SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 31, 1997
CONTINENTAL AMERICAN TRANSPORTATION, INC.
Exact name of Registrant as specified in charter)
Colorado 0-18729 84-1089599
(State or other (Commission (IRS employee
jurisdiction of file number) identification
incorporation no.)
495 Lovers Lane Road, Calhoun, Georgia 30701
- --------------------------------------------------------
(Address of principal executive office) Zip Code
Registration telephone number, including area code: (706) 629-8682
Item 5.
On October 31, 1997, Registrant and its subsidiaries executed
and delivered a certain marketing agreement with Professional
Transportation Group, Ltd., Inc. ("PTG") pursuant to the general terms
of which the Registrant's subsidiaries agreed, on an interim basis, to
lease or sublease, as the case may be, substantially all of their
assets to a subsidiary of PTG, Timely North, Inc. (the "Interim PTG
Agreement"). PTG is a transportation services company headquartered in
Atlanta, Georgia, providing ground transportation and logistics
services for the air freight industry throughout the continental United
States.
Faced with the imminent threat of repossession of
substantially all of its tractors by its equipment finance lenders and
the imminent seizure of its bank accounts by the Internal Revenue
Service for delinquent tax payments, the Board of Directors chose the
course of action announced today. The Board of Directors executed and
delivered the Interim PTG Agreement as its only available option that
provided for (1) the continued employment of Registrant's subsidiaries'
employees, amounting to over 1,000 persons; (2) the opportunity to
obtain a loan in order to pay down delinquent taxes due to the Internal
Revenue Service, and; (3) the opportunity to preserve Registrant's
business operations so that Registrant could continue to negotiate a
sale of its assets and thereby gain some value for its current
shareholders.
The Interim PTG Agreement obligates PTG's subsidiary, Timely
North, Inc. to (1) immediately employ substantially all of the
employees of Registrant's subsidiaries, Carpet Transport, Inc., Blue
Mack Transport, Inc. and Chase Brokerage, Inc. on an "at will" basis;
(2) as to leased equipment, pay to the applicable subsidiary equipment
rental amounts equal to the required lease payments under existing
obligations and, in certain cases, PTG has the right to renegotiate
lease terms as long as the applicable subsidiary is released from
liability under such renegotiated leases; (3) as to owned equipment,
pay to the applicable subsidiary equipment rental amounts equivalent to
fair market rental values; (4) pay a nominal amount of the gross
revenues generated from the subsidiaries' customers, and; (5) pay to
the applicable entity rental amounts for personal property and business
premises equal to their respective fair market rental values.
Registrant had previously executed a letter agreement with Professional
Transportation Group Ltd., Inc. on September 10, 1997 pursuant to the
general terms of which Registrant and its subsidiaries obtained a loan
commitment to borrow up to $1.5 million from PTG in exchange for a
120-day exclusive option to purchase assets for consideration,
adjustable at the closing and consisting of (1) 220,000 PTG Common
Shares and (2) a 50% profit participation right for a period of 54
months following the consummation of any contemplated asset disposition
(the "PTG Letter Agreement").
Included in its terms, the Interim PTG Agreement reaffirms the
validity of the PTG Letter Agreement and provides PTG and/or an
affiliate the continued exclusive option to purchase all or
substantially all of the assets of Registrant's subsidiaries, with the
option period extended to 9 months, commencing November 1, 1997,
subject to due diligence investigations and the disbursement of the
proceeds of a PTG loan to pay down certain tax liabilities. The Interim
PTG Agreement shall terminate upon the earliest to occur of (a) 60
days' prior written notice of termination by PTG's
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subsidiary; (b) the consummation of the contemplated asset purchase
agreement by a PTG affiliate, or; (c) 9 months from the date of the
Interim PTG Agreement. The approval of Registrant's shareholders would
be required in the event that PTG and/or its affiliate and the
Registrant execute and deliver any definitive agreement, contemplating
the conveyance of substantially all of Registrant's assets.
Registrant's Board of Directors executed and delivered the
Interim PTG Agreement in order to obtain the required financial
assistance to pay delinquent taxes and maintain business operations
during the time period needed in order to permit its auditors to
complete the audit of its financial statements for Registrant's fiscal
year ended June 30, 1997, targeted for completion within the next 60
days. On October 6, 1997 Registrant changed its auditors and retained
Grant Thornton LLP to audit its financial statements for the subject
fiscal year. This change in auditors has resulted in the Registrant's
current delinquency in filing its Form 10-KSB for the subject fiscal
year. The completion of the subject audit will facilitate the due
diligence required pursuant to the Interim PTG Agreement.
Charles Prater, a former owner of Registrant's subsidiaries,
Carpet Transport, Inc. and Chase Brokerage, Inc., is no longer
retained as a consultant to Registrant or to any of its
subsidiaries.
Item 7.ancial Statements and Exhibits
Exhibits
(10)(i) Marketing Agreement, dated October 31, 1997,
by and between Continental American
Transportation, Inc., Carpet Transport, Inc.,
Blue Mack Transport, Inc., Chase Brokerage,
Inc., CTI Properties, Inc. and Timely North,
Inc.
(ii) Letter Agreement, dated September 10, 1997, by and
between Professional Transportation Group Ltd.,
Inc., Continental American Transportation, Inc.,
Carpet Transport, Inc., Chase Brokerage, Inc., and
CTI Properties, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
CONTINENTAL AMERICAN TRANSPORTATION, INC.
By: s/Timothy Holstein
Timothy Holstein, President
Dated: November 4, 1997
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catfor19.8-k
EXHIBIT (10)(i)
MARKETING
AGREEMENT
Dated as of October 31, 1997 at 8:00 p.m.
By and Among
CARPET TRANSPORT, INC.
BLUE MACK TRANSPORT, INC.
CHASE BROKERAGE, INC.
CTI PROPERTIES, INC.
(collectively, "CTI"),
CONTINENTAL AMERICAN TRANSPORTATION, INC.
("CAT")
and
TIMELY NORTH, INC.
("TIMELY NORTH")
MARKETING AGREEMENT
THIS MARKETING AGREEMENT is made and entered into as of the 31st day of
October, 1997 at 8:00 p.m., by and among Carpet Transport, Inc., a Florida
corporation, Blue Mack Transport, Inc., a Pennsylvania corporation, and Chase
Brokerage, Inc., a Georgia corporation, and CTI Properties, Inc., a Delaware
corporation (individually and collectively, "CTI") and Continental American
Transportation, Inc. ("CAT"), a Colorado corporation, which is the sole
shareholder of each of CTI, on the one hand, and Timely North, Inc., a Georgia
corporation, on the other hand ("Timely North").
WHEREAS, CTI and CAT are engaged in the business of operating a full,
non-union full-and less-than-truckload carrier fleet and freight brokerage and
logistics business throughout the United States primarily for the carpet
manufacturing industry; and
WHEREAS, CAT has represented that it owns all of the issued and outstanding
shares of the capital stock of CTI; and
WHEREAS, the financial condition of CTI is severely distressed and is
confronted by failure in the event that CTI fails to take immediate action at
least on an interim basis; and
WHEREAS, the termination of CTI's operations will result in the
unemployment of substantially all of its more than 1,000 employees; and
WHEREAS, Timely North desires to employ all of CTI's employees, to sublease
from CTI all of its leased rolling stock used in CTI's business (the
"Business"), to lease from CTI all of its owned rolling stock used in the
Business, and to lease from CTI or its affiliates all terminal facilities being
used by CTI (whether owned or leased); in the event that the facility is owned,
Timely North shall lease it, and in the event that the facility is leased,
Timely North will sublease it), and CTI desires to lease and sublease such
rolling stock and facilities to Timely North; and
WHEREAS, Timely North and CTI desire that this Agreement shall set forth
their full and complete understanding of the terms and conditions under which
CTI will lease and sublease such rolling stock and facilities and other matters.
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NOW, THEREFORE, in consideration of the mutual promises and the other
representations, warranties, covenants and agreements herein contained, the
parties DO HEREBY AGREE as follows:
SECTION 1. DESCRIPTION OF TRANSACTION.
1.1 Lease and Sublease. The property (the "Property") that is the subject
of this Agreement is as follows:
(a) On the terms and subject to the conditions set forth in this Agreement,
CTI shall lease or sublease, as the case may be, and deliver to Timely North,
and Timely North shall lease or sublease from CTI on the Closing Date as
hereinafter defined, the following described items utilized in the Business:
(i) all over-the-road tractors and all trailers used by CTI in
the Business. As to CTI's leased rolling stock, Timely North will pay a rental
equal to the rents owed by CTI to its lessors. Timely North shall discharge its
rental obligation to CTI by paying its rent under the sublease directly to the
various lessors. Timely North and/or PTG shall have the right to renegotiate any
of such leases on terms agreeable to PTG so long as CTI is released from
liability under any such lease. As to the rolling stock owned by CTI, Timely
North will pay a rental during the term of this Agreement equivalent to fair
market rental.
(ii) all of CTI's personal property (desks, telephones, etc.)
during the term of this Agreement for fair market rental.
(iii) the Calhoun terminal facilities during the term of this
Agreement at a rental equal to the monthly interest owed by CTI to affiliates of
Timely North with respect to amounts previously advanced by them to CTI and its
affiliates. Such obligation shall be deemed discharged and satisfied by all
parties by accounting entry and without the necessity of swapping checks.
(iv) CTI's terminal facilities during the term of this
Agreement in Orlando, Tampa and Port Allen. The rental for each facility shall
be fair market rental, or if less, payment obligations of CTI to the holder of
any indebtedness secured by any such facility.
(v) all the leases that are used or useful in the Business upon
the terms of such leases; and
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(vi) all the contracts in the absolute discretion of Timely North
upon the terms set forth in such contracts.
(b) CTI shall retain title to the Property except as specifically set forth
herein.
(c) During the term of this Agreement, Timely North shall have free and
complete access to the books and records relating to the Business, including
without limitation, customer lists, market and cost studies, supplier
information, equipment information, materials information, manuals, magnetic
tapes, computer discs, electronically stored data, computer data and other
information. In addition, Timely North shall have all of CTI's right, title and
interest in the telephone numbers, including toll-free number(s), if any, that
are used in connection with the Business, and telephone directory advertising;
1.2 No Assumption of Liabilities. Timely North shall have no obligation
for any debts, liabilities, duties or obligations of CTI or CAT, and CTI and CAT
shall pay, satisfy and discharge all such other debts, liabilities, duties and
obligations as they become due. It is expressly understood and agreed between
the parties hereto that:
(a) The Property shall be leased or assigned by CTI to Timely North,
with general warranties of title, free and clear of any and all liens,
restrictions, easements, security interests, security agreements, security
deeds, claims and encumbrances (excluding leases), and CTI shall be solely
liable and responsible for satisfying and discharging, all other liabilities and
obligations of CTI, whether known or unknown, mature or contingent. Timely North
shall have the right to directly pay as such amounts become due, any such
obligations and liabilities which are secured by or encumber in any manner any
of the Property as of the Closing Date. All other obligations and liabilities of
CTI shall be paid and discharged by CTI in a timely manner after the Closing
Date;
(b) Timely North shall not assume, and CTI shall remain liable for, all
claims and liabilities, whether arising on or before, or subsequent to the
Closing Date, resulting from CTI's breach, at any time, of any covenant,
condition or other obligation required of CTI under any contract or agreement to
provide its services;
(c) EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 1.2, IT IS EXPRESSLY
UNDERSTOOD AND AGREED THAT TIMELY NORTH SHALL NOT ASSUME AND IS NOT ASSUMING,
NOR SHALL TIMELY NORTH BECOME LIABLE, OBLIGATED OR RESPONSIBLE FOR THE PAYMENT
OF ANY DEBTS, LIABILITIES OR OBLIGATIONS OR THE PERFORMANCE OF ANY DUTIES OF CTI
OR CAT, OF ANY KIND OR NATURE WHATSOEVER,
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WHETHER NOW OR HEREAFTER ARISING AND WHETHER CONTINGENT OR LIQUIDATED IN AMOUNT,
INCLUDING, WITHOUT LIMITATION, ANY DEBTS, LIABILITIES, OBLIGATIONS OR DUTIES
ARISING OUT OF ACCOUNTS PAYABLE, TAX LIABILITIES, EMPLOYEE BENEFITS, CONTRACTS,
AGREEMENTS OR OTHER TYPES OF LIABILITIES OF CTI OR CAT OR RELATED TO THE
OPERATION OF THE BUSINESS.
1.3 Employment of CTI's Employees. Upon the Closing Date, Timely North
will employ all of the current employees of CTI on an "at will" basis and
initially at their current base salary (but with the benefits currently accorded
the similarly-situated employees of Timely North and its affiliates). Timely
North reserves the right to adjust compensation and benefits on an
employee-by-employee basis. CTI shall use its best efforts in good faith to
promote the relationship between Timely North and the former CTI employees.
1.4 Fee Payable to CTI. During the term of this Agreement, Timely North
will pay to CTI as a fee for the transactions described herein the amount of
.67% (two/thirds of 1%) of monthly gross revenues actually received by Timely
North from CTI's customers as of the date of this Agreement as listed on
Schedule 1.4. Such fee shall be paid to CTI no later than the 15th day of the
month following the calendar month during which such revenues were received by
Timely North. The payments due to CTI hereunder shall be subject to setoff in
the amount of any accrued but unpaid interest on the debt obligations of CTI and
its affiliates to Timely North and its affiliates. In addition, to the extent
that Timely North in its sole judgment decides to pay any obligations of CTI,
such amount shall be treated as a debt of CTI to Timely North and shall be
subject to the same right of setoff.
SECTION 2. ALLOCATIONS RELATED TO FREIGHT IN TRANSIT.
Freight in Transit. With respect to any freight picked up from a customer
after 8:00:00 p.m. Eastern Time on the Closing Date, all revenues attributable
thereto as well as expenses directly associated with that freight in transit
such as driver's wages shall be for the account of Timely North unless otherwise
mutually agreed upon by the parties hereto in writing.
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SECTION 3. CLOSING.
Closing. The consummation of the transactions contemplated herein (the
"Closing") shall be effective at 8:00 p.m. local time on October 31, 1997 (such
date and time are the "Closing Date") at the offices of Nelson, Mullins, Riley &
Scarborough L.L.P. in Atlanta, Georgia, or on such other date or at such other
time or place as may be mutually agreed upon by the parties in writing.
SECTION 4. JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES
OF CTI AND CAT
CTI and CAT hereby make the following representations and warranties to
Timely North, each of which is true and correct on the date hereof and will be
true and correct on the Closing Date, except as expressly disclosed herein, each
of which shall be unaffected by any investigation heretofore or hereafter made
by Timely North and each of which shall survive Closing and the transactions
contemplated hereby:
4.1 Organization, Existence and Qualification. CTI is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and is duly qualified to do business and is in
good standing in the states of the United States of America and foreign
jurisdictions in which its ownership or leasing of property or the conduct of
its Business requires it to be so qualified except to the extent that failure to
so qualify would not have a material adverse effect on the Business as a whole,
the Property or the ability to consummate this Agreement and perform the
transactions contemplated hereby, and has the corporate power and authority to
carry on its business as now conducted and to own, lease and operate its assets,
properties and Business; provided, however that Carpet Transport, Inc. has been
administratively dissolved by the Florida Secretary of State. Carpet Transport,
Inc. shall have a period of seven days from the Closing Date to reinstate itself
to good standing, and if Carpet Transport, Inc. effects the foregoing during
such period, it shall not be deemed to have breached this representation and
warranty. There are no dissolution, liquidation or bankruptcy proceedings
pending or threatened against CTI or CAT.
4.2 Capitalization. All of CTI's issued and outstanding capital stock
is owned by CAT, free and clear of any liens. No options, warrants or other
rights to acquire, or commitments to issue or sell its capital stock or other
ownership rights in it, whether by conversion or otherwise, are outstanding. CTI
has no subsidiaries.
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4.3 Performance of Agreement. CTI and CAT have full corporate power and
authority to execute, deliver and perform this Agreement and all agreements and
transactions contemplated by this Agreement.
4.4 Authorization. CTI's and CAT's execution, delivery and performance
of this Agreement and its performance of all agreements and transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate and shareholder action. Assuming their enforceability against Timely
North, this Agreement and all transactions contemplated by this Agreement
constitute legal, valid and binding obligations of CTI and CAT, and are
enforceable against it in accordance with this Agreement's terms.
4.5 No Conflict. Neither CTI's authorization, nor CTI's execution,
delivery or performance of this Agreement or the performance by it of any of the
agreements or transactions contemplated by this Agreement will: (a) violate or
conflict with any provisions of CTI's certificate or articles of incorporation,
bylaws or other corporate documents, (b) violate or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default),
or require notice or consent or permit the acceleration of obligations, under
any material mortgage, indenture, deed of trust, lease, contract, agreement,
license or other instrument or document or any order, judgment, writ, decree or
ruling of any governmental body, regulatory commission or other party, to which
CTI is a party or which applies to any of the Property, (c) result in the
creation of any lien upon the Property, or (d) violate any provision of law
applicable to any one or more of them in a way which materially affects the
Business or the Property, individually or in the aggregate.
4.6 Consent. Neither CTI's or CAT's authorization, nor CTI's or CAT's
execution, delivery or performance of this Agreement or any of the agreements or
transactions contemplated by this Agreement will require consent from, action
by, or filing with, any court or governmental authority or other party, except
as indicated on Schedule 4.6 or to the extent that failure to obtain or make
such consent, filing or action would not have a material adverse effect on the
ability of CTI or CAT to consummate this Agreement or perform the agreements and
transactions contemplated hereby.
4.7 Financial Condition. CTI and CAT have delivered to Timely North
copies, true and correct in all material respects, of all of their filings with
the United States Securities Exchange Commission (all of the foregoing being
collectively referred to as the "Financial Statements"). CTI and CAT represent
and warrant that the Financial Statements (as of the dates thereof and for the
periods covered thereby): are in
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accordance with the books and records of CTI and CAT which are complete and
accurate in all material respects and which have been maintained in accordance
with good business practices, and present fairly the financial position and the
results of operations and resulting cash flows of the CTI and CAT as of the
dates and for the periods indicated, applied on a basis consistent with prior
periods (subject in the case of interim financial statements to normal recurring
year-end adjustments). No entities other than CTI are reflected in the Financial
Statements of CAT.
4.8 Absence of Undisclosed Liabilities. CTI and CAT represent and
warrant that, except as reflected elsewhere in this Agreement or in the
Financial Statements, CTI and CAT have no liabilities or obligations of any
nature, whether absolute, accrued, contingent or otherwise, of a type and nature
that are not reported, reflected or reserved on the Financial Statements
(including the notes thereto) other than liabilities arising in the ordinary
course of business.
4.9 Tractors & Trailers. CTI will transfer to Timely North at the
Closing, good and marketable title or leasehold interest, as the case may be, to
the tractors and trailers, subject to existing liens. The tractors and trailers
are in good and proper operating condition and repair, subject only to ordinary
wear and tear occurring in the ordinary course of business and are adequate and
sufficient for use in the operation of the Business as currently conducted. All
CTI's leasehold interests in the tractors and trailers are in full force and
effect in accordance with their respective terms and constitute legal, valid and
binding obligations of the parties thereto and are not currently subject to any
liens. A true, correct and complete copy of each document creating each
leasehold interest has been furnished to Timely North. No other party to any of
the leasehold interests has breached or defaulted under, or is alleged to have
breached or defaulted in any material respect, any of the leasehold interests,
or has done or omitted to do any act which, by notice or lapse of time or both,
will become a breach or default in any material respect, or has given or
received any notice of default which remains unresolved, and none of the
leasehold interests are subject to any claims by third parties.
4.10 Customers. CTI believes that its customers will continue to do
business with Timely North and nothing has come to the attention of CTI that
would indicate a decrease of business volumes or rate levels from these
customers at the Closing Date. There is no fact known to CTI which would
indicate that these customer relationships would be adversely affected when the
Business is conducted by Timely North. CTI has not received notice, or has no
reason to believe, that any customer of the Business intends or has threatened
to discontinue or substantially diminish or change its relationship with the
Business or the terms of such relationship.
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4.11 Collective Bargaining Agreements. There have never been and are
not now any: (a) collective bargaining agreements to which CTI is a party
relating to the Business or the Property, or (b) strikes, lockouts, work
stoppages, slowdowns, jurisdictional disputes or organizing activity occurring
or threatened with respect to the Business or the Property.
4.12 Compensation Plans. There are no compensation plans, pension,
profit sharing and retirement plans, bonus thrift and savings plans, vacation or
sick leave plans or policies, group insurance, hospitalization, medical or
disability plans or any other incentive, employee benefit or welfare plans or
policies to which CTI is a party or a participating employer (the "Employee
Benefit Plans"), other than CTI's 401(k) plan and a vacation policy. CTI is not
in default in any material respect of any obligation to be performed under the
Employee Benefit Plans or has done any act which, by notice or lapse of time or
both, will become a default in any material respect of any obligation to be
performed thereunder.
4.13 Compliance with Law and Legal Proceedings. CTI is in compliance in
all material respects with all applicable statutes, orders, rules and
regulations enacted or promulgated by any governmental agency, regulatory body,
board, authority, bureau or instrumentality relating to the operation or conduct
of the Business or the Property except where the failure to so comply would not
have a material adverse effect on the Business or the Property, individually or
in the aggregate. Such statutes, orders, rules and regulations include, without
limitation all those relating to occupational health and safety, employee right
to know, equal employment opportunities, fair employment practices, and sex,
race, religion or age discrimination. The generality of the foregoing shall not
be deemed to restrict the environmentally related representations and warranties
made below. CTI has not received any notice alleging any material non-compliance
with such statutes, orders, rules or regulations, and no such notice is
contemplated or threatened. There is no suit, action, arbitration, legal,
administrative or regulatory proceeding or investigation pending, contemplated
or threatened against or involving or relating to the Business or the Property,
and no basis for any such action exists.
4.14 Compliance with Environmental Laws. CTI represents as follows: (a)
CTI has complied with all environmental statutes, regulations, orders,
decisions, judgments, decrees and restrictions of the United States of America
and its subdivisions (including state, county and local statutes, regulations,
orders, decisions and restrictions) applicable to the Property to be leased or
subleased by Timely North as provided in Section 1.1 hereof; (b) said Property
has not been (whether or not previously remedied) and is not now contaminated
with, or threatened with contamination by, any hazardous substance; (c) said
Property has never been used for a
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mine, landfill, dump or other disposal facility or gasoline service station; (d)
no reports have been filed with respect to the Property disclosing the presence
of any hazardous substance upon, or with respect to, it; and (e) there has not
been and there is not now any suit, action, arbitration, directive, complaint,
legal, administrative or regulatory proceeding or investigation or inquiry
pending, contemplated or threatened, with respect to the Property, relating to
the refinement, production, generation, storage, handling, processing, disposal,
treatment, transportation, discharge or release of hazardous substances. In the
event that any of such Property is required by applicable law to be remediated
as a result of noncompliance by CTI prior to the Closing Date, Timely North
shall be entitled to incur such remediation expense and to setoff such expense
against the fee to be paid to CTI hereunder.
4.15 Tax Returns Filed. All tax returns and other tax reports and
filings (collectively, the "Tax Returns") which CTI or any Employee Benefit
Plans are required to file have been filed with the appropriate governmental
agencies by the time due; the information set forth in the Tax Returns is true,
correct and complete; and all taxes of CTI and the Employee Benefit Plans,
including any interest and penalties thereon, have been paid on or before the
date due except as provided in Schedule 4.15 hereof. Neither CTI nor the
Employee Benefit Plans are under audit for any tax year nor has any of them
received notice of a proposed audit.
4.16 Insurance. Insurance in coverage amounts sufficient for the
conduct of its Business is currently maintained in conjunction with the
operation of the Business or the ownership of the Property. All such policies
are in full force and effect and are sufficient for compliance with workers'
compensation laws and all premiums for such policies have been paid. CTI has not
received any notice of cancellation, termination, nonrenewal or denial of
liability with respect to any policy. There are no retroactive, or other,
premium adjustments applicable to these policies, and none will become
applicable as a direct or indirect result of this Agreement or the transactions
contemplated hereby.
4.17 Broker's or Finder's Fees. Except for an agreement with Lance
Enterprises, Inc., neither CTI nor CAT has authorized any person to act as a
broker or a finder or in any similar capacity in connection with this Agreement
or the transactions contemplated hereby. With respect to any agreements with
Lance Enterprises, Inc., all fees, costs or other charges shall be borne by CAT
and shall not be part of the liabilities assumed by Timely North hereunder.
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4.18 Owned Real Property. With respect to its owned Real Property:
(a) CTI has good and marketable title to the Real Property, free and clea
of any security interest, easement, covenant, or other restriction,
except for (i) installments of special assessments not yet delinquent
and (ii) recorded easements, covenoants, and other restrictions which do
not impair the current use, occupancy, value, or the marketability of title
of the Real Property;
(b) there are no (i) pending or threatened condemnation proceedings related
to the Real Property, (ii) pending or threatened litigation or administrative
actions relating to the Real Property, or (iii) other matters adversely
affecting the current use, occupancy, or value thereof;
(c) the legal description for the Real Property contained in the deeds
thereof describe such parcels fully and adequately, the buildings and
improvements are located within the boundary lines of the described parcels of
land, are not in violation of applicable setback requirements, zoning laws, and
ordinances (and none of the properties or buildings or improvements thereon are
subject to "permitted non-conforming use" of "permitted non-conforming
structure" classifications), and do not encroach any easement which may burden
the land, the land does not serve any adjoining property for any purpose
inconsistent with the use of the land, the property is not located within a
flood plain or subject to any similar type restriction for which any permits or
licenses necessary to the use thereof have not been obtained, and access to the
property is provided by paved public right-of-way with adequate curb cuts
available;
(d) all facilities have received all approvals of governmental authorities
(including licenses and permits) required in connection with the ownership or
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations;
(e) there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any party or parties the right of use
or occupancy of any portion of the parcels of Real Property;
(f) there are no outstanding options or rights of first refusal to purchase
the Real Property or any portion thereof or interest therein;
(g) there are no other parties in possession of the Real Property or any
portion thereof;
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(h) all facilities located on the Real Property are supplied with utilities
and other services necessary for the operation of such facilities, including
gas, electricity, water, telephone, sanitary sewer, and storm sewer, all of
which services are adequate in accordance with applicable laws, ordinances,
rules, and regulations and are provided via public road or via permanent,
irrevocable, appurtenant easements benefiting the Real Property;
(i) each parcel of Real Property abuts on and has direct vehicular access
to a public road or access via permanent, irrevocable, appurtenant easements
benefiting the Real Property.
4.19 Employees. CTI warrants that with respect to all employees, CTI is
and has been at all times in compliance with all federal, state and local laws,
rules and regulations with respect to employment, wages, hours and benefits; CTI
is not engaged in any unfair labor practices nor are any unfair labor practices
or other complaints against CTI filed with or threatened to be filed with or by
the National Labor Relations Board, Equal Employment Opportunity Commission,
Department of Labor or any similar agency or instrumentality of any state or
local government; and CTI has experienced no labor interruptions over the past
three years and considers its relationship with employees to be good.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF TIMELY NORTH.
Timely North represents and warrants to CTI as follows:
5.1 Organization and Good Standing of Timely North. Timely North is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia.
5.2 Corporate Power and Authority. Timely North has full corporate
power and authority to execute, deliver and perform this Agreement and all
agreements and transactions contemplated by this Agreement. The execution,
delivery and performance by Timely North of this Agreement and all agreements
and transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action. Assuming their enforceability against CTI and CAT,
this Agreement and all agreements and transactions contemplated by this
Agreement constitute legal, valid and binding obligations of Timely North and
are enforceable against it in accordance with its terms, except as such
enforcement may be limited by bankruptcy or other law of general application
affecting creditors' rights, general principles of equity or principles of
public policy.
12
5.3 Performance of Agreement. Neither the authorization, execution, or
delivery of this Agreement nor Timely North's performance of this Agreement or
any of the agreements or transactions contemplated by this Agreement will (a)
violate or conflict with any of the provisions of the articles of incorporation
or bylaws of Timely North; (b) violate or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default), or
require notice or consent or permit the acceleration of obligations, under any
material mortgage, indenture, deed of trust, lease, contract, agreement, license
or other instrument or document or any order, judgment, writ, decree or ruling
of any governmental body, regulatory commission or other party, to which Timely
North is a party or which applies to Timely North or any of its property; or (c)
violate any provision of law applicable to Timely North in a way which
materially affects the business of Timely North. Neither the authorization,
execution or delivery of this Agreement nor the performance by Timely North of
this Agreement or any of the agreements or transactions contemplated by this
Agreement will require consent from, action by, or filing with, any court or
governmental authority, except as noted on Schedule 5.3 or to the extent that
the failure to obtain or make such consent, action or filing would not have a
material adverse affect on CTI's ability to perform this Agreement or enter into
the agreements or transactions contemplated hereby.
SECTION 6. CERTAIN COVENANTS.
6.1 Covenants Regarding Business. During the term of this Agreement,
CTI shall use its best efforts to preserve its relationships with customers and
others having business dealings with it.
6.2 Cooperation. CTI shall make available at times and locations
reasonably acceptable to and with minimal disruption of CTI's day-to-day
activities the books, records (including tax returns), contracts, agreements,
offices, properties, employees and agents of CTI and Employee Benefit Plans
related to the Property or Business for inspection and review by Timely North
and shall furnish to Timely North such photocopies of documents and additional
data and information as Timely North shall deem necessary or advisable. Timely
North shall be entitled to conduct such studies, reviews and audits including
environmental audits, of the Business and Property as Timely North shall
determine. Subject to the terms and conditions of this Agreement, the parties
hereto shall use all reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable laws and regulations to consummate and make
effective, as soon as practicable after the date of this Agreement, the
transactions contemplated by this Agreement. The parties hereto shall use their
best efforts to obtain consents of all regulatory authorities and other third
parties or governmental bodies necessary or
13
desirable for the consummation of the transactions contemplated by this
Agreement. Each party hereto shall cooperate with the others, and execute and
deliver, or cause to be executed and delivered, all such additional instruments,
including instruments of conveyance, assignment and transfer and take all such
other actions as may reasonably be requested from time to time in order to
effectuate the provisions and purposes of this Agreement or to ensure that each
party hereto receives the full benefit of the transactions contemplated by this
Agreement. CTI shall give prompt written notice to Timely North of any material
developments affecting the assets, liabilities, business, financial condition,
operations, results of operations, or future prospects of the Business. Each
party will give prompt notice to the other of any material development affecting
the ability of the parties to consummate the transactions contemplated hereby.
Each party hereto shall endeavor in good faith and cooperate one with the other
to complete the Exhibits and Schedules called for by this Agreement.
6.3 Contact with Third Parties. CTI recognizes that Timely North and
its authorized representatives will contact customers, suppliers, employees,
accountants, governmental bodies and other persons or entities having a present
business relationship with the Business in connection with the investigation of
the Business or the transferor proposed transfer of the Property. CTI consents
to such contact and waives any rights it may have to inhibit or prevent such
contact to the extent such contact relates to the investigation of the Business
or the lease or sublease of the Property.
6.4 Public Announcements; Confidentiality. The parties hereto shall
maintain the terms and conditions of this Agreement and any and all other
agreements and transactions contemplated hereby in confidence subject to the
applicable rules and regulations of the SEC or Nasdaq and any other applicable
regulatory authority and shall cooperate one with the other in making adequate
and controlled disclosure with respect thereto to the public. The parties hereto
acknowledge that should information regarding the discussions relating to the
transactions contemplated by this Agreement become known to the investment
community generally or to parties who might try to trade in the common stock or
warrants of Professional Transportation Group Ltd., Inc.("PTG") , the publicly
owned parent corporation of Timely North, on the basis of knowledge regarding
said discussions, then public disclosure regarding said discussions could be
mandated prior to the time the parties hereto otherwise intend. Thus, any
discussions with customers, suppliers or other third parties concerning the
agreements and transactions contemplated hereby must be entered into on a
limited and confidential basis. Further, once this Agreement is delivered and
binding, subject only to limited conditions, Timely North will be required to
make prompt general, public disclosure of said fact. To the extent that any
party hereto wishes to make selected disclosure of the delivery and binding
nature of this Agreement to certain
14
customers or employees of CTI or Timely North prior to general, public
disclosure, such disclosures must not be made until after Nasdaq markets close
on the trading day prior to the date on which general, public disclosure is
scheduled.
6.5 Coordination Regarding Employment. Subject to Section 6.5, CTI
shall coordinate with Timely North regarding any announcements of the agreements
and transactions contemplated by this Agreement to the employees of CTI and any
announcements regarding termination of employment by CTI as a result of such
agreements and transactions. CTI shall be responsible for the termination of
employment of its employees resulting from the agreements and transactions
contemplated by this Agreement and any notices thereof required by applicable
law and the payment of any and all salaries or benefits (including vacation)
accrued or payable on termination. CTI shall terminate those drivers that Timely
North wishes to hire as well as certain administrative and maintenance
personnel. Additionally, CTI shall release all owner-operators whose services
Timely North wishes to utilize, from their contractual obligations to CTI.
Within five business days after execution of this Agreement, CTI shall provide
to Timely North all information contained in its personnel records with respect
to its employees who Timely North will employ. This information shall include
all employment history and other information customarily maintained by CTI with
respect to its employees.
6.6 Employee Benefit Matters. CTI shall be solely responsible for any
termination or partial termination of any Employee Benefit Plan resulting by
reason of the agreements and transactions contemplated by this Agreement,
including any matters arising under the Internal Revenue Code of 1986, as
amended, or under the Employee Retirement Income Security Act of 1974, as
amended, or any proceedings involving the Pension Benefit Guaranty Corporation,
and including all determinations, reports and filings. CTI shall be solely
responsible for, pay and fully settle all benefits under Employee Benefit Plans,
including without limitation, the vesting of retirement benefits and obligations
for severance pay which result from the transactions contemplated by this
Agreement. To the extent that Timely North would otherwise be liable for any
such benefits after the Closing, CTI shall continue benefits under any Employee
Benefit Plan, including without limitation hospitalization, medical and
disability plans, if such benefit has started or the condition requiring the
payment of benefits commenced prior to the Closing, and such benefits shall
continue in accordance with the terms of the Employee Benefit Plans as in effect
at the time of execution of this Agreement. Anything contained elsewhere in this
Agreement to the contrary notwithstanding, no liabilities arising under this
Section 6.7 shall be assumed by Timely North hereunder or otherwise, and CTI
hereby indemnifies Timely North against any such liabilities.
15
6.7 Environmental Reports. CTI shall provide to Timely North any
environmental-related or site assessment reports that either has with respect to
the Real Property.
6.8 Employment Contracts and Covenants Not to Compete. CTI agrees that
during the term of this Agreement, it will not, jointly or severally, directly
or indirectly, engage in or associate with (either as a stockholder, consultant,
agent, member or otherwise, of or through any corporation, partnership,
association, firm or otherwise other than passive investments that are not
initiated at the direction of CTI) any enterprise or business directly or
indirectly competitive with the business of Timely North, which for the purposes
of these covenants not to compete shall be deemed to consist of the general
truckload and less than truckload of materials and goods in the continental
United States and any trucking business for customers of CTI. CTI acknowledges
that the failure of any one or more of them to adhere strictly to the terms of
these covenants not to compete would materially diminish the value to Timely
North of the transactions contemplated by this Agreement and the associated
Business such that Timely North would be denied the fundamental benefit of the
consideration intended to accrue to Timely North under the terms of this
Agreement. Accordingly, any such violation shall entitle Timely North, in
addition to all other legal remedies available to it, to apply to any court of
competent jurisdiction to enjoin such violation.
SECTION 7. CONDITIONS TO TIMELY NORTH'S OBLIGATIONS. The
obligations of Timely North to consummate the transactions contemplated by this
Agreement are conditioned upon the satisfaction of the following conditions:
7.1 Representations and Warranties. All representations and warranties
of CTI contained in this Agreement shall be true and correct on and as of the
Closing Date with the same force and effect as if such representations and
warranties had been made on and as of the Closing Date, as the case may be, and
there shall have been delivered to Timely North a certificate dated as of the
Closing Date and signed on behalf of CTI to that effect.
7.2 Covenants and Compliance. CTI shall have complied fully in all
material respects with all covenants and shall have performed all acts which by
the terms of this Agreement are to be performed by CTI on or prior to the
Closing Date, and there shall have been delivered to Timely North a certificate
dated as of the Closing Date and signed on behalf of CTI to that effect.
16
7.3 Regulatory Approvals. The approval by any regulatory authority having
jurisdiction, of this Agreement and all other agreements and transactions
contemplated hereby, after submission of any necessary filings to said
regulatory authorities by the parties hereto, which approvals shall be
unconditional or which shall be restricted in a way that such approvals do not
substantially or materially limit or decrease the scope of the truckload
services presently authorized to be conducted by CTI and Timely North. Any
applicable waiting period pursuant to rules or regulations of governmental
agencies or other regulatory bodies having jurisdiction over any of the
agreements and transactions contemplated by this Agreement shall have expired or
shall have been earlier terminated and no action, suit, proceeding,
investigation or inquiry by any governmental agency or regulatory body or
private party shall have been commenced or threatened to restrain, enjoin,
prohibit, materially restrict or otherwise challenge the consummation, legality
or validity of any agreement or transaction contemplated by this Agreement.
7.3 Approval by Purchaser's Lenders. The approval of this Agreement and
all other agreements and transactions contemplated hereby by the lenders that
are party to Timely North's financing agreement that is dated as of March 28,
1997.
7.4 Approval by Timely North's Board. The approval of this Agreement
and all other agreements and transactions contemplated hereby by Timely North's
Board of Directors.
7.5 Approval by Seller's Lessors and Creditors. The approval of this
Agreement and all other transactions contemplated hereby by CTI's lessors and
creditors including the execution and delivery by them of documents necessary to
enable Timely North to assume the leases without any assumption fees or charges
or any other charges of similar import and on terms and conditions at least as
favorable as those presently enjoyed by CTI.
7.6 Approval by CTI's Board of Directors and Shareholders. The approval
of this Agreement by CTI's Board of Directors and Shareholders and any other
necessary parties, including the Board of Directors and if necessary the
shareholders of CAT.
7.7 Due Diligence. The completion of due diligence by Timely North and
Timely North's satisfaction, in its sole discretion, with the results thereof.
7.8 Employee Terminations. CTI's termination of those of its
employees that Timely North wishes to hire.
17
SECTION 8. CONDITIONS TO THE OBLIGATIONS OF CTI.
The obligations of CTI to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction of the following conditions:
8.1 Representations and Warranties. All representations and warranties
of Timely North contained in this Agreement shall be true and correct on and as
of the Closing Date, with the same force and effect as if such representations
and warranties had been made on and as of the Closing Date, and there shall have
been delivered to CTI a certificate dated as of the Closing Date and signed on
behalf of Timely North to that effect.
8.2 Covenants and Compliance. Timely North shall have fully complied in
all material respects with all covenants and shall have performed all acts which
by the terms of this Agreement are to be performed by it on or prior to the
Closing Date, and there shall have been delivered to CTI a certificate dated as
of the Closing Date and signed on behalf of Timely North to that effect.
SECTION 9. INDEMNIFICATION.
9.1 Indemnification by CTI. CTI and CAT, jointly and severally, shall
indemnify and hold Timely North and its directors, officers, employees and
shareholder harmless (and Timely North shall have the right to enforce such
claim by way of setoff of any amounts owed by it to CTI) against and from any
and all losses suffered or incurred by Timely North or any of its directors,
officers, employees and shareholder which (with the exception of losses related
to the indemnitees' own acts or omissions) relate to, result from or arise out
of:
(a) any inaccuracy in or any breach of any of CTI's representations or
warranties contained in this Agreement;
(b) any breach by CTI of any covenant or other undertaking contained in
this Agreement;
(c) the ownership of the Property or the conduct of the Business, or
any actions or omissions, of CTI prior to the Closing Date;
(d) any assets, business or properties of CTI not the subject of this
Agreement to the extent that losses with respect thereto accrue to Timely North
pursuant to theories of successor entity liability.
18
9.2 Indemnification by Timely North. Timely North shall indemnify and
hold CTI harmless from and against any and all losses suffered or incurred by it
which (with the exception of losses related to the indemnitees' own acts or
omissions) relate to, result from or arise out of:
(a) any inaccuracy in or any breach of any of Timely North'
representations or warranties contained in this Agreement;
(b) any breach by Timely North of any covenant or other undertaking
contained in this Agreement; or
(c) the management of the Property or the Business after the Closing
Date.
9.3 Losses. As used in this Section 9, the term "losses" shall mean all
losses, injuries, liabilities and damages suffered or incurred by an indemnified
party and all amounts paid by an indemnified party to satisfy, settle or
discharge any matter with respect to which an indemnifying party has agreed to
indemnify it as provided hereinabove and all reasonable costs and expenses
(including without limitation, litigation costs and attorneys', accountants' and
experts' fees and expenses) incurred by the indemnified party. The losses of a
party shall not be reduced by any insurance maintained by such party paid or
payable with respect thereto, and no party shall be obligated to proceed against
any insurance company or policy to recover any losses or portion thereof.
SECTION 10. TERMINATION OF AGREEMENT. This Agreement shall continue in full
force until the earliest to occur of: (1) the giving of 60 days advance written
notice by Timely North to CTI; (2) the consummation of an asset purchase
agreement by a Timely North affiliate of substantially all of the assets of CTI;
or (3) nine months from the date of execution of this Agreement.
SECTION 11. NO EFFECT ON PRIOR LETTER AGREEMENT. PTG shall
continue to have the exclusive option to acquire substantially all of the assets
of CTI upon the terms and conditions set forth in that certain letter agreement
dated September 12, 1997, except that the period during which PTG shall have
such option shall instead be nine months from the date of execution of this
Agreement. With the exception of that modification, the letter agreement shall
remain in full force and effect.
19
SECTION 12. MISCELLANEOUS.
12.1 Notice. Any service of process, notice or request or communication
required by or provided under this Agreement shall be given in writing and shall
be personally delivered, delivered by nationally recognized, overnight courier
confirmed by receipt, or given by telex or facsimile confirmed by such overnight
courier delivery confirmed by receipt, addressed:
If to the CTI or CAT: Carpet Transport, Inc.
Blue Mack Transport, Inc.
Chase Brokerage, Inc.
CTI Properties, Inc.
495 Lovers Lane Road
Calhoun, Georgia 30701
Attn: President
If to Timely North: Timely North, Inc.
5025 Derrick Jones Road, Suite 120
Atlanta, Georgia 30349
Attn: Chief Executive Officer
With a copy to: Nelson Mullins Riley & Scarborough, L.L.P.
First Union Plaza, Suite 1400
999 Peachtree St., NE
Atlanta, Georgia 30309
Attn: William R. Asbell, Jr.
Such notice shall be deemed given upon receipt at the address of the party
above stated or at any other address specified by such party to all other
parties as provided above, except that if delivery is refused or cannot be made
for any reason, such notice shall be deemed given on the fifth day after it is
sent.
12.2 Parties in Interest. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors. This
Agreement shall not be assignable by any party, and nothing in this Agreement,
express or implied, is intended or shall be construed to confer upon any person
other than the parties hereto any right, remedy or claim under or by reason of
this Agreement.
20
12.3 Integration and Effectiveness. This Agreement including the
Schedules hereto and the agreements contemplated by those Schedules constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and shall supersede all prior understandings, agreements, contracts or
other documents. Despite its prior execution, this Agreement shall be of no
effect until all Schedules referenced herein have been attached, the condition
specified in Section 7.14 has been satisfied and until its delivery.
12.4 Survival of Representations, Warranties, and Covenants. All
representations, warranties, and covenants set forth in this Agreement shall not
be affected by any investigation made by or on behalf of any party. Thus, while
the representations, warranties and covenants relate to matters on or prior to
the Closing Date, the parties entitled to the benefit of those representations,
warranties, and covenants may seek remedy post-Closing for their violation and
in that sense the representations, warranties and covenants set forth in this
Agreement survive Closing.
12.5 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Georgia, without regard
to choice of law principles.
12.6 Waiver, Etc. No failure or delay by any party hereto in exercising
any right, power or privilege hereunder shall operate as a waiver thereof except
as may be otherwise specifically provided or contemplated by the terms of this
Agreement. No waiver of any right, power or privilege hereunder shall preclude
any further exercise of the right, power or privilege or the exercise of any
other right, power or privilege.
12.7 Expenses. Except as specifically provided to the contrary
elsewhere in this Agreement, all fees, commissions and other expenses incurred
by the parties in connection with the negotiation of this Agreement and in
preparing to consummate the agreements and transactions contemplated hereby,
including the fees and expenses of their respective counsel and auditors, shall
be borne by the party that incurred such fee, commission or expense; provided,
however, that no such fees, commissions or other expenses incurred by CTI shall
in any way be included in those liabilities of CTI assumed by Timely North
hereunder.
12.8 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall be ineffective to the extent
of such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining terms or provisions hereof, and any such invalidity
or unenforceability in any such jurisdiction shall not invalidate or render
unenforceable such term or provision in any other jurisdiction; provided,
however, that any such invalidity or unenforceability does
21
not deny any party hereto any of the basic benefits of the bargain contemplated
by this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
CTI:
CARPET TRANSPORT, INC.
ATTEST:
By: s/Earl D. Ruth By: s/Don Conord
Name: Earl D. Ruth Name: Don Conord
Title: Title: Sec.
BLUE MACK TRANSPORT, INC.
ATTEST:
By: s/Earl D. Ruth By: s/Don Conord
Name: Earl D. Ruth Name: Don Conord
Title: Title: Sec.
CHASE BROKERAGE, INC.
ATTEST:
By: s/Earl D. Ruth By: s/Don Conord
Name: Earl D. Ruth Name: Don Conord
Title: Title: Sec.
22
CTI PROPERTIES, INC.
ATTEST:
By: s/Earl D. Ruth By: s/Don Conord
Name: Earl D. Ruth Name: Don Conord
Title: Title: Sec.
CAT:
CONTINENTAL AMERICAN
TRANSPORTATION, INC.
ATTEST:
By: s/Earl D. Ruth By: s/Don Conord
Name: Earl D. Ruth Name: Don Conord
Title: Title: Sec.
TIMELY NORTH:
TIMELY NORTH, INC.
ATTEST:
By: s/Ralph R. Jones By: s/Peter C. Roth
Name: Ralph R. Jones Name: Peter C. Roth
Title: Title: CFO
51dh01
23
EXHIBIT (10)(ii)
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
5025 Derrick Jones Road
Suite 120
Atlanta, Georgia 30349
September 10, 1997
Carpet Transport, Inc.
495 Lovers Lane
Calhoun, Georgia 30701
Re: Loan and Asset Acquisition Option
Gentlemen:
This letter sets forth the basic terms and conditions under which
Professional Transportation Group Ltd., Inc. ("PTG") and its affiliates are
willing to proceed with the negotiation and execution of a secured loan and the
analysis of a possible acquisition of substantially all of the assets of Carpet
Transport, Inc. ("CTI") and its affiliates as described below.
It is anticipated that the consummation of the loan transaction
contemplated herein will occur within seven calendar days from the date of this
letter, and that the asset acquisition will be consummated (if at all) within
120 days from the date of this letter. In any event, each of the parties will be
responsible for its own costs incurred in connection with the proposed
transactions and will not seek restitution or reimbursement from any other party
to the proposed transactions.
I. Debt Component
A. PTG (or its affiliate) advances to CTI, Blue Mack, Chase Brokerage
and CTI Properties, Inc. (collectively, the "Borrowers") an amount
or amounts mutually determined but not to exceed $1.5 million.
Funding for the entire $1.5 million will occur as soon as title
insurance satisfactory to PTG in its sole discretion is issued on
the Borrowers' Calhoun, Georgia property.
B. The advances will be documented by a demand promissory note or
notes bearing 16% interest.
C. The note or notes will be secured by four parcels of real estate
currently owned by CTI Properties, Inc. In addition, the notes will
be secured by the rolling stock of CTI and its affiliates.
D. All liens on the property will be satisfied by the Borrowers or
their affiliates within ten days from the date of the first advance
from PTG to the Borrowers.
E. The notes will be guaranteed by Continental American
Transportation, Inc. and by Charles Prater.
F. Interest only payments monthly in arrears for 90 days or until
demand, beginning on October 1, 1997.
Carpet Transport, Inc.
September 10, 1997
Page 2
G. Principal payment due upon demand plus five business days.
H. Five business day cure provision.
I. Borrowers shall execute such documents as PTG shall reasonably
require to document this transaction and to obtain and perfect
security interests in the collateral.
II. Potential Asset Acquisition
A. A PTG affiliate ("PTG Acquisition") will have an an irrevocable and
exclusive option to buy the assets of the Borrowers for a 120-day.
Following the execution of this letter, the Company contemplates the
expenditure of substantial efforts and resources in the conduct of
its due diligence investigation of the Borrowers and the preparation
and negotiation of the acquisition agreement. Accordingly, neither
the Borrowers nor any of the Borrowers' representatives shall,
directly or indirectly, solicit or encourage the invitation of
inquiries or offers from any entiry (other than the Company)
concerning any purchase or sale of securities, assets, or
liabilities of the Borrowers (other than in the ordinary course of
business) or any merger or similar transaction involving the
Borrowers. In addition, except to the extent necessary to comply
with the fiduciary duties of the Borrowers' board of directors,
neither the Borrowers nor any of the Borrowers' representatives
shall, directly or indirectly, provide any confidential information
to, participate in discussions with, or otherwise cooperate with any
effort by any entity to take any of the actions described above. The
Borrowers shall immediately advise the Company if any such inquiry
or proposal is made or received by the Borrowers or any of the
Borrowers' representatives. The obligations of this Paragraph II.A
shall terminate upon the earlier of (w) the delivery of written
notice from the Compoany to the Borrowers that the Company is
terminating its due diligence investigation of the Borrower and
negotiation of the acquisition agreement, (x) 120 days from the date
of the Borrowers' acceptance of this letter, if by that date the
prties have not executed and delivered the acquisition agreement
(provided that the Company may extend that date by 30 additional
days, if necessary for the completion of its due diligence
investigation), or (y) the termination of the acquisition agreement
in accordance with the terms thereof. During this period, none of
the Borrowers shall pay any expense, incur any liability (including
but not limited to leases) or make or make any commitment in excess
of $25,000 without the prior written consent of PTG Acquisition. The
initial purchase price would be no more than 220,000 shares of
unregistered PTG common stock valued at the date of closing, plus a
contract right to receive 50% of net after-tax income of the new
entity for 54 months, subject in all cases to payment to the Company
under paragraph II.E below. The holders of the unregistered PTG
shares will have piggyback registration rights.
B. PTG Acquisition is free to pick and choose assets. PTG may determine
at any time not to go forward with the acquisition.
C. PTG Acquisition assumes any debt secured by purchased assets.
Carpet Transport, Inc.
September 10, 1997
Page 3
D. Consideration from PTG Acquisition will be paid to the sellers of
the assets, i.e., the subsidiaries of Continental American. The
subsidiaries will warrant and represent that each will not
distribute any of the consideration to their shareholders or
otherwise without providing for payment of unsecured debt to their
creditors. The subsidiaries will also provide in the acquisition
agreement, if any, the usual commercial representations and
warranties and any other representations and warranties and
indemnities reasonably required by the Company. These warranties
will be secured by having South Trust Bank of Georgia, N.A. or
another mutually agreeable party hold the purchase price until the
subsidiaries' obligations are discharged.
E. In the event that PTG Acquisition in its sole discretion determines
to close the asset acquisition, it shall be repaid its debt
obligation out of the first available cash from operations of the
new entity. However, PTG Acquisition shall receive no more than
$333,000 plus accrued interest with respect to any 12-month period
pursuant to this provision, subject to any "catch up" amount from a
prior year.
F. The liability of Continental American with respect to amounts owed
to Messrs. Prater and Warmack for the original purchase price will
be paid by PTG Acquisition according to a formula. The purpose of
the formula is to establish the "fair market value" of the debt.
The formula shall provide that in the event that PTG Acquisition's
net income (determined before taxes in accordance with GAAP
consistently applied) during its second complete taxable year
equals or exceeds $4,000,000, then the indebtedness shall be deemed
equal to its present balance. In the event that the net income is
less than $4,000,000, then the indebtedness shall be reduced
proportionately. During the initial 24-month period of operation
of PTG Acquisition, Prater and Warmack shall receive interest
payments in accordance with the terms of the existing promissory
notes.
It is expressly agreed and understood that PTG Acquisition is not
assuming any other liabilities not disclosed, including but not limited to: (1)
any sales and use taxes payable or incurred prior to the closing, (2) any
federal or state employment taxes payable or incurred prior to the closing, (3)
any accumulated garnishments prior to or as of the closing, (4) any federal,
state, or local franchise, excise or income taxes arising out of or in
connection with operations occurring or income earned by CTI or its affiliates
prior to or as a result of the closing of the transactions contemplated herein,
and (5) any payroll or similar taxes payable or incurred up to the date of the
closing.
We certainly expect that there will be no material adverse change in the
business, prospects, operations, earnings, assets, or financial condition of CTI
or its affiliates between now and the date of the closing. CTI and its
affiliates will grant to PTG, its agents or other representatives full and
Carpet Transport, Inc.
September 10, 1997
Page 4
complete access to the books and records and employees of CTI and its affiliates
up to and until the closing date.
This letter may be executed in two or more counterparts, each of which
shall be deemed to be an original and all of which together constitute one and
the same document. The provisions of Sections I and II shall be binding upon the
parties hereto as soon as PTG may advance any amounts to the Borrowers.
We have attempted to set forth herein all the major points that we have
discussed. While there were many other relatively minor points that were brought
up during our discussions, we did not believe they warranted attention in this
letter but can be added in the final documents, if necessary or appropriate.
Sincerely,
s/Dennis A. Bakal
Dennis A. Bakal, President
Acknowledged and agreed to this 10th day of September, 1997.
BORROWERS:
CARPET TRANSPORT, INC.
By: s/Timothy Holstein
Printed: Timothy Holstein
Title: Pres.
BLUE MACK TRANSPORT, INC.
By: s/ Timothy Holstein
Printed: Timothy Holstein
Title: Pres.
CHASE BROKERAGE, INC.
By: s/ Timothy Holstein
Printed: Timothy Holstein
Title: Pres.
CTI PROPERTIES, INC.
By: s/ Timothy Holstein
Printed: Timothy Holstein
Title: Pres.
Carpet Transport, Inc.
September 10, 1997
Page 5
GUARANTORS:
CONTINENTAL AMERICAN TRANSPORTATION, INC.
By: s/ Timothy Holstein
Printed: Timothy Holstein
Title: Pres.
s/Charles B. Prater
Charles B. Prater
ptg-loan.cat