $189,000 in
2001 primarily as a result of lower customer finance charges.
MINORITY INTEREST
As a result of the Company purchasing the minority partner's interest
in August of 2002, the minority interest decreased to $0.0 million in 2002 from
$0.3 million in 2001. Pursuant to the HGDS Partnership Agreement, each of the
partners had a legal obligation to the partnership for any deficit balance in
their respective capital accounts. Accordingly, there was a debit balance
reflected in minority interest in the accompanying condensed consolidated
balance sheets related to the minority partner's deficit capital account balance
of approximately $2.5 million at December 31, 2001. Management believed that the
balance in the minority account was collectable at December 31, 2001. Hub had a
legal right to pursue the minority partner for the deficit balance in the
capital account. In August of 2002, the Company entered into a settlement
agreement and release with the minority partner that resulted in the
relinquishment of the minority partner's 35% interest in HGDS and release of the
minority partner's claims against the Company in exchange for $4.0 million in
cash and release of Hub's claims against the minority partner including the $3.0
million balance in minority interest. The acquisition resulted in goodwill of
approximately $7 million.
INCOME TAX PROVISION
The income tax provision increased to $0.8 million in 2002 compared to
a benefit of $0.8 million in 2001. The Company recorded income taxes using an
effective rate of 41.0% in 2001 and 36.5% in 2002. The rate changed because of
changes in permanent differences between book and taxable income (loss) and the
impact of state net operating losses.
NET INCOME (LOSS)
Net income increased to $1.4 million in 2002 from a net loss of $1.1
million in 2001.
EARNINGS (LOSS) PER SHARE
Basic and diluted earnings (loss) per common share increased to $0.18
in 2002 from a loss of $0.14 in 2001.
NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2001
REVENUE
Revenue for Hub Group, Inc. increased 0.3% to $989.6 million in 2002
from $987.0 million in 2001. Intermodal revenue decreased 0.3% from 2001. The
decline is primarily attributed to a $32.8 million reduction in demand from the
Company's steamship customers when comparing the first quarter of 2002 with the
first quarter of 2001. As previously disclosed, these customers ceased doing
business with the Company early in the second quarter of 2001. Without the
12
decrease in revenue related to the loss of the steamship customers, intermodal
revenue would have increased 4.6%. Truckload brokerage revenue increased 9.9%
from 2001 primarily due to increased volume. Revenue from supply chain solutions
logistics services increased 24.2% to $79.9 million in 2002 from $64.4 million
in 2001 as a result of adding new customers and increased business from existing
customers. Hub Group Distribution Services' revenue decreased 31.2% to $59.0
million in 2002 from $85.7 million in 2001 primarily as a result of lower demand
in the installation business during the first part of the year and the loss of a
large logistics customer.
GROSS MARGIN
Gross margin decreased to $119.9 million in 2002 from $135.9 million in
2001. As a percent of revenue, gross margin decreased to 12.1% from 13.8% in
2001. The decrease in gross margin as a percent of revenue is primarily
attributed to Hub Distribution experiencing lower volumes and lower margins in
the installation business. Intermodal gross margin as a percentage of revenue
decreased due to changes in customer mix, competitive pricing, and increased
transportation costs as compared to 2001. During the three months ended March
31, 2002, the Company revised its estimate of accrued transportation costs
resulting in an increase in pretax income of approximately $2.8 million.
SALARIES AND BENEFITS
Salaries and benefits decreased 2.0% to $70.2 million in 2002 from
$71.7 million in 2001. As a percentage of revenue, salaries and benefits
decreased to 7.1% from 7.3% in 2001. The decrease is attributed primarily to a
decrease in both headcount and incentive compensation, partially offset by
increased costs for health benefits.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses decreased 15.9% to $34.9
million in 2002 from $41.5 million in 2001. As a percentage of revenue, these
expenses decreased to 3.5% in 2002 from 4.2% in 2001. This decrease is primarily
attributed to a $4.7 million write-off of a receivable from a Korean steamship
line customer in 2001. In the first nine months of 2002, the Company incurred a
$1.4 million expense for professional fees related to the investigation and
restatement at HGDS.
DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT
Depreciation and amortization decreased 3.2% to $7.9 million in 2002
from $8.1 million in 2001. This expense as a percentage of revenue remained
constant at 0.8%. Depreciation expense in the prior year included $1.5 million
of higher depreciation expense due primarily to a reduction in estimated useful
lives of various assets. This expense as a percentage of revenue increased to
0.8% in 2002 from 0.7% in 2001. The expense increased as a result of new
software applications placed in service throughout 2001.
AMORTIZATION OF GOODWILL
Amortization of goodwill decreased to $0.0 million in 2002 from $4.3
million in 2001. As of January 1, 2002, the Company adopted Financial Accounting
Standards Board Statement No. 142, "Goodwill and Other Intangible Assets
("Statement 142"). Under Statement 142, goodwill and intangible assets that have
indefinite useful lives are no longer amortized.
IMPAIRMENT OF PROPERTY AND EQUIPMENT
The $3.4 million impairment charge in 2001 was due to Hub
Distribution's exit from its initiative surrounding the home delivery of large
box items purchased over the internet.
OTHER INCOME (EXPENSE)
Interest expense decreased 6.2% to $7.3 million in 2002 from $7.8
million in 2001. The decrease in interest expense is due primarily to carrying a
lower average debt balance and lower interest rates this year as compared to the
prior year.
13
Interest income decreased 68.2% to $166,000 in 2002 from $522,000 in
2001 primarily as result of lower finance charges.
MINORITY INTEREST
The minority interest was a $0.5 benefit in 2002 compared with a $0.7
million charge in 2001.
INCOME TAX PROVISION
The income tax provision increased to $0.4 million in 2002 compared to
a benefit of $0.5 million in 2001. The Company recorded income taxes using an
effective rate of 41.0% in 2001 and 39.9% in 2002. The rate changed because of
changes in permanent differences between book and taxable income (loss), the
impact of state net operating losses and as a result of the Company recording
the minority partner's portion of the loss for HGDS during the quarter ended
June 30, 2002.
NET INCOME (LOSS)
Net income increased to $0.1 million in 2002 from a net loss of $0.7
million in 2001.
EARNINGS (LOSS) PER SHARE
Basic and diluted earnings (loss) per common share increased to $0.01
in 2002 from a loss of $0.09 in 2001.
RECENT ACCOUNTING PRONOUNCEMENTS
On June 30, 2001, the Financial Accounting Standards Board issued
Statement 142. Under Statement 142, goodwill and intangible assets that have
indefinite useful lives are no longer amortized but rather will be tested at
least annually for impairment. Intangible assets that have finite useful lives
will continue to be amortized over their useful lives. The Company adopted
Statement 142 as of January 1, 2002.
In connection with SFAS 142, the Company completed the first step of
transitional goodwill impairment testing. The transitional testing used
discounted cash flow and market capitalization methodologies to determine a fair
market value for the reporting unit. The results of the transitional testing
indicated no impairment.
The transitional testing is based upon the Company's estimates of the
value of the reporting unit, future operating performance and discount rates.
Should the estimates differ materially from actual results, the Company may be
required to record impairment charges in future periods. The Company will
continue to test the value of its goodwill for any impairment at least annually
and impairment, if any, will be recorded as expense in the period of impairment.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations and capital expenditures through
cash flows from operations and bank borrowings.
Cash provided by operations for the nine months ended September 30,
2002 was approximately $3.7 million which resulted primarily from net income
from operations before non-cash charges of $7.9 million and a net decrease in
working capital $4.3 million.
Net cash used in investing activities for the nine months ended
September 30, 2002 was $8.6 million and relates to $4.6 million of capital
expenditures as well as the $4.0 million purchase of the minority interest in
HGDS. The capital expenditures were primarily related to enhancing the Company's
operating system and various software applications.
14
The net cash provided by financing activity for the nine months ended
September 30, 2002 was $5.0 million. This is comprised of $11.0 million of
borrowings on the Company's line of credit and $6.0 million of scheduled
payments on the Company's term debt and capital leases.
The Company maintains a multi-bank credit facility. The facility is
comprised of term debt and a revolving line of credit. As of September 30, 2002,
there was $29.0 million of outstanding term debt and $30.0 million outstanding
and $19.0 million unused and available under the line of credit. Borrowings
under the revolving line of credit have a five-year term that began on April 30,
1999, with a floating interest rate based upon the LIBOR (London Interbank
Offered Rate) or Prime Rate. The term debt has quarterly principal payments of
$2,000,000 with a balloon payment of $19.0 million due on March 31, 2004.
The Company maintains $50.0 million of private placement debt (the
"Notes"). These Notes have an eight-year average life. Interest is paid
quarterly. These Notes mature on June 25, 2009, with annual principal payments
of $10.0 million commencing June 25, 2005.
On October 15, 2002, amendments to the Company's credit and note
agreements were executed to modify the fixed charge coverage ratio, minimum
earnings before interest, taxes, depreciation, amortization and minority
interest and the cash flow leverage ratio for all periods subsequent to December
31, 2002. In addition, the capital expenditure limitation was reduced from $15.0
million to $9.0 million for the year ended December 31, 2003. Further, effective
October 15, 2002, the loans are secured by substantially all assets of the
Company. The Company was in compliance with its debt covenants, as amended, as
of September 30, 2002.
OUTLOOK, RISKS AND UNCERTAINTIES
In October 2002, the Company announced an expense reduction program,
which includes a reduction in force. The costs associated with this program will
be recorded during the three month period ending December 31, 2002 when the
program is implemented.
Due to the lockout of West Coast dock workers during the first part of
October, a shortened time frame for moving imported merchandise into place will
occur during the fourth quarter 2002. The Company believes that any diversion
from land based intermodal transportation or future labor disputes or residual
impact from the lockout could have a negative impact on volume and could have a
material adverse affect on the Company's results of operations.
Except for historical data, the information contained in this Quarterly
Report constitutes forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements are
inherently uncertain and subject to risks. Such statements should be viewed with
caution. Actual results or experience could differ materially from the
forward-looking statements as a result of many factors. Forward-looking
statements in this report include, but are not limited to, those contained in
this "Outlook, Risks and Uncertainties" section regarding expectations, hopes,
beliefs, estimates, intentions or strategies regarding the future. The Company
assumes no liability to update any such forward-looking statements. In addition
to those mentioned elsewhere in this section, such risks and uncertainties
include the impact of competitive pressures in the marketplace, including the
entry of new, web-based competitors and direct marketing efforts by the
railroads, the degree and rate of market growth in the intermodal, brokerage and
logistics markets served by the Company, changes in rail and truck capacity,
further consolidation of rail carriers, deterioration in relationships with
existing rail carriers, rail service conditions, changes in governmental
regulation, adverse weather conditions, fuel shortages, changes in the cost of
services from rail, drayage and other vendors and fluctuations in interest
rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that cash to be provided by operations, cash
available under its line of credit and the Company's ability to obtain
additional credit will be sufficient to meet the Company's short-term working
capital and capital expenditure needs. The Company believes that the
aforementioned items are sufficient to meet its anticipated long-term working
15
capital, capital expenditure and debt repayment needs.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk related to changes in interest
rates which may adversely affect its results of operations and financial
condition. The majority of the Company's debt is at a fixed interest rate.
The Company had an interest rate swap agreement designated as a hedge
on a portion of the Company's variable rate debt that expired on September 30,
2002.
CONTROLS AND PROCEDURES
Within the 90-day period prior to the filing of this report, an
evaluation was carried out under the supervision and with the participation of
the Company's management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. Based upon this evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the design and
operation of these disclosure controls and procedures were effective. No
significant changes were made in our internal controls or in other factors that
could significantly affect these controls subsequent to the date of this
evaluation.
16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On February 19, 2002, a purported class action lawsuit was
filed by Riggs Partners, LLC in the United States District
Court for the Northern District of Illinois, Eastern Division.
The complaint names as defendants the Company, the Company's
officers and former officers that signed the Company's
periodic reports filed with the Securities and Exchange
Commission and the Company's former auditors. The complaint
alleges that the defendants violated Section 10 (b) and Rule
10b-5 there under and section 20 (a) of the Securities
Exchange Act of 1934 by filing or causing to be filed with the
Securities and Exchange Commission periodic reports that
contained inaccurate financial statements. The complaint seeks
unspecified compensatory damages, reimbursement of reasonable
costs and expenses, including counsel fees and expert fees,
and such other relief as the court deems proper. On June 7,
2002, the plaintiffs filed a consolidated amended complaint.
On July 18, 2002, the Company and is officers and former
officers filed a motion to dismiss the amended complaint in
its entirety. The Company's former auditors also filed a
motion to dismiss the amended complaint. On October 23, 2002,
the federal district court granted the Company's motion to
dismiss the complaint in its entirety for failing to allege
facts sufficient to state a claim. The court also granted the
motion of the Company's former auditors. The Court's order
requires plaintiffs to file any amended complaint by November
22, 2002. If no further claims are filed, the law suit will
terminate. If any further claims are filed, the Company will
continue to vigorously defend itself and its officers. An
adverse judgment based on comparable claims, if filed, could
have a material adverse effect on the Company's financial
position and results of operations.
Item 6. Exhibits.
A list of exhibits included as part of this Report is set
forth in the Exhibit Index appearing elsewhere herein by this
reference.
17
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly authorized this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUB GROUP, INC.
DATE: November 5, 2002 /S/ THOMAS M. WHITE
-------------------
Thomas M. White
Senior Vice President-Finance and
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATE
I, David P. Yeager, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Hub Group, 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 officers 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;
5) The registrant's other certifying officers 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
6. The registrant's other certifying officers 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.
Date: November 5, 2002
/S/ DAVID P. YEAGER
-----------------------------------
Name: David P. Yeager
Title: Chief Executive Officer
CERTIFICATE
I, Thomas M. White, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Hub Group, 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 officers 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;
5) The registrant's other certifying officers 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
6. The registrant's other certifying officers 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.
Date: November 5, 2002
/S/ THOMAS M. WHITE
--------------------------------------
Name: Thomas M. White
Title: Chief Financial Officer
EXHIBIT INDEX
Exhibit No.
10.24 Amendment to $100 million Credit Agreement among the Registrant, Hub
City Terminals, Inc. and Harris Trust and Savings Bank dated
October 15, 2002.
10.25 Amendment to $50 million Note Purchase Agreement among the Registrant,
Hub City Terminals, Inc. and various purchasers dated October 15, 2002.
10.26 Security Agreement among the Registrant, Hub City Terminals, Inc.,
Harris Trust and Savings Bank and various Note Holders dated
October 15, 2002.
99.2 Section 906 Certification.
HUB GROUP, INC.
HUB CITY TERMINALS, INC.
AMENDMENT TO CREDIT AGREEMENT
Harris Trust and Savings Bank LaSalle Bank National Association
Chicago, Illinois Chicago, Illinois
U.S. Bank National Association National City Bank
Des Plaines, Illinois Cleveland, Ohio
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of
April 30, 1999 (the "CREDIT AGREEMENT"), as amended and currently in effect, by
and among Hub Group, Inc. (the "PUBLIC HUB COMPANY"), Hub City Terminals, Inc.
for itself and as successor by merger to Hub Holdings, Inc. ("HUB CHICAGO";
together with the Public Hub Company, the "BORROWERS") and you (the "LENDERS").
All capitalized terms used herein without definition shall have the same
meanings herein as such terms have in the Credit Agreement.
The Borrowers have requested that the Lenders modify certain financial
covenants and make certain other amendments to the Credit Agreement and the
Lenders are willing to do so under the terms and conditions set forth in this
amendment (herein, the "AMENDMENT").
1. AMENDMENTS.
Subject to the satisfaction of the conditions precedent set forth in
Section 2 below, the Credit Agreement shall be and hereby is amended as follows:
1.01. The definition of "EDITDAM" appearing in Section 4.1 of the Credit
Agreement shall be amended and as so amended shall be restated in its entirety
to read as follows:
""EBITDAM" means, with reference to any period, Net
Income for such period plus all amounts deducted in arriving
at such Net Income amount in respect of (i) Interest Expense
for such period, PLUS (ii) taxes (including federal, state and
local income taxes) for such period, PLUS (iii) all amounts
properly charged for depreciation and amortization during such
period on the books of the Hub Group, PLUS (iv) any deduction
for Minority Interest during such period, PLUS (v) if such
period includes the fiscal quarters of the Public Hub Company
ending on December 31, 2000 or March 31, 2001, non-cash
charges during such quarters on the books of the Hub Group in
accordance with GAAP aggregating up to $5,100,000 (for both
such quarters taken together), plus (vi) all other non-cash
charges during such period on the books of the Hub Group in
accordance with GAAP to the extent the aggregate amount of
such other non-cash charges do not exceed $2,500,000 during
any period of four consecutive fiscal quarters of the Public
Hub Company (prorated appropriately downward (or upward) for
any shorter (or longer) period); PLUS (vii) if such period
includes the fiscal quarters of the Public Hub Company ending
on December 31, 2000, March 31, 2001 or June 30, 2001,
severance payments made during such quarters aggregating up to
$1,200,000 (for all such quarters taken together); PLUS (viii)
if such period includes the fiscal quarters of the Public Hub
Company ending on March 31, 2001, June 30, 2001, September 30,
2001 or December 31, 2001, severance payments (in addition to
those accounted for in clause (vii) above) made during such
quarters aggregating up to $600,000 (for all four such
quarters taken together), PLUS (ix) if such period includes
the fiscal quarter of the Public Hub Company ending on
September 30, 2001, the write-off of the receivable due from
Cho Yang Shipping Co., Ltd. during such quarter on the books
of the Hub Group in an amount not in excess of $4,740,000,
PLUS (x) if such period includes the fiscal quarter of the
Public Hub Company ending on December 31, 2002 or March 31,
2003, restructuring charges during such quarters on the books
of the Hub Group in accordance with GAAP (including cash
severance payments) in an aggregate amount not in excess of
$1,000,000."
1.02. Sections 7.8, 7.9 and 7.10 of the Credit Agreement shall be amended
and as so amended shall be restated in their entirety to read, respectively, as
follows:
"SECTION 7.8. FIXED CHARGE COVERAGE RATIO. The Hub
Group shall not, as of the close of each fiscal quarter of
the Public Hub Company specified below, permit the Fixed
Charge Coverage Ratio as of such date to be less than:
FIXED CHARGE COVERAGE RATIO
AS OF THE FISCAL QUARTER ENDING ON: SHALL NOT BE LESS THAN:
9/30/02 0.90 to 1
12/31/02 0.875 to 1
3/31/03 0.80 to 1
6/30/03 0.95 to 1
9/30/03 1.00 to 1
12/31/03 and at all times 1.05 to 1
thereafter
2
Notwithstanding anything contained in this Agreement to the
contrary, for purposes of computing the Hub Group's compliance
with this Section, the Hub Group's adjustment of earnings for
the 2001 fiscal year (which was an aggregate EBITDAM
adjustment of $1,800,000 for such year) shall be treated as if
such adjustment had occurred evenly in each fiscal quarter of
such year (I.E. $450,000 per fiscal quarter).
SECTION 7.9. MINIMUM EBITDAM. The Hub Group shall, as
of the close of each fiscal quarter of the Public Hub Company
specified below, maintain EBITDAM for the four fiscal quarters
of the Public Hub Company then ended of not less than:
AS OF THE FISCAL EBITDAM SHALL
QUARTER ENDING ON: NOT BE LESS THAN:
9/30/02 $24,000,000
12/31/02 $21,500,000
3/31/03 $20,000,000
6/30/03 $24,000,000
9/30/03 $25,000,000
12/31/03 and at all times $26,000,000
thereafter
Notwithstanding anything contained in this Agreement to the
contrary, for purposes of computing the Hub Group's compliance
with this Section, the Hub Group's adjustment of earnings for
the 2001 fiscal year (which was an aggregate EBITDAM
adjustment of $1,800,000 for such year) shall be treated as if
such adjustment had occurred evenly in each fiscal quarter of
such year (I.E. $450,000 per fiscal quarter).
SECTION 7.10. CASH FLOW LEVERAGE RATIO. The Hub
Group shall not, as of the close of each fiscal quarter of the
Public Hub Company specified below, permit the Cash Flow
Leverage Ratio as of such date to be more than:
AS OF THE FISCAL CASH FLOW LEVERAGE
QUARTER ENDING RATIO SHALL NOT BE
ON: MORE THAN:
9/30/02 4.75 to 1
12/31/02 5.25 to 1
3/31/03 5.50 to 1
6/30/03 4.50 to 1
9/30/03 4.25 to 1
12/31/03 and at all times 4.00 to 1
thereafter
3
Notwithstanding anything contained in this Agreement to the
contrary, for purposes of computing the Hub Group's compliance
with this Section, the Hub Group's adjustment of earnings for
the 2001 fiscal year (which was an aggregate EBITDAM
adjustment of $1,800,000 for such year) shall be treated as if
such adjustment had occurred evenly in each fiscal quarter of
such year (I.E. $450,000 per fiscal quarter)."
1.03. Section 7.13(m) of the Credit Agreement shall be amended and as
so amended shall be restated in its entirety to read as follows:
"(m) intentionally omitted;"
1.04. Section 7.26 of the Credit Agreement shall be amended and as so
amended shall be restated in its entirety to read as follows:
"7.26. CAPITAL EXPENDITURES. The Hub Group shall not
expend or become obligated for Capital Expenditures during the
fiscal year ending December 31, 2002 in an aggregate amount in
excess of $15,000,000 and shall not expend or become obligated
for Capital Expenditures during the fiscal year ending
December 31, 2003 in an aggregate amount in excess of
$9,000,000."
2. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of
all of the following conditions precedent:
2.01. The Borrowers, the Guarantors and the Required Lenders shall have
executed and delivered this Amendment.
2.02. The Senior Note Offering shall have been modified by written
instrument (the "SENIOR NOTE AMENDMENT") in form and substance reasonably
satisfactory to the Agent to effect a modification of the terms and conditions
thereof such that the same are no more burdensome on the Borrowers than the
corresponding provisions of the Credit Agreement after giving effect to the
modifications contemplated by this Amendment.
4
2.03. The Borrowers shall have paid to the Agent, for the ratable benefit
of the Lenders which have executed and delivered to counsel for the Agent a
counterpart of this Amendment no later than 5:00 p.m. (Chicago time) on October
15, 2002, an amendment fee in an amount equal to 0.15% of such executing
Lenders' Revolving Credit Commitments and outstanding Term Loans (the "AMENDMENT
FEE"), such Amendment Fee to be fully earned and due and payable to such
executing Lenders upon such Lenders' execution of this Amendment.
2.04. The Borrowers and the Guarantors shall have executed and delivered
the Collateral Documents.
2.05. Legal matters incident to the execution and delivery of this
Amendment, the Senior Note Amendment and the Collateral Documents shall be
reasonably satisfactory to the Agent and its counsel.
3. REPRESENTATIONS.
In order to induce the Lenders to execute and deliver this Amendment,
the Borrowers hereby represent to the Lenders that as of the date hereof, the
representations and warranties set forth in Section 5 of the Credit Agreement
are and remain true and correct in all material respects (except to the extent
the same expressly relate to an earlier date and except that for purposes of
this paragraph the representations contained in Section 5.5 shall be deemed to
refer to the most recent financial statements of the Public Hub Company
delivered to the Lenders) and the Borrowers are in full compliance with all of
the terms and conditions of the Credit Agreement after giving effect to this
Amendment and no Default or Event of Default has occurred and is continuing
under the Credit Agreement or shall result after giving effect to this
Amendment.
4. MISCELLANEOUS.
4.01. Each Borrower and each Guarantor acknowledges and agrees that,
except as modified by this Amendment, all of the Loan Documents to which it is a
party remain in full force and effect for the benefit and security of, among
other things, the Obligations as modified hereby. Each Borrower and each
Guarantor further acknowledges and agrees that all references in such Loan
Documents to the Obligations shall be deemed a reference to the Obligations as
so modified. Each Borrower and each Guarantor further agrees to execute and
deliver any and all instruments or documents as may be reasonably required by
the Agent or the Required Lenders to confirm any of the foregoing.
4.02. Except as specifically amended hereby, the Credit Agreement shall
continue in full force and effect in accordance with its original terms.
Reference to this specific Amendment need not be made in the Credit Agreement,
the Notes, or any other instrument or document executed in connection therewith,
or in any certificate, letter or communication issued or made pursuant to or
with respect to the Credit Agreement, any reference in any of such items to the
Credit Agreement being sufficient to refer to the Credit Agreement as
specifically amended hereby.
5
4.03. This Amendment may be executed in any number of counterparts, and
by the different parties on different counterpart signature pages, all of which
taken together shall constitute one and the same agreement. Any of the parties
hereto may execute this Amendment by signing any such counterpart and each of
such counterparts shall for all purposes be deemed to be an original. This
Amendment shall be governed by the internal laws of the State of Illinois.
4.04. The Borrowers agree to pay, jointly and severally, all reasonable
out-of-pocket costs and expenses incurred by the Agent in connection with the
preparation, execution and delivery of this Amendment, the Collateral Documents,
the Intercreditor Agreement and the documents and transactions contemplated
hereby, including the reasonable fees and expenses of counsel for the Agent with
respect to the foregoing.
6
Dated as of October 15, 2002.
HUB GROUP, INC., a Borrower
HUB CITY TERMINALS, INC., a Borrower
By
David P. Yeager
Chief Executive Officer for each of the above
Companies
7
Accepted and agreed to as of the date and year last above written.
HARRIS TRUST AND SAVINGS BANK
By
Name:_____________________________________
Title:____________________________________
U.S. BANK NATIONAL ASSOCIATION
By
Name:_____________________________________
Title:____________________________________
LASALLE BANK NATIONAL ASSOCIATION
By
Name:_____________________________________
Title:____________________________________
NATIONAL CITY BANK
By
Name:_____________________________________
Title:____________________________________
8
GUARANTORS' CONSENT
The undersigned heretofore executed and delivered to the Lenders the
Guaranty Agreement. The undersigned hereby consent to the Amendment to the
Credit Agreement as set forth above and confirm that the Guaranty Agreement and
all of the obligations of the undersigned thereunder remain in full force and
effect. The undersigned further agree that their consent to any further
amendments to the Credit Agreement shall not be required as a result of this
consent having been obtained, except to the extent, if any, required by the
Guaranty Agreement.
HUB CHICAGO HOLDINGS, INC., a Guarantor
By
David P. Yeager
Chief Executive Officer
HLX COMPANY, L.L.C., a Guarantor
By
David P. Yeager
Vice Chairman and Chief Executive Officer
QSSC, INC.
QUALITY SERVICES, L.L.C.,
QUALITY SERVICES OF KANSAS, L.L.C.
QUALITY SERVICES OF NEW JERSEY, L.L.C.
Q.S. OF ILLINOIS, L.L.C.
Q.S. OF GEORGIA, L.L.C.
By
David P. Yeager
Chief Executive Officer for each of the
above Guarantors
HUB GROUP ALABAMA, LLC
HUB GROUP ATLANTA, LLC
HUB GROUP BOSTON, LLC
HUB GROUP CANADA, L.P.
HUB GROUP CLEVELAND, LLC
HUB GROUP DETROIT, LLC
HUB GROUP FLORIDA, LLC
HUB GROUP GOLDEN GATE, LLC
HUB GROUP INDIANAPOLIS, LLC
HUB GROUP KANSAS CITY, LLC
HUB GROUP LOS ANGELES, LLC
HUB GROUP MID ATLANTIC, LLC
HUB GROUP NEW ORLEANS, LLC
HUB GROUP NEW YORK STATE, LLC
HUB GROUP NEW YORK-NEW JERSEY, LLC
HUB GROUP NORTH CENTRAL, LLC
HUB GROUP OHIO, LLC
HUB GROUP PHILADELPHIA, LLC
HUB GROUP PITTSBURGH, LLC
HUB GROUP PORTLAND, LLC
HUB GROUP ST. LOUIS, LLC
HUB GROUP TENNESSEE, LLC
HUB CITY TEXAS, L.P.
HUB GROUP TRANSPORT, LLC
HUB GROUP ASSOCIATES, INC.
HUB FREIGHT SERVICES, INC.
HUB HIGHWAY SERVICES
HUB GROUP DISTRIBUTION SERVICES, LLC
By
David P. Yeager
Chief Executive Officer for each of
the above Guarantors
2
================================================================================
HUB GROUP, INC.
and
HUB CITY TERMINALS, INC.
-----------------------------------
SIXTH AMENDMENT
Dated as of October 15, 2002
to
NOTE PURCHASE AGREEMENTS
Dated as of June 15, 1999
-----------------------------------
Re: $50,000,000 9.14% Senior Notes
Due June 25, 2009
================================================================================
SIXTH AMENDMENT TO NOTE PURCHASE AGREEMENTS
THIS SIXTH AMENDMENT dated as of October 15, 2002 (the or this "SIXTH
AMENDMENT") to the Note Purchase Agreements each dated as of June 15, 1999, as
amended by the First Amendment to Note Purchase Agreements dated as of February
26, 2001, the Second Amendment to Note Purchase Agreements dated as of March 30,
2001, the Third Amendment to Note Purchase Agreements dated as of November 8,
2001, the Fourth Amendment to Note Purchase Agreements dated as of March 27,
2002 and the Fifth Amendment to Note Purchase Agreements dated as of August 14,
2002, among HUB GROUP, INC., a Delaware corporation ("PUBLIC HUB COMPANY"), HUB
CITY TERMINALS, INC., a Delaware corporation, for itself and as successor by
merger to Hub Holdings, Inc. ("HUB CHICAGO"; Public Hub Company and Hub Chicago
being individually referred to herein as an "OBLIGOR" and collectively as the
"OBLIGORS"), and each of the institutions which is a signatory to this Sixth
Amendment (collectively, the "NOTEHOLDERS").
RECITALS:
A. The Obligors and each of the Noteholders have heretofore entered
into separate and several Note Purchase Agreements, each dated as of June 15,
1999 (as amended by the First Amendment to Note Purchase Agreements dated as of
February 26, 2001, the Second Amendment to Note Purchase Agreements dated as of
March 30, 2001, the Third Amendment to Note Purchase Agreements dated as of
November 8, 2001, the Fourth Amendment to Note Purchase Agreements dated as of
March 27, 2002 and the Fifth Amendment to Note Purchase Agreements dated as of
August 14, 2002, collectively, the "NOTE PURCHASE AGREEMENTS"). The Obligors
have heretofore issued the $50,000,000 9.14% Senior Notes Due June 25, 2009 (the
"NOTES") pursuant to the Note Purchase Agreements.
B. The Obligors and the Noteholders now desire to amend the Note
Purchase Agreements in the respects, but only in the respects, hereinafter
set forth.
C. Capitalized terms used herein shall have the respective meanings
ascribed thereto in the Note Purchase Agreements unless herein defined or the
context shall otherwise require.
D. All requirements of law have been fully complied with and all other
acts and things necessary to make this Sixth Amendment a valid, legal and
binding instrument according to its terms for the purposes herein expressed have
been done or performed.
NOW, THEREFORE, upon the full and complete satisfaction of the
conditions precedent to the effectiveness of this Sixth Amendment set forth in
SECTION 3.1 hereof, and in consideration of good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the Obligors and the
Noteholders do hereby agree as follows:
SECTION 1. AMENDMENTS.
SECTION 1.1. The definition of "CONSOLIDATED EBITDA" appearing in
Schedule B to the Note Purchase Agreements shall be amended and restated in its
entirety to read as follows:
2
"CONSOLIDATED EBITDA" for any period means the sum of (a)
Consolidated Net Income during such period PLUS (to the extent deducted
in determining Consolidated Net Income), (b) all provisions for any
Federal, state or local income taxes made by the Public Hub Company and
the Restricted Subsidiaries during such period, (c) all provisions for
depreciation and amortization (other than amortization of debt
discount) made by the Public Hub Company and the Restricted
Subsidiaries during such period, (d) Consolidated Interest Expense
during such period, (e) Minority Interest Expense, (f) if such period
includes the fiscal quarters of the Public Hub Company ending on
December 31, 2000 or March 31, 2001, non-cash charges during such
quarters on the books of the Public Hub Company and its Restricted
Subsidiaries in accordance with GAAP aggregating up to $5,100,000 (for
both such quarters taken together), (g) all other non-cash charges
during such period on the books of the Public Hub Company and its
Restricted Subsidiaries in accordance with GAAP to the extent the
aggregate amount of such other non-cash charges do not exceed
$2,500,000 during any period of four consecutive fiscal quarters of the
Public Hub Company (prorated appropriately downward (or upward) for any
shorter (or longer) period), (h) if such period includes the fiscal
quarters of the Public Hub Company ending on December 31, 2000 March
31, 2001 or June 30, 2001, severance payments made during such quarters
aggregating up to $1,200,000 (for all such quarters taken together),
(i) if such period includes the fiscal quarters of the Public Hub
Company ending on March 31, 2001, June 30, 2001, September 30, 2001 or
December 31, 2001, severance payments (in addition to those accounted
for in clause (h) above) made during such quarters aggregating up to
$600,000 (for all four such quarters taken together), (j) if such
period includes the fiscal quarter of the Public Hub Company ending on
September 30, 2001, the write-off of the receivable due from Cho Yang
Shipping Co., Ltd. during such quarter on the books of the Public Hub
Company and its Restricted Subsidiaries in an amount not in excess of
$4,740,000 and (k) if such period includes the fiscal quarter of the
Public Hub Company ending on December 31, 2002 or March 31, 2003,
restructuring charges during such quarter on the books of the Public
Hub Company and its Restricted Subsidiaries in accordance with GAAP
(including cash severance payments) in an aggregate amount not in
excess of $1,000,000. For purposes of calculations under SECTION 10.3,
Consolidated EBITDA shall be adjusted for the period in respect of
which any such calculation is being made to give effect to (i) the
audited "EBITDA" (determined in a manner consistent with the definition
of "Consolidated EBITDA" contained in this Agreement) of any business
entity acquired by the Public Hub Company or any Restricted Subsidiary
(the "ACQUIRED Business") and (ii) all Debt incurred by the Public Hub
Company or any Restricted Subsidiary in connection with such
acquisition, and shall be computed as if the Acquired Business had been
a Restricted Subsidiary throughout the period and all Debt incurred in
connection with such acquisition had been incurred at the beginning of
such period in respect of which such calculation is being made. Without
3
limiting the foregoing, Consolidated EBITDA shall also be adjusted for
the period in respect of which any such calculation is being made to
eliminate (1) the audited "EBITDA" of any Subsidiary or other property
or assets disposed of by the Public Hub Company or any Restricted
Subsidiary (the "TRANSFERRED BUSINESS") and (2) Debt relating to such
Subsidiary, property or assets, as the case may be, and shall be
computed as if the Transferred Business had been transferred at the
beginning of such period in respect of which such calculation is being
made. In the case of any business entity acquired during the twelve
calendar month period immediately preceding the date of any
determination hereunder whose financial records are not, and are not
required to be in accordance with applicable laws, rules and
regulations, audited by the Public Hub Company's independent public
accountants at the time of the acquisition thereof, the Public Hub
Company shall base such determination upon the Public Hub Company's
internally audited net earnings of such business entity for the
immediately preceding fiscal year or the net earnings of such business
entity as audited by such business entity's independent auditors for
the immediately preceding fiscal year.
SECTION 1.2. The definition of "CONSOLIDATED EBITDAR" appearing in
Schedule B to the Note Purchase Agreements shall be amended and restated in its
entirety to read as follows:
"CONSOLIDATED EBITDAR" for any period means the sum of (a)
Consolidated Net Income during such period, PLUS (to the extent
deducted in determining Consolidated Net Income) (b) all provisions for
any Federal, state or local income taxes made by the Public Hub Company
and the Restricted Subsidiaries during such period, (c) all provisions
for depreciation and amortization (other than amortization of debt
discount) made by the Public Hub Company and the Restricted
Subsidiaries during such period, (d) Consolidated Interest Expense
during such period, (e) all Rentals (other than Rentals on Capital
Leases) payable during such period by the Public Hub Company and the
Restricted Subsidiaries, (f) Minority Interest Expense, (g) if such
period includes the fiscal quarters of the Public Hub Company ending on
December 31, 2000 or March 31, 2001, non-cash charges during such
quarters on the books of the Public Hub Company and its Restricted
Subsidiaries in accordance with GAAP aggregating up to $5,100,000 (for
both such quarters taken together), (h) all other non-cash charges
during such period on the books of the Public Hub Company and its
Restricted Subsidiaries in accordance with GAAP to the extent the
aggregate amount of such other non-cash charges do not exceed
$2,500,000 during any period of four consecutive fiscal quarters of the
Public Hub Company (prorated appropriately downward (or upward) for any
shorter (or longer) period), (i) if such period includes the fiscal
quarters of the Public Hub Company ending on December 31, 2000 or March
31, 2001 or June 30, 2001, severance payments made during such quarters
aggregating up to $1,200,000 (for all such quarters taken together),
(j) if such period includes the fiscal quarters of the Public Hub
Company ending on March 31, 2001, June 30, 2001, September 30, 2001 or
December 31, 2001, severance payments (in addition to those accounted
for in clause (i) above) made during such quarters aggregating up to
4
$600,000 (for all four such quarters taken together), (k) if such
period includes the fiscal quarter of the Public Hub Company ending on
September 30, 2001, the write-off of the receivable due from Cho Yang
Shipping Co., Ltd. during such quarter on the books of the Public Hub
Company and its Restricted Subsidiaries in an amount not in excess of
$4,740,000 and (l) if such period includes the fiscal quarter of the
Public Hub Company ending on December 31, 2002 or March 31, 2003,
restructuring charges during such quarter on the books of the Public
Hub Company and its Restricted Subsidiaries in accordance with GAAP
(including cash severance payments) in an aggregate amount not in
excess of $1,000,000. Consolidated EBITDAR shall not be adjusted to
take into account earnings or interest of an Acquired Business that
were earned or accrued prior to its becoming an Acquired Business.
SECTION 1.3. The definition of the term "Reinvestment Yield" in Section
8.7 of the Note Purchase Agreements shall be amended and restated in its
entirety to read as follows:
"REINVESTMENT YIELD" means, with respect to the Called Principal of any
Note, (x) 3.93% for the period from October 15, 2002 through and
including May 31, 2003, and 1.00% at all other times, in either case of
any prepayment of the Notes pursuant to SECTION 8.2, (y) 3.93% in the
case of any prepayment created by the application of SECTION 10.12 and
(z) .50% in any other case, over in each such case the yield to maturity
implied by (a) the yields reported, as of 10:00 A.M. (New York City
time) on the second Business Day preceding the Settlement Date with
respect to such Called Principal, on the display designated as "Page
PX7" of the Bloomberg Financial Markets Services Screen (or, if not
available, any other national recognized trading screen reporting
on-line intraday trading in the U.S. Treasury securities) for actively
traded on-the-run U.S. Treasury securities having a maturity equal to
the Remaining Average Life of such Called Principal as of such
Settlement Date, or (b) if such yields are not reported as of such time
or the yields reported as of such time are not ascertainable, the
Treasury Constant Maturity Series Yields reported, for the latest day
for which such yields have been so reported as of the second Business
Day preceding the Settlement Date with respect to such Called Principal,
in Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury securities
having a constant maturity equal to the Remaining Average Life of such
Called Principal as of such Settlement Date. Such implied yield will be
determined, if necessary, by (i) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted
financial practice and (ii) interpolating linearly between (1) the
actively traded on-the-run U.S. Treasury security with the maturity
closest to and greater than the Remaining Average Life and (2) the
actively traded on-the-run U.S. Treasury security with the maturity
closest to and less than the Remaining Average Life.
SECTION 1.4. Section 10.2 of the Note Purchase Agreements shall be
amended and restated in its entirety to read as follows:
5
"SECTION 10.2. FIXED CHARGE COVERAGE RATIO. The Public Hub
Company and its Restricted Subsidiaries will not, as of close of each
fiscal quarter specified below, permit the ratio of (a) Consolidated
EBITDAR for the immediately preceding four consecutive fiscal quarter
period to (b) Consolidated Fixed Charges as of such date to be less
than (i) 1.20 to 1.00 as of the end of the fiscal quarters ending
September 30, 2002 and December 31, 2002, (ii) 1.15 to 1.00 as of the
end of the fiscal quarter ending March 31, 2003, (iii) 1.25 to 1.00 as
of the end of the fiscal quarters ending June 30, 2003 and September
30, 2003 and (iv) 1.30 to 1.00 as of the close of each fiscal quarter
thereafter. Notwithstanding anything contained in this Agreement to the
contrary, for purposes of computing the Public Hub Company and its
Restricted Subsidiaries' compliance with this Section, the Public Hub
Company and its Restricted Subsidiaries' adjustment of earnings for the
2001 fiscal year (which was an aggregate earnings adjustment of
$1,800,000 for such year) shall be treated as if such adjustment had
occurred evenly in each fiscal quarter of such year (I.E. $450,000 per
fiscal quarter)"
SECTION 1.5. Section 10.3 of the Note Purchase Agreements shall be
amended and restated in its entirety to read as follows:
"SECTION 10.3. CASH FLOW LEVERAGE RATIO. The Public Hub Company
and its Restricted Subsidiaries will not, as of the close of each
fiscal quarter specified below, permit the ratio of Consolidated Debt
to Consolidated EBITDA for the immediately preceding four consecutive
fiscal quarter period to exceed the ratios set forth below:
CONSOLIDATED DEBT TO CONSOLIDATED
AS OF THE FISCAL QUARTER EBITDA SHALL NOT BE MORE THAN:
ENDING ON:
September 30, 2002 4.75 to 1.00
December 31, 2002 5.25 to 1.00
March 31, 2003 5.50 to 1.00
June 30, 2003 4.50 to 1.00
September 30, 2003 4.25 to 1.00
December 31, 2003 4.00 to 1.00
March 31, 2004 4.00 to 1.00
June 30, 2004 3.75 to 1.00
September 30, 2004 3.75 to 1.00
December 31, 2004 3.50 to 1.00
March 31, 2005 3.50 to 1.00
June 30, 2005 3.25 to 1.00
September 30, 2005 3.25 to 1.00
December 31, 2005 3.00 to 1.00
March 31, 2006 3.00 to 1.00
June 30, 2006 2.75 to 1.00
September 30, 2006 2.75 to 1.00
December 31, 2006, and thereafter 2.50 to 1.00
6
Notwithstanding anything contained in this Agreement to the contrary,
for purposes of computing the Public Hub Company and its Restricted
Subsidiaries' compliance with this Section, the Public Hub Company and
its Restricted Subsidiaries' adjustment of earnings for the 2001 fiscal
year (which was an aggregate earnings adjustment of $1,800,000 for such
year) shall be treated as if such adjustment had occurred evenly in
each fiscal quarter of such year (I.E. $450,000 per fiscal quarter)."
SECTION 1.6. Section 10.10 of the Note Purchase Agreements shall be
amended and restated in its entirety to read as follows:
"SECTION 10.10. CAPITAL EXPENDITURES. The Public Hub Company and its
Restricted Subsidiaries shall not expend or become obligated for
Capital Expenditures during the fiscal year ending December 31, 2002 in
an aggregate amount in excess of $15,000,000 and shall not expend or
become obligated for Capital Expenditures during the fiscal year ending
December 31, 2003 in an aggregate amount in excess of $9,000,000."
SECTION 1.7. The following shall be added as a new Section 10.11 to the
Note Purchase Agreements:
"SECTION 10.11. COMPLIANCE CERTIFICATE. Notwithstanding anything to the
contrary contained herein, including, without limitation, in SECTION 7,
the Public Hub Company shall, five (5) Business Days prior to the
earlier to occur of (a) April 30, 2004, and (b) the termination of the
Bank Credit Agreement, deliver to each Noteholder a certificate of a
Senior Financial Officer of the Public Hub Company setting forth the
information (including detailed calculations) required in order to
establish whether the Public Hub Company is in compliance with the
requirements of SECTIONS 10.1 through and including 10.4, 10.5(H) and
(I), 10.6(B) and 10.10 as of the last day of the last completed fiscal
quarter for which financial statements are available (including with
respect to each such Section, where applicable, the calculations of the
maximum or minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Sections, and the calculation of
the amount, ratio or percentage then in existence)."
SECTION 1.8. The following shall be added as a new Section 10.12 to the Note
Purchase Agreements:
"SECTION 10.12. REFINANCING OF BANK CREDIT AGREEMENT. The Obligors
hereby covenant and agree that any funds received by or on behalf of
the Obligors in connection with a refinancing of the Bank Credit
7
Agreement, prior to or at maturity thereof, shall be applied on a
pro-rata basis as between the Banks and the Noteholders, and, with
respect to the Noteholders, pursuant to an offer to prepay pursuant to
SECTION 8.2; it being understood that a refinancing for purposes of
this SECTION 10.12 shall not include (a) an extension of the current
Bank Credit Agreement led by the current Agent thereunder (Harris Trust
and Savings Bank), or (b) a replacement of the Bank Credit Agreement
led by a lender other than the current Agent thereunder and with the
same or different lenders if such replacement (i) (x) is in an
aggregate principal amount not in excess of 110%, and (y) is not in an
aggregate principal amount less than 90%, in either case of this
SECTION 10.12 (B)(I)(X) and SECTION 10.12 (B)(I)(Y), of the aggregate
outstanding principal amount of, and all undrawn commitments under, the
Bank Credit Agreement at such time, (ii) contains financial covenants
which are no more burdensome to the Obligors than the financial
covenants in the Note Purchase Agreements, (iii) is comparable to the
Bank Credit Agreement and (iv) places the Obligors and the Noteholders
in no worse a position."
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS.
SECTION 2.1. To induce the Noteholders to execute and deliver this
Sixth Amendment (which representations shall survive the execution and delivery
of this Sixth Amendment), the Obligors, jointly and severally, represent and
warrant to the Noteholders that:
(a) this Sixth Amendment has been duly authorized, executed
and delivered by each Obligor and this Sixth Amendment constitutes the
legal, valid and binding obligation, contract and agreement of each
Obligor enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or
limiting creditors' rights generally;
(b) the Note Purchase Agreements, as amended by this Sixth
Amendment, constitute the legal, valid and binding obligations,
contracts and agreements of the Obligors enforceable against them in
accordance with their respective terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws or equitable principles relating to or limiting creditors'
rights generally;
(c) the execution, delivery and performance by the Obligors
of this Sixth Amendment (i) has been duly authorized by all requisite
corporate action and, if required, shareholder action, (ii) does not
require the consent or approval of any governmental or regulatory body
or agency, and (iii) will not (A) violate (1) any provision of law,
statute, rule or regulation or its certificate of incorporation or
bylaws, (2) any order of any court or any rule, regulation or order of
any other agency or government binding upon it, or (3) any provision of
any material indenture, agreement or other instrument to which any
Obligor is a party or by which any Obligor's properties or assets are
or may be bound, including, without limitation, the Bank Credit
Agreement, or (B) result in a breach or constitute (alone or with due
8
notice or lapse of time or both) a default under any indenture,
agreement or other instrument referred to in CLAUSE (III)(A)(3) of this
SECTION 2.1(C);
(d) as of the date hereof and after giving effect to this
Sixth Amendment, no Default or Event of Default has occurred which is
continuing;
(e) all the representations and warranties contained in
Section 5 of the Note Purchase Agreements (other than those contained
in Sections 5.3, 5.3(a), 5.3(b) and 5.9) are true and correct in all
material respects with the same force and effect as if made by the
Obligors on and as of the date hereof (other than any representation
and warranty that expressly relates to a specified earlier date, which
was true and correct in all material respects as of such date);
PROVIDED, THAT, notwithstanding any reference in Sections 5.3(c) and
5.3(d) of the Note Purchase Agreements to the Restricted Subsidiaries
listed on Schedule 5.3 to the Note Purchase Agreements, the
representations and warranties hereby made by the Obligors with
reference to Sections 5.3(c) and 5.3(d) of the Note Purchase Agreements
shall relate to the Restricted Subsidiaries existing on the date
hereof;
(f) the statements and information furnished to the
Noteholders in connection with the negotiation of this Amendment do
not, taken as a whole, and other than financial projections or
forecasts, contain any untrue statements of a material fact or omit a
material fact necessary to make the material statements contained
herein or therein not misleading, the Noteholders acknowledging that as
to any projections furnished to the Noteholders, the Obligors and the
Constituent Company Guarantors only represent that the same were
prepared on the basis of information and estimates the Obligors
believed to be reasonable; and
(g) all tax returns with respect to any income tax or other
material tax required to be filed by the Obligors and the Restricted
Subsidiaries in any jurisdiction have, in fact, been filed, and all
taxes, assessments, fees and other governmental charges upon the
Obligors or the Restricted Subsidiaries or upon any of their respective
properties, income or franchises, which are shown to be due and payable
in such returns, have been paid. The Obligors do not know of any
proposed additional tax assessment against the Obligors or any
Restricted Subsidiary for which adequate provision in accordance with
GAAP has not been made. Adequate provisions in accordance with GAAP for
taxes on the books of the Obligors and each Restricted Subsidiary have
been made for all open years, and for its current fiscal period.
SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS SIXTH AMENDMENT.
SECTION 3.1. This Sixth Amendment shall not become effective until, and
shall become effective when, each and every one of the following conditions
shall have been satisfied:
(a) executed counterparts of this Sixth Amendment, duly
executed by the Obligors and the holders of at least 51% of the
outstanding principal amount of the Notes, shall have been delivered to
the Noteholders;
9
(b) the Obligors and the Constituent Company Guarantors shall
have executed and delivered the Collateral Documents and the Amended
and Restated Intercreditor Agreement shall have been executed and
delivered by the parties thereto;
(c) the Noteholders shall have received a copy of the
resolutions of the Board of Directors of each Obligor authorizing the
execution, delivery and performance by such Obligor of this Sixth
Amendment, the Collateral Documents and the Amended and Restated
Intercreditor Agreement, certified by such Obligor's Secretary or an
Assistant Secretary;
(d) the representations and warranties of the Obligors set
forth in SECTION 2 hereof are true and correct on and with respect to
the date hereof;
(e) the Obligors shall have arranged to the satisfaction of
the Required Holders for the payment to each Noteholder by no later
than 5:00 p.m. (Chicago time) on October 15, 2002, an amendment fee in
an amount equal to .15% times the outstanding principal amount of the
Notes held by such Noteholder (the "AMENDMENT FEE"), such Amendment Fee
to be fully earned and due and payable to each Noteholder upon the
effectiveness of this Amendment;
(f) the Bank Credit Agreement shall have been amended in form
and substance satisfactory to the Required Holders to effect a
modification of the terms and conditions thereof such that the same are
no more burdensome on the Obligors than the corresponding provisions of
the Note Purchase Agreements after giving effect to the modifications
contemplated by this Amendment;
(g) legal matters incident to the execution and delivery of
this Amendment and the amendment to the Bank Credit Agreement shall be
reasonably satisfactory to the Noteholders and their counsel.
Upon receipt of all of the foregoing, this Sixth Amendment shall become
effective as of October 15, 2002.
SECTION 4. PAYMENT OF NOTEHOLDERS' COUNSEL FEES AND EXPENSES.
SECTION 4.1. The Obligors agrees to pay upon demand, the reasonable
fees and expenses of Chapman and Cutler, counsel to the Noteholders, in
connection with the negotiation, preparation, approval, execution and delivery
of this Sixth Amendment, the Amended and Restated Intercreditor Agreement and
the Collateral Documents.
SECTION 5. MISCELLANEOUS.
SECTION 5.1. This Sixth Amendment shall be construed in connection with
and as part of each of the Note Purchase Agreements, and except as modified and
expressly amended by this Sixth Amendment, all terms, conditions and covenants
contained in the Note Purchase Agreements and the Notes are hereby ratified and
shall be and remain in full force and effect.
10
SECTION 5.2. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
Sixth Amendment may refer to the Note Purchase Agreements without making
specific reference to this Sixth Amendment but nevertheless all such references
shall include this Sixth Amendment unless the context otherwise requires.
SECTION 5.3. The descriptive headings of the various Sections or parts
of this Sixth Amendment are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
SECTION 5.4. THIS SIXTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH ILLINOIS LAW.
SECTION 5.5. The execution hereof by you shall constitute a contract
between us for the uses and purposes hereinabove set forth, and this Sixth
Amendment may be executed in any number of counterparts, each executed
counterpart constituting an original, but all together only one agreement.
SECTION 5.6. The Noteholders acknowledge that the obligations of the
Obligors under Section 5.2 of the Fifth Amendment to Note Purchase Agreements
dated as of August 14, 2002 have been satisfied by this Sixth Amendment.
[Signature Pages Begin on Next Page]
11
IN WITNESS WHEREOF, the Obligors and the Noteholders have caused this
instrument to be executed as of October 15, 2002.
HUB GROUP, INC.
HUB CITY TERMINALS, INC.
By _____________________________________________
David P. Yeager
Chief Executive Officer for each of the above
Companies
CONSTITUENT COMPANY GUARANTORS' CONSENT
The undersigned heretofore executed and delivered to the Noteholders
the Constituent Company Guaranty. The undersigned hereby consent to the Sixth
Amendment to the Note Purchase Agreements as set forth above and confirm that
the Constituent Company Guaranty and all of the obligations of the undersigned
thereunder remain in full force and effect. The undersigned further agree that
their consent to any further amendments to the Note Purchase Agreements shall
not be required as a result of this consent having been obtained, except to the
extent, if any, required by the Constituent Company Guaranty.
HUB CHICAGO HOLDINGS, INC., a Constituent Company
Guarantor
By
David P. Yeager
Chief Executive Officer
HLX COMPANY, L.L.C., a Constituent Company Guarantor
By
David P. Yeager
Vice Chairman and Chief Executive Officer
QSSC, INC.
QUALITY SERVICES, L.L.C.,
QUALITY SERVICES OF KANSAS, L.L.C.
QUALITY SERVICES OF NEW JERSEY, L.L.C.
Q.S. OF ILLINOIS, L.L.C.
Q.S. OF GEORGIA, L.L.C.
By
David P. Yeager
Chief Executive Officer for each of the above
Constituent Company Guarantors
HUB GROUP ALABAMA, LLC
HUB GROUP ATLANTA, LLC
HUB GROUP BOSTON, LLC
HUB GROUP CANADA, L.P.
HUB GROUP CLEVELAND, LLC
HUB GROUP DETROIT, LLC
HUB GROUP FLORIDA, LLC
HUB GROUP GOLDEN GATE, LLC
HUB GROUP INDIANAPOLIS, LLC
HUB GROUP KANSAS CITY, LLC
HUB GROUP LOS ANGELES, LLC
HUB GROUP MID ATLANTIC, LLC
HUB GROUP NEW ORLEANS, LLC
HUB GROUP NEW YORK STATE, LLC
HUB GROUP NEW YORK-NEW JERSEY, LLC
HUB GROUP NORTH CENTRAL, LLC
HUB GROUP OHIO, LLC
HUB GROUP PHILADELPHIA, LLC
HUB GROUP PITTSBURGH, LLC
HUB GROUP PORTLAND, LLC
HUB GROUP ST. LOUIS, LLC
HUB GROUP TENNESSEE, LLC
HUB CITY TEXAS, L.P.
HUB GROUP TRANSPORT, LLC
HUB GROUP ASSOCIATES, INC.
HUB FREIGHT SERVICES, INC.
HUB HIGHWAY SERVICES
HUB GROUP DISTRIBUTION SERVICES, LLC
By
David P. Yeager
Chief Executive Officer for each of the above
Constituent Company Guarantors
Consented, Accepted and Agreed as of October 15, 2002:
BAYSTATE HEALTH SYSTEM, INC.
By: David L. Babson & Company Inc. as Investment
Adviser
By____________________________________________
Name:
Title:
Consented, Accepted and Agreed as of October 15, 2002:
C.M. LIFE INSURANCE COMPANY
By: David L. Babson & Company Inc. as Investment
Sub-Adviser
By________________________________
Name:
Title:
Consented, Accepted and Agreed as of October 15, 2002:
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: David L. Babson & Company Inc., as Investment
Adviser
By________________________________
Name:
Title:
Consented, Accepted and Agreed as of October 15, 2002:
INVESTORS PARTNER LIFE INSURANCE COMPANY
By____________________________________
Name:
Title:
Consented, Accepted and Agreed as of October 15, 2002:
JOHN HANCOCK LIFE INSURANCE COMPANY
By____________________________________
Name:
Title:
Consented, Accepted and Agreed as of October 15, 2002:
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
By____________________________________
Name:
Title:
Consented, Accepted and Agreed as of October 15, 2002:
MELLON BANK, N.A., solely in its capacity as Trustee
for the Bell Atlantic Master Trust (as directed
by John Hancock Life Insurance Company), and not
in its individual capacity
By____________________________________
Name:
Title:
Consented, Accepted and Agreed as of October 15, 2002:
RELIASTAR LIFE INSURANCE COMPANY
By: ING INVESTMENT MANAGEMENT LLC,
as agent
By____________________________________
Name:
Title:
Consented, Accepted and Agreed as of October 15, 2002:
RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK
By: ING INVESTMENT MANAGEMENT LLC,
as agent
By____________________________________
Name:
Title:
Consented, Accepted and Agreed as of October 15, 2002:
UNITED OF OMAHA LIFE INSURANCE COMPANY
By____________________________________
Name:
Title:
SECURITY AGREEMENT
This Security Agreement (the "AGREEMENT") is dated as of October 15,
2002, by and among Hub Group, Inc., a Delaware corporation (the "PUBLIC HUB
COMPANY"), Hub City Terminals, Inc., a Delaware corporation ("HUB CHICAGO") (the
Public Hub Company and Hub Chicago being hereinafter referred to collectively as
the "BORROWERS" and individually as a "BORROWER"), and the other parties
executing this Agreement under the heading "DEBTORS" (the Borrowers and such
other parties, along with any parties who execute and deliver to the Agent an
agreement substantially in the form attached hereto as Schedule G, being
hereinafter referred to collectively as the "DEBTORS" and individually as a
"DEBTOR"), each with its mailing address as set forth in Section 14(b) below,
and Harris Trust and Savings Bank, an Illinois banking corporation ("HTSB"),
with its mailing address as set forth in Section 14(b) below, acting as
collateral agent hereunder for the Secured Creditors hereinafter identified and
defined (HTSB acting as such collateral agent and any successor or successors to
HTSB acting in such capacity being hereinafter referred to as the "AGENT").
PRELIMINARY STATEMENTS
A. The Borrowers and HTSB, individually and as administrative agent
(HTSB acting as such administrative agent and any successor or successors to
HTSB acting in such capacity being hereinafter referred to as the
"ADMINISTRATIVE AGENT"), have entered into a Credit Agreement dated as of April
30, 1999 (such Credit Agreement, as heretofore amended and as the same may be
further amended or modified from time to time, including amendments and
restatements thereof in its entirety, being hereinafter referred to as the
"CREDIT AGREEMENT"), pursuant to which HTSB and other banks and financial
institutions from time to time party to the Credit Agreement (HTSB, in its
individual capacity, and such other banks and financial institutions being
hereinafter referred to collectively as the "LENDERS" and individually as a
"LENDER" and HTSB, in its capacity as the letter of credit issuer under the
Credit Agreement, being hereinafter referred to as the "L/C ISSUER") have
agreed, subject to certain terms and conditions, to extend credit and make
certain other financial accommodations available to the Borrowers (the
Administrative Agent, the L/C Issuer, and the Lenders, together with any
affiliates of the Lenders party to the Hedging Agreements referred to below,
being hereinafter referred to collectively as the "BANK CREDITORS" and
individually as a "BANK CREDITOR").
B. The Borrowers, BayState Health System, Inc., C.M. Life Insurance
Company, Massachusetts Mutual Life Insurance Company, Investors Partner Life
Insurance Company, John Hancock Life Insurance Company, John Hancock Variable
Life Insurance Company, Mellon Bank, N.A. (solely in its capacity as Trustee for
the Bell Atlantic Master Trust (as directed by John Hancock Life Insurance
Company), and not in its individual capacity), ReliaStar Life Insurance Company,
ReliaStar Life Insurance Company of New York and United of Omaha Life Insurance
Company (collectively, the "SENIOR NOTEHOLDERS") have entered into separate and
several Note Purchase Agreements each dated as of June 15, 1999, as the same may
be amended, supplemented or otherwise modified from time to time (the "SENIOR
NOTE AGREEMENTS") pursuant to which the Borrowers have issued their 8.64% Senior
Notes Due June 25, 2009, in the aggregate principal amount of $50,000,000 (the
"SENIOR NOTES") (the Agent, the Bank Creditors and the Senior Noteholders being
referred to herein collectively as the "SECURED CREDITORS" and individually as a
"SECURED CREDITOR").
C. The Borrowers and the other Debtors may from time to time enter
into one or more agreements with respect to, among other things, interest rate,
foreign currency and/or commodity exchange, swap, cap, collar, floor, forward,
option or other similar agreements with one or more of the Lenders, the Senior
Noteholders, or their affiliates, for the purpose of hedging or otherwise
protecting against interest rate, foreign currency and/or commodity exposure
(such agreements as the same may be amended or modified from time to time being
hereinafter referred to as "HEDGING AGREEMENTS" and the liability of the Debtors
in respect of such Hedging Agreements being hereinafter referred to as "HEDGING
LIABILITY").
D. Concurrently herewith, the Bank Creditors, the Senior Noteholders
and the Agent have entered into an Intercreditor and Collateral Agency Agreement
(the "INTERCREDITOR AGREEMENT") pursuant to which the Bank Creditors and the
Senior Noteholders have appointed the Agent as collateral agent thereunder.
E. As a condition to the continued extension of credit to the
Borrowers under the Credit Agreement, and as a condition to entering into any
Hedging Agreement, the Secured Creditors have required, among other things, that
each Debtor grant to the Agent for the benefit of the Secured Creditors a lien
on and security interest in the personal property of such Debtor described
herein subject to the terms and conditions hereof.
F. The Public Hub Company owns, directly or indirectly, equity
interests in each other Debtor and the Borrowers provide each of the other
Debtors with financial, management, administrative, and technical support which
enables such Debtors to conduct their businesses in an orderly and efficient
manner in the ordinary course.
G. Each Debtor will benefit, directly or indirectly, from credit
and other financial accommodations extended by the Secured Creditors to the
Borrowers.
NOW, THEREFORE, for good and valuable consideration, receipt whereof is
hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. TERMS DEFINED IN CREDIT AGREEMENT. All capitalized terms
used herein without definition shall have the same meanings herein as such terms
have in the Credit Agreement. The term "Debtor" and "Debtors" as used herein
shall mean and include the Debtors collectively and also each individually, with
all grants, representations, warranties, and covenants of and by the Debtors, or
any of them, herein contained to constitute joint and several grants,
representations, warranties, and covenants of and by the Debtors; PROVIDED,
HOWEVER, that unless the context in which the same is used shall otherwise
require, any grant, representation, warranty or covenant contained herein
related to the Collateral shall be made by each Debtor only with respect to the
Collateral owned by it or represented by such Debtor as owned by it.
2
SECTION 2. GRANT OF SECURITY INTEREST IN THE COLLATERAL. As
collateral security for the Secured Obligations defined below, each Debtor
hereby grants to the Agent for the benefit of the Secured Creditors a lien on
and security interest in, and right of set-off against, and acknowledges and
agrees that the Agent has and shall continue to have for the benefit of the
Secured Creditors a continuing lien on and security interest in, and right of
set-off against, all right, title, and interest, whether now owned or existing
or hereafter created, acquired or arising, in and to all personal property and
fixtures of such Debtor, including all of the following property of such Debtor:
(a) Accounts (including Health-Care-Insurance
Receivables, if any);
(b) Chattel Paper;
(c) Instruments (including Promissory Notes);
(d) Documents;
(e) General Intangibles (including Payment Intangibles and
Software, all tax refunds, and all patents, trademarks, copyrights and
similar intellectual property rights, and all applications and
registrations therefor, and all goodwill of the business connected with
or represented thereby);
(f) Letter-of-Credit Rights;
(g) Supporting Obligations;
(h) Deposit Accounts;
(i) Investment Property (including certificated and
uncertificated Securities, Securities Accounts,
Security Entitlements, Commodity Accounts, and
Commodity Contracts);
(j) Inventory;
(k) Equipment (including all software, whether or not the
same constitutes embedded software, used in the
operation thereof);
(l) Fixtures;
(m) Commercial Tort Claims (as described on Schedule F
hereto or on one or more supplements to this
Agreement);
(n) All rights to merchandise and other Goods (including
rights to returned or repossessed Goods and rights of stoppage in
transit) which is represented by, arises from, or relates to any of the
foregoing;
3
(o) All personal property and interests in personal property
of such Debtor of any kind or description now held by any Secured
Creditor or at any time hereafter transferred or delivered to, or
coming into the possession, custody or control of, any Secured
Creditor, or any agent or affiliate of any Secured Creditor, whether
expressly as collateral security or for any other purpose (whether for
safekeeping, custody, collection or otherwise), and all dividends and
distributions on or other rights in connection with any such property;
(p) All supporting evidence and documents relating to any of
the above-described property, including, without limitation, computer
programs, disks, tapes and related electronic data processing media,
and all rights of such Debtor to retrieve the same from third parties,
written applications, credit information, account cards, payment
records, correspondence, delivery and installation certificates,
invoice copies, delivery receipts, notes and other evidences of
indebtedness, insurance certificates and the like, together with all
books of account, ledgers, and cabinets in which the same are reflected
or maintained;
(q) All Accessions and additions to, and substitutions
and replacements of, any and all of the foregoing; and
(r) All Proceeds and products of the foregoing, and all
insurance of the foregoing and proceeds thereof;
all of the foregoing being herein sometimes referred to as the "COLLATERAL";
PROVIDED, HOWEVER, that except to the extent any such provision would be
rendered ineffective by Section 9-406, 9-407 or 9-408 of the Uniform Commercial
Code of the State of Illinois as in effect from time to time ("UCC"), in no
event shall the Collateral include, and the Debtors shall not be deemed to have
granted a security interest in, any asset to the extent that such a grant would,
under the provisions of any contract or agreement enforceable under applicable
law and pertaining to such asset or otherwise, result in a mandatory prepayment
under, breach or termination of the provisions of, or constitute a default under
or termination of, any such contract or agreement, PROVIDED, that if and when
such provisions are removed, terminated or otherwise become unenforceable as a
matter of law, the Collateral shall be deemed to include such assets and the
Debtors shall be deemed to have granted a security interest therein; PROVIDED,
FURTHER, HOWEVER, that in no event will Collateral include Investment Property
and General Intangibles consisting of equity securities of any issuer that is
(i) a Subsidiary of any Debtor and (ii) organized under the laws of any
jurisdiction other than the United States (or any state thereof) in excess of
65% of the total voting power of all equity securities of such Subsidiary.
Notwithstanding anything herein to the contrary, if by no later than 5:00 p.m.
on October 15, 2002, the Borrowers shall have provided to the Bank Creditors and
Senior Noteholders a signed commitment of one or more lenders to provide
financing in an amount sufficient to repay in full the Obligations owing to the
Bank Creditors, the Senior Notes and all other indebtedness, obligations and
liabilities of the Debtors to the Senior Noteholders under the Senior Note
Agreements on or before October 31, 2002 and containing such other terms and
4
conditions as shall be reasonably acceptable to the Agent, the Required Lenders
and the Required Holders (as defined in the Senior Note Agreements), then the
Liens of the Collateral Documents shall not be perfected until November 1, 2002.
All terms which are used in this Agreement which are defined in the UCC shall
have the same meanings herein as such terms are defined in the UCC, unless this
Agreement shall otherwise specifically provide. For purposes of this Agreement,
the term "RECEIVABLES" means all rights to the payment of a monetary obligation,
whether or not earned by performance, and whether evidenced by an Account,
Chattel Paper, Instrument, General Intangible, or otherwise.
SECTION 3. SECURED OBLIGATIONS. This Agreement is made and given to
secure, and shall secure, the prompt payment and performance when due of (a) any
and all indebtedness, obligations, and liabilities of the Debtors, and of any of
them individually, to the Secured Creditors, and to any of them individually,
under or in connection with or evidenced by the Credit Agreement, any other Loan
Document, the Senior Notes or the Senior Note Agreements, including, without
limitation, all obligations evidenced by the Notes of the Borrowers heretofore
or hereafter issued under the Credit Agreement, all obligations evidenced by the
Senior Notes of the Borrowers heretofore or hereafter issued under the Senior
Note Agreements, all obligations of the Borrowers to reimburse the Bank
Creditors for the amount of all drawings on all Letters of Credit issued
pursuant to the Credit Agreement and all other obligations of the Borrowers
under all Applications for Letters of Credit, all obligations of the Debtors,
and of any of them individually, with respect to any Hedging Liability, and all
obligations of the Debtors, and of any of them individually, arising under any
guaranty issued by it relating to the foregoing or any part thereof, in each
case whether now existing or hereafter arising (and whether arising before or
after the filing of a petition in bankruptcy and including all interest accrued
after the petition date), due or to become due, direct or indirect, absolute or
contingent, and howsoever evidenced, held or acquired and (b) any and all
reasonable expenses and charges, legal or otherwise, suffered or incurred by the
Secured Creditors, and any of them individually, in collecting or enforcing any
of such indebtedness, obligations, and liabilities or in realizing on or
protecting or preserving any security therefor, including, without limitation,
the lien and security interest granted hereby (all of the indebtedness,
obligations, liabilities, expenses, and charges described above being
hereinafter referred to as the "SECURED OBLIGATIONS"). Notwithstanding anything
in this Agreement to the contrary, the right of recovery against any Debtor
under this Agreement (other than the Borrowers to which this limitation shall
not apply) shall not exceed $1.00 less than the lowest amount which would render
such Debtor's obligations under this Agreement void or voidable under applicable
law, including fraudulent conveyance law.
SECTION 4. COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES.
Each Debtor hereby covenants and agrees with, and represents and warrants to,
the Secured Creditors that:
(a) Each Debtor is a corporation, limited liability company,
or partnership duly organized and validly existing in good standing
under the laws of the state of its organization as set forth on
Schedule A. Each Debtor is the sole and lawful owner of its Collateral,
and has full right, power, and authority to enter into this Agreement
and to perform each and all of the matters and things herein provided
for. The execution and delivery of this Agreement, and the observance
and performance of each of the matters and things herein set forth,
will not (i) contravene or constitute a default under any material
provision of law or any material judgment, injunction, order or decree
5
binding upon any Debtor or any provision of any Debtor's organizational
agreements (E.G., charter, articles of incorporation or by-laws,
certificate of formation or limited liability company operating
agreement or partnership agreement, as relevant) or any material
covenant, indenture or agreement of or affecting any Debtor or any of
its property or (ii) result in the creation or imposition of any lien
or encumbrance on any property of any Debtor except for the lien and
security interest granted to the Agent hereunder.
(b) Each Debtor's respective chief executive office is at the
location listed under Column 2 on Schedule A attached hereto opposite
such Debtor's name; and such Debtor has no other executive offices or
places of business other than those listed under Column 3 on Schedule A
attached hereto opposite such Debtor's name. The Collateral is and
shall remain in such Debtor's possession or control at the locations
listed under Columns 2 and 3 on Schedule A attached hereto opposite
such Debtor's name or at such other locations of which such Debtor
shall have given the Agent written notice (it being understood that
each Debtor shall give quarterly written notice to the Agent of any new
location, and that no default shall arise from keeping any Collateral
at a location not previously identified to the Agent if such location
is identified to the Agent at the time of the next such quarterly
notice following the opening of such location) (collectively for each
Debtor, the "PERMITTED COLLATERAL LOCATIONS"), except for Collateral
aggregating less than $100,000 in fair market value outstanding at any
one time. If for any reason any Collateral is at any time kept or
located at a location other than a Permitted Collateral Location, the
Agent shall nevertheless have and retain a lien on and security
interest therein. The Debtors own and shall at all times own all
Permitted Collateral Locations, except to the extent otherwise
disclosed under Columns 2 and 3 on Schedule A or in a quarterly notice.
No Debtor shall move its chief executive office without first providing
the Agent at least 30 days' prior written notice of the Debtor's intent
to do so; PROVIDED that (i) each Debtor shall at all times maintain its
chief executive office in the United States of America and such Debtor
shall have taken all action reasonably requested by the Agent to
maintain the lien and security interest of the Agent in the Collateral
at all times fully perfected and in full force and effect and (ii) the
Debtors that, on the date hereof, have chief executive offices located
in Lombard, Illinois may change such chief executive offices to
Highland Landmark IV Office Building, 3050 Highland Parkway, Downers
Grove, Illinois 60515.
(c) Each Debtor's legal name, state of organization and
organizational number (if any) are correctly set forth under Column 1
on Schedule A of this Agreement. No Debtor has transacted business at
any time during the immediately preceding five-year period, and does
not currently transact business, under any other legal names or trade
names other than the prior legal names and trade names (if any) set
forth on Schedule B attached hereto. No Debtor shall change its state
of organization or its legal name or transact business under any other
trade name without first giving 30 days' prior written notice of its
intent to do so to the Agent.
(d) The Collateral and every part thereof is and shall be
free and clear of all security interests, liens (including, without
limitation, mechanics', laborers' and statutory liens), attachments,
levies, and encumbrances of every kind, nature, and description and
whether voluntary or involuntary, except for the lien and security
6
interest of the Agent therein and other Liens permitted by the Credit
Agreement and the Senior Note Agreements (herein, the "PERMITTED
LIENS"). Each Debtor shall warrant and defend the Collateral against
any claims and demands of all persons at any time claiming any interest
in the Collateral adverse to that of the Secured Creditors.
(e) Each Debtor will promptly pay when due all taxes,
assessments, and governmental charges and levies that might become a
Lien upon its Collateral, in each case before the same become
delinquent and before penalties accrue thereon, unless and to the
extent that the same are being contested in good faith and by
appropriate proceedings which prevent enforcement of the matter under
contest and such Debtor shall have established adequate reserves
therefor.
(f) Each Debtor agrees it will not waste or destroy the
Collateral or any part thereof. Each Debtor agrees it will not use,
manufacture, sell or distribute any Collateral in violation of any
statute, ordinance or other governmental requirement, except to the
extent that any such violation would not be reasonably expected to have
a material adverse effect on the financial condition, Properties,
business or operations of the Public Hub Company or the Hub Group taken
as a whole. Each Debtor will perform in all material respects its
obligations under any material contract or other agreement constituting
part of the Collateral, it being understood and agreed that the Secured
Creditors have no responsibility to perform such obligations.
(g) Except as otherwise permitted by Section 5(b), 6(a),
7(b), 7(c), or 8(c) hereof or by the terms of the Credit Agreement and
the Senior Note Agreements, each Debtor agrees it will not, without the
Agent's prior written consent, sell, assign, mortgage, lease, or
otherwise dispose of the Collateral or any interest therein.
(h) Each Debtor will insure its Collateral consisting of
tangible personal property against such risks and hazards as other
companies similarly situated insure against, and including in any event
loss or damage by fire, theft, burglary, pilferage, and loss in
transit, in amounts and under policies containing loss payable clauses
to the Agent as its interest may appear (and, if the Agent requests,
naming the Agent as additional insured therein) by insurers having a
general policyholder service rating of not less than "A" as rated in
the most current available Best's Insurance Report. All premiums on
such insurance shall be paid by the Debtors and the policies of such
insurance (or certificates therefor) delivered to the Agent. All
insurance required hereby shall provide that any loss shall be payable
notwithstanding any act or negligence of the relevant Debtor, shall
provide that no cancellation thereof shall be effective until at least
30 days after receipt by the relevant Debtor and the Agent of written
notice thereof. In case of any material loss, damage to or destruction
of the Collateral or any portion thereof, the relevant Debtor shall
promptly give written notice thereof to the Agent generally describing
the nature and extent of such damage or destruction. In case of any
loss, damage to or destruction of the Collateral or any part thereof,
the relevant Debtor, whether or not the insurance proceeds, if any,
7
received on account of such damage or destruction shall be sufficient
for that purpose, at such Debtor's cost and expense, will promptly
repair or replace the Collateral so lost, damaged or destroyed, except
to the extent such Collateral is not necessary to the conduct of such
Debtor's business in the ordinary course. Each Debtor hereby authorizes
the Agent, at the Agent's option, to adjust, compromise, and settle any
losses under any insurance afforded at any time after the occurrence
and during the continuation of any Event of Default, and such Debtor
does hereby irrevocably constitute the Agent, its officers, agents, and
attorneys, as such Debtor's attorneys-in-fact, with full power and
authority after the occurrence and during the continuation of any
Default or Event of Default to effect such adjustment, compromise,
and/or settlement and to endorse any drafts drawn by an insurer of the
Collateral or any part thereof and to do everything necessary to carry
out such purposes and to receive and receipt for any unearned premiums
due under policies of such insurance. All insurance proceeds shall be
subject to the lien and security interest of the Agent hereunder.
UNLESS THE DEBTORS PROVIDE THE AGENT WITH EVIDENCE OF THE
INSURANCE COVERAGE REQUIRED BY THIS AGREEMENT, THE AGENT MAY PURCHASE
INSURANCE AT THE DEBTORS' EXPENSE TO PROTECT THE AGENT'S INTERESTS IN
THE COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT ANY DEBTOR'S
INTERESTS IN THE COLLATERAL. THE COVERAGE PURCHASED BY THE AGENT MAY
NOT PAY ANY CLAIMS THAT ANY DEBTOR MAKES OR ANY CLAIM THAT IS MADE
AGAINST SUCH DEBTOR IN CONNECTION WITH THE COLLATERAL. THE DEBTORS MAY
LATER CANCEL ANY SUCH INSURANCE PURCHASED BY THE AGENT, BUT ONLY AFTER
PROVIDING THE AGENT WITH EVIDENCE THAT THE DEBTORS HAVE OBTAINED
INSURANCE AS REQUIRED BY THIS AGREEMENT. IF THE AGENT PURCHASES
INSURANCE FOR THE COLLATERAL, THE DEBTORS WILL BE RESPONSIBLE FOR THE
COSTS OF THAT INSURANCE, INCLUDING INTEREST AND ANY OTHER CHARGES THAT
THE AGENT MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF THE INSURANCE,
UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE
INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO THE SECURED
OBLIGATIONS SECURED HEREBY. THE COSTS OF THE INSURANCE MAY BE MORE THAN
THE COST OF INSURANCE THE DEBTORS MAY BE ABLE TO OBTAIN ON THEIR OWN.
(i) Each Debtor will at all times allow the Secured Creditors
and their respective representatives free access to and right of
inspection of the Collateral at such reasonable times and intervals as
the Agent or any other Secured Creditor may designate; PROVIDED,
HOWEVER, that except upon the occurrence and during the continuation of
any Default or Event of Default, (i) such visitations and inspections
shall be made only with reasonable advance notice to the relevant
Debtor and during normal business hours of such Debtor and (ii) the
Agent and the Secured Creditors agree to use reasonable efforts to
coordinate their visits and inspections under this Section so as not to
be unreasonably burdensome on the Debtor being visited or inspected.
(j) As to any premises not owned by a Debtor wherein any of
the Collateral is located and which is essential to the tracking of its
Receivables (it being understood that the only such location as of the
date hereof is 377 East Butterfield Road, Lombard, Illinois, such
Debtor shall, upon the Agent's request, use commercially reasonable
efforts to cause each party having any right, title or interest in, or
lien on, any of such premises to enter into an agreement whereby such
party disclaims any right, title, and interest in and lien on the
8
Collateral, allows the use and removal of such Collateral by the Agent
or its agents or representatives, and otherwise is in form and
substance reasonably acceptable to the Agent; PROVIDED, HOWEVER, that
no such agreement need be obtained with respect to any such location
wherein the value of the Collateral as to which such agreement has not
been obtained aggregates less than $100,000 at any one time PROVIDED,
FURTHER, that the value of all such locations as to which such
agreements have not been obtained aggregates less than $250,000
PROVIDED, FURTHER, that it is understood that the obligations of the
Debtors to use commercially reasonable efforts as set forth in this
Section shall not involve the payment of money, the granting of lease
concessions or the incurrence of material expense.
(k) If an Event of Default has occurred and is continuing and
the Agent so requests, each Debtor agrees from time to time to deliver
to the Agent such evidence of the existence, identity, and location of
its Collateral and of its availability as collateral security pursuant
hereto (including, without limitation, schedules describing all
Receivables created or acquired by such Debtor, copies of customer
invoices or the equivalent and original shipping or delivery receipts
for all merchandise and other goods sold or leased or services rendered
by it, together with such Debtor's warranty of the genuineness thereof,
and reports stating the book value of its Inventory and Equipment by
major category and location), in each case as the Agent may reasonably
request. If any Event of Default has occurred and is continuing, the
Agent shall have the right to verify all or any part of the Collateral
in any manner, and through any medium, which the Agent considers
appropriate and reasonable, and each Debtor agrees to furnish all
assistance and information, and perform any acts, which the Agent may
require in connection therewith.
(l) Each Debtor will comply in all material respects with the
terms and conditions of any and all leases, easements, right-of-way
agreements, and other agreements binding upon or affecting such
Debtor's Collateral, in each case which cover the premises wherein the
Collateral is located, and any orders, ordinances, laws or statutes
affecting such Debtor's Collateral of any city, state or other
governmental entity, department or agency having jurisdiction with
respect to such premises or the conduct of business thereon.
(m) Schedule C attached hereto contains a true, complete, and
current listing of all copyrights, copyright applications, trademarks,
trademark rights and licenses (other than commercially available
software licenses), trademark registrations, trade names, patents,
patent rights and licenses, patent applications, and other intellectual
property rights owned by each of the Debtors as of the date hereof that
are, in each case, registered with any governmental authority. The
Debtors shall promptly notify the Agent in writing of any additional
intellectual property rights that are so registered, acquired or
arising after the date hereof, and shall submit to the Agent a
supplement to Schedule C to reflect such additional rights (provided
any Debtor's failure to do so shall not impair the Agent's security
interest therein).
(n) Schedule F attached hereto contains a true, complete and
current listing of all Commercial Tort Claims held or maintained by
each of the Debtors where the amount claimed exceeds $500,000 as of the
9
date hereof, each described by referring to a specific incident giving
rise to the claim. Each Debtor agrees to execute and deliver to the
Agent an agreement in the form attached hereto as Schedule H, or in
such other form reasonably acceptable to the Agent, promptly upon
becoming aware of any Commercial Tort Claim of such Debtor arising
after the date hereof where the amount claimed exceeds $500,000
(provided any Debtor's failure to do so shall not impair the Agent's
security interest therein). If at any time required by the Agent or the
Secured Creditors, the Debtors shall execute and deliver to the Agent a
Supplemental Security Agreement (in the form attached hereto as
Schedule H) listing all Commercial Tort Claims regardless of the amount
of such Claims.
(o) Each Debtor agrees to execute and deliver to the Agent
such further agreements, assignments, instruments, and documents, and
to do all such other things, as the Agent may reasonably deem necessary
or appropriate to assure the Agent its lien and security interest
hereunder, including, without limitation, (i) executing such financing
statements or other instruments and documents as the Agent may from
time to time reasonably require to comply with the UCC and any other
applicable law, (ii) executing such patent, trademark, and copyright
agreements as the Agent may from time to time reasonably require to
comply with the filing requirements of the United States Patent and
Trademark Office and the United States Copyright Office, and (iii)
executing such control agreements with respect to Deposit Accounts,
Securities Accounts, Letter-of-Credit Rights, and electronic Chattel
Paper as the Agent may from time to time reasonably require. Each
Debtor hereby agrees that a carbon, photographic or other reproduction
of this Agreement or any such financing statement is sufficient for
filing as a financing statement by the Agent without notice thereof to
such Debtor wherever the Agent in its sole discretion desires to file
the same. Each Debtor hereby authorizes the Agent to file any and all
financing statements covering the Collateral or any part thereof as the
Agent may require, including financing statements describing the
Collateral as "all assets" or "all personal property" or words of like
meaning. The Agent may order lien searches from time to time against
any Debtor and the Collateral, and the Debtors shall promptly reimburse
the Agent for all reasonable costs and expenses incurred in connection
with such lien searches. In the event for any reason the law of any
jurisdiction other than Illinois becomes or is applicable to the
Collateral or any part thereof, or to any of the Secured Obligations,
each Debtor agrees to execute and deliver all such agreements,
assignments, instruments, and documents and to do all such other things
as the Agent reasonably deems necessary or appropriate to preserve,
protect, and enforce the security interest of the Agent under the law
of such other jurisdiction. Each Debtor agrees to mark its books and
records to reflect the lien and security interest of the Agent in the
Collateral.
(p) On failure of any Debtor to perform any of the covenants
and agreements herein contained, the Agent may, at its option, perform
the same and in so doing may (after three Business Days' notice to the
relevant Debtor) expend such sums as the Agent reasonably deems
advisable in the performance thereof, including, without limitation,
the payment of any insurance premiums, the payment of any taxes, liens,
and encumbrances, expenditures made in defending against any adverse
claims, and all other expenditures which the Agent may be compelled to
make by operation of law or which the Agent may make by agreement or
10
otherwise for the protection of the security hereof. All such sums and
amounts so expended shall be repayable by the Debtors upon demand,
shall constitute additional Secured Obligations secured hereunder, and
shall bear interest from the date said amounts are expended at the rate
per annum (computed on the basis of a year of 360 days for the actual
number of days elapsed) equal to the Domestic Rate from time to time in
effect plus the Applicable Margin for the Domestic Rate Portion of the
Term Loan, with any change in such rate per annum as so determined by
reason of a change in such Domestic Rate to be effective on the date of
such change in said Domestic Rate (such rate per annum as so determined
being hereinafter referred to as the "DEFAULT RATE"). No such
performance of any covenant or agreement by the Agent on behalf of a
Debtor, and no such advancement or expenditure therefor, shall relieve
any Debtor of any default under the terms of this Agreement or in any
way obligate any Secured Creditor to take any further or future action
with respect thereto. The Agent, in making any payment hereby
authorized, may do so according to any bill, statement or estimate
procured from the appropriate public office or holder of the claim to
be discharged without inquiry into the accuracy of such bill, statement
or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien or title or claim. The Agent is hereby authorized
to charge any account of any Debtor maintained with any Secured
Creditor for the amount of such sums and amounts so expended and the
Agent shall give such Debtor notice of any such charge.
SECTION 5. SPECIAL PROVISIONS RE: RECEIVABLES. (a) If any
Receivable arises out of a contract with the United States of America, or any
state or political subdivision thereof, or any department, agency or
instrumentality of any of the foregoing, each Debtor agrees to promptly so
notify the Agent and, at the request of the Agent or the Secured Creditors after
the occurrence and during the continuation of an Event of Default, execute
whatever instruments and documents are reasonably required by the Agent in
order that such Receivable shall be assigned to the Agent and that proper notice
of such assignment shall be given under the federal Assignment of Claims Act
(or any successor statute) or any similar state or local statute, as the case
may be; PROVIDED, HOWEVER, that such procedures shall not be required with
respect to any one contract generating Receivables of less than $100,000.
(b) Unless and until an Event of Default has occurred and is continuing
any merchandise or other goods which are returned by a customer or account
debtor or otherwise recovered may be resold by a Debtor in the ordinary course
of its business as presently conducted in accordance with Section 7(b) hereof;
and, during the existence of any Event of Default, such merchandise and other
goods shall be set aside at the request of the Agent and held by the relevant
Debtor as trustee for the Secured Creditors and shall remain part of the Secured
Creditors' Collateral. Unless and until an Event of Default has occurred and is
continuing, each Debtor may settle and adjust disputes and claims with its
customers and account debtors, handle returns and recoveries, and grant
discounts, credits, and allowances in the ordinary course of its business as
presently conducted for amounts and on terms which such Debtor in good faith
considers advisable; and, during the existence of any Event of Default, at the
Agent's request, the Debtors shall notify the Agent promptly of all returns and
recoveries and, on the Agent's request, deliver any such merchandise or other
goods to the Agent. During the existence of any Event of Default, at the Agent's
request, the Debtors shall also notify the Agent promptly of all disputes and
11
claims and settle or adjust them at no expense to the Agent, but no discount,
credit or allowance other than on normal trade terms in the ordinary course of
business as presently conducted shall be granted to any customer or account
debtor and no returns of merchandise or other goods shall be accepted by any
Debtor without the Agent's consent. The Agent may, at all times during the
existence of any Event of Default, settle or adjust disputes and claims directly
with customers or account debtors for amounts and upon terms which the Agent
considers advisable.
(c) To the extent any Receivable or other item of Collateral is
evidenced by an Instrument (other than a check, draft, money order or similar
item which is to be deposited in a Deposit Account) or tangible Chattel Paper,
each Debtor shall cause such Instrument or tangible Chattel Paper to be pledged
and delivered to the Agent; PROVIDED, HOWEVER, that, prior to the existence of a
Default or Event of Default and thereafter until otherwise required by the
Agent, a Debtor shall not be required to deliver any such Instrument or tangible
Chattel Paper if and only so long as the unpaid principal balance of any such
Instrument or tangible Chattel Paper held by such Debtor and not delivered to
the Agent hereunder is less than $100,000 in each instance and the aggregate
unpaid principal balance of all such Instruments and tangible Chattel Paper held
by all Debtors and not delivered to the Agent hereunder is less than $250,000 at
any one time outstanding. Unless delivered to the Agent or its agent, all
tangible Chattel Paper and Instruments (other than a check, draft, money order
or similar item which is to be deposited in a Deposit Account) shall contain a
legend acceptable to the Agent indicating that such Chattel Paper or Instrument
is subject to the security interest of the Agent contemplated by this Agreement.
SECTION 6. COLLECTION OF RECEIVABLES. (a) Except as otherwise
provided in this Agreement, the Credit Agreement and the Senior Note Agreements,
each Debtor shall make collection of its Receivables in the ordinary course of
business and may use the same to carry on its business.
(b) If an Event of Default has occurred and is continuing, and whether
or not the Agent has exercised any of its other rights under other provisions of
this Section 6, in the event the Agent requests any Debtor to do so:
(i) all Instruments and tangible Chattel Paper at any time
constituting part of the Receivables (including any postdated checks)
shall, upon receipt by such Debtor, be immediately endorsed to and
deposited with Agent; and/or
(ii) such Debtor shall instruct all customers and account
debtors to remit all payments in respect of Receivables or any other
Collateral to a lockbox or lockboxes under the sole custody and control
of the Agent and which are maintained at one or more post offices
selected by the Agent.
(c) If an Event of Default has occurred and is continuing, and whether
or not the Agent has exercised any of its other rights under the other
provisions of this Section 6, the Agent or its designee may notify the relevant
Debtor's customers and account debtors at any time that Receivables have been
assigned to the Agent or of the Agent's security interest therein, and either in
its own name, or such Debtor's name, or both, demand, collect (including,
12
without limitation, through a lockbox analogous to that described in Section
6(b)(ii) hereof), receive, receipt for, sue for, compound and give acquittance
for any or all amounts due or to become due on Receivables, and in the Agent's
discretion file any claim or take any other action or proceeding which the Agent
may deem necessary or appropriate to protect and realize upon the security
interest of the Agent in the Receivables or any other Collateral.
(d) After the occurrence and during the continuance of an Event of
Default, any proceeds of Receivables or other Collateral transmitted to or
otherwise received by the Agent pursuant to any of the provisions of Section
6(b) or 6(c) hereof may be handled and administered by the Agent in and through
a remittance account or accounts maintained at the Agent or by the Agent at a
commercial bank or banks selected by the Agent (collectively the "DEPOSITARY
BANKS" and individually a "DEPOSITARY BANK"), and each Debtor acknowledges that
the maintenance of such remittance accounts by the Agent is solely for the
Agent's convenience and that the Debtors do not have any right, title or
interest in such remittance accounts or any amounts at any time standing to the
credit thereof. The Agent may, after the occurrence and during the continuation
of an Event of Default, apply the proceeds of Receivables or other Collateral
received by it from any source to the payment of the Secured Obligations
(whether or not then due and payable), such applications to be made in the
manner provided for in the Intercreditor Agreement, if applicable, and otherwise
at the direction of the Secured Creditors. The Agent need not apply or give
credit for any item included in proceeds of Receivables or other Collateral
until the Depositary Bank has received final payment therefor at its office in
cash or final solvent credits current at the site of deposit acceptable to the
Agent and the Depositary Bank as such. However, if the Agent does permit credit
to be given for any item prior to a Depositary Bank receiving final payment
therefor and such Depositary Bank fails to receive such final payment or an item
is charged back to the Agent or any Depositary Bank for any reason, the Agent
may at its election in either instance charge the amount of such item back
against any such remittance accounts or any Deposit Account of any Debtor
subject to the lien and security interest of this Agreement, together with
interest thereon at the Default Rate. Concurrently with each transmission of any
proceeds of Receivables or other Collateral to any such remittance account, upon
the Agent's request, the relevant Debtor shall furnish the Agent with a report
in such form as Agent shall reasonably require identifying the particular
Receivable or such other Collateral from which the same arises or relates.
Unless and until a Default or an Event of Default has occurred and is
continuing, the Agent will release proceeds of Collateral which the Agent has
not applied to the Secured Obligations as provided above from the remittance
account from time to time after receipt thereof. Each Debtor hereby indemnifies
the Secured Creditors from and against all liabilities, damages, losses,
actions, claims, judgments, and all reasonable costs, expenses, charges, and
attorneys' fees suffered or incurred by any Secured Creditor because of the
maintenance of the foregoing arrangements; PROVIDED, HOWEVER, that no Debtor
shall be required to indemnify any Secured Creditor for any of the foregoing to
the extent they arise from the gross negligence or willful misconduct of the
person seeking to be indemnified. The Secured Creditors shall have no liability
or responsibility to any Debtor for the Agent or any Depositary Bank accepting
any check, draft or other order for payment of money bearing the legend "payment
in full" or words of similar import or any other restrictive legend or
endorsement whatsoever or be responsible for determining the correctness of any
remittance.
13
SECTION 7. SPECIAL PROVISIONS RE: INVENTORY AND EQUIPMENT.
(a) Each Debtor shall at its own cost and expense maintain, keep, and preserve
its Inventory in good and merchantable condition and keep and preserve its
Equipment (other than obsolete, worn-out or redundant Equipment) in good repair,
working order, and condition, ordinary wear and tear excepted, and, without
limiting the foregoing, make all necessary and proper repairs, replacements,
and additions to its Equipment (other than obsolete, worn-out or redundant
Equipment) so that the efficiency thereof shall be fully preserved and
maintained.
(b) Each Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Agent, use, consume,
sell, and lease the Inventory in the ordinary course of its business, but a sale
in the ordinary course of business shall not under any circumstance include any
transfer or sale in satisfaction, partial or complete, of a debt owing by such
Debtor.
(c) Each Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Agent, sell Equipment
to the extent not prohibited by the Credit Agreement and the Senior Note
Agreements.
(d) As of the time any Inventory or Equipment of a Debtor becomes
subject to the security interest provided for hereby and at all times
thereafter, such Debtor shall be deemed to have warranted as to any and all of
such Inventory and Equipment that all warranties of such Debtor set forth in
this Agreement are true and correct in all material respects with respect to
such Inventory and Equipment; and that all of such Inventory and Equipment is
located at a location set forth or otherwise disclosed or to be disclosed
pursuant to Section 4(b) hereof. Each Debtor warrants and agrees that none of
its Inventory is or will be consigned to any other person without the Agent's
prior written consent.
(e) If an Event of Default has occurred and is continuing and the Agent
or the Secured Creditors so request, each Debtor shall at its own cost and
expense cause the lien of the Agent in and to any portion of the Collateral
subject to a certificate of title law to be duly noted on such certificate of
title or to be otherwise filed in such manner as is prescribed by law in order
to perfect such lien and will cause all such certificates of title and evidences
of lien to be deposited with the Agent.
(f) Except for Equipment from time to time located on the real estate
described on Schedule D attached hereto or as otherwise hereafter disclosed to
the Agent and the Secured Creditors in writing, none of the Equipment is or will
be attached to real estate in such a manner that the same may become a fixture.
(g) If any of the Inventory is at any time evidenced by a document of
title, such document shall be promptly delivered by the relevant Debtor to the
Agent.
14
SECTION 8. SPECIAL PROVISIONS RE: INVESTMENT PROPERTY AND DEPOSITS.
(a) Unless and until an Event of Default has occurred and is continuing and
thereafter until notified to the contrary by the Agent pursuant to Section
10(d) hereof:
(i) each Debtor shall be entitled to exercise all voting
and/or consensual powers pertaining to its Investment Property, or any
part thereof; and
(ii) each Debtor shall be entitled to receive and retain all
cash dividends paid upon or in respect of its Investment Property
subject to the lien and security interest of this Agreement.
(b) All Investment Property (including all securities, certificated or
uncertificated, securities accounts, and commodity accounts) maintained by each
Debtor on the date hereof is listed and identified on Schedule E attached hereto
and made a part hereof. Each Debtor shall promptly notify the Agent of any other
Investment Property acquired by such Debtor after the date hereof, and shall
submit to the Agent a supplement to Schedule E to reflect such additional rights
(provided any Debtor's failure to do so shall not impair the Agent's security
interest therein). Certificates for all certificated securities now or at any
time constituting Investment Property and part of the Collateral hereunder shall
be promptly delivered by the relevant Debtor to the Agent duly endorsed in blank
for transfer or accompanied by an appropriate assignment or assignments or an
appropriate undated stock power or powers, in every case sufficient to transfer
title thereto, including, without limitation, all stock received in respect of a
stock dividend or resulting from a split-up, revision or reclassification of the
Investment Property or any part thereof or received in addition to, in
substitution of or in exchange for the Investment Property or any part thereof
as a result of a merger, consolidation or otherwise. With respect to any
uncertificated securities or any Investment Property held by a securities
intermediary, commodity intermediary, or other financial intermediary of any
kind, at the Agent's request, the relevant Debtor shall execute and deliver, and
shall cause any such issuer or intermediary to execute and deliver, an agreement
among such Debtor, the Agent, and such issuer or intermediary in form and
substance reasonably satisfactory to the Agent which provides, among other
things, for the issuer's or intermediary's agreement that it will, while an
Event of Default exists, comply with such entitlement orders and apply any value
distributed on account of any Investment Property, as directed by the Agent
without further consent by such Debtor. The Agent may, at any time after the
occurrence and during the continuation of any Event of Default, cause to be
transferred into its name or the name of its nominee or nominees any and all of
the Investment Property hereunder.
(c) Unless and until an Event of Default has occurred and is
continuing, each Debtor may sell or otherwise dispose of any of its Investment
Property to the extent not prohibited by the Credit Agreement and the Senior
Note Agreements, PROVIDED that, except to the extent permitted by the Credit
Agreement and the Senior Note Agreements, no Debtor shall sell or otherwise
dispose of any capital stock or other equity interest in any direct or indirect
Subsidiary hereunder without the prior written consent of the Agent. After the
occurrence and during the continuation of any Event of Default, no Debtor shall
sell all or any part of its Investment Property without the prior written
consent of the Agent.
15
(d) Each Debtor represents that on the date of this Agreement, none of
its Investment Property consists of margin stock (as such term is defined in
Regulation U of the Board of Governors of the Federal Reserve System) except to
the extent such Debtor has delivered to the Agent a duly executed and completed
Form U-1 with respect to such stock. If at any time the Investment Property or
any part thereof consists of margin stock, the relevant Debtor shall promptly so
notify the Agent and deliver to the Agent a duly executed and completed Form U-1
and such other instruments and documents reasonably requested by the Agent in
form and substance reasonably satisfactory to the Agent.
(e) Notwithstanding anything to the contrary contained herein, in the
event any Investment Property is subject to the terms of a separate security
agreement in favor of the Agent, the terms of such separate security agreement
shall govern and control unless otherwise agreed to in writing by the Agent.
(f) All Deposit Accounts maintained by each Debtor on the date hereof
are listed and identified (by account number and depository institution) on
Schedule E attached hereto and made a part hereof. Each Debtor shall promptly
notify the Agent of any other Deposit Account opened or maintained by such
Debtor after the date hereof, and shall submit to the Agent a supplement to
Schedule E to reflect such additional accounts (provided any Debtor's failure to
do so shall not impair the Agent's security interest therein). With respect to
any Deposit Account (other than payroll accounts and insurance accounts)
maintained by a depository institution other than the Agent, and as a condition
to the establishment and maintenance of any such Deposit Account, such Debtor,
the depository institution, and the Agent shall execute and deliver an account
control agreement in form and substance reasonably satisfactory to the Agent
which provides, among other things, for the depository institution's agreement
that, while an Event of Default exists, it will comply with instructions
originated by the Agent directing the disposition of the funds in the Deposit
Account without further consent by such Debtor; PROVIDED, HOWEVER, that no such
agreement need be obtained with respect to any Deposit Account wherein the value
of the Collateral as to which such agreement has not been obtained aggregates
less than $50,000 at any one time PROVIDED, FURTHER, that the value of all such
Deposit Accounts as to which such agreements have not been obtained aggregates
less than $250,000. Notwithstanding anything herein to the contrary, no such
account control agreement shall be required with respect to (i) account number
00021350-149 maintained by the Public Hub Company with Bank of Montreal unless
the Agent or the Secured Creditors so indicate and (ii) account number 715815662
maintained by Hub Group Pittsburgh, LLC with National City Bank of Pennsylvania
unless such account remains open more than 60 days after the date hereof.
SECTION 9. POWER OF ATTORNEY. In addition to any other powers of
attorney contained herein, each Debtor hereby appoints the Agent, its nominee,
or any other person whom the Agent may designate as such Debtor's
attorney-in-fact, with full power and authority upon the occurrence and during
the continuation of any Event of Default: to sign such Debtor's name on
verifications of Receivables and other Collateral; to send requests for
verification of Collateral to such Debtor's customers, account debtors, and
other obligors; to endorse such Debtor's name on any checks, notes, acceptances,
money orders, drafts, and any other forms of payment or security that may come
into the Agent's possession; to endorse the Collateral in blank or to the order
16
of the Agent or its nominee; to sign such Debtor's name on any invoice or bill
of lading relating to any Collateral, on claims to enforce collection of any
Collateral, on notices to and drafts against customers and account debtors and
other obligors, on schedules and assignments of Collateral, on notices of
assignment and on public records; to notify the post office authorities to
change the address for delivery of such Debtor's mail to an address designated
by the Agent; to receive, open, and dispose of all mail addressed to such
Debtor; and to do all things necessary to carry out this Agreement. Each Debtor
hereby ratifies and approves all acts of any such attorney done in good faith
and agrees that neither the Agent nor any such attorney will be liable for any
acts or omissions nor for any error of judgment or mistake of fact or law other
than such person's gross negligence or willful misconduct. The Agent may file
one or more financing statements disclosing its security interest in all or any
part of the Collateral without any Debtor's signature appearing thereon, and
each Debtor also hereby grants the Agent a power of attorney to execute any such
financing statements, and amendments and supplements thereto, on behalf of such
Debtor without notice thereof to any Debtor. The foregoing powers of attorney,
being coupled with an interest, are irrevocable until the Secured Obligations
have been fully paid and satisfied and the commitments of the Bank Creditors to
extend credit to or for the account of the Borrowers (or either of them) under
the Credit Agreement have expired or otherwise terminated.
SECTION 10. DEFAULTS AND REMEDIES. (a) The occurrence of any event or
the existence of any condition which is specified as an "Event of Default" under
the Credit Agreement or under any Senior Note Agreement shall constitute an
"EVENT OF DEFAULT" hereunder. For purposes hereof, a "DEFAULT" means any event
or condition the occurrence of which would, with the passage of time or the
giving of notice, or both, constitute an Event of Default.
(b) Upon the occurrence and during the continuation of any Event of
Default, the Agent shall have, in addition to all other rights provided herein
or by law, the rights and remedies of a secured party under the UCC (regardless
of whether the UCC is the law of the jurisdiction where the rights or remedies
are asserted and regardless of whether the UCC applies to the affected
Collateral), and further the Agent may, without demand and, to the extent
permitted by applicable law, without advertisement, notice, hearing or process
of law, all of which each Debtor hereby waives to the extent permitted by
applicable law, at any time or times, sell and deliver any or all Collateral
held by or for it at public or private sale, at any securities exchange or
broker's board or at the Agent's office or elsewhere, for cash, upon credit or
otherwise, at such prices and upon such terms as the Agent deems advisable, in
its discretion. In the exercise of any such remedies, the Agent may sell the
Collateral as a unit even though the sales price thereof may be in excess of the
amount remaining unpaid on the Secured Obligations. Also, if less than all the
Collateral is sold, the Agent shall have no duty to marshal or apportion the
part of the Collateral so sold as between the Debtors, or any of them, but may
sell and deliver any or all of the Collateral without regard to which of the
Debtors are the owners thereof. In addition to all other sums due any Secured
Creditor hereunder, each Debtor shall pay the Agent all reasonable costs and
expenses incurred by the Agent, including reasonable attorneys' fees and court
costs, in obtaining, liquidating or enforcing payment of Collateral or the
Secured Obligations or in the prosecution or defense of any action or proceeding
by or against any Secured Creditor or any Debtor concerning any matter arising
out of or connected with this Agreement or the Collateral or the Secured
Obligations, including, without limitation, any of the foregoing arising in,
arising under or related to a case under the United States Bankruptcy Code (or
any successor statute). Any requirement of reasonable notice shall be met if
17
such notice is personally served on or mailed, postage prepaid, to the Debtors
in accordance with Section 14(b) hereof at least ten days before the time of
sale or other event giving rise to the requirement of such notice; PROVIDED,
HOWEVER, no notification need be given to a Debtor if such Debtor has signed,
after an Event of Default hereunder has occurred, a statement renouncing any
right to notification of sale or other intended disposition. The Agent shall not
be obligated to make any sale or other disposition of the Collateral regardless
of notice having been given. Any Secured Creditor may be the purchaser at any
such sale. Each Debtor hereby waives all of its rights of redemption from any
such sale. The Agent may postpone or cause the postponement of the sale of all
or any portion of the Collateral by announcement at the time and place of such
sale, and such sale may, without further notice, be made at the time and place
to which the sale was postponed or the Agent may further postpone such sale by
announcement made at such time and place. The Agent has no obligation to prepare
the Collateral for sale. The Agent may sell or otherwise dispose of the
Collateral without giving any warranties as to the Collateral or any part
thereof, including disclaimers of any warranties of title or the like, and each
Debtor acknowledges and agrees that the absence of such warranties shall not
render the disposition commercially unreasonable.
(c) Without in any way limiting the foregoing, upon the occurrence and
during the continuation of any Event of Default hereunder, in addition to all
other rights provided herein or by law, (i) the Agent shall have the right to
take physical possession of any and all of the Collateral and anything found
therein, the right for that purpose to enter without legal process any premises
where the Collateral may be found (provided such entry be done lawfully), and
the right to maintain such possession on the relevant Debtor's premises (each
Debtor hereby agreeing, to the extent it may lawfully do so, to lease such
premises without cost or expense to the Agent or its designee if the Agent so
requests) or to remove the Collateral or any part thereof to such other places
as the Agent may desire, (ii) the Agent shall have the right to direct any
intermediary at any time holding any Investment Property or other Collateral, or
any issuer thereof, to deliver such Collateral or any part thereof to the Agent
and/or to liquidate such Collateral or any part thereof and deliver the proceeds
thereof to the Agent (including, without limitation, the right to deliver a
notice of control with respect to any Collateral held in a securities account or
commodities account and deliver all entitlement orders with respect thereto),
(iii) the Agent shall have the right to exercise any and all rights with respect
to all Deposit Accounts of each Debtor, including, without limitation, the right
to direct the disposition of the funds in each Deposit Account and to collect,
withdraw, and receive all amounts due or to become due or payable thereunder,
and (iv) each Debtor shall, upon the Agent's demand, promptly assemble the
tangible Collateral and make it available to the Agent at a place reasonably
designated by the Agent which is reasonably convenient to such Debtor and the
Agent. If the Agent exercises its right to take possession of the Collateral,
each Debtor shall also at its expense perform any and all other steps reasonably
requested by the Agent to preserve and protect the security interest hereby
granted in the Collateral, such as placing and maintaining signs indicating the
security interest of the Agent, appointing overseers for the Collateral and
maintaining Collateral records.
(d) Without in any way limiting the foregoing, upon the occurrence and
during the continuation of any Event of Default, all rights of the Debtors to
exercise the voting and/or consensual powers which they are entitled to exercise
pursuant to Section 8(a)(i) hereof and/or to receive and retain the
distributions which they are entitled to receive and retain pursuant to Section
8(a)(ii) hereof, shall, at the option of the Agent, cease and thereupon become
18
vested in the Agent, which, in addition to all other rights provided herein or
by law, shall then be entitled solely and exclusively to exercise all voting and
other consensual powers pertaining to the Investment Property and/or to receive
and retain the distributions which such Debtor would otherwise have been
authorized to retain pursuant to Section 8(a)(ii) hereof and shall then be
entitled solely and exclusively to exercise any and all rights of conversion,
exchange or subscription or any other rights, privileges or options pertaining
to any Investment Property as if the Agent were the absolute owner thereof
including, without limitation, the rights to exchange, at its discretion, all
Investment Property or any part thereof upon the merger, consolidation,
reorganization, recapitalization or other readjustment of the respective issuer
thereof or upon the exercise by or on behalf of any such issuer or the Agent of
any right, privilege or option pertaining to any Investment Property and, in
connection therewith, to deposit and deliver the Investment Property or any part
thereof with any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as the Agent may determine. In
the event the Agent in good faith believes any of the Collateral constitutes
restricted securities within the meaning of any applicable securities laws, any
disposition thereof in compliance with such laws shall not render the
disposition commercially unreasonable.
(e) Without in any way limiting the foregoing, each Debtor hereby
grants to the Secured Creditors a non-exclusive royalty-free irrevocable license
and right to use, after the occurrence and during the continuance of an Event of
Default, all of such Debtor's patents, patent applications, patent licenses,
trademarks, trademark registrations, trademark licenses, trade names, trade
styles, and similar intangibles in connection with any foreclosure or other
realization by the Agent or the Secured Creditors on all or any part of the
Collateral to the extent permitted by law. The Agent agrees that it will, when
exercising its rights under the license granted under this Section 10(e), comply
in all material respects with quality standards and specifications employed by
the Debtors in commerce with respect to the Collateral. The license and right
granted the Secured Creditors hereby shall be without any royalty or fee or
charge whatsoever.
(f) The powers conferred upon the Secured Creditors hereunder are
solely to protect their interest in the Collateral and shall not impose on them
any duty to exercise such powers. The Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession or control if such Collateral is accorded treatment substantially
equivalent to that which the Agent accords its own property, consisting of
similar type assets, it being understood, however, that the Agent shall have no
responsibility for (i) ascertaining or taking any action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Collateral, whether or not the Agent has or is deemed to have knowledge of such
matters, (ii) taking any necessary steps to preserve rights against any parties
with respect to any Collateral, or (iii) initiating any action to protect the
19
Collateral or any part thereof against the possibility of a decline in market
value. This Agreement constitutes an assignment of rights only and not an
assignment of any duties or obligations of the Debtors in any way related to the
Collateral, and the Agent shall have no duty or obligation to discharge any such
duty or obligation. Neither any Secured Creditor nor any party acting as
attorney for any Secured Creditor shall be liable for any acts or omissions or
for any error of judgment or mistake of fact or law other than such person's
gross negligence or willful misconduct.
(g) Failure by the Agent to exercise any right, remedy or option under
this Agreement or any other agreement between any Debtor and the Agent or
provided by law, or delay by the Agent in exercising the same, shall not operate
as a waiver; and no waiver shall be effective unless it is in writing, signed by
the party against whom such waiver is sought to be enforced and then only to the
extent specifically stated. The rights and remedies of the Secured Creditors
under this Agreement shall be cumulative and not exclusive of any other right or
remedy which any Secured Creditor may have.
SECTION 11. APPLICATION OF PROCEEDS. The proceeds and avails of the
Collateral at any time received by the Agent upon any collection, sale or other
disposition of the Collateral shall, when received by the Agent in cash or its
equivalent, be applied by the Agent in reduction of, or held as collateral
security for, the Secured Obligations in accordance with the terms of this
Agreement and the Intercreditor Agreement. The Debtors shall remain liable to
the Secured Creditors for any deficiency. Any surplus remaining after the full
payment and satisfaction of the Secured Obligations shall be returned to the
Public Hub Company, as agent for the Debtors, or to whomsoever is lawfully
entitled thereto.
SECTION 12. CONTINUING AGREEMENT. This Agreement shall be a continuing
agreement in every respect and shall remain in full force and effect until all
of the Secured Obligations (other than contingent obligations that, by their
terms, survive the termination of the Credit Agreement, the Senior Note
Agreements and any related guaranties), both for principal and interest, have
been fully paid and satisfied and the commitments of the Secured Creditors to
extend credit to or for the account of the Borrowers, or either of them, under
the Credit Agreement have expired or otherwise terminated. Upon such termination
of this Agreement, the security interests granted herein shall terminate and the
Agent shall, upon the request and at the expense of the Debtors, forthwith
release its liens and security interests hereunder and shall deliver to the
Debtors such documents as the Debtors may reasonably request to evidence such
termination. If any of the Collateral (including without limitation equity
interests in any Subsidiary) shall be sold, transferred or otherwise disposed of
by any Debtor in a transaction permitted by the Credit Agreement and the Senior
Note Agreements, then the Agent shall, at the request and expense of such
Debtor, execute and deliver to such Debtor all releases and other documents
reasonably necessary for the release of the Liens created hereby on such
Collateral.
SECTION 13. THE AGENT. In acting under or by virtue of this Agreement,
the Agent shall be entitled to all the rights, authority, privileges, and
immunities provided in Sections 7 and 12 of the Intercreditor Agreement, all of
which provisions of said Intercreditor Agreement are incorporated by reference
herein with the same force and effect as if set forth herein in their entirety.
The Agent hereby disclaims any representation or warranty to the Secured
Creditors or any other holders of the Secured Obligations concerning the
perfection of the liens and security interests granted hereunder or in the value
of any of the Collateral.
SECTION 14. MISCELLANEOUS. (a) This Agreement cannot be changed or
terminated orally. This Agreement shall create a continuing lien on and security
interest in the Collateral and shall be binding upon each Debtor, its successors
and assigns and shall inure, together with the rights and remedies of the
Secured Creditors hereunder, to the benefit of the Secured Creditors and their
20
successors and permitted assigns; PROVIDED, HOWEVER, that no Debtor may assign
its rights or delegate its duties hereunder without the Agent's prior written
consent.
(b) Except as otherwise specified herein, all notices hereunder shall
be in writing (including, without limitation, notice by telecopy) and shall be
given to the relevant party at its address or telecopier number set forth below
(or, if no such address is set forth below, at the address of the relevant
Debtor as shown on the records of the Agent), or such other address or
telecopier number as such party may hereafter specify by notice to the other
given by courier, by United States certified or registered mail, by telecopy or
by other telecommunication device capable of creating a written record of such
notice and its receipt. Notices hereunder shall be addressed:
to the Debtors at: to the Agent at:
Hub Group, Inc. Harris Trust and Savings Bank
377 East Butterfield Road, Suite 700 111 West Monroe Street
Lombard, Illinois 60148 Chicago, Illinois 60603
Attention: Chief Financial Officer Attention: Mark Piekos
Telephone: (630) 271-3600 Telephone: (312) 461-2246
Telecopy: (630) 964-3787 Telecopy: (312) 293-4856
Each such notice, request or other communication shall be effective (i) if given
by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section and a confirmation of such telecopy has been received
by the sender, (ii) if given by mail, five days after such communication is
deposited in the mail, certified or registered with return receipt requested,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the addresses specified in this Section.
(c) No Secured Creditor (other than the Agent) shall have the right to
institute any suit, action or proceeding in equity or at law for the foreclosure
or other realization upon any Collateral subject to this Agreement or for the
execution of any trust or power hereof or for the appointment of a receiver, or
for the enforcement of any other remedy under or upon this Agreement; it being
understood and intended that no one or more of the Secured Creditors shall have
any right in any manner whatsoever to affect, disturb or prejudice the lien and
security interest of this Agreement by its or their action or to enforce any
right hereunder, and that all proceedings at law or in equity shall be
instituted, had, and maintained by the Agent in the manner herein provided for
the benefit of the Secured Creditors.
(d) In the event and to the extent that any provision hereof shall be
deemed to be invalid or unenforceable by reason of the operation of any law or
by reason of the interpretation placed thereon by any court, this Agreement
shall to such extent be construed as not containing such provision, but only as
to such jurisdictions where such law or interpretation is operative, and the
invalidity or unenforceability of such provision shall not affect the validity
of any remaining provisions hereof, and any and all other provisions hereof
which are otherwise lawful and valid shall remain in full force and effect.
Without limiting the generality of the foregoing, in the event that this
21
Agreement shall be deemed to be invalid or otherwise unenforceable with respect
to any Debtor, such invalidity or unenforceability shall not affect the validity
of this Agreement with respect to the other Debtors.
(e) The lien and security interest herein created and provided for
stand as direct and primary security for the Secured Obligations of the
Borrowers arising under or otherwise relating to the Credit Agreement and the
Senior Note Agreements as well as for the other Secured Obligations secured
hereby. No application of any sums received by the Secured Creditors in respect
of the Collateral or any disposition thereof to the reduction of the Secured
Obligations or any part thereof shall in any manner entitle any Debtor to any
right, title or interest in or to the Secured Obligations or any collateral or
security therefor, whether by subrogation or otherwise, unless and until all
Secured Obligations have been fully paid and satisfied and all commitments of
the Secured Creditors to extend credit to or for the account of the Borrowers,
or either of them, have expired or otherwise terminated. Each Debtor (other than
the Borrowers) acknowledges and agrees that the lien and security interest
hereby created and provided are absolute and unconditional and shall not in any
manner be affected or impaired by any acts of omissions whatsoever of any
Secured Creditor or any other holder of any Secured Obligations, and without
limiting the generality of the foregoing, the lien and security interest hereof
shall not be impaired by any acceptance by any Secured Creditor or any other
holder of any Secured Obligations of any other security for or guarantors upon
any of the Secured Obligations or by any failure, neglect or omission on the
part of any Secured Creditor or any other holder of any of the Secured
Obligations to realize upon or protect any of the Secured Obligations or any
collateral or security therefor. Each Debtor (other than the Borrowers) agrees
that the lien and security interest hereof shall not in any manner be impaired
or affected by (and the Secured Creditors, without notice to anyone, are hereby
authorized to make from time to time) any sale, pledge, surrender, compromise,
settlement, release, renewal, extension, indulgence, alteration, substitution,
exchange, change in, modification or disposition of any of the Secured
Obligations or of any collateral or security therefor, or of any guaranty
thereof, or of any instrument or agreement setting forth the terms and
conditions pertaining to any of the foregoing. The Secured Creditors may at
their discretion at any time grant credit to the Borrowers, or either of them,
without notice to the other Debtors in such amounts and on such terms as the
Secured Creditors may elect without in any manner impairing the lien and
security interest created and provided for. In order to realize hereon and to
exercise the rights granted the Secured Creditors hereunder and under applicable
law, there shall be no obligation on the part of any Secured Creditor or any
other holder of any Secured Obligations at any time to first resort for payment
to the Borrowers, or either of them, or any other Debtor or to any guaranty of
the Secured Obligations or any portion thereof or to resort to any other
collateral, security, property, liens or any other rights or remedies
whatsoever, and the Secured Creditors shall have the right to enforce this
Agreement against any Debtor or its Collateral irrespective of whether or not
other proceedings or steps seeking resort to or realization upon or from any of
the foregoing are pending.
(f) In the event the Secured Creditors shall at any time in their
discretion permit a substitution of Debtors hereunder or a party shall wish to
become a Debtor hereunder, such substituted or additional Debtor shall, upon
executing an agreement in the form attached hereto as Schedule G, become a party
hereto and be bound by all the terms and conditions hereof to the same extent as
though such Debtor had originally executed this Agreement and, in the case of a
substitution, in lieu of the Debtor being replaced. Any such agreement shall
22
contain information as to such Debtor necessary to update Schedules A, B, C, D,
E, and F hereto with respect to it. No such substitution shall be effective
absent the written consent of the Agent nor shall it in any manner affect the
obligations of the other Debtors hereunder.
(g) This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterpart signature pages, each
constituting an original, but all together one and the same instrument.
(h) This Agreement shall be deemed to have been made in the State of
Illinois and shall be governed by, and construed in accordance with, the laws of
the State of Illinois. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning of any
provision hereof.
(i) Each Debtor hereby submits to the non-exclusive jurisdiction of the
United States District Court for the Northern District of Illinois and of any
Illinois state court sitting in the City of Chicago, Illinois, for purposes of
all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. Each Debtor irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in an
inconvenient form. EACH DEBTOR AND, BY ACCEPTING THE BENEFITS OF THIS AGREEMENT,
EACH SECURED CREDITOR HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
[SIGNATURE PAGES TO FOLLOW]
23
IN WITNESS WHEREOF, each Debtor has caused this Security Agreement to
be duly executed and delivered as of the date first above written.
"DEBTORS"
HUB GROUP, INC.
HUB CITY TERMINALS, INC.
HUB CHICAGO HOLDINGS, INC.
HLX COMPANY, L.L.C.
QSSC, INC.
QUALITY SERVICES, L.L.C.,
QUALITY SERVICES OF KANSAS, L.L.C.
QUALITY SERVICES OF NEW JERSEY, L.L.C.
Q.S. OF ILLINOIS, LLC
Q.S. OF GEORGIA, L.L.C.
HUB GROUP ALABAMA, LLC
HUB GROUP ATLANTA, LLC
HUB GROUP BOSTON, LLC
HUB GROUP CANADA, LP
HUB GROUP CLEVELAND, LLC
HUB GROUP DETROIT, LLC
HUB GROUP FLORIDA, LLC
HUB GROUP GOLDEN GATE, LLC
HUB GROUP INDIANAPOLIS, LLC
HUB GROUP KANSAS CITY, LLC
HUB GROUP LOS ANGELES, LLC
HUB GROUP MID ATLANTIC, LLC
HUB GROUP NEW ORLEANS, LLC
HUB GROUP NEW YORK STATE, LLC
HUB GROUP NEW YORK-NEW JERSEY, LLC
HUB GROUP NORTH CENTRAL, LLC
HUB GROUP OHIO, LLC
HUB GROUP PHILADELPHIA, LLC
HUB GROUP PITTSBURGH, LLC
HUB GROUP PORTLAND, LLC
HUB GROUP ST. LOUIS, LLC
HUB GROUP TENNESSEE, LLC
HUB CITY TEXAS, L.P.
HUB GROUP TRANSPORT, LLC
HUB GROUP ASSOCIATES, INC.
HUB FREIGHT SERVICES, INC.
HUB HIGHWAY SERVICES
HUB GROUP DISTRIBUTION SERVICES, LLC
By
David P. Yeager, Chief Executive Officer
for each of the above Debtors
24
Accepted and agreed to in Chicago, Illinois, as of the date first above
written.
HARRIS TRUST AND SAVINGS BANK, as Agent
By
Name________________________________________
Title_______________________________________
25
SCHEDULE A
LOCATIONS
COLUMN 1 COLUMN 2 COLUMN 3
NAME OF DEBTOR (AND STATE OF ADDITIONAL PLACES OF BUSINESS AND
ORGANIZATION AND ORGANIZATIONAL CHIEF EXECUTIVE OFFICE (AND NAME OF COLLATERAL LOCATIONS (AND NAME OF AND
REGISTRATION NUMBER) LANDLORD AT SUCH LOCATION) LANDLORD AT SUCH LOCATIONS)
HUB GROUP, INC. 377 E. Butterfield Road None
Delaware corporation Lombard, Illinois 60148
#2456676 (CarrAmerica)
HUB CITY TERMINALS, INC. 333 E. Butterfield Rd. None
Delaware corporation 8th Floor
#0768811 Lombard, IL 60148
(CarrAmerica)
HUB CHICAGO HOLDINGS, INC. 377 E. Butterfield Road None
Delaware corporation Lombard, Illinois 60148
#2877605 (CarrAmerica)
HLX COMPANY, L.L.C. 100 Plaza Drive None
Delaware limited liability company Secaucus, New Jersey 07094-3604
#2589176 (Meadow Park Associates)
QSSC, INC. 780 South Nogales Street None
Delaware corporation City of Industry, CA 91748
#3073474 (PH Ketchum Trust)
QUALITY SERVICES, L.L.C. Mailing address: None
Missouri limited liability company 5420 Brown Avenue
#LC0001870 St. Louis, MO 63120
Property location:
Union Seventy Center
Business Park
3901 Union Blvd
St. Louis, MO 63115
(Union Seventy Partnership)
QUALITY SERVICES OF KANSAS, L.L.C. 9250 Glenwood None
Kansas limited liability company Overland Park, KS 66212
#2409704 (BB Holdings LC)
QUALITY SERVICES OF NEW JERSEY, L.L.C. None None
New Jersey limited liability company
#0600026763
Q.S. OF ILLINOIS, LLC 5090 S. Lawndale Avenue None
Michigan limited liability company McCook, IL 60525
#B02918 (Finch & Barry Properties)
COLUMN 1 COLUMN 2 COLUMN 3
NAME OF DEBTOR (AND STATE OF ADDITIONAL PLACES OF BUSINESS AND
ORGANIZATION AND ORGANIZATIONAL CHIEF EXECUTIVE OFFICE (AND NAME OF COLLATERAL LOCATIONS (AND NAME OF AND
REGISTRATION NUMBER) LANDLORD AT SUCH LOCATION) LANDLORD AT SUCH LOCATIONS)
Q.S. OF GEORGIA, L.L.C. 3100 Ellenwood Industrial Dr. None
Georgia limited liability company Ellenwood, GA 30294
#K626114 (Diamond)
HUB GROUP ALABAMA, LLC 100 Centerview Dr., Suite 120 None
Delaware limited liability company Birmingham, AL 35216
#2540528 (Graham & Company, Inc.)
HUB GROUP ATLANTA, LLC 3700 Crestwood Parkway Lakeshore Marketplace 19501
Delaware limited liability company Suite 400 Highway 73 West Suite 203
#2540527 Duluth, GA 30096 Cornelius, NC 28031-1619
(Southeast Properties Group LP) (Lakeshore Marketplace)
HUB GROUP BOSTON, LLC 136 Turnpike Road, Suite 210 None
Delaware limited liability company Southborough, MA 01772
#2540526 (136 Turnpike Road LLC)
HUB GROUP CANADA, LP 26555 Evergreen Rd. None
Delaware limited partnership Suite 1070
#2540525 Southfield, MI 48076
(Ttertt Associates, LLC)
HUB GROUP CLEVELAND, LLC 25111 Country Club Blvd. None
Delaware limited liability company North Olmsted, OH 44070
#2540524 (Tech Park Associates Ltd)
HUB GROUP DETROIT, LLC 26555 Evergreen Rd. 3655 Alpine Ave. N.W.
Delaware limited liability company Suite 1070 Suite #330
#2540522 Southfield, MI 48076 Comstock Park, MI 49321
(Ttertt Associates, LLC) (Trinity Properties)
HUB GROUP FLORIDA, LLC 3700 Crestwood Parkway None
Delaware limited liability company Suite 400
#2540521 Duluth, GA 30096
(Southeast Properties Group LP)
HUB GROUP GOLDEN GATE, LLC 2125 Oak Grove Rd 3684 West 2340
Delaware limited liability company Suite 310 South Suite A, Taylor Bldg.
#2540520 Walnut Creek, CA 94598 West Valley City, UT 84120
(IRPM-Walnut Creek) (Boyd Enterprises Utah, LLC)
2870 N. Speer Blvd.
Suite 103
Denver, CO 80211
(Aspen Gold)
2
COLUMN 1 COLUMN 2 COLUMN 3
NAME OF DEBTOR (AND STATE OF ADDITIONAL PLACES OF BUSINESS AND
ORGANIZATION AND ORGANIZATIONAL CHIEF EXECUTIVE OFFICE (AND NAME OF COLLATERAL LOCATIONS (AND NAME OF AND
REGISTRATION NUMBER) LANDLORD AT SUCH LOCATION) LANDLORD AT SUCH LOCATIONS)
HUB GROUP INDIANAPOLIS, LLC 701 Congressional Blvd None
Delaware limited liability company Suite 110
#2540494 Carmel, IN 46032-5625
(Technology Center Associates)
HUB GROUP KANSAS CITY, LLC 9250 Glenwood Street None
Delaware limited liability company Overland Park, KS 66212
#2540496 (Gaylord Reichart)
HUB GROUP LOS ANGELES, LLC 2600 Nutwood Suite 500 444 W. Camelback Suite 103
Delaware limited liability company Fullerton, CA 92831 Phoenix, AZ 85013
#2540497 (CSFU Foundation) (Abrams Realty & Management)
9089 Clairemont Mesa Blvd Suite
307
San Diego, CA 92123
(Dewitt Transfer & Storage Co.)
HUB GROUP MID ATLANTIC, LLC 8600 LaSalle Rd None
Delaware limited liability company Oxford Bldg Suite 633
#2540499 Towson, MD 21286
(MIE Properties, Inc.)
HUB GROUP NEW ORLEANS, LLC 427 W. 20th Street Suite 300 None
Delaware limited liability company Houston, TX 77008
#2540504 (Heights Medical Tower, Ltd.)
HUB GROUP NEW YORK STATE, LLC 150 Allens Creek Road None
Delaware limited liability company Rochester, NY 14618
#2540505 (The Park at Allens Creek LLC)
HUB GROUP NEW YORK-NEW JERSEY, LLC One Hovchild Plaza 4000 None
Delaware limited liability company Route 66, 4th Floor
#2540507 Tinton Falls, NJ 07753
(Hovtown, Inc)
HUB GROUP NORTH CENTRAL, LLC 4915 S. Howell Ave 13786 Frontier Ct. Suite 106
Delaware limited liability company 5th Floor Burnsville, MN 55337
#2540488 Milwaukee, WI 53207-5939 (UHI Commercial Real Estate)
(Towne Realty, Inc)
3
COLUMN 1 COLUMN 2 COLUMN 3
NAME OF DEBTOR (AND STATE OF ADDITIONAL PLACES OF BUSINESS AND
ORGANIZATION AND ORGANIZATIONAL CHIEF EXECUTIVE OFFICE (AND NAME OF COLLATERAL LOCATIONS (AND NAME OF AND
REGISTRATION NUMBER) LANDLORD AT SUCH LOCATION) LANDLORD AT SUCH LOCATIONS)
HUB GROUP OHIO, LLC 7015 W. Spring Meadows Dr None
Delaware limited liability company Suite 201
#2540491 Holland, OH 43528
(Tolson Investments)
HUB GROUP PHILADELPHIA, LLC None None
Delaware limited liability company
#2540495
HUB GROUP PITTSBURGH, LLC 2550 Boyce Plaza Rd None
Delaware limited liability company Suite 200
#2540498 Pittsburgh, PA 15241
(Barson Development Co.)
HUB GROUP PORTLAND, LLC 10550 S. W. Allen Blvd 12600 S. E. 38th St.
Delaware limited liability company Suite 211 Suite 119
#2540501 Beaverton, OR 97005 Bellevue, WA 98006-5727
(North Pacific Management, Inc.) (Sterling Realty Organization)
HUB GROUP ST. LOUIS, LLC Creve Coeur Corporate Center III None
Delaware limited liability company 600 Emerson Road
#2540506 Suite 200
Creve Coeur, MO 63141
(Creve Coeur LLC
(aka Trammel Crow)
HUB GROUP TENNESSEE, LLC 57 Germantown Ct. Suite 301 None
Delaware limited liability company Cordova, TN 38018
#2540510 (Koger Equity, Inc.)
HUB CITY TEXAS, L.P. 427 W. 20th Street Suite 300 Houston, 9319 LBJ Suite 120
Delaware limited partnership TX 77008 Dallas, TX 75243
#2540523 (Heights Medical Tower, Ltd.) (2.4 For 1, Ltd)
14110 Transportation Ave.
Suite 2
Laredo, TX 78045
(Okary, LLC)
5400 Mounes Ave. Suite 202 New
Orleans, LA 70123
(Hibernia National Bank)
HUB GROUP TRANSPORT, LLC 377 E. Butterfield Road None
Delaware limited liability company Lombard, Illinois 60148
#3451015 (CarrAmerica)
HUB GROUP ASSOCIATES, INC. 377 E. Butterfield Road None
Illinois corporation Lombard, Illinois 60148
#53843689 (CarrAmerica)
HUB FREIGHT SERVICES, INC. 377 E. Butterfield Road None
Delaware corporation Lombard, Illinois 60148
#2698255 (CarrAmerica)
4
COLUMN 1 COLUMN 2 COLUMN 3
NAME OF DEBTOR (AND STATE OF ADDITIONAL PLACES OF BUSINESS AND
ORGANIZATION AND ORGANIZATIONAL CHIEF EXECUTIVE OFFICE (AND NAME OF COLLATERAL LOCATIONS (AND NAME OF AND
REGISTRATION NUMBER) LANDLORD AT SUCH LOCATION) LANDLORD AT SUCH LOCATIONS)
HUB GROUP DISTRIBUTION SERVICES, LLC 3250 Arlington Heights Road 3080 Orchard Lake Road
Illinois limited liability company Suite 300 Keego Harbor, MI 48320
#00781649 Arlington Heights, IL 60004 (Dollar Lake LLC)
(South P.W. LLC)
HUB HIGHWAY SERVICES 377 E. Butterfield Road None
Illinois general partnership Lombard, Illinois 60148
No Organizational ID Number (CarrAmerica)
5
SCHEDULE B
OTHER NAMES
A. PRIOR LEGAL NAMES
NAME OF DEBTOR PRIOR LEGAL NAMES
Hub Group, Inc. None
Hub City Terminals, Inc. None
Hub Chicago Holdings, Inc. None
HLX Company, L.L.C. None
QSSC, Inc. None
Quality Services, L.L.C. None
Quality Services of Kansas, L.L.C. None
Quality Services of New Jersey, L.L.C. None
Q.S. of Illinois, LLC Quality Services of Michigan, L.L.C.;
Q.S. of Illinois, Inc.
(Note: QS of Illinois, Inc. merged into Quality
Services of Michigan which then changed names to QS of
Illinois LLC)
Q.S. of Georgia, L.L.C. None
Hub Group Alabama, LLC Hub City Alabama, L.P.
Hub Group Atlanta, LLC Hub City Atlanta, L.P.
Hub Group Boston, LLC Hub City Boston, L.P.
Hub Group Canada, LP Hub City Canada, L.P.; Hub Group Canada, LLC
Hub Group Cleveland, LLC Hub City Cleveland, L.P.
Hub Group Detroit, LLC Hub City Detroit, L.P.
Hub Group Florida, LLC Hub City Florida, L.P.
Hub Group Golden Gate, LLC Hub City Golden Gate, L.P.
NAME OF DEBTOR PRIOR LEGAL NAMES
Hub Group Indianapolis, LLC Hub City Indianapolis, L.P.
Hub Group Kansas City, LLC Hub City Kansas City, L.P.
Hub Group Los Angeles, LLC Hub City Los Angeles, L.P.
Hub Group Mid Atlantic, LLC Hub City Mid Atlantic, L.P.
Hub Group New Orleans, LLC Hub City New Orleans, L.P.
Hub Group New York State, LLC Hub City New York State, L.P.
Hub Group New York-New Jersey, LLC Hub City New York-New Jersey, L.P.
Hub Group North Central, LLC Hub City North Central, L.P.
Hub Group Ohio, LLC Hub City Ohio, L.P.
Hub Group Philadelphia, LLC Hub City Philadelphia, L.P.
Hub Group Pittsburgh, LLC Hub City Pittsburgh, L.P.
Hub Group Portland, LLC Hub City Portland, L.P.
Hub Group St. Louis, LLC Hub City St. Louis, L.P.
Hub Group Tennessee, LLC Hub City Tennessee, L.P.
Hub City Texas, L.P. None
Hub Group Transport, LLC None
Hub Group Associates, Inc. None
Hub Freight Services, Inc. None
Hub Group Distribution Services, LLC Hub Group Distribution Services
Hub Highway Services None
B. TRADE NAMES
NAME OF DEBTOR TRADE NAMES
Hub Group, Inc. Hub Group; Hub Group Supply Chain Solutions; Premier
Service Network; Hub Group Expedited Services; Hub
Online Services
2
NAME OF DEBTOR TRADE NAMES
Hub City Terminals, Inc. Hub Chicago
Hub Chicago Holdings, Inc. None
HLX Company, L.L.C. None
QSSC, Inc. None
Quality Services, L.L.C. None
Quality Services of Kansas, L.L.C. None
Quality Services of New Jersey, L.L.C. None
Q.S. of Illinois, LLC None
Q.S. of Georgia, L.L.C. None
Hub Group Alabama, LLC None
Hub Group Atlanta, LLC None
Hub Group Boston, LLC None
Hub Group Canada, LP None
Hub Group Cleveland, LLC Hub Group Columbus
Hub Group Detroit, LLC Hub Group Western Michigan
Hub Group Florida, LLC None
Hub Group Golden Gate, LLC Hub Group Intermountain
Hub Group Indianapolis, LLC None
Hub Group Kansas City, LLC None
Hub Group Los Angeles, LLC Hub Group San Diego; Hub Group Arizona
Hub Group Mid Atlantic, LLC None
Hub Group New Orleans, LLC None
Hub Group New York State, LLC None
Hub Group New York-New Jersey, LLC None
Hub Group North Central, LLC None
3
NAME OF DEBTOR TRADE NAMES
Hub Group Ohio, LLC None
Hub Group Philadelphia, LLC None
Hub Group Pittsburgh, LLC None
Hub Group Portland, LLC Hub Group Seattle
Hub Group St. Louis, LLC None
Hub Group Tennessee, LLC None
Hub City Texas, L.P. None
Hub Group Transport, LLC None
Hub Group Associates, Inc. None
Hub Freight Services, Inc. None
Hub Group Distribution Services, LLC None
Hub Highway Services None
4
SCHEDULE C
INTELLECTUAL PROPERTY RIGHTS
NAME OF DEBTOR INTELLECTUAL PROPERTY RIGHTS
REGISTERED TRADEMARKS REGISTRATION NUMBER DATE
Hub Group, Inc. H (design) 2,033,119 1/21/97
Hub Group 1,997,149 8/27/96
Premier Service 2,579,075 6/11/02
Network
Knowledge Driven 2,151,187 4/14/98
Logistics
Hub Online 2,604,197 8/6/02
Hub City Terminals, Inc. None
Hub Chicago Holdings, Inc. None
HLX Company, L.L.C. None
QSSC, Inc. None
Quality Services, L.L.C. None
Quality Services of Kansas, L.L.C. None
Quality Services of New Jersey, L.L.C. None
Q.S. of Illinois, LLC None
Q.S. of Georgia, L.L.C. None
Hub Group Alabama, LLC None
Hub Group Atlanta, LLC None
Hub Group Boston, LLC None
Hub Group Canada, LP None
Hub Group Cleveland, LLC None
Hub Group Detroit, LLC None
NAME OF DEBTOR INTELLECTUAL PROPERTY RIGHTS
Hub Group Florida, LLC None
Hub Group Golden Gate, LLC None
Hub Group Indianapolis, LLC None
Hub Group Kansas City, LLC None
Hub Group Los Angeles, LLC None
Hub Group Mid Atlantic, LLC None
Hub Group New Orleans, LLC None
Hub Group New York State, LLC None
Hub Group New York-New Jersey, LLC None
Hub Group North Central, LLC None
Hub Group Ohio, LLC None
Hub Group Philadelphia, LLC None
Hub Group Pittsburgh, LLC None
Hub Group Portland, LLC None
Hub Group St. Louis, LLC None
Hub Group Tennessee, LLC None
Hub City Texas, L.P. None
Hub Group Transport, LLC None
Hub Group Associates, Inc. None
Hub Freight Services, Inc. None
Hub Group Distribution Services, LLC None
Hub Highway Services None
2
SCHEDULE D
REAL ESTATE LEGAL DESCRIPTIONS
None
SCHEDULE E
INVESTMENT PROPERTY AND DEPOSITS
A. INVESTMENT PROPERTY
INVESTMENT PROPERTY
NAME OF DEBTOR (NAME AND PERCENTAGE OF ENTITY OWNED)
Hub Group, Inc. HLX Company, L.L.C. 50%
Hub City Terminals, Inc. 100%
Hub City Terminals, Inc. Hub City Texas, L.P. 1% (GP)
Hub Group Alabama, LLC 100%
Hub Group Atlanta, LLC 100%
Hub Group Boston, LLC 100%
Hub Group Canada, LP 99%
Hub Group Cleveland, LLC 100%
Hub Group Detroit, LLC 100%
Hub Group Florida, LLC 100%
Hub Group Golden Gate, LLC 100%
Hub Group Indianapolis, LLC 100%
Hub Group Kansas City, LLC 100%
Hub Group Los Angeles, LLC 100%
Hub Group Mid Atlantic, LLC 100%
Hub Group New Orleans, LLC 100%
Hub Group New York State, LLC 100%
Hub Group New York-New Jersey, LLC 100%
Hub Group North Central, LLC 100%
Hub Group Ohio, LLC 100%
Hub Group Philadelphia, LLC 100%
Hub Group Pittsburgh, LLC 100%
Hub Group Portland, LLC 100%
Hub Group St. Louis, LLC 100%
Hub Group Tennessee, LLC 100%
HLX Company, L.L.C. 50%
Hub Chicago Holdings, Inc. 100%
Hub Group Associates, Inc. 100%
Hub Group Distribution Services, LLC 100%
Q.S. of Georgia, L.L.C. 25%
Q.S. of Illinois, LLC 100%
QSSC, Inc. 100%
Quality Services, L.L.C. 25%
Quality Services of Kansas, L.L.C. 25%
Quality Services of New Jersey, L.L.C. 25%
INVESTMENT PROPERTY
NAME OF DEBTOR (NAME AND PERCENTAGE OF ENTITY OWNED)
Hub Chicago Holdings, Inc. Hub Group Canada, LP 1%
Hub City Texas, LP 99%
HLX Company, L.L.C. None
QSSC, Inc. None
Quality Services, L.L.C. None
Quality Services of Kansas, L.L.C. None
Quality Services of New Jersey, L.L.C. None
Q.S. of Illinois, LLC None
Q.S. of Georgia, L.L.C. None
Hub Group Alabama, LLC None
Hub Group Atlanta, LLC Quality Services of Georgia, L.L.C. 75%
Hub Group Boston, LLC None
Hub Group Canada, LP None
Hub Group Cleveland, LLC None
Hub Group Detroit, LLC None
Hub Group Florida, LLC None
Hub Group Golden Gate, LLC None
Hub Group Indianapolis, LLC None
Hub Group Kansas City, LLC Quality Services of Kansas, L.L.C. 75%
Hub Group Los Angeles, LLC None
Hub Group Mid Atlantic, LLC None
Hub Group New Orleans, LLC None
Hub Group New York State, LLC None
Hub Group New York-New Jersey, LLC Quality Services of New Jersey, L.L.C. 75%
Hub Group North Central, LLC None
2
INVESTMENT PROPERTY
NAME OF DEBTOR (NAME AND PERCENTAGE OF ENTITY OWNED)
Hub Group Ohio, LLC None
Hub Group Philadelphia, LLC None
Hub Group Pittsburgh, LLC None
Hub Group Portland, LLC None
Hub Group St. Louis, LLC Quality Services, L.L.C. 75%
Hub Group Tennessee, LLC None
Hub City Texas, L.P. None
Hub Group Transport, LLC None
Hub Group Associates, Inc. Hub Freight Services, Inc. 100%
Hub Group Transport, LLC 100%
Hub Freight Services, Inc. None
Hub Group Distribution Services, LLC None
Hub Highway Services None
B. DEPOSITS
NAME OF DEBTOR DEPOSITS
Hub Group, Inc. Harris Bank
111 West Monroe
Chicago, IL 60603
Account Number: 292-132-8
Account Number: 292-131-0 (Key Account)
Account Number: 292-153-4 (Medical Claims)
Account Number: 292-154-2 (Flexible Spend)
Bank of Montreal
First Canadian Place
PO Box 3
Toronto, Ontario M5X 1A3
Account Number: 00021358-149
3
NAME OF DEBTOR DEPOSITS
Hub City Terminals, Inc. Harris Bank
111 West Monroe
Chicago, IL 60603
Account Number: 292-294-6
Account Number: 292-295-3
Hub Chicago Holdings, Inc. None
HLX Company, L.L.C.
