UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
Quarterlyreport pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 For the quarterly
period ended June 30, 1997 or
Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 For the transition period
from_______________to____________
Commission File Number: 0-26954
CONSOLIDATED DELIVERY & LOGISTICS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 22-3350958
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
380 Allwood Road 07012
Clifton, New Jersey (Zip Code)
(Address of principal executive offices)
(973) 471-1005
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _x_ No___
The number of shares of common stock of the Registrant, par value $.001 per
share, outstanding as of August 8, 1997, was 6,658,551.
CONSOLIDATED DELIVERY & LOGISTICS, INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
Page
Part I - Financial Information (unaudited)
Item 1 - Financial Statements
Consolidated Delivery & Logistics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets as of December 31, 1996 and
June 30, 1997 3
Condensed Consolidated Statements of Income for the Three and Six Months
Ended June 30, 1996 and 1997 4
Condensed Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1996 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Part II - Other Information
Item 1 - Legal Proceedings 13
Item 4 - Submission of Matters to a Vote of Security Holders 13
Item 6 - Exhibits and Reports on Form 8-K 14
Signature 15
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share information)
December
31, 1996 June 30, 1997
------------------ -----------------
(Note 1) (Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,725 $2,680
Accounts receivable, net 22,858 20,842
Prepaid expenses and other current assets 2,476 3,143
------------------ -----------------
Total current assets 27,059 26,665
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net 4,316 6,387
OTHER ASSETS 4,315 4,258
================== =================
Total assets $35,690 $37,310
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $7,200 $8,250
Current maturities of long-term debt 1,152 1,008
Accounts payable and accrued liabilities 13,235 12,744
------------------ -----------------
Total current liabilities 21,587 22,002
LONG-TERM DEBT 3,415 4,811
OTHER LONG-TERM LIABILITIES 1,958 2,038
------------------ -----------------
Total liabilities 26,960 28,851
------------------ -----------------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; 2,000,000 shares
authorized; no shares issued and outstanding 0 0
Common stock, $.001 par value; 30,000,000 shares
authorized; 6,795,790 and 6,658,551 shares issued and
outstanding at December 31, 1996 and June 30, 1997,
respectively 7 7
Additional paid-in capital 9,601 9,001
Retained earnings (accumulated deficit) (878) (549)
------------------ -----------------
Total Stockholders' Equity 8,730 8,459
================== =================
Total Liabilities and Stockholders' Equity $35,690 $37,310
================== =================
See accompanying notes to condensed consolidated financial
statements.
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
For The Three Months Ended For The Six Months Ended
June 30, June 30,
------------------------------------ ------------------------------------
1996 1997 1996 1997
---------------- ---------------- ---------------- ----------------
REVENUES $41,529 $43,708 $81,694 $85,443
Cost of Revenues 30,759 33,230 60,242 65,171
---------------- ---------------- ---------------- ----------------
GROSS PROFIT 10,770 10,478 21,452 20,272
Selling, General, &
Administrative Expenses 10,115 9,961 20,325 20,236
---------------- ---------------- ---------------- ----------------
OPERATING INCOME 655 517 1,127 36
OTHER (INCOME) EXPENSE:
Gain on Sale of Subsidiary, net 0 0 0 (816)
Other income, net (143) (119) (237) (214)
Interest expense 226 274 407 518
---------------- ---------------- ---------------- ----------------
INCOME BEFORE PROVISION FOR
FOR INCOME TAXES 572 362 957 548
Provision for Income Taxes 240 144 402 219
---------------- ---------------- ---------------- ----------------
NET INCOME $332 $218 $555 $329
================ ================ ================ ================
NET INCOME PER SHARE $.05 $.03 $.08 $.05
================ ================ ================ ================
WEIGHTED AVERAGE SHARES
OUTSTANDING 6,637 6,659 6,633 6,682
================ ================ ================ ================
See accompanying notes to condensed consolidated financial
statements.
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended Six Months
June 30, 1996 Ended June 30,
1997
CASH FLOWS FROM OPERATING ACTIVITIES:
- ----------------------------------------------------------------------------
Net income $555 $329
- ----------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by
(used in) operating activities -
- ----------------------------------------------------------------------------
Gain on disposal of equipment and leasehold improvements (1) (10)
- ----------------------------------------------------------------------------
Gain on sale of subsidiary 0 (816)
- ----------------------------------------------------------------------------
Depreciation and amortization 792 918
- ----------------------------------------------------------------------------
Changes in operating assets and liabilities
- ----------------------------------------------------------------------------
(Increase) decrease in -
- ----------------------------------------------------------------------------
Accounts receivable, net (2,794) 1,385
- ----------------------------------------------------------------------------
Prepaid expenses and other current assets (798) (765)
- ----------------------------------------------------------------------------
Other assets 266 (295)
- ----------------------------------------------------------------------------
Increase (decrease) in -
- ----------------------------------------------------------------------------
Accounts payable and accrued liabilities (1,460) 510
- ----------------------------------------------------------------------------
Other long-term liabilities (276) 80
- ----------------------------------------------------------------------------
Net cash provided by (used in) operating activities (3,716) 1,336
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- ----------------------------------------------------------------------------
Additions to equipment and leasehold improvements (927) (730)
- ----------------------------------------------------------------------------
Proceeds from sale of equipment and leasehold improvements 46 26
- ----------------------------------------------------------------------------
Purchases of businesses (1,416) 0
- ----------------------------------------------------------------------------
Net cash used in investing activities (2,297) (704)
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- ----------------------------------------------------------------------------
Short-term borrowings, net 2,852 1,050
- ----------------------------------------------------------------------------
Proceeds from long-term debt 1,092 0
- ----------------------------------------------------------------------------
Repayments of long-term debt (3,023) (643)
- ----------------------------------------------------------------------------
Issuance of common stock in connection with
- --------------------------------------------------------------------------- 402 0
purchases of businesses
- ----------------------------------------------------------------------------
Deferred financing costs (121) (84)
- ----------------------------------------------------------------------------
Net cash provided by financing activities 1,202 323
- ----------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (4,811) 955
- ----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, beginning of period 6,589 1,725
- ----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $1,778 $2,680
- ----------------------------------------------------------------------------
============================================================================
See accompanying notes to condensed consolidated financial statements
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. The condensed consolidated balance sheet at
December 31, 1996, has been derived from the audited financial
statements at that date. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a
fair presentation have been included. Operating results for the three
and six months ended June 30, 1997, are not necessarily indicative of
the results that may be expected for any other interim period or for
the year ending December 31, 1997. For further information, refer to
the consolidated financial statements and footnotes thereto included in
the Company's Form 10-K for the year ended December 31, 1996.
Certain reclassifications have been made to the prior year's
condensed consolidated financial statements in order to conform to the
1997 presentation.
(2) NON-COMPLIANCE UNDER BANK COVENANTS:
The Company and certain of its subsidiaries were parties to a
Credit Agreement, dated as of May 31, 1996 (the "Credit Agreement"),
with Summit Bank and Mellon Bank, N.A. as co-agents for the banks party
thereto (collectively, the "Banks") pursuant to which the Banks
provided the Company with a working capital facility (the "Facility").
At June 30, 1997, as a result of losses during 1996, the Company was in
violation of certain of the financial covenants contained in the Credit
Agreement, including leverage, interest and fixed charge coverage
ratios. In April 1997, the Company entered into a Forbearance and
Amendment Agreement with the Banks (the "Forbearance Agreement")
pursuant to which the Banks waived any default arising out of the
Company's failure to comply with the covenants referenced above and
agreed not to exercise any remedies under the Credit Agreement in
respect thereof until April 1, 1998. Pursuant to the terms of the
Forbearance Agreement, amounts available for borrowing under the
Facility were reduced to approximately $8.8 million until June 15, 1997
and, thereafter, to the lesser of $8.8 million or an amount determined
on a formula basis taking into account the Company's eligible accounts
receivable and any pre-tax losses incurred after March 31, 1997. The
interest rates borne by borrowings under the Facility were increased on
variable rate loans to prime plus 2.5%, the types of borrowings
available to the Company were reduced and the commitment fees payable
to the Banks were increased. In addition, under the Forbearance
Agreement, the Company was required to maintain a consolidated net
worth of at least $6.8 million, could not make any acquisitions and was
required to establish certain separate cash collection accounts. Under
the Forbearance Agreement, all amounts outstanding under the Facility
would have become due and payable on April 1, 1998. (See Note 3).
(3) REVOLVING CREDIT FACILITY:
On July 14, 1997, the Company entered into a Loan and Security
Agreement (the "First Union Agreement") with First Union Commercial
Corporation ("First Union") to replace the Credit Agreement (see Note
2) and establish a new revolving credit facility. Credit availability
is based on certain criteria, up to a maximum amount of $15.0 million
and is secured by substantially all of the assets, including accounts
receivable, of the Company and its subsidiaries. Interest rates on
borrowings are based on margins over First Union's lending rates or the
London interbank borrowing rate (Libor). The First Union Agreement also
contains certain restrictive covenants for which the Company was or
would have been in compliance as of June 30, 1997. The initial
borrowing under the First Union Agreement was used to repay, in full,
the amount outstanding under the Facility (see Note 2). The First Union
Agreement expires on July 30, 1999.
(4) LITIGATION:
On March 19, 1997, a purported class action complaint,
captioned Gapszewicz v. Consolidated Delivery & Logistics, Inc., et al.
(97 Civ. 1939), was filed in the United States District Court for the
Southern District of New York against the Company, certain of the
Company's present and former executive officers, and the co-managing
underwriters of the Company's initial public offering (the "Offering").
The gravamen of the complaint is that the Company's registration
statement for the Offering contained misstatements and omissions of
material fact in violation of the federal securities laws and that the
Company's financial statements included in the registration statement
were false and misleading and did not fairly reflect the Company's true
financial condition. The complaint seeks the certification of a class
consisting of purchasers of the Company's Common Stock from November
21, 1995 through February 27, 1997, rescission of the Offering,
attorneys' fees and other damages.
Since the original complaint in the Gapszewicz action was
filed, several additional purported class actions containing
allegations substantially similar to those made in the Gapszewicz
action have been filed against the Company, certain of the Company's
directors, and the co-managing underwriters of the Company's initial
public offering.
The Company believes that the allegations contained in the
complaints referred to above are without merit and has filed a motion
to dismiss each of the actions referred to above.
The Company and its subsidiaries are from time to time,
parties to litigation arising in the normal course of their business,
most of which involves claims for personal injury and property damage
incurred in connection with their operations. Management believes that
none of these actions, including the above actions, will have a
material adverse effect on the financial position or results of
operations of the Company and its subsidiaries.
(5) EARNINGS PER SHARE:
The computation of net income per share for the three and six
months ended June 30, 1997 and 1996, is based upon 6,659,000,
6,637,000, 6,682,000, and 6,633,000 shares, respectively, of Common
Stock outstanding. The conversion of stock options and debentures
outstanding are not included in the computations as the effect would be
antidilutive
The Financial Accounting Standards Board has issued a new
standard, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"). SFAS 128 establishes standards for
computing and presenting earnings per share. SFAS 128 simplifies the
standards for computing earnings per share previously found in APB
Opinion No. 15, "Earnings Per Share," and makes them comparable to
international earnings per share standards. It replaces the
presentation of primary earnings per share with a presentation of basic
earnings per share. It also requires dual presentation of basic and
diluted earnings per share on the face of the income statement for all
entities with complex capital structures and requires a reconciliation
of the numerator and denominator of the basic earnings per share
computation to the numerator and denominator of the diluted earnings
per share computation. The Company is required to adopt this standard
as of December 15, 1997 and early adoption is not permitted. SFAS 128
requires restatement of all prior period earnings per share
calculations presented. The Company intends to adopt this standard when
required and has determined that adoption of SFAS 128 will have no
effect on earnings per share.
(6) NEW ACCOUNTING PRONOUNCEMENTS:
The Financial Accounting Standards Board has issued two new
statements, Statements of Accounting Financial Standards Numbers 130,
"Reporting Comprehensive Income" (SFAS 130"), and 131, "Disclosures
About Segments of an Enterprise and Related Information" (SFAS 131").
SFAS 130 establishes standards for reporting and displaying
comprehensive income and its components in a full set of general
purpose financial statements. The objective of SFAS 130 is to report a
measure of all changes in equity of an enterprise that result from
transactions and other economic events of the period other than
transactions with owners ("comprehensive income"). Comprehensive income
is the total of net income and all other nonowner changes in equity.
SFAS 130 is effective for fiscal years beginning after December 15,
1997, with earlier application allowed but not required. Upon adoption,
reclassification of comparative financial statements provided for prior
periods is required. The Company intends to adopt this standard when
required and is in the process of determining the effect of SFAS 130 on
the Company's financial statement presentation.
SFAS 131 introduces a new model for segment reporting, called
the "management approach." The management approach is based on the way
that the chief operating decision maker organizes segments within a
company for making operating decisions and assessing performance.
Reportable segments are based on products and services, geography,
legal structure, management structure - any manner in which management
disaggregates a company. The management approach replaces the notion of
industry and geographic segments in current FASB standards. The Company
is required to adopt this standard as of December 15, 1997 and early
adoption is encouraged. However, SFAS 131 need not be applied to
interim statements in the initial year of application. SFAS 131
requires restatement of all prior period information reported. The
Company intends to adopt this standard when required and is in the
process of determining the effect of SFAS 131 on the Company's
financial statements.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The following discussion of the Company's results of operations and of
its liquidity and capital resources should be read in conjunction with the
Condensed Consolidated Financial Statements of the Company and the related Notes
thereto appearing elsewhere herein.
Disclosure Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward looking statements. Certain information contained in this
Form 10-Q includes information that is forward looking, such as the Company's
expectations for future performance, its growth and acquisition strategies, its
anticipated liquidity and capital needs and its future prospects. The matters
referred to in such forward looking statements could be affected by the risks
and uncertainties related to the Company's business. These risks and
uncertainties include, but are not limited to, the effect of economic and market
conditions, the Company's limited operating history, the ability of the Company
to successfully execute its strategic plan, and the impact of competition.
Subsequent written and oral forward looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the cautionary statements contained herein and elsewhere in this
Form 10-Q and the Company's 1996 Annual Report on Form 10-K.
Results of Operations
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Revenues
Revenues for the first half of 1997 increased by $3.7 million (4.5%) to
$85.4 million from $81.7 million for the first half of 1996. 1997 revenues were
affected by the disposition of the Company's contract logistics subsidiary,
which accounted for $2.0 million in revenues for the six month period ended June
30, 1996, but only $400,000 for the six months ended June 30, 1997. Air courier
revenues increased $2.5 million (10.2%), ground delivery revenue increased $4.5
million (9.3%) and logistics revenue, including the contract logistics
subsidiary, declined $3.3 million (38.8%), for the first half of 1997 when
compared to the first half of 1996.
Air courier revenues increased primarily as a result of previously
disclosed acquisitions bolstering the New York - Los Angeles air routes. Ground
delivery revenues increased primarily due to the addition of time services and
facilities management service revenue through previously disclosed acquisitions
which added $3.4 million to revenues for the six months ended June 30, 1997 in
addition to an increase in contract distribution revenue in the pharmaceutical,
electronic repair and office product distribution industries. Logistics revenue
was negatively impacted due to the sale of the Company's contract logistics
subsidiary previously discussed.
Cost of Revenues
For the six months ended June 30, 1997, cost of revenues increased $5.0
million (8.3%) from $60.2 million for the first half 1996 to $65.2 million for
the comparable period in 1997. The air courier business experienced higher costs
in the second quarter of 1997 due to a shift in business mix to heavier weight
shipments. This shift, combined with higher costs for agents as well as pick-up
and delivery charges in the first quarter, are primarily responsible for an
increase in air courier costs of $3.3 million for the six-month period ended
June 30, 1997 over the same period for 1996. Cost of revenues for ground
delivery increased due to contract start-up expenses incurred during the
six-month period as well as cost increases necessary to support increased
revenue levels. Cost of revenues were favorably impacted by the sale of the
Company's contract logistics subsidiary, which accounted for $1.5 million of
such expenses in 1996, compared to $300,000 in the 1997 period.
As a result of the matters discussed above, gross profit declined by
$1.2 million (5.6%), from $21.5 million in the 1996 period to $20.3 million in
the comparable period in 1997. Stated as a percentage of revenues, gross profit
declined by 2.6%, from 26.3% for the six months ended June 30, 1996, to 23.7%
for the six months ended June 30, 1997.
Selling, General and Administrative Expense
Selling, general and administrative expenses decreased by $89,000 from
$20.3 million for the six months ended June 30,1996 to $20.2 million for the six
months ended June 30,1997. As a percentage of revenues, these expenses decreased
by 1.2% from 24.9% for the six months ended June 30, 1996, to 23.7% for the six
months ended June 30, 1997, as a result of the Company's ongoing consolidation
and expense reduction efforts.
Operating Income
For the reasons described above, the Company's operating income
decreased 96.8%, from $1.1 million for the six months ended June 30, 1996, to
$36,000 for the six months ended June 30, 1997.
Gain on Sale of Subsidiary
On January 31, 1997, the Company sold its contract logistics
subsidiary, for which it recognized a gain of $816,000 before applicable
Federal, state, and local income taxes.
Interest Expense
Interest expense increased by $111,000 to $518,000 for the six months
ended June 30, 1997 compared to $407,000 for the same period in 1996 primarily
due to increased borrowing levels and interest rate increases imposed as a
result of the Forbearance Agreement described in Note 2.
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996
Revenues
Revenues for the second quarter of 1997 increased by $2.2 million
(5.3%) to $43.7 million from $41.5 million for the second quarter of 1996.
Revenues for the second quarter of 1997 were affected by the disposition of the
Company's contract logistics subsidiary, which had approximately $1.0 million of
revenues in the second quarter of 1996 but none in the comparable period in
1997. Ground delivery revenues in the second quarter of 1997 grew by $2.7
million (10.8%), air courier revenues grew by $0.9 million (7.0%), and logistics
revenue declined by $1.4 million (33.1%) compared to the second quarter of 1996.
Revenues contributed by previously disclosed acquisitions amounted to $2.8
million for the second quarter of 1997. The remaining increase resulted
primarily from the expansion in ground delivery routes and previously disclosed
new contract revenues for pharmaceutical and office product distribution
contracts. Logistics revenue was negatively impacted due to the sale in of the
Company's contract logistics subsidiary previously discussed.
Cost of Revenues
Cost of revenues increased $2.5 million (8.1%) for the three months
ended June 30, 1997 to $33.2 million from $30.7 million for the three months
ended June 30, 1996. The increase was due primarily to increased business volume
and the matters described under "Cost of Revenues" in the Six months comparison.
Cost of revenues were favorably impacted by the sale of the Company's contract
logistics subsidiary, which accounted for approximately $700,000 of such
expenses in the second quarter of 1996 and none in the comparable period in
1997.
Gross Profit
Gross profit decreased by $300,000 from $10.8 million for the quarter
ended June 30, 1996 to $10.5 million for the quarter ended June 30,1997 as a
result of the aforementioned revenues and cost of revenues changes. As a
percentage of revenues, gross profit declined by 1.9%, to 24.0% in the second
quarter of 1997, compared to 25.9% for the comparable period of 1996.
Selling, General and Administrative Expense
Selling, general and administrative expenses decreased by $154,000 from
$10.1 million for the quarter ended June 30, 1996 to $10.0 million for the
quarter ended June 30, 1997. As a percentage of revenues, these expenses
decreased 1.6%, from 24.4% for the three months ended June 30, 1996, to 22.8%
for the three months ended June 30, 1997, as a result of the Company's
consolidation and expense reduction policies.
Liquidity and Capital Resources
Working capital decreased by approximately $800,000 from $5.5 million
at December 31, 1996 to $4.7 million at June 30, 1997. Cash and cash equivalents
increased by $1.0 million from $1.7 million at December 31, 1996 to $2.7 million
at June 30, 1997. The increase in cash and cash equivalents is primarily due to
the net cash provided by operating activities of $1.3 million, principally
related to increased receivable collections efforts, combined with the net
increase in borrowings of approximately $400,000. This cash was reduced by
approximately $700,000 of additions to equipment and leasehold improvements.
The Company incurred a capital lease obligation of $2.2 million during
the second quarter of 1997 in connection with lease agreements to acquire 175
delivery vehicles.
On July 14, 1997, the Company entered into a Loan and Security
Agreement (the "First Union Agreement") with First Union Commercial Corporation
("First Union") to replace the Credit Agreement (see Note 2) and establish a new
revolving credit facility. Credit availability is based on certain criteria, up
to a maximum amount of $15.0 million and is secured by substantially all of the
assets, including accounts receivable, of the Company and its subsidiaries.
Interest rates on borrowings are based on margins over First Union's lending
rates or the London interbank borrowing rate (Libor). The First Union Agreement
also contains certain restrictive covenants for which the Company was or would
have been in compliance as of June 30, 1997. The initial borrowing under the
First Union Agreement was used to repay, in full, the amount outstanding under
the Facility (see Note 2). The First Union Agreement expires on July 30, 1999.
Management believes that cash flows from operations, together with its
new sources of liquidity and borrowing capacity (see Note 3), are sufficient to
support the Company's operations and general business and capital liquidity
requirements.
Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board (The "FASB") has issued three
new standards, Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" ("SFAS 128"), Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), and Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information ("SFAS 131").
SFAS 128 establishes standards for computing and presenting earnings
per share, simplifies the standards for computing earnings per share previously
found in APB Opinion No. 15, "Earnings Per Share," and makes them comparable to
international earnings per share standards. It replaces the presentation of
primary earnings per share with a presentation of basic earnings per share. It
also requires dual presentation of basic and diluted earnings per share on the
face of the income statement for all entities with complex capital structures
and requires a reconciliation of the numerator and denominator of the basic
earnings per share computation to the numerator and denominator of the diluted
earnings per share computation. The Company is required to adopt this standard
as of December 15, 1997 and early adoption is not permitted. SFAS 128 requires
restatement of all prior period earnings per share calculations presented. The
Company intends to adopt this standard when required and has determined that
adoption of SFAS 128 will have no effect on earnings per share.
SFAS 130 establishes standards for reporting and displaying
comprehensive income and its components in a full set of general purpose
financial statements. The objective of SFAS 130 is to report a measure of all
changes in equity of an enterprise that result from transactions and other
economic events of the period other than transactions with owners
("comprehensive income"). Comprehensive income is the total of net income and
all other nonowner changes in equity. SFAS 130 is effective for fiscal years
beginning after December 15, 1997, with earlier application allowed but not
required. Upon adoption, reclassification of comparative financial statements
provided for prior periods is required. The Company intends to adopt this
standard when required and is in the process of determining the effect of SFAS
130 on the Company's financial statement presentation.
SFAS 131 introduces a new model for segment reporting, called the
"management approach." The management approach is based on the way that the
chief operating decision maker organizes segments within a company for making
operating decisions and assessing performance. Reportable segments are based on
products and services, geography, legal structure, management structure - any
manner in which management disaggregates a company. The management approach
replaces the notion of industry and geographic segments in current FASB
standards. The Company is required to adopt this standard as of December 15,
1997 and early adoption is encouraged. However, SFAS 131 need not be applied to
interim statements in the initial year of application. SFAS 131 requires
restatement of all prior period information reported. The Company intends to
adopt this standard when required and is in the process of determining the
effect of SFAS 131 on the Company's financial statements.
Inflation
Inflation has not had a material impact on the Company's results of
operations.
Part II - OTHER INFORMATION
Item 1 - Legal Proceedings.
On March 19, 1997, a purported class action complaint,
captioned Gapszewicz v. Consolidated Delivery & Logistics, Inc., et al.
(97 Civ. 1939), was filed in the United States District Court for the
Southern District of New York against the Company, certain of the
Company's present and former executive officers, and the co-managing
underwriters of the Company's initial public offering (the "Offering").
The gravamen of the complaint is that the Company's registration
statement for the Offering contained misstatements and omissions of
material fact in violation of the federal securities laws and that the
Company's financial statements included in the registration statement
were false and misleading and did not fairly reflect the Company's true
financial condition. The complaint seeks the certification of a class
consisting of purchasers of the Company's Common Stock from November
21, 1995 through February 27, 1997, rescission of the Offering,
attorneys' fees and other damages.
Since the original complaint in the Gapszewicz action was
filed, several additional purported class actions containing
allegations substantially similar to those made in the Gapszewicz
action have been filed against the Company, certain of the Company's
directors, and the co-managing underwriters of the Company's initial
public offering.
The Company believes that the allegations contained in the
complaints referred to above are without merit and has filed a motion
to dismiss each of the actions referred to above.
The Company and its subsidiaries are from time to time,
parties to litigation arising in the normal course of their business,
most of which involves claims for personal injury and property damage
incurred in connection with their operations. Management believes that
none of these actions, including the above actions, will have a
material adverse effect on the financial position or results of
operations of the Company and its subsidiaries.
Item 4 - Submission of Matters to a Vote of Security Holders.
On June 19, 1997, the Company held its annual meeting of stockholders.
The following sets forth a brief description of each matter which was
acted upon, as well as the votes cast for, against or withheld for each
such matter, and, where applicable, the number of abstentions and
broker non-votes for each matter:
1. Election of Directors
Name of Director Votes For Votes Against Authority Withheld
------
William T. Brannan 5,068,513 -- 34,919
------
William T. Beaury 5,068,513 -- 34,919
------
Michael Brooks 5,068,513 -- 34,919
------
Labe Leibowitz 5,068,513 -- 34,919
------
Robert Wyatt 5,068,513 -- 34,919
------
Albert W. Van Ness, Jr. 5,068,213 -- 35,219
------
Jon F. Hanson 5,068,513 -- 34,919
------
Marilu Marshall 5,068,513 -- 34,919
------
Kenneth W. Tunnell 5,068,513 -- 34,919
2. Ratification of the selection by the Board of Directors of
Arthur Andersen LLP as the Company's independent auditors
for 1997:
Votes For: 4,427,356
Votes Against: 662,006
Abstentions: 14,070
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Loan And Security Agreement, Dated July 14, 1997 By
And Between First Union Commercial Corporation And
Consolidated Delivery & Logistics, Inc. And Subsidiaries
27.1 Financial Data Schedule (for electronic submission only)
(b) The Company has not filed any reports on Form 8-K during the
relevant period.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 14, 1997 CONSOLIDATED DELIVERY & LOGISTICS, INC.
By:___________________________
Joseph G. Wojak
Executive Vice President, Chief
Financial Officer, Treasurer
and Secretary
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 14, 1997 CONSOLIDATED DELIVERY & LOGISTICS, INC.
By: /s/ Joseph G. Wojak
Joseph G. Wojak
Executive Vice President, Chief
Financial Officer, Treasurer
and Secretary
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
EXHIBIT INDEX
10.1 Loan And Security Agreement, Dated July 14, 1997 By And
Between First Union Commercial Corporation And Consolidated
Delivery & Logistics, Inc. And Subsidiaries.
27.1 Financial Data Schedule (for electronic submission only)
EXIBIT 10.1
LOAN AND SECURITY AGREEMENT, dated
July ___, 1997 by and between FIRST
UNION COMMERCIAL CORPORATION, with a
place of business at 190 River Road,
Summit, New Jersey 07901,
hereinafter called "Lender", and
CONSOLIDATED DELIVERY & LOGISTICS,
INC., CLAYTON/NATIONAL COURIER
SYSTEMS, INC., NATIONAL EXPRESS
COMPANY, INC., AMERICAN COURIER,
INC., CLICK MESSENGER SERVICE, INC.,
CLICK MESSENGER SERVICE OF N.Y.,
INC., COURT COURIER SYSTEMS, INC.,
OLYMPIC COURIER SYSTEMS, INC.,
SECURITIES COURIER CORPORATION,
SILVER STAR EXPRESS, INC., SUREWAY
AIR TRAFFIC CORPORATION, and SUREWAY
LOGISTICS CORPORATION, hereinafter
individually and collectively called
"Borrower."
This Agreement specifies the terms of a revolving credit facility of up
to Fifteen Million and no/100 ($15,000,000.00) Dollars by Lender to Borrower,
and further specifies the terms by which all Obligations, as defined herein, of
Borrower to Lender and each Lender Affiliate are to be secured by certain
personal property and assets, tangible and intangible, of each Borrower.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the parties hereto agree as follows:
I
DEFINITIONS
1.1 "ACCOUNT" or "ACCOUNTS RECEIVABLE" means, in addition to the
definition of account as contained in the Uniform Commercial Code, the right of
the Borrower to receive payment for goods sold or leased or for services
rendered which are not evidenced by an instrument or chattel paper, whether or
not it has been earned by performance.
1.2 "ACCOUNT DEBTOR" means, in addition to the definition of account
debtor as contained in the Uniform Commercial Code, the Person or Persons
obligated to Borrower on an Account, or who is represented by the Borrower to be
so obligated.
1.3 "ADVANCES" means all loans by Lender to Borrower under the
revolving credit facility provided for in paragraph 2.1 of this Agreement.
1.4 "ADVANCE DOLLAR LIMIT" means Fifteen Million and no/100
($15,000,000.00) Dollars or such lesser amount as the maximum amount of the
revolving credit facility provided for herein may be reduced in accordance with
paragraph 7.10 hereof.
1.5 "AFFILIATE" means any Person which, directly or indirectly, owns or
controls, on an aggregate basis, including all beneficial ownership and
ownership or control as a trustee, guardian or other fiduciary, at least fifteen
(15%) percent of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors (irrespective of whether, at the
time, stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency) of
Borrower or any Obligor or any Subsidiary, or is controlled by or is under
common control with Borrower or any such Person, or any stockholders of Borrower
or any such Person, or any Subsidiary. For the purpose of this definition,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of management and policies, whether through the ownership
of voting securities, by contract or otherwise.
1.6 "AGREEMENT" means this Loan and Security Agreement as may from time
to time be supplemented, amended or modified.
1.7 "BANK" means First Union National Bank, its successors and assigns.
1.8 "BORROWER" means the parties identified on the first page hereof as
Borrower, it being the intent of this Agreement that each shall be considered
individually or collectively as Borrower regardless of which receives the
proceeds of the loans, advances or financial accommodations hereunder and
regardless of which is the source of the Collateral hereunder and that each
Borrower shall be jointly and severally liable for all of the Obligations.
1.9 "BORROWING BASE" means the lesser of (A) Fifteen Million and no/100
($15,000,000.00) Dollars, or (B) the sum of (i) the Eligible Loan Value of
Eligible Accounts minus (ii) the Debenture Reserve Amount plus (iii) the
outstanding principal balance from time to time in the Collateral Account, as
such term is defined in paragraph 2.4 hereof.
1.10 "BUSINESS DAY" means a day other than a Saturday or Sunday or
other day on which Bank is authorized or required to close under the laws of the
States of New Jersey, North Carolina, Pennsylvania or applicable Federal Law.
1.11 "CAPITAL EXPENDITURES" means for any period the aggregate of all
expenditures (including that portion of Capital Leases which is or should be
capitalized, in accordance with GAAP on the consolidated balance sheet of a
Person) by such Person during that period for any fixed assets, improvements, or
replacements, substitutions or additions thereto that have a useful life of more
than one (1) year including, without limitation, the direct or indirect
acquisition of such assets by way of increased product charges, offset items or
otherwise.
1.12 "CAPITAL LEASE" as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee which would,
in conformity with GAAP be required to be accounted for as a capital lease on
the balance sheet of that Person.
1.13 "CASH FLOW LEVERAGE RATIO" means at any date the ratio of (A)
Total Funded Debt at said date divided by the EBITDA for the period ending on
said date provided that with respect to the fiscal quarters of Borrower ending
through and including September 30, 1997 notwithstanding the definition of
EBITDA, for the purpose of calculating the Cash Flow Leverage Ratio the EBITDA
shall be calculated on an annualized basis of the fiscal quarters ending after
March 31, 1997; for example, for the quarter ending June 30, 1997 the EBITDA
shall be calculated based upon the income and expenses of Borrower for said
quarter times 4 rather than for the 12 month period ending June 30, 1997; and
for the quarter ending September 30, 1997 the EBITDA shall be calculated based
upon the income and expenses of Borrower for the quarters ending June 30 and
September 30, 1997 times 2.
1.14 "CASH MANAGEMENT SERVICES" means that certain Cash Management
Services and Controlled Disbursement Service that may be provided by Bank to
Borrower from time to time.
1.15 "CHATTEL PAPER" means, in addition to the definition of chattel
paper as contained in the Uniform Commercial Code, a writing or writings which
evidence both a money obligation and a security interest in, or a lease of,
specific Goods. When a transaction is evidenced both by such a security
agreement or a lease and by an Instrument or series of Instruments, the group of
writings taken together constitutes Chattel Paper.
1.16 "COLLATERAL" means all of those present or future assets, real or
personal, of Borrower in which a security interest in or lien on is granted to
Lender hereunder or contemplated hereby, or under any other present or future
agreement by Borrower in favor of Lender or any Lender Affiliate.
1.17 "CONTINGENT OBLIGATIONS" shall mean, as to any Person, any
obligation of such Person guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (A) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (B) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (C) to
purchase property, securities or services primarily for the purpose of assuring
the beneficiary of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation, (D) for the obligations of a
partnership in which such Person is a general partner, or (E) otherwise to
assure or hold harmless the beneficiary of such primary obligation against loss
in respect thereof; provided, however, that the term Contingent Obligations
shall not include the endorsement of instruments for deposit or collection in
the ordinary course of business. The amount of any Contingent Obligation shall
be deemed to be an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent Obligation is made or, if
not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by Lender in good faith.
1.18 "DEBENTURE RESERVE AMOUNT" means the net of (A) Two Million and
no/100 Dollars ($2,000,000.00) minus (B) the principal amount of the
Subordinated Convertible Debentures as to which (i) the Borrower has hereafter
paid in full said Subordinated Convertible Debenture upon a demand for payment
thereunder having been made after August 21, 1998 by the holder thereof in
accordance with the terms hereof or (ii) the holder thereof has, pursuant to a
writing in from and substance satisfactory to Lender, extended (a) the maturity
date thereof and (b) the earliest date on which a demand for payment thereunder
can be made, to a date at least 90 days after the expiration of the Term of the
revolving credit facility provided for herein.
1.19 "DEFAULT" means an event of the nature specified in Article VIII
hereof and which, with the giving of notice or passage of time, or both, would
become an Event of Default.
1.20 "DOCUMENT(S)" shall have the meaning set forth in the Uniform
Commercial Code for such term.
1.21 "EBITDA" means at any date the sum of (A) Net Income,
excluding any extraordinary and nonoperating income, of a Person for the
preceding twelve (12) months plus (B) any interest, income taxes, depreciation,
amortization and other non-cash charges for such twelve (12) months to the
extent they were deducted from gross income to calculate Net Income.
1.22 "ELIGIBLE ACCOUNT" means an Account which has been due for less
than the Eligibility Period number of days from the date of issuance of the
invoice and is, in all other respects, acceptable to Lender, in its good faith
discretion but specifically, without limitation, excluding any Ineligible
Account.
1.23 "ELIGIBLE LOAN VALUE OF ELIGIBLE ACCOUNTS" means (A) prior to the
Loan Value Percentage Change Date, up to eighty (80%) percent of the face amount
of Eligible Accounts, less returns and discounts, offsets, contra balances,
credits or allowances of any nature, at any time issued, owing, granted or
outstanding, and (B) on and after the Loan Value Percentage Change Date, up to
eighty-five (85%) percent of the face amount of Eligible Accounts less returns
and discounts, offsets, contra balances, credits or all allowances of any
nature, at any time issued, owing, granted or outstanding.
1.24 "ELIGIBILITY PERIOD" shall mean ninety (90) days for all Accounts
other than (a) those owing from Account Debtors identified on Exhibit 1.24
annexed hereto as to which Accounts the Eligibility Period shall be one hundred
twenty (120) days or (b) those owing from any Account Debtor identified in a
writing hereafter executed and delivered by Lender and making reference to this
paragraph 1.24 as having an Eligibility Period of more than ninety (90) days as
to which Accounts the Eligibility Period shall be the number of days set forth
in said writing.
1.25 "ENVIRONMENTAL LAWS" means (A) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. 9601 et
seq. ("CERCLA"), as amended by the Superfund Amendment and Reauthorization Act
of 1986; (B) the Resource Conservation and Recovery Act of 1976, as amended (42
U.S.C. 6901 et seq.); (C) the Spill Compensation and Control Act (N.J.S.A.
58:10-23.11 et seq.), (D) the Industrial Site Recovery Act (N.J.S.A. 13:1K-6 et
seq.); (E) the Underground Storage Tanks Act (N.J.S.A. 58:10A-21 et seq.); and
(F) any and all other laws, regulations and executive orders, federal, state and
local, pertaining to environmental matters, as same may be amended or
supplemented from time to time.
1.26 "EQUIPMENT" means, in addition to the definition of equipment
contained in the Uniform Commercial Code, machinery and equipment of every kind,
nature and description, as well as trucks, vehicles of every nature and
description, including but not limited to trailers and the like, handling and
delivery equipment, cranes and hoisting equipment, fixtures, office machines and
furniture, whether affixed to realty or not.
1.27 "ERISA" means the Employee Retirement Income Security Act of 1974
as amended from time to time. 1.28 "EVENT OF DEFAULT" means an event of
the nature specified in Article VIII hereof 1.29 "EXPIRATION DATE"
means the expiration date of the revolving credit facility provided for
and
as set forth in paragraph 2.1 hereof or the date of termination of said
revolving credit facility pursuant to the terms hereof.
1.30 "FINANCIAL UNDERTAKING" of a Person means (i) any repurchase
obligation or liability of such Person or any of its Subsidiaries with respect
to Accounts or notes receivable sold by such Person or any of its Subsidiaries,
(ii) any sale and leaseback transaction which does not create a liability on the
consolidated balance sheet of such Person and its Subsidiaries, if any, (iii)
any other transaction which is the functional equivalent of or takes the place
of borrowing but which does not constitute a liability on the consolidated
balance sheet of such Person and its Subsidiaries, or (iv) any obligation under
any "swap agreement" (as defined in 11 U.S.C.ss.101) including any sums payable
upon termination of any such swap agreement.
1.31 "FIXED CHARGE COVERAGE RATIO" means at any date the ratio of
(A)(i) the EBITDA minus (ii) all unfunded Capital Expenditures and taxes paid
during the 12 months ending on said date divided by (B) the sum of (i) the
current portion of long-term debt paid or scheduled to be paid during the twelve
(12) months ending on such date plus (ii) the interest expense for the twelve
(12) months ending on said date. Notwithstanding the foregoing, with respect to
the fiscal quarters of Borrower ending through and including March 31, 1998
notwithstanding the definition of EBITDA and the foregoing (A) for the purpose
of calculating the Fixed Charge Coverage Ratio the EBITDA and taxes paid and
unfunded Capital Expenditures shall be calculated on a cummulative basis for the
fiscal quarters ending after March 31, 1997, (B) the current portion of
long-term debt shall be only that portion paid or scheduled to be paid during
the subject quarters, (C) the interest expense shall be for the subject
quarters, and (D) with respect to the proposed Capital Expenditures for new
computer hardware and software intended to improve the record keeping of Sureway
Air Traffic Corporation's Accounts Receivable, up to the aggregate cost of
$250,000.00 to the extent said Sureway Computer Capital Expenditures are
expended in one fiscal quarter rather than over three fiscal quarters as
projected by Borrower, for the purpose of calculating the Fixed Charge Coverage
Ratio said Sureway Computer Capital Expenditures shall be divided by three (3)
and deemed expended in three consecutive quarters.
1.32 "GAAP" means generally accepted accounting principles in effect
from time to time in the United States of America.
1.33 "GENERAL INTANGIBLES" shall mean all rights of Borrower as defined
in the Uniform Commercial Code including, but not limited to, all rights to
property, choses in action and other rights of Borrower not otherwise
specifically included elsewhere in this Agreement, further including but not
limited to all present and future trademarks, trade names, service marks,
copyrights and patents, tax refunds and all rights under license agreements for
the use of same, and all rights of Borrower under any and all leases of personal
property and all rights of Borrower under all franchise agreements including all
rights of Borrower in all Accounts Receivable generated by services performed by
franchisees.
1.34 "GOODS" means, in addition to the definition of goods as contained
in the Uniform Commercial Code, all articles of tangible personal property,
sold, supplied, leased or otherwise disposed of, represented by an Account.
1.35 "GOVERNMENTAL BODY" means any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of, or pertaining
to government or any court or arbitrator.
1.36 "INDEBTEDNESS" means, as to any Person, at a particular time, all
items which, in accordance with GAAP, would be classified as liabilities on a
balance sheet of such Person as at such time and which constitute, without
duplication, (A) Indebtedness for borrowed money or the deferred purchase price
of Property (other than credit extended to such Person for the purchase of goods
in the ordinary course of business to the extent the same would not otherwise
constitute Indebtedness), (B) indebtedness evidenced by notes, bonds, debentures
or similar instruments, (C) obligations under leases which, in accordance with
GAAP, are required to be capitalized on a balance sheet, (D) obligations under
conditional sales or other title retention agreements, (E) indebtedness arising
under letter of credit (both documentary and standby) and acceptance facilities
and the face amount of all letters of credit issued for the account of such
Person and, without duplication, all drafts drawn thereunder to the extent such
Person shall not have reimbursed the issuer in respect of the issuer's payment
of such drafts, (F) all liabilities secured by any Lien on any property owned by
such Person even though such Person has not assumed or otherwise become liable
for the payment thereof and liens for taxes, assessments or similar charges
incurred in the ordinary course of business to the extent such liens are
Permitted Encumbrances, (G) mandatory obligations of such Person to redeem or
purchase Stock or to purchase or repay Indebtedness, (H) Contingent Obligations
of such Person in respect of any of the foregoing, and (I) any Financial
Undertaking of a Person.
1.37 "INELIGIBLE ACCOUNTS" means those Accounts as to which any of
the following has occurred:
(A) a portion of the Goods or services giving rise to the
Account are returned, rejected, repossessed, lost or damaged;
(B) the Account Debtor disputes said Account;
(C) the termination of existence, insolvency, business failure
or suspension of business or appointment of a custodian, receiver or trustee of
any part of the property of, the making of an assignment for the benefit of
creditors of, calling of a meeting of the creditors of, or the commencement of
any Bankruptcy, liquidation, reorganization or similar proceeding under state or
federal law against the Account Debtor;
(D) more than twenty-five (25%) percent of the aggregate
Accounts due from the Account Debtor remains unpaid past the applicable
eligibility periods set forth in the definition of Eligible Account;
(E) the Account is due from an employee, stockholder,
Affiliate or Subsidiary of Borrower; (F) any of the
representations set forth in Paragraph 5.9 are untrue with
respect to said Account; (G) Borrower has failed with respect
to said Account to comply with the requirements of
Paragraph 6.9 hereof;
(H) the Account arises out of a contract with any Governmental
Body unless, if required by Lender, all filings have been made under the Federal
Assignment of Claims Act or comparable state or other statute as may be required
by the Lender with regard to said Account;
(I) the Goods giving rise to said Account are subject to any
"bill and hold" or similar arrangements, have been sold on approval or
consignment or sale or return basis, or under a repurchase or similar agreement;
(J) the Account Debtor does not meet credit standards
acceptable to Lender in its good faith discretion;
(K) the Account is not payable in United States Dollars or the
Account Debtor is located outside the United States except those Accounts which
are supported by foreign credit insurance or Letters of Credit satisfactory to
and assigned to Lender;
(L) the Account Debtor is located in Minnesota or other
jurisdiction which requires a Notice of Business Activities Report or similar
report to be filed by Borrower, and Borrower has not filed for the then current
year the required report or is not otherwise authorized to transact business in
said jurisdiction;
(M) because of the nature of Borrower's ownership of assets or
conduct of business, Borrower is required by applicable law to be authorized to
do business in the jurisdiction where the Account Debtor is located and Borrower
is not so authorized;
(N) the Account is subject to any offset, counterclaim or
other claim or defense on the part of the Account Debtor;
(O) the Account is subject to a Lien in favor of any Person
other than Lender; (P) the Account is not a good and valid
Account, representing an undisputed bona fide
indebtedness incurred by the Account Debtor therein named, for a fixed sum as
set forth in the invoice relating thereto with respect to an absolute sale and
delivery, upon the stated terms, of Goods sold and delivered, or services
actually rendered, by Borrower;
(Q) the Account is otherwise unacceptable to Lender in its
good faith discretion;
(R) the Account arises out of a contract or purchase order
for which a surety bond was issued on behalf of Borrower;
(S) a Letter of Credit has been issued to Borrower to secure
payment of such Account unless (i) the issuer of such Letter of Credit is
acceptable to Lender, in its good faith discretion (ii) the original Letter of
Credit has been delivered to Lender, and (iii) the Letter of Credit has been
transferred to Lender and Lender is the beneficiary or the Person issuing the
Letter of Credit has been notified in writing of the assignment by Borrower to
Lender of the proceeds of the Letter of Credit and to make payment of such
proceeds to Lender;
(T) a credit insurance policy has been issued in favor of
Borrower covering the Account unless (i) the issuer of such credit insurance
policy is acceptable to Lender in its good faith discretion, and (ii) the Lender
is a beneficiary under such policy; or
(U) The Account arises from services performed by a franchisee
of Borrower unless and until Borrower furnishes to Lender evidence that each of
the following conditions have been met:
(i) the franchisee has executed and delivered to Borrower an
assignment of billing and receivables in the form annexed hereto as Exhibit
1.37, or such other form as Lender may reasonably approve,
(ii) Borrower has filed such UCC-1 financing statements as may
be appropriate to perfect Borrower's interest in the Accounts generated by such
franchisee,
(iii) Borrower has executed and delivered to Lender UCC-3
statements of assignment, assigning to Lender all of Borrower's rights under the
UCC-1 financing statements filed against the franchisee, and
(iv) Borrower has conducted such UCC and other searches as may
be appropriate to determine no Liens or other interests exist in the Accounts
arising from the services of such franchisee, other than the interest of
Borrower therein.
1.38 "INVENTORY" means, in addition to the definition of inventory as
contained in the Uniform Commercial Code, all Goods held by Borrower for resale
or lease or furnished or to be furnished under contracts of service, and shall
include raw materials, goods and work in process and finished goods, and all
goods returned by or reclaimed from customers.
1.39 "INSTRUMENT" means, in addition to the definition of instrument as
contained in the Uniform Commercial Code, a negotiable instrument or a security,
or any other writing which evidences a right to the payment of money and is not
itself a security agreement or lease and is of the type which is, in the
ordinary course of business, transferred by delivery with any necessary
endorsement or assignment.
1.40 "INTEREST PERIOD" means with respect to each Libor Loan, the
period commencing on the date such Advance commences to be a Libor Loan as
elected by the Borrower and ending one, two or three or six months thereafter as
Borrower may elect in the applicable interest rate request and thereafter, each
period commencing on the last day of the immediately preceding Interest Period
and ending one, two or three or six months thereafter as selected by the
Borrower, but in no event after the Expiration Date; subject, however, to the
following provisions: (i) if any Interest Period would otherwise end on a day
which is not a New York business day, that Interest Period shall be extended to
the next succeeding New York business day unless the result of such extension
would be to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the immediately preceding New York
business day; (ii) any Interest Period that begins on the last New York business
day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last New York business day of a calendar month; and (iii) if
the Borrower selects an Interest Period which would otherwise end after the
Expiration Date, the duration of such Interest Period shall be shortened to one
or two or three months such that the end of such Interest Period shall occur
prior to or of even date with the Expiration Date.
1.41 "INTEREST RATE AND FEE CASH FLOW LEVERAGE RATIO" means at any date
the ratio of (A) Total Funded Debt divided by (B) the EBITDA, said ratio to be
calculated quarterly based upon the financial statements of Borrower to be
furnished to Lender hereunder;
1.42 "INVESTMENT OBLIGATIONS" means any of the following: (A)
Obligations of or guaranteed by the United States of America; (B) Obligations
issued or guaranteed by any instrumentality or agency of the United States of
America, whether now existing or hereafter organized; (C) Obligations issued or
guaranteed by any state of the United States or the District of Columbia; (D)
Repurchase agreements fully secured by obligations of a kind specified in (A),
(B) or (C) above; (E) Interest-bearing accounts, certificates of deposit,
bankers acceptances or commercial paper of Lender or any Lender Affiliate and
investments in the Evergreen Funds; (F) Certificates of deposit of United States
Lenders having a ratio of Tier 1 capital of not less than six percent (6%) and
then in an amount not exceeding 10% of the issuing Lender's unimpaired capital
and surplus. "Tier 1 capital" shall be defined from time to time pursuant to
regulations published by the Office of the Comptroller of the Currency and the
Federal Deposit Insurance Corporation.
1.43 "LENDER" means First Union Commercial Corporation, its successors
and assigns.
1.44 "LENDER AFFILIATE" means First Union Corporation, its successor
and assigns, and any of its direct and indirect Affiliates and Subsidiaries.
1.45 "LETTER OF CREDIT" means a letter of credit issued in favor of
Borrower to secure payment of the sale of goods or of any Account or other
obligation due or to become due to Borrower.
1.46 "LIBOR" means, with respect to each day during each Interest
Period, the rate (rounded to the next higher 1/100 of 1%) for U.S. dollar
deposits of a one, two, three or six month maturity equivalent to the period
selected by the Borrower as the Interest Period as reported on Telerate page
3750 as of 11:00 a.m., London time, on the second London business day before the
relevant Interest Period begins (or if not so reported, then as determined by
the Lender from another recognized source or interbank quotation), adjusted for
reserves by dividing that rate by 1.00 minus the Libor Reserve. Notwithstanding
the foregoing, if the Borrower has hedged the Libor based rate by entering into
an interest rate swap agreement with Lender, Libor shall be rounded five decimal
places in accordance with the 1991 ISDA Definitions published by the
International Swaps and Deriviates Association, Inc.
1.47 "LIBOR LOAN" means each Advance on which interest thereon is in
accordance with the terms of this Agreement, based on Libor.
1.48 "LIBOR MARGIN" means (A) initially two percent (2%) and (B)
hereafter a percentage set forth below determined by reference to the Interest
Rate and Fee Cash Flow Leverage Ratio of the Borrower on a consolidated basis,
with adjustments to be made on the dates and as set forth in paragraph 2.2(D)
hereof:
Interest Rate & Fee
Cash Flow Leverage Ratio Margin
greater than 4.50 to 1.0 2.00%
4.50 - 3.01 to 1.0 1.875%
less than 3.01 to 1.0 1.50%
1.49 "LIBOR RESERVE" means the maximum percentage reserve requirement
(rounded to the next higher 1/100 of 1% and expressed as a decimal) in effect
for any day during the Interest Period under the Federal Reserve Board's
Regulation D for Eurocurrency liabilities as defined therein.
1.50 "LIEN" means any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority, or other security agreement, or
preferential arrangement, charge, or encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing) and the filing of any financing statement under
the Uniform Commercial Code (or comparable law) of any jurisdiction to evidence
any of the foregoing.
1.51 "LOAN DOCUMENTS" means this Agreement, all notes, mortgages or
other documents executed and delivered by Borrower or any Obligor hereunder, and
any amendments, renewals, modifications or supplements thereto, or substitutions
therefor from time to time.
1.52 "LOAN VALUE PERCENTAGE CHANGE DATE" means that date that Borrower
has furnished to Lender (A) the annual audited financial statements of the
Borrower for the year ending December 31, 1997 and which indicate that Borrower
has achieved a Net Income, exclusive of extraordinary and nonoperating income,
of at least $884,000.00 for the fiscal year ending December 31, 1997, and (B)(i)
written evidence satisfactory to Lender in its good faith discretion
demonstrating that Borrower has improved certain internal procedures with
respect to collection of Accounts Receivable and other accounting matters as
discussed between Lender and Borrower, or (ii) Borrower furnishes to Lender the
management letter by Arthur Anderson LLP accompanying Borrowers financial
statement for the years ending December 31, 1997 which is satisfactory to Lender
in the good faith exercise of its discretion.
1.53 "LONDON BUSINESS DAY" means a day on which commercial banks
are open for dealings in U.S. Dollar deposits in the London (England, U.K.)
interbank market.
1.54 "MATERIAL ADVERSE CHANGE" means, as to a Person, a material
adverse change in the financial condition, operations, business, prospects or
property of such Person.
1.55 "MATERIAL ADVERSE EFFECT" means, as to a Person, a material
adverse effect on the financial condition, operations, business, prospects or
property of such Person.
1.56 "NET INCOME" means the net after tax income of a Person
determined in accordance with GAAP.
1.57 "OBLIGATION" or "OBLIGATIONS" means any and all loans, advances
and other financial accommodations made by Lender or any Lender Affiliate prior
to, on and after the date of this Agreement to, or on the account of Borrower,
and any and all interest, fees, late fees, attorney's fees and costs,
commissions, obligations, liabilities, indebtedness, charges and expenses,
direct or indirect, primary, secondary, contingent, joint or several which are
due or to become due or that may hereafter be contracted or acquired of Borrower
to Lender or any Lender Affiliate, no matter how or when arising and whether
under any present or future Loan Agreement or other agreement or instrument
between Borrower and Lender or any Lender Affiliate, including "swap agreements"
(as defined in 11 U.S.C. ss.101) or otherwise, and the amount due or to become
due upon any notes, reimbursement agreement or other obligations given to, or
received by, Lender or any Lender Affiliate or on account of any of the
foregoing and the performance and fulfillment by Borrower of all the terms,
conditions, promises, covenants and provisions contained in the Loan Documents,
or in any future agreement or instrument between Borrower and Lender or any
Lender Affiliate.
1.58 "OBLIGOR" means the Borrower hereunder, all sureties and
guarantors, if any, and, if any debt due to Lender hereunder is evidenced by a
note or other instrument, the makers and endorsers thereof.
1.59 "PAYMENT DATE" means (A) with respect to Prime Rate Loans the
first day of each month, and (B) with respect to Libor Loans the last day of the
Interest Period provided that if the Interest Period is six months Payment Date
shall mean the last day of the third month of the Interest Period and the last
day of the Interest Period.
1.60 "PERMITTED ENCUMBRANCES" means (A) Liens for taxes, assessments or
governmental charges or levies on property of Borrower if the same shall not at
the time be delinquent or thereafter can be paid without penalty, or are being
diligently contested in good faith and by appropriate proceedings and against
which Borrower has established adequate reserves, (B) Liens imposed by law, such
as carriers, warehousemen and mechanics Liens, and Liens incurred in connection
with construction or other similar Liens arising in the ordinary course of
business provided same are not at the time due and payable, (C) Liens arising
out of pledge or deposits under workers compensation law, unemployment
insurance, old age pension or other social security or retirement benefit or
similar legislation, (D) Liens arising from judgments or awards with respect to
which Borrower shall be diligently and in good faith prosecuting an appeal or
proceedings for review and shall have secured a stay of execution pending such
appeal or review, (E) Liens in favor of Lender or any Lender Affiliate, (F) the
existing and future purchase money security interests in items of Equipment and
(G) the existing liens on specific assets of Borrower as identified on Exhibit
1.60 annexed hereto.
1.61 "PERMITTED INDEBTEDNESS" means (A) Indebtedness to Lender or any
Lender Affiliate, (B) Subordinated Debt consented to in writing by Lender
including the Indebtedness under the Subordinated Convertible Debentures, (C)
the Seller Indebtedness, (D) purchase money Indebtedness incurred with respect
to the purchase of items of equipment or under Capital Leases of items of
Equipment provided said Indebtedness incurred in each year does not exceed the
maximum per annum Capital Expenditures permitted hereunder and (E) guarantees by
a Borrower of the obligations of another Borrower to third persons.
1.62 "PERSON" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, entity, party or government (whether national, federal, state,
county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
1.63 "PLAN" means an employee benefit plan or other plan maintained for
employees of Borrower and covered by Title IV of ERISA.
1.64 "PRIME RATE" means the rate of interest established by Bank from
time to time as its reference rate in making loans but which does not reflect
the rate of interest charged to any particular Person and is not tied to any
external rate of interest or index. The rate of interest charged hereunder shall
change automatically and immediately as of the date of each change in the Prime
Rate without prior notice to Borrower. Lender shall endeavor to notify Borrower
of changes in the Prime Rate but the failure to so notify Borrower shall not
preclude a change in the interest rate on the loans provided for herein from
being effective on the date of changes in the Prime Rate.
1.65 "PRIME RATE LOANS" means each Advance on which interest thereon is
in accordance with the terms of this Agreement based on the Prime Rate.
1.66 "PRIME RATE MARGIN" means (A) initially one quarter of one percent
(.25%) and (B) hereafter a percentage set forth below determined by reference to
the Interest Rate and Fee Cash Flow Leverage Ratio of the Borrower on a
consolidated basis, with adjustments to be made on the dates and as set forth in
paragraph 2.2(D) hereof:
Interest Rate & Fee
Cash Flow Leverage Ratio Margin
greater than 4.50 to 1.0 .25%
4.50 - 3.01 to 1.0 00%
less than 3.01 to 1.0 minus .25%
1.67 "REPORTABLE EVENT" has the meaning assigned to such term in Title
IV of ERISA, or regulations issued thereunder other than a Reportable Event not
subject to the provision for a thirty (30) day notice to the Pension Benefit
Guaranty Corporation under such regulations.
1.68 "SELLER INDEBTEDNESS" means the Indebtedness of Borrower
identified on Exhibit 5.20 annexed hereto arising from the purchase by Borrower
of assets of third Persons.
1.69 "SUBORDINATED CONVERTIBLE DEBENTURES" means those certain 8%
Subordinated Convertible Debentures due 2000 of Consolidated Delivery &
Logistics, Inc. dated September 14, 1995, the holders thereof and the principal
amount thereof being identified in Exhibit 5.19 annexed hereto.
1.70 "SUBORDINATED DEBT" means all Indebtedness of a Person permitted
by this Agreement or any other Loan Document and which is subordinated to
payment in full of all Obligations of such Person to Lender pursuant to a debt
subordination agreement or subordination provisions therein in form and
substance satisfactory to Lender.
1.71 "SUBSIDIARY" means any corporation of which more than fifty (50%)
percent of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether,
at the time, stock of any other class or classes of such corporation shall have
or might have voting power by reason of the happening of any contingency) is at
the time, directly or indirectly, owned by Borrower or any Obligor or one or
more Subsidiaries.
1.72 "TANGIBLE CAPITAL FUNDS" means the Tangible Net Worth of a Person
plus the outstanding principal amount of all Subordinated Debt.
1.73 "TANGIBLE NET WORTH" means Total Assets, less (without limitation
and without duplication of deductions) the sum of (A) Total Liabilities of a
Person, (B) any reserves established by a Person for anticipated losses or
expenses, (C) the amount, if any, of all intangible items including any
leasehold rights, the amount of any investment in any Affiliate or other entity
including a Subsidiary, good will (including any amounts, however designated on
the balance sheet, representing the cost of acquisition of business and
investments in excess of underlying tangible assets), trademarks, trademark
rights, trade name rights, copyrights, patents, patent rights, licenses,
unamortized debt discount, marketing expenses and customer and/or mailing lists
and (D) all amounts due from employees, stockholders, Affiliates and
Subsidiaries.
1.74 "TERM" means the period from the date hereof through and including
the later of (A) the Expiration Date and (B) the payment and performance in full
of the Obligations.
1.75 "TOTAL ASSETS" means, at any date, the amount shown on the books
and records of a Person, determined in accordance with GAAP, of all property,
both real and personal, of a Person.
1.76 "TOTAL FUNDED DEBT" means all Indebtedness of the Borrower,
including without limitation the Obligations of Borrower to Lender, the
Indebtedness under the Subordinated Convertible Debentures, the Seller
Indebtedness and under Capital Leases.
1.77 "TOTAL LIABILITIES" means, at any date, the amount of all
liabilities which, in accordance with GAAP, should be included in determining
total liabilities as shown on a liability side of a balance sheet of a Person at
such date.
1.78 "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as
adopted and in effect under the laws of the State of New Jersey.
1.79 "UNUSED COMMITMENT FEE RATE" means (A) initially one half of one
percent (.50%) and (B) hereafter a percentage set forth below determined by
reference to the Interest Rate and Fee Cash Flow Leverage Ratio of the Borrower
on a consolidated basis, with adjustments to be made on the dates and as set
forth in paragraph 2.2(D) hereof:
Interest Rate & Fee Cash Flow Leverage Ratio Rate
-------------------------------------------- ----
greater 4.50 to 1.0 .50%
4.50 to 3.01 to 1.0 .375%
less than 3.01 to 1.0 .25%
1.80 "INTERPRETATION AND CONSTRUCTION"
(a) The terms "hereby," "hereof," "hereto," "herein,"
"hereunder" and any similar terms, as used in this Agreement, refer to this
Agreement in its entirety and not any particular Article or paragraph, and the
term "hereafter" means after, and the term "heretofore" means before, the date
of delivery of this Agreement;
(b) Words importing a particular gender mean and include every
other gender, and words importing the singular number mean and include the
plural number and vice versa.
(c) All financial tests shall be applied only to the Borrower
on a consolidated basis.
II
LOANS
2.1 REVOLVING CREDIT FACILITY
(A) Facility. So long as no Default nor Event of Default exists,
Lender shall, from time to time hereafter, through the Expiration Date, lend to
Borrower such amounts as the Borrower may from time to time request, based upon
the Eligible Loan Value of Eligible Accounts Receivable as may exist from time
to time, but not to exceed the Borrowing Base, and as may be reported by
Borrower to Lender on a borrowing base report in the form of Exhibit 2.1 which
is to be submitted by Borrower to Lender by Tuesday of each week and as of the
close of business of the preceeding Friday. Lender shall have the right, from
time to time, in the good faith exercise of its discretion, upon at least five
(5) days prior notice to Borrower, to alter the percentages of the Eligible Loan
Value of Eligible Accounts and/or to establish reserves against Eligible
Accounts. Each month Lender may render to Borrower a statement of the status of
the loans provided for herein, which Borrower hereby agrees shall be deemed to
be an account stated and correct and acceptable to and binding on Borrower
unless Lender shall receive a corrected statement of exceptions from Borrower
within thirty (30) days after the monthly statements have been rendered to
Borrower. The revolving credit facility provided for herein shall have a Term
through July 31, 1999. All such loans shall be payable on the Expiration Date or
as otherwise set forth in this Agreement and shall be evidenced by a promissory
note in the form of Exhibit 2.1 annexed hereto. Notwithstanding the expiration
of the Term, the rights of Lender hereunder and the obligations of Borrower
hereunder, including any Obligations with respect to loans and other financial
accommodations made after the Expiration Date, further including but not limited
to the grant of security interests in and Liens on the Collateral as set forth
in Article III hereof, shall remain in full force and effect until all of the
Obligations of Borrower to Lender and each Lender Affiliate are satisfied in
full.
(B) Interest on Advances.
(i) The Borrower agrees to notify the Lender orally or in
writing, by 11:00 a.m. local time, at least two (2) Business Days (with respect
to Libor Loans) prior to each date it requests interest on the Advances, or a
portion thereof, to be based on Libor. Each such notice shall be irrevocable and
confirmed immediately by delivery to the Lender of a Libor rate request. Each
Libor rate request shall specify:
(a) the date from which interest is to accrue based
on Libor, which shall be a London Business Day;
(b) the aggregate amount of Advances on which interest
is to be based on Libor; and
(c) the duration of the Interest period applicable
thereto.
(ii) No more than three (3) Interest Periods with respect
to Libor Loans shall be outstanding at any time.
(iii) All Libor Loans shall be in the principal amount of Two
Hundred Fifty Thousand and 00/100 ($250,000.00) Dollars or an integral multiple
thereof.
(iv) On all Advances as to which Borrower has not, in
accordance with the foregoing, selected to have interest based on Libor,
interest shall be based on the Prime Rate as set forth in subparagraph (C)(i)
below.
(C). Interest Rate and Payment Dates
(i) Each Prime Rate Loan shall bear interest on the daily
outstanding principal amount thereof for each day such Prime Rate Loan is
outstanding at a rate per annum equal to the Prime Rate in effect from time to
time plus the Prime Rate Margin. Such interest shall be payable in arrears on
each Payment Date.
(ii) Each Libor Loan shall bear interest for each Interest
Period applicable thereto, on the daily outstanding principal amount thereof, at
a rate per annum equal to Libor plus the Libor Margin. Interest shall be payable
in arrears for each Interest Period on each Payment Date.
(D) Conversion and Continuation Options.
(i) The Borrower may elect from time to time to convert a
Libor Loan to a Prime Rate Loan by giving the Lender at least one (1) Business
Day's prior irrevocable notice of such election, provided that conversion of a
Libor Loan to a Prime Rate Loan shall only be made on the last day of an
Interest Period with respect thereto. The Borrower may elect from time to time
to convert a Prime Rate Loan to a Libor Loan, in each case by giving the Lender
by 11:00 a.m. local time at least two (2) Business Days' prior irrevocable
notice of such election. Each notice to be given by the Borrower pursuant to
this paragraph, shall be confirmed by delivery to the Lender of a written
notice, which shall specify:
(a) the date on which such rate conversion shall
take effect; (b) the aggregate amount of the Advances
to be converted on such date; (c) whether the
Advances to be converted are Libor Loans, or Prime
Rate Loans; (d) whether the Advances, after
conversion, will be Libor Loans or PrimRate Loans;
and (e) in the case of a Libor Loan, the duration of
the Interest Period applicable thereto.
All or any part of the outstanding principal of a Libor Loan, or a
Prime Rate Loan, may be converted as provided herein, provided that partial
conversions shall be in an aggregate principal amount of a minimum of Two
Hundred Fifty Thousand ($250,000.00) Dollars or an integral multiple thereof.
(ii) A Libor Loan may be continued as such upon the
expiration of an Interest Period with respect thereto by compliance by the
Borrower with the notice provisions contained in this paragraph, provided that a
Libor Loan may not be continued as such when any Event of Default has occurred
and is continuing, but shall be automatically converted to a Prime Rate Loan on
the last day of the subject Interest Period.
(iii) If the Borrower shall fail to give notice to convert or
continue a Libor Loan in the manner required by paragraphs (i) or (ii) above,
the Borrower shall be deemed to have elected to convert the Libor Loan to a
Prime Rate Loan on the last day of the Interest Period applicable thereto;
(E) Prepayment. Prime Rate Loans may be prepaid in whole or in part,
at any time without premium or penalty. Libor Loans may be prepaid, in whole or
in part, only on the last day of an Interest Period; provided, however, that any
partial prepayments shall be in a principal amount of not less than $250,000.00,
or multiples thereof. Any prepayment shall include accrued and unpaid interest
to the date of prepayment on the principal amount prepaid and all other sums due
and payable hereunder. All payments received on the Advances may be applied in
such order as the Lender in its sole discretion shall determine.
(F) Indemnification. The Borrower shall indemnify the Lender against
the Lender's loss or expense in employing deposits as a consequence of (i) the
Borrower's failure to make any payment when due under the Advances constituting
a Libor Loan, or (ii) any prepayment of a Libor Loan on a date other than the
last day of the applicable Interest Period ("Indemnified Loss or Expense").
(G) Additional Costs. If, at any time, a new, or a revision in any
existing law or interpretation or administration (including reversals) thereof
by any government authority, central bank or comparable agency imposes,
increases or modifies any reserve or similar requirement against assets,
deposits or credit extended by lenders generally, or subjects lenders generally
to any tax, duty or other charge (except tax on the Lender's net income), and
any of the foregoing increases the cost to the Lender of maintaining its
commitment to provide Libor Loans or reduce the amount of any sum received or
receivable by the Lender under the Advances which are Libor Loans, within 15
days after demand by the Lender, the Borrower agrees to pay the Lender such
additional amounts as will compensate the Lender for such increased costs or
reductions ("Additional Costs").
(H) Match Funding. The amount of such (i) Indemnified Loss or Expense,
or (ii) Additional Costs outlined above shall be determined, in the Lender's
sole discretion, based upon the assumption that the Lender funded 100% of that
portion of the Advances to which the Libor-based rate applies in the applicable
London interbank market.
(I) Unavailability of Interest Rate. If, at any time, (i) the Lender
shall determine that, by reason of circumstances affecting foreign exchange and
interbank markets generally, Libor deposits in the applicable amounts are not
being offered to the Lender or Bank; or (ii) a new, or a revision in any
existing law or interpretation or administration (including reversals) thereof
by any government authority, central bank or comparable agency shall make it
unlawful or impossible for the Lender to honor its obligations under the
Advances, then (A) the Lender's obligation, if any, to make or maintain a Libor.
Loan shall be suspended, and (B) at the Lender's discretion the applicable
Libor-based rate shall, for the remainder of the term of the Loan, immediately
be converted to the Prime Rate plus the Prime Rate Margin, but if so converted
the indemnification obligation of Borrower under (F) above shall not apply.
2.2 PAYMENT AND COMPUTATION AND ADJUSTMENTS IN MARGINS
(A) Business Day. Whenever any payment to be made hereunder or
under any note issued hereunder shall be stated to be due on other than a
Business Day, such payment may be made on the next succeeding Business Day,
unless such Business Day falls in the next succeeding calendar month, in which
case, such payment shall be made on the next preceding Business Day. Any such
alteration of time shall, in such case, be included in the computation of
payment of interest. All payments (including prepayments) made by Borrower on
account of principal of or interest on the loans hereunder shall be made without
set-off or counterclaim and shall be made prior to 3:00 p.m. (New York City
time) on the date such payment is due, to Lender, in each case in lawful money
of the United States of America and in immediately available funds. The failure
of Borrower to make any such payment by 3:00 p.m. (New York City time) on such
due date shall not constitute a Default or Event of Default hereunder, provided
that such payment is made on such due date, but any such payment received by
Lender on any Business Day after 3:00 p.m. (New York City time) shall be deemed
to have been received on the immediately succeeding Business Day for the purpose
of calculating any interest payable in respect thereof.
(B) Debiting of Account. The Borrower agrees to maintain an
account at the Bank continuously until the Obligations owing hereunder are paid
in full. That account is account #____________________ (the "Deposit Account").
The Lender may, and the Borrower authorizes the Bank to, debit the Deposit
Account for the amount of any payment as and when such payment becomes due
hereunder and to remit same to Lender. Notwithstanding the foregoing, if there
are insufficient funds in the Deposit Account to make said payment, and Borrower
has otherwise failed to make said payment, including by the authorization under
(F) below, the Lender and any Lender Affiliate may, and the Borrower authorizes
the Lender and any Lender Affiliate to, debit any other account and/or
certificate of deposit maintained by the Borrower with the Lender or any Lender
Affiliate for the amount of any payment, as and when such payment becomes due
hereunder, whether such payment is for accrued interest, principal or expense
and to remit same to Lender, even if debiting such account results in a loss or
reduction of interest to the Borrower or the imposition of a penalty applicable
to the early withdrawal of time deposits. Such authorization shall not affect
the Borrower's obligation to pay when due all amounts payable hereunder, whether
or not there are sufficient funds in any accounts of the Borrower. The foregoing
rights of the Lender and each Lender Affiliate to debit the Borrower's accounts
shall be in addition to, and not in limitation of, any rights to make Advances
or of set-off which the Lender and/or any Lender Affiliate may have hereunder or
under any Loan Document.
(C) Computation. Interest and any fees or compensation based upon a per
annum rate shall be calculated on the basis of a 360 day year for the actual
number of days elapsed.
(D) Adjustments. The Prime Rate Margin and the Libor Margin and the
Unused Commitment Fee Rate shall be calculated based upon the quarterly
financial statements of Borrower on a consolidated basis to be furnished to
Lender in accordance with the terms hereof and shall be adjusted as of the first
day of the month following the month in which such financial statements and the
required accompanying compliance certificates are furnished by Borrower to
Lender provided there are at least five (5) Business Days between the date same
are so furnished to Lender and the first day of the following month. If there is
less than five (5) Business Days said margins and rate shall be adjusted as of
the sixth (6th) Business Day following the date said financial statements are
furnished to Lender. Subject to paragraph 9.7 hereof, if said quarterly
financial statements and compliance certificate are not furnished to Lender
within the time period set forth in paragraph 6.1 hereof, the margins and rate
shall be the highest such margin and rate until said financial statements and
certificate are furnished to Lender.
(E) Notwithstanding any adjustment in the Libor Margin as set forth in
(D) above, the interest rate on a Libor Loan shall not be adjusted downward as
to said Libor Loan during the middle of the applicable Interest Period, but
shall be adjusted upward to the applicable margin for the remainder of the
Interest Period if there is an upward adjustment in the Libor Margin as a
consequence of the calculation of the Interest Rate and Fee Cash Flow Coverage
Ratio.
(F) Borrower hereby irrevocably requests and authorizes Lender to make
Advances hereunder to the extent of any fees set forth in paragraphs 2.3 hereof
or interest due from time to time under this Agreement or any other Loan
Documents and to apply the proceeds of such Advances to such fees or interest.
The foregoing shall not obligate Lender to make any such Advances and Borrower
shall remain obligated to pay said fees and interest when due.
2.3 FEES
(A) Unused Commitment Fee. On the first Business Day of each month
hereafter, Borrower shall pay to Lender a commitment fee equal to Unused
Commitment Fee Rate on a per annum basis, of the daily average undisbursed
portion of the Advance Dollar Limit of the revolving credit facility under
paragraph 2.1 hereof for the prior month.
(B) Facility Fee. Contemporaneous with the execution hereof Borrower
shall pay to Lender the unpaid portion of a facility fee of $37,500.00.
(C) Examination Fee. If from time to time Lender, in accordance with
its rights hereunder, examines or inspects the books and records of Borrower
and/or Collateral, Borrower shall upon the demand of Lender pay to Lender an
examination fee of $500.00 per Person for each day a Person who is employed by
Lender or a Lender Affiliate engages in such examination, plus all other
out-of-pocket expenses, including but not limited to travel expenses, incurred
by Lender in connection therewith. If Lender engages an outside firm to conduct
such examination, Borrower shall pay to Lender upon demand the actual out of
pocket reasonable costs and expenses incurred by Lender in having said
examination conducted, such payment to be make within ten (10) days of the
submission of an invoice from Lender detailing the costs and expenses.
Notwithstanding the foregoing provided no Default or Event of Default exists
hereunder Borrower shall not be obligated to pay for more than four (4) such
examinations or inspections per annum.
(D) Late Charge. If any payment hereunder is not paid in full when the
same is due, the Lender may collect from the Borrower a fee on such unpaid
amount equal to five percent (5%) of such amount.
2.4 PREPAYMENT AND EARLY TERMINATION (A) If on any day the sum of the
aggregate outstanding principal balance of the loans under paragraph 2.1 hereof
shall exceed the Borrowing Base, Borrower shall, on such day, prepay such loans
by an amount equal to such excess. Any mandatory prepayment under this paragraph
shall be applied first to Prime Rate Loans, and second to Libor Loans, and as to
Libor Loans, if more than one (1) Interest Period is in effect, then to such
Libor Loans in the order of the Interest Periods with the shortest remaining
number of days. Notwithstanding the foregoing after all then outstanding Prime
Rate Loans are satisfied as a consequnce of such application of prepayments, any
excess prepayments shall be applied as follows:
(i) the next Two Million Dollars ($2,000,000.00) of prepayments, or
such greater amount as Lender may agree to, shall be credited to an account (the
"Collateral Account") to be established with Bank or other Lender Affiliate,
which Collateral Account shall be subject to a Lien in favor of Lender as
additional security for the Obligations, and
(ii) all prepayments in excess of said Two Million Dollars
($2,000,000.00) may be applied to Libor Loans as set forth above.
On the expiration date of any Interest Period, there shall be withdrawn
from the Collateral Account an amount equal to the Libor Loan which has the
Interest Period so expiring and said amount shall be applied to payment of said
Libor Loan. If after any monies are so credited to the Collateral Account the
Borrower obtains any Prime Rate Loans, these shall be withdrawn from the
Collateral Account an amount equal to said Prime Rate Loans with said amount
applied to payment of said Prime Rate Loans.
(B) Each loan hereunder bearing interest at a floating rate
based upon the Prime Rate, in effect from time to time, may be voluntarily
prepaid, in whole or in part, at any time without premium or penalty. Libor
Loans may be prepaid only on the last day of the applicable Interest Period.
(C) Early Termination Fee. If the revolving credit facility is
terminated by Lender upon the occurrence of an Event of Default, or is
terminated by Borrower prior to the Expiration Date or if Borrower prepays said
facility prior to said Expiration Date, in view of the impracticability and
extreme difficulty of ascertaining actual damages and by mutual agreement of the
parties as to a reasonable calculation of Lender's lost profits as a result
thereof, Borrower shall pay Lender upon the effective date of such termination
or prepayment a fee in an amount equal to: (a) one percent (1.0%) of the Advance
Dollar Limit if such termination occurs on or prior to the first (1st)
anniversary of the commencement date of the Term; or (b) one half of one percent
(.5%) of the Advance Dollar Limit if such termination occurs after the first
(1st) anniversary of the commencement date of the Term. Such fee shall be
presumed to be the amount of damages sustained by Lender as the result of an
early termination and Borrower acknowledges that it is reasonable under the
circumstances currently existing. The fee provided for in this Section shall be
deemed included in the Obligations.
2.5 PROCEDURES FOR ADVANCES On each Business Day Prime Rate Loans shall
be advanced by the Lender to the Borrower pursuant to the terms and conditions
of the Cash Management Services. Subject to paragraph 2.1(B) hereof with respect
to Libor Loans, Borrower shall provide Lender with at least one (1) Business
Day's oral notice of the requested Advance, specifying the date (the "Loan
Date") and amount, which oral notice shall be promptly confirmed in writing by
Borrower. Lender shall, on or after 1:00 P.M. (New York time) of the Loan
The Balance of This Page Left Intentionally Blank
Date, make the amount of the requested loan available to Borrower, provided all
conditions precedent to such loan have been met or satisfied. Each requested
Advance hereunder which is to be a Libor Loan shall be in the minimum amount of
$250,000.00 and multiples of $250,000.00 in excess thereof.
2.6 CONDITIONS TO INITIAL ADVANCE The obligation of Lender to execute
this Agreement and to make the initial Advance or other financial accommodations
hereunder is subject to the satisfaction of the following conditions precedent:
(A) Documents. Lender shall have received the duly executed
note conforming to the requirements hereof, and not less than four (4) copies of
this Agreement, each executed on behalf of Borrower and/or by its duly
authorized officers.
(B) Deliveries by Borrower. Borrower shall have delivered or
caused to be delivered to the Lender or the Lender shall have received, the
following items, which shall be in form and substance reasonably satisfactory to
the Lender and its counsel:
(i) Legal Opinion of Counsel to Borrower. Opinion of
Lowenstein, Sandler, Kohl, Fisher & Boylan P.A. counsel to Borrower dated the
date hereof and addressed to Lender, substantially in the form of Exhibit 2.6
hereto.
(ii) Corporate Proceedings. Resolutions of the Boards of
Directors of Borrower certified on the date hereof by the Secretary or an
Assistant Secretary of Borrower authorizing (a) the execution, delivery and
performance of this Agreement, and all of the other Loan Documents to which it
is a party; (b) the consummation of the transactions contemplated hereby and
thereby; and (c) the borrowings and other matters contemplated in the Loan
Documents. Such certificate shall state that the resolutions set forth therein
have not been amended, modified, revoked or rescinded as of the date of such
certificate and are in full force and effect as of the closing date.
(iii) Incumbency Certificate. A certificate of the Secretary
or an Assistant Secretary of Borrower, dated the date hereof, as to the
incumbency and signature of the officers executing each of the Loan Documents
and any other document to be delivered pursuant to any of such documents,
together with evidence of the incumbency of such Secretary or Assistant
Secretary.
(iv) Officer's Certificate. A certificate of Borrower signed
by its president or chief financial officer stating that to the best of his
knowledge after diligent investigation: (a) as of the date hereof and giving
effect to any loan no Default or Event of Default exists hereunder; and (b) all
of Borrower's representations and warranties contained in this Agreement and the
other Loan Documents are presently true and correct in all material respects.
(v) Consents, Licenses, Approvals, etc. Copies of all
consents, licenses and approvals required in connection with the execution,
delivery, performance, validity and enforceability of this Agreement, the note
and other Loan Documents, and such consents, licenses and approvals shall be in
full force and effect and be reasonably satisfactory in form and substance to
Lender and its counsel.
(vi) Searches. Copies, in form and substance reasonably
satisfactory to Lender, of written or other advice relating to such corporate
status, financing statement, tax lien, judgment and other searches as Lender may
reasonably require.
(vii) Other Documents. All other documents provided for
herein or which Lender may request or require.
(viii) Additional Information. Such additional information
and materials which Lender shall have reasonably requested.
(ix) Supporting Documents. On or before the date hereof, (a) a
copy of the Certificate of Incorporation of Borrower, certified by the
Secretaries of State of their respective states of incorporation; (b) a
certificate of such Secretaries of State, dated as of a recent date, as to the
good standing of Borrower and attaching the charter documents of Borrower on
file in the office of such Secretary of State; and (c) a certificate of the
Secretary or an Assistant Secretary of Borrower dated the Closing Date and
certifying with respect to Borrower (I) that attached thereto is a true and
complete copy of the By-laws of Borrower, as in effect on the date of such
certification, and (II) that the Certificate of Incorporation of Borrower has
not been amended since the date of the last amendment thereto indicated on the
certificate of the Secretary of State furnished pursuant to clause (A) above.
(x) Fees. Borrower shall have paid all of the reasonable fees
and expenses of Lender's counsel which are occasioned in connection with the
preparation of this Agreement, and all other Loan Documents and the closing of
the transactions contemplated hereby and thereby.
(xi) Insurance. Evidence of the insurance required to
be in effect as set forth in this Agreement.
(xii) Availability. Borrower has a sufficient amount of
Eligible Accounts so that it has available additional borrowings after the
initial borrowing equal to not less than the difference between (a) Four Million
Dollars ($4,000,000.00) and (b) the cash and cash equivalents of Borrower as of
the date of the initial borrowing.
(xiii) Borrower shall have delivered to Lender a duly
completed borrowing base report as of not earlier than the close of business of
the preceding Friday.
(xiv) The agent for the existing lenders to Borrower shall
have executed and delivered (a) to Lender a payoff letter in form satisfactory
to Lender and (b) to Stryker, Tams & Dill LLP, counsel for Lender, UCC-3
statements of termination with respect to all financing statements in favor of
said agent and the original stock certificates of the Sudsidiaries of
Consolidated Delivery & Logistics, Inc. and Sureway Air Traffic Corporation,
said UCC-3 statements and stock certificates to be held by said counsel in
escrow pending payment to said agent of the required payoff amount.
2.7 CONDITIONS TO ALL LOANS The obligation of Lender to make any loan
or other financial accommodation hereunder is subject to fulfillment of the
following additional conditions precedent, to the reasonable satisfaction of
counsel to Lender:
(a) Representations and Warranties. The representations and
warranties made by Borrower and any Obligor herein or in any other of the Loan
Documents or which are contained in any certificate, document or financial or
other statement furnished at any time under or in connection herewith shall be
correct in all material respects on and as of the date of each loan or other
financial accommodation hereunder, after giving effect to such loan or other
financial accommodation hereunder, as if made on and as of such date.
(b) No Default. No Event of Default has occurred,
and no Default has arisen and is continuing on the date the loan or other
financial accommodation hereunder is to be made, after giving effect to the such
loan or other financial accommodation hereunder.
(c) Litigation. No suit, action, investigation, inquiry or
other proceeding by any governmental authority or other Person or any other
legal or administrative proceeding shall be pending or threatened which (i)
questions the validity or legality of the transactions contemplated by this
Agreement, or (ii) seeks damages in connection therewith and which, in the
reasonable judgment of Lender, (x) involves a significant risk of a preliminary
or permanent injunction or other order by a state or federal court which would
prevent, or require rescission of, the transactions contemplated by this
Agreement, or (y) in the case of any action or proceeding which seeks monetary
damages involves a significant risk of resulting in substantial financial
liability to Borrower, any guarantor and/or Lender.
(d) Material Adverse Change. No event shall have occurred
since the date of the most recent financial statements of Obligors furnished to
Lender which resulted in a Material Adverse Change of any Obligor or had a
Material Adverse Effect on any Obligor.
(e) Legal Matters. All legal matters incident to the
making of the loans and other financial accommodations shall be satisfactory to
counsel to Lender, in the reasonable exercise of its judgment.
2.8 REGULATORY CAPITAL REQUIREMENTS If any existing or future law or
regulation or the interpretation thereof by any court or administrative or
governmental authority charged with the administration thereof, or compliance by
Lender with any request or directive (whether or not having the force of law) of
any such authority, results in any increases after the date hereof in any
capital maintenance, capital ratio or similar requirement against loan
commitments made by lenders generally, other than those covered by paragraph
2.1(G) above, and the result thereof is to impose upon Lender or increase any
capital requirement applicable to Lender as a result of the making or
maintenance of the revolving credit available hereunder (which imposition of or
increase in capital requirement may be determined by Lender's reasonable
allocation of the aggregate of such capital impositions or increases) then, upon
demand by Lender, Borrower shall immediately pay to Lender from time to time as
specified by Lender a commitment fee which shall be sufficient to compensate
Lender for such imposition of or increase in capital requirements together with
interest on each such amount from the date demanded until payment in full
thereof at the rate provided in this Agreement with respect to commitment fees
not paid when due. A certificate setting forth in reasonable detail the amount
necessary to compensate Lender as a result of an imposition of or increase in
capital requirements submitted by Lender to Borrower shall be conclusive, absent
manifest error or bad faith, as to the amount thereof. For purposes of this
Paragraph 2.8, in calculating the amount necessary to compensate for any
imposition of or increase in capital requirements, Lender shall be deemed to be
entitled to a rate of return on capital (after federal, state and local taxes)
of fifteen percent per annum.
2.9 EXCESS LOANS In the event Lender shall advance an amount in excess
of the aggregate amount of all loans and other financial accommodations set
forth in this Agreement or if Borrower should directly or indirectly become
indebted to Lender in an amount which, together with all advances made pursuant
to this Agreement, is in excess of the aggregate amount set forth in this
Agreement, such advances or such Indebtedness shall nevertheless be covered by
the terms of this Agreement.
III
COLLATERAL
3.1 CROSS COLLATERAL All of the Collateral heretofore, herein or
hereafter given or assigned to Lender hereunder shall secure payment of all
Obligations, as defined herein, of Borrower to Lender and each Lender Affiliate.
3.2 ACCOUNTS RECEIVABLE Borrower hereby creates in favor of Lender and
hereby grants to Lender a security interest in all Accounts, as defined herein,
presently owned by Borrower or hereafter acquired.
3.3 EQUIPMENT Borrower hereby creates in favor of Lender and hereby
grants to Lender a security interest in all of Borrower's Equipment, as such
term is defined herein, whether presently owned by Borrower or hereafter
acquired, and wherever located excepting only items of motor vehicle rolling
stock subject to purchase money security interests in favor of third Persons and
unencumbered motor vehicles more than five (5) years old.
3.4 INVENTORY Borrower hereby creates in favor of Lender and hereby
grants to Lender a security interest in all of Borrower's Inventory, as defined
herein, whether presently owned by Borrower or hereafter acquired and wherever
located.
3.5 GENERAL INTANGIBLES Borrower hereby creates in favor of Lender and
hereby grants to Lender a security interest in all of Borrower's General
Intangibles, as herein defined, whether presently owned by Borrower or hereafter
acquired.
3.6 DEPOSIT ACCOUNTS Borrower hereby creates in favor of Lender, hereby
assigns to Lender and hereby grants to Lender a security interest in the balance
of every deposit account, now or hereafter existing, of Borrower with Lender,
and all money, Instruments, securities, documents, Chattel Paper, credits,
claims, and other property of Borrower now or hereafter in the possession or
custody of Lender or any of its agents.
3.7 CHATTEL PAPER Borrower hereby creates in favor of Lender and hereby
grants to Lender a security interest in all of Borrower's Chattel Paper, as
defined herein, whether presently owned by Borrower or hereafter acquired,
including but not limited to all such Chattel Paper now or hereafter left in the
possession of Lender for any purpose, further including but not limited to for
collection.
3.8 INSTRUMENTS Borrower hereby creates in favor of Lender and hereby
grants to Lender a security interest in all of Borrower's Instruments, as
defined herein, whether presently owned by Borrower or hereafter acquired,
including but not limited to all such Instruments now or hereafter left in the
possession of Lender for any purpose, further including but not limited to for
collection.
3.9 DOCUMENTS Borrower hereby creates in favor of Lender and hereby
grants to Lender a security interest in all of Borrower's Documents, as defined
herein, whether presently owned by Borrower or hereafter acquired, including but
not limited to all such Documents now or hereafter left in the possession of
Lender for any purpose.
3.10 STOCK Consolidated Delivery & Logistics, Inc. and Sureway Air
Traffic Corporation shall, contemporaneous with the execution of this Agreement
execute and deliver to Lender pledge agreements, pursuant to which they pledge
to Lender a security interest in all of their present and future active
Subsidiaries.
3.11 SECURITY FOR ACCOUNTS Borrower hereby assigns to and grants to
Lender a security interest in all rights of Borrower in, to and under all
guarantees and security Borrower may now or hereafter acquire of any Accounts
and other Collateral, including but not limited to any Letters of Credit
securing any Accounts, any credit insurance policies covering any Account and
the proceeds of any such guarantees and other security.
3.12 COLLECTION ACCOUNTS AND COLLATERAL ACCOUNTS Borrower hereby
assigns to and grants to Lender a security interest and Lien on all of
Borrower's right, title and interest in and to all Collection Accounts and
Collateral Accounts and all monies from time to time in said accounts.
3.13 PROCEEDS AND RECORDS Borrower hereby creates in favor of Lender
and hereby grants to Lender a security interest in (A) all books and records,
including, without limitation, customer lists, credit files, computer programs,
print-outs and other computer materials and records of Borrower pertaining to
all of the Collateral; and (B) all of the products and proceeds of all of the
foregoing Collateral (including all proceeds of insurance policies covering the
Collateral); as well as all accessions, additions, substitutions, replacements
and increments as to the assets in (A) and (B).
3.14 CONTINUING PERFECTION Borrower agrees to immediately turn over to
Lender the original of any Letter of Credit and if such Letter of Credit is
transferable, to transfer such Letter of Credit to Lender, and if such Letter of
Credit is not transferable, to notify, in writing, the issuer of any such Letter
of Credit of the assignment by Borrower to Lender of Borrowers right to the
proceeds thereof and to make payment of such proceeds directly to Lender.
Borrower will perform any and all steps requested by Lender to create and
maintain in Lender's favor a first and exclusive and valid lien on or security
interest in the Collateral or pledges of Collateral (other than items of
Collateral which are subject to Permitted Encumbrances), including, without
limitation, the execution, delivery, filing and recording of financing
statements and continuation statements, supplemental security agreements, notes
and any other documents necessary, in the opinion of Lender, to protect its
interest in the Collateral. Lender and its designated officer are hereby
appointed Borrower's attorney-in-fact to do all acts and things which Lender may
deem necessary to perfect and continue perfected the security interests and
Liens provided for in this Agreement, including, but not limited to, executing
financing statements on behalf of Borrower. Neither the Lender nor its
attorneys, officers, employees, or agents shall be liable for acts, omissions,
any error in judgment, or mistake in fact in its/their capacity as
attorney-in-fact. This power, being coupled with an interest, is irrevocable
until the Obligations have been fully satisfied. At the Lender's sole option,
and without the Borrower's consent, the Lender may file a carbon, photographic,
or other reproduction of this Agreement or any financing statement executed
pursuant hereto as a financing statement in any jurisdiction so permitting.
IV
PROCEEDS OF COLLATERAL
4.1 LOCKBOX Borrower agrees to establish and maintain with Lender a
lockbox, in accordance with Lender's standard lockbox agreement in effect from
time to time, and to direct all Account Debtors to make remittances on all
Accounts to said lockbox other than with respect to Accounts (a) generated from
Olympic Courier Systems, Inc.'s facility in Manhattan, New York, (b) owing from
Account Debtors whose monthly average Accounts are less than $5,000.00 (the
"Under 5 Accounts") and (c) billed, in accordance with Borrowers present conduct
of business, from Borrower's St. Louis, Mo. office (the "St. Louis Accounts").
Any and all remittances received in said lockbox may be applied to the
Obligations of Borrower to Lender in accordance with paragraph 4.3 hereof.
4.2 PAYMENTS ON COLLATERAL If, notwithstanding the notices to Account
Debtors to remit payments on Accounts to the lockbox referred to above Borrower
receives any payments on Accounts or other Collateral, Borrower agrees to
receive any and all payments and remittances on Accounts and Inventory and other
Collateral, including cash, checks, drafts, notes, acceptances or other forms of
payment in trust for Lender and to deliver such payments to Lender in the
identical form in which they were received, together with any necessary
endorsement in favor of Lender and with collection reports in form satisfactory
to Lender. As to all remittances on Accounts invoiced from Olympic Courier
Systems, Inc.'s facility in Manhattan, New York, Borrower agrees to receive said
remittances in trust for Lender and to deposit them in the same form received
with any necessary endorsement into a separate account, on which designees of
Lender are the sole signatories, at European American Bank or such other bank as
Lender and Borrower may hereafter agree to in writing, with European American
Bank or such other bank entering into an agreement with Lender in the form of
Exhibit 4.2 annexed hereto or such other form as may be satisfactory to Lender
(a "Blocked Account Agreement"). As to all remittances on St. Louis Accounts,
Borrower agrees to receive said remittances in trust for Lender and to deposit
them in the same form received with any necessary endorsement into a separate
account, on which designees of Lender are the sole signatories, at such bank as
Lender and Borrower may hereafter agree to in writing, with said bank entering
into a Blocked Account Agreement with Lender. As to all remittances on Under 5
Accounts Borrower agrees to receive said remittances in trust for Lender and to
deposit them in the same form received with any necessary endorsement into a
designated account, on which designee 's of Lender are the sole signatories,
with Bank, to the extent Bank has a deposit office within reasonable proximity
to the office where said remittances are received, or if Bank does not so have a
deposit office within reasonable proximity at such other bank as Lender and
Borrower may hereafter agree to in writing, with said bank entering into a
Blocked Account Agreement with Lender. Each deposit account at European American
Bank, the Bank or such other banks at which such deposit accounts may from time
to time be established is herein referred to as a "Collection Account"). Lender
shall be authorized to cause all funds in each Collection Account to be credited
to Lender via an Automated Clearing House charge or by wire transfer or other
method satisfactory to Lender, with such sums received by Lender to be applied
to the Obligations of Borrower to Lender in accordance with paragraph 4.3
hereof. Borrower shall pay all fees, charges and expenses relating to the
establishment and maintenance of said accounts and to the remittance of all
monies in said account to Lender and Borrower shall otherwise indemnify and hold
Lender harmless from all claims, demands, actions or causes of action relating
to said account including without limitation any obligations, if any, with
respect to checks or other instruments deposited in said Account and which are
dishonored or returned unpaid.
4.3 APPLICATION OF PAYMENTS All proceeds of any Account(s) and
Inventory and other Collateral which are delivered to or otherwise received by
Lender for application to the loans provided for herein shall be deemed received
as of the date of actual receipt by Lender, and shall be applied by Lender on
account of the Obligations upon Lender's receipt of same; provided, however,
that no checks, drafts, or other Instruments received by Lender shall constitute
payment to Lender unless and until such item of payment has actually been
collected by Lender. For the sole purpose of calculation of interest due to
Lender from Borrower, all such proceeds and other payments on account of the
loans provided for in this Agreement, irrespective of the type or form of
payment thereof shall not be considered applied on account of the Obligations
until two (2) Business Days after Lender's application of same to the
Obligations. All sums so applied to the Obligations shall be applied first to
Prime Rate Loans and second to Libor Loans, and as to Libor Loans, if more than
one (1) Interest Period is in effect, then to such Libor Loans in the order of
the Interest Periods with the shortest remaining number of days. Notwithstanding
the foregoing after all then outstanding Prime Rate Loans are satisfied as a
consequnce of such application of proceeds, any excess proceeds shall be applied
as follows:
(i) the next One Million Dollars ($1,000,000.00) of proceeds, or such
greater amount as Lender may agree to, shall be credited to an account (the
"Collateral Account") to be established with Bank or other Lender Affiliate,
which Collateral Account shall be subject to a Lien in favor of Lender as
additional security for the Obligations, and
(ii) all prepayments in excess of said One Million Dollars
($1,000,000.00) may be applied to Libor Loans as set forth above.
On the expiration date of any Interest Period, there shall be withdrawn
from the Collateral Account an amount equal to the Libor Loan which has the
Interest Period so expiring and said amount shall be applied to payment of said
Libor Loan. If after any monies are so credited to the Collateral Account the
Borrower obtains any Prime Rate Loans, there shall be withdrawn from the
Collateral Account an amount equal to said Prime Rate Loans with said amount
applied to payment of said Prime Rate Loans.
V
REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement and to make loans and
other financial accommodations hereunder, Borrower represents and warrants to
Lender that:
5.1 GOOD STANDING Exhibit "A" sets forth:
(A) the jurisdiction of incorporation of Borrower and in
which it is in good standing;
(B) all other jurisdictions in which Borrower is
authorized to transact business in all of which it is in good standing;
(C) any changes in the structure of Borrower, after
November 30, 1995 such as mergers, consolidations and the like;
(D) any name changes of Borrower after November 30, 1995;
(E) all trade names or trade styles under which Borrower
conducts business or issue invoices;
(F) all Subsidiaries and Affiliates of Borrower and
the percentage of stock or other ownership interest thereof owned by Borrower
or Affiliates of Borrower;
(G) all stockholders of Borrower other than Consolidated
Delivery and Logistics, Inc.
5.2 CORPORATE AUTHORITY Borrower, and all Affiliates and
Subsidiaries have requisite power and authority to own their property and to
carry on their business as now conducted, and are in good standing and
authorized to do business in each jurisdiction in which the failure so to do
would have a Material Adverse Effect on Borrower or such Affiliate or
Subsidiary. Each Borrower has the corporate power to execute, deliver and carry
out this Agreement and all other Loan Documents to which they are a party and
their Boards of Directors have duly authorized and approved the terms of the
loans and other financial accommodations described herein and the taking of any
and all action contemplated herein and therein, and this Agreement and all other
Loan Documents to which Borrower or any Obligor are a party constitute the valid
and binding obligations of them, enforceable in accordance with their terms. No
consent or approval of, or exemption by, shareholders, any Governmental Body or
any other Person is required to authorize, or is otherwise required in
connection with the execution, delivery and performance of, the Loan Documents
to which it is a party, or is required as a condition to the validity or
enforceability of the Loan Documents to which it is a party.
5.3 COMPLIANCE WITH LAW (A) Borrower and all other Obligors are in
compliance with all laws, rules and regulations to which they are subject and
have all licenses, certificates, permits and franchises and other governmental
authorization necessary to own their properties and to conduct their businesses;
(B) The execution of this Agreement, and each other Loan
Document and the performance by Borrower and other Obligors of their obligations
hereunder and thereunder, do not, at the date of execution hereof, violate any
existing law or regulation or any writ or decree of any court or Governmental
Body or the charter or by-laws of Borrower or any Obligor or any agreement or
undertaking to which either is a party or by which they are bound.
5.4 NO LITIGATION Except as set forth on Schedule 5.4 there are no
judgments against Borrower or any Obligor as of the date of this Agreement and
no material litigation or administrative proceeding before any Governmental Body
is presently pending, or to the knowledge of Borrower, threatened, against
Borrower or any Obligor or any of their property.
5.5 NO FINANCIAL CHANGE (A) There has been no Material Adverse Change
in the condition of Borrower and other Obligors since their last financial
statements and reports dated May 31, 1997 furnished to Lender and the
information contained in said statements and reports is true and correctly
reflects the financial condition of Borrower and such Obligors as of the dates
of the statements and reports, and such statements and reports have been
prepared in accordance with GAAP and do not contain any material misstatement of
fact or omit to state any facts necessary to make the statements contained
therein not misleading.
(B) Borrower has no Contingent Obligations or Financial
Undertaking other than as disclosed in its financial statements dated December
31, 1996 or March 31, 1997 heretofore furnished to Lender.
5.6 TAX COMPLIANCE Except as set forth on Schedule 5.6 Borrower and
each Obligor has filed, or caused to be filed, all tax returns required to be
filed and has paid all taxes shown to be due and payable on said return or on
any assessment made against it.
5.7 GOOD TITLE AND ABSENCE OF LIENS On the date of this Agreement
Borrower has good and marketable title to all of its properties and assets,
real, personal and mixed, and none of said properties or assets is subject to
any Lien, except for Permitted Encumbrances.
5.8 PLACE OF RECORDS, CHIEF EXECUTIVE OFFICE, INVENTORY AND EQUIPMENT
AND OTHER COLLATERAL (A) Borrower's chief executive office, and the office where
Borrower keeps its records concerning its Accounts, and all locations of its
Inventory, if any, and Equipment, and all other business locations of Borrower
are presently at the locations set forth on Exhibit "A". (B) Except as set forth
on Exhibit "A", within four (4) months of the date of this Agreement, none of
Borrower's assets have been moved from any jurisdiction or other locations than
the present locations of assets set forth on Exhibit "A" under item 5.8 (A)(v)
except for Equipment purchased by Borrower in the ordinary course of business
from persons or entities customarily selling such Inventory or Equipment. (C) as
of the date hereof Borrower has no Inventory (D) Borrower does not presently
purchase or otherwise hold, purchase or otherwise hold Goods on a consignment
basis except as set forth on Exhibit "A". (E) Except as set forth on Exhibit
"A", Borrower has not purchased any Equipment except in the ordinary course of
business for value and from persons customarily in the business of selling such
Equipment. (F) Except as set forth on Exhibit "A", Borrower does not hold any
Instrument or Chattel Paper connected with any Account. (G) Except as set forth
on Exhibit "A", Borrower does not own any trademarks, trade names, patents or
copyrights. (H) Except as set forth on schedule 5.8(H) no surety bonds have been
issued on behalf of Borrower with respect to any contracts or purchase orders
out of which Accounts Receivable have arisen or are expected to arise.
5.9 WARRANTIES AS TO ACCOUNTS Except as otherwise provided in the
assignment of Accounts, if any, given to Lender, or invoice or other writing,
Borrower warrants that as to all Accounts reported to Lender; (A) each Account
is a valid subsisting Account as defined herein; (B) each Account represents a
bona fide performed transaction; (C) the amount shown on Borrower's books and on
any invoice or statement delivered to Lender is owing to Borrower; (D) no
partial payment has been made; (E) no material set-off or counterclaim exists as
to any such Account and no agreement has been made under which any deductions or
discount may be claimed except regular discounts in the usual course of
business, but only if disclosed on the face of the invoice; (F) the Account
Debtor has not disputed the Account or otherwise asserted any defense, material
set-off or counterclaim; (G) that to the extent required by law Borrower is
authorized to do business and is in good standing in any state in which any such
Account must be enforced; (H) each Eligible Account is a valid subsisting
Eligible Account as defined herein; (I) all agings of Accounts submitted to
Lender are true and accurate; (J) no surety bond was required or given on behalf
of Borrower in connection with any contracts or purchase orders under which the
Account arose.
5.10 ERISA (A) No Reportable Event or unfunded deficiencies or failure
of compliance with ERISA or the Internal Revenue Code of 1986, as amended, has
occurred and is continuing with respect to any Plan which would have a Material
Adverse Effect; (B) Borrower has complied with the provisions of ERISA and the
Internal Revenue Code of 1986, as amended, with respect to each Plan, which such
failure would have a Material Adverse Effect.
5.11 LICENSES AND PERMITS AND LAWS Borrower and all of its Subsidiaries
hold all necessary licenses and permits for the operation of their businesses,
including all permits required under Environmental Laws and Borrower has
complied with all laws, rules and regulations applicable to its business,
including but not limited to the Fair Labor Standards Act, 29 U.S.C. ss.
215(a)(1). All such licenses and permits are in good standing and are not under
any outstanding citation issued by any governmental authority, and no litigation
has been instituted nor (to the best knowledge of Borrower) have any claims been
made by any third parties relating to the licenses and permits issued by any
Governmental Body for the operation of their businesses, and no such citation,
litigation or claim, to the best knowledge of Borrower, is contemplated by any
Governmental Body or any third persons nor, to the best knowledge of Borrower,
does there exist any basis for any such citation, litigation or claim by any of
the authorities or any Person.
5.12 ENVIRONMENTAL STATUS As to all properties owned, leased or
operated by Borrower and to all operations of Borrower's businesss, to the best
knowledge of Borrower:
(A) there is no pending or threatened proceeding affecting
Borrower with respect to any Environmental Law;
(B) Borrower has not been identified as a responsible or
potentially responsible party under CERCLA and has not received notification
that any hazardous substance or contaminant has been found at any site;
(C) none of such properties are listed or proposed for
listing on the National Priorities List under CERCLA;
(D) no Hazardous Substance or Hazardous Waste (as such term is
defined in Environmental Laws) have been disposed of or otherwise released or
discharged on such properties;
(E) no underground storage tanks exist on the properties and
the removal of any such tanks from the properties was undertaken in compliance
with the Underground Storage Tank Act, and
(F) no friable asbestos, or any substance containing asbestos
or PCB's have been installed in or exists on such properties.
(G) no lien has attached to any revenues or any real or
personal property owned by the Borrower in any jurisdiction, arising from an
intentional or unintentional action or omission of the Borrower or any previous
owner and/or operator of said real property, resulting from the dumping of
hazardous substances or wastes into the atmosphere or waters or onto lands, any
of which may have damaged any Natural Resources;
(H) the Borrower has not received a summons, citation,
directive, letter, or other communication, written or oral, from any
jurisdiction, or political sub-division or any agency or instrumentality
thereof, concerning any intentional or unintentional action or omission on the
Borrower's part resulting in the dumping of hazardous substances into the
atmosphere or waters, or onto the lands in any jurisdiction, any of which has
resulted in damage to the Natural Resources;
5.13 REAFFIRMATION Each and every request for a loan or other financial
accommodation hereunder shall be deemed as an affirmation by Borrower that no
Default nor Event of Default exists hereunder and that the representations and
warranties contained in this Article V are true and accurate as of the date of
each such request (notwithstanding that some of the terms hereof speak as of the
date of this Agreement) and that Borrower is in compliance with all applicable
laws, rules and regulations.
5.14 PROCEEDS OF LOAN Borrower is not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying any margin stock within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System, as amended. No part of the
proceeds of the loans will be used, directly or indirectly, for a purpose which
violates any law, rule or regulation of any Governmental Body, including without
limitation the provisions of Regulations G, T, U or X of the Board of Governors
of the Federal Reserve System, as amended. Borrower represents that the proceeds
of the loan(s) provided for herein shall be used in the following manner: to
refinance existing debts, to support working capital requirements and other
general corporate purposes. No proceeds of any loan or other financial
accommodations hereunder shall be used to purchase or carry any margin stock
(within the meaning of Regulation U issued by the Board of Governors of the
Federal Reserve System) or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
5.15 BORROWER AND OBLIGOR All of the Borrowers are operated as part of
one consolidated business entity and are directly dependent upon each other for
and in connection with their respective business activities and their respective
financial resources. Each Borrower will receive a direct economic and financial
benefit from the Obligations incurred under this Agreement by Borrower, and the
incurrence of such Obligations is in the best interests of each Borrower.
5.16 SOLVENCY The fair value of the business and assets of the
Borrowers on a consolidated basis (including, without limitation, contingent,
unmatured and unliquidated claims arising out of all rights of indemnity,
contribution, reimbursement or any similar right, or any claim of subrogation,
as such claims may arise or mature, that each Borrower may have against each
Borrower) will be in excess of the amount that will be required to pay its
liabilities (including, without limitation, contingent, subordinated, unmatured
and unliquidated liabilities on existing debts, as such liabilities may become
absolute and matured), in each case after giving effect to the transactions
contemplated by this Agreement and the use of proceeds therefrom. After giving
effect to the transactions contemplated by this Agreement and the use of
proceeds therefrom, Borrowers will not be engaged in any business or
transaction, or about to engage in any business or transaction, for which such
Person has an unreasonably small capital (within the meaning of the Uniform
Fraudulent Transfer Act, as adopted in the State of New Jersey and Section 548
of the Federal Bankruptcy Code). Borrower has no intent to
(A) hinder, delay or defraud any entity to which it is,
or will become, on or after the date hereof, indebted, or
(B) to incur debts that would be beyond its ability to
pay as they mature.
5.17 DEFAULTS. Borrower is not in default under the Subordinated
Convertible Debentures and the Seller Indebtedness, and is not in material
default under any other agreement to which the Borrower is a party or by which
the Borrower or any of its property is bound, or under any indenture or
instrument evidencing any Indebtedness of the Borrower, and neither the
Borrower's execution of nor performance under the Loan Documents will create a
default or any Lien under any such agreement, indenture or instrument other than
a Lien in favor of the Lender;
5.18 ERISA. No employee benefit plan established or maintained by the
Borrower which is subject to the Employee Retirement Income Security Act 29
U.S.C. ss. 1001 et seq. ("ERISA") has an accumulated funding deficiency (as such
term is defined in ERISA). No material liability to the Pension Benefit Guaranty
Corporation (or any successor thereto under ERISA) has been incurred by the
Borrower with respect to any such plan and no Reportable Event under ERISA has
occurred. The Borrower has no actual or anticipated liability under Section 4971
of the Internal Revenue Code ("Code") (relating to tax on failure to meet the
minimum funding standard of Section 412 of the Code) with respect to any
employee benefit plan to which it contributes but which is not maintained or
established by it;
5.19 SUBORDINATED CONVERTIBLE DEBENTURES (A) Exhibit 5.19 annexed
hereto identifies the names and address of the holders of the Senior Convertible
Debentures and the outstanding principal amount thereof held by such Persons.
(B) The Obligations of Borrower to Lender under this Agreement and the other
Loan Documents constitute Senior Debt under the Subordinated Convertible
Debentures.
5.20 SELLER INDEBTEDNESS Exhibit 5.20 annexed hereto accurately
describes all Seller Indebtedness of the Borrower, including without limitation
the Borrower which is obligated under such Indebtedness, the outstanding
principal amount thereof, the scheduled payment obligations of Borrower
thereunder and the holder of said Indebtedness.
VI
AFFIRMATIVE COVENANTS OF BORROWER
6.1 AUDIT AND OTHER REPORTS (A) Borrower agrees that within one hundred
five (105) days of the end of each fiscal year, it will furnish Lender with
detailed audited financial statements, including a balance sheet, profit and
loss statement, cash flow statement and surplus reconciliation, certified on an
unqualified basis, by an independent certified public accountant satisfactory to
Lender; (B) Borrower will also furnish monthly similar statements uncertified
except for a certification by an officer of Borrower as to their correctness
within thirty (30) days of the end of each month. All such statements shall be
on a consolidated and consolidating basis and in accordance with GAAP; (C)
simultaneous with the submission of the statements required under "A" above, and
with the 10Q reports to be furnished as set forth below Borrower shall cause to
be submitted to Lender (i) a compliance certificate of the chief financial
officer of Borrower in the form of exhibit 6.1 annexed hereto setting forth the
calculations of the financial tests described in paragraph 7.2 and the Interest
Rate and Fee Cash Flow Leverage Ratio hereof and stating whether or not, to the
best of said officer's knowledge, after diligent inquiry a Default or Event of
Default exists, and if such exists, specify the nature thereof and the steps
Borrower is taking to remedy same and (ii) a comparison of the operating results
for said quarter with the budget for said quarter and with the operating results
for the prior fiscal years equivalent quarter; (D) promptly after the furnishing
thereof to third parties, Borrower shall furnish to Lender copies of any
statements, reports, proxy material, registration statement and prospectus
furnished to any holder of any securities of Borrower or filed with any
regulatory agency or agencies, including without limitation all 10K and 10Q
reports; (E) promptly, but no later than five (5) days after a responsible
officer of Borrower shall become aware of (i) a Default or Event of Default
hereunder, (ii) a Reportable Event or "prohibited transaction" as such term is
defined in ERISA, (iii) litigation against Borrower or any Subsidiary in excess
of $250,000.00 in the aggregate not fully covered by insurance (other than
normal deductibles) (iv) changes in the executive management of Consolidated
Delivery and Logistics, Inc. or (v) the termination or threatened termination of
or claim of breach by Borrower or any Subsidiary of any material contract,
agreement or obligation, or of any claim of patent infringement, Borrower shall
furnish to Lender a written notice specifying the existence thereof and the
action Borrower or any Subsidiary is taking or proposes to take with respect
thereto; (F) Borrower will furnish to Lender prompt written notice if: (i) any
Indebtedness of Borrower or any Subsidiary is declared or shall become due and
payable prior to its stated maturity, or called and not paid when due or (ii) a
default shall have occurred under any note or the holder of any such note, or
other evidence of Indebtedness, certificate of security evidencing any such
Indebtedness or any obligee with respect to any Indebtedness of Borrower or any
Subsidiary has the right to declare any such Indebtedness due and payable prior
to its stated maturity as a result of such default; (G) Borrower also agrees to
furnish to Lender (i) a copy of any "management letter" or similar report
furnished to it by its accountants within five (5) days of Borrowers receipt
thereof, (ii) such other data and information concerning it and its Subsidiaries
as from time to time may be requested by Lender within two (2) days after the
request by Lender and (iii) a copy of its federal tax return promptly, but no
later than five (5) days, after the filing of same; and (H) Borrower shall
furnish to Lender by no later than thirty (30) days of the end of each fiscal
year a budget for the following year, on a month to month basis, in form
satisfactory to Lender, including without limitation a detailed profit and loss
statement, balance sheet, cash flow statement, anticipated loan usage and excess
availability and a comparison of said budget to the prior fiscal years operating
results and balance sheet as of the end of each month.
6.2 INSURANCE Borrower agrees to keep all of the tangible Collateral
assigned hereunder insured, at its own cost and expense, for the benefit of
Lender, and in such amounts, in such companies, and against such risks as may be
reasonably acceptable to Lender, and, if requested by Lender, deliver the
policies evidencing such insurance to Lender. If Borrower fails to take the
action called for herein, Lender may, in its discretion obtain insurance
covering Lender's interest in the Collateral and the amount of the premium for
said insurance shall be added to the Obligations of Borrower to Lender. All
policies of insurance on the Collateral shall be in form and with insurers
recognized as adequate by prudent business persons and all such policies shall
be in such amounts as may be reasonably satisfactory to Lender. Borrower shall
deliver to Lender the original (or certified copy) of each policy of insurance
and evidence of payment of all premiums therefor. Such policies of insurance
shall contain an endorsement, in form and substance satisfactory to Lender,
showing loss payable to Lender. Such endorsement or an independent instrument
furnished to Lender, shall provide that the insurance companies will give Lender
at least thirty (30) days prior written notice before any such policy or
policies of insurance shall be altered or canceled and that no act or default of
Borrower or any other person shall affect the right of Lender to recover under
such policy or policies of insurance in case of loss or damage. Borrower hereby
directs all insurers under such policies of insurance to pay all proceeds
payable thereunder directly to Lender. Borrower irrevocably makes, constitutes
and appoints Lender (and all officers, employees or agents designated by Lender)
as Borrower's true and lawful attorney (and agent-in-fact) for the purpose of
making, settling and adjusting claims under such policies of insurance (provided
that until an Event of Default exists, Lender shall obtain the consent of
Borrower prior to finally making, settling or adjusting claims under such
policies of insurance), endorsing the name of Borrower on any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect to such
policies of insurance. In the event Borrower, at any time or times hereafter,
shall fail to obtain or maintain any of the policies of insurance required above
or to pay any premium in whole or in part relating thereto, then Lender, without
waiving or releasing any obligation or default by Borrower hereunder, may (but
shall be under no obligation to do so) at any time or times thereafter obtain
and maintain such policies of insurance and pay such premium and take any other
action with respect thereto which Lender deems advisable. All sums so disbursed
by Lender, including reasonable attorneys' fees, court costs, expenses and other
charges related thereto, shall be payable, on demand, by Borrower to Lender and
shall be additional Obligations hereunder secured by the Collateral. Borrower
also agrees to at all times maintain insurance, both hazard and liability,
against such risks and in such amounts as reasonably prudent to companies
similarly situated as Borrower would maintain and to furnish to Lender from time
to time evidence that such insurance is in full force and effect.
Notwithstanding the provisions of this section, in the event that all
or any part of the Collateral is damaged by fire or other casualty, and Borrower
promptly notifies Lender of Borrower's desire to repair and restore or replace
the same, then:
(A) Provided no Event of Default exists Lender shall upon the request
of Borrower remit to Borrower all such insurance proceeds up to Fifty Thousand
Dollars ($50,000.00) per casualty loss, to be used by Borrower to repair or
restore the damaged Collateral, and
(B) as to all such proceeds in excess of Fifty Thousand Dollars
($50,000.00) provided that the following terms and conditions are and remain
fully satisfied by Borrower, Lender shall disburse such insurance proceeds for
repair and restoration of the damaged Collateral against completed work in
accordance with Lender's standard loan disbursement conditions and requirements;
otherwise, and to the extent of any excess proceeds, Lender shall have the right
to apply the proceeds toward reduction of the Obligations:
(i) no Event of Default or event which, with the giving of notice or
the passage of time, or both, would constitute an Event of Default under any of
the Loan Documents shall have occurred and remains uncured within any applicable
grace or cure period;
(ii) the work is performed under or the purchase of replacement item of
Collateral is under a fixed price or guaranteed maximum price contract
satisfactory to Lender;
(iii) Borrower shall have deposited with Lender for disbursement in
connection with the restoration the greater of: (1) the applicable deductible
under the insurance policies covering the loss; or (2) the amount by which the
cost of repair to substantially the same value, condition and character as
existed prior to such damage or cost of replacement is estimated by Lender to
exceed the net insurance proceeds available for repair or replacement; and
(iv) Borrower has paid as and when due all of Lender's costs and
expenses incurred in connection with the collection and disbursement of
insurance proceeds.
6.3 PAYMENT OF EXPENSES Borrower will pay any and all expenses,
including reasonable counsel fees and disbursements, filing and recording fees,
and all other charges and expenses incurred or to be incurred by Lender in
connection with the preparation and execution and recording of this Agreement
and all other Loan Documents, and the loans and advances made under this
Agreement and all amendments and modifications hereto and in defending or
prosecuting any actions or proceedings arising out of or relating to Lender's
transactions with Borrower including but not limited to any proceedings in any
proceeding under the Bankruptcy Code relating to Borrower or any other Obligor.
6.4 LANDLORD'S WAIVER Borrower shall use its best efforts to cause the
landlord of all premises where Borrower's chief executive office and the
locations of Borrower's books and records relating to Accounts Receivable may be
located to execute and deliver to Lender a Landlord's Waiver and Subordination
in such form as may be acceptable to Lender.
6.5 GOOD WORKING CONDITION Borrower and each Subsidiary shall maintain
all of their property in good working condition, ordinary wear and tear
excepted.
6.6 REPORTS OF COLLATERAL Borrower shall, within fifteen (15) days of
the end of each month, deliver to Lender an aging of its Accounts and an aging
of its accounts payable in such form as may be acceptable to Lender and a duly
completed accounts receivable reconciliation report in the form satisfactory to
Lender.
6.7 OBSERVANCE OF LEGAL REQUIREMENT, LICENSES AND PERMITS AND
PROTECTION OF COLLATERAL (A) Borrower shall comply in all
material respects with any and all laws, legislation,
rules and regulations in effect as of the date hereof and subsequent hereto,
including but not limited to all state, local and federal laws, legislation,
rules and regulations relating to employee pension and benefit funds, the
payment of taxes, assessments, and other governmental charges, zoning, and the
use, occupancy, transfer or encumbrancing of the Collateral and all
Environmental Laws. Borrower agrees to comply with all reasonable conditions
required by Lender designed to protect Lender and the Collateral from effect of
all Environmental Laws, ERISA and such other laws, legislation, rules and
regulations as are in, or may come into, effect and apply to Borrower, Lender,
the transactions contemplated hereby or the Collateral or any occupants or users
thereof, whether as lessees, tenants, licensees or otherwise. Borrower agrees to
pay any costs required to comply with any of the above conditions.
(B) Borrower shall observe and comply in all material respects
with all laws (including ERISA), ordinances, orders, judgments, rules,
regulations, certifications, franchises, permits, licenses, directions and
requirements of all Governmental Bodies, which now or at any time hereafter may
be applicable to Borrower and the operation of its business, a violation of
which might have a Material Adverse Effect on Borrower, except such thereof as
shall be contested in good faith and by appropriate proceedings diligently
conducted by Borrower, provided that such reserve or other appropriate provision
as shall be required by the accountants for Borrower in accordance with GAAP,
shall have been made therefor.
(C) Borrower and all Subsidiaries will continue to hold all
necessary licenses and permits for the operations of their business.
6.8 INSPECTION Lender (by any of its officers, employees and agents)
shall have the right, at any time or times during Borrower's usual business
hours, to inspect the Collateral, all records related thereto (and to make
extracts from such records) and the premises upon which any of the Collateral is
located, to discuss Borrower's affairs and finances with the accountants for
Borrower and with any other person and to verify the amount, quality, quantity,
value and condition of, or any other matter relating to, the Collateral.
6.9 COLLATERAL REQUIREMENTS Unless Lender notifies Borrower in writing
that it dispenses with any one or more of the following requirements, Borrower
will (A) on at least a once a week basis report and give Lender assignments, in
form acceptable to Lender, of all Accounts, as defined herein, and of the monies
due or to become due on specific contracts related to Accounts; (B) upon request
of Lender furnish to Lender all original and other documents evidencing right to
payment including but not limited to invoices, original orders, shipping and
delivery receipts; (C) give Lender such financial statements, reports, lists of
Account Debtors and other data concerning its Accounts, contracts and
collections and the other Collateral, or any other matters which Lender may,
from time to time specify; (D) permit Lender or its nominee to examine all of
Borrower's records at any time and to make extracts therefrom; (E) inform Lender
immediately of claims made, in regard to Eligible Accounts in excess of Ten
Thousand Dollars ($10,000.00); (F) make no change in terms of any Eligible
Account in excess of Ten Thousand Dollars ($10,000.00) against which Lender has
advanced any money; (G) furnish to Lender all information received by Borrower
adversely affecting the financial standing of any Account Debtor whose Accounts
are in excess of Ten Thousand Dollars ($10,000.00); (H) notify Lender
immediately in writing if any of its Accounts arise out of contracts between
Borrower and the United States or any department, agency or instrumentality
thereof, or any other governmental body and if requested by Lender take all
steps necessary to protect Lender under the Federal Assignment of Claims Act or
other applicable state or local statutes or ordinances; (I) deliver to Lender,
appropriately endorsed, any Instrument or Chattel Paper connected with any
Account; (J) mark its records of its Accounts in any manner satisfactory to
Lender to indicate the interest of Lender; (K) collect its Accounts in the
ordinary course of business; (L) keep accurate and complete records of its
Accounts; (M) promptly notify Lender in writing of any trademarks, trade names,
patents or copyrights which it may hereafter own or obtain a license to use or
under which it may issue invoices; and (N) furnish to Lender copies of any
credit insurance policies covering any Accounts Receivable of Borrower and take
such actions as may be required so as to have Lender a beneficiary thereof.
6.10 CONTROL OF ACCOUNTS (A) Lender shall have the right at any time on
and after the occurrence of an Event of Default and from time to time
thereafter, unless such Event of Default is cured within any allowable grace or
cure period, without notice, to notify Account Debtors to make payments to
Lender, to endorse all items of payment which may come into its hands payable to
Borrower, to take control of any cash or non-cash proceeds of Accounts and of
any returned or repossessed goods; to compromise, extend or renew any Account or
deal with it as it may deem advisable, and to make exchanges, substitutions or
surrenders of Collateral, to notify the postal authorities, after an Event of
Default, to deliver all mail, correspondence or parcels addressed to Borrower to
Lender at such address as Lender may choose. (B) Borrower herewith appoints
Lender or its designee as Attorney-in-Fact to endorse Borrower's name on any
checks, notes, acceptances, drafts or any other Instrument or document requiring
said endorsement and to sign Borrower's name on any invoice or bills of lading
relating to any Account, or drafts against its customers, or schedules or
confirmatory assignment on Accounts, financing statements under the Uniform
Commercial Code, and other public records, and in verification of Accounts and
after the occurrence of an Event of Default in notices to Account Debtors and
notices of assignment. (C) Lender shall have no obligation to preserve any
rights against any Person obligated on any Account, Chattel Paper, Instrument or
other item of Collateral.
6.11 CHANGE OF LOCATIONS Borrower will furnish Lender with at least
thirty (30) days prior written notice of any change in location of or addition
to its chief executive office, the office where it keeps its records concerning
its Accounts, and its location of Inventory, if any, Equipment and other assets,
and other business locations.
6.12 ENVIRONMENTAL LIENS. In the event that there shall be filed a Lien
against any property of the Borrower by any jurisdiction, political
sub-division, agency or instrumentality thereof arising from an intentional or
unintentional act or omission of the Borrower, resulting in the Dumping of
hazardous substances or wastes into the atmosphere or waters or onto lands then,
within thirty (30) days from the date that the Borrower is given notice that the
Lien has been placed against such property, or within such shorter period of
time in the event that such jurisdiction, political sub-division, agency, or
instrumentality thereof has commenced steps to cause such property to be sold
pursuant to the lien, either (i) pay the claim and remove the Lien from the
applicable property or (ii) furnish to such jurisdiction political subdivision,
agency or instrumentality thereof that imposed the lien with one of the
following: (a) a bond satisfactory to such jurisdiction, political sub-division,
agency, or instrumentality thereof that imposed the lien in the amount of the
claim out of which the Lien arises, (b) a cash deposit in the amount of the
claim out of which the Lien arises or (c) other security reasonably satisfactory
to such jurisdiction, political sub-division, agency, or instrumentality thereof
in an amount sufficient to discharge the claim out of which the Lien arises;
6.13 REMOVAL OF HAZARDOUS SUBSTANCES. Should the Borrower cause or
permit any intentional or unintentional act or omission resulting in the Dumping
of hazardous substances or wastes into the atmosphere or waters, or onto the
lands resulting in damage to the Natural Resources without having obtained a
permit issued by the appropriate governmental authorities, the Borrower shall
promptly clean up same in accordance with all applicable federal, state, and
local orders, statutes, laws, ordinances, rules and regulations;
6.14 NATURE OF BUSINESS. Borrower shall continue to engage in business
of the same general type as now conducted by Borrower and subject to paragraph
7.13 hereof preserve, renew and keep in full force and effect its corporate
existence and all licenses, permits, rights and privileges necessary or
desirable for the normal conduct of such business,
6.15 SUBORDINATED CONVERTIBLE DEBENTURES
Borrower will promptly notify Lender in writing if Borrower
receives any notice from any holder of the Subordinated Convertible Debentures:
(i) Notifying Borrower of any default thereunder
(ii) Demanding payment thereof in accordance with the
terms thereof; or (iii) Exercising any conversion
rights thereunder.
6.16 SELLER INDEBTEDNESS Borrower will promptly notify Lender in
writing if Borrower receives any notice from any holder of any of the Seller
Indebtedness notifying Borrower of a default thereunder.
VII
NEGATIVE COVENANTS OF BORROWER
7.1 LOANS AND ADVANCES AND INVESTMENTS Borrower will not, without prior
written consent of Lender, make any loans or advances to or investment in any
Person except for Investment Obligations.
7.2 FINANCIAL COVENANTS
(A) Tangible Capital Funds. Borrower, on a
consolidated basