FORM 10-Q
________________________________________________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002.
Commission File No. 1-8129.
US 1 INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Indiana 95-3585609
(State of Incorporation) (I.R.S. Employer Identification No.)
1000 Colfax, Gary, Indiana 46406
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (219) 977-5225
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 ___
As of August 16, 2002 there were 10,618,224 shares of registrant's common stock
were outstanding.
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001
Part I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
ASSETS
June 30, December 31,
2002 2001
(Unaudited)
CURRENT ASSETS:
Cash $ 0 $ 322,060
Accounts receivable-trade, less allowance for
doubtful accounts of $462,000 and $518,000
respectively 17,383,631 11,946,382
Other receivables 1,638,738 1,374,835
Deposits 45,200 44,200
Prepaid expenses 289,910 544,143
Current deferred tax asset 600,000 600,000
----------- ----------
Total current assets 19,957,479 14,831,620
FIXED ASSETS:
Equipment 1,713,974 1,542,945
Less accumulated depreciation and amortization (383,399) (250,954)
----------- ----------
Net fixed assets 1,330,575 1,291,991
----------- -----------
ASSETS HELD FOR SALE:
Land 195,347 195,347
Valuation allowance (141,347) (141,347)
----------- -----------
Net assets held for sale 54,000 54,000
Non-current deposits 126,461 126,461
Non-current deferred tax asset 600,000 600,000
Other Assets 280,423 257,325
----------- -----------
TOTAL ASSETS $22,348,938 $17,161,397
=========== ===========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</FN>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
June 30, December 31,
2002 2001
(Unaudited)
CURRENT LIABILITIES:
Revolving line of credit $ 7,000,000 $ 6,765,999
Current portion of long-term debt 263,264 399,190
Accounts payable 7,343,736 3,469,666
Accrued expenses 376,990 251,859
Insurance and claims 855,985 629,796
Accrued compensation 97,405 79,545
Accrued interest 992,882 974,039
Fuel and other taxes payable 98,488 82,228
Accrued Legal Settlement 500,000 140,000
----------- ------------
Total current liabilities 17,528,750 12,792,322
----------- ------------
LONG-TERM DEBT (primarily to related parties) 4,025,133 4,260,668
Minority Interest 65,019 0
REDEEMABLE PREFERRED STOCK:
Authorized 5,000,000 shares; no par value,
Series A shares issued and outstanding:
2002 and 2001 - 1,094,224
Liquidation preference $0.94 per share 1,159,540 1,102,968
SHAREHOLDERS' DEFICIENCY:
Common stock, authorized 20,000,000 shares;
no par value; shares outstanding 10,618,224 40,899,117 40,844,296
Accumulated deficit (41,328,621) (41,838,857)
----------- -----------
Total shareholders' deficiency ( 429,504) ( 994,561)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
DEFICIENCY $ 22,348,938 $ 17,161,397
=========== ============
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</FN>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
JUNE 30, 2002 (UNAUDITED) AND JUNE 30, 2001 (UNAUDITED)
Three Month Ended Six Months Ended
2002 2001 2002 2001
OPERATING REVENUES $28,121,169 $16,826,082 $50,212,551 $31,909,611
----------- ---------- ---------- ----------
OPERATING EXPENSES:
Purchased
Transportation 21,190,010 13,558,255 38,019,063 24,912,976
Commissions 2,666,838 1,243,907 4,703,021 3,052,279
Insurance and claims 1,043,454 445,105 1,819,081 855,388
Salaries, wages, and
Other 1,220,422 529,738 2,243,759 1,069,764
Operation supplies/other 1,316,540 745,311 2,310,139 1,366,472
----------- ---------- ---------- ----------
Total operating
expenses 27,437,264 16,522,316 49,095,063 31,256,879
---------- ---------- ---------- ----------
OPERATING INCOME 683,905 303,766 1,117,488 652,732
----------- ---------- ---------- ----------
NON-OPERATION INCOME (EXPENSE)
Legal Settlement 0 0 (350,964) 0
Interest income 6,576 459 16,526 2,894
Interest (expense) (140,387) (166,040) (275,854) (372,956)
Other income 39,024 73,403 104,454 120,544
----------- ---------- --------- ---------
Total non-operating
(expense) (94,787) ( 92,178) (505,838) (249,518)
----------- ---------- ---------- ---------
NET INCOME BEFORE MINORITY
INTEREST $ 589,118 $ 211,588 $ 611,650 $ 403,214
Minority Interest Expense (30,485) 0 (44,838) 0
----------- --------- ---------- ---------
NET INCOME $ 558,633 $ 211,588 $ 566,812 $ 403,214
DIVIDENDS ON PREFERRED SHARES (28,286) (25,714) (56,571) (51,428)
-------- ---------- ---------- ----------
NET INCOME AVAILABLE
TO COMMON SHAREHOLDERS 530,347 185,874 510,241 351,786
========== ========== ========== ==========
Basic and Diluted Net income
Per Common Share $ 0.05 $ 0.02 $ 0.05 $ 0.03
=========== ========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING BASIC AND
DILUTED 10,618,224 10,618,224 10,618,224 10,618,224
=========== ========== =========== ===========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</FN>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
JUNE 30, 2002 (UNAUDITED) AND JUNE 30, 2001 (UNAUDITED)
Six Months Ended June 30,
2002 2001
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income 566,812 403,214
Adjustments to reconcile net income to net
cash used in operating activities
Depreciation and amortization 132,445 71,031
Compensation Expense resulting from
issuance of equity in subsidiary 75,000 0
Provision for bad debts 306,149 162,297
Minority interest expense 44,836 0
Changes in operating assets and liabilities:
Accounts receivable - trade (5,743,398) (185,071)
Other receivables (263,903) (446,620)
Prepaid expenses 254,233 42,040
Deposits & other assets (24,098) (42,500)
Accounts payable 3,874,070 358,289
Accrued expenses 125,131 (34,502)
Accrued interest 18,843 72,665
Insurance and claims 226,189 (152,514)
Accrued compensation 17,860 5,422
Fuel and other taxes payable 16,260 (103,561)
Accrued Legal Settlement 360,000 0
--------- --------
Net Cash(used in)provided by operating activities (13,571) 150,190
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to fixed assets (171,029) (955,164)
-------- --------
Net cash used in investing activities (171,029) (955,164)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit 234,001 524,171
Proceeds from equipment loans 0 669,394
Principal payments on long term debt (222,344) (156,280)
Repayments of shareholder loans (149,117) (232,311)
--------- --------
Net cash(used in)provided by financing activities (137,460) 804,974
--------- --------
NET (DECREASE) IN CASH (322,060) 0
CASH, BEGINNING OF PERIOD 322,060 0
--------- --------
CASH, END OF PERIOD 0 0
========= ========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2002 AND 2001
1. BASIS OF PRESENTATION
The accompanying consolidated balance sheet as of June 30, 2002, and the
consolidated statements of operations and cash flows for the three month and six
month periods ended June 30, 2002 and 2001 are unaudited, but, in the opinion of
management, include all adjustments (consisting of normal, recurring accruals)
necessary for a fair presentation of the financial position and the results of
operations for such periods. The year-end balance sheet data was derived from
audited financial statements. These statements should be read in conjunction
with the Company's audited consolidated financial statements for the year ended
December 31, 2001, and the notes thereto included in the Company's annual report
on Form 10-K. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted, as permitted by the requirements of the Securities
and Exchange Commission, although the Company believes that the disclosures
included in these financial statements are adequate to make the information not
misleading. The results of operations for the three months and six months
ended June 30, 2002 and 2001 are not necessarily indicative of the results for
a full year.
2. RECLASSIFICATIONS
Certain reclassifications have been made to the previously reported 2001
financial statement to conform with the 2002 presentation.
3. EARNINGS PER COMMON SHARE
The Company calculates earnings per share ("EPS") in accordance with Statement
of Financial Accounting Standards No. 128. Following is the reconciliation of
the numerators and denominators of the basic and diluted EPS.
There were no outstanding common stock equivalents in these periods.
Three Months Ended Six Months Ended
Numerator 2002 2001 2002 2001
Net income $ 558,633 $ 211,588 $ 566,812 $ 403,214
Dividends on preferred
shares (28,286) (25,714) (56,571) (51,428)
--------- ---------- ---------- ---------
Net income available to common
shareholders for basic
and diluted EPS 530,347 185,874 510,241 351,786
Denominator
Weighted average common 10,618,224 10,618,224 10,618,224 10,618,224
shares outstanding for
basic and diluted EPS
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
4. REVOLVING LINE OF CREDIT
The Company has a $7.0 million line of credit that matures on October 1,
2003. Advances under this revolving line of credit are limited to 70% of
eligible accounts receivable. The interest rate is based upon certain financial
covenants and may range from prime to prime plus .5%. At June 30, 2002, the
interest rate on this line of credit was 5.0%. The Company's accounts
receivable, property, and other assets collateralize advances under the
agreement. Borrowings up to $1 million are guaranteed by the Chief Executive
Officer and Chief Financial Officer of the Company. At June 30, 2002, the
outstanding borrowings on this line of credit were $7.0 million.
This line of credit is subject to termination upon various events of
default, including failure to remit timely payments of interest, fees and
principal, any adverse change in the business of the Company or failure to meet
certain financial covenants. Financial covenants include: minimum net worth
requirements, total debt service coverage ratio, capital expenditure
limitations, and prohibition of additional indebtedness without prior
authorization.
In August, 2002, the Company's lender amended the loan agreement,
Increasing the line from $7.0 million to $8.5 million. The lender also
increased the company's advance rate from 70% of eligible accounts receivable
to 75%.
5. MINORITY INTEREST
The Company entered into an agreement with certain key employees of Carolina
National Transportation, Inc. ("Carolina"), a wholly owned subsidiary of the
Company, in which these employees will earn up to 40% ownership interest in
Carolina over a three year period, beginning in the year following which
Carolina achieves positive retained earnings, contingent upon certain
restrictions, including continued employment at Carolina. In 2001, Carolina
achieved positive retained earnings. As a result, the Company will incur total
compensation expense of $400,000 over the three-year vesting period. These
employees will receive 15% ownership in Carolina at December 31, 2002, an
additional 15% at December 2003, and a 10% ownership interest at December 31,
2004. As a result of this agreement, the company incurred compensation expense
of $37,500 and $75,000 for the three months and six months ended June 30, 2002,
respectively. The Company also recognized minority interest expense of $30,485
and $44,838 relating to the employees' portion of Carolina's net income for the
three months and six months ended June 30, 2002, respectively.
6. LEGAL SETTLEMENT
Cam Regional Transport and Laurel Mountain Leasing, Inc. filed a complaint
against the Company in 1994, which alleged breach of contract, claiming that
Trailblazer Transportation, Inc. a subsidiary of the Company which filed
bankruptcy, failed to abide by a purchase agreement entered into with Cam
Regional Transport, Inc. and Laurel Mountain Leasing, Inc. In addition, two
individuals affiliated with these companies claimed breach of employment
contracts against the Company.
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
6. LEGAL SETTLEMENT (Continued)
In May 2002, judgment was rendered on these claims in favor of the
plaintiff. Under the terms of the initial court filing, the Company must pay
damages of $500,000. As a result, the Company increased its accrual for this
litigation to $500,000 by recording a charge of $360,000 relating to this
litigation for the six months ended June 30, 2002. The Company intends to
appeal this judgment.
In February 2002, one of the Company's subsidiaries, Carolina National
Transportation, was named as a defendant in a suit entitled Hoover
Transportation Services, Inc. vs. Tim A. Frye, Sr. filed in the Federal District
Court for the Southern District of Ohio, No. C2-02-25. In essences, the suit
alleges that the primary defendant, Mr. Frye, violated a non-competition
agreement with, and confidentiality obligations to, the plaintiff by providing
freight related services in the metropolitan Charlotte area. Mr. Frye's business
contracted with the Company's subsidiary for shipping, and, accordingly, the
plaintiff alleges that the Company's subsidiary is liable for damages as well.
During July 2002, Mr. Frye was enjoined from further violations of the non-
competition agreement. The Company's subsidiary is actively contesting the
claims against it. Discovery is ongoing, and no trial date has been set. At
this time, the Company and its legal counsel are unable to assess the outcome
of this complaint. The Company intends to vigorously defend itself in the
matter.
7. CONVERSION OF REDEEMABLE PREFERRED STOCK
On February 19, 2002, the company's board of directors approved the
conversion of all of the outstanding Series A redeemable preferred stock
(1,094,224 shares) plus all accrued dividends, into 1,000,000 shares of the
Company's common stock. As of August 16, 2002, the conversion has not yet been
finalized and therefore is not reflected on the balance sheet at June 30, 2002.
The following shows proforma earning per common share assuming the preferred
stock has been converted as of the earliest date presented.
Three Months Ended June 30, Six Months ended June 30,
2002 2001 2002 2001
___________________________ ________________________
Basic and Diluted
Net Income per $0.05 $0.02 $0.05 $0.03
Common share
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
Results of Operations
You should read the following discussion regarding the Company along with
the Company's consolidated financial statements and related notes included in
this quarterly report. The following discussion contains forward-looking
statements that are subject to risks, uncertainties and assumptions. The
Company's actual results, performance and achievements in 2002 and beyond may
differ materially from those expressed in, or implied by these forward-looking
statements.
The financial statements and related notes contained elsewhere in this
Form 10-Q as of and for the three and six months ended June 30, 2002 and 2001
and in the Company's Form 10-K for its fiscal year ended December 31, 2001,
are essential to an understanding of the comparisons and are incorporated by
reference into the discussion that follows.
Six months ended June 30, 2002 Compared to the six months ended June 30, 2001
The Company's operating revenues increased to $50.2 million for the six
months ended June 30, 2002 from $31.9 million for the same period in 2001. This
is an increase of 57.4%. This increase is attributable to the continued growth
at Carolina National Transportation, the continued growth of an operation that
specializes in over-size loads at Keystone Lines, the addition of new intermodal
operations at Keystone Lines, and the new operations of Transport Leasing, Inc.
and Harbor Bridge Transportation.
Purchased transportation represents the amount an independent contractor is
paid to haul freight and is primarily based on a contractually agreed-upon
percentage of revenue generated by the haul for truck capacity provided by
independent contractors. Purchased transportation is the largest component of
operating expenses. Purchased transportation plus commission expense increases
or decreases in proportion to the revenue generated through independent
contractors. At June 30, 2002 purchased transportation was 75.7% of revenue in
comparison to 78.1% at June 30, 2001. The decrease in purchased transportation
of 2.4% relative to revenue is attributable to new terminals, which have
negotiated lower purchased transportation percentages to be paid out to the
owner operators.
Commissions to agents and brokers are primarily based on contractually
agreed-upon percentages of revenue. Commissions remained relatively consistent
at 9.6% of revenue for the six months ending June 30, 2002 verses 9.4% for the
six months ended June 30, 2001.
A majority of the insurance and claims expense is based on a percentage of
revenue and, as a result, will increase or decrease, on a consolidated basis
with the company's revenue. Potential liability associated with accidents in
the trucking industry is severe and occurrences are unpredictable. A material
increase in the frequency or severity of accidents or the unfavorable
development of existing claims could adversely affect the Company's operating
income. Insurance and claims increased to 3.6% of revenue for June 30, 2002
verses 2.7% of revenue at June 30, 2001. The increase can be attributed mainly
to the increase of certain operations' liability and cargo insurance rates.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
Six months ended June 30, 2002 Compared to the six months ended June 30, 2001
Salaries, wages, fringe benefits, and other operating expenses are
principally non-variable expenses and therefore will not typically vary directly
as a percentage of the Company's revenue. Salaries, wages, and fringe benefits
were 4.5% of revenue at June 30, 2002, which was an increase of 1.2% as a
percentage of revenue compared to June 30, 2001, which was 3.3% of revenue.
This increase can be attributed to three newer divisions that utilize employees
who are paid a salary instead of agents who would be paid commissions. Other
operating expenses as a percentage of revenue increased by .3% of revenue. At
June 30, 2002 operating expenses were 4.6% of revenue in comparison to 4.3% at
June 30, 2001. The increase can be attributed to higher operating expenses in
connection with new offices that opened in late 2001 and early 2002.
The following table set forth the percentage relationships of expense items to
revenue for the six months ended June 30, 2002 and June 30, 2001:
2002 2001
------ ------
Revenue 100.0% 100.0%
Operating expenses:
Purchased transportation 75.7 78.1
Commissions 9.4 9.6
Insurance and claims 3.6 2.7
Salaries, wages and fringe benefits 4.5 3.3
Other operating expenses 4.6 4.3
------- ------
Total operating expenses 97.8 98.0
------ ------
Operating income 2.2 2.0
Based on the changes in revenue and expenses discussed above, operating
income increased by $464,756. Operating income for the six months ended June 30,
2002 was $1,117,488 compared to $652,732 for the six months ended June 30, 2001.
Interest expense decreased by $97,102 in 2002. Interest expense at June 30,
2002 was $275,854 and at June 30, 2001 interest expense was $372,956. This
decrease in interest expense is attributable to continued decrease in the prime
rate. The rate on the Company's loan with Firstar is currently based on
certain financial covenants and may range from prime to prime plus .5%.
Non-operating (income) expense, exclusive of interest expense, increased to
an expense of $229,984 for the six months ended June 30, 2002 from income of
($123,438) for the six months ended June 30, 2001. This is an increase of
$353,422 and is primarily attributable to a $360,000 expense incurred for the
six months ended June 30, 2002, relating to a court ruling on litigation
against the Company.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION (continued).
Minority interest expense of $44,838 for the six months ended June 30,
2002, is the result of an agreement with certain key employees of Carolina
National, a wholly owned subsidiary of the Company, in which these employees
will earn up to a 40% ownership interest in Carolina over a 3 year period (see
note 5 to condensed financial statements).
Net income for the six months ended June 30, 2002 was $566,812 compared with
$403,214 for the same period in 2001.
Three months ended June 30, 2002 Compared to the three months ended June 30,
2001
The Company's operating revenues increased by $11.2 million to $28.1 million
for the three months ended June 30, 2002 from 16.8 million for the same period
in 2001. This is an increase of 67.1%. This increase is attributable to the
continued growth at Carolina National Transportation, the opening of a new
operation that specialized in over-size loads at Keystone Lines, the addition
of new inter modal operations at Keystone Lines, and the new operations of
Transport Leasing, Inc. and Harbor Bridge Transportation.
Purchased transportation represents the amount an independent contractor is
paid to haul freight and is primarily based on a contractually agreed-upon
percentage of revenue generated by the haul for truck capacity provided by
independent contractors. Purchased transportation is the largest component of
operating expenses. Purchased transportation plus commission expense increases
or decreases in proportion to the revenue generated through independent
contractors. For the three months ended June 30, 2002, purchased
transportation was 75.4% of revenue in comparison to 80.6% for the three months
ended June 30, 2001. The decrease in purchased transportation relative to
revenue is attributable to opening certain new offices that pay a lower
percentage of revenue as purchased transportation. Under certain agreements
with agents, when the independent owner operator is paid a lower amount, the
agent commission is higher. As a result, the decrease in purchased
transportation as a percent of revenues is somewhat offset by an increase in
commission expense.
Commissions to agents and brokers are primarily based on contractually
agreed-upon percentages of revenue. For the three months ended June 30, 2002,
commission was 9.5% of revenue in comparison to 7.4% for the three months ended
June 30, 2001. This increase of 2.1% is offset by the decrease in purchased
transportation. This increase in commission expense is somewhat offset by a
decrease in purchased transportation discussed above. Overall, purchased
transportation and commissions in total decreased to 84.9% of revenues for the
three months ended June 30, 2002 from 88% of revenues for the three months
ended June 30, 2001. This decrease in these expenses as a percent of revenues
is due in part to the Company brokering a lower percentage of its freight for
the three months ended June 30, 2002 as compared to the same period in 2001.
When the Company brokers freight, the Company does not pay insurance on the
freight. However, the purchased transportation expense is greater for brokered
freight. In addition, an increase in business at a division specializing in
oversized freight and divisions that utilize employees rather than agents has
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION (continued).
Three months ended June 30, 2002 Compared to the three months ended June 30,
2001 (Continued)
also contributed to the overall decrease in purchased transportation and
commissions in total as a percent of revenues, as these divisions tend to pay
lower purchased transportation and commissions (although salary expense is
typically higher).
A majority of the insurance and claims expense is based on a percentage of
revenue and, as a result, will increase or decrease on a consolidated basis with
the company's revenue. Potential liability associated with accidents in the
trucking industry is severe and occurrences are unpredictable. A material
increase in the frequency or severity of accidents or the unfavorable
development of existing claims could adversely affect the Company's operating
income. Insurance and claims increased to 3.7% of revenue for the three months
ended June 30, 2002 from 2.6% of revenue for the three months ended June 30,
2001. The increase can be attributed mainly to the increase of certain
operations' liability and cargo insurance rates.
Salaries, wages, fringe benefits, and other operating expenses are
principally non-variable expenses and therefore will not typically vary directly
as a percentage of the Company's revenue. Salaries, wages, and fringe benefits
were 4.3% of revenue for the three months ended June 30, 2002 compared to 3.2%
of revenue for the three months ended June 30, 2001. This is an increase of
1.1% as a percentage of revenue and can be attributed to three newer divisions
that utilize employees who are paid a salary instead of agents who would be
paid commissions. Other operating expenses as a percentage of revenue
increased to 4.7% for the three months ended June 30, 2002, from 4.4% for the
three months ended June 30, 2001. The increase can be attributed to higher
operating expenses in connection with new offices that opened in late 2001 and
early 2002.
The following table set forth the percentage relationships of expense items to
revenue for the three months ended June 30, 2002 and June 30, 2001:
2002 2001
------ ------
Revenue 100.0% 100.0%
Operating expenses:
Purchased transportation 75.4 80.6
Commissions 9.5 7.4
Insurance and claims 3.7 2.6
Salaries, wages and fringe benefits 4.3 3.2
Other operating expenses 4.7 4.4
------- ------
Total operating expenses 97.6 98.2
------ ------
Operating income 2.4 1.8
Based on the changes in revenue and expenses discussed above, operating
income (loss) increased by $380,139. For the three months ended June 30, 2002,
operating income was $683,905 compared to $303,766 for the three months ended
June 30, 2001.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION (continued).
Three months ended June 30, 2002 Compared to the three months ended June 30,
2001 (Continued)
Interest expense decreased by $25,653 for the three months ended June 30,
2002 compared to the same period in 2001. Interest expense for the three months
ended June 30, 2002 was $140,387 compared to $166,040 for the three months
ended June 30, 2001. This decrease in interest expense is attributable to
continued decrease in the prime rate. The rate on the Company's loan with US
Bank is currently based on certain financial covenants and may range from prime
to prime plus .5%.
Non-operating income, exclusive of interest expense, increased by $27,344.
For the three months ended June 30, 2002 non-operating income exclusive of
interest was $45,600. For the three months ended June 30, 2001, non-operating
income exclusive of interest expense was $73,602.
Minority interest expense of $30,485 for the three months ended June 30,
2002 is the result of an agreement with certain key employees of Carolina
National, a wholly owned subsidiary of the Company, in which these employees
will earn up to a 40% ownership interest in Carolina over a 3 year period (see
note 5 to condensed financial statements).
Net income for the three months ended June 30, 2002 was $558,633 compared
with $211,588 for the same period in 2001.
Liquidity and Capital Resources
Net cash provided by (used in) operating activities decreased $163,761 from
$150,190 for the six months ended June 30, 2001 to $(13,571) for the six months
ended June 30, 2002. The cash used in operating activities increased mainly
due to an increase in accounts receivable resulting from the Company opening
additional terminals during the first half of 2002. A substantial amount of
the increase in accounts receivable was offset by a corresponding increase in
accounts payable and accrued expenses in the first half of 2002.
Net cash used in investing activities decreased $784,135 from $955,164 for
the six months ended June 30, 2001 to $171,029 for the six months ended June 30,
2002. Net cash used in investing activities during the first six months of 2001
related to the investment in additional equipment.
Net cash provided by (used in) financing activities decreased $942,434 from
$804,974 for the six months ended June 30, 2001 to ($137,460) for the six months
ended June 30, 2002. For the six months ended June 30, 2002, the Company
made payments on shareholder loans and other long-term debt totaling $371,461.
This decrease was partially offset by the Company increasing its borrowings on
its line of credit by $234,001. For the six months ended June 30, 2001, the
Company borrowed $669,394 to fund equipment purchases (primarily trailers). The
Company also increased borrowings on the line of credit for the six months
ended June 30, 2001 by $524,171 to fund the operations of the Company. These
increases were partially offset by payments on shareholder loans and other
long-term debt totaling $388,591.
Liquidity and Capital Resources (Continued)
On August 12, 2002, the Company's lender amended the loan agreement,
increasing the line from $7.0 million to $8.5 million. The lender also
increased the company's advance rate from 70% of eligible accounts receivable
to 75%. We are dependent upon the funds available under our loan agreement for
liquidity. The facility generally permits us to borrow up to 75% of our
receivables. As a result, so long as we can fund the remaining 25% from funds
generated internally from operations or otherwise, this facility provides us
sufficient liquidity to meet our needs on an ongoing basis. However, as we
grow, we will need to expand the facility in order to fund our growth.
Although our financial condition continues to improve as the result of
profitable operations, we continue to have a negative net worth and substantial
indebtedness. As a result, an investment in our stock continues to be risky.
Quantitative and Qualitative Disclosures About Market Risk
Inflation
Changes in freight rates charged by the Company to its customers are
generally reflected in the cost of purchased transportation and commissions paid
by the Company to independent contractors and agents, respectively. Therefore,
management believes that future-operating results of the Company will be
affected primarily by changes in volume of business. However, due to the
highly competitive nature of the truckload motor carrier industry, it is
possible that future freight rates and cost of purchased transportation may
fluctuate, affecting the Company's profitability.
Certain Relationships and Related Transactions.
The Company leases office space for its headquarters in Gary, Indiana, for
$3,000 monthly, from Michael E. Kibler, the president and Chief Executive
Officer and a director of the Company, and Harold E. Antonson, the Chief
Financial Officer, treasurer and a director of the Company. Messrs. Kibler and
Antonson own the property as joint tenants.
One of the Company's subsidiaries provides safety, management, and
accounting services to companies controlled by the President and Chief Financial
Officer of the Company. These services are priced to cover the cost of the
employees providing the services.
The Company has approximately $152,000 of other accounts receivable due from
entities under common control.
One of the Company's insurance providers, American Inter-Fidelity Exchange
(AIFE), is managed by a Director of the Company and the Company has a deposit
with the Provider.
The Company has long-term notes payable due to its Chief Executive Officer,
Chief Financial Officer, and August Investment Partnership, an entity affiliated
through common ownership, totaling approximately $3.4 million.
PART II. OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS
Cam Regional Transport and Laurel Mountain Leasing, Inc. filed a complaint
against the Company in 1994, which alleged breach of contract, claiming that
Trailblazer Transportation, Inc. a subsidiary of the Company which filed
bankruptcy, failed to abide by a purchase agreement entered into with Cam
Regional Transport, Inc. and Laurel Mountain Leasing, Inc. In addition, two
individuals affiliated with these companies claimed breach of employment
contracts against the Company.
In May 2002, judgment was rendered on these claims in favor of the
plaintiff. Under the terms of the initial court filing, the Company must pay
damages of $500,000. As a result, the Company increased its accrual for this
litigation to $500,000 by recording a charge of $360,000 relating to this
litigation for the six months ended June 30, 2002. The Company intends to
appeal this judgment.
In February 2002, one of the Company's subsidiaries, Carolina National
Transportation, was named as a defendant in a suit entitled Hoover
Transportation Services, Inc. vs. Tim A. Frye, Sr. filed in the Federal District
Court for the Southern District of Ohio, No. C2-02-25. In essences, the suit
alleges that the primary defendant, Mr. Frye, violated a non-competition
agreement with, and confidentiality obligations to, the plaintiff by providing
freight-related services in the metropolitan Charlotte area. Mr. Frye's business
contracted with the Company's subsidiary for shipping, and, accordingly, the
plaintiff alleges that the Company's subsidiary is liable for damages as well.
During July 2002, Mr. Frye was enjoined from further violations of the non-
competition agreement. The Company's subsidiary is actively contesting the
claims against it. Discovery is ongoing, and no trial date has been set. At
this time, the Company and its legal counsel are unable to assess the outcome
of this complaint. The Company intends to vigorously defend itself in the
matter.
Item 6(b). Reports on Form 8-K
No Reports on Form 8-K have been filed during the quarter.
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 there unto duly authorized.
US 1 Industries, Inc.
Michael E. Kibler
President
Harold E. Antonson
Chief Financial Officer
August 16, 2002
SIXTH AMENDMENT TO LOAN AGREEMENT
This Sixth Amendment to Loan Agreement ("Amendment"), dated as of August
12, 2002, is between CAROLINA NATIONAL TRANSPORTATION INC., an Indiana
corporation ("Carolina"); KEYSTONE LINES, a California corporation
("Keystone"); GULF LINE TRANSPORT INC., an Indiana corporation ("Gulf Line");
FIVE STAR TRANSPORT, INC., an Indiana corporation ("Five Star"); CAM TRANSPORT,
INC., an Indiana corporation ("Cam"); UNITY LOGISTIC SERVICES INC., an Indiana
corporation ("Unity"); ERX, INC., an Indiana corporation ("ERX"); FRIENDLY
TRANSPORT, INC., an Indiana corporation ("Friendly"); TRANSPORT LEASING, INC.,
an Arkansas corporation ("Transport Leasing"); TRANSPORT LOGISTICS, LLC, an
Arkansas limited liability company ("Transport Logistics"); and HARBOR BRIDGE
INTERMODAL, INC., an Indiana corporation ("Harbor") (Carolina, Keystone, Gulf
Line, Five Star, Cam, Unity, ERX, Friendly, Transport Leasing, Transport
Logistics, and Harbor are hereinafter collectively referred to as "Borrowers"
or individually as a "Borrower"); US 1 INDUSTRIES, INC., an Indiana corporation
("Guarantor"); and U.S. BANK NATIONAL ASSOCIATION, a national banking
association, formerly known as FIRSTAR BANK N.A. ("Lender"). Capitalized terms
not defined herein have the meanings ascribed to them in the Loan Agreement, as
that term is defined herein.
PRELIMINARY STATEMENT:
All Borrowers have previously entered into a Loan Agreement with Lender
dated as of April 18, 2000, and amended as of June 9, 2000, December 7, 2000,
March 1, 2001, October 15, 2001, and May 1, 2002 (the April 18, 2000 Loan
Agreement, as so amended, is the "Existing Loan Agreement," and, as amended by
this Sixth Amendment to Loan Agreement, constitutes the "Loan Agreement").
Lender has agreed to amend the Existing Loan Agreement to do the following:
(i) increase the amount of the Revolving Loan Commitment therein from (ii)
$7,000,000 to $8,500,000, (ii) increase the advance rate on Eligible (iii)
Accounts Receivable from 70% to 75%, (iii) change the interest rate (iv)
applicable to the Revolving Loan Note from grid pricing to the Prime (v) Rate,
and (iv) modify certain financial covenants, all as hereinafter (vi) set forth.
NOW, THEREFORE, it is hereby agreed as follows:
1. Each of Borrowers and Guarantor represent and warrant that no Event of
Default or Incipient Default exists or will occur as a result of the
execution of and performance under this Sixth Amendment to Loan Agreement
and that each of their representations and warranties set forth in the Loan
Instruments is true and correct as of the date hereof, except to the extent
that any such representations or warranties speak exclusively to an earlier
date.
2. The parties hereby agree to amend and restate in their entirety the
following definitions in Section 1.1 of the Loan Agreement as follows:
"Loan Instruments:
(i) Loan Agreement;
(ii) Revolving Loan Note;
(iii) Equipment Loan Note;
(iv) Guidance Loan Note;
(v) Corporate Guaranty;
(vi) Security Instruments;
(vii) Closing Certificate;
(viii) Subordination Agreements;
(ix) Personal Guaranties; and
(x) such other instruments and documents as Lender reasonably may
require in connection with the transactions contemplated by
this Loan Agreement; as the same may be amended and/or
restated from time to time, including without limitation as
amended by or pursuant to that certain Loan Agreement dated
April, 18, 2000, by and between the parties hereto, as amended
by that certain Amendment to Loan Agreement dated June 9,
2000, that certain Second Amendment to Loan Agreement dated
December 7, 2000, that certain Third Amendment to Loan
Agreement dated March 1, 2001, that certain Fourth Amendment
to Loan Agreement dated October 15, 2001, that certain Fifth
Amendment to Loan Agreement dated May 1, 2002, and that
certain Sixth Amendment to Loan Agreement dated August 12,
2002";
"Revolving Loan Commitment: $8,500,000"; and
"Revolving Loan Note: the promissory note executed by Borrowers payable to
the order of Lender in the amount of the Revolving Loan Commitment, dated as of
the Closing Date, and as further amended and restated as of June 9, 2000,
December 7, 2000, October 15, 2001, May 1, 2002, and August 12, 2002".
3. The parties hereby agree to amend and restate in its entirety Section
2.1.4(e) of the Loan Agreement as follows:
"availability shall be limited to Lender's advance of funds not exceeding
seventy-five percent (75%) of Borrowers' Eligible Accounts Receivable."
4. The parties hereby agree to amend and restate in its entirety Section
2.3.1(a) of the Loan Agreement as follows:
"The principal balance of the Revolving Loan shall bear interest in an
amount equal to the Prime Rate in effect from time to time, provided, however,
that during a Default Rate Period, Borrowers' Obligations shall bear interest at
the applicable Default Rate."
5. The parties hereby agree to amend and restate in its entirety Section
7.16 of the Loan Agreement as follows:
"7.16 Maximum Unsubordinated Debt to EBITDA Ratio. Permit the ratio of
Unsubordinated Indebtedness to EBITDA to exceed 4 to 1 at any time prior to and
including December 31, 2002, or permit such ratio to exceed 3.5 to 1 at any time
after December 31, 2002. For the purposes of this Section 7.16, EBITDA shall be
determined based on a rolling four (4) quarter average."
6. The parties hereby agree to amend and restate in its entirety Section 7.18 of
the Loan Agreement as follows:
"7.18 Minimum Net Worth. Fail to Maintain Tangible Net Worth plus
Permitted Subordinated Indebtedness of at least $2,750,000."
7. The parties hereby agree to amend and restate in its entirety Section
7.19 of the Loan Agreement as follows: "7.19 Minimum Debt Service Ratio.
Fail to maintain a minimum debt service ratio for Guarantor and its subsidiaries
(on a consolidated basis) of 1.25:1 based on a rolling four (4) quarter
average, to be calculated as follows: 1) the sum of: (i) Net Income before
taxes, (ii) depreciation and amortization expense, (iii) interest expense, and
(iv) rent and lease expense, less (v) taxes, distributions, and cash dividends
paid, divided by 2) the sum of: (i) current maturity of long term debt, (ii)
interest expense, and (iii) rent and lease expense. For the purposes of testing
the minimum debt service ratio, "interest expense" in the denominator shall be
defined as interest expense of Unsubordinated Indebtedness plus interest paid
on Subordinated Indebtedness. For the purposes of testing the minimum debt
service ratio, "rent and lease expense" shall mean all amounts payable to any
landlords and lessors by any of Borrowers for the use of any real or
personal property."
8. Simultaneously with the execution hereof, Borrowers and Guarantor shall
deliver to Lender the following, duly executed by the parties thereto other than
Lender:
i) The Revolving Loan Note, dated as of August 12, 2002, in the form attached
hereto as Exhibit "A" (the "Revolving Loan Note");
ii) Amended and Restated Personal Guaranties of Michael Kibler and Harold
Antonson, in the forms attached hereto as Exhibit "B-1" and "B-2";
iii) Amended and Restated Corporate Guaranty of Guarantor, in the
form attached hereto as Exhibit "C";
iii) Acknowledgments of the holders of Subordinated Indebtedness of, 1) the
execution of the Sixth Amendment to Loan Agreement; 2) the continued
effectiveness of those certain Subordination Agreements dated April 18, 2000, as
amended, by and between Lender and a) Harold Antonson and Michael Kibler, and b)
August Investment Partnership (as so amended, the "Subordination Agreements");
and 3) the inclusion of any indebtedness incurred under the Loan Agreement by
any borrower, including Harbor, within the term "Senior Debt," as defined in
the Subordination Agreements, in the forms attached hereto as Exhibit "D-1" and
"D-2";
iv) Certified Resolutions of the Boards of Directors or the Managers, as the
case may be, of each Borrower and of the Guarantor authorizing the execution and
delivery and performance of this Amendment and other documents referred to
herein; and
v) An opinion letter from Borrowers' counsel, Troutman Sanders, L.L.P., in a
form reasonably satisfactory to Lender's counsel regarding the Borrowers' and
the Guarantor's authorization, execution and delivery of this Amendment and the
documents referenced herein, and the incorporation or organization, as the case
may be, and good standing, of each Borrower and of the Guarantor.
9. Nothing herein shall be deemed to supercede or otherwise modify the Equipment
Loan Note or the Guidance Loan Note, which shall remain fully effective in their
existing form, provided that references therein to the "Loan Agreement" and
other terms defined in the Loan Agreement shall be deemed to take account of the
Loan Agreement, as amended by this Amendment, including without limitation the
changes set forth in paragraphs 5, 6, and 7 hereof.
10. The Borrowers and Guarantor hereby acknowledge that they have previously
entered into and executed Security Agreements dated as of April 18, 2000 (in the
case of Carolina, Keystone, Gulf Line, Five Star, and Guarantor), as of
December 7, 2000 (in the case of Cam), as of October 15, 2001 (in the case of
Unity, ERX, Friendly, Transport Leasing, and Transport Logistics), and as of
May 1, 2002 (in the case of Harbor), all of which have been acknowledged and
reaffirmed, most recently as of May 1, 2002 (collectively, the "Existing
Security Agreements"), with Lender, by which certain assets of the Borrowers
and the Guarantor were pledged to secure Borrowers' Obligations (as that term
is defined in the Loan Agreement). The Borrowers and the Guarantor do hereby
acknowledge that Borrowers' Obligations, as that term is used in the Loan
Agreement and the Existing Security Agreements, means Borrowers' Obligations
under the Loan Agreement, and includes, without limitation, the obligation to
repay as and when due any and all amounts advanced by Lender to the Borrowers
(including Borrowers other than the existing Borrowers), or any of them,
together with interest thereon, as provided in the Revolving Loan Note in the
face amount of $8,500,000, dated April 18, 2000, as amended and restated as of
June 12, 2000, December 7, 2000, October 15, 2001, May 1, 2002, and August 12,
2002; the Equipment Loan Note in the face amount of $1,000,000, dated December
7, 2000, as amended and restated as of March 1, October 15, 2001 and May 1,
2002; and the Guidance Loan in the face amount of $300,000, dated as of October
15, 2001, as amended and restated as of May 1, 2002, all made by Borrowers and
payable to Lender, and do hereby reaffirm their obligations thereunder.
11. Lender hereby waives Borrowers' failure, on or about March 31, 2002, to
comply with the negative covenant contained in Section 7.16 of the Existing Loan
Agreement, regarding the ratio of Unsubordinated Indebtedness to Tangible Net
Worth plus Subordinated Indebtedness, without prejudice to Lender's right to
require Borrowers' strict compliance with all terms of the Loan Agreement in the
future.
12. Borrowers shall pay Lender a fee of $3,750 upon the execution hereof.
Borrowers shall reimburse Lender for all of Lender's out-of-pocket costs related
to the transaction contemplated herein, including without limitation public
record searches ordered by Lender or its counsel and legal fees incurred by
Lender in connection with the preparation of documents, due diligence review or
closing regarding the transaction contemplated herein or the enforcement of the
terms hereof or of any of the Loan Instruments.
13. From time to time, Borrowers and Guarantor shall execute and deliver to
Lender such additional documents as Lender reasonably may require to carry out
the purposes of this Amendment and the Loan Instruments and to protect Lender's
rights hereunder and thereunder, and shall not take any action inconsistent
with the purposes of the Loan Instruments.
14. Except as expressly amended hereby, the terms and conditions of the Existing
Loan Agreement shall remain in full force and effect.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the undersigned Borrowers, Lender, and Guarantor have signed
this Amendment as of the date first above written.
CAROLINA NATIONAL TRANSPORTATION INC.,
an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
KEYSTONE LINES, a California corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
GULF LINE TRANSPORT INC.,
an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
FIVE STAR TRANSPORT, INC.,
an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
CAM TRANSPORT, INC.,
an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
UNITY LOGISTIC SERVICES INC.,
an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
ERX, INC., an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
FRIENDLY TRANSPORT, INC.,
an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
TRANSPORT LEASING, INC.,
an Arkansas corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
TRANSPORT LOGISTICS, LLC,
an Arkansas limited liability company
By: _____________________________
Name: ___________________________
Title: ____________________________
HARBOR BRIDGE INTERMODAL, INC.,
an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
US 1 INDUSTRIES, INC., an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
U.S. BANK NATIONAL ASSOCIATION,
a national banking association
By: _____________________________
Name: Craig B. Collinson
Title: Senior Vice President
EXHIBIT "A"
REVOLVING LOAN NOTE
$8,500,000.00 Dated as of April 18, 2000
Chicago, Illinois Amended and Restated as of June 12, 2000
Further Amended and Restated as of December 7, 2000
Further Amended and Restated as of October 15, 2001
Further Amended and Restated as of May 1, 2002
Further Amended and Restated as of August 12, 2002
FOR VALUE RECEIVED, the undersigned, CAROLINA NATIONAL TRANSPORTATION
INC., an Indiana corporation ("Carolina"); KEYSTONE LINES, a California
corporation ("Keystone"); GULF LINE TRANSPORT INC., an Indiana corporation
("Gulf Line"); FIVE STAR TRANSPORT, INC., an Indiana corporation ("Five Star");
CAM TRANSPORT, INC., an Indiana corporation ("Cam"); UNITY LOGISTIC SERVICES
INC., an Indiana corporation ("Unity"); ERX, INC., an Indiana corporation
("ERX"); FRIENDLY TRANSPORT, INC., an Indiana corporation ("Friendly");
TRANSPORT LEASING, INC., an Arkansas corporation ("Transport Leasing");
TRANSPORT LOGISTICS, LLC, an Arkansas limited liability company ("Transport
Logistics"); and HARBOR BRIDGE INTERMODAL, INC. ("Harbor") (Carolina, Keystone,
Gulf Line, Five Star, Cam, Unity, ERX, Friendly, Transport Leasing, Transport
Logistics, and Harbor are hereinafter collectively referred to as "Maker"),
hereby promise, jointly and severally, to pay to the order of U.S. BANK NATIONAL
ASSOCIATION, a national banking association, formerly known as FIRSTAR
BANK N.A. ("Lender"), the principal sum of EIGHT MILLION FIVE HUNDRED THOUSAND
AND NO/100ths DOLLARS ($8,500,000.00), or, if less, the aggregate unpaid amount
of the Revolving Loan made by Lender pursuant to and in accordance with the
applicable provisions of that certain Loan Agreement dated April 18, 2000, and
amended as of June 9, 2000, December 7, 2000, October 15, 2001, May 1, 2002,
and August 12, 2002 (as the same may be amended, modified, supplemented or
restated from time to time, the "Loan Agreement") between Maker, US 1
INDUSTRIES, INC., an Indiana corporation ("Guarantor"), and Lender, at the
office of Lender at 30 N. Michigan Avenue, Chicago, Illinois 60602, or at such
other place as the holder hereof may appoint, plus interest thereon as set forth
below.
This Revolving Loan Note is delivered by Maker to Lender pursuant to and
in accordance with the applicable provisions of the Loan Agreement. All
capitalized terms used but not elsewhere defined herein shall have the
respective meanings ascribed to such terms in the Loan Agreement.
The Principal Balance of this Revolving Loan Note shall bear interest at
the per annum rate of interest set forth in subsection 2.3.1 of the Loan
Agreement. Accrued and unpaid interest on, and the Principal Balance of, this
Revolving Loan Note shall be paid in the manner set forth in Section 2.4 of the
Loan Agreement.
Interest shall be: (i) computed on the basis of a year consisting of 360
days and (ii) charged for the actual number of days during the period for which
interest is being charged.
During a Default Rate Period, the Principal Balance of this Revolving Loan
Note shall bear interest at the Default Rate, which interest at such Default
Rate shall be paid by Maker to Lender immediately upon demand.
Subject to the provisions of Section 8.2 of the Loan Agreement, at the
election of the holder hereof, upon the occurrence of an Event of Default,
without further notice or demand, the Principal Balance of this Revolving
Loan Note, and all accrued and unpaid interest thereon, shall be and become
immediately due and payable in full. Failure to exercise this option shall not
constitute a waiver of the right to exercise the same in the event of any
subsequent Event of Default, and such failure shall not be deemed to establish
a custom or course of dealing or performance between Maker and Lender.
This Revolving Loan Note may be prepaid, in whole or in part, without
penalty and in accordance with the terms and conditions of the Loan Agreement
applicable thereto.
All funds received by Lender during the existence of an Event of Default
shall be applied in the manner set forth in Section 8.4 of the Loan Agreement.
All payments to be made by Maker pursuant to this Note shall be made in
accordance with the instructions therefor set forth in the Loan Agreement.
Payment shall not be deemed to have been received by Lender until
Lender is in receipt of Good Funds.
Notwithstanding any provision to the contrary contained herein or in any
other Loan Instrument, Lender shall not collect a rate of interest on any
obligation or liability due and owing by Maker in excess of the maximum contract
rate of interest permitted by applicable law ("Excess Interest"). If any Excess
Interest is provided for or determined by a court of competent jurisdiction to
have been provided for in this Revolving Loan Note or any other Loan Instrument,
then in such event (i) Maker shall not be obligated to pay such Excess
Interest, (ii) any Excess Interest collected by Lender shall be, (A) if any
Event of Default exists and is continuing, applied to the Principal Balance or
to accrued and unpaid interest not in excess of the maximum rate permitted by
applicable law or (B) if no Event of Default exists and is continuing, refunded
to the payor thereof, (iii) the interest rates provided for herein
(collectively the "Stated Rate") shall be automatically reduced to the maximum
rate allowed from time to time under applicable law (the "Maximum Rate") and
this Revolving Loan Note and the other Loan Instruments, as applicable, shall be
deemed to have been, and shall be, modified to reflect such reduction, and (iv)
Maker shall not have any action against Lender for any damages arising out of
the payment or collection of such Excess Interest; provided, however, that if at
any time thereafter the Stated Rate is less than the Maximum Rate, Maker
shall, to the extent permitted by law, continue to pay interest at the Maximum
Rate until such time as the total interest received by Lender is equal to the
total interest which Lender would have received had the Stated Rate been (but
for the operation of this provision) the interest rate payable. Thereafter, the
interest rate payable shall be the Stated Rate unless and until the Stated Rate
again exceeds the Maximum Rate, in which event the provisions contained in this
paragraph again shall apply.
If any suit or action is instituted or attorneys are employed to collect
this Revolving Loan Note or any part thereof, Maker promises and agrees, jointly
and severally, to pay all costs of collection, including all court costs and
reasonable attorneys' fees.
Maker hereby waives presentment for payment, protest and demand and notice
of protest, demand, dishonor and nonpayment of this Revolving Loan Note, and
expressly agrees that this Revolving Loan Note, or any payment hereunder, may
be extended from time to time before, at or after maturity, without in any way
affecting the liability of Maker hereunder or any guarantor hereof.
This Revolving Loan Note shall be construed in accordance with and
governed by the laws and decisions of the State of Illinois, without regard to
the conflict of laws principles thereof. All funds disbursed to or for the
benefit of Maker will be deemed to have been disbursed in Chicago, Illinois.
Maker hereby agrees that all actions or proceedings initiated by any Maker
and arising directly or indirectly out of this Revolving Loan Note shall be
litigated in either the Circuit Court of Cook County, Illinois or in the United
States District Court for the Northern District of Illinois, or, if Lender
initiates such action, in addition to the foregoing courts, any court in which
Lender shall initiate or to which Lender shall remove such action, to the
extent such court has jurisdiction. Maker hereby expressly submits and
consents in advance to such jurisdiction in any action or proceeding commenced
by Lender in or removed by Lender to any of such courts, and hereby agrees that
personal service of the summons and complaint, or other process or papers
issued therein may be made by registered or certified mail addressed to Maker
at the address to which notices are to be sent pursuant to Section 11.1 of the
Loan Agreement. Maker waives any claim that either the Circuit Court of Cook
County, Illinois or the United States District Court for the Northern District
of Illinois is an inconvenient forum or an improper forum based on lack of
venue. To the extent provided by law, should any Maker, after being so served,
fail to appear or answer to any summons, complaint, process or papers so served
within the number of days prescribed by law after the mailing thereof, Maker
shall be deemed in default and an order and/or judgment may be entered by the
court against Maker as demanded or prayed for in such summons, complaint,
process or papers. The exclusive choice of forum for Maker set forth in this
paragraph shall not be deemed to preclude the enforcement by Lender of any
judgment obtained in any other forum or the taking by Lender of any action to
enforce the same in any other appropriate jurisdiction, and Maker hereby waives
the right to collaterally attack any such judgment or action.
Maker acknowledges and agrees that any controversy which may arise under
this Revolving Loan Note would be based upon difficult and complex issues and,
therefore, Maker agrees that any lawsuit arising out of any such controversy
will be tried in a court of competent jurisdiction by a judge sitting without a
jury.
This Revolving Loan Note may not be changed or amended orally, but only by
an instrument in writing signed by the party against whom enforcement of the
change or amendment is sought.
This Revolving Loan Note shall be binding upon Maker and upon Maker's
successors and assigns, and shall inure to the benefit of the successors and
permitted assigns of Lender. If more than one party shall sign this
Revolving Loan Note as Maker, their obligations hereunder as Maker shall be
joint and several.
In the event that any provision hereof shall be deemed to be invalid by
reason of the operation of any law, or by reason of the interpretation placed
thereon by any court or any Governmental Body, this Revolving Loan Note shall
be construed as not containing such provision and the invalidity of such
provision shall not affect the validity of any other provisions hereof, and any
and all other provisions hereof which otherwise are lawful and valid shall
remain in full force and effect.
Time for the performance of Maker's obligations under this Revolving Loan
Note is of the essence.
This Revolving Loan Note is entitled to the benefit of certain collateral
security, all as more fully set forth in the Loan Agreement.
The Revolving Loan Note amends, restates in its entirety, and supercedes a
Revolving Loan Note dated May 1, 2002, in the principal face amount of
$7,000,000, which amended and restated a Revolving Loan Note dated October 15,
2001, in the principal face amount of $7,000,000, which amended and restated a
Revolving Loan Note dated December 7, 2000, in the principal face amount of
$5,500,000, which amended and restated a Revolving Loan Note dated June 12,
2000, in the principal face amount of $3,500,000, which amended and restated a
Revolving Loan Note dated April 18, 2000, in the principal face amount of
$2,000,000, made by Maker and payable to Lender.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, this Revolving Loan Note has been executed and delivered by
Maker by its duly authorized officer on the date first set forth above.
CAROLINA NATIONAL TRANSPORTATION INC.,
an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
KEYSTONE LINES, a California corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
GULF LINE TRANSPORT INC., an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
FIVE STAR TRANSPORT, INC., an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
CAM TRANSPORT, INC., an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
UNITY LOGISTIC SERVICES INC.,
an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
ERX, INC., an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
FRIENDLY TRANSPORT, INC.,
an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
TRANSPORT LEASING, INC.,
an Arkansas corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
TRANSPORT LOGISTICS, LLC,
an Arkansas limited liability company
By: _____________________________
Name: ___________________________
Title: ____________________________
HARBOR BRIDGE INTERMODAL, INC.,
an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
EXHIBIT "B-1"
Date: April 18, 2000
Amended and Restated as of June 9, 2000
Further Amended and Restated as of December 7, 2000
Further Amended and Restated as of March 1, 2001
Further Amended and Restated as of October 15, 2001
Further Amended and Restated as of May 1, 2002
Further Amended and Restated As of August 12, 2002
LIMITED GUARANTY
The undersigned, Michael Kibler ("Kibler") ("Guarantor"), does hereby
absolutely and unconditionally, subject to the limitation as to amount set
forth below, guarantee to U.S. Bank National Association, a national banking
association formerly known as Firstar Bank N.A. ("Lender"), (i) prompt payment
when due, whether at stated maturity, upon acceleration or otherwise, and at
all times thereafter, of that certain Revolving Loan Note, dated April 18,
2000, as amended and restated as of June 12, 2000, December 7, 2000, October
15, 2001, May 1, 2002, and August 12, 2002, in the principal amount of
$8,500,000; that certain Equipment Loan Note, dated December 7, 2000, as amended
and restated as of March 1, 2001, October 15, 2001, and May 1, 2002, in the
principal amount of $1,000,000; and that certain Guidance Loan Note dated
October 15, 2001, as amended and restated as of May 1, 2002, in the principal
amount of $300,000, all executed by Carolina National Transportation Inc., an
Indiana corporation ("Carolina"); Keystone Lines, a California corporation
("Keystone"); Gulf Line Transport Inc., an Indiana corporation ("Gulf Line");
Five Star Transport, Inc., an Indiana corporation ("Five Star"); CAM Transport,
Inc., an Indiana corporation ("Cam"); Unity Logistic Services Inc., an Indiana
corporation ("Unity"); ERX, Inc., an Indiana corporation ("ERX"); Friendly
Transport, Inc. ("Friendly"); Transport Leasing, Inc., an Arkansas corporation
("Transport Leasing"); Transport Logistics, LLC, an Arkansas limited liability
company ("Transport Logistics"); and Harbor Bridge Intermodal, Inc., an Indiana
corporation ("Harbor") (Carolina, Keystone, Gulf Line, Five Star, Unity, ERX,
Friendly, Transport Leasing, Transport Logistics, and Harbor are hereinafter
collectively referred to as "Borrowers") (including all renewals, extensions and
modifications thereof and all court costs, expert witness fees and reasonable
attorneys' fees incurred by Lender in connection with the collection or
enforcement thereof) (the Revolving Loan Note, Equipment Loan Note and Guidance
Loan Note are collectively referred to herein as the "Notes") and (ii) prompt
performance and payment of all of Borrowers' Obligations (as defined in that
certain Loan Agreement dated April 18, 2000, as amended and restated as of June
9, 2000, December 7, 2000, March 1, 2001, October 15, 2001, May 1, 2002, and
August 12, 2002, between Borrowers, Lender, and US 1 Industries, Inc. (the
"Loan Agreement")) (any and all indebtedness represented or evidenced by or
arising with respect to the Notes in favor of Lender and Borrowers' Obligations
hereinafter sometimes collectively referred to as the "Guaranteed Debt").
The undersigned waives notice of the acceptance of this Guaranty and of
the extension or continuation of the Guaranteed Debt or any part thereof. The
undersigned further waives presentment, protest, notice, demand or action on
delinquency and any other formalities required to charge the undersigned with
liability hereunder, in respect of the Guaranteed Debt or any part thereof, or
otherwise to enforce payment thereof against any collateral securing the
Guaranteed Debt or any part thereof. It is the intent hereof that Guarantor
remain liable as a principal until all of the Guaranteed Debt is paid in full
notwithstanding any act or thing that might otherwise operate as a legal or
equitable discharge of a surety.
In the event of default under the Notes or the Loan Agreement, Guarantor
agrees to pay on demand by Lender all sums then or thereafter due under the
Notes and Loan Agreement regardless of any defense, right of setoff or claims
which any Borrowers or Guarantor might have against Lender.
This is a guaranty of payment and performance, not collection. It is
expressly understood and agreed that the liability of the undersigned Guarantor
hereunder for the Guaranteed Debt shall be limited to the sum of (i) the
principal sum of $1,500,000 and (ii) all interest, fees, charges, costs and
attorneys' fees applicable thereto which may accrue or be incurred after demand
for payment of such principal sum. It is further expressly understood and
agreed that separate recovery may be had by Lender for such sum regardless of
whether action is taken or suit is brought by Lender against any other person
liable for the Guaranteed Debt and regardless of whether any action is taken by
Lender to enforce its rights against any collateral for the Guaranteed Debt.
In any right of action which shall accrue to Lender by reason of this
Guaranty, Lender may, at its sole election, proceed against Guarantor with or
without (a) joining any of Borrowers or the Corporate Guarantor, US 1
Industries, Inc., in such action or (b) commencing any action against, or obtain
any judgment against any of Borrowers.
The validity and enforceability of this Guaranty shall not be impaired or
affected by any of the following, whether occurring before or after receipt by
Lender of notice of termination of this Guaranty: (a) any extension,
modification or renewal of, or indulgence with respect to, or substitutions
for, the Guaranteed Debt or any part thereof or any agreement relating thereto
at any time; (b) any failure or omission to enforce any right, power or remedy
with respect to the Guaranteed Debt or any part thereof or any agreement
relating thereto, or any collateral securing the Guaranteed Debt or any part
thereof; (c) any waiver of any right, power or remedy or of any default with
respect to the Guaranteed Debt or any part thereof or any agreement relating
thereto or with respect to any collateral securing the Guaranteed Debt or any
part thereof; (d) any release, surrender, compromise, settlement, waiver,
subordination or modification, with or without consideration, of any collateral
securing the Guaranteed Debt or any part thereof, any other guaranties with
respect to the Guaranteed Debt or any part thereof, or any other obligation of
any person or entity with respect to the Guaranteed Debt or any part thereof;
(e) the enforceability or validity of the Guaranteed Debt or any part thereof or
the genuineness, enforceability or validity of any agreement relating thereto
or with respect to any collateral securing the Guaranteed Debt or any part
thereof; or (f) the application of payments received from any source to the
permitted payment of indebtedness other than the Guaranteed Debt, any part
thereof or amounts which are not covered by this Guaranty even though Lender
might lawfully have elected to apply such payments to any part or all of the
Guaranteed Debt or to amounts which are not covered by this Guaranty, all
whether or not the undersigned shall have had notice or knowledge of any act or
omission referred to in the foregoing clauses (a) through (f) of this
paragraph. It is agreed that the undersigned's liability hereunder is joint and
several and independent of any other guaranties or other obligations at any
time in effect with respect to the Guaranteed Debt or any part thereof and that
the undersigned's liability hereunder may be enforced regardless of the
existence, validity, enforcement or non-enforcement of any such other guaranties
or other obligations.
The undersigned further agrees that if at any time all or any part of any
payment heretofore applied by Lender to the Guaranteed Debt hereby is or must
be rescinded or returned by Lender for any reason whatsoever (including,
without limitation, the insolvency, bankruptcy, or reorganization of any
Guarantor), such indebtedness shall for the purposes of this Guaranty, to the
extent that such payment is or must be rescinded or returned, be deemed to have
continued in existence, notwithstanding such application by Lender, and this
Guaranty shall continue to be effective or be reinstated as the case may be, as
to such guaranteed indebtedness, all as though such application by Lender had
not been made.
Until the Guaranteed Debt is paid in full (i) the undersigned waives any
benefit of the collateral, if any, which may from time to time secure the
Guaranteed Debt or any part thereof and (ii) the undersigned authorizes
Lender to take any action or exercise any remedy with respect thereto, which
Lender in its sole discretion shall determine, without notice to the
undersigned. In the event Lender in its sole discretion elects to give notice of
any action with respect to the collateral, if any, securing the Guaranteed Debt
or any part thereof, ten (10) days' written notice shall be deemed reasonable
notice of any matters contained in such notice. The payment by the undersigned
of any amount pursuant to this Limited Guaranty shall not entitle the
undersigned to any right, title or interest, whether by way of subrogation or
otherwise, in and to any of the Obligations, including, but not limited to, any
indebtedness evidenced by the Notes, or any collateral therefor. The undersigned
does hereby release Borrowers from any and all obligations of indemnification,
contribution, subrogation and exoneration which may arise or come into
existence as a result of the undersigned's assumption or performance of its
obligations in this Limited Guaranty on behalf of Borrowers in favor of Lender
or its successors and assigns.
The undersigned shall pay all costs, fees and expenses (including court
costs, expert witness fees and reasonable attorneys' fees) incurred by Lender in
collecting or enforcing the undersigned's obligations under this
Guaranty.
Any notice, demand or request which may be permitted, required or desired
to be given in connection therewith shall be given in writing and directed to
Lender and Guarantor as follows:
Lender: U.S. Bank National Association
30 N. Michigan Avenue
Chicago, IL 60602
Fax: (312) 696-1397
With a copy to Christopher J. Horvay
its attorneys: Gould & Ratner
222 N. LaSalle Street
Suite 800
Chicago, IL 60601
Fax: (312) 235-3241
Guarantor: Michael Kibler
1000 Colfax Street
Gary, Indiana 46406
Fax: (219) 977-5227
With a copy to W. Brinkley Dickerson, Jr.
his attorneys: Troutman Sanders, L.L.P.
100 Peachtree Street
Atlanta, Georgia 30342
Fax: (404) 885-3827
Notices shall be deemed properly delivered and received when and if (i)
personally delivered; (ii) delivered by Federal Express or other overnight
courier; or (iii) delivered by facsimile provided a hard copy of any such
notice delivered by facsimile is delivered to the addressee within one business
day thereafter by either of the methods listed in (i) or (ii) above.
This Guaranty shall (i) bind the undersigned and their successors and
assigns, (ii) inure to the benefit of Lender, its successors and assigns and
(iii) be governed by the internal laws of the State of Illinois.
This Guaranty amends, restates in its entirety, and supercedes an original
Guaranty made by the Guarantor dated April 18, 2000, as amended and restated as
of June 9, 2000, December 7, 2000, March 1, 2001, October 15, 2001, and May 1,
2002, in favor of Lender.
Chicago, Illinois
_________________________
Michael Kibler
EXHIBIT "B-2"
Date: April 18, 2000
Amended and Restated as of June 9, 2000
Further Amended and Restated as of December 7, 2000
Further Amended and Restated as of March 1, 2001
Further Amended and Restated as of October 15, 2001
Further Amended and Restated as of May 1, 2002
Further Amended and Restated as of August 12, 2002
LIMITED GUARANTY
The undersigned, Harold Antonson ("Antonson") ("Guarantor"), does hereby
absolutely and unconditionally, subject to the limitation as to amount set forth
below, guarantee to U.S. Bank National Association, a national banking
association formerly known as Firstar Bank N.A. ("Lender"), (i) prompt payment
when due, whether at stated maturity, upon acceleration or otherwise, and at all
times thereafter, of that certain Revolving Loan Note, dated April 18, 2000, as
amended and restated as of June 12, 2000, December 7, 2000, October 15, 2001,
May 1, 2002, and August 12, 2002, in the principal amount of $8,500,000; that
certain Equipment Loan Note, dated December 7, 2000, as amended and restated as
of March 1, 2001, October 15, 2001, and May 1, 2002, in the principal amount of
$1,000,000; and that certain Guidance Loan Note dated October 15, 2001, as
amended and restated as of May 1, 2002, in the principal amount of $300,000,
all executed by Carolina National Transportation Inc., an Indiana corporation
("Carolina"); Keystone Lines, a California corporation ("Keystone"); Gulf Line
Transport Inc., an Indiana corporation ("Gulf Line"); Five Star Transport, Inc.,
an Indiana corporation ("Five Star"); CAM Transport, Inc., an Indiana
corporation ("Cam"); Unity Logistic Services Inc., an Indiana corporation
("Unity"); ERX, Inc., an Indiana corporation ("ERX"); Friendly Transport, Inc.
("Friendly"); Transport Leasing, Inc., an Arkansas corporation ("Transport
Leasing"); Transport Logistics, LLC, an Arkansas limited liability company
("Transport Logistics"); and Harbor Bridge Intermodal, Inc., an Indiana
corporation ("Harbor") (Carolina, Keystone, Gulf Line, Five Star, Unity, ERX,
Friendly, Transport Leasing, Transport Logistics, and Harbor are hereinafter
collectively referred to as "Borrowers") (including all renewals, extensions
and modifications thereof and all court costs, expert witness fees and
reasonable attorneys' fees incurred by Lender in connection with the collection
or enforcement thereof) (the Revolving Loan Note, Equipment Loan Note and
Guidance Loan Note are referred to herein as the "Notes") and (ii) prompt
performance and payment of all of Borrowers' Obligations (as defined in that
certain Loan Agreement dated April 18, 2000, as amended and restated as of June
9, 2000, December 7, 2000, March 1, 2001, October 15, 2001, May 1, 2002, and
August 12, 2002, between Borrowers, Lender and US 1 Industries, Inc. (the "Loan
Agreement")) (any and all indebtedness represented or evidenced by or arising
with respect to the Notes in favor of Lender and Borrowers' Obligations
hereinafter sometimes collectively referred to as the "Guaranteed Debt").
The undersigned waives notice of the acceptance of this Guaranty and of
the extension or continuation of the Guaranteed Debt or any part thereof. The
undersigned further waives presentment, protest, notice, demand or action on
delinquency and any other formalities required to charge the undersigned with
liability hereunder, in respect of the Guaranteed Debt or any part thereof, or
otherwise to enforce payment thereof against any collateral securing the
Guaranteed Debt or any part thereof. It is the intent hereof that Guarantor
remain liable as a principal until all of the Guaranteed Debt is paid in full
notwithstanding any act or thing that might otherwise operate as a legal or
equitable discharge of a surety.
In the event of default under the Notes or the Loan Agreement, Guarantor
agrees to pay on demand by Lender all sums then or thereafter due under the
Notes and Loan Agreement regardless of any defense, right of setoff or claims
which any Borrowers or Guarantor might have against Lender.
This is a guaranty of payment and performance, not collection. It is
expressly understood and agreed that the liability of the undersigned Guarantor
hereunder for the Guaranteed Debt shall be limited to the sum of (i) the
principal sum of $1,500,000 and (ii) all interest, fees, charges, costs and
attorneys' fees applicable thereto which may accrue or be incurred after demand
for payment of such principal sum. It is further expressly understood and
agreed that separate recovery may be had by Lender for such sum regardless of
whether action is taken or suit is brought by Lender against any other person
liable for the Guaranteed Debt and regardless of whether any action is taken by
Lender to enforce its rights against any collateral for the Guaranteed Debt.
In any right of action which shall accrue to Lender by reason of this
Guaranty, Lender may, at its sole election, proceed against Guarantor with or
without (a) joining any of Borrowers or the Corporate Guarantor, US 1
Industries, Inc., in such action or (b) commencing any action against, or obtain
any judgment against any of Borrowers.
The validity and enforceability of this Guaranty shall not be impaired or
affected by any of the following, whether occurring before or after receipt by
Lender of notice of termination of this Guaranty: (a) any extension,
modification or renewal of, or indulgence with respect to, or substitutions for,
the Guaranteed Debt or any part thereof or any agreement relating thereto at any
time; (b) any failure or omission to enforce any right, power or remedy with
respect to the Guaranteed Debt or any part thereof or any agreement relating
thereto, or any collateral securing the Guaranteed Debt or any part thereof; (c)
any waiver of any right, power or remedy or of any default with respect to the
Guaranteed Debt or any part thereof or any agreement relating thereto or with
respect to any collateral securing the Guaranteed Debt or any part thereof; (d)
any release, surrender, compromise, settlement, waiver, subordination or
modification, with or without consideration, of any collateral securing the
Guaranteed Debt or any part thereof, any other guaranties with respect to the
Guaranteed Debt or any part thereof, or any other obligation of any person or
entity with respect to the Guaranteed Debt or any part thereof; (e) the
enforceability or validity of the Guaranteed Debt or any part thereof or the
genuineness, enforceability or validity of any agreement relating thereto or
with respect to any collateral securing the Guaranteed Debt or any part
thereof; or (f) the application of payments received from any source to the
permitted payment of indebtedness other than the Guaranteed Debt, any part
thereof or amounts which are not covered by this Guaranty even though Lender
might lawfully have elected to apply such payments to any part or all of the
Guaranteed Debt or to amounts which are not covered by this Guaranty, all
whether or not the undersigned shall have had notice or knowledge of any act or
omission referred to in the foregoing clauses (a) through (f) of this paragraph.
It is agreed that the undersigned's liability hereunder is joint and several and
independent of any other guaranties or other obligations at any time in effect
with respect to the Guaranteed Debt or any part thereof and that the
undersigned's liability hereunder may be enforced regardless of the existence,
validity, enforcement or non-enforcement of any such other guaranties or other
obligations.
The undersigned further agrees that if at any time all or any part of any
payment heretofore applied by Lender to the Guaranteed Debt hereby is or must be
rescinded or returned by Lender for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy, or reorganization of any Guarantor),
such indebtedness shall for the purposes of this Guaranty, to the extent that
such payment is or must be rescinded or returned, be deemed to have continued in
existence, notwithstanding such application by Lender, and this Guaranty shall
continue to be effective or be reinstated as the case may be, as to such
guaranteed indebtedness, all as though such application by Lender had not been
made.
Until the Guaranteed Debt is paid in full (i) the undersigned waives any
benefit of the collateral, if any, which may from time to time secure the
Guaranteed Debt or any part thereof and (ii) the undersigned authorizes
Lender to take any action or exercise any remedy with respect thereto, which
Lender in its sole discretion shall determine, without notice to the
undersigned. In the event Lender in its sole discretion elects to give notice of
any action with respect to the collateral, if any, securing the Guaranteed Debt
or any part thereof, ten (10) days' written notice shall be deemed reasonable
notice of any matters contained in such notice. The payment by the undersigned
of any amount pursuant to this Limited Guaranty shall not entitle the
undersigned to any right, title or interest, whether by way of subrogation or
otherwise, in and to any of the Obligations, including, but not limited to, any
indebtedness evidenced by the Notes, or any collateral therefor. The undersigned
does hereby release Borrowers from any and all obligations of indemnification,
contribution, subrogation and exoneration which may arise or
come into existence as a result of the undersigned's assumption or performance
of its obligations in this Limited Guaranty on behalf of Borrowers in favor of
Lender or its successors and assigns.
The undersigned shall pay all costs, fees and expenses (including court
costs, expert witness fees and reasonable attorneys' fees) incurred by Lender
in collecting or enforcing the undersigned's obligations under this Guaranty.
Any notice, demand or request which may be permitted, required or desired
to be given in connection therewith shall be given in writing and directed to
Lender and Guarantor as follows:
Lender: U.S. Bank National Association
30 N. Michigan Avenue
Chicago, IL 60602
Fax: (312) 696-1397
With a copy to Christopher J. Horvay
its attorneys: Gould & Ratner
222 N. LaSalle Street
Suite 800
Chicago, IL 60601
Fax: (312) 235-3241
Guarantor: Harold Antonson
1000 Colfax Street
Gary, Indiana 46406
Fax: (219) 977-5227
With a copy to W. Brinkley Dickerson, Jr.
his attorneys: Troutman Sanders, L.L.P.
600 Peachtree Street
Atlanta, Georgia 30342
Fax: (404) 885-3827
Notices shall be deemed properly delivered and received when and if (i)
personally delivered; (ii) delivered by Federal Express or other overnight
courier; or (iii) delivered by facsimile provided a hard copy of any such
notice delivered by facsimile is delivered to the addressee within one business
day thereafter by either of the methods listed in (i) or (ii) above.
This Guaranty shall (i) bind the undersigned and their successors and
assigns, (ii) inure to the benefit of Lender, its successors and assigns and
(iii) be governed by the internal laws of the State of Illinois.
This Guaranty amends, restates in its entirety, and supercedes an original
Guaranty made by the Guarantor dated April 18, 2000, as amended and restated as
of June 9, 2000, December 7, 2000, March 1, 2001, October 15, 2001, and May 1,
2002, in favor of Lender.
Chicago, Illinois
_________________________
Harold Antonson
EXHIBIT "C"
Date: April 18, 2000
Amended and Restated as of June 9, 2000
Further Amended and Restated as of December 7, 2000
Further Amended and Restated as of March 1, 2001
Further Amended and Restated as of October 15, 2001
Further Amended and Restated as of May 1, 2002
Further Amended and Restated as of August 12, 2002
CORPORATE GUARANTY
To induce U.S. Bank National Association, a national banking association
formerly known as Firstar Bank N.A., whose address is 30 N. Michigan Avenue,
Chicago, Illinois 60602 ("Lender"), to advance funds to Carolina National
Transportation Inc., an Indiana corporation ("Carolina"); Keystone Lines, a
California corporation ("Keystone"); Gulf Line Transport Inc., an Indiana
corporation ("Gulf Line"); Five Star Transport, Inc., an Indiana corporation
("Five Star"); CAM Transport, Inc., an Indiana corporation ("Cam"); Unity
Logistic Services Inc., an Indiana corporation ("Unity"); ERX, Inc., an Indiana
corporation ("ERX"); Friendly Transport, Inc. ("Friendly"); Transport Leasing,
Inc., an Arkansas corporation ("Transport Leasing"); and Transport Logistics,
LLC, an Arkansas limited liability company ("Transport Logistics"); and Harbor
Bridge Intermodal, Inc. ("Harbor") (Carolina, Keystone, Gulf Line, Five Star,
Unity, ERX, Friendly, Transport Leasing, Transport Logistics, and Harbor are
hereinafter collectively referred to as "Borrowers") and to enter into a
certain Sixth Amendment to Loan Agreement of even date herewith between
Borrowers and Lender (which Sixth Amendment to Loan Agreement, together with
the original Loan Agreement dated April 18, 2000, and the amendments thereto
dated June 9, 2000, December 7, 2000, March 1, 2001, October 15, 2001, and May
1, 2002, is the "Loan Agreement") and to otherwise extend credit to Borrowers,
the undersigned hereby irrevocably, absolutely and unconditionally guarantees
payment and performance when due of all presently existing or hereafter
incurred direct, indirect, absolute or contingent indebtedness, liabilities and
other obligations of Borrowers to Lender arising out of or incurred in
connection with the Revolving Loan Note dated April 18, 2000 from Borrowers to
Lender, as amended and restated as of June 9, 2000, December 7, 2000, October
15, 2001, May 1, 2002, and August 12, 2002 (the "Revolving Loan Note"); the
Equipment Loan Note from Borrowers to Lender dated as of December 7, 2000, as
amended and restated as March 1, 2001, October 15, 2001, and May 1, 2002; and
the Guidance Line Note, dated as of October 15, 2001 and as amended and
restated as of May 1, 2002 (the Revolving Loan Note, the Equipment Loan Note,
and the Guidance Note are herein collectively referred to as the "Notes"), or
any document, instrument, mortgage, guaranty, or security agreement given or
delivered to evidence or secure the indebtedness evidenced by the Notes, and
all modifications, amendments and supplements thereto including, but not limited
to, charges, interest and the principal, interest and other sums payable
pursuant to the Notes or the Loan Agreement or any of the Loan Instruments (as
defined in the Loan Agreement) (collectively, the "Obligations"). The
undersigned further agrees to pay all costs of collection and attorneys' fees
paid or incurred by Lender in the collection of the Obligations and the
enforcement of this Corporate Guaranty. This Corporate Guaranty shall continue
in full force and effect until all of the Obligations, including, but not
limited to, all indebtedness evidenced by the Notes, have been fully and
irrevocably paid and discharged. This is a guarantee of payment and not of
collection and shall be enforceable directly without resorting to any other
right, remedy or security.
If Borrowers do not pay or otherwise fully perform the Obligations in a
timely manner as provided in the Notes and Loan Agreement, the undersigned will
promptly pay the amount due and payable by Borrowers to Lender upon demand. The
undersigned acknowledges that it will benefit from the extension of credit
described herein made by Lender to Borrowers and that, in order to induce Lender
to accept the Notes and to otherwise extend credit to Borrowers that it
has agreed to execute and deliver this Corporate Guaranty on the understanding
that doing so is a condition precedent to Lender accepting the Notes and
otherwise agreeing to extend credit. The undersigned represents and warrants
that it (i) has personal knowledge of and is familiar with Borrowers' business
affairs, books and records; and (ii) has the ability to influence Borrowers'
decision making process. The undersigned further represents and warrants that
Borrowers are in sound financial condition, that all financial statements of
Borrowers and the undersigned heretofore provided to Lender are true, correct
and complete and that Borrowers are able to and will perform their obligations
in accordance with the terms and conditions of the Notes. The undersigned
acknowledges that Lender is relying upon the undersigned's representations,
warranties and covenants herein in accepting the Notes and agreeing to
otherwise extend credit to Borrowers, and undertakes to perform or cause
Borrowers to perform the Obligations promptly and in good faith. If Borrowers
do not pay any sum when due under the Notes or Loan Agreement, upon the
expiration of the applicable cure period, if any, Lender in its sole
discretion, may proceed directly against the undersigned under this Corporate
Guaranty without first proceeding against any of Borrowers or any of the
collateral or exhausting any of its remedies against any of Borrowers. The
payment by the undersigned of any amount pursuant to this Corporate Guaranty
shall not entitle the undersigned to any right, title or interest, whether by
way of subrogation or otherwise, in and to any of the Obligations, including,
but not limited to, any indebtedness evidenced by the Notes, or any collateral
therefor. The undersigned does hereby release Borrowers from any and all
obligations of indemnification, contribution, subrogation and exoneration which
may arise or come into existence as a result of the undersigned's assumption or
performance of its obligations in this Corporate Guaranty on behalf of
Borrowers in favor of Lender or its successors and assigns.
The liability and obligation of the undersigned hereunder shall not be
affected or impaired in any manner by (and Lender is hereby expressly
authorized to make, from time to time, without notice to the undersigned) any
sale, pledge, surrender, compromise, release, renewal, extension, modification,
or other disposition of or with respect to any of the Obligations, including,
without limitation, the indebtedness evidenced by the Notes, or any collateral
therefor, and such obligation and liability of the undersigned shall not in any
manner be affected or impaired by any acceptance of security for or other
guarantees of any such indebtedness or by any forbearance or indulgence in the
collection thereof or any failure, neglect or omission to realize upon any
collateral therefor. Diligence in collection and presentment for payment,
demand, protest and/or notice of dishonor, default or nonpayment and notice of
the creation or existence of any and all Obligations and security therefor and
of the acceptance of this Corporate Guaranty are hereby expressly waived.
The undersigned agrees that, if at any time all or any part of any payment
theretofore applied to any of the Obligations is rescinded or returned for any
reason whatsoever (including, without limitation, the insolvency, bankruptcy,
liquidation, receivership, arrangement or reorganization of any party or by any
defense which any Borrower or any shareholder thereof may have by reason of the
order, decree or decision of any court or administrative body resulting from
any such proceeding), such Obligation shall, for the purposes of this Corporate
Guaranty, be deemed to have continued in existence to the extent of such
payment, notwithstanding such application by Lender, and this Corporate Guaranty
shall continue to be effective or be reinstated, as the case may be, as to such
Obligation, all as though such application had not been made.
The undersigned agrees that the obligations, covenants and agreements of
the undersigned under this Corporate Guaranty shall not be affected or impaired
by any act of Lender, or any event or condition except full performance of the
Obligations and any other sums due hereunder. The undersigned agree that,
without full performance of the Obligations, the liability of the undersigned
hereunder shall not be discharged or diminished by: (i) the renewal or
extension of time for the performance of the Obligations under the Loan
Instruments or any other agreement relating to the Obligations, whether made
with or without the knowledge or consent of the undersigned; (ii) any transfer,
waiver, compromise, settlement, modification, surrender, or release of the Loan
Instruments or any collateral assigned, pledged or hypothecated thereby; (iii)
the existence of any defenses to enforcement of the Loan Instruments; (iv) any
failure, omission, delay or inadequacy, whether entire or partial, of Lender to
exercise any right, power or remedy under the Loan Instruments regarding the
Obligations; (v) the existence of any setoff, claim, reduction, or diminution
of the Obligations, or any defense of any kind or nature, which the undersigned
may have against any of the Borrowers or which any party has against Lender;
(vi) the application of payments received from any source to the payment of any
obligation other than the Obligations, even though Lender might lawfully have
elected to apply such payments to any part or all of the Obligations; or (vii)
the addition of any and all other endorsers, guarantors, obligors and other
persons liable for the performance of the Obligations and the acceptance of any
and all other security for the performance of the Obligations, all whether or
not the undersigned shall have had notice or knowledge of any act or omission
referred to in the foregoing clauses (i) through (vii) of this paragraph. The
undersigned intends that the undersigned shall remain liable hereunder as a
principal until all Obligations shall have been performed in full,
notwithstanding, any fact, act, event or occurrence which might otherwise
operate as a legal or equitable discharge of a surety or guarantor other than
payment and performance in full of the Obligations.
If this Corporate Guaranty is signed by more than one person, firm, or
corporation, every obligation of each signatory shall be joint and several. No
release or discharge of any one or more of the undersigned, if there be more
than one, shall release or discharge any other or others of the undersigned
unless and until all of the Obligations shall have been fully paid. This
Corporate Guaranty and each and every part hereof shall be binding upon the
undersigned jointly and severally (if there be more than one) and upon the
heirs, legal representatives, successors and assigns of the undersigned, and
shall inure to the benefit of Lender and its successors and assigns.
The undersigned expressly waives: (i) notice of the acceptance by Lender
of this Corporate Guaranty; (ii) notice of the existence, creation, payment or
nonpayment of the Obligations; (iii) presentment, demand at maturity, notice of
dishonor, protest, and all other notices whatsoever; and (iv) any failure by
Lender to inform the undersigned of any facts Lender may now or hereafter know
about any of Borrowers or the transactions contemplated by the Loan
instruments, it being understood and agreed that Lender has no duty so to inform
and that the undersigned is fully responsible for being and remaining informed
by Borrowers of all circumstances bearing on the existence, creation, or risk of
nonpayment of the Obligations. Credit may be granted or continued from time to
time by Lender to Borrowers without notice to or authorization from the
undersigned, regardless of the financial or other condition of any of Borrowers
at the time of any such grant or continuation. Lender shall have no obligation
to disclose or discuss with the undersigned its assessment of the financial
condition of any Borrower. No modification or waiver of any of the provisions
of this Corporate Guaranty will be binding upon Lender except as expressly set
forth in a writing duly signed and delivered on behalf of Lender. The
undersigned further agrees that any exculpatory language pertaining to any
Borrower contained in the Loan Instruments or any document executed and
delivered by any Borrower thereunder shall in no event apply to this Corporate
Guaranty, and will not prevent Lender from proceeding against the undersigned
to enforce this Corporate Guaranty.
This Corporate Guaranty has been executed in Chicago, Illinois, and shall
be governed by the laws of the State of Illinois without reference to the
principles of conflicts of law thereof. If any provision of this Corporate
Guaranty, or any paragraph, sentence, clause, phrase, or word, or the
application thereof, in any circumstances, is adjudicated by a court of
competent jurisdiction to be invalid, the validity of the remainder of this
Corporate Guaranty shall be construed as if such invalid part were never
included herein. Time is of the essence of this Corporate Guaranty. All
payments to be made hereunder shall be made in currency and coin of the United
States of America which is legal tender for public and private debts at the
time of payment.
This Corporate Guaranty is secured by a Security Agreement dated April 18,
2000, from Guarantor to Lender and by all collateral described therein.
The undersigned hereby submits to personal jurisdiction in the State of
Illinois for the enforcement of this Corporate Guaranty and waives any and all
personal rights to object to such jurisdiction for the purposes of litigation
to enforce this Corporate Guaranty. The undersigned hereby consents to the
jurisdiction of either the Circuit Court of Cook County, Illinois, or the
United States District Court for the Northern District of Illinois, Eastern
Division, in any action, suit or proceeding which Lender may at any time wish
to file in connection with this Corporate Guaranty or any related matter. The
undersigned hereby agrees that any action, suit or proceeding to enforce this
Corporate Guaranty may be brought in any State or Federal Court in the State of
Illinois and hereby waive any objection which the undersigned may have to the
laying of the venue of any such action, suit or proceeding in any such Court;
provided, however, that the provisions of this paragraph shall not be deemed to
preclude Lender from filing any such action, suit or proceeding in any other
appropriate forum. THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES THE RIGHT TO
TRIAL BY JURY WITH RESPECT TO ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR
RESPECT ARISING OUT OF OR RELATING. TO THIS CORPORATE GUARANTY.
Any notice, demand or other communication which either party may desire or
may be required to give to the other party shall be in writing, and shall be
deemed given (i) if and when personally delivered, or (ii) upon receipt via
facsimile transmission provided that a copy is also sent via overnight mail,
addressed to the intended recipient at its address set forth below, or to such
other address as such party may have designated to all other parties by notice
furnished in accordance herewith:
if to Lender: U.S. Bank National Association
30 N. Michigan Avenue
Chicago, Illinois 60602
Attention: Craig B. Collinson,
Senior Vice President
Fax No.: (312) 696-1397
With a copy to: Gould & Ratner
222 North LaSalle Street
Suite 800
Chicago, Illinois 60601
Attention: Christopher J. Horvay
Fax No.: (312) 236-3241
and if to the undersigned: at the address set forth below its name
Except as otherwise specifically required herein, notice of the exercise of any
right, option or power granted to Lender by this Corporate Guaranty is not
required to be given.
This Corporate Guaranty amends, restates in its entirety, and supercedes
an original Corporate Guaranty made by the Guarantor dated April 18, 2000, as
amended and restated as of June 9, 2000, December 7, 2000, March 1, 2001,
October 15, 2001, and May 1, 2002, in favor of Lender.
US 1 INDUSTRIES, INC., an Indiana corporation
By: _________________________________
Name: _______________________________
Title: ________________________________
Address: 1000 Colfax Street
Gary, IN 46406
Fax No.: (219) 977-5227
EXHIBIT "D-1"
ACKNOWLEDGEMENT
(Subordination Agreement)
The undersigned hereby acknowledge and agree, 1) that U.S. Bank National
Association, a national banking association formerly known as Firstar Bank N.A.
("Lender"), has agreed to enter into a certain Sixth Amendment to Loan
Agreement dated as of August 12, 2002 (the "Amendment") with the Borrowers
dentified therein (the "Borrowers"); 2) that the Subordinated Debt (as defined
in that certain Subordination Agreement dated April 18, 2000, as amended,
between Lender and the undersigned (the "Subordination Agreement")) is and
shall continue to be subordinate, all as provided in the Subordination
Agreement, to any sums loaned to the Borrowers, or any of them, in addition to
being subordinate to any amounts otherwise advanced to Borrowers, or any of
them, by Lender prior to or subsequent to the date hereof under the Loan
Agreement (as that term is defined in the Amendment); and 3) that any amounts
advanced to any of the Borrowers prior to or subsequent to the date hereof
under the Loan Agreement shall constitute Senior Debt for purposes of the
Subordination Agreement.
IN WITNESS WHEREOF, this Acknowledgment has been executed and delivered as of
August 12, 2002.
______________________________
Harold Antonson
______________________________
Michael Kibler
EXHIBIT "D-2"
ACKNOWLEDGEMENT
(Subordination Agreement)
The undersigned hereby acknowledges and agrees, 1) that U.S. Bank National
Association, a national banking association formerly known as Firstar Bank N.A.
("Lender"), has agreed to enter into a certain Sixth Amendment to Loan
Agreement dated as of August 12, 2002 (the "Amendment") with the Borrowers
identified therein (the "Borrowers"); 2) that the Subordinated Debt (as defined
in that certain Subordination Agreement dated April 18, 2000, as amended,
between Lender and the undersigned (the "Subordination Agreement")) is and
shall continue to be subordinate, all as provided in the Subordination
Agreement, to any sums loaned to the Borrowers, or any of them, in addition to
being subordinate to any amounts otherwise advanced to Borrowers, or any of
them, by Lender prior to or subsequent to the date hereof under the Loan
Agreement (as that term is defined in the Amendment); and 3) that any amounts
advanced to any of the Borrowers prior to or subsequent to the date hereof
under the Loan Agreement shall constitute Senior Debt for purposes of the
Subordination Agreement.
IN WITNESS WHEREOF, this Acknowledgment has been executed and delivered as of
August 12, 2002.
AUGUST INVESTMENT PARTNERSHIP
By: AUGUST INVESTMENT CORPORATION,
General Partner
By: ______________________________
Its: ______________________________