Harris Bank
111 West Monroe
Chicago, IL 60603
Account Number: 292-133-6 (Payroll Account)
QSSC, Inc. Harris Bank
111 West Monroe
Chicago, IL 60603
Account Number: 292-299-5
Quality Services, L.L.C. Harris Bank
111 West Monroe
Chicago, IL 60603
Account Number: 385-571-5
Quality Services of Kansas, L.L.C. Harris Bank
111 West Monroe
Chicago, IL 60603
Account Number: 385-557-4
Quality Services of New Jersey, L.L.C. Harris Bank
111 West Monroe
Chicago, IL 60603
Account Number: 385-930-3
Q.S. of Illinois, LLC Harris Bank
111 West Monroe
Chicago, IL 60603
Account Number: 385-558-2
Account Number: 385-516-0
(Account is in the name of Q.S. of Illinois, Inc.)
Account Number: 385-515-2 (Payroll Account)
Hub Group Alabama, LLC None
Hub Group Atlanta, LLC None
4
NAME OF DEBTOR DEPOSITS
Hub Group Boston, LLC Harris Bank
111 West Monroe
Chicago, IL 60603
Account Number: 292-150-0
Hub Group Canada, LP None
Hub Group Cleveland, LLC None
Hub Group Detroit, LLC None
Hub Group Florida, LLC None
Hub Group Golden Gate, LLC None
Hub Group Indianapolis, LLC None
Hub Group Kansas City, LLC Harris Bank 111 West
Monroe Chicago, IL 60603
Account Number: 292-143-5
Hub Group Los Angeles, LLC None
Hub Group Mid Atlantic, LLC None
Hub Group New Orleans, LLC None
Hub Group New York State, LLC None
Hub Group New York-New Jersey, LLC Harris Bank
111 West Monroe
Chicago, IL 60603
Account Number: 292-138-5
Hub Group North Central, LLC None
Hub Group Ohio, LLC None
Hub Group Philadelphia, LLC None
5
NAME OF DEBTOR DEPOSITS
Hub Group Pittsburgh, LLC Harris Bank
111 West Monroe
Chicago, IL 60603
Account Number: 292-148-4
National City Bank of Pennsylvania
116 Allegheny Center Mall
Pittsburgh PA 15212
Account Number 715815662
(Account is in the name of Hub City Pittsburgh LP)
Hub Group Portland, LLC Harris Bank
111 West Monroe
Chicago, IL 60603
Account Number: 292-145-0
Hub Group St. Louis, LLC Harris Bank
111 West Monroe
Chicago, IL 60603
Account Number: 293-291-1
Hub Group Tennessee, LLC Harris Bank
111 West Monroe
Chicago, IL 60603
Account Number: 292-411-6
Hub City Texas, L.P. Harris Bank
111 West Monroe
Chicago, IL 60603
Account Number: 292-423-1 (Grower Pay)
Hub Group Transport, LLC Harris Bank
111 West Monroe
Chicago, IL 60603
Account Number: 292-315-9
Hub Group Associates, Inc. Harris Bank
111 West Monroe
Chicago, IL 60603
Account Number: 292-312-6
Account Number: 292-313-4 (Lockbox Account)
Hub Freight Services, Inc. None
6
NAME OF DEBTOR DEPOSITS
Hub Group Distribution
Services, LLC Harris Bank
111 West Monroe Chicago,
IL 60603 Account Number:
292-420-7
Account Number: 292-430-6 (Payroll Account)
Hub Highway Services None
7
SCHEDULE F
COMMERCIAL TORT CLAIMS
NAME OF DEBTOR COMMERCIAL TORT CLAIMS
Hub Group, Inc. HUB GROUP, INC. VS. LOCKTON COMPANIES, INC. AND ROANOKE TRADE
SERVICES, INC., Case No. 01L 016537 filed in the Circuit Court of
Cook County, Illinois. Hub Group, Inc. filed this suit against its
insurance brokers to recover defense costs and cargo claims that
Hub Group, Inc. paid and contends that such costs and claims should
have been defended and paid under its insurance policy procured
through the defendants. Hub Group, Inc. alleges breach of
contract, breach of fiduciary duty, negligence, negligent
misrepresentation and unjust enrichment in its complaint.
Hub City Terminals, Inc. None
Hub Chicago Holdings, Inc. None
HLX Company, L.L.C. None
QSSC, Inc. None
Quality Services, L.L.C. None
Quality Services of Kansas, L.L.C. None
Quality Services of New Jersey, L.L.C. None
Q.S. of Illinois, LLC None
Q.S. of Georgia, L.L.C. None
Hub Group Alabama, LLC None
Hub Group Atlanta, LLC None
Hub Group Boston, LLC None
Hub Group Canada, LP None
Hub Group Cleveland, LLC None
Hub Group Detroit, LLC None
Hub Group Florida, LLC None
Hub Group Golden Gate, LLC None
Hub Group Indianapolis, LLC None
NAME OF DEBTOR COMMERCIAL TORT CLAIMS
Hub Group Kansas City, LLC None
Hub Group Los Angeles, LLC None
Hub Group Mid Atlantic, LLC None
Hub Group New Orleans, LLC None
Hub Group New York State, LLC None
Hub Group New York-New Jersey, LLC None
Hub Group North Central, LLC None
Hub Group Ohio, LLC None
Hub Group Philadelphia, LLC None
Hub Group Pittsburgh, LLC None
Hub Group Portland, LLC None
Hub Group St. Louis, LLC None
Hub Group Tennessee, LLC None
Hub City Texas, L.P. None
Hub Group Transport, LLC None
Hub Group Associates, Inc. None
Hub Freight Services, Inc. None
Hub Group Distribution Services, LLC None
Hub Highway Services None
2
SCHEDULE G
ASSUMPTION AND SUPPLEMENTAL SECURITY AGREEMENT
THIS AGREEMENT dated as of this _____ day of _____________, 20__ from
[NEW DEBTOR], a _______________ CORPORATION/LIMITED LIABILITY
COMPANY/PARTNERSHIP (the "NEW DEBTOR"), to Harris Trust and Savings Bank
("HTSB"), as collateral agent for the Secured Creditors (defined in the Security
Agreement hereinafter identified and defined) (HTSB acting as such agent and any
successor or successors to HTSB in such capacity being hereinafter referred to
as the "AGENT").
PRELIMINARY STATEMENTS
A. Hub Group, Inc., a Delaware corporation (the "PUBLIC HUB
COMPANY"), Hub City Terminals, Inc., a Delaware corporation ("HUB CHICAGO")
(the Public Hub Company and Hub Chicago being hereinafter referred to
collectively as the "BORROWERS" and individually as a "BORROWER") and certain
other parties have executed and delivered to the Agent that certain Security
Agreement dated as of _____________, 2002 (such Security Agreement, as the same
may from time to time be amended, modified or restated, including supplements
thereto which add additional parties as Debtors thereunder, being hereinafter
referred to as the "SECURITY AGREEMENT"), pursuant to which such parties (the
"EXISTING DEBTORS") have granted to the Agent for the benefit of the Secured
Creditors a lien on and security interest in the Existing Debtors' Collateral
(as such term is defined in the Security Agreement) to secure the Secured
Obligations (as such term is defined in the Security Agreement).
B. The Borrowers provide the New Debtor with substantial financial,
managerial, administrative, and technical support and the New Debtor will
benefit, directly and indirectly, from credit and other financial accommodations
extended by the Secured Creditors to the Borrowers.
NOW, THEREFORE, FOR VALUE RECEIVED, and in consideration of advances
made or to be made, or credit accommodations given or to be given, to the
Borrowers by the Secured Creditors from time to time, the New Debtor hereby
agrees as follows:
1. The New Debtor acknowledges and agrees that it shall become a
"Debtor" party to the Security Agreement effective upon the date the New
Debtor's execution of this Agreement and the delivery of this Agreement to the
Agent, and that upon such execution and delivery, all references in the Security
Agreement to the terms "Debtor" or "Debtors" shall be deemed to include the New
Debtor. Without limiting the generality of the foregoing, the New Debtor hereby
repeats and reaffirms all grants (including the grant of a lien and security
interest), covenants, agreements, representations, and warranties contained in
the Security Agreement as amended hereby, each and all of which are and shall
remain applicable to the Collateral from time to time owned by the New Debtor or
in which the New Debtor from time to time has any rights. Without limiting the
foregoing, in order to secure payment of the Secured Obligations, whether now
existing or hereafter arising, the New Debtor does hereby grant to the Agent for
the benefit of the Secured Creditors, and hereby agrees that the Agent has and
shall continue to have for the benefit of the Secured Creditors a continuing
lien on and security interest in, among other things, all of the New Debtor's
Collateral (as such term is defined in the Security Agreement), including,
without limitation, all of the New Debtor's Accounts, Chattel Paper,
Instruments, Documents, General Intangibles Letter-of-Credit Rights, Supporting
Obligations, Deposit Accounts, Investment Property, Inventory, Equipment,
Fixtures, Commercial Tort Claims, and all of the other Collateral described in
Section 2 of the Security Agreement, each and all of such granting clauses being
incorporated herein by reference with the same force and effect as if set forth
herein in their entirety except that all references in such clauses to the
Existing Debtors or any of them shall be deemed to include references to the New
Debtor. Nothing contained herein shall in any manner impair the priority of the
liens and security interests heretofore granted in favor of the Agent under the
Security Agreement.
2. Schedules A (Locations), Schedule B (Other Names), Schedule C
(Intellectual Property Rights), Schedule D (Real Estate), Schedule E (Investment
Property and Deposits), and Schedule F (Commercial Tort Claims) to the Security
Agreement shall be supplemented by the information stated below with respect to
the New Debtor:
SUPPLEMENT TO SCHEDULE A
NAME OF DEBTOR (AND STATE OF ADDITIONAL PLACES OF BUSINESS AND
ORGANIZATION AND ORGANIZATIONAL CHIEF EXECUTIVE OFFICE (AND NAME OF COLLATERAL LOCATIONS (AND NAME OF
REGISTRATION NUMBER) RECORD OWNER OF SUCH LOCATION) RECORD OWNER OF SUCH LOCATIONS)
---------------------- ------------------------- -----------------------
---------------------- ------------------------- -----------------------
SUPPLEMENT TO SCHEDULE B
NAME OF DEBTOR PRIOR LEGAL NAMES AND TRADE NAMES OF SUCH DEBTOR
------------------------------------ ---------------------------------
SUPPLEMENT TO SCHEDULE C
INTELLECTUAL PROPERTY RIGHTS
----------------------------------
----------------------------------
2
SUPPLEMENT TO SCHEDULE D
REAL ESTATE LEGAL DESCRIPTIONS
----------------------------------
----------------------------------
SUPPLEMENT TO SCHEDULE E
INVESTMENT PROPERTY AND DEPOSITS
-------------------------
-------------------------
SUPPLEMENT TO SCHEDULE F
COMMERCIAL TORT CLAIMS
-------------------------
-------------------------
3. The New Debtor hereby acknowledges and agrees that the Secured
Obligations are secured by all of its Collateral according to, and otherwise on
and subject to, the terms and conditions of the Security Agreement to the same
extent and with the same force and effect as if the New Debtor had originally
been one of the Existing Debtors under the Security Agreement and had originally
executed the same as such an Existing Debtor.
4. All capitalized terms used in this Agreement without definition
shall have the same meaning herein as such terms have in the Security Agreement,
except that any reference to the term "Debtor" or "Debtors" and any provision of
the Security Agreement providing meaning to such term shall be deemed a
reference to the Existing Debtors and the New Debtor. Except as specifically
modified hereby, all of the terms and conditions of the Security Agreement shall
stand and remain unchanged and in full force and effect.
3
5. The New Debtor agrees to execute and deliver such further
instruments and documents and do such further acts and things as the Agent may
reasonably deem necessary or proper to carry out more effectively the purposes
of this Agreement.
6. No reference to this Agreement need be made in the Security
Agreement or in any other document or instrument making reference to the
Security Agreement, any reference to the Security Agreement in any of such to be
deemed a reference to the Security Agreement as modified hereby.
7. This Agreement shall be governed by and construed in accordance
with the State of Illinois (without regard to principles of conflicts of law).
[INSERT NAME OF NEW DEBTOR]
By
Name_________________________________________
Title________________________________________
Accepted and agreed to as of the date first above written.
HARRIS TRUST AND SAVINGS BANK, as Agent
By
Name_________________________________________
Title________________________________________
4
SCHEDULE H
SUPPLEMENTAL SECURITY AGREEMENT
THIS AGREEMENT (this "AGREEMENT") dated as of this _____ day of
_____________, 20__ from [DEBTOR], a _____________ CORPORATION/LIMITED LIABILITY
COMPANY/PARTNERSHIP (the "DEBTOR"), to Harris Trust and Savings Bank ("HTSB "),
as collateral agent for the Secured Creditors (defined in the Security Agreement
hereinafter identified and defined) (HTSB acting as such agent and any successor
or successors to HTSB in such capacity being hereinafter referred to as the
"AGENT").
PRELIMINARY STATEMENTS
A. Hub Group, Inc., a Delaware corporation (the "PUBLIC HUB
COMPANY"), Hub City Terminals, Inc., a Delaware corporation ("HUB CHICAGO") (the
Public Hub Company and Hub Chicago being hereinafter referred to collectively
as the "BORROWERS" and individually as a "BORROWER") and certain other parties
have executed and delivered to the Agent that certain Security Agreement dated
as of _____________, 2002 (such Security Agreement, as the same may from time
to time be amended, modified or restated, being hereinafter referred to as the
"SECURITY AGREEMENT"), pursuant to which such parties have granted to the Agent
for the benefit of the Secured Creditors a lien on and security interest in the
Collateral to secure the Secured Obligations (as such term is defined in the
Security Agreement).
B. Pursuant to the Security Agreement, the Debtor granted to the
Agent, among other things, a continuing security interest in all Commercial
Tort Claims.
C. The Debtor has acquired a Commercial Tort Claim, and executes
and delivers this Agreement to confirm and assure the Agent's security interest
therein.
NOW, THEREFORE, FOR VALUE RECEIVED, and in consideration of advances
made or to be made, or credit accommodations given or to be given, to the
Borrowers by the Secured Creditors from time to time, the Debtor hereby agrees
as follows:
1. In order to secure payment of the Secured Obligations, whether now
existing or hereafter arising, the Debtor does hereby grant to the Agent for the
benefit of the Secured Creditors, and hereby agrees that the Agent has and shall
continue to have for the benefit of the Secured Creditors a continuing lien on
and security interest in the Commercial Tort Claim described below:
(Insert description of the Commercial Tort Claim by referring to a
specific incident giving rise to the claim)
2. Schedule F (Commercial Tort Claims) to the Security Agreement is
hereby amended to include reference to the Commercial Tort Claim referred to in
Section 1 above. The Commercial Tort Claim described herein is in addition to,
and not in substitution or replacement for, the Commercial Tort Claims
heretofore described in and subject to the Security Agreement, and nothing
contained herein shall in any manner impair the priority of the liens and
security interests heretofore granted by the Debtor in favor of the Agent under
the Security Agreement.
3. All capitalized terms used in this Agreement without definition
shall have the same meaning herein as such terms have in the Security Agreement,
except that any reference to the term "Collateral" and any provision of the
Security Agreement providing meaning to such term shall be deemed to include the
Commercial Tort Claim referred to in Section 1 above. Except as specifically
modified hereby, all of the terms and conditions of the Security Agreement shall
stand and remain unchanged and in full force and effect.
4. The Debtor agrees to execute and deliver such further instruments
and documents and do such further acts and things as the Agent may reasonably
deem necessary or proper to carry out more effectively the purposes of this
Agreement.
5. No reference to this Agreement need be made in the Security
Agreement or in any other document or instrument making reference to the
Security Agreement, any reference to the Security Agreement in any of such to be
deemed a reference to the Security Agreement as modified hereby.
6. The Debtor acknowledges that this Agreement shall be effective upon
its execution and delivery by the Debtor to the Agent, and it shall not be
necessary for the Agent to execute this Agreement or any other acceptance hereof
or otherwise to signify or express its acceptance hereof.
7. This Agreement shall be governed by and construed in accordance
with the State of Illinois (without regard to principles of conflicts of law).
[INSERT NAME OF DEBTOR]
By
Name____________________________________________
Title___________________________________________
2
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
-----------------------------------------------------------------------
The following statement is provided by the undersigned to accompany the
Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 of Hub
Group, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
1350) and shall not be deemed filed pursuant to any provision of the Exchange
Act of 1934 or any other securities law.
Each of the undersigned certifies that the foregoing Report on Form
10-Q fully complies with the requirements of Section 13(a) of the Securities
Exchange Act of 1934 (15 U.S.C. 78m) and that the information contained in the
Form 10-Q fairly presents, in all material respects, the financial condition and
results of operations of Hub Group, Inc.
/s/David P. Yeager___________________ /s/Thomas M. White______________
- ------------------------------------- --------------------------------
David P. Yeager Thomas M. White
Chief Executive Officer Chief Financial Officer
Hub Group, Inc. Hub Group, Inc.