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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-Q
_________________
[X] |
QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015.
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or
[_] |
TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_________ to _________
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Commission
File Number: 001-36605
_____________________
PATRIOT TRANSPORTATION HOLDING,
INC.
(Exact name of registrant as specified in its
charter)
_____________________
Florida |
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47-2482414 |
(State or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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200 W. Forsyth St., 7th Floor,
Jacksonville, FL |
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32202 |
(Address of principal executive offices) |
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(Zip Code) |
904-396-5733
(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 [_]
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). Yes [x] No [_]
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer,” “non-accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [_] |
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Accelerated filer [_] |
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Non-accelerated filer [x] |
Smaller reporting company [_] |
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [_] No [x]
Indicate the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable date.
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Class |
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Outstanding at June 30, 2015 |
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Common Stock |
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3,268,804 |
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PATRIOT TRANSPORTATION HOLDING, INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 2015
CONTENTS
Page No.
Preliminary Note Regarding Forward-Looking Statements |
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3 |
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Part I. Financial Information |
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Item 1. |
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Financial Statements |
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Consolidated and combined Balance Sheets |
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4 |
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Consolidated and combined Statements of Income |
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5 |
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Consolidated and combined Statements of Cash Flows |
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6 |
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Condensed Notes to consolidated and combined financial statements |
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7 |
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Item 2. |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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16 |
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Item 3. |
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Quantitative and Qualitative Disclosures about Market Risks |
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29 |
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Item 4. |
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Controls and Procedures |
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29 |
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Part II. Other Information |
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Item 1A. |
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Risk Factors |
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30 |
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Item 2. |
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Purchase of Equity Securities by the Issuer |
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30 |
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Item 6. |
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Exhibits |
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31 |
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Signatures |
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31 |
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Exhibit 31 |
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Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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33 |
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Exhibit 32 |
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Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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36 |
Preliminary Note Regarding Forward-Looking
Statements.
Certain matters discussed in this
report contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ
materially from those indicated by such forward-looking statements.
These forward-looking statements
relate to, among other things, capital expenditures, liquidity, capital resources and competition and may be indicated by words
or phrases such as ”anticipate”, ”estimate”, ”plans”, ”projects”, ”continuing”,
”ongoing”, ”expects”, ”management believes”, ”the Company believes”, ”the
Company intends” and similar words or phrases. The following factors and others discussed in the Company’s periodic
reports and filings with the Securities and Exchange Commission are among the principal factors that could cause actual results
to differ materially from the forward-looking statements: freight demand for petroleum products including recessionary and terrorist
impacts on travel in the Company’s markets; fuel costs and the Company’s ability to recover fuel surcharges; accident
severity and frequency; risk insurance markets; driver availability and cost; the impact of future regulations regarding the transportation
industry; availability and terms of financing; competition in our markets; interest rates, and inflation and general economic conditions.
However, this list is not a complete statement of all potential risks or uncertainties.
These forward-looking statements
are made as of the date hereof based on management’s current expectations, and the Company does not undertake an obligation
to update such statements, whether as a result of new information, future events or otherwise. Additional information regarding
these and other risk factors may be found in the Company’s other filings made from time to time with the Securities and Exchange
Commission.
PART I. FINANCIAL INFORMATION, ITEM 1.
FINANCIAL STATEMENTS
PATRIOT TRANSPORTATION HOLDING, INC.
AND SUBSIDIARIES
CONSOLIDATED AND COMBINED BALANCE SHEETS
(Unaudited) (In thousands)
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June 30, |
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September 30, |
Assets |
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2015 |
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2014 |
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Current assets: |
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Cash and cash equivalents |
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$ |
— |
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— |
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Accounts receivable (net of allowance for |
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doubtful accounts of $144 and $155, respectively) |
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7,772 |
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7,119 |
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Inventory of parts and supplies |
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920 |
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895 |
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Prepaid tires on equipment |
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2,086 |
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2,048 |
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Prepaid taxes and licenses |
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303 |
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754 |
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Prepaid insurance |
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332 |
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789 |
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Prepaid expenses, other |
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81 |
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80 |
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Total current assets |
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11,494 |
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11,685 |
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Property and equipment, at cost |
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98,695 |
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97,071 |
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Less accumulated depreciation |
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57,658 |
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54,897 |
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Net property and equipment |
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41,037 |
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42,174 |
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Goodwill |
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3,431 |
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3,431 |
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Intangible assets, net |
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1,532 |
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3,812 |
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Other assets, net |
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22 |
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32 |
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Total assets |
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$ |
57,516 |
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61,134 |
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Liabilities and Net Investment |
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Current liabilities: |
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Accounts payable |
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$ |
3,689 |
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3,288 |
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Bank overdraft |
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324 |
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933 |
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Federal and state income taxes payable |
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206 |
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129 |
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Deferred income taxes |
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23 |
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345 |
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Accrued payroll and benefits |
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4,985 |
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3,937 |
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Accrued insurance |
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1,067 |
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1,186 |
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Accrued liabilities, other |
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383 |
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518 |
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Total current liabilities |
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10,677 |
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10,336 |
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Long-term debt |
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1,430 |
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7,282 |
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Deferred income taxes |
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7,897 |
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8,579 |
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Accrued insurance |
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1,317 |
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1,393 |
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Other liabilities |
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778 |
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822 |
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Total liabilities |
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22,099 |
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28,412 |
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Commitments and contingencies (Note 8) |
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— |
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— |
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Shareholders’ Equity/Net investment: |
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Preferred stock, 5,000,000 shares authorized, |
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of which 250,000 shares are designated Series A |
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Junior Participating Preferred Stock; $0.01 par |
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value; none issued and outstanding |
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— |
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— |
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Common stock, $.10 par value; (25,000,000 shares |
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authorized; 3,268,804 shares issued and |
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outstanding at June 30, 2015) |
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327 |
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— |
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Capital in excess of par value |
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34,803 |
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— |
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Net investment by Parent |
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— |
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32,669 |
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Retained earnings |
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234 |
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— |
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Accumulated other comprehensive income, net |
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53 |
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53 |
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Total shareholders’ equity/net investment |
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35,417 |
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32,722 |
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Total liabilities and shareholders’ equity/net investment |
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$ |
57,516 |
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61,134 |
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See notes to consolidated and combined financial statements.
PATRIOT TRANSPORTATION HOLDING,
INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS
OF INCOME
(In thousands)
(Unaudited)
|
THREE MONTHS ENDED |
|
NINE MONTHS ENDED |
JUNE 30, |
JUNE 30, |
|
2015 |
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2014 |
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2015 |
|
2014 |
Revenues: |
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Transportation revenues |
$ |
28,609 |
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28,124 |
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$ |
82,994 |
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81,414 |
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Fuel surcharges |
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2,490 |
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5,445 |
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9,559 |
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15,646 |
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Total revenues |
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31,099 |
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33,569 |
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92,553 |
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|
97,060 |
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Cost of operations: |
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Compensation and benefits |
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12,552 |
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12,290 |
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36,308 |
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35,702 |
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Fuel expenses |
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5,095 |
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7,535 |
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15,961 |
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22,465 |
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Repairs & tires |
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2,019 |
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1,929 |
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5,739 |
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5,806 |
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Other operating |
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1,090 |
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1,316 |
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3,215 |
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4,042 |
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Insurance and losses |
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2,681 |
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2,709 |
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8,298 |
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7,747 |
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Depreciation expense |
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2,098 |
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2,068 |
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6,330 |
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6,099 |
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Rents, tags & utilities |
|
987 |
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973 |
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2,882 |
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2,750 |
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Sales, general & administrative |
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2,143 |
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2,095 |
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6,779 |
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6,614 |
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Corporate expenses |
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782 |
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528 |
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2,833 |
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2,072 |
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Intangible asset impairment |
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— |
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— |
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2,074 |
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— |
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Gain on equipment sales |
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(21 |
) |
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(213 |
) |
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(819 |
) |
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(304 |
) |
Total cost of operations |
|
29,426 |
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31,230 |
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89,600 |
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92,993 |
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Total operating profit |
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1,673 |
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|
2,339 |
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2,953 |
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4,067 |
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Interest expense |
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(29 |
) |
|
(28 |
) |
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|
(78 |
) |
|
(86 |
) |
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Income before income taxes |
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1,644 |
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|
2,311 |
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|
2,875 |
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3,981 |
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Provision for income taxes |
|
641 |
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|
901 |
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|
1,121 |
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1,553 |
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Net income |
$ |
1,003 |
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|
1,410 |
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$ |
1,754 |
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|
2,428 |
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|
|
|
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Comprehensive Income |
$ |
1,003 |
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|
1,410 |
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|
$ |
1,754 |
|
|
|
2,428 |
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|
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Earnings per common share: |
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|
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Net Income- |
|
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|
|
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|
|
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Basic |
|
0.31 |
|
|
0.43 |
|
|
|
0.54 |
|
|
|
0.75 |
|
Diluted |
|
0.31 |
|
|
0.43 |
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|
|
0.54 |
|
|
|
0.75 |
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Number of shares (in thousands)used in computing: |
|
|
|
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-basic earnings per common share |
|
3,268 |
|
|
3,243 |
|
|
|
3,265 |
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|
|
3,243 |
|
-diluted earnings per common share |
|
3,276 |
|
|
3,243 |
|
|
|
3,273 |
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|
|
3,243 |
|
See notes to consolidated and combined financial statements.
PATRIOT TRANSPORTATION HOLDING,
INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30,
2015 AND 2014
(In thousands)
(Unaudited)
|
Nine months Ended June 30, |
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2015 |
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2014 |
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Cash flows from operating activities: |
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|
|
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Net income |
$ |
1,754 |
|
|
|
2,428 |
|
Adjustments to reconcile net income to net cash |
|
|
|
|
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provided by operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
7,103 |
|
|
|
6,910 |
|
Intangible asset impairment |
|
2,074 |
|
|
|
— |
|
Deferred income taxes |
|
(1,004 |
) |
|
|
(338 |
) |
Gain on sale of equipment and property |
|
(838 |
) |
|
|
(304 |
) |
Stock-based compensation |
|
552 |
|
|
|
526 |
|
Net changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
(653 |
) |
|
|
(1,392 |
) |
Inventory of parts and supplies |
|
(25 |
) |
|
|
(22 |
) |
Prepaid expenses and other current assets |
|
869 |
|
|
|
1,031 |
|
Other assets |
|
(54 |
) |
|
|
(5 |
) |
Accounts payable and accrued liabilities |
|
1,195 |
|
|
|
(585 |
) |
Income taxes payable and receivable |
|
77 |
|
|
|
(173 |
) |
Long-term insurance liabilities and other long-term |
|
|
|
|
|
|
|
liabilities |
|
(120 |
) |
|
|
(123 |
) |
Net cash provided by operating activities |
|
10,930 |
|
|
|
7,953 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Purchase of property and equipment |
|
(5,929 |
) |
|
|
(8,476 |
) |
Business acquisition |
|
— |
|
|
|
(10,023 |
) |
Proceeds from the sale of property, plant and equipment |
|
1,071 |
|
|
|
944 |
|
Net cash used in investing activities |
|
(4,858 |
) |
|
|
(17,555 |
) |
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Decrease in bank overdrafts |
|
(609 |
) |
|
|
— |
|
Proceeds from borrowing on revolving credit facility |
|
33,646 |
|
|
|
23,528 |
|
Payments on revolving credit facility |
|
(39,498 |
) |
|
|
(13,300 |
) |
Excess tax benefits from exercise of stock options |
|
349 |
|
|
|
— |
|
Proceeds from exercised stock options |
|
141 |
|
|
|
— |
|
Net distributions to Parent |
|
(101 |
) |
|
|
(526 |
) |
Net cash (used in) provided by financing activities |
|
(6,072 |
) |
|
|
9,702 |
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
— |
|
|
|
100 |
|
Cash and cash equivalents at beginning of period |
|
— |
|
|
|
— |
|
Cash and cash equivalents at end of the period |
$ |
— |
|
|
|
100 |
|
The Company recorded non-cash transactions for vacation liability
of the Pipeline business acquisition of $132 in the first nine months of fiscal 2014. The Company recorded a non-cash, impairment
charge related to the customer relationship intangible asset recorded resulting from the Pipeline acquisition of $2,074 during
the second quarter of fiscal 2015.
See notes to consolidated and combined financial statements.
PATRIOT
TRANSPORTATION HOLDING, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED
AND COMBINED FINANCIAL STATEMENTS
JUNE 30,
2015
(Unaudited)
(1) Description of Business
and Basis of Presentation.
Description of Business
Spin-off Transaction. On
December 30, 2014, the board of directors of FRP Holdings, Inc. ("FRP" or “Parent”) approved a plan to separate
its real estate and transportation businesses into two independent publicly traded companies through the tax-free spin-off (the
“Spin-off") of a newly-formed company that retained FRP’s transportation business and the corporate name Patriot
Transportation Holding, Inc., (the "Company" or "Patriot"). We filed a registration statement on Form 10 with
the U.S. Securities and Exchange Commission ("SEC") that was declared effective on January 12, 2015. The Spin-off was
completed on January 30, 2015 when FRP distributed all of the outstanding stock of the Company to FRP's shareholders as of the
record date of January 9, 2015. FRP’s shareholders received one share of Patriot (stock symbol “PATI”) for every
three shares of FRP owned on the record date resulting in 3,242,524 of Patriot shares outstanding on the distribution date. Following
the separation, Patriot is an independent, publicly traded company, and FRP retains no ownership in Patriot.
Unless otherwise stated or the
context otherwise indicates, all references in these consolidated and combined financial statements to “us,” “our”,
“we”, “Transportation” or the “Company” mean Patriot subsequent to the Spin-off.
Company’s Business.
The business of the Company, conducted through our wholly owned subsidiary, Florida Rock & Tank Lines, Inc. is to transport
petroleum and other liquids and dry bulk commodities. We do not own any of the products we haul. Approximately 82% of our business
consists of hauling liquid petroleum products (mostly gas and diesel fuel) from large scale fuel storage facilities to our customer’s
retail outlets (e.g. convenience stores, truck stops and fuel depots) where we off-load the product into our Customer’s fuel
storage tanks for ultimate consumption by the retail consumer. The remaining 18% of our business consists of picking up and delivering
our customer’s dry bulk commodities such as cement, lime and various industrial powder products and liquid chemicals. As
of June 30, 2015, we employed 699 revenue-producing drivers who operated our fleet of 477 tractors and 566 trailers from our 21
terminals and 9 satellite locations in Florida, Georgia, Alabama, South Carolina, North Carolina and Tennessee.
Basis of Presentation
Patriot Transportation Holding,
Inc. was incorporated on August 5, 2014. In connection with its organization, Patriot issued 100 shares of common stock to FRP
on December 3, 2014 and issued an additional 3,242,424 shares of common stock to FRP on January 28, 2015 in preparation for the
Spin-off. Patriot was formed solely in contemplation of the Spin-off and until the separation was completed on January 30, 2015,
it had not commenced operations and had no material assets, liabilities, or commitments.
Accordingly, the accompanying consolidated
and combined financial statements presented prior to the Spin-off reflect the historical results of operations, financial position
and cash flows and certain assets, liabilities and operating expenses of the Company and its subsidiaries on a stand-alone basis,
as if such companies and accounts had been consolidated and combined for the historical periods presented prior to the Spin-off.
These financial statements were derived from FRP's consolidated financial statements and accounting records. The consolidated and
combined statements of income include expense allocations for certain corporate functions performed by FRP during the periods prior
to the Spin-off, including general corporate expenses related to executive oversight, accounting, treasury, tax, legal, procurement
and information technology. The amounts allocated to the Company for these items are based primarily on specific identification,
headcount or computer utilization. Going forward, these functions will be performed by the Company. Additionally, the Company will
provide most of these services to FRP under a Transition Services Agreement (see Note 3) initially on an annual basis. This Agreement
provides for reimbursement of the costs of those services by FRP to the Company. As a result, corporate expense in our Company’s
financial statements will be shown net of the reimbursements we receive from FRP for these services. All significant intercompany
transactions and accounts within the consolidated and combined financial statements have been eliminated.
We believe the assumptions underlying
the consolidated and combined financial statements, including the historical allocated charges for general corporate functions
provided by FRP, are reasonable. However, these consolidated and combined financial statements do not include all of the actual
expenses that would have been incurred had we actually operated as a stand-alone public company (e.g. NASDAQ listing fees, etc.)
during the periods prior to the Spin-off and therefore do not reflect the actual consolidated and combined results of operations,
financial position and cash flows had we been operated as a stand-alone public company during those periods.
These statements have been prepared in accordance
with accounting principles generally accepted in the United States of America for interim financial information and the instructions
to Form 10-Q and do not include all the information and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of management, all adjustments (primarily consisting of normal
recurring accruals) considered necessary for a fair statement of the results for the interim periods have been included. Operating
results for the three and nine months ended June 30, 2015 are not necessarily indicative of the results that may be expected for
the fiscal year ending September 30, 2015. The accompanying consolidated and combined financial statements and the information
included under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" should
be read in conjunction with the audited financial statements and notes for the year ended September 30, 2014 included in the Company’s
Information Statement dated January 12, 2015 as filed as an exhibit to the Company's registration statement on Form 10.
(2) Recently Issued Accounting Standards.
In January 2015, the FASB issued ASU 2015-01, "Income Statement—Extraordinary and Unusual Items (Subtopic 225-20) Simplifying
Income Statement Presentation by Eliminating the Concept of Extraordinary Items." This guidance is effective for annual periods
beginning on or after December 15, 2015 and interim periods within those years, with early adoption permitted. We do not expect
the adoption of this guidance will have a material impact on our financial statements.
In April 2015, the FASB issued ASU No. 2015-03,
“Simplifying the Presentation of Debt Issuance Costs”, which relates to the financial statement presentation of debt
issuance costs. This guidance requires debt issuance costs to be presented in the balance sheet as a reduction of the related debt
liability rather than an asset. The guidance is effective for annual and interim periods beginning after December 15, 2015 and
early adoption is permitted and will only result in a change in presentation of these costs on our balance sheets.
(3) Related Party Agreements with FRP.
In order to effect the Spin-off and govern our relationship with
FRP Holdings, Inc. after the Spin-off, we entered into an Employee Matters Agreement and a Transition Services Agreement. The Employee
Matters Agreement generally allocates responsibilities to each company for liabilities relating to each Company’s current
and former employees and allocated responsibilities under employee benefit plans. The Transition Services Agreement sets forth
the terms on which the Company will provide to FRP certain services that were shared prior
to the Spin-off, including the services of
certain shared executive officers, for a period of 12 or more months after the Spin-off.
The consolidated and combined statements
of income reflect charges and/or allocation to FRP Holdings, Inc. for these services of $924,000 and $525,000 for the three months
ended June 30, 2015 and 2014, and $2,361,000 and $2,022,000 for the nine months ended June 30, 2015 and 2014, respectively. Included
in the charges above are amounts recognized for corporate executive stock-based compensation expense. These charges are reflected
as a reduction to corporate expenses.
To determine these allocations between FRP
and Patriot, we generally employed the same methodology historically used by the Company pre Spin-off to allocate said expenses
and thus we believe that the allocations to FRP are a reasonable approximation of the costs related to FRP’s operations but
any such related-party transactions cannot be presumed to be carried out on an arm’s-length basis as the terms were negotiated
while Patriot was still a subsidiary of FRP.
(4)
Long-Term debt. The Company’s long-term
debt is summarized as follows (in thousands):
|
|
June 30, |
|
September 30, |
|
|
|
2015 |
|
2014 |
|
Revolving credit (uncollateralized) |
|
$ |
1,430 |
|
|
|
7,282 |
|
|
|
|
|
|
|
|
|
|
Prior to the Spin-off, the Company
was permitted to borrow under FRP's credit agreement with Wells Fargo Bank, N.A. (the "FRP Credit Agreement"). On January
30, 2015, the Company entered into a new $25 million, five year, revolving credit agreement with Wells Fargo Bank, N.A. and assumed
and refinanced $5.1 million then outstanding on the FRP Credit Agreement into this new revolver. As of June 30, 2015, we had $1,430,000
borrowed on this revolver, $2,745,000 outstanding under letters of credit and $20,825,000 available for additional borrowings and
the Company was in compliance with all of its loan covenants.
(5) Earnings per share. Basic
earnings per common share are based on the weighted average number of common shares outstanding during the periods. Diluted earnings
per common share are based on the weighted average number of common shares and potential dilution of securities that could share
in earnings. The differences between basic and diluted shares used for the calculation are the effect of employee and director
stock options.
On January 30, 2015, 3,242,524 shares of
our common stock were distributed to the shareholders of FRP in connection with the Spin-off and distribution. For comparative
purposes, we have assumed this amount to be outstanding as of the beginning of each period prior to the Spin-off and distribution
presented in the calculation of weighted average shares outstanding.
The following details the computations of
the basic and diluted earnings per common share (dollars in thousands, except per share amounts):
|
|
Three Months ended |
|
Nine months ended |
|
|
June 30, |
|
June 30, |
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
Weighted average common shares |
|
|
|
|
|
|
|
|
outstanding during the period |
|
|
|
|
|
|
|
|
- shares used for basic |
|
|
|
|
|
|
|
|
earnings per common share |
|
|
3,268 |
|
|
|
3,243 |
|
|
|
3,265 |
|
|
|
3,243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issuable under |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
share based payment plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
which are potentially dilutive |
|
|
8 |
|
|
|
— |
|
|
|
8 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares used for diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
earnings per common share |
|
|
3,276 |
|
|
|
3,243 |
|
|
|
3,273 |
|
|
|
3,243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,003 |
|
|
|
1,410 |
|
|
|
1,754 |
|
|
|
2,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-basic |
|
$ |
0.31 |
|
|
|
0.43 |
|
|
|
0.54 |
|
|
|
0.75 |
|
-diluted |
|
$ |
0.31 |
|
|
|
0.43 |
|
|
|
0.54 |
|
|
|
0.75 |
|
For the three and nine months ended June
30, 2015, 19,218 shares attributable to outstanding stock options were excluded from the calculation of diluted earnings per share
because their inclusion would have been anti-dilutive. For the three months and nine months ended June 30, 2014, all outstanding
stock options were included in the calculation of diluted earnings per share because the exercise prices of the stock options were
lower than the average price of the common shares, and therefore were dilutive.
(6)
Stock-Based Compensation Plans.
Participation in FRP Plans
The Company's directors, officers
and key employees are eligible to participate in FRP's 2000 Stock Option Plan and the 2006 Stock Option Plan under which options
for shares of common stock were granted to directors, officers and key employees. All related compensation expense has been fully
allocated to the Company (rather than FRP) and included in corporate expenses. Corporate expense also reflects an offsetting credit
for the Transition Services Agreement allocation to FRP. All outstanding options held
by company directors, officers
and key employees on January 30, 2015 were cancelled and replaced by an equal number of FRP options at 75.14% of the previous exercise
price based upon the market value of FRP less the when issued market value of the Company on that day.
Patriot Incentive Stock Plan
In January, 2015 the Board of Directors
of the Company adopted the Patriot Transportation Holding, Inc. Incentive Stock Plan. Grants were issued based upon all outstanding
FRP options held by company directors, officers and key employees on January 30, 2015 with the same remaining terms. The grants
were based upon the FRP options outstanding at 24.86% of the previous exercise price based upon the when issued market value of
the Company compared to the market value of FRP on that day. Simultaneously, the number of shares were divided by 3 and the exercise
price multiplied by 3 to adjust for the Spin-off distribution of 1 for 3 shares of FRP. The number of common shares available for
future issuance was 194,405 at June 30, 2015.
Subsequent to Spin-off, the realized
tax benefit pertaining to options exercised and the remaining compensation cost of options previously granted prior to the Spin-off
will be recognized by FRP or Patriot based on the employment location of the related employee or director.
The Company recorded the following
stock compensation expense for FRP and Patriot options (including allocations in periods prior to the Spin-off) in its consolidated
and combined statements of income (in thousands):
|
|
Three Months ended |
|
Nine months ended |
|
|
June 30, |
|
June 30, |
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
Stock option grants |
|
$ |
65 |
|
|
|
46 |
|
|
|
209 |
|
|
|
177 |
|
Annual director stock award |
|
|
— |
|
|
|
— |
|
|
|
343 |
|
|
|
349 |
|
|
|
$ |
65 |
|
|
|
46 |
|
|
|
552 |
|
|
|
526 |
|
A summary of Company stock options is presented
below (in thousands, except share and per share amounts):
|
|
|
|
|
|
Weighted |
|
|
|
Weighted |
|
|
|
Weighted |
|
|
|
Number |
|
|
|
Average |
|
|
|
Average |
|
|
|
Average |
|
|
|
of |
|
|
|
Exercise |
|
|
|
Remaining |
|
|
|
Grant Date |
|
Options |
|
Shares |
|
|
|
Price |
|
|
|
Term (yrs) |
|
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants substituted on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 30, 2015 |
|
91,315 |
|
|
$ |
20.31 |
|
|
|
5.6 |
|
|
$ |
254 |
|
Exercised |
|
(12,000 |
) |
|
$ |
11.83 |
|
|
|
|
|
|
$ |
(22 |
) |
Outstanding at |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
79,315 |
|
|
$ |
21.60 |
|
|
|
5.8 |
|
|
$ |
232 |
|
Exercisable at |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
58,398 |
|
|
$ |
20.55 |
|
|
|
4.9 |
|
|
$ |
156 |
|
Vested during |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
nine months ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015 |
|
8,807 |
|
|
|
|
|
|
|
|
|
|
$ |
25 |
|
The aggregate intrinsic value of exercisable
Company options was $269,000 and the aggregate intrinsic value of all outstanding in-the-money options was $319,000 based on the
Company’s market closing price of $24.65 on June 30, 2015 less exercise prices. Gains of $157,000 were realized by option
holders during the nine months ended June 30, 2015.
The realized tax benefit from Patriot option
exercises during the nine months ended June 30, 2015 was $61,000. The unrecognized compensation expense of Patriot options granted
as of June 30, 2015 was $190,000, which is expected to be recognized over a weighted-average period of 3.5 years.
(7) Fair Value Measurements.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used
to measure fair value into three broad levels. Level 1 means the use of quoted prices in active markets for identical assets or
liabilities. Level 2 means the use of values that are derived principally from or corroborated by observable market data. Level
3 means the use of inputs that are unobservable and significant to the overall fair value measurement.
As of June 30, 2015 the Company
had no assets or liabilities measured at fair value on a recurring basis or non-recurring basis. We measure certain assets, such
as intangible assets, at fair value on a non-recurring basis. These assets are recognized at fair value if they are deemed to be
impaired. As disclosed in Note 10, the customer relationship intangible assets acquired from Pipeline were considered partially
impaired in the quarter ended March 31, 2015. As of June 30, 2015, there were no other assets required to be recorded at fair value
on a non-recurring basis since no impairment indicators were present. The fair value of all Company financial instruments approximates
their carrying value due to the short-term nature of such instruments. We believe the fair value of the revolver approximates the
carrying value as (i) the related
debt agreement reflects present
market terms and (ii) is based on interest rates that reset periodically based on then current market indices.
(8) Contingent liabilities. The Company
is involved in litigation on a number of matters and is subject to certain claims which arise in the normal course of business.
The Company elects to retain certain self-insurance risks with respect to medical and workmen’s compensation claims and losses
for third party liability and property damage. There is a reasonable possibility that the Company’s estimate of liability
related to outstanding claims is understated or overstated but the possible range cannot be estimated. The liability at any point
in time is determined by independent actuaries based upon the relative ages and amounts of the individual open claims. Management
believes that the financial resolution of these matters will not have a material adverse effect on the Company’s financial
condition, results of operations or cash flows.
(9) Concentrations.
Market:
The Company primarily serves customers in the petroleum industry in the Southeastern U.S. Significant economic disruption or downturn
in this geographic region or within these industries could have an adverse effect on our financial statements.
Customers:
During the first nine months of fiscal 2015, the Company’s ten largest customers accounted for approximately 59.1% of our
revenue and one of these customers accounted for 21.9% of our revenue. During the second quarter, we were informed by one of these
customers that we would not be able to retain a sizeable piece of their business going forward at the rates we quoted them during
a competitive bid process. Management elected to let this business go in the second quarter and attempt to replace it with new
business at better rates rather than to lower our quoted rates to retain that business. Accounts receivable from the ten largest
customers was $4,274,000 and $4,075,000 at June 30, 2015 and September 30, 2014 respectively. The loss of any one of these ten
customers could have a material adverse effect on the Company’s revenues and income.
Deposits:
The Company places its cash and cash equivalents with high credit quality institutions. At times, such amounts may exceed FDIC
limits.
(10) Pipeline Business Acquisition.
The operations acquired from
Pipeline Transportation, Inc. on November
7, 2013 for $10,023,000 are included in the Company’s consolidated and combined operating results subsequent to the acquisition
date. The Company accounted for this acquisition in accordance with the provisions of ASC 805, Business Combinations (ASC 805)
and allocated the purchase price of the business based upon the fair value of the assets acquired and liabilities assumed, using
a third party valuation expert.
The goodwill recorded resulting from the
acquisition amounted to $2,344,000 and is shown on the consolidated and combined balance sheets under Goodwill, and is amortizable
for tax purposes. The other intangible assets acquired in the transaction are reflected in the line Intangible assets, net on the
consolidated and combined balance sheets. In connection with the Pipeline acquisition, the Company assumed certain vehicle leases.
As of June 30, 2015 these non-cancellable operating leases will require minimum annualized rental payments approximating $1,389,000
for the next 2.3 fiscal years.
The Company recorded an impairment charge
related to the recorded customer relationship intangible asset resulting from the Pipeline acquisition of $2,074,000, with an after
tax impact to net income of $1,265,000, in its consolidated and combined financial statements for the quarter ended March 31, 2015.
The impairment charge was calculated utilizing the assistance of a third party valuation expert. The Company's conclusion that
an impairment charge was necessary in second quarter 2015 was a the result of (i) the loss of certain Pipeline customers over the
course of the first nine months of calendar 2014, and then (ii) the notification from another customer during the second quarter
that we would not be able to retain a sizeable piece of the business we acquired from Pipeline at the rates we quoted them during
a competitive bid process.
(11) Unusual or Infrequent Items Impacting Quarterly Results.
An impairment charge of $2,074,000 was recorded
in second quarter 2015 related to the recorded customer relationship intangible asset fair value pertaining to the Pipeline acquisition
in November 2013.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in
conjunction with the consolidated financial information and related notes that appear in Part I, Item 1 of this Quarterly Report
on Form 10-Q. The following discussion also includes certain non-GAAP financial measures within the meaning of Regulation G promulgated
by the Securities and Exchange Commission (“Regulation G”) to supplement the financial results as reported in accordance
with GAAP. The non-GAAP financial measures discussed below include adjusted net income, adjusted operating profit and adjusted
operating ratio. These non-GAAP financial measures exclude the intangible asset impairment charge incurred in the second quarter
of this fiscal year. Patriot uses these metrics to analyze its continuing operations and to monitor, assess, and identify meaningful
trends in its operating and financial performance. These measures are not, and should not be viewed as, substitutes for GAAP financial
measures. Refer to “Non-GAAP Financial Measures” below in this Quarterly Report on Form 10-Q for a more detailed discussion,
including reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
Overview
The business of the Company, conducted through
our wholly owned subsidiary, Florida Rock & Tank Lines, Inc., is to transport petroleum and other liquids and dry bulk commodities.
We do not own any of the products we haul, rather, we act as a third party carrier to deliver our customer’s products from
point A to point B predominately using Company employees driving Company owned tractors and tank trailers. Approximately 82% of
our business consists of hauling liquid petroleum products (mostly gas and diesel fuel) from large scale fuel storage facilities
to our customers’ retail outlets (e.g. convenience stores, truck stops and fuel depots) where we off-load the product into
our customer’s fuel storage tanks for ultimate sale to the retail consumer. The remaining 18% of our business consists of
hauling our customer’s dry bulk commodities such as cement, lime and various industrial powder products and liquid chemicals.
As of June 30, 2015, we employed 699 revenue-producing drivers who operated our fleet of 477 tractors and 566 trailers from our
21 terminals and 9 satellite locations in Florida, Georgia, Alabama, South Carolina, North Carolina and Tennessee. We experience
increased seasonal demand in the spring and summer months in most of our markets.
Our industry is characterized by such barriers
to entry as the time and cost required to develop the capabilities necessary to handle hazardous material, the resources required
to recruit, train and
retain drivers, substantial industry regulatory
and insurance requirements and the significant capital investments required to build a fleet of equipment and establish a network
of terminals.
Our ability to provide superior customer
service at competitive rates and to operate safely and efficiently is important to our success in growing our revenues and increasing
profitability. Our focus is to grow our profitability by executing on our key strategies of (i) increasing our business with existing
and new customers, particularly hypermarket and large convenience store chains, that are willing to compensate us for our ability
to provide superior, safe and reliable service which facilitates their ability to grow their footprint with confidence and market
share, (ii) expanding our service offerings with respect to dry bulk and chemical products particularly in markets where we already
operate terminals, and (iii) pursuing strategic acquisitions. Our ability to execute this strategy depends on continuing our dedicated
commitments to customer service and safety and continuing to recruit and retain qualified drivers.
Our industry is experiencing a severe driver
shortage. While we have been able to grow our driver count significantly over the past few years, we saw our average driver count
drop from the same quarter last year due in large part to our turnover rate rising to historically high levels. Our management
team is keenly focused on continuing to grow our driver count in markets where there are opportunities for us to grow our business
and to retain all of our drivers at the levels we have historically achieved. We are working with two national firms to help us
improve specifically in the areas of driver hiring and retention.
There are several opportunities available
today in our markets that will allow us to execute on our growth strategy so long as we can find, hire and retain qualified drivers
to meet the demands of these opportunities. We believe the tighter driver market has and will continue to provide us with opportunities
to capture new business. As these opportunities arise, we are willing to let certain lower priced business go in this environment
to grow our business with customers willing to pay for our reliability and superior customer service.
We generate both transportation based revenue
as well as fuel surcharge revenue. Our transportation revenue consists of base revenue for each delivery which is generally calculated
by multiplying a negotiated mileage-based rate by the quantity of product delivered plus any fees for extra stops to load or unload,
powered product unloading and toll cost reimbursements. These negotiated transportation rates compensate us both for transporting
the products as well as for loading and unloading time.
While our base
rates include a fixed amount to cover our cost of fuel using an assumed price for diesel, we have fuel surcharges in place with
our customers that allow us to obtain full compensation for any additional fuel expense incurred when the price of diesel rises
above that assumed price. There is a time lag between fuel price fluctuations and changes to fuel surcharges to our customers.
In a rapidly rising price environment this time lag can negatively impact the Company’s financial
results and in a rapidly declining price environment this time lag can positively impact the Company’s financial results
(as was the case in Q1 fiscal 2015 and Q3 fiscal 2014).
In recent years, some customer contracts
have been modified to provide for reduced fuel surcharges but have been adjusted such that the base rates factor in a larger fuel
expense to the customer. As a result of this trend, and the recent decline in the price of diesel, fuel surcharges have been declining
as a percentage of our total revenue. The main factors that affect our total revenue are the number of revenue miles driven, rates
per mile, quantity of products hauled and the amount of fuel surcharges.
Our operating costs primarily consist of
the following:
| · | Compensation and Benefits - Wages
and employee benefits for our drivers and terminal support personnel is the largest component of our operating costs. These costs
are impacted by such factors as miles driven, driver pay increases, driver turnover and training costs and additional driver pay
due to temporary out-of-town deployments to serve new business; |
| · | Fuel Expenses - Our fuel expenses
will vary depending on miles driven as well as such factors as fuel prices (which can be highly volatile), the fuel efficiency
of our fleet and the average haul length; |
| · | Repairs and Tires – This
category consists of vehicle maintenance and repairs (excluding shop personnel) and tire expense (including amortization of tire
cost and road repairs). These expenses will vary based on such factors as miles driven, the age of our fleet, and tire prices. |
| · | Other Operating Expenses –
This category consists of tolls, hiring costs, out-of-town driver travel cost, terminal facility maintenance and other operating
expenses. These expenses will vary based on such factors as, driver availability and out-of-town driver travel requirements, business
growth and inflation among others; |
| · | Insurance and Losses
– This includes costs associated with insurance premiums,
and the self-insured portion of liability, worker’s compensation, health insurance and cargo claims and wreck repairs.
We work very hard to manage these expenses through our safety and wellness programs, but these expenses will vary depending on
the frequency and severity of accident and health claims, insurance markets and deductible levels; |
| · | Depreciation Expense –
Depreciation expense consists of the depreciation of the cost of fixed assets such as tractors and trailers over the life assigned
to those assets. The amount of depreciation expense is impacted by equipment prices and the timing of new equipment purchases.
We expect the cost of new tractors and trailers to continue to increase, impacting our future depreciation expense; |
| · | Rents, Tags and Utilities
Expenses – This category consists of rents payable on leased facilities and leased equipment, federal
highway use taxes, vehicle registrations, license and permit fees and personal property taxes assessed against our equipment, communications,
utilities and real estate taxes; |
| · | Sales, General and Administrative
Expenses - This category consists of the wages, bonus accruals, benefits, travel, vehicle and office costs for our administrative
personnel as well as professional fees and amortization charges for intangible assets purchased in acquisitions of other businesses; |
| · | Corporate Expenses – Corporate
expenses consist of wages, bonus accruals, insurance and other benefits, travel, vehicle and office costs for corporate executives,
director fees, stock option expense and aircraft expense; |
| · | Gains/Loss on Equipment - Our
financial results for any period may be impacted by any gain or loss that we realize on the sale of used equipment and losses on
wrecked equipment. We periodically sell used equipment as we replace older tractors and trailers. Gains or losses on equipment
sales can vary significantly from period to period depending on the timing of our equipment replacement cycle, market prices for
used equipment and losses on wrecked equipment. |
This quarterly report presents several adjusted
financial measures which exclude the effect of a second quarter 2015 $2,074,000 non-cash, intangible asset impairment charge. The
impairment charge will not result in any future cash expenditures or otherwise impact the Company's liquidity, cash flows, compliance
with its debt
covenants or any future operations. Management
believes these adjusted measures better reflect our operating performance during the quarter and reflect how management evaluates
our operational results. These measures are not and should not be viewed as substitutes for GAAP reporting measures.
To measure our performance, management focuses
primarily on total revenue growth, transportation revenue growth, revenue miles, our preventable accident frequency rate (“PAFR”),
our operating ratio (defined as our operating expenses as a percentage of our operating revenue), turnover
rate and average driver count (defined as average number of revenue producing drivers under employment over the specified time
period) as compared to the same period in the prior year.
ITEM |
Q3 2015 vs. Q3 2014 |
First nine months FY 2015 vs. first nine months FY 2014 |
Total Revenue |
Down 7% |
Down 4.6% |
Transportation Revenue |
Up 1.7% |
Up 1.9% |
Revenue Miles |
Down by 2.7% |
Down by 1.7% |
PAFR |
Improved 1.6% |
Improved 1.8% |
GAAP Operating Ratio |
1.6% Worse |
1% Worse |
Adjusted Operating Ratio |
N/A |
Improved 1.2% |
Driver Turnover Rate |
Up 17% |
Up 20% |
Average Number of Drivers |
Down 4.8% |
Down 2.8% |
The Company’s operations are influenced
by a number of external and internal factors. External factors include levels of economic and industrial activity in the United
States and the Southeast, driver availability and cost, government regulations regarding driver qualifications and limitations
on the hours drivers can work, petroleum product demand in the Southeast which is driven in part by tourism and commercial aviation,
and fuel costs. Internal factors include revenue mix, equipment utilization, Company imposed restrictions on hiring drivers under
the age of 25 or drivers without at least two years of driving experience, auto and workers’ compensation accident frequencies
and severity, administrative costs, and group health claims experience. The financial results of the Company for any individual
quarter are not necessarily indicative of results to be expected for the year.
Highlights of the Third Quarter of Fiscal 2015
| · | Net income declined $407,000 to $1,003,000
compared to the same quarter last year. |
| · | Operating profit declined $666,000 to
$1,673,000 compared to the same quarter last year. |
| · | Transportation revenue increased $485,000,
or 1.7% despite a decrease in revenue miles. |
| · | Fuel cost net of fuel surcharges increased
$515,000. |
Comparative Results of Operations
for the Three months ended June 30, 2015 and 2014
|
Three months ended June 30 |
|
(dollars in thousands) |
2015 |
|
% |
|
2014 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue miles (in thousands) |
|
11,075 |
|
|
|
|
|
|
|
11,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation revenue |
$ |
28,609 |
|
|
|
92.0 |
% |
|
|
28,124 |
|
|
|
83.8 |
% |
Fuel surcharges |
|
2,490 |
|
|
|
8.0 |
% |
|
|
5,445 |
|
|
|
16.2 |
% |
Total Revenues |
|
31,099 |
|
|
|
100.0 |
% |
|
|
33,569 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits |
|
12,552 |
|
|
|
40.4 |
% |
|
|
12,290 |
|
|
|
36.6 |
% |
Fuel expenses |
|
5,095 |
|
|
|
16.4 |
% |
|
|
7,535 |
|
|
|
22.4 |
% |
Repairs & tires |
|
2,019 |
|
|
|
6.5 |
% |
|
|
1,929 |
|
|
|
5.7 |
% |
Other operating |
|
1,090 |
|
|
|
3.5 |
% |
|
|
1,316 |
|
|
|
3.9 |
% |
Insurance and losses |
|
2,681 |
|
|
|
8.6 |
% |
|
|
2,709 |
|
|
|
8.1 |
% |
Depreciation expense |
|
2,098 |
|
|
|
6.7 |
% |
|
|
2,068 |
|
|
|
6.2 |
% |
Rents, tags & utilities |
|
987 |
|
|
|
3.2 |
% |
|
|
973 |
|
|
|
2.9 |
% |
Sales, general & administrative |
|
2,143 |
|
|
|
6.9 |
% |
|
|
2,095 |
|
|
|
6.2 |
% |
Corporate expenses |
|
782 |
|
|
|
2.5 |
% |
|
|
528 |
|
|
|
1.6 |
% |
(Gain) Loss on equipment |
|
(21 |
) |
|
|
-0.1 |
% |
|
|
(213 |
) |
|
|
-0.6 |
% |
Total cost of operations |
|
29,426 |
|
|
|
94.6 |
% |
|
|
31,230 |
|
|
|
93.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating profit |
$ |
1,673 |
|
|
|
5.4 |
% |
|
|
2,339 |
|
|
|
7.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company reported a net income
of $1,003,000 or $.31 per diluted share in the third quarter of fiscal 2015, a decrease of $407,000 or $.12 per diluted share compared
to net income of $1,410,000 or $.43 per diluted share in the same period last year. Transportation revenue increased $485,000 or
1.7% on 302,000 (-2.7%) fewer miles but fuel surcharge revenues were down versus the comparable quarter last year $515,000 more
than the decline in fuel costs. Our number of drivers available declined 4.8% from the year ago quarter despite a 1.4% increase
in driving pay on the fewer miles. Our actuarial experience in our self-insured medical coverage also worsened by $284,000 over
last year’s third quarter. The significant customer loss experienced last quarter for which we took an impairment charge
of $2,074,000 ($1,265,000 after tax) was
largely overcome with revenue from
other customers with better rates than offered by the impairment customer. The availability of fewer drivers year over year hindered
management’s ability to achieve revenue miles equivalent to last year’s third quarter performance. Corporate expenses
allocated to the Company were also up $254,000 quarter over comparable quarter.
Highlights of the First Nine Months of
Fiscal 2015
| · | Net income declined $674,000 to $1,754,000
in comparison to the year ago same period. Adjusted net income increased $591,000 to $3,019,000 over the same period last year.
The Company’s adjusted net income excludes the impact of the $1,265,000 after tax intangible asset impairment charge incurred
in the second quarter of this fiscal year. |
| · | Operating profit decreased $1,114,000
to $2,953,000 from the first nine months of fiscal 2014. Adjusted operating profit increased $960,000 to $5,027,000 compared to
the same period last year. The Company’s adjusted operating profit excludes the impact of the $2,074,000 intangible asset
impairment charge incurred in the second quarter of this fiscal year. |
| · | Operating ratio diminished by 1.0% from
95.8% in the year ago same period to 96.8% this period. The adjusted operating ratio for the Company in the period was 94.6%, an
improvement of 1.2% over the same period last year. The Company’s adjusted operating ratio excludes the impact of the $2,074,000
intangible asset impairment charge incurred in this period. |
| · | One time Spin-off costs of $327,000
were incurred during the first nine months of fiscal 2015. |
Comparative Results of Operations
for the Nine months ended June 30, 2015 and 2014
|
Nine months ended June 30 |
|
(dollars in thousands) |
2015 |
|
% |
|
2014 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue miles (in thousands) |
|
32,467 |
|
|
|
|
|
|
|
33,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation revenue |
$ |
82,994 |
|
|
|
89.7 |
% |
|
|
81,414 |
|
|
|
83.9 |
% |
Fuel surcharges |
|
9,559 |
|
|
|
10.3 |
% |
|
|
15,646 |
|
|
|
16.1 |
% |
Total Revenues |
|
92,553 |
|
|
|
100.0 |
% |
|
|
97,060 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits |
|
36,308 |
|
|
|
39.2 |
% |
|
|
35,702 |
|
|
|
36.8 |
% |
Fuel expenses |
|
15,961 |
|
|
|
17.2 |
% |
|
|
22,465 |
|
|
|
23.1 |
% |
Repairs & tires |
|
5,739 |
|
|
|
6.2 |
% |
|
|
5,806 |
|
|
|
6.0 |
% |
Other operating |
|
3,215 |
|
|
|
3.5 |
% |
|
|
4,042 |
|
|
|
4.2 |
% |
Insurance and losses |
|
8,298 |
|
|
|
9.0 |
% |
|
|
7,747 |
|
|
|
8.0 |
% |
Depreciation expense |
|
6,330 |
|
|
|
6.9 |
% |
|
|
6,099 |
|
|
|
6.3 |
% |
Rents, tags & utilities |
|
2,882 |
|
|
|
3.1 |
% |
|
|
2,750 |
|
|
|
2.8 |
% |
Sales, general & administrative |
|
6,779 |
|
|
|
7.3 |
% |
|
|
6,614 |
|
|
|
6.8 |
% |
Corporate expenses |
|
2,833 |
|
|
|
3.1 |
% |
|
|
2,072 |
|
|
|
2.1 |
% |
Intangible asset impairment |
|
2,074 |
|
|
|
2.2 |
% |
|
|
— |
|
|
|
0.0 |
% |
(Gain) Loss on equipment |
|
(819 |
) |
|
|
-0.9 |
% |
|
|
(304 |
) |
|
|
-0.3 |
% |
Total cost of operations |
|
89,600 |
|
|
|
96.8 |
% |
|
|
92,993 |
|
|
|
95.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating profit |
$ |
2,953 |
|
|
|
3.2 |
% |
|
|
4,067 |
|
|
|
4.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the first nine months of
fiscal 2015 was $1,754,000 or $.54 per share, a decrease of $674,000 or $.21 per diluted share compared to net income of $2,428,000
or $.75 per diluted share in the same period last year. The Company recorded an intangible asset impairment charge of $2,074,000,
with an after tax impact to net income of $1,265,000, in its consolidated and combined financial statements for the quarter ended
March 31, 2015, relating to the Pipeline Transportation acquisition in November 2013. The Company's conclusion that an impairment
charge was necessary is the result of (i) the loss of a significant Pipeline customer over the course of the first six months
of calendar 2014, and then (ii) the notification from another customer during the second quarter that the Company would not be
able to retain a sizeable piece of the business the Company acquired from Pipeline at the rates the Company quoted them during
a competitive bid process. In both cases, management was not willing to lower our rates to retain the business and chose instead
to use our assets and manpower to find and service new business.
The following discussion includes
certain non-GAAP financial measures (“adjusted”) within the meaning of Regulation G promulgated by the Securities and
Exchange Commission (“Regulation G”) to supplement the financial results as reported in accordance with GAAP. The non-GAAP
financial measures discussed below include adjusted net income, adjusted operating profit and adjusted operating ratio. These non-GAAP
financial measures exclude the intangible asset impairment charge incurred in the quarter. Patriot uses these metrics to analyze
its continuing operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. These
measures are not, and should not be viewed as, substitutes for GAAP financial measures. Refer to “Non-GAAP Financial Measures”
below in this press release for a more detailed discussion, including reconciliations of these non-GAAP financial measures to their
most directly comparable GAAP financial measures.
Management believes these adjusted
measures better reflect our operating performance during the periods discussed and reflect how management evaluates our operational
results. These measures are not, and should not be viewed as, substitutes for GAAP reporting measures. The Company’s adjusted
net income for the first nine months of fiscal 2015 was $3,019,000, or $.92 per diluted share, an improvement of $591,000 or $.17
per diluted share as compared to net income of $2,428,000, or $.75 per diluted share, in the same period last year. Our adjusted
operating profit for the period was up $960,000 over the same period last year and our adjusted operating ratio improved from 95.8%
to 94.6%.
For the nine months our transportation
revenue was up $1,580,000, a 2% improvement over the same period last year and the fuel cost savings for the period were greater
than the decrease in fuel surcharge revenue by $417,000 adding to the positive improvement. On the expense side the Company improved
by $827,000 over the first nine months of last year in reducing out-of-town driver costs, toll charges and rigging expenses. The
nine month performance improvement was still lessened by $327,000 of one-time spin-off costs, a $551,000 increase in insurance
and losses, a $606,000 increase in driver compensation and benefits as driver turnover worsened, a $231,000 increase in depreciation
and a $761,000 increase in corporate expenses (most of which occurred in this third quarter).
Liquidity and Capital Resources.
The Company maintains its operating accounts with Wells Fargo bank, N.A. and these accounts directly sweep overnight against the
Wells Fargo revolver. As of June 30, 2015, we had $1,430,000 borrowed on this revolver, $2,745,000 outstanding under letters of
credit and $20,825,000 available for additional borrowings. The Company was in compliance with all of its loan covenants. The Company
expects our fiscal year 2015 cash generation to cover the cost of our operations, all of our budgeted capital expenditures and
also allow us to reduce the outstanding amount borrowed under the Wells Revolver.
Cash Flows - The following
table summarizes our cash flows from operating, investing and financing activities for each of the periods presented (in thousands
of dollars):
|
|
Nine months
Ended June 30, |
|
|
|
2015 |
|
2014 |
|
Total cash provided by (used for): |
|
|
|
|
|
|
Operating activities |
$ |
10,930 |
|
|
7,953 |
|
Investing activities |
|
(4,858 |
) |
|
(17,555 |
) |
Financing activities |
|
(6,072 |
) |
|
9,702 |
|
Increase (decrease) in cash and cash equivalents |
$ |
— |
|
$ |
100 |
|
|
|
|
|
|
|
|
Outstanding debt at the beginning of the period |
|
7,282 |
|
|
- |
|
Outstanding debt at the end of the period |
|
1,430 |
|
|
10,228 |
|
|
|
|
|
|
|
|
Operating Activities - Net cash provided
by operating activities (as set forth in the cash flow statement) was $10,930,000 for the nine months ended June 30, 2015, and
$7,953,000 for the comparable period in 2014. The total of net income plus depreciation and amortization and less gains on sales
of property and equipment decreased $1,015,000 versus the same period last year. These changes are described above under "Comparative
Results of Operations." Net cash flow provided by operating activities was negatively impacted in the same period last year
by an increase of $1,392,000 of accounts receivable primarily related to the growth in revenues as a result of the Pipeline acquisition.
Accrued liabilities increased $1,780,000 primarily due to lower bonus compensation accruals in the same period last year. These
changes comprise the majority of the increase in net cash provided by operating activities. The $2,074,000 impairment charge and
the related $809,000 of deferred income taxes are added back to net income as these are non-cash items.
Investing Activities – Investing
activities include the purchase of property and equipment, any business acquisitions and proceeds from sales of these assets upon
retirement. For the first nine months ended June 30, 2015, we spent $4,858,000 on equipment net of proceeds from retirements. For
the first nine months ended June 30, 2014 we spent $17,555,000 consisting of $7,532,000 on equipment net of retirements and $10,023,000
for the Pipeline acquisition.
Financing Activities –Financing
activities primarily include net changes to our outstanding revolving debt. For the first nine months ended June 30, 2015 we used
$6,072,000 of cash to pay down debt. During the nine months ended June 30, 2014, we increased our borrowings by $9,702,000 primarily
due to the purchase of Pipeline, to fund Pipeline receivables and to purchase a larger amount of property and equipment than the
usual quarterly expenditures. Our outstanding long-term debt was $1,430,000 on June 30, 2015 as compared to $10,228,000 at June
30, 2014.
Credit Facilities - In connection
with the Spin-off, on January 30, 2015, the Company entered into a five-year credit agreement with Wells Fargo Bank N.A. which
provides a $25 million revolving line of credit with a $10 million sublimit for stand-by letters of
credit. In connection with the Spin-off,
the Company assumed and refinanced onto this new revolving credit line approximately $5.1 million of indebtedness from FRP. The
amounts outstanding under the credit agreement bear interest at a rate of 1.0% over LIBOR, which rate may change quarterly based
on the Company’s ratio of consolidated total debt to consolidated total capital. A commitment fee of 0.15% per annum is payable
quarterly on the unused portion of the commitment, which fee may change quarterly based on our ratio of consolidated total debt
to consolidated total capital. The credit agreement contains certain conditions and financial covenants, including a minimum $25
million tangible net worth. As of June 30, 2015, the tangible net worth covenant would have limited our ability to pay dividends
or repurchase stock with borrowed funds to a maximum of $5.4 million combined.
In addition to the unsecured revolving
facility provided by Wells Fargo, Management determined the Company needed an additional financing source to provide capital for
potential growth opportunities. As a result, the Company closed on a loan from Branch Banking and Trust Company (BB&T) for
up to $25 million under a two (2) year revolving facility to be secured by a portion of the Company’s equipment. This facility
contains a provision which automatically converts any draws under the revolver into five-year term loans with a seven year amortization.
Each draw requires the payment of a bank fee equal to .25% of the amount drawn. Any amounts outstanding under this facility bear
interest at a rate of 1.5% over LIBOR, which rate may change quarterly based on the Company’s leverage ratio. A commitment
fee of 0.15% per annum is payable quarterly on the unused portion of the commitment. The credit agreement contains certain conditions
and financial covenants, including limitations on the payment of cash dividends that are based on the Company’s consolidated
retained earnings. As of June, 30, 2015, the Company had not taken any draws against this facility.
Cash Requirements - The Company currently
expects its fiscal 2015 capital expenditures to be approximately $10,041,000 for expansion and replacement equipment which we expect
to be fully funded by our cash generated from our operations. The Company does not currently pay any cash dividends on common stock.
Any excess cash generated during the fiscal year will be used to pay down the Wells Fargo revolver.
Summary and Outlook.
Management’s strategy of
letting lower rated business go and replacing it with better rated business resulted in an increase of $1,580,000 in transportation
revenue for our first nine months this
year versus the same period last
year on 577,000 fewer revenue miles. While Management is pleased with the positive trends in our transportation revenue we are
still challenged to produce better improvement in bottom line results. Headwinds to our improvement are the continuing high costs
associated with hiring and training drivers in this very tight driver market in addition to historically higher medical and risk
claims costs. Management is continuing to work with two national firms on reducing the high costs associated with driver turnover
and to create a more targeted approach to adding company drivers in markets where it believes that both (i) solid new business
opportunities are available and (ii) a good driver applicant pool appears to exist. The intent is to focus on better hiring techniques,
improved dispatch process and dispatcher interaction with our drivers, and various aspects of driver pay. A hiring module will
be added to our application process that will help local management hire the best possible driver at a faster pace. We will roll
out a new dispatcher procedure and training plan that is focused on more positive dispatcher interaction with the driver. We also
have already announced a driver pay increase effective July 2015. If diesel prices stay as low as presently exist, our earnings
will continue to be impacted until we can establish better rates. Management continues to monitor our position with respect to
the levels of self-insurance we will carry on medical claims going forward as the national trend of higher medical costs continues
to worsen.
Non-GAAP Financial Measures.
To supplement the financial results presented
in accordance with GAAP, Patriot presents certain non-GAAP financial measures within the meaning of Regulation G promulgated by
the Securities and Exchange Commission. The non-GAAP financial measures included in this Quarterly Report on Form 10-Q are adjusted
net income, adjusted operating profit and adjusted operating ratio. Patriot uses these non-GAAP financial measures to analyze its
continuing operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. These
measures are not, and should not be viewed as, substitutes for GAAP financial measures.
Adjusted Net Income
Adjusted net income excludes the impact of
the intangible asset impairment charge. Adjusted net income is presented to provide additional perspective on underlying trends
in Patriot’s core operating results. A reconciliation between net income and adjusted net income is as follows:
|
|
Three months ended |
|
Nine months ended |
|
|
June 30, 2015 |
|
June 30, 2015 |
Net Income |
|
$ |
1,003 |
|
|
|
1,754 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Intangible asset impairment charge |
|
|
— |
|
|
|
1,265 |
|
Adjusted net income |
|
$ |
1,003 |
|
|
|
3,019 |
|
Adjusted Operating Ratio
Adjusted operating ratio excludes the impact
of the intangible asset impairment charge. Adjusted operating ratio is presented to provide additional perspective on underlying
trends in Patriot’s core operating results. A reconciliation between operating ratio and adjusted operating ratio is as follows:
|
|
Three months ended |
|
Nine months ended |
|
|
June 30, 2015 |
|
June 30, 2015 |
Operating ratio |
|
$ |
94.6% |
|
|
|
96.8% |
|
Adjustments: |
|
|
|
|
|
|
|
|
Intangible asset impairment charge |
|
|
0.0% |
|
|
|
(2.2% |
) |
Adjusted operating ratio |
|
$ |
94.6% |
|
|
|
94.6% |
|
Adjusted Operating Profit
Adjusted operating profit excludes the impact
of the intangible asset impairment charge. Adjusted operating profit is presented to provide additional perspective on underlying
trends in Patriot’s core operating results. A reconciliation between operating profit and adjusted operating profit is as
follows:
|
|
Three months ended |
|
Nine months ended |
|
|
June 30, 2015 |
|
June 30, 2015 |
Operating profit |
|
$ |
1,673 |
|
|
|
2,953 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Intangible asset impairment charge |
|
|
— |
|
|
|
2,074 |
|
Adjusted operating profit |
|
$ |
1,673 |
|
|
|
5,027 |
|
ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Interest Rate Risk - We are exposed
to the impact of interest rate changes through our variable-rate borrowings under the Wells Fargo Credit Agreement. The applicable
margin for borrowings at June 30, 2015 was 1.0% which is the lowest margin applicable under the Credit Agreement. The applicable
margin for such borrowings will be increased in the event our debt to capitalization ratio as calculated under the Credit Agreement
reaches certain target levels. Based upon our indebtedness at June 30, 2015 of $1,430,000, a 1% increase in interest rate would
result in $14,300 of additional interest expense annually.
Commodity Price Risk - The price and
availability of diesel fuel are subject to fluctuations due to changes in the level of global oil production, seasonality, weather,
global politics and other market factors. Historically, we have been able to recover a significant portion of fuel costs from our
customers in the form of our base rates plus fuel surcharges.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls
and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management,
including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate,
to allow timely decisions regarding required disclosure.
The Company also maintains a system of internal
accounting controls over financial reporting that are designed to provide reasonable assurance to the Company’s management
and Board of Directors regarding the preparation and fair presentation of published financial statements.
All control systems, no matter how well designed,
have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving
the desired control objectives.
As of June 30, 2015, the Company, under the
supervision and with the participation of the Company's management, including the CEO, CFO and CAO, carried out an evaluation of
the effectiveness of the design and operation of the Company's disclosure controls and
procedures. Based on this evaluation, the
Company’s CEO, CFO and CAO concluded that the Company's disclosure controls and procedures are effective in alerting them
in a timely manner to material information required to be included in periodic SEC filings.
There have been no changes in the Company’s
internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1A. RISK FACTORS
In addition to the other information
set forth in this report, you should carefully consider the factors discussed in the Company’s Information Statement dated
January 12, 2015 as filed with a Form 8-K on January 13, 2015, which could materially affect our business, financial condition
or future results. The risks described in our Information Statement are not the only risks facing our Company. Additional risks
and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our
business, financial condition and/or operating results.
Item 2. PURCHASES OF EQUITY SECURITIES
BY THE ISSUER
|
|
|
|
|
(c) |
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
Shares |
|
(d) |
|
|
|
|
|
Purchased |
|
Approximate |
|
(a) |
|
|
|
As Part of |
|
Dollar Value of |
|
Total |
|
(b) |
|
Publicly |
|
Shares that May |
|
Number of |
|
Average |
|
Announced |
|
Yet Be Purchased |
|
Shares |
|
Price Paid |
|
Plans or |
|
Under the Plans |
Period |
Purchased |
|
per Share |
|
Programs |
|
or Programs (1) |
|
April 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Through |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
5,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Through |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
5,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Through |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
5,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
— |
|
|
$ |
|
|
|
|
— |
|
|
|
|
|
(1) On February 4, 2015, the Board
of Directors authorized management to expend up to $5,000,000 to repurchase shares of the Company’s common stock from time
to time as opportunities arise. To date, the Company has not repurchased any common stock of the Company.
Item 6. EXHIBITS
| (a) | Exhibits. The response to this item is submitted as a separate Section entitled
"Exhibit Index", on page 32. |
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
August 5, 2015 PATRIOT TRANSPORTATION HOLDING,
INC.
Thompson
S. Baker II
Thompson S.
Baker II
President
and Chief Executive
Officer
John D.
Milton, Jr.
John D. Milton,
Jr.
Executive
Vice President, Treasurer,
Secretary
and Chief
Financial
Officer
John D.
Klopfenstein
John D. Klopfenstein
Controller
and Chief
Accounting
Officer
PATRIOT TRANSPORTATION HOLDING,
INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE
30, 2015
EXHIBIT INDEX
(10.6) Credit
Agreement, dated May 13, 2015, among Patriot Transportation Holding, Inc. and Branch Banking and Trust Company (BB&T).
| (14) | Financial Code
of Ethical Conduct between the Company, Chief Executive Officers, and Financial Managers, as adopted on May 6, 2015, which is available
on the Company’s website at www.patriottrans.com. |
| (31)(a) | Certification of Thompson S. Baker II. |
| (31)(b) | Certification of John D. Milton, Jr. |
| (31)(c) | Certification of John D. Klopfenstein. |
| (32) | Certification of Chief Executive Officer, Chief Financial Officer, and Chief
Accounting Officer under Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS |
XBRL Instance Document |
101.XSD |
XBRL Taxonomy Extension Schema |
101.CAL |
XBRL Taxonomy Extension Calculation Linkbase |
101.DEF |
XBRL Taxonomy Extension Definition Linkbase |
101.LAB |
XBRL Taxonomy Extension Label Linkbase |
101.PRE |
XBRL Taxonomy Extension Presentation Linkbase |
BB&T
Loan
Agreement
This
Loan Agreement (the “Agreement”) is made this 13th day of May, 2015 (the “Effective Date”)
by and between BRANCH BANKING AND TRUST COMPANY, a North Carolina banking corporation (“Bank”), and:
PATRIOT
TRANSPORTATION HOLDING, INC., a Florida corporation and FLORIDA ROCK & TANK LINES, INC., a Florida corporation
(collectively, “Borrower”), each having its chief executive office at 200 West Forsyth Street, 7th Floor,
Jacksonville, Florida 32202.
PATRIOT
TRANSPORTATION, INC., OF FLORIDA, a Florida corporation (individually “Guarantor” and collectively the “Guarantors”)
having its chief executive office at 200 West Forsyth Street, 7th Floor, Jacksonville, Florida 32202.
The
Borrower has applied to Bank for and the Bank has agreed to make, subject to the terms of this Agreement, the following loan
and/or Guidance Line of Credit (hereinafter sometimes referred to, singularly or collectively, if more than one, as “Loan”):
Guidance
Line of Credit (“Guidance Line of Credit”) in the maximum principal amount not to exceed Twenty-Five Million and
No/100 Dollars ($25,000,000.00) at any one time outstanding, The Guidance Line of Credit shall expire on the earlier of an Event
of Default and May 12, 2017 (such earlier date, the “Termination Date”). Subject to the terms and conditions of this
Agreement, Bank agrees to make loans (each such loan, a “Guidance Loan”) to Borrower from time to time up to, but
not including, the Termination Date, provided, however, in no event shall Bank be obligated to make a Guidance Loan if doing so
would, after giving effect thereto, cause the aggregate principal amount of all Guidance Loans to exceed the Guidance Line of
Credit or result in an Event of Default. The Guidance Line of Credit shall automatically expire and terminate on the Termination
Date. Within the foregoing limits and subject to the terms and conditions of this Agreement, Borrower may borrow, repay, and reborrow
the principal amount of the Guidance Loans at any time up to, but not including, the Termination Date. Borrower shall use the
proceeds of the Guidance Loans for the acquisition of transportation business or equipment and general company purposes of the
Borrower.
All
requests for Guidance Loans shall be in writing (such notice, the “Guidance Loan Takedown Request”) and shall (i)
specify the date for the making of the applicable Guidance Loan, which date must be a business day; (ii) specify the principal
amount of the applicable Guidance Loan to be made; (iii) specify Borrower’s election for a fixed interest rate or a floating
interest rate; (iv) instructions for the disbursement of the proceeds of such Guidance Loan; (v) be accompanied by a current Loan
Base Report, Covenant Compliance Certificate and a Collateral Identification Schedule; and (vi) include such other information
Bank may reasonably require from time to time. All Guidance Loans are subject to Availability.
The
Borrower shall pay to Bank, a fee equal to 0.250% of the amount of each Guidance Loan advanced under the Guidance Line of Credit
(the “Guidance Facility Fee”), which Guidance Facility Fee shall be due and payable with respect to each advance under
the Guidance Line of Credit on the closing date for such Guidance Loan (a “Guidance Loan Closing Date”).
The
Borrower shall pay the Bank, quarterly in arrears on the last day of each calendar quarter, an unused fee equal to 0.15% per annum
on the average daily unused amount of the Guidance Line of Credit for such calendar quarter calculated on the basis of a year
of 360 days for the actual number of days elapsed.
On
each Guidance Loan Closing Date, Borrower shall execute and deliver to the Bank a promissory note with addendum to promissory
note substantially in the form of Exhibit A, attached hereto and made a part hereof (each such note, together with
all of such notes, a “Guidance Note”), which Guidance Note, together with Bank’s records, shall evidence the
applicable Guidance Loan and interest accruing thereon. All Guidance Loans shall have a sixty (60) month maturity from the date
the Guidance Note is made and delivered, and shall provide for monthly fixed principal payments calculated using an 84 month amortization
period, plus monthly interest payments. All Guidance Loans shall bear interest at a per annum rate (the “Guidance Loan Interest
Rate”) equal to the One Month LIBOR plus the Applicable Margin (set forth below), unless Borrower elects a fixed rate of
interest which shall be determined by the Bank in reference to its standard internal cost of funds for the proposed Guidance Loan
at the time it receives Borrower’s Guidance Loan Takedown Request plus the Applicable Margin. All interest on any
Guidance Loan shall be calculated on the presumed basis of a year of 360 days, for the actual number of days elapsed. The Applicable
Margin shall be determined as follows:
If
Borrower’s Leverage Ratio is: |
Then
the Applicable Margin is:
|
≥
3.76:1.0 to 5:1.0 |
2.25%
|
≥
2.51:1.0 to 3.75:1.0 |
2.0%
|
BB&T
Loan
Agreement
≥
1.26:1.0 to 2.5:1.0
|
1.75%
|
≤ 1.25:1.0 |
1.5% |
Each
Guidance Note shall be secured by a first and prior lien and security interest in the Borrower’s Collateral, and at each
Guidance Loan Closing Borrower shall execute and deliver to Bank a Security Agreement, substantially in the form of Exhibit
B, attached hereto and made a part hereof, Certificates of Title and such other evidence documenting the Bank’s
first priority security interest in the Collateral as security for the Guidance Note as Bank and its counsel shall require, including,
without limitation, registering the Bank’s security interest with the Department of Motor Vehicles, and/or any other entity
which issues the Certificates of Title for the Collateral, and Guarantor shall deliver a Guaranty. Borrower and Guarantor shall
also execute and deliver to Bank at each Guidance Loan Closing such other documentation as Bank and its counsel shall require
to more fully evidence the provisions of this Loan Agreement and to fully document the Guidance Note.
Yield
Protection. If at any time a change in any law or regulation (including without limitation the Dodd-Frank Wall Street Reform
and Consumer Protection Act and all rules, guidelines, or directives promulgated by the Bank for International Settlements, the
Basel Committee on Banking Supervision or other U.S. or foreign regulatory authorities pursuant to Basel III) or in the interpretation
thereof by any governmental authority having the authority to interpret or enforce the same shall make it unlawful for Bank to
make or maintain the Loan under the terms of this Agreement, Bank shall have the right to convert the applicable interest rate
on the loans to a rate based on the Prime Rate. Similarly, should Bank incur increased costs or a reduction in the amounts received
or receivable on the Loan because of any change in any applicable law, regulation, rule, guideline or order, including without
limitation the imposition, modification or applicability of any reserves, deposits or capital adequacy then Borrower shall pay
to Bank within ten (10) business days of demand, which demand shall contain the basis and calculations supporting such demand,
as may be required to compensate Bank for such increased costs or reductions in amounts to be received hereunder. Each determination
and calculation made by Bank shall, absent manifest error, be binding and conclusive on the parties hereto. All payments made
by Borrower hereunder or the other Loan Documents shall be made free and clear and without deduction of any present or future
taxes, levies, imposts, charges or withholdings other than taxes based on net income and franchise taxes imposed on Bank by the
law of the jurisdiction in which Bank is organized or transacting business.
The
Guidance Notes are collectively referred to herein as the “Note(s)” and shall include all extensions, renewals, modifications
and substitutions thereof. Bank may, at its sole discretion, effect payment of any sums past due under the Note(s) and any fees
or reimbursable expenses due by debiting Borrower’s operating or other deposit account with Bank.
Section
1 Conditions Precedent
The
Bank shall not be obligated to make any disbursement of Loan proceeds until all of the following conditions have been satisfied
by proper evidence, execution, and/or delivery to the Bank of the following items in addition to this Agreement, all in form and
substance satisfactory to the Bank and the Bank's counsel in their sole discretion:
USA
Patriot Act Verification Information: Information or documentation, including but not limited to the legal name, address,
tax identification number, driver’s license, and date of birth (if the Borrower is an individual) of the Borrower sufficient
for the Bank to verify the identity of the Borrower in accordance with the USA Patriot Act. Borrower shall notify Bank promptly
of any change in such information.
Note(s):
A Guidance Note duly executed by the Borrower.
Security
Agreement(s): A Security Agreement in which Borrower and any other owner of personal property collateral (a “Debtor”)
shall grant to Bank a first priority security interest in the personal property specified therein. (If Bank has or will have a
security interest in any collateral which is inferior to the security interest of another creditor, Borrower must fully disclose
to Bank any and all prior security interests, and Bank must specifically approve any such security interest which will continue
during the Loan.)
Certificates
of Title: Certificates of Title for each vehicle, trailer, or other titled personal property serving as collateral for the
Loan.
UCC
Financing Statements: Copies of UCC Financing Statements duly filed in Borrower’s or Debtor’s state of incorporation,
organization or residence, and in all jurisdictions necessary, or in the opinion of the Bank desirable, to perfect the security
interests granted in the Security Agreement(s), and certified copies of Information Requests identifying all previous financing
statements on record for the Borrower or other debtor, as appropriate from all jurisdictions indicating that no security interest
has previously been granted in any of the Collateral, unless prior approval has been given by the Bank.
Corporate
Resolution: A Certificate of Corporate Resolutions signed by the corporate secretary or certified officer containing resolutions
duly adopted by the Board of Directors of the Borrower and the Guarantor authorizing the execution, delivery, and performance
of the Loan Documents on or in a form provided by or acceptable to Bank.
Articles
of Incorporation: A copy of the Articles of Incorporation and all other charter documents of Borrower and Guarantor, all filed
with and certified by the Secretary of State of the State of the Borrower's incorporation.
BB&T
Loan
Agreement
By-Laws:
A copy of the By-Laws of the Borrower and Guarantor, certified by the Secretary of the Borrower as to their completeness and
accuracy.
Certificate
of Incumbency: A certificate of the Secretary of the Borrower and Guarantor certifying the names and true signatures of the
officers of the Borrower authorized to sign the Loan Documents.
Certificate
of Existence: A certification of the Secretary of State (or other government authority) of the State of the Borrower's Incorporation
or Organization as to the existence or good standing of the Borrower and its charter documents on file.
Opinion
of Counsel: An opinion of counsel for the Borrower satisfactory to the Bank and the Bank’s counsel, substantially in
the form of Exhibit C, attached hereto and made a part hereof.
Guaranty:
Guaranty Agreement, substantially in the form of Exhibit D, attached hereto and made a part hereof, duly executed
by the Guarantor.
Additional
Documents: Receipt by the Bank of other approvals, opinions, or documents as the Bank may reasonably request.
Appraisal(s):
Two (2) copies of an appraisal ordered by the Bank of the estimated market value of the personal property offered as collateral
for the Loan(s) referenced herein. The appraisal(s) must be addressed to the Bank and must conform to the Uniform Standards of
Professional Appraisal Practice (“USPAP”) adopted by the Appraisal Standards Board of the Appraisal Foundation. Any
deviation from the USPAP must be explained in the appraisal(s). The appraiser(s) must be licensed and/or certified if required
by applicable Federal Deposit Insurance Corporation regulations or state laws.
Section
2 Representations and Warranties
The
Borrower represents and warrants to Bank that:
2.01.
Financial Statements. The balance sheet of the Borrower and its subsidiaries, if any, and the related Statements of Income
and Retained Earnings of the Borrower and its subsidiaries, the accompanying footnotes together with the accountant's opinion
thereon, and all other financial information previously furnished to the Bank, are true and correct and fairly reflect the financial
condition of the Borrower and its subsidiaries as of the dates thereof, including all contingent liabilities of every type, and
the financial condition of the Borrower and its subsidiaries as stated therein has not changed materially and adversely since
the date thereof.
2.02.
Name, Capacity and Standing. The Borrower’s exact legal name is correctly stated in the initial paragraph of the
Agreement. If the Borrower and any of its subsidiaries, if any, is a corporation, general partnership, limited partnership,
limited liability partnership, or limited liability company, it is duly organized and validly existing under the laws of its respective
state of incorporation or organization; that it and/or its subsidiaries, if any, are duly qualified and in good standing in every
other state in which the nature of their business shall require such qualification, and are each duly authorized by their board
of directors, general partners or member/manager(s), respectively, to enter into and perform the obligations under the Loan Documents.
2.03.
No Violation of Other Agreements. The execution and delivery of the Loan Documents, and the performance by the Borrower,
by any and all pledgors (whether the Borrower or Debtor (hereinafter sometimes referred to as the “Pledgor”)) or by
the Guarantor(s) thereunder will not violate any provision, as applicable, of its articles of incorporation, by-laws, articles
of organization, operating agreement, agreement of partnership, limited partnership or limited liability partnership, or,
of any law, other agreement, indenture, note, or other instrument binding upon the Borrower, any Pledgor or Guarantor(s),
or give cause for the acceleration of any of the respective obligations of the Borrower or Guarantor(s).
2.04.
Authority. The execution, delivery and performance of this Agreement, the Note(s) and the other Loan Documents has been
duly authorized by all necessary and proper corporate or equivalent action. All authority from and approval by any federal, state,
or local governmental body, commission or agency necessary to the making, validity, or enforceability of this Agreement and the
other Loan Documents has been obtained.
2.05.
Asset Ownership. The Borrower and each Pledgor has good and marketable title to all of the properties and assets reflected
on the balance sheets and financial statements furnished to the Bank, and all such properties and assets are free and clear of
mortgages, deeds of trust, pledges, liens, and all other encumbrances except as otherwise disclosed by such financial statements.
2.06.
Discharge of Liens and Taxes. The Borrower and its subsidiaries, if any, have filed, paid, and/or discharged all taxes
or other claims which may become a lien on any of their respective properties or assets, excepting to the extent that such items
are being appropriately contested in good faith and for which an adequate reserve (in an amount acceptable to Bank) for the payment
thereof is being maintained.
2.07.
Regulations U and X. None of the Loan proceeds shall be used directly or indirectly for the purpose of purchasing or carrying
any margin stock in violation of the provisions of Regulation U and Regulation X of the Board of Governors of the Federal Reserve
System.
2.08.
ERISA. Each employee benefit plan, as defined by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
maintained by the Borrower or by any subsidiary of the Borrower or any corporate Guarantor meets, as of the date hereof, the minimum
funding standards of Section 302 of ERISA, all applicable requirements of ERISA and of the Internal Revenue Code of 1986, as amended,
and no “Reportable Event” nor “Prohibited Transaction” (as defined by ERISA) has occurred with respect
to any such plan.
BB&T
Loan
Agreement
2.09.
Litigation. There is no claim, action, suit or proceeding pending, threatened or reasonably anticipated before any
court, commission, administrative agency, whether State or Federal, or arbitration which will materially adversely affect the
financial condition, operations, properties, or business of the Borrower, its subsidiaries, if any, any Guarantor, or any Pledgor,
or affect the ability of the Borrower or any Guarantor or any Pledgor to perform its obligations under the Loan Documents.
2.10.
Other Agreements. The representations and warranties made by Borrower to Bank in the other Loan Documents are true and
correct in all respects on the date hereof
2.11.
Binding and Enforceable. The Loan Documents, when executed, shall constitute valid and binding obligations of the Borrower
and Guarantors respectively, and are enforceable in accordance with their terms, except as may be limited by bankruptcy,
insolvency, moratorium, or similar laws affecting creditors' rights generally.
2.12.
Commercial Purpose. The Loan(s) are not “consumer transactions”, as defined in the Florida Uniform Commercial
Code, and none of the collateral was or will be purchased or held primarily for personal, family or household purposes.
2.13.
No Violation of Wells Fargo Credit Facility. The execution and delivery of the Loan Documents, and the performance by the
Borrower, by any and all Pledgors or by the Guarantor(s) thereunder will not violate any provision of that certain 2015 Credit
Agreement dated as of January 30, 2015 by and between Patriot Transportation Holding, Inc. and Wells Fargo Bank, N.A. (the “Wells
Fargo Credit Facility” and together with all documents and agreements entered into in connection therewith as in effect
on the date of this Loan Agreement, the “Wells Fargo Credit Facility Loan Documents”).
Section
3 Affirmative Covenants
The
Borrower covenants and agrees that from the date hereof and until payment in full of all indebtedness and performance of all obligations
owed under the Loan Documents, Borrower shall:
3.01.
Maintain Existence and Current Legal Form of Business. (a) Maintain its existence and good standing in the state of its
incorporation or organization, (b) maintain its current legal form of business indicated above, and (c), as applicable, qualify
and remain qualified as a foreign corporation in each jurisdiction in which such qualification is required.
3.02.
Maintain Records. Keep adequate records and books of account, in which complete entries will be made in accordance with
GAAP consistently applied, reflecting all financial transactions of the Borrower.
3.03.
Maintain Properties. Maintain, keep, and preserve all of its properties (tangible and intangible) including the collateral
necessary or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted.
3.04.
Conduct of Business. Continue to engage in an efficient, prudent, and economical manner in a business of the same general
type as now conducted.
3.05.
Maintain Insurance. Maintain insurance with financially sound and reputable insurance companies acceptable to Bank in such
amounts and covering such risks as are usually carried by companies engaged in the same or a similar business, which insurance
may provide for reasonable deductible(s). The Bank shall be named as loss payee (Long Form) on all policies which apply to the
Bank's collateral, and the Borrower shall deliver certificates of insurance at closing evidencing same. All such insurance policies
shall provide, and the certificates shall state, that no policy will be terminated without 20 days prior written notice to Bank.
3.06.
Comply With Laws. Comply in all respects with all applicable laws, rules, regulations, and orders including, without limitation,
paying before the delinquency of all taxes, assessments, and governmental charges imposed upon it or upon its property, and all
Environmental Laws.
3.07.
Right of Inspection. Permit the officers and authorized agents of the Bank, at any reasonable time or times in the Bank's
sole discretion, and if no Event of Default then exists upon prior written notice to Borrower, to examine and make copies of the
records and books of account of, to visit the properties of the Borrower, and to discuss such matters with any officers, directors,
managers, members or partners, limited or general of the Borrower, and the Borrower's independent accountant as the Bank deems
necessary and proper.
3.08.
Reporting Requirements. Furnish to the Bank:
Financial
Statements: As soon as available and not more than forty-five (45) days after the end of the first, second and third quarters
of each fiscal year, balance sheets, statements of income, cash flow, and retained earnings for the period ended and a statement
of changes in the financial position, all in reasonable detail, and all prepared in accordance with GAAP consistently applied
and certified as true and correct by an officer, general partner or manager (or member(s)) of the Borrower, as appropriate.
Annual
Financial Statements: As soon as available and not more than one hundred twenty (120) days after the end of each fiscal year,
balance sheets, statements of income, and retained earnings for the period ended and a statement of changes in the financial position,
all in reasonable detail, and all prepared in accordance with GAAP consistently applied. The financial statements must be of the
following quality or better: Audited.
BB&T
Loan
Agreement
Covenant
Compliance Certificate: On or before the forty-fifth (45th) day after the end of each quarter, a Covenant Compliance
Certificate of Borrower in the form attached hereto as Schedule EE signed by the President, Chief Executive Officer
or Chief Financial Officer of the Borrower.
Loan
Base Report: On or before the forty-fifth (45th) day after the end of each quarter, a Loan Base Report in a form
acceptable to Bank signed by the President, Chief Executive Officer or Chief Financial Officer of the Borrower, reflecting any
changes in the Eligible Equipment and the Availability.
Notice
of Litigation: Promptly after the receipt by the Borrower, or by any Guarantor of which Borrower has knowledge, of notice
or complaint of any action, suit, and proceeding before any court or administrative agency of any type which, if determined adversely,
could have a material adverse effect on the financial condition, properties, or operations of the Borrower or Guarantor, as appropriate.
Notice
of Default: Promptly upon discovery or knowledge thereof, notice of the existence of any event of default under this Agreement
or any other Loan Documents.
USA
Patriot Act Verification Information: Information or documentation, including but not limited to the legal name, address,
tax identification number, driver’s license, and date of birth (if the Borrower is an individual) of the Borrower sufficient
for the Bank to verify the identity of the Borrower in accordance with the USA Patriot Act. Borrower shall notify Bank promptly
of any change in such information.
Wells
Fargo Credit Facility Documents. Promptly upon execution and delivery to Wells Fargo, true and complete copies of any modifications,
amendments, restatements, and renewals of the Wells Fargo Credit Facility Loan Documents.
Other
Credit Facility Documents. Promptly upon execution and delivery to any lender or creditor who extends credit or loans to Borrower
other than Bank or Wells Fargo (but excluding trade creditors in the ordinary course of Borrower’s business), true and correct
copies of the loan and credit documents delivered in connection therewith, and upon modification, amendment, restatement and renewals
thereof, true and correct copies of such modification, amendment, restatement and renewal (collectively, the “Other Credit
Facility Documents”).
Other
Information: Such other information as the Bank may from time to time reasonably request.
3.09.
Deposit Accounts. Open and maintain at least one deposit account with the Bank.
3.10.
Affirmative Covenants from other Loan Documents. All affirmative covenants contained in any Security Agreement, or other
security document executed by the Borrower which are described in Section 1 hereof are hereby incorporated by reference herein.
3.11. Minimum
Collateral Value. Maintain a loan to value ratio whereby the Net Orderly Liquidation Value of the Collateral plus
the Interim Assigned Value of the Collateral equals or exceeds 118% of the aggregate outstanding principal balance of
the Guidance Notes (the “Minimum Collateral Value”), provided, however, if upon receipt of any updated appraisal
of the Collateral, Borrower does not meet the Minimum Collateral Value, Borrower shall have the right to add additional
Eligible Equipment to the Collateral at any time prior to the due date of the next succeeding Loan Base Report. In addition,
at any time during the term of this Agreement so long as no Event of Default exists, Borrower may add or remove Eligible
Equipment to and from the Collateral so long as it maintains the required Minimum Collateral Value. The value of any Eligible
Equipment which is added to or removed from the Collateral shall be its Net Orderly Liquidation Value, and to the extent that
any such Eligible Equipment was not appraised during the twelve (12) months preceding its addition or removal, such equipment
shall be valued at the Interim Assigned Value.
3.12.
Collateral Appraisals and Exams. From time to time, as deemed necessary by Bank in its reasonable discretion to monitor Collateral,
but no more than once a year, unless an Event of Default exists in which event there shall be no restrictions on frequency of
appraisals and Bank can exercise its sole discretion, Borrower hereby authorizes Bank or any agent, employee or representative
thereof to inspect, examine, and verify the Collateral, order and obtain appraisals of the Collateral, examine and make copies
of and make abstracts from all the records and books of account of, and visit the properties of, Borrower, and to discuss or communicate
the affairs, finances, and Collateral generally of Borrower with any of Borrower’s owners, officers, employees, directors,
shareholders, members or partners, as well as Borrower’s independent accountants and consultants or with respect to any
Collateral, any of its Account Debtors. Without expense to Bank, Bank may use any of Borrower’s personnel, premises and
equipment (including, without limitation, computer equipment, programs and computer readable media) as deemed reasonably necessary
by Bank to conduct such exam. Borrower shall pay to Bank for each appraisal of the Collateral and any exam, an examination fee
plus actual expenses such as, but not limited to, travel time, specialized equipment needed to count and/or value goods pledged
as Collateral, the use of outside firms to perform any exam as deemed necessary by Bank in its reasonable discretion to appraise
the Collateral and/or monitor the Collateral, with said reimbursement being represented by receipts and/or listing of expense(s)
submitted to Borrower by Bank along with Bank's invoice for reimbursement.
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3.13.
Compliance with Wells Fargo Credit Facility Documents. Comply in all respects with the terms and provisions of the Wells
Fargo Credit Facility Documents.
Section
4 Guarantor(s) Covenants
Each
Guarantor covenants and agrees that from the date hereof and until payment in full of all indebtedness and performance of all
obligations owed under the Loan Documents, Guarantor shall:
4.01.
Maintain Existence and Current Legal Form of Business. If Guarantor is a corporation, partnership, limited partnership,
limited liability partnership or limited liability company (a) maintain its existence and good standing in the state of its incorporation
or organization, (b) maintain its current legal form of business as shown on the guaranty agreement provided by Guarantor to Bank
in connection with the Loan, (c) without the Bank’s prior written consent, not change Guarantor’s name, or enter into
any merger, consolidation, reorganization or exchange of stock, ownership interests or assets, and (d) as applicable, qualify
and remain qualified as a foreign corporation, general partnership, limited partnership, limited liability partnership or limited
liability company in each jurisdiction in which such qualification is required.
4.02.
Maintain Properties. Guarantor shall not, without the prior written consent of Bank, sell, transfer or otherwise dispose
of all or substantially all of Guarantor's properties and assets (tangible or intangible), except in the ordinary course of business.
4.03.
Comply With Laws. Comply in all respects with all applicable laws, rules, regulations, and orders including, without limitation,
paying before the delinquency thereof all taxes, assessments, and governmental charges imposed or assessed upon Guarantor or upon
Guarantor’s property, and with all Environmental Laws.
4.04.
Reporting Requirements. Furnish to the Bank:
Annual
Financial Statement(s): As soon as available and not more than one hundred twenty (120) days after the end of each fiscal
year of Guarantor, balance sheets, statements of income, and retained earnings for the period ended and a statement of changes
in financial position, on form(s) to be provided by the Bank, all in reasonable detail, and all prepared in accordance with GAAP
consistently applied; and, such financial statements must be of the following quality or better: Audited, provided, however, if
Guarantor does not prepare its own separate financial statements, but its financial statements are reflected on its parent’s
financial statement, Guarantor shall provide any consolidating statements and information together with the audited financial
statements of Guarantor’s parent.
Notice
of Litigation: Promptly after the receipt by Guarantor, or by Borrower of which Guarantor has knowledge, notice of any claim,
action, suit, and proceeding before any court or governmental agency of any type which, if determined adversely, could have a
material adverse effect on the financial condition, properties, or operations of the Guarantor or Borrower, as appropriate.
4.05.
Transfer of Ownership. Not, without the prior written consent of the Bank: If Guarantor is a corporation, (a) issue, transfer
or sell any new class of stock, or (b) issue, transfer or sell, in the aggregate, from its treasury stock and/or currently authorized
but unissued shares of any class of partnership, limited partnership, limited liability partnership or limited liability company,
issue, transfer or sell any interest in Guarantor.
4.06.
[intentionally deleted]
4.07.
Other Information: Furnish such other information as the Bank may from time to time reasonably request.
4.08.
Representations and Warranties. Each Guarantor represents and warrants to Bank that: (i) if Guarantor is a corporation,
partnership, limited partnership, limited liability partnership, limited liability limited partnership, or limited liability company,
it is duly organized and validly existing under the laws of its respective state of incorporation or organization; that it and/or
its subsidiaries, if any, are duly qualified and in good standing in every other state in which the nature of their business shall
require such qualification, and are each duly authorized by their board of directors, general partners or member/manager(s), respectively,
to enter into and perform the obligations under its Guaranty Agreement, (ii) all financial statements and related information
furnished to Bank in connection with the Loan are true, correct and complete in all material respects, accurately represent the
financial condition of such Guarantor as of the date thereof, and no material adverse change in its financial condition has occurred
since the date thereof; (iii) it has full knowledge of the financial condition and business operations of the Borrower; and (iv)
there is no litigation pending or, to the knowledge of such Guarantor, threatened which if adversely decided would materially
impair its ability to honor and pay its obligations under its Guaranty Agreement.
4.09.
Eligible Contract Participant. Notwithstanding anything to the contrary herein, any person that does not qualify as an
Eligible Contract Participant (as defined in the Commodity Exchange Act, as amended) or otherwise does not qualify as an “indirect
proprietorship” pursuant to the rules of the Commodity Futures Trading Commission, shall not be deemed a party to any guaranty
of any Swap Obligation with Bank entered into or modified on or after October 12, 2012, and shall not be liable for any swap obligations
to Bank arising from such Swap Obligation. The foregoing exclusion shall have no effect on any other obligation of such person
to Bank under his Guaranty. “Swap Obligation” means, with respect to any Guarantor, any obligation to pay or perform
under any agreement, contract or transaction that constitutes a Swap Agreement (including any Hedge Agreement) within the meaning
of section 1a(47) of the Commodity Exchange Act (7 U.S.C. Sec. 1 et seq.).
4.10.
Keepwell. If at any time a Guarantor guarantees a Swap Obligation under any Hedge Agreement in connection with this Agreement,
such guarantor, to the extent he is an Eligible Contract Participant, as defined in Section 4.09 hereof, unconditionally and irrevocably
agrees to provide such funds or other support as needed by each other Guarantor to honor all of its obligations under any Hedge
Agreement in respect of any Swap Obligation, as defined in Section 4.09 hereof. The obligation of each Guarantor under this Section
4.10 shall remain in full force and effect until the Loan shall have been repaid in full and all commitments to make advances
hereunder have terminated. Each Guarantor intends that this Section 4.10 shall constitute a “keepwell, support or other
agreement” for the benefit of each other Guarantor for all purposes of section 1a(18)(A)(v)(II) of the Commodity Exchange
Act (7 U.S.C. Section 1 et seq.).
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Section
5 Financial Covenants
The
Borrower covenants and agrees that from the date hereof until payment in full of the Loan and the performance of all obligations
under the Loan Documents, it shall at all times maintain the following financial covenants and ratios all in accordance with GAAP
unless otherwise specified:
Leverage
Ratio/Debt to Tangible Net Worth. Maintain a ratio of total book liabilities to Tangible Net Worth of not greater than 5.0
to 1.0 tested quarterly during the term of this Agreement. “Tangible Net Worth” is defined as net worth, plus obligations
contractually subordinated to debts owed to Bank, minus loans or advances to affiliated Persons, goodwill, contract rights, and
other assets representing claims on shareholders or affiliated Persons. Subject to the Bank’s review and approval in its
sole discretion, the Borrower may include pro forma financial statement information for any acquisition in this calculation.
Funded
Debt to EBITDA Ratio. Maintain a Funded Debt to EBITDA Ratio of not greater than 2.5:1.0, tested quarterly, on a trailing
twelve month basis, during the term of this Agreement. “Funded Debt to EBITDA Ratio” means the ratio of (a) all liabilities
and obligations which bear interest, to (b) the sum of net income plus interest expense plus taxes plus depreciation
plus amortization. Subject to the Bank’s review and approval in its sole discretion, the Borrower may include pro
forma financial statement information for any acquisition in this calculation. The current portion of long-term debt will be measured
as of the last day of the calculation period.
Fixed
Charge Coverage Ratio. Maintain a Fixed Charge Coverage Ratio of at least 1.15:1.0, tested quarterly, on a trailing
twelve month basis, during the term of this Agreement. “Fixed Charge Coverage Ratio” means the ratio of (a) the
sum of net income plus interest expense plus amortization plus lease expense and rent expense minus
dividends and distributions, to (b) the sum of the current portion of long term debt for the prior period plus
interest expense plus lease expense and rent expense. Subject to the Bank’s review and approval in its sole
discretion, the Borrower may include pro forma financial statement information for any acquisition in this calculation. The
current portion of long-term debt will be measured as of the last day of the calculation period.
Section
6 Negative Covenants
The
Borrower covenants and agrees that from the date hereof and until payment in full of all indebtedness and performance of all obligations
under the Loan Documents, the Borrower shall not, without the prior written consent of the Bank:
6.01. Liens.
Create, incur, assume, or suffer to exist any lien upon or with respect to the Collateral, or the properties of any Pledgor
securing payment of the Loan, now owned or hereafter acquired, except:
| (a) | Liens
and security interests in favor of the Bank; |
| (b) | Liens
for taxes not yet due and payable or otherwise being contested in good faith and for
which appropriate reserves are maintained; |
| (c) | Other
liens imposed by law not yet due and payable, or otherwise being contested in good faith
and for which appropriate reserves are maintained; |
| (d) | [intentionally
deleted]; |
| (e) | purchase
money security interests on any property hereafter acquired, provided that such lien
shall attach only to the property acquired. |
6.02.
Debt. To the same extent set forth in the Wells Fargo Credit Facility Loan Documents, as same are amended, modified or
restated from time to time, or if the Wells Fargo Credit Facility no longer exists, to the same extent set forth in the Other
Credit Facility Loan Documents, Borrower shall not create, incur, assume, or suffer to exist any debt or enter into any capital
lease obligations except as permitted by the Wells Fargo Credit Facility Loan Documents and the Other Credit Facility Loan Documents.
6.03.
[intentionally deleted]
6.04.
Change of Legal Form of Business. Change Borrower’s name or the legal form of Borrower’s business as shown
above, whether by merger, consolidation, conversion or otherwise.
| (a) | [intentionally
deleted] |
6.05.
Dividends or Distributions; Acquisition of Capital Stock or Other Ownership Interests. Declare or pay any dividends or
distributions of any kind, or purchase or redeem, retire, or otherwise acquire any of Borrower’s capital stock or other
ownership interests, now or hereafter outstanding, except for (i) dividends not exceeding 66.6% of the consolidated net income
of Borrower and its subsidiaries subsequent to September 30, 2003, (ii) dividends payable solely in shares of any class of Borrower’s
common stock, (iii) dividends or distributions, purchase or redemption made by Borrower in any subsidiary or by any subsidiary
in Borrower, and (iv) cash redemptions of Borrower’s common stock, unless any such distribution would cause Borrower to
commit an event of default under Section 5 hereof.
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6.06.
[intentionally deleted]
6.07.
Guaranties. Assume, guarantee, endorse, or otherwise be or become directly or contingently liable for obligations of any
Person, except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary
course of business and guaranties made in connection with an asset acquisition by Borrower so long as no Event of Default then
exists or would occur after giving effect thereto.
6.08.
[intentionally deleted]
6.09.
Disposition of Assets. Sell, lease, transfer or otherwise dispose of, or permit any of its subsidiaries to sell, lease,
transfer or otherwise dispose of, any of its assets or properties except in the ordinary and usual course of its business.
6.10.
[intentionally deleted]
6.11.
Negative Covenants from other Loan Documents. All negative covenants contained in any Security Agreement, or other security
document executed by the Borrower which are described in Section 1 hereof or are otherwise in effect under any other loan to Borrower
are hereby incorporated by reference herein.
Section
7 Hazardous Materials and Compliance with Environmental Laws
7.01. [intentionally
deleted]
7.02. Compliance.
Borrower agrees to comply with all applicable Environmental Laws, including, without limitation, all those relating to Hazardous
Materials, where noncompliance may have a significant negative effect on the Collateral. Borrower further agrees to provide Bank,
with immediate notice in writing of any violation of any Environmental Laws where noncompliance may have a significant negative
effect on the Collateral, and to pursue diligently to completion all appropriate and/or required remedial action.
7.03. Remedial
Action; Indemnity: Borrower agrees to indemnify and hold Bank harmless from any and all loss or liability arising out of any
violation of the representations, covenants, and obligations contained in this Section 7. In addition, Bank shall have all rights
and remedies provided in other Loan Documents with respect to Hazardous Materials and violations of Environmental Laws.
Section
8 Events of Default
Subject
to the applicable notice and cure periods set forth below, the following shall be “Events of Default” by Borrower
or any Guarantor:
8.01. Should
Borrower fail to make payment of any installment of principal or interest on any of the Note(s) within five (5) days of when due
or payable
8.02. Should
any representation or warranty made in the Loan Documents prove to be false or misleading in any material respect when made.
8.03. Should
any report, certificate, financial statement, or other document furnished prior to the execution of or pursuant to the terms of
this Agreement prove to be false, incomplete or misleading in any material respect when made.
8.04. Should
the Borrower or any Guarantor default on the performance of any other obligation of indebtedness when due or in the performance
of any obligation incurred in connection with money borrowed.
8.05. Should
the Borrower, any Guarantor or any Pledgor breach any covenant, condition, or agreement made under any of the Loan Documents
to which it is a party.
8.06. Should
a custodian be appointed for or take possession of any or all of the assets of the Borrower or any Guarantor, or should the Borrower
or any Guarantor either voluntarily or involuntarily become subject to any insolvency proceeding, including becoming a debtor
under the United States Bankruptcy Code, any proceeding to dissolve the Borrower or any Guarantor, any proceeding to have a receiver
appointed, or should the Borrower or any Guarantor make an assignment for the benefit of creditors, or should there be an attachment,
execution, or other judicial seizure of all or any portion of the Borrower's or any Guarantor's assets, including an action or
proceeding to seize any Collateral or any funds on deposit with the Bank, and such seizure is not discharged within 30 days.
8.07. Should
final judgment for the payment of money be rendered against the Borrower or any Guarantor which is not covered by insurance and
which would cause a material adverse change in Borrower’s or any Guarantor’s financial condition or business operations
in Bank’s sole discretion, and shall remain undischarged for a period of 30 days unless such judgment or execution thereon
be effectively stayed.
8.08. Upon
the death of, or termination of existence of, or dissolution of, any Borrower, Pledgor or Guarantor;.
8.09. Should
Bank determine that a Borrower or any Guarantor has suffered a material adverse change in its financial condition or its business
operations.
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8.10. Should
any lien or security interest granted to Bank to secure payment of the Note(s) terminate, fail for any reason to have the priority
agreed to by Bank on the date granted, or become unenforceable, unperfected or invalid for any reason.
8.11. Default
under any Hedge Agreement, as defined in Section 10.01.
8.12. Should
Borrower assert for any reason that this Agreement or any provision hereof or any other Loan Document is invalid or unenforceable,
or should any Guarantor assert that that its Guaranty is invalid or unenforceable.
8.13. Should
Borrower refuse to permit Bank to inspect, examine or verify the Collateral or the books and records in accordance with the Exam
provisions of set forth in this Agreement.
8.14. Should
a Default or Event of Default occur under the Wells Fargo Credit Facility which is not cured under any applicable cure period
set forth thereunder.
8.15. Should
the value of the Collateral or other collateral securing the Loan decline below the Minimum Collateral Value in violation of this
Agreement and Borrower does not within ten (10) days thereafter either (i) make a principal prepayment on the Loan, or (ii) grant
Bank a first priority perfected security interest in additional Eligible Equipment, in each case to the extent necessary to achieve
the Minimum Collateral Value.
Notice
and Right to Cure. Notwithstanding any provision contained in this Agreement, the Note(s) or any other Loan Document to the
contrary, in the event of a payment default, Bank’s right to accelerate the Note(s) shall be immediate and without notice.
With respect to any non-payment default under this Agreement that remains uncured beyond the Notice Period (defined below), the
Note(s) or the other Loan Documents which is curable, Bank’s right to accelerate the indebtedness evidenced by the Note(s)
shall be thirty (30) days from the first to occur of (i) the date that Borrower has knowledge of such default or (ii) Borrower’s
receipt of written notice from Bank of such default (such thirty (30) day period, the “Notice Period”). For the avoidance
of doubt, in no event shall any notice and right to cure be required or given for any event of default arising from any representation,
financial statement or report, certificate or other document made or furnished prior or pursuant to this Agreement which proves
to be false or misleading in any material respect when made; should Borrower or any Guarantor voluntarily become a debtor under
the Bankruptcy Code, become subject to any insolvency proceeding, make an assignment for the benefit of creditors or become subject
to any attachment, execution, or judicial seizure of its assets (including any funds on deposit with Bank); any failure to repay
the Loan at maturity; any commencement of the process of liquidation or dissolution; any proceeding commenced against it seeking
the forfeiture of any of the Collateral or other assets as a result of any criminal activity; the sale, conveyance, transfer or
encumbrance of the Collateral or a bulk sale transfer of Borrower’s personal property without the prior consent of Bank;
or upon the termination of any Guaranty Agreement by any Guarantor.
Section
9 Remedies Upon Default
Upon
the occurrence of any of the above listed Events of Default, and subject to any applicable notice and cure periods, if any, Bank
may at any time thereafter, at its option, take any or all of the following actions, at the same or at different times:
9.01. Declare
the outstanding balance(s) of the Note(s) to be immediately due and payable, both as to principal and interest, late fees, and
all other amounts/expenditures without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly
waived by Borrower and each Guarantor, and such balance(s) shall accrue interest at the Default Rate as provided herein until
paid in full;
9.02. Require
Borrower or Guarantor(s) to pledge additional collateral to Bank from the Borrower's or any Guarantor's assets and properties,
the acceptability and sufficiency of such collateral to be determined in Bank's sole discretion;
9.03. Take
immediate possession of and/or foreclose upon any or all collateral which may be granted to Bank as security for the indebtedness
and obligations of Borrower or any Guarantor under the Loan Documents;
9.04. Exercise
any and all other rights and remedies available to Bank under the terms of the Loan Documents and applicable law, including the
Florida Uniform Commercial Code;
9.05. Any
obligation of Bank to advance funds to Borrower or any other Person under the terms of the Note(s) and all other obligations,
if any, of Bank under the Loan Documents shall immediately cease and terminate unless and until Bank shall reinstate such obligation
in writing.
Section
10 Miscellaneous Provisions
10.01. Definitions.
“Availability”
shall mean (X) the lesser of (i) $25,000,000.00 and (ii) the Eligible Equipment Loan Value shown on the most recent Loan Base
Report furnished by Borrower to Bank, reduced by (Y) the aggregate outstanding principal balance on the Guidance Notes.
“Collateral”
shall mean the vehicles, trucks and semi-trailers owned by Borrower, for which Borrower has granted the Bank a first priority
security interest pursuant to a Security Agreement and for which the Bank’s security interest has been properly reflected
on the certificate of title and the Bank’s lien is otherwise fully perfected, and which is unencumbered other than the Bank’s
lien.
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“Collateral
Identification Schedule” shall mean a list of vehicles, trucks and semi-trailers owned by Borrower which Borrower proposes
to be Collateral for a Guidance Loan, which list shall accompany a Guidance Loan Takedown Request and shall include VIN numbers
and other specific identifying information for each proposed item of Collateral along with the item’s Net Orderly Liquidation
Value, or if such value is not available for any particular item, the Interim Assigned Value of such item.
“Default
Rate” shall mean a rate of interest equal to Bank's Prime Rate plus five percent (5%) per annum (not to exceed the legal
maximum rate) from and after the date of an Event of Default hereunder which shall apply, in the Bank's sole discretion, to all
amounts owing, on such date.
“Eligible
Equipment” shall mean those vehicles, trucks, trailers and other Equipment used in the commercial transportation of
petroleum and chemical products owned by Borrower which are unencumbered, which are not Ineligible Equipment.
“Eligible
Equipment Loan Value” shall mean the aggregate value of (i) 85% of the Net Orderly Liquidation Value plus (ii)
the Interim Assigned Value, in each case as applied to the Eligible Equipment.
“Environmental
Laws” shall mean all federal and state laws and regulations which affect or may affect the Borrower’s real property,
including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Sections 9601
et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.), the Federal Water Pollution Control Act
(33 U.S.C. Sections 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
Section 2601 et seq.), and all applicable Florida environmental laws and regulations, as such laws or regulations have been amended
or may be amended.
“Hazardous
Materials” shall mean asbestos, oil, petroleum or other hydrocarbons, urea formaldehyde, PCBs, hazardous or nuclear
waste, toxic chemicals and substances, or other hazardous materials, as defined in applicable Environmental Laws.
“Hedge
Agreement” means agreement between Borrower and Bank, now existing or hereafter entered into, which provides for an
interest rate, credit, commodity, equity swap or other Swap Obligation, cap floor, collar, spot or forward foreign exchange transaction,
currency swap, cross-currency rate swap, currency option or any similar transaction or any combination of, or option with respect
to, these or similar transactions, for the purpose of hedging Borrower’s exposure to fluctuations in interest or exchange
rates, loan, credit, exchange, security or currency valuations or currency prices.
“Ineligible
Equipment” shall mean the following: (a) Equipment not legally owned by Borrower, (b) Equipment deemed by Bank, at its
sole discretion, to cause and/or represent unusual danger to the health and/or safety of individual(s) and/or the environment,
(c) Equipment which violates any federal law and/or laws of the city, county, or state where the Equipment is located or in which
it is used, (d) Equipment subject to a security interest, lien or other encumbrance in favor of any other Person other than Bank,
(e) Equipment which is no longer usable in Borrower’s normal course of business, and (f) Equipment which is not used in
the ordinary course of Borrower’s business, as Borrower operates its business on the date of this Agreement. Bank reserves
the right, upon notice, in its reasonable discretion, to amend the terms of the Ineligible Equipment at any time.
“Interim
Assigned Value” for any vehicle, truck or trailer owned by Borrower but not listed in the most recent appraisal obtained
by Bank to determine the Net Orderly Liquidation Value of Borrower’s equipment, shall mean the lesser of (i) 100% of such
item’s book value (using Semi-Truck Blue Book or such other book value agreed upon by Bank and Borrower) and (ii) 75% of
its purchase price if acquired since the date of the last appraisal.
“Loan
Base Report” shall mean a report on the Bank's standard form, or in a form otherwise acceptable to Bank, to be prepared,
signed, dated and delivered by Borrower in accordance with Bank's instructions, and submitted to Bank by Borrower at specified
intervals and/or occasions, and detailing pertinent information as regards the Eligible Equipment, the outstanding aggregate principal
balance on the Guidance Notes, the Guidance Line of Credit balance, and the Availability.
“Loan
Documents” shall mean this Agreement including any Schedule attached hereto, the Note(s), the Deed(s) of Trust,
the Mortgage(s), the Security Agreement(s), the Assignment(s) of Leases and Rents, all UCC Financing Statements, the Guaranty
Agreement(s), and all other documents, certificates, and instruments executed in connection therewith, and all renewals,
extensions, modifications, substitutions, and replacements thereto and therefore.
“Net
Orderly Liquidation Value” shall mean the estimated market value allocated to the Eligible Equipment in connection with
an orderly liquidation of the Eligible Equipment as set forth in a current appraisal of the Eligible Equipment prepared by a licensed
and/or certified appraiser, approved by the Bank, and shall be addressed to the Bank and must conform to the USPAP adopted by
the Appraisal Standards Board of the Appraisal Foundation.
“Person”
shall mean an individual, partnership, corporation, trust, unincorporated organization, limited liability company, limited
liability partnership, association, joint venture, or a government agency or political subdivision thereof.
“GAAP”
shall mean generally accepted accounting principles as established by the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants, as amended and supplemented from time to time.
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“Prime
Rate” shall mean the rate of interest per annum announced by Bank from time to time and adopted as its Prime Rate, which
is one of several rate indexes employed by Bank when extending credit, and may not necessarily be Bank's lowest lending rate.
10.02. Non-impairment.
If any one or more provisions contained in the Loan Documents shall be held invalid, illegal, or unenforceable in any respect,
the validity, legality, and enforceability of the remaining provisions contained therein shall not in any way be affected or impaired
thereby and shall otherwise remain in full force and effect.
10.03. Applicable
Law. The Loan Documents shall be construed in accordance with and governed by the laws of the State of Florida.
10.04. Waiver.
Neither the failure nor any delay on the part of Bank in exercising any right, power or privilege granted in the Loan Documents
shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise of
any other right, power, or privilege which may be provided by law.
10.05. Modification.
No modification, amendment, or waiver of any provision of any of the Loan Documents shall be effective unless in writing and
signed by the Borrower and Bank.
10.06. Payment
Amount Adjustment. In the event that any Loan(s) referenced herein is paid on a principal and interest basis, instead of a
principal plus interest basis, has a variable (floating) interest rate, and the interest rate increases, Bank, at its sole discretion,
may at any time adjust the Borrower's payment amount(s) to prevent the amount of interest accrued in a given period to exceed
the periodic payment amount or to cause the Loan(s) to be repaid within the same period of time as originally agreed upon.
10.07. Stamps
and Other Fees. Borrower shall pay all federal or state stamp and recording taxes, or other fees or charges, if any are payable
or are determined to be payable by reason of the execution, delivery, or issuance of the Loan Documents or any security granted
to the Bank; and the Borrower and Guarantors agree to indemnify and hold harmless Bank against any and all liability in respect
thereof. Borrower shall pay all fees incurred by Bank for the appraisal of the Collateral obtained at any time after the date
of this Agreement which Bank requires pursuant to federal or state regulations, in connection with any event of default under
the Loan Documents or restructure of the Loan, any material damage to or condemnation of the Collateral, or in connection with
any foreclosure or forbearance. Such appraisal fees shall be payable on demand, shall accrue interest at the Default Rate following
demand and shall be secured by the Security Agreement and other security documents executed by Borrower or Pledgor.
10.08. Attorneys’
Fees. In the event Borrower, any Guarantor or any Pledgor shall default in any of its obligations hereunder and the Bank finds
it necessary to employ an attorney to assist in the enforcement or collection of the indebtedness of the Borrower to the Bank,
to enforce the terms and provisions of the Loan Documents, to modify the Loan Documents, or in the event the Bank voluntarily
or otherwise should become a party to any suit or legal proceeding (including a proceeding conducted under the Bankruptcy Code),
the Borrower and Guarantors, jointly and severally, agree to pay all reasonable attorneys’ fees incurred by Bank and all
related costs of collection or enforcement that may be incurred by Bank. The Borrower and Guarantor shall be liable for such attorneys’
fees and costs whether or not any suit or proceeding is actually commenced.
10.09.
Bank Making Required Payments. In the event Borrower shall fail to maintain insurance, pay taxes or assessments, costs
and expenses which Borrower is, under any of the terms hereof or of any Loan Documents, required to pay, or fail to keep any
of the properties and assets constituting collateral free from new security interests, liens, or encumbrances, except as
permitted herein, Bank may at its election make expenditures for any or all such purposes and the amounts expended together
with interest thereon at the Default Rate, shall become immediately due and payable to Bank, and shall have benefit of and be
secured by the collateral; provided, however, the Bank shall be under no duty or obligation to make any such payments
or expenditures.
10.10. Right
of Offset. Any indebtedness owing from Bank to Borrower may be set off and applied by Bank on any indebtedness or liability
of Borrower to Bank, at any time and from time to time after maturity, whether by acceleration or otherwise, and without demand
or notice to Borrower. Bank may sell participations in or make assignments of any Loan made under this Agreement, and Borrower
agrees that any such participant or assignee shall have the same right of setoff as is granted to Bank herein.
10.11. UCC
Authorization. Borrower authorizes Bank to file such UCC Financing Statements describing the collateral in any location deemed
necessary and appropriate by Bank.
10.12. Modification
and Renewal Fees. Bank may, at its option, charge any fees for modification, renewal, extension, or amendment of any terms
of the Note(s) not prohibited by Florida law, and as otherwise permitted by law if Borrower is located in another state.
10.13. Conflicting
Provisions. If provisions of this Agreement shall conflict with any terms or provisions of any of the Note(s) or security
document(s) or any schedule attached hereto, the provisions of such Note(s) or security document(s) or any schedule attached hereto,
as appropriate, shall take priority over any provisions in this Agreement.
10.14. Notices.
Any notice permitted or required by the provisions of this Agreement shall be deemed to have been given when delivered in
writing to the City Executive or any Vice President of the Bank at its offices in Jacksonville, Florida, and to the Chief Executive
Officer of the Borrower at its offices in Jacksonville, Florida when sent by certified mail and return receipt requested.
10.15. Consent
to Jurisdiction. Borrower hereby irrevocably agrees that any legal action or proceeding arising out of or relating to this
Agreement may be instituted in the Circuit Court in Duval County, Florida, or any United States District Court for Florida, or
in such other appropriate court and venue as Bank may choose in its sole discretion. Borrower consents to the jurisdiction of
such courts and waives any objection relating to the basis for personal or in rem jurisdiction or to venue which Borrower may
now or hereafter have in any such legal action or proceedings.
BB&T
Loan
Agreement
10.16. Counterparts.
This Agreement may be executed by one or more parties on any number of separate counterparts and all of such counterparts
taken together shall be deemed to constitute one and the same instrument.
10.17. Entire
Agreement. The Loan Documents embody the entire agreement between Borrower and Bank with respect to the Loans, and there are
no oral or parole agreements existing between Bank and Borrower with respect to the Loans which are not expressly set forth in
the Loan Documents.
10.18. Indemnity.
The Borrower and the Guarantors hereby jointly and severally agree to indemnify and hold Bank, its affiliates, their successors
and assigns and their respective directors, officer, employees and shareholders harmless from and against, any loss, damage lawsuit,
proceeding, judgment, cost, penalty, expense (including all reasonable in-house and outside counsel fees, whether or not suit
is brought, accountants’ fees and/or consultants’ fees) or liability whatsoever arising from or otherwise relating
to the closing, disbursement, administration, or repayment of the Loans, including without limitation: (i) Borrower’s or
Guarantors’ failure to comply with the terms of this Agreement and the other Loan Documents; (ii) the breach of any representation
or warranty made to Bank in this Agreement or in any other Loan Documents now or hereafter executed in connection with the Loans;
(iii) the violation of any covenants or agreements made for the benefit of the Bank and contained in this Agreement or any of
the other Loan Documents; provided, however, that the foregoing indemnification shall not be deemed to cover any such loss, damage,
lawsuit, proceeding, cost, expense or liability which is finally determined by a court of competent jurisdiction to result solely
from the Bank’s gross negligence or willful misconduct. This indemnity obligation shall survive the payment of the Loan
or the termination of this Agreement.
10.19. Termination.
Bank may, at its option, terminate this Agreement at any time after the occurrence of an Event of Default hereunder. Prior
to the occurrence of an Event of Default hereunder, Borrower may at any time upon thirty (30) days’ prior written notice
to the other party terminate this Agreement; provided, that if any Guidance Loan or any obligation thereunder, remains outstanding,
then with respect to such outstanding Guidance Loan and obligations thereunder such termination shall not affect or impair any
lien or security interest in any Collateral or any right of Bank under this Agreement or the other Loan Documents, any obligation
of the Borrower under this Agreement or the other loan Documents, or any obligation of any Guarantor or Pledgor in connection
with the Guidance Loan.
10.20. WAIVER
OF JURY TRIAL. UNLESS EXPRESSLY PROHIBITED BY APPLICABLE LAW, THE UNDERSIGNED HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS
OR CLAIMS ARISING OUT OF THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH OR OUT OF THE CONDUCT OF
THE RELATIONSHIP BETWEEN THE UNDERSIGNED AND BANK. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANK TO MAKE THE LOAN AND ENTER
INTO THIS AGREEMENT. FURTHER, THE UNDERSIGNED HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT OF BANK, NOR BANK’S COUNSEL,
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT BANK WOULD NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. NO
REPRESENTATIVE OR AGENT OF BANK, NOR BANK’S COUNSEL, HAS THE AUTHORITY TO WAIVE, CONDITION OR MODIFY THIS PROVISION.
[Signatures
on Following Page]
Signature
Page
IN
WITNESS WHEREOF, the Bank, Borrower and Guarantor(s) have caused this Agreement to be duly executed under seal all as of the date
first above written.
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BORROWER: |
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WITNESS: |
PATRIOT TRANSPORTATION HOLDING, INC., |
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a Florida corporation |
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By: |
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Title: |
John D. Milton, Jr. Executive Vice President |
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WITNESS: |
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FLORIDA ROCK &TANK LINES, INC., |
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a Florida corporation |
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By: |
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John D. Milton, Jr. |
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Title: |
Executive Vice President |
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GUARANTOR: |
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WITNESS: |
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PATRIOT TRANSPORTATION, INC., OF FLORIDA, |
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a Florida corporation |
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By: |
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John D. Milton, Jr. |
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Title: |
Executive Vice President |
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BANK: |
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WITNESS: |
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BRANCH BANKING AND TRUST COMPANY |
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By: |
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Ryan G. Tiedeberg |
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Title: |
Sr. Vice President |
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Exhibit
“A”
Form
of Guidance Note
Borrower: |
PATRIOT
TRANSPORTATION HOLDING, INC., a Florida corporation
FLORIDA
ROCK & TANK LINES, INC., a Florida corporation
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Account Number: |
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Note Number: |
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Address: |
200 West Forsyth Street,
7th Floor |
BB&T |
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, Georgia |
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Jacksonville, Florida 32202 |
PROMISSORY NOTE |
Date: |
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PATRIOT
TRANSPORTATION HOLDING, INC., a Florida corporation, and FLORIDA ROCK & TANK LINES, INC., a Florida
corporation (individually and collectively, the “Borrower”) HEREBY REPRESENTS THAT THE LOAN EVIDENCED HEREBY IS
BEING OBTAINED FOR BUSINESS/COMMERCIAL OR AGRICULTURAL PURPOSES AND NOT FOR PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES. For
value received, each Borrower, jointly and severally, promises to pay to BRANCH BANKING AND TRUST COMPANY, a North
Carolina banking corporation (the “Bank”), or order, at any of Bank's offices in the above referenced city (or
such other place or places that may be hereafter designated by Bank), the sum of
Dollars ($ ) together with interest as provided herein in immediately available currency
of the United States of America.
☐ |
Borrower shall pay a prepayment fee as set forth in the Prepayment Fee
Addendum attached to this Promissory Note (“Note”). |
Interest
shall accrue from the date hereof on the unpaid balance outstanding from time to time at the:
☐ |
Fixed
rate of %
per annum. |
☐ |
Variable rate of the Bank’s Prime Rate plus
% per annum to be adjusted as the Bank’s Prime Rate changes. If checked here☐,
the interest rate will not exceed a(n) ☐ fixed ☐ average maximum rate of % or
a ☐ floating maximum rate of the greater of % or the Bank’s Prime Rate;
and the interest rate will not decrease below a fixed minimum rate of %. If an average maximum
rate is specified, a determination of any required reimbursement of interest by Bank will be made: ☐ when the Note is repaid
in full by Borrower ☐ annually beginning on . |
☐ |
Fixed rate of
% per annum through which automatically converts on to
a variable rate equal to the Bank’s Prime Rate plus % per annum which shall be adjusted
as such Prime Rate changes. |
☒ |
Variable rate as set forth in the Addendum to Promissory Note dated of even date herewith executed by Borrower. |
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Principal
and interest are payable as follows: |
☐ |
Principal (plus any accrued interest not otherwise scheduled herein) |
} |
is due in full at maturity on . |
☐ |
Principal
plus accrued interest |
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☒ |
Payable in consecutive installments
of |
☒ Principal |
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} |
commencing on ___ |
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☐ Principal and Interest |
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and continued on the same day of each calendar period thereafter, in
equal payments of $ , with one final payment of all
remaining principal and accrued interest due on . |
☒ |
Accrued interest is payable
commencing on and continuing on the same day of each calendar period thereafter,
with one final payment of all remaining interest due on . |
☐ |
Bank reserves the right in its sole discretion to adjust the fixed payment due
hereunder on
and continuing on the same day of each calendar period thereafter, in order to maintain an amortization period of no more
than months
from the date of this Note. Borrower understands the payment may increase if interest rates increase. |
☐ |
Prior
to an event of default, Borrower may borrow, repay, and reborrow hereunder pursuant to the terms of the Loan Agreement, hereinafter
defined. |
☐ |
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☐ |
Borrower
hereby authorizes Bank to automatically draft from its demand, deposit, or savings account(s) with Bank or other bank, any payment(s)
due under this Note on the date(s) due. Borrower shall provide appropriate account number(s) for account(s) at Bank or other bank. |
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☐ |
Documentary
stamp tax in the amount of $__________ and intangibles tax will be paid in connection with the recording of the Mortgage in the
official records of $__________ County, Florida, securing this Promissory Note. |
☐ |
Documentary
stamp tax in the amount of $___________________ has been or will be paid to the Florida Department of Revenue. Certificate of
Registration No. 56-1074313-19-001. |
☐ |
This
Promissory Note constitutes a consolidation of Note #_______________/ ________ and Note # ____________/ _______, each executed
by the Borrower. Documentary stamp taxes in the amounts of $____________ and $ _________ were previously paid ☐ to the Florida
Department of Revenue and no additional documentary stamp taxes are required ☐ together with intangibles tax in connection with
the recording of a Mortgage (Book _______, Page ______ / Instrument # ___________) to the Clerk of Court of ______________ County,
Florida, and/or a Mortgage (Book _____, Page _____ / Instrument # ______ ) to the Clerk of Court of _______ County, Florida, or
a modification(s) thereof securing this Promissory Note, and no additional documentary stamp taxes are required. |
☐ |
This
Promissory Note constitutes a consolidation and increase of Note # ______________ / _________ and Note # __________ / ___________,
each executed by the Borrower, and evidences a new advance in the amount of $ __________________. Documentary stamp taxes in the
amounts of $ _____________ and $ ______________ were previously paid ☐ to the Florida Department of Revenue and additional documentary
stamp taxes in the amount of $ _______ will be paid to the Florida Department of Revenue ☐ together with intangibles tax in
connection with the recording of a Mortgage (Book ______, Page ______ / Instrument # __________) to the Clerk of Court of _______________
County, Florida, and/or a Mortgage (Book _________, Page ________ / Instrument # ____________) to the Clerk of Court of ____________________
County, Florida or a modification(s) thereof securing this Promissory Note, and additional documentary stamp taxes in the amount
of $ _____________ together with appropriate intangibles tax will be paid to the Clerk of Court of _________________ County, Florida,
and/or _____________ County, Florida, in connection with the recording of a Mortgage(s) or a modification(s) thereof. |
☐ |
This
Promissory Note constitutes a renewal and increase of Note # _______________/ ________ in the original amount of $ ____________.
Documentary stamp tax in the amount of $ _______________ was paid ☐ to the Florida Department of Revenue ☐ the Clerk of Court
of _________________ County, Florida, and additional documentary stamp tax in the amount of $ _______________ ☐ has been or
will be paid to the Florida Department of Revenue ☐ has been or will be paid to the Clerk of Court of ______________ County,
Florida in connection with the recording of a Mortgage or modification thereof securing this Promissory Note. |
☒ |
This
Promissory Note was executed, delivered and accepted outside of the State of Florida in accordance with the requirements of the
Florida Department of Revenue and no documentary stamp tax is required. |
☐ |
Florida
documentary stamp tax is not required. |
Borrower
shall pay to Bank, or order, a late fee in the amount of five percent (5%) of any installment past due for ten (10) or more days.
When any installment payment is past due for ten (10) or more days, subsequent payments shall first be applied to the past due
balance. In addition, Borrower shall pay to Bank a returned payment fee if the Borrower or any other obligor hereon makes any
payment at any time by check or other instrument, or by any electronic means, which is returned to Bank because of nonpayment
due to nonsufficient funds.
All
interest shall be computed and charged for the actual number of days elapsed on the basis of a year consisting of three hundred
sixty (360) days. In the event periodic accruals of interest shall exceed any periodic fixed payment amount described above, the
fixed payment amount shall be immediately increased, or additional supplemental interest payments required on the same periodic
basis as specified above (increased fixed payments or supplemental payments to be determined in the Bank's sole discretion), in
such amounts and at such times as shall be necessary to pay all accruals of interest for the period and all accruals of unpaid
interest from previous periods. Such adjustments to the fixed payment amount or supplemental payments shall remain in effect for
so long as any interest accruals shall exceed the original fixed payment amount and shall be further adjusted upward or downward
to reflect changes in any variable interest rate; provided that unless elected otherwise above, the fixed payment amount shall
not be reduced below the original fixed payment amount. However, Bank shall have the right, in its sole discretion, to lower the
fixed payment amount below the original payment amount. Notwithstanding any other provision contained in this Agreement, in no
event shall the provisions of this paragraph be applicable to any promissory note which requires disclosures pursuant to the Consumer
Protection Act (Truth-In-Lending Act), 15 USC § 1601, et seq., as implemented by Regulation Z.
This
Note is executed and delivered by Borrower in connection with the following agreements (if any) between Borrower or other parties
owning collateral and Bank:
Mortgage(s)/
Deed(s) of Trust/ Security Deeds granted in favor of Bank as mortgagee/ beneficiary:
☐ |
dated in the maximum principal amount of $
granted by
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Assignment
of Leases and Rents in favor of Bank as assignee/ beneficiary: |
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dated
executed by |
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Security
Agreement(s) conveying a security interest to Bank: |
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dated
______, 2015 given by Florida Rock & Tank Lines, Inc., a Florida corporation |
☐ |
dated given
by |
☐ |
Securities
Account Pledge and Security Agreement dated ,
executed by .
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☐ |
Control Agreement(s) dated ,
covering |
☐ Deposit Account(s) |
☐ Investment Property |
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☐ Letter of Credit Rights |
☐ Electronic Chattel Paper |
☐ |
Assignment of Certificate of Deposit, Security Agreement, and Power of Attorney (for Certificated Certificates of Deposit) dated , executed by . |
☐ |
Pledge
and Security Agreement for Publicly Traded Certificated Securities dated ,
executed by . |
☐ |
Assignment
of Life Insurance Policy as Collateral dated ,
executed by . |
☒ |
Loan
Agreement dated May 13, 2015, executed by
☒ Borrower and ☒
Guarantor(s). |
All
of the terms, conditions and covenants of the above described agreements (the “Agreements”) are expressly made a part
of this Note by reference in the same manner and with the same effect as if set forth herein at length, and any holder of this
Note is entitled to the benefits of and remedies provided in the Agreements and any other agreements by and between Borrower and
Bank. In addition to Bank’s right of setoff and to any liens and security interests granted to Bank in the Agreements, the
Borrower hereby grants to Bank a security interest in all of its deposit accounts maintained with and investment property held
by Bank, which shall serve as collateral for the indebtedness and obligations evidenced by this Note.
No
delay or omission on the part of Bank or other holder hereof in exercising any right hereunder shall operate as a waiver of such
right or of any other right of such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or
waiver of the same or of any other right on any future occasion. Each Borrower under this Note regardless of the time, order or
place of signing waives presentment, demand, protest and notices of every kind and assents to any one or more extensions or postponements
of the time of payment or any other indulgences, to any substitutions, exchanges or releases of collateral if at any time there
be available to the holder collateral for this Note, and to the additions or releases of any other parties or persons primarily
or secondarily liable herefor.
Subject
to applicable notice and cure periods set forth below, or to the extent a notice and cure period is not set forth herein below,
any applicable notice and cure periods set forth in the Loan Agreement, the following shall constitute events of default hereunder:
Borrower’s failure to pay any part of the principal or interest within five (5) days of when due or to fully perform any
covenant or obligation under this Note, the Agreements or on any other liability to Bank by any one or more of the Borrower, by
any affiliate of the Borrower (as defined in 11 USC Section (101)(2)), or by any guarantor of this Note (said affiliate or guarantor
herein called “Obligor”); or should any financial statement, representation or warranty made to Bank by any Borrower
or any Obligor be found to be incorrect or incomplete in any material respect; or should any Borrower fail to furnish information
and documentation to the Bank sufficient to verify the identity of the Borrower as required under the USA Patriot Act; or should
Borrower commit an event of a default under any of the Agreements or under any other obligation of any of the Borrower or of any
Obligor; or should any Borrower or any Obligor die, terminate its existence, allow the appointment of a receiver for any part
of its property, make an assignment for the benefit of creditors; or should a proceeding under bankruptcy or insolvency laws be
initiated by or against any Borrower or any Obligor; or should Bank determine that Borrower or any Obligor has suffered a material
adverse change in its financial condition or business operations; or should there occur an attachment, execution, or other judicial
seizure of (A) all or any portion of the Borrower's or any Obligor's assets which secures this Note or (B) all or any material
portion of the Borrower’s or any Obligor’s assets, whether or not such assets secure this Note, including an action
or proceeding to seize any funds on deposit with the Bank, and such seizure is not discharged within 20 days; or should a final
judgment for the payment of money be rendered against any Borrower or any Obligor which (x) is not covered by insurance or debt
cancellation contract and (y) in Bank’s discretion would cause a material adverse change in Borrower’s or any Obligor’s
financial condition or to its business operations, or cause Borrower or any Obligor to fail to meet the financial covenants set
forth in the Loan Agreement after giving effect to such final judgment, and such judgment shall remain undischarged for a period
of 30 days unless such judgment or execution thereon is effectively stayed; or should any guarantor terminate any guaranty agreement
given in connection with this Note, then any one of the same shall
be a material default hereunder and this Note and other debts due the Bank by any Borrower shall immediately become due and payable
at the option of the Bank without notice or demand of any kind, which is hereby waived.
Notwithstanding
any provision contained in this Note or any other Agreements to the contrary, in the event of a payment default, Bank’s
right to accelerate the indebtedness evidenced by this Note shall be immediate and without notice to Borrower of such event of
default. With respect to any non-payment default under this Note or the other Agreements which is curable and remains uncured
beyond the Notice Period (as defined below), the Bank’s right to accelerate the indebtedness evidenced by this Note shall
be thirty (30) days from the first to occur of (i) the date that Borrower has knowledge of such default or (ii) Borrower’s
receipt of written notice from Bank of such default (such thirty (30) day period, the “Notice Period”). For the avoidance
of doubt, in no event shall any notice and right to cure be required or given for any event of default arising from: any financial
statement, report, certificate or other document furnished prior or pursuant to the Agreements which proves to be false or misleading
in any material respect; should Borrower or any Obligor voluntarily become a debtor under the Bankruptcy Code, become subject
to any insolvency proceeding, make an assignment for the benefit of creditors or become subject to any attachment, execution,
or judicial seizure of its assets (including ay funds on deposit with Bank); any failure to repay this Note at maturity; any commencement
of the process of liquidation or dissolution; any proceeding commenced against it seeking the forfeiture of all or any part of
the collateral securing this Note or other assets as a result of any criminal activity; the sale, conveyance, transfer or encumbrance
of any real property subject to a Mortgage/ Deed of Trust granted to Bank or a bulk sale transfer of any personal property collateral
which is subject to a security interest in favor of the Bank, without the prior consent of Bank; or upon the termination of any
Guaranty Agreement by any Guarantor or the death of any Guarantor.
From
and after any event of default hereunder, interest shall accrue on the sum of the principal balance then outstanding at the variable
rate equal to the Bank's Prime Rate plus 5% per annum (“Default Rate”) until such principal and interest have been
paid in full, provided that such rate shall not exceed at any time the highest rate of interest permitted by the laws of the State
of Florida; and further provided that such rate shall apply after judgment. In addition, upon default, the Bank may pursue its
full legal remedies under the Agreements and other remedies at law or equity, and the balance due hereunder may be charged against
any obligation of the Bank to any party including any Obligor. Bank shall not be obligated to accept any check, money order,
or other payment instrument marked “payment in full” on any disputed amount due hereunder, and Bank expressly reserves
the right to reject all such payment instruments. Borrower agrees that tender of its check or other payment instrument
so marked will not satisfy or discharge its obligation under this Note, disputed or otherwise, even if such check or payment
instrument is inadvertently processed by Bank unless in fact such payment is in fact sufficient to pay the amount due hereunder.
In
no event shall the total of all interest and charges payable under this Note, the Loan Agreement and any other documents executed
and delivered in connection herewith and therewith that are or could be held to be in the nature of interest exceed the highest
rate of interest permitted by the laws of the State of Florida. If for any circumstances whatsoever, the Bank receives any payment
that is or would be in excess of that permitted to be charged under the laws of the State of Florida, such payment shall have
been, and shall be deemed to have been, made in error and shall thereupon be applied to reduce the principal balance outstanding
on this Note.
Unless
otherwise required under a Loan Agreement, if applicable, and as long as any indebtedness evidenced by this Note remains outstanding
or as long as Bank remains obligated to make advances, the Borrower shall furnish annually an updated financial statement in a
form satisfactory to Bank, which, when delivered shall be the property of the Bank.
The
term “Prime Rate,” if used herein, means the rate of interest per annum announced by the Bank from time to time and
adopted as its Prime Rate at its executive offices in Winston-Salem, North Carolina. The Prime Rate is one of several rate indexes
employed by the Bank when extending credit, and not necessarily the lowest rate. Any change in the interest rate resulting from
a change in the Bank's Prime Rate shall become effective as of the opening of business on the effective date of the change. If
this Note is placed with an attorney for collection, the Borrower agrees to pay, in addition to principal, interest, and late
fees, if any, all costs of collection, including but not limited to all reasonable attorneys' fees incurred by Bank. All obligations
of the Borrower shall bind his heirs, executors, administrators, successors, and/or assigns. Use of the masculine pronoun herein
shall include the feminine and the neuter, and also the plural. If more than one party shall execute this Note, the term “Borrower”
as used herein shall mean all the parties signing this Note and each of them, and all such parties shall be jointly and severally
obligated hereunder. Wherever possible, each provision of this Note shall be interpreted in such a manner to be effective and
valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under such law, such provision
shall be ineffective but only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Note. Each Borrower hereby waives all exemptions and homestead laws. The proceeds of the loan
evidenced by this Note may be paid to any Borrower.
From
time to time the maturity date of this Note may be extended, or this Note may be renewed in whole or in part, or a new note of
different form may be substituted for this Note, or the rate of interest may be modified, or changes may be made in consideration
of loan extensions, and the holder hereof, from time to time may waive or surrender, either in whole or in part any rights, guaranties,
security interests or liens, given for the benefit of the holder in connection with the payment and the securing of payment of
this Note; but no such occurrence shall in any manner affect, limit, modify, or otherwise impair any rights, guaranties or security
of the holder hereof not specifically waived, released, or surrendered in writing, nor shall the Borrower or any obligor be released
from liability by reason of the occurrence of any such event. The holder hereof, from time to time, shall have the unlimited right
to release any person who might be liable hereon, and such release shall not affect or discharge the liability of any other person
who is or might be liable hereon. No waivers and modifications shall be valid unless in writing and signed by Bank. The Bank may,
at its option, charge any fees for the modification, renewal, extension, or amendment of any of the terms of this Note unless
prohibited by Florida law. In case of a conflict between the terms of this Note and any Loan Agreement executed in connection
herewith, the priority of controlling terms shall be first this Note, then the Loan Agreement. This Note shall be governed by
and construed in accordance with the laws of Florida.
REQUIRED
INFORMATION FOR A NEW LOAN: To help the government fight the funding of terrorism and money laundering activities, federal law
requires Bank to obtain, verify and record information that identifies each person or entity obtaining a loan including the borrower's
legal name, address, date of birth, driver's license, organizational documents or other identifying documents.
UNLESS
EXPRESSLY PROHIBITED BY APPLICABLE LAW, THE BORROWER HEREBY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS OR CLAIMS ARISING
OUT OF THIS NOTE OR ANY OF THE LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH OR OUT OF THE CONDUCT OF THE RELATIONSHIP BETWEEN
THE BORROWER AND BANK. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANK TO MAKE THE LOAN AND ENTER INTO THIS AGREEMENT. FURTHER,
THE BORROWER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF BANK, NOR BANK’S COUNSEL, HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT BANK WOULD NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. NO REPRESENTATIVE OR AGENT OF BANK,
NOR BANK’S COUNSEL, HAS THE AUTHORITY TO WAIVE, CONDITION OR MODIFY THIS PROVISION.
(SIGNATURES
ON FOLLOWING PAGE)
BB&T
PROMISSORY
NOTE SIGNATURE PAGE
Borrower: |
PATRIOT
TRANSPORTATION HOLDING, INC., a Florida corporation
FLORIDA
ROCK & TANK LINES, INC., a Florida corporation
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Notice
of Right to Copy of Appraisal: If a 1-4 family residential dwelling is pledged as collateral for this Note, you, the Borrower,
have a right to a copy of the real estate appraisal report used in connection with your application for credit. If you wish to
receive a copy, please notify in writing the branch office where you applied for credit. You must forward your request to the
Bank no later than 90 days after the date of this Note. In your request letter, please provide your name, mailing address, appraised
property address, the date of this Note, and the Account and Note Numbers shown on the front of this Note.
IN
WITNESS WHEREOF, the Borrower, on the day and year first written above, has executed, or caused this Note to be executed by its
authorized officer or representative, under seal.
WITNESS: |
PATRIOT TRANSPORTATION HOLDING, INC., |
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WITNESS: |
FLORIDA ROCK & TANK LINES, INC., |
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BB&T
ADDENDUM
TO PROMISSORY NOTE
THIS ADDENDUM TO
PROMISSORY NOTE (“Addendum”) is hereby made a part of the Promissory Note dated , from PATRIOT TRANSPORTATION
HOLDING, INC., a Florida corporation and FLORIDA ROCK & TANK LINES, INC., a Florida corporation (jointly and severally,
“Borrower”) payable to the order of Branch Banking and Trust Company (“Bank”) in the principal
amount of $___ (including all renewals, extensions, modifications and substitutions thereof, the “Note”).
I.
DEFINITIONS.
1.1
Adjusted LIBOR
Rate means a rate of interest per annum equal to the sum obtained (rounded upwards, if necessary, to the next higher 1/100th
of 1.0%) by adding (i) the One Month LIBOR plus (ii) the Applicable Margin (as defined below) per annum, which shall be adjusted
[ ] monthly or [ X ] quarterly on the first day of each LIBOR Interest Period. The Adjusted LIBOR Rate shall be adjusted for any
change in the LIBOR Reserve Percentage so that Bank shall receive the same yield. The interest rate will in no instance exceed
the maximum rate permitted by applicable law and if checked here [_] the interest rate will not decrease below a fixed minimum
rate of ______%. If checked here [_] the interest rate will not exceed [_] a fixed maximum rate of _______% or [_] an average maximum
rate of %. If an average maximum rate is specified, a determination of any required reimbursement of interest by Bank will
be made: [_] when the Note is repaid in full by Borrower or [_] annually beginning on __________. If the loan has been repaid prior
to this date, no reimbursement will be made. The Applicable Margin shall be determined as follows:
If Borrower’s Leverage Ratio (as defined in the Loan Agreement) is: |
Then the Applicable Margin
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≥ 3.76:1.0 to 5:1.0 |
2.25% |
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≥ 2.51:1.0 to 3.75:1.0 |
2.0% |
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≥ 1.26:1.0 to 2.5:1.0 |
1.75% |
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≤ 1.25:1.0 |
1.5% |
The Applicable Margin shall adjust quarterly
upon receipt of the Covenant Compliance Certificate required by the Loan Agreement, and if Borrower fails to deliver its Covenant
Compliance Certificate timely or such Certificate fails to include the applicable Leverage Ratio information, or such information
is otherwise incomplete, then the Applicable Margin shall be 2.25% until such time as the Certificate is submitted, corrected or
otherwise completed.
1.2
Business Day means
a day other than a Saturday, Sunday, legal holiday or any other day when the Bank is authorized or required by applicable law to
be closed.
1.3
LIBOR Advance
means the advances made by Bank to Borrower evidenced by this Note upon which the Adjusted LIBOR Rate of interest shall apply.
1.4
LIBOR Interest
Period means the period, as may be elected by the Borrower applicable to any LIBOR Advance, commencing on the date the Note
is first made (or the date of any subsequent LIBOR addendum to the Note) and (i) if adjusted monthly, ending on the day that is
immediately prior to the numerically corresponding day of each month thereafter or (ii) if adjusted quarterly, ending on the day
that is immediately prior to the numerically corresponding day of each quarter thereafter; provided that:
(a)
any LIBOR Interest
Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless
such Business Day falls in another calendar month, in which case such LIBOR Interest Period shall end on the next preceding Business
Day; and
(b)
any LIBOR Interest
Period which begins on a day for which there is no numerically corresponding day in a subsequent month if adjusted monthly or in
a subsequent quarter if adjusted quarterly, shall end on the last Business Day of each subsequent month if adjusted monthly or
on the last Business Day of each subsequent quarter if adjusted quarterly.
1.5
LIBOR Reserve
Percentage means the maximum aggregate rate at which reserves (including, without limitation, any marginal supplemental or
emergency reserves) are required to be maintained under Regulation D by member banks of the Federal Reserve System with respect
to dollar funding in the London interbank market. Without limiting the effect of the foregoing, the LIBOR Reserve Percentage shall
reflect any other reserves required to be maintained by such member banks by reason of any applicable regulatory change against
(i) any category of liability which includes deposits by reference to which the Adjusted LIBOR Rate is to be determined or (ii)
any category of extensions of credit or other assets related to LIBOR.
1.6
One Month LIBOR
means the average rate quoted on Reuters Screen LIBOR01 Page (or such replacement page) on the determination date for deposits
in U. S. Dollars offered in the London interbank market for one month determined as of 11:00 am London time two (2) Business Days
prior to the commencement of the applicable LIBOR Interest Period; provided that if the above method for determining one month
LIBOR shall not be available, the rate quoted in The Wall Street Journal, or a rate determined by a substitute method
of determination agreed on by Borrower and Bank; provided, if such agreement is not reached within a reasonable period of time
(in Bank’s sole judgment), a rate reasonably determined by Bank in its sole discretion as a rate being paid, as of the determination
date, by first class banking organizations (as determined by Bank) in the London interbank market for U. S. Dollar deposits.
1.7
Standard Rate
means, for any day, a rate per annum equal to the Bank’s announced Prime Rate minus .25% per annum, and each change
in the Standard Rate shall be effective on the date any change in the Prime Rate is publicly announced as being effective.
II.
LOAN BEARING ADJUSTED
LIBOR RATE
2.1
Application of
Adjusted LIBOR Rate. The Adjusted LIBOR Rate shall apply to the entire principal balance outstanding of a LIBOR Advance for
any LIBOR Interest Period.
2.2
Adjusted LIBOR
Based Rate Protections.
(a)
Inability to Determine
Rate. In the event that Bank shall have determined, which determination shall be final, conclusive and binding, that by reason
of circumstances occurring after the date of this Note affecting the London interbank market, adequate and fair means do not exist
for ascertaining the One Month LIBOR on the basis provided for in this Note, Bank shall give notice (by telephone confirmed in
writing or by telecopy) to Borrower of such determination, whereupon (i) no LIBOR Advance shall be made until Bank notifies Borrower
that the circumstances giving rise to such notice no longer exist, and (ii) any request by Borrower for a LIBOR Advance shall be
deemed to be a request for an advance at the Standard Rate.
(b)
Illegality; Impracticability.
In the event that Bank shall determine, which determination shall be final, conclusive and binding, that the making, maintaining
or continuance of any portion of a LIBOR Advance (i) has become unlawful as a result of compliance by Bank with any law, treaty,
governmental rule, regulation, guideline or order (or would conflict with any of the same not having the force of law even though
the failure to comply therewith would not be unlawful) or (ii) has become impracticable, or would cause Bank material hardship,
as a result of contingencies occurring after the date of this Note materially and adversely affect the London interbank market
or Bank’s ability to make LIBOR Advances generally, then, and in any such event, Bank shall give notice (by telephone confirmed
in writing or by telecopy) to Borrower of such determination. Thereafter, (x) the obligation of Bank to make any LIBOR Advances
or to convert any portion of the loan to a LIBOR Advance shall be suspended until such notice shall be withdrawn by Bank, and
(y) any request by Borrower for a LIBOR Advance shall be deemed to be a request for an advance at the Standard Rate.
This Addendum shall
operate as a sealed instrument.
WITNESS: |
PATRIOT TRANSPORTATION HOLDING, INC., |
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a Florida corporation |
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WITNESS: |
FLORIDA ROCK & TANK LINES, INC. |
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a Florida corporation |
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Exhibit “B”
Form of Security Agreement
City:
Jacksonville, FL
BB&T SECURITY AGREEMENT
This Security
Agreement (“Security Agreement”) is made , 2015, by and among PATRIOT TRANSPORTATION HOLDING, INC., a Florida
corporation and FLORIDA ROCK & TANK LINES, INC., a Florida corporation (collectively, “Debtor”), and Branch Banking
and Trust Company, a North Carolina banking corporation (“Secured Party”).
This Security Agreement is entered
into in connection with (check applicable items):
☒ (i) a
Loan Agreement dated May 13, 2015, under which the Secured Party has agreed to make a loan(s) and/or establish a line(s) of credit,
as same may be modified or amended from time to time (“Loan Agreement”);
☒ (ii) Promissory Notes of the
Debtor (sometimes referred to herein as the “Borrower”), made and delivered to the Secured Party from time to time
in accordance with the terms of the Loan Agreement (including all extensions, renewals, modifications and substitutions thereof,
the “Note”);
☒ (iii) a guaranty agreement
or agreements (whether one or more, the “Guaranty”) executed by the guarantors named therein (whether one or more,
the “Guarantors”) dated on or about the same date as this Security Agreement;
☐ (iv) a control agreement covering
the Debtor’s, Borrower’s, or any Guarantor’s Deposit Account(s), Investment Property, Letter-of-Credit Rights,
or Electronic Chattel Paper dated on or about the same date as this Security Agreement executed by the Debtor, the Borrower, and
any such Guarantor;
☐ (v) the sale by Debtor and
purchase by Secured Party of Accounts, Chattel Paper, Payment Intangibles and/or Promissory Notes; and/or
☐ (vi) ____.
Secured Party and Debtor agree as follows:
I. DEFINITIONS.
1.1 Collateral.
Unless specific items of personal property are described below, the Collateral shall consist of all now owned and hereafter
acquired and wherever located personal property of Debtor identified below, each capitalized term as defined in Article 9 of the
Florida Uniform Commercial Code (“UCC”)(check applicable items):
☐ (i) Accounts,
including all contract rights and health-care-insurance receivables;
☐ (i-a) The
Account(s), contract right(s) and/or Health-Care-Insurance Receivables specifically described as follows:______ .
☐ (ii) Inventory,
including all returned inventory;
☐ (ii-a)
The Inventory specifically described as follows: ______.
☐ (iii) Equipment,
including all Accessions thereto, and all manufacturers’ warranties, parts and tools therefore;
☐ (iii-a) The Equipment, including
all Accessions thereto, all manufacturer’s warranties therefore, and all parts and tools therefore, specifically described
as follows: ______.
☐ (iv) Investment
Property, including the following certificated securities and/or securities account(s) specifically described as follows: ______.
☐ (v) Instruments,
including all promissory notes and certificated certificates of deposit specifically described as follows: ______.
☐ (vi) Deposit
Accounts with Secured Party specifically described below (list account number(s));
☐ (vi-a) The
Deposit Accounts with other financial institutions specifically described as follows (list financial institution and account number(s)
______.)
☐ (vii) Chattel Paper (whether tangible or electronic);
☐ (vii-a) The Chattel Paper
specifically described as follows: ______.
☐ (viii) Goods,
including all Fixtures and timber to be cut, located or situated on the real property specifically described as follows (list legal
description as shown on deed including county and state): ______..
☐ (ix) Farm
Products, including all crops grown, growing or to be grown, livestock (born and unborn), supplies used or produced in a farming
operation, and products of crops and livestock;
☐ (ix-a) The Farm Products
specifically described as follows: ______.
☐ (x) As-Extracted
Collateral from the following location(s) (list legal description including county and state): ______.
☐ (xi) The
Letter-of-Credit Rights under the following letter(s) of credit (list issuer, number and amount): ______.
☐ (xii)
Documents of Title, including all warehouse receipts and bills of lading specifically described as follows: ______.
☐ (xiii) Commercial
Tort Claim(s) more specifically described as follows: ______.
☐ (xiv) Money,
including currency and/or rare coins delivered to and in possession of the Secured Party specifically described as follows: ______.
☐ (xv) Software
specifically described as follows: ______.
☐ (xvi) Manufactured
Home(s):
Model |
Year |
Serial Number 1 |
Doublewide
Serial Number 2 |
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☒ (xvii) Vehicles,
semi-trucks, cabs, tractor units and semi-trailers of Debtor more particularly described on the attached Schedule A
(the “Vehicles”) which Schedule may be amended and restated from time to time by the Secured Party and Debtor, initialed
or signed by each such party, and attached hereto.
☐ (xviii) General
intangibles, including all Payment Intangibles, copyrights, trademarks, patents, tradenames, tax refunds, company records (paper
and electronic), rights under equipment leases, warranties, software licenses, and the following, if any:
☐ (xix) Supporting
Obligations;
☒ (xx) to
the extent not listed above as original collateral, all proceeds (cash and non-cash) and products of the foregoing.
1.2
Obligations.
This Security Agreement secures the following (collectively, the “Obligations”):
(i)
Debtor’s
or Borrower’s obligations under the Note, the Loan Agreement, and this Security Agreement, and in addition to the foregoing
obligations, if the Debtor is a Guarantor, its obligations under its Guaranty;
(ii)
all of Debtor’s
or Borrower’s present and future indebtedness and obligations to Secured Party including without limitation reimbursement
of drafts or drawings paid by Secured Party on any Commercial or Standby Letter of Credit issued on the account of the Debtor or
Borrower; and all indebtedness and obligations of Debtor or Borrower to Secured Party (or an affiliate of Secured Party) under
any interest rate swap transactions, interest rate cap and/or floor transactions, interest rate collar transactions, swap agreements
(as defined in 11 U.S.C. § 101) or other similar transactions or agreements, including without limitation any ISDA Master
Agreement executed by Debtor or Borrower and all Schedules and Confirmations entered into in connection therewith, hereinafter
collectively referred to as a Hedge Agreement.
(iii)
the repayment
of (a) any amounts that Secured Party may advance or spend for the maintenance or preservation of the Collateral, and (b) any other
expenditures that Secured Party may make under the provisions of this Security Agreement or for the benefit of Debtor or Borrower;
(iv)
all amounts
owed under any modifications, renewals, extensions or substitutions of any of the foregoing obligations;
(v)
all Default
Costs, as defined in Paragraph VIII of this Security Agreement; and
(vi)
any of the
foregoing that may arise after the filing of a petition by or against Debtor or Borrower under the Bankruptcy Code, even if the
obligations do not accrue because of the automatic stay under Bankruptcy Code § 362 or otherwise.
1.3
UCC. Any term
used in the UCC and not otherwise defined in this Security Agreement has the meaning given to the term in the UCC.
II.
GRANT OF SECURITY
INTEREST.
Debtor grants a security interest in
the Collateral to Secured Party to secure the payment and performance of the Obligations.
III.
PERFECTION OF
SECURITY INTERESTS.
3.1
Filing of Security
Interests.
(i)
Debtor authorizes Secured
Party to execute on the Debtor’s behalf and file any financing statement (the “Financing Statement”) describing
the Collateral in any location deemed necessary and appropriate by Secured Party.
(ii)
Debtor authorizes Secured
Party to file a Financing Statement describing any agricultural liens or other statutory liens held by Secured Party.
(iii)
Secured Party shall
receive prior to the closing an official report from the Secretary of State of each Place of Business and the Debtor State, each
as defined below, collectively (the “Filing Reports”) indicating that Secured Party’s security interest is prior
to all other security interests or other interests reflected in the report.
3.2
Possession.
(i)
Debtor shall have possession
of the Collateral, except where expressly otherwise provided in this Security Agreement or where the Collateral consists of personal
property for which possession is permitted or required for perfection and Secured Party chooses to perfect its security interest
by possession in addition to the filing of a Financing Statement.
(ii)
Where Collateral is
in the possession of a third party, Debtor will join with Secured Party in notifying the third party of Secured Party’s security
interest and obtaining an acknowledgment from the third party that it is holding the Collateral for the benefit of Secured Party.
(iii)
Debtor shall deliver
original certificates of title for all portions of the Collateral which are Vehicles, together with a properly executed power of
attorney authorizing Secured Party to file and register its security interest in such Vehicles with the applicable Department of
Motor Vehicles.
3.3
Control Agreements.
Debtor will cooperate with Secured Party in obtaining a control agreement in form and substance satisfactory to Secured Party with
respect to Collateral consisting of (check appropriate items):
☐ Deposit Accounts
(for deposit accounts at other financial institutions);
☐ Investment
Property (for securities accounts, mutual funds and other uncertificated securities);
☐ Letter-of-credit
rights; and/or
☐ Electronic
chattel paper.
3.4
Marking of Chattel
Paper. If Chattel Paper is part of the Collateral, Debtor will not create any Chattel Paper without placing a legend on the
Chattel Paper acceptable to Secured Party indicating that Secured Party has a security interest in the Chattel Paper.
IV.
POST-CLOSING COVENANTS
AND RIGHTS CONCERNING THE COLLATERAL.
4.1
Inspection.
The parties to this Security Agreement may inspect any Collateral in the other party’s possession, at any time upon reasonable
notice.
4.2
Personal Property.
Except for items specifically identified by Debtor and Secured Party as Fixtures, the Collateral shall remain personal property
at all times, and Debtor shall not affix any of the Collateral to any real property in any manner which would change its nature
from that of personal property to real property or to a fixture.
4.3
Secured Party’s
Collection Rights. Secured Party shall have the right at any time to enforce Debtor’s rights against any of Debtor’s
account debtors and obligors solely with respect to the proceeds (cash and non-cash) and products of the Collateral.
4.4
Limitations on Obligations
Concerning Maintenance of Collateral.
(i)
Risk of Loss.
Debtor has the risk of loss of the Collateral.
(ii)
No Collection Obligation.
Secured Party has no duty to collect any income accruing on the Collateral or to preserve any rights relating to the Collateral.
4.5
No Disposition of
Collateral. Secured Party does not authorize, and Debtor agrees not to:
(i)
make any sales or leases
of any of the Collateral other than in the ordinary course of business;
(ii)
license any of the
Collateral; or
(iii)
grant any other security
interest in any of the Collateral.
4.6
Purchase Money Security
Interests. To the extent Debtor uses the Loan to purchase Collateral, Debtor’s repayment of the Loan shall apply on a
“first-in-first-out” basis so that the portion of the Loan used to purchase a particular item of Collateral shall be
paid in the chronological order the Debtor purchased the Collateral.
4.7
Insurance.
Debtor shall obtain and keep in force such insurance on the Collateral as is normal and customary in the Debtor’s
business or as the Secured Party may require, all in such amounts, under such forms of policies, upon such terms, for such
periods and written by such insurance companies as the Secured Party may approve. All policies of insurance will contain the
long-form Lender’s Loss Payable clause in favor of the Secured Party, and the Debtor shall deliver the policies or
complete copies thereof to the Secured Party. Such policies shall be noncancellable except upon thirty (30) days’ prior
written notice to the Secured Party. The proceeds of all such insurance, if any loss should occur, may be applied by the
Secured Party to the payment of the Obligations or to the replacement of any of the Collateral damaged or destroyed, as the
Secured Party may elect or direct in its sole discretion. The Debtor hereby appoints (which appointment constitutes a power
coupled with an interest and is irrevocable as long as any of the Obligations remain outstanding) Secured Party as its lawful
attorney-in-fact with full authority to make, adjust, settle claims under and/or cancel such insurance and to endorse the
Debtor’s name on any instruments or drafts issued by or upon any insurance companies.
V.
DEBTOR’S
REPRESENTATIONS AND WARRANTIES.
Debtor represents and warrants to Secured
Party:
5.1
Title to and transfer
of Collateral. It has rights in or the power to transfer the Collateral and its title to the Collateral is free of all adverse
claims, liens, security interests and restrictions on transfer or pledge except as created by this Security Agreement.
5.2
Location of Collateral.
All collateral consisting of goods (equipment, inventory, fixtures, crops, unborn young of animals, timber to be cut, manufactured
homes; and other tangible, movable personal property) is titled, or if not titled located (as such term is used in the UCC)
solely in the following States (the “Collateral States”): Florida and Georgia
5.3
Location, State
of Incorporation and Name of Debtor. Debtor’s:
(i)
chief executive office
(if Debtor has more than one place of business), place of business (if Debtor has one place of business), or principal residence
(if Debtor is an individual), is located in the following State and address (the “Place of Business”): 200 West
Forsyth Street, 7th Floor, Jacksonville, Florida 32202.
(ii)
state of incorporation
or organization is Florida (the “Debtor State”);
(iii)
exact legal name is
as set forth in the first paragraph of this Security Agreement.
5.4
Business or Agricultural
Purpose. None of the Obligations is a Consumer Transaction, as defined in the UCC and none of the Collateral has been or will
be purchased or held primarily for personal, family or household purposes.
VI.
DEBTOR’S
COVENANTS.
Until the Obligations are paid in full,
Debtor agrees that it will:
6.1
(i) (a) maintain its
existence and good standing in the state of its incorporation or organization, (b) maintain its current legal form of business,
and (c), as applicable, qualify and remain qualified as a foreign corporation in each jurisdiction in which such qualification
is required;
(ii) not (a) sell,
lease, transfer or otherwise dispose of, or permit any of its subsidiaries to sell, lease, transfer or otherwise dispose of, any
of its assets or properties except in the ordinary and usual course of its business, and (b) sell, convey, transfer or encumber
the Collateral or consummate a bulk sale transfer of Debtor’s personal property without the prior consent of Secured Party;
6.2
not change the Debtor
State of its registered organization;
6.3
not change Debtor’s
name without providing Secured Party with 30 days’ prior written notice, or change the legal form of Debtor’s business,
whether by merger, consolidation, conversion or otherwise; and
6.4
not change the state
of its Place of Business or, if Debtor is an individual, change his state of residence without providing Secured Party with 30
days’ prior written notice.
VII.
EVENTS OF DEFAULT.
The occurrence of any of the following
shall, at the option of Secured Party, be an Event of Default:
7.1
Any default or Event
of Default by Borrower or Debtor under the Note, Loan Agreement, Hedge Agreement or any of the other loan documents, and any Guaranty
or any of the other Obligations;
7.2
Subject to any applicable
notice and cure periods set forth in the respective document, Debtor’s failure to comply with any of the provisions of, or
the incorrectness of any representation or warranty contained in, this Security Agreement, the Note, the Loan Agreement, or in
any other document relating to the Obligations;
7.3
Transfer or disposition
of any of the Collateral, except as expressly permitted by this Security Agreement;
7.4
Attachment, execution
or levy on any of the Collateral;
7.5
Debtor voluntarily
or involuntarily becoming subject to any proceeding under (a) the Bankruptcy Code or (b) any similar remedy under state
statutory or common law;
7.6
Debtor shall fail to
comply with, or become subject to any administrative or judicial proceeding under any federal, state or local (a) hazardous waste
or environmental law where noncompliance may have a significant negative effect on the Collateral, (b) asset forfeiture or
similar law which can result in the forfeiture of the Collateral, or (c) other law where noncompliance may have a significant
negative effect on the Collateral; or
7.7
Secured Party shall
receive at any time following the closing a UCC filing report indicating that Secured Party’s security interest is not
prior to all other security interests or other interests reflected in the report.
VIII.
DEFAULT COSTS.
8.1
Should an Event of
Default occur, Debtor will pay to Secured Party all costs incurred by the Secured Party for the purpose of enforcing its rights
hereunder, including:
(i)
costs of foreclosure;
(ii)
costs of obtaining
money damages; and
(iii)
a reasonable fee for
the service of attorneys employed by Secured Party for any purpose related to this Security Agreement or the Obligations, including
without limitation consultation, drafting documents, sending notices or instituting, prosecuting or defending litigation or arbitration.
IX.
REMEDIES UPON
DEFAULT.
9.1
General. Upon
any Event of Default, Secured Party may pursue any remedy available at law (including those available under the provisions of the
UCC), or in equity to collect, enforce or satisfy any Obligations then owing, whether by acceleration or otherwise.
9.2.
Concurrent Remedies.
Upon any Event of Default, Secured Party shall have the right to pursue any of the following remedies separately, successively
or concurrently:
(i)
File suit and obtain
judgment and, in conjunction with any action, Secured Party may seek any ancillary remedies provided by law or at equity, including
levy of attachment and garnishment.
(ii)
Take possession of
any Collateral if not already in its possession without demand and without legal process. Upon Secured Party’s demand,
Debtor will assemble and make the Collateral available to Secured Party as it directs. Debtor grants to Secured Party the right,
for this purpose, to enter into or on any premises where Collateral may be located.
(iii)
Without taking possession,
sell, lease or otherwise dispose of the Collateral at public or private sale in accordance with the UCC.
X.
FORECLOSURE PROCEDURES.
10.1
No Waiver. No
delay or omission by Secured Party to exercise any right or remedy accruing upon any Event of Default shall (a) impair any
right or remedy, (b) waive any default or operate as an acquiescence to the Event of Default, or (c) affect any subsequent
default of the same or of a different nature.
10.2
Notices. Secured
Party shall give Debtor such notice of any private or public sale as may be required by the UCC.
10.3
Condition of Collateral.
Secured Party has no obligation to repair, clean-up or otherwise prepare the Collateral for sale.
10.4
No Obligation to
Pursue Others. Secured Party has no obligation to attempt to satisfy the Obligations by collecting them from any other person
liable for them and Secured Party may release, modify or waive any collateral provided by any other person to secure any of
the Obligations, all without affecting Secured Party’s rights against Debtor. Debtor waives any right it may have to require
Secured Party to pursue any third person for any of the Obligations.
10.5
Compliance With
Other Laws. Secured Party may comply with any applicable state or federal law requirements in connection with a disposition
of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.
10.6
Warranties.
Secured Party may sell the Collateral without giving any warranties as to the Collateral and may specifically disclaim any warranties
of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the
Collateral.
10.7
[intentionally deleted]
10.8
Purchases by Secured
Party. In the event Secured Party purchases any of the Collateral being sold, Secured Party may pay for the Collateral by crediting
some or all of the Obligations of the Debtor.
10.9
No Marshalling.
Secured Party has no obligation to marshal any assets in favor of Debtor, or against or in payment of:
(i)
the Note,
(ii)
any of the other Obligations,
or
(iii)
any other obligation
owed to Secured Party, Borrower or any other person.
XI.
MISCELLANEOUS.
11.1
Assignment.
(i)
Binds Assignees.
This Security Agreement shall bind and shall inure to the benefit of the successors and assigns of Secured Party, and shall
bind all heirs, personal representatives, executors, administrators, successors and permitted assigns of Debtor.
(ii)
No Assignments by
Debtor. Secured Party does not consent to any assignment by Debtor except as expressly provided in this Security Agreement.
(iii)
Secured Party Assignments.
Secured Party may assign its rights and interests under this Security Agreement. If an assignment is made, Debtor shall render
performance under this Security Agreement to the assignee. Debtor waives and will not assert against any assignee any claims, defenses
or set-offs which Debtor could assert against Secured Party except defenses which cannot be waived.
11.2
Severability.
Should any provision of this Security Agreement be found to be void, invalid or unenforceable by a court or panel of arbitrators
of competent jurisdiction, that finding shall only affect the provisions found to be void, invalid or unenforceable and shall not
affect the remaining provisions of this Security Agreement.
11.3
Notices. Any
notices required by this Security Agreement shall be deemed to be delivered when a record has been (a) deposited in any United
States postal box if postage is prepaid, and the notice properly addressed to the intended recipient, (b) received by telecopy,
(c) received through the Internet, and (d) when personally delivered.
11.4
Headings. Section
headings used in this Security Agreement are for convenience only. They are not a part of this Security Agreement and shall
not be used in construing it.
11.5
Governing Law.
This Security Agreement is being executed and delivered and is intended to be performed in the State of Florida shall be construed
and enforced in accordance with the laws of the State of Florida, except to the extent that the UCC provides for the application
of the law of the Debtor State.
11.6
Rules of Construction.
(i)
No reference to “proceeds”
in this Security Agreement authorizes any sale, transfer, or other disposition of the Collateral by the Debtor except in the
ordinary course of business.
(ii)
“Includes”
and “including” are not limiting.
(iii)
“Or” is
not exclusive.
(iv)
“All” includes
“any” and “any” includes “all.”
11.7
Integration and
Modifications.
(i)
This Security Agreement
is the entire agreement of the Debtor and Secured Party concerning its subject matter.
(ii)
Any modification to
this Security Agreement must be made in writing and signed by the party adversely affected.
11.8
Waiver. Any
party to this Security Agreement may waive the enforcement of any provision to the extent the provision is for its benefit.
11.9
Further Assurances.
Debtor agrees to execute any further documents, and to take any further actions, reasonably requested by Secured Party to evidence
or perfect the security interest granted herein or to effectuate the rights granted to Secured Party herein.
11.10
WAIVER
OF TRIAL BY JURY. UNLESS EXPRESSLY PROHIBITED BY APPLICABLE LAW, THE UNDERSIGNED HEREBY WAIVE THE RIGHT TO TRIAL BY JURY
OF ANY MATTERS OR CLAIMS ARISING OUT OF THIS SECURITY AGREEMENT OR ANY LOAN DOCUMENT EXECUTED IN CONNECTION HEREWITH OR OUT
OF THE CONDUCT OF THE RELATIONSHIP BETWEEN THE UNDERSIGNED AND SECURED PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
SECURED PARTY TO MAKE THE LOAN TO DEBTOR OR BORROWER. FURTHER, THE UNDERSIGNED HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT
OF SECURED PARTY, NOR SECURED PARTY’S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SECURED PARTY WOULD NOT
SEEK TO ENFORCE THIS WAIVER OR RIGHT TO JURY TRIAL PROVISION IN THE EVEN OF LITIGATION. NO REPRESENTATIVE OR AGENT OF SECURED
PARTY, NOR SECURED PARTY’S COUNSEL, HAS THE AUTHORITY TO WAIVE, CONDITION OR MODIFY THIS PROVISION.
[SIGNATURES
ON THE FOLLOWING PAGE]
SIGNATURE PAGE
The parties have signed this Security Agreement
under seal as of the day and year first above written.
WITNESS: |
PATRIOT TRANSPORTATION HOLDING, INC., |
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WITNESS: |
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FLORIDA ROCK &TANK LINES, INC., |
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a Florida corporation |
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GUARANTOR: |
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PATRIOT TRANSPORTATION, INC., OF FLORIDA, |
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a Florida corporation |
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BANK: |
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BRANCH BANKING AND TRUST COMPANY |
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Ryan G. Tiedeberg |
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Schedule A
Vehicles
[LIST OF EQUIPMENT TO BE INSERTED
FROM COLLATERAL IDENTIFICATION SCHEDULE
AS AGREED UPON BY DEBTOR AND SECURED PARTY]
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Model/Body Type |
VIN Number/
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Exhibit “C”
Form of Opinion Letter
[LETTERHEAD
OF BORROWER’S COUNSEL]
[Date of Closing]
Branch Banking and Trust Company
200 West Forsyth Street, Suite 200
Jacksonville, Florida 32202
Attention: Ryan G. Tiedeberg, Sr. Vice President
Re:
$25,000,000 Guidance Loan Facility
Ladies and Gentlemen:
We
have acted as counsel to PATRIOT TRANSPORTATION HOLDING, INC., a Florida corporation, and FLORIDA ROCK & TANK LINES, INC.,
a Florida corporation (individually and collectively, “Borrower”), and PATRIOT TRANSPORTATION, INC., OF FLORIDA, a
Florida corporation (“Guarantor”), in connection with that certain guidance line of credit facility in the principal
amount of Twenty-Five Million and No/100 Dollars ($25,000,000.00) (the “Loan”) from BRANCH BANKING AND TRUST COMPANY,
a North Carolina banking corporation (“Bank”), to Borrower.
BACKGROUND
For
purposes of rendering this opinion, we have examined the following documents, all dated of even date herewith, unless otherwise
noted below:
(i)
Loan
Agreement (“Loan Agreement”) between Borrower and Bank and joined by Guarantor dated as of May 13, 2015;
(ii)
Promissory
Note (“Note”) by Borrower in favor of Bank;
(iii)
Security
Agreement (“Security Agreement”) between Borrower and Bank under which the Borrower granted to Bank a security interest
in certain of the Borrower’s personal property and vehicles, semi-trucks, cabs, tractor units and semi-trailers described
therein (“Personal Property”) as security for the Loan;
(iv)
An
undated UCC Financing Statement (“Financing Statement”) to be filed with the office of the Secretary of State of Florida;
(v)
Guaranty
Agreement (“Guaranty”) executed by the Guarantor;
(vi)
Written
Consent of the Board of Directors of each Borrower, which contains such Borrower’s authority to borrow and to execute the
Loan Documents (“Borrower Consents”); and
(vii)
Written
Consent of the Board of Directors of Guarantor, which contains the Guarantor’s authority to guaranty and to execute the Guaranty
(“Guarantor Consent”).
For
purposes of this opinion, the Loan Agreement, the Note, the Security Agreement, the Financing Statement, the Borrower Consents
and the Guarantor Consent are collectively called the “Loan Documents”. All capitalized terms used herein and not otherwise
defined herein shall have the same meanings given them in the Loan Agreement.
We
have also reviewed and relied upon such certificates of Borrower and Guarantor as to factual matters, certificates of public officials
and other instruments, documents and agreements as we have deemed necessary or appropriate to enable us to render the opinions
set forth below.
ASSUMPTIONS
In
rendering this opinion, we have assumed, with your express permission and without independent verification or investigation, each
of the following:
(a)
All
natural persons executing the Loan Documents and the Guaranty are legally competent to do so; all signatures on all documents
submitted to us (other than the signatures of Borrower and Guarantor) are genuine; all documents submitted to us as originals
are authentic; and all documents submitted to us as copies conform to the original documents, which themselves are authentic;
(b)
To the extent that any Loan
Document or the Guaranty imposes any obligations upon Bank, the Loan Documents and the Guaranty are valid and binding obligations
of Bank, enforceable against Bank in accordance with their respective terms.
(c)
The documentary stamp tax
required by the State of Florida due on each promissory note or other written obligation to pay in connection with this Loan has
been duly paid.
OPINIONS
Based
upon the foregoing assumptions and subject to the qualifications, limitations and exceptions set forth herein, we are of the opinion
that:
1.
Borrower
is a corporation duly organized and validly existing in good standing under the laws of the State of Florida with full corporate
power to borrow money and to execute, deliver and perform the obligations set forth in the Loan Documents, and to grant liens and
security interests in the Personal Property to secure the Loan. In rendering our opinion that the Borrower is ‘validly existing
in good standing” we have relied on a Certificate of Status dated ____________, 201__, from the Florida Secretary of State.
2.
The
execution and delivery of the Loan Documents have been duly authorized by all necessary corporate action on the part of Borrower.
3.
Each
of the Loan Documents has been duly executed and delivered by Borrower and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms.
4.
Guarantor
is a corporation duly organized and validly existing in good standing under the laws of the State of Florida with full corporate
power to execute, deliver, undertake and perform the obligations set forth in its Guaranty. In rendering our opinion that such
Guarantor is “validly existing in good standing” we have relied on a Certificate of Status dated _____________, 201__,
from the Florida Secretary of State.
5.
The
execution, delivery and performance of its Guaranty have been duly authorized by all necessary corporate action on the part of
Guarantor.
6.
The
Guaranty has been duly executed and delivered by Guarantor and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms.
7.
The
Loan Documents and the performance by Borrower of its obligations thereunder do not conflict with, or result in a violation of
its Articles of Incorporation and Bylaws. To the best of our knowledge, the execution, delivery and performance of the Loan Documents
by Borrower (a) do not and will not violate or conflict with any order, writ, injunction or decree of any court, administrative
agency or any other governmental authority applicable to Borrower or the Personal Property or any agreement, including, without
limitation, any credit or guaranty agreement, by which it is bound, and (b) will not result in the creation or imposition of any
lien, charge or encumbrance upon any of its assets, except as set forth or contemplated by the terms of the Loan Documents.
8.
The
Guaranty and the performance by Guarantor of its obligations thereunder do not conflict with or result in a violation of its Articles
of Incorporation and Bylaws. To the best of our knowledge upon inquiry, the execution, delivery and performance by each Guarantor
of its obligations under the Guaranty do not and will not violate or conflict with any order, writ, injunction or decree of any
court, administrative agency or any other governmental authority applicable to such Guarantor, or with any agreement, including,
without limitation, any credit or guaranty agreement, by which any Guarantor is bound.
9.
To
the best of our knowledge, there is no action, suit or proceeding at law or in equity, or by or before any governmental instrumentality
or agency or arbitral body now pending, or overtly threatened against Borrower, any Guarantor or the Personal Property, except
which has been expressly disclosed to Bank prior to the date hereof.
10.
The
Loan, as described and set forth in the Loan Documents, does not violate any existing laws of the State of Florida relating to
interest or usury and will not violate any such law by virtue of any fluctuations in any base, prime, index or equivalent rate
or rates in which interest charges may be based under the Loan Documents.
11.
The Security
Agreement creates for the benefit of Bank a valid security interest in the Personal Property owned by Borrower which consists of
types or items of personal property to which the Uniform Commercial Code of the State of Florida (“UCC”) is applicable
and in which a security interest may be created thereunder. The filing of the Financing Statement in such office will perfect the
security interest in the Personal Property owned by Borrower and described in the Financing Statement which consists of types or
items of personal property to which the UCC is applicable and in which a security interest may be perfected by filing of financing
statements in the State of Florida. The security interest granted to Bank in the portion of the Personal Property which is covered
by certificates of title will be perfected upon the notation on the face of each certificate of title
issued by the Florida Department of Motor Vehicles.
QUALIFICATIONS
The opinions
set forth herein are subject to the following qualifications:
(A)
Enforceability
of the Loan Documents and the Guaranty may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar state or federal debtor relief laws from time to time in effect and which affect the enforcement of
creditors’ rights or the collection of debtors’ obligations in general, (ii) general principles of equity, the application
of which may deny Bank certain of the rights and remedies granted to Bank under the Loan Documents or the Guaranty, including the
rights to specific performance, injunctive relief and the appointment of a receiver, and (iii) general principles of commercial
reasonableness and good faith to the extent required of Bank by applicable law;
(B)
Certain
remedies, waivers and other provisions of the Loan Documents and Guaranty may not be enforceable, but such unenforceability will
not render the Loan Documents or the Guaranty invalid as a whole or preclude (i) the judicial enforcement of the obligation of
Borrower to repay the principal, together with interest thereon, as provided in the Note or the obligation of any Guarantor to
repay such principal and interest as provided in the Guaranty, and (ii) either the judicial or nonjudicial foreclosure of the Security
Agreement. Provisions that may be unenforceable due to public policy concerns may include, but are not limited to, issues related
to the waiver of procedural, substantive or constitutional rights or other legal or equitable rights, including, without limitation,
and the right of statutory or equitable redemption; the confession or consent to any judgment; the consent by Borrower or the Guarantor
to the jurisdiction of any court or to service of process in any particular manner; forum selection clauses; disclaimers or limitations
of liabilities; discharges of defenses; the exercise of self-help or other remedies without judicial process; and the waiver of
accountings for rent or sale proceeds.
(C)
We
express no opinion as to the enforceability of any provisions of any of the Loan Documents or the Guaranty which impose liquidated
damages, penalties, forfeitures, or that appoint Bank or others as the agent or attorney-in-fact for Borrower or any Guarantor.
(D)
With
respect to the Guaranty, we express no opinion as to the enforceability of any provision of any Guaranty against the estate of
a deceased or incompetent Guarantor to the extent of advances made on the Loan after any Guarantor’s death or incompetency;
(E)
We
express no opinion as to the effectiveness of any provisions of the Loan Documents that provide for the assignment or transfer
of any permits, licenses or similar rights of Borrower;
(F)
In
connection with the opinion set forth in paragraph 11 above, we call your attention to the following:
(i)
The
security interest of Bank in the Personal Property perfected by filing a financing statement requires the filing of continuation
statements duly executed by Bank within the period of six (6) months prior to the expiration of five (5) years from the date of
filing of the Financing Statement;
(ii)
Under
certain circumstances described in §679.3151 of the UCC, the rights of a secured party to enforce a perfected security interest
in proceeds of collateral may be limited;
(iii)
Under
certain circumstances described in §679.320 of the UCC, purchasers of collateral may take the same free and clear of a perfected
security interest; and
(iv)
Pursuant
to §679.508 of the UCC perfection of the security interest of Bank in the Personal Property will be terminated as to any property
acquired by Borrower more than four (4) months after the date Borrower changes its name or identity so as to make the filed Financing
Statement seriously misleading unless new appropriate financing statements indicating the new name or identity of Borrower are
properly filed before the expiration of such four month period.
(G)
In
rendering the opinions set forth in paragraphs 7, 8 and 9 above we have, with your permission, advised you only as to such knowledge
as we have obtained from (a) the certificates of Borrower and Guarantor and our examination of any documents referred to therein
(including, without limitation, a review of the Wells Fargo Credit Facility Documents); and (b) inquiries of Guarantor and officers,
partners, members and any responsible employees of Borrower and each corporate, partnership or limited liability company Guarantor
and lawyers presently in our firm whom we have determined are likely, in the ordinary course of their respective duties, to have
knowledge of the transactions contemplated by the Loan Documents, the Guaranty and the matters covered by this opinion. Except
to the extent otherwise set forth above, for purposes of this opinion, we have not made an independent review of any agreements,
instruments, writs, orders, judgments, rules or other regulations or decrees which may have been executed by or which may now be
binding upon Borrower or any Guarantor or which may affect the Personal Property, nor have we undertaken to review our internal
files or any files of Borrower or any Guarantor relating to transactions to which Borrower or any Guarantor may be a party, or
to discuss their transactions or business with any other lawyers in our firm or with any officers, partners or any employees of
Borrower or any Guarantor.
(H)
We
are admitted to practice only in the State of Florida and we express no opinion as to matters under or involving the laws of any
jurisdiction other than the United States of America and the State of Florida and its political subdivisions. This opinion is rendered
solely to Bank in connection with the Loan and may not be relied upon by any other party (except counsel to Bank) or for any other
purposes other than the purposes herein stated without our prior written consent.
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Yours
truly, |
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NELSON
MULLINS RILEY & SCARBOROUGH, LLP |
Exhibit “D”
Form of Guaranty
BB&T
GUARANTY AGREEMENT
BRANCH BANKING AND TRUST COMPANY |
Date: |
, 2015 |
As an inducement to Branch Banking and
Trust Company (“Bank”), to extend credit to and to otherwise deal with PATRIOT TRANSPORTATION HOLDING, INC.,
a Florida corporation and FLORIDA ROCK & TANK LINES, INC., a Florida corporation (collectively, “Borrower”),
and in consideration thereof, the undersigned (the “Guarantor” and each of the undersigned Guarantors, jointly and
severally, if more than one) hereby unconditionally guarantees to Bank and its successors and assigns the due and punctual payment
of any and all notes, drafts, debts, ACH obligations and liabilities, primary or secondary (whether by way of endorsement or otherwise),
of Borrower, at any time, whether now existing or hereafter incurred with or held by Bank, together with interest, as and when
the same become due and payable, and whether by acceleration or otherwise (collectively, the “Obligations”), in accordance
with the terms of the Obligations including all renewals, extensions and modifications thereof. This Guaranty is a guarantee of
payment and not of collection.
To secure the Obligations, the Guarantor
hereby grants to bank a security interest in all of the Guarantor’s deposit accounts maintained with Bank, and Bank shall
also at all times have the right of set-off against any such deposit account in the same manner and to the same extent that the
right of set-off may exist against the Borrower. The Guarantor hereby subordinates any and all indebtedness of Borrower now or
hereafter owed to the Guarantor to the Obligations, and agrees with Bank that the Guarantor shall not demand payment of principal
or interest from Borrower, shall not claim any offset or other reduction of the Obligations because of any such indebtedness and
shall not take any action to obtain any of the security described in and encumbered by the documents evidencing Obligations (“Loan
Documents”); provided, however, that, if Bank so requests, such indebtedness shall be collected, enforced and received by
the Guarantor as trustee for Bank and shall be paid over to Bank on account of the Obligations, but without reducing or affecting
any manner the liability of the Guarantor under the other provisions of this Guaranty Agreement.
Guarantor understands and agrees that
an Obligation may be accepted or created with Bank at any time and from time to time without notice to Guarantor and Guarantor
hereby expressly waives presentment, demand, protest, and notice of dishonor of any such Obligation. Bank may receive and accept
as collateral from time to time any securities or other property for the Obligations, and may surrender, compromise, exchange and
release such collateral or any part thereof at any time without notice and without in any manner affecting the obligation and liability
of the Guarantor hereunder. Bank shall have no obligation to protect, perfect, secure or insure any security interests, liens or
encumbrances in any collateral now or hereafter held for the Obligations.
Notwithstanding anything to the contrary
herein, any person that does not qualify as an Eligible Contract Participant (as defined in the Commodity Exchange Act, as amended)
or otherwise does not qualify as an “indirect proprietorship” pursuant to the rules of the Commodity Futures Trading
Commission, shall not be deemed a party to any guaranty of any swap agreement with Bank entered into or modified on or after October
12, 2012, and shall not be liable for any swap obligations to Bank arising from such swap agreement. The foregoing exclusion shall
have no effect on any other obligation of such person to Bank under this Guaranty.
In the event of the occurrence of a “Default”
or “Event of Default’ otherwise related to the Obligations or evidenced or secured by any of the other Loan Documents
or relating to the transactions contemplated by the Loan Documents, all rights powers and remedies available to Bank in such event
shall be non-exclusive and cumulative of all other rights, powers and remedies provided thereunder or hereunder or by law or in
equity. Accordingly, the Guarantor hereby authorizes and empowers Bank upon the occurrence of Default or Event of Default under
the Note(s) or Loan Documents, at its sole discretion, and except as otherwise provided herein, without notice to Guarantor, to
exercise and cause to be exercised any right or remedy which Bank may have, including, but not limited to, judicial foreclosure,
non-judicial foreclosure by exercise of power of sale, acceptance of a deed or assignment in lieu of foreclosure, appointment of
a receiver to collect rents and profits, exercise of remedies against personal property, or enforcement of any assignment of leases,
rents, profits, accounts and certificates of deposit, or any other security, whether real, personal or tangible or intangible.
At any public or private sale of any security or collateral for any indebtedness or any part hereof guaranteed hereby, whether
by foreclosure or otherwise, Bank, may in its discretion, purchase all of any part of such security or collateral so sold or offered
for sale for its own account and may apply against the amount bid therefor the balance due it pursuant to the Note(s) or any of
the other Loan Documents without prejudice to Bank’s remedies hereunder against Guarantor for deficiencies or if allowed
by applicable law. If the Obligations are partially paid by reason of the election of Bank, its successors, endorsees or assigns,
to pursue any of the remedies available to Bank or if the Obligations are otherwise partially paid, then this Guaranty shall nevertheless
remain in full force and effect, and the Guarantor shall remain liable for the entire balance of the Obligations, even though any
rights which Guarantor may have against Borrower may be destroyed or diminished by the exercise of any such remedy.
This obligation of the Guarantor hereunder
shall be a primary and not a secondary obligation and liability, payable immediately upon demand without recourse first having
been obtained by Bank against the Borrower or any other guarantor or obligor, and without first resorting to any collateral held
by Bank for the Obligations. The Guarantor hereby waives the benefit of all provisions of law, for stay or delay of execution or
sale of any property or other satisfaction of judgment against the Guarantor until judgment is obtained against the Borrower and
execution thereon returned unsatisfied, or until it is determined that the Borrower has no property or assets available for the
satisfaction of the Obligations, or until any other proceedings can be completed. Guarantor hereby agrees to indemnify Bank for
all costs of collection, including but not limited to the costs of repossession, appraisal, foreclosure, all attorneys’ fees
reasonably incurred and all court costs incurred by Bank should Bank first be required by the Guarantor to resort to any collateral
held by the Bank or to obtain execution or other satisfaction of a judgment against the Borrower for the Obligations. The Guarantor
further agrees that the Guarantor is responsible for any part of the Obligations which have been paid by the Borrower to Bank and
which the Bank is subsequently required to return to the Borrower or a trustee for the Borrower in any bankruptcy or insolvency
proceeding. Guarantor agrees that it shall not have any right of subrogation, reimbursement or indemnity whatsoever, nor any right
of recourse to bank’s collateral for Obligations unless and until all of Obligations of the Borrower have been paid in full.
The Guarantor hereby waives, to the extent avoidable under any provision of the Bankruptcy Code, any right arising upon payment
by the Guarantor of any obligation under this Guaranty to assert a claim against the bankruptcy estate of the Borrower.
In addition to the other waivers set
forth elsewhere in this Guaranty, the Guarantor hereby waives and agrees not to assert or take advantage of (a) if allowed by applicable
law, the defense of the statute of limitations in any action hereunder or for the collection of the Obligations or the performance
of any Obligation; (b) any defense that may arise by reason of the incapacity, lack of authority, death or disability of Guarantor,
Borrower, or any other party or entity, or the failure of Bank to file or enforce a claim against the estate (either in administration,
bankruptcy or any other proceeding) of Borrower or any other party or entity; (c) any defense based upon the failure of Bank to
give notice of the existence, creation, or incurring of any new or additional indebtedness or obligation or the failure of Bank
to give notice of any action or non-action on the part of any other party whosoever, in connection with any Obligation, including
without limitation the release of any other guarantor; (d) any defense based upon an election of remedies by Bank which destroys
or otherwise impairs any subrogation rights of Guarantor to proceed against Borrower for reimbursement, or both; (e) any defense
based upon failure of Bank to commence an action against Borrower or any other guarantor of the Obligations; (f) any duty on the
part of Bank to disclose to the Guarantor any fact that is may know or hereafter know regarding Borrower; (g) acceptance or notice
of acceptance of this Guaranty by Bank; (h) as stated above, notice of presentment and demand for payment or performance of the
Obligations or performance of any except as otherwise required in this Guaranty; (i) as set forth above, protest and notice of
dishonor or of default to the Guarantor or to any other party with respect to the indebtedness or performance of obligations hereby
guaranteed; (j) except as otherwise provided herein, any and all other notices whatsoever to which the Guarantor might otherwise
be entitled; (k) any defense based on lack of due diligence by the Bank and the collection, protection or realization upon any
collateral securing the Obligations; (l) any transfer by Borrower of all or any part of the security for the Obligations; and (m)
any other legal or equitable defenses whatsoever to which the Guarantor might be entitled, to the extent permitted by law, unless
such defenses are based upon the willful misconduct of the Bank.
Check applicable box:
☒ This Guaranty is unlimited and
applies to all indebtedness of Borrower, whether now existing or hereafter arising, including without limitation (a) all obligations
of the Borrower to Bank in connection with any transfer of funds through the ACH System, and (b) all obligations of the Borrower
to Bank in connection with that certain Loan Agreement dated of even date herewith by and between Borrower and Bank, the guidance
loan extended to Borrower thereunder and any and all loans arising therefrom or made pursuant thereto.
☐ This Guaranty applies to all indebtedness
of Borrower evidenced by that certain promissory note number dated (including all extensions, renewals, modifications
and substitutions thereof) in the principal amount of $ .
☐ This Guaranty is limited to an
amount of $ plus accrued interest, late fees, costs of collection (including attorneys’ fees) and all other obligations
and indebtedness which may accrue or be incurred with respect to the Borrower’s indebtedness and obligations to Bank.
To secure the payment of all Obligations
and in addition to the security interest granted to Bank in its deposit accounts, the Guarantor hereby grants a security interest
and lien in the following property owned by the Guarantor:
(the “Collateral”).
The Guarantor agrees to execute and deliver
to Bank any security agreement, deed of trust, mortgage, UCC financing statement, or other document required by the Bank in order
to perfect and protect its security interest or lien in the Collateral. This document shall constitute a security agreement under
the Uniform Commercial Code of Florida (“Code”), and in addition to having all other legal rights and remedies, the
Bank shall have all rights and remedies of a secured party under the Code.
This Guaranty shall inure to the benefit
of Bank, its successors and assigns, and the owners and holders of any of the Obligations, and shall remain in force until a written
notice revoking it has been received by Bank; but such revocation shall not release Guarantor from liability to Bank, its successors
and assigns, or the owners and holders of any of Obligations, for any Obligation of the Borrower which is hereby guaranteed and
then in existence or from any renewals, extensions or modifications thereof in whole or in part, whether such renewals, extensions
or modifications are made before or after such revocation, with or without notice to the Guarantor. The Guarantor waives presentment,
demand, protest and notices of every kind and assents to any one or more extensions, modifications, renewals or postponements of
the time or amount of payment or any other indulgences given to Borrower. The Guarantor shall be responsible for and shall reimburse
the Bank for all costs and expenses (including reasonable attorneys’ fees) incurred by the Bank in connection with the enforcement
of this Guaranty or the protection or preservation of any right or claim of the Bank in connection herewith, including without
limitation costs and expenses incurred by the Bank in connection with its attempts to collect the Obligations.
If the Borrower is a corporation, this
instrument covers all indebtedness, obligations and liabilities to Bank purporting to be made or undertaken on behalf of such corporation
by any such officer or agent of said corporation without regard to the actual authority of such officer or agent. The term “corporation”
shall include associations of all kinds and all purported corporations, whether correctly and legally chartered and organized.
The Guarantor hereby warrants and represents
to Bank that: (i) this Guaranty is enforceable against it in accordance with its terms; (ii) the execution and delivery of this
Guaranty does not violate or constitute a breach of any agreement to which the Guarantor is a party; (iii) there is no litigation,
claim, action or proceeding pending or, to the best knowledge of Guarantor, threatened against it which would materially adversely
affect the financial condition of Guarantor or its ability to fulfill its obligations hereunder; (iv) that it has knowledge of
the Borrower’s financial condition and affairs; and (v) unless otherwise required in a Loan Agreement, if applicable, as
long as any Obligations remain outstanding or as long as Bank remains obligated to make advances, the Guarantor shall furnish annually
an updated financial statement in a form satisfactory to Bank, which, when delivered shall be the property of Bank.
This Guaranty is
made in and shall be construed in accordance with the laws and judicial decisions of the State of Florida. The Guarantor agrees
that any dispute arising out of this Guaranty shall be adjudicated in either the state or federal courts of Florida and in no other
forum. For that purpose, the Guarantor hereby submits to the jurisdiction of the state and/or federal courts of Florida. The Guarantor
waives any defense that venue is not proper for any action brought in any federal or state court in the State of Florida.
UNLESS EXPRESSLY
PROHIBITED BY APPLICABLE LAW, GUARANTOR HEREBY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS OR CLAIMS ARISING OUT OF THIS GUARANTY
OR ANY OF THE LOAN DOCUMENTS EXECUTED BY THE BORROWER IN CONNECTION HEREWITH OR OUT OF THE CONDUCT OF THE RELATIONSHIP BETWEEN
THE BORROWER OR GUARANTOR AND BANK. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANK TO EXTEND CREDIT TO BORROWER. GUARANTOR HEREBY
CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF BANK, NOR BANK’S COUNSEL, HAS REPRESENTED THAT BANK WOULD NOT SEEK TO ENFORCE
THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION AND THAT NO REPRESENTATIVE OR AGENT OF BANK, NOR BANK’S COUNSEL, HAS THE AUTHORITY
TO WAIVE, CONDITION OR MODIFY THIS PROVISION.
[signature on following page]
GUARANTY SIGNATURE PAGE
Witness the signature and seal of the undersigned Guarantor.
WITNESS: |
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PATRIOT TRANSPORTATION, INC., OF FLORIDA, a |
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Florida corporation |
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By: |
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(SEAL) |
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Name: |
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Title: |
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STATE OF FLORIDA ) |
COUNTY OF_________________ ) to-wit: |
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I HEREBY CERTIFY, that on this _____
day of ____________, 201__, before me, the undersigned, a Notary Public of the State aforesaid, personally appeared __________________,
the __________________ of PATRIOT TRANSPORTATION, INC., OF FLORIDA, a Florida corporation, on behalf of the corporation, who ☐ is personally known to me or ☐ has produced as identification, and executed the foregoing instrument for the purposes
therein contained.
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[NOTARY SEAL] |
Print Name:_________________________________________ |
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Notary Public, State of Florida |
SCHEDULE “EE” TO BB&T
LOAN AGREEMENT
OFFICER COMPLIANCE CERTIFICATE
This certificate
(the “Certificate”) is delivered pursuant to Section 3.08 of the Loan Agreement dated May 13, 2015, between PATRIOT
TRANSPORTATION HOLDING, INC., a Florida corporation and FLORIDA ROCK & TANK LINES, INC., a Florida corporation
(the “Bank”), as the same may be amended or supplemented from time to time, being herein referred to as the Loan
Agreement. All capitalized terms used in this Certificate which are defined in the Loan Agreement are used in this Certificate
with the same meanings given such terms in the Loan Agreement.
I hereby certify,
to the best of my knowledge and belief and in my representative capacity on behalf of the Borrower, to the Bank as follows:
1.
| | I am the duly elected or appointed and acting _______________________________ (Title) of the
Borrower. |
2.
| | I have reviewed the financial statements of the Borrower as of and for the period
ending ______________________ attached hereto as Exhibit I, which were prepared in accordance with GAAP,
consistently applied, and are true and correct in all material aspects and fairly present the financial position and results
and operations of the Borrower. |
3.
| | The Representations and Warranties set forth in Section 2 of the Loan Agreement are true and
correct as of the date hereof. |
4.
| | I further certify that the Borrower is in compliance (unless otherwise specified) with all
covenants set forth in Sections 3, 5 and 6 of the Loan Agreement and any Schedules thereto, and specifically the
covenants listed below. |
Required by Loan Agreement |
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Actual |
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In Compliance?
Yes/No |
Maximum Funded Debt to EBITDA (tested quarterly)
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2.5 |
To |
1.0 |
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☐ Yes ☐ No |
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Maximum Debt to Tangible Net Worth ratio (tested quarterly)
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5.0 |
To |
1.0 |
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☐ Yes ☐ No |
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Fixed Charge Coverage Ratio (tested quarterly, on a trailing twelve month basis) |
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1.15 |
To |
1.0 |
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☐ Yes ☐ No |
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5.
| | As of the date hereof, no Default or Event of Default under Section 8 of the Loan
Agreement and any Schedules thereto has occurred (except as specified on Exhibit II, attached hereto, which Exhibit
II also sets forth any corrective action taken or proposed to be taken with respect to such Default or Event of
Default). |
6.
| | As of the date hereof, (A) no Default or Event of Default has occurred under the Wells
Fargo Credit Facility and (B) Borrower has not
received any notices from the Lender under the Wells Fargo Credit Facility of
any Default, Event of Default or the waiver of any Default or Event of Default (except as specified on Exhibit
III, attached hereto). |
In Witness Whereof, I have caused
this Officer Compliance Certificate and Schedule EE to Loan Agreement to be executed and delivered to the Bank this ___ day of
____________, 201__.
WITNESS: |
PATRIOT TRANSPORTATION HOLDING, INC., a Florida corporation |
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By: |
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Print name: |
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Title: |
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WITNESS: |
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FLORIDA A ROCK & TANK LINES, INC., a Florida
corporation |
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By: |
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Print Name: |
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Attach Exhibit I, II and III, if applicable
CERTIFICATIONS Exhibit 31(a)
I, Thompson S. Baker II, certify
that:
| 1. | I have reviewed this
report on Form 10-Q of Patriot Transportation Holding, Inc.; |
| 2. | Based on my knowledge,
this 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 report; |
| 3. | Based on my knowledge,
the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) for the registrant and have: |
| a) | designed such disclosure
controls and procedures, or caused such disclosure controls to be designed under our supervision, 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 report is being prepared; |
| b) | evaluated the effectiveness
of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosures controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| c) | disclosed in this
report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial report; and |
| 5. | The registrant’s
other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the
equivalent functions): |
| a) | all significant deficiencies
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and |
| b) | any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting. |
Date: August 5, 2015 /s/Thompson
S. Baker II
President and
Chief Executive
Officer
CERTIFICATIONS Exhibit 31(b)
I, John D. Milton, Jr., certify that:
| 1. | I have reviewed this
report on Form 10-Q of Patriot Transportation Holding, Inc.; |
| 2. | Based on my knowledge,
this 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 report; |
| 3. | Based on my knowledge,
the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) for the registrant and have: |
| a) | designed such disclosure
controls and procedures, or caused such disclosure controls to be designed under our supervision, 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 report is being prepared; |
| b) | evaluated the effectiveness
of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosures controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| c) | disclosed in this
report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial report; and |
| 5. | The registrant’s
other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the
equivalent functions): |
| a) | all significant deficiencies
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and |
| b) | any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting. |
Date: August 5, 2015 /s/John D.
Milton, Jr.
Executive Vice
President, Treasurer,
Secretary and
Chief Financial Officer
CERTIFICATIONS Exhibit 31(c)
I, John D. Klopfenstein, certify
that:
| 1. | I have reviewed this
report on Form 10-Q of Patriot Transportation Holding, Inc.; |
| 2. | Based on my knowledge,
this 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 report; |
| 3. | Based on my knowledge,
the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) for the registrant and have: |
| a) | designed such disclosure
controls and procedures, or caused such disclosure controls to be designed under our supervision, 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 report is being prepared; |
| b) | evaluated the effectiveness
of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosures controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| c) | disclosed in this
report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial report; and |
| 5. | The registrant’s
other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the
equivalent functions): |
| a) | all significant deficiencies
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and |
| b) | any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting. |
Date: August 5, 2015 /s/John D.
Klopfenstein
Controller and
Chief Accounting
Officer
Exhibit 32
CERTIFICATION UNDER SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, each of the undersigned certifies that this periodic report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this periodic report fairly presents,
in all material respects, the financial condition and results of operations of Patriot Transportation Holding, Inc.
August 5, 2015 PATRIOT TRANSPORTATION HOLDING, INC.
THOMPSON
S. BAKER II
Thompson S. Baker II
President
and Chief Executive
Officer
JOHN D.
MILTON, JR._
John D. Milton,
Jr.
Executive
Vice President,
Treasurer,
Secretary and
Chief Financial
Officer
JOHN D.
KLOPFENSTEIN
John D. Klopfenstein
Controller
and Chief
Accounting
Officer
A signed original of this written
statement required by Section 906 has been provided to Patriot Transportation Holding, Inc. and will be retained by Patriot Transportation
Holding, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification accompanies
the issuer’s Quarterly report on Form 10-Q and is not filed as provided in SEC Release Nos. 33-8212, 34-4751 and IC-25967,
dated June 30, 2003.
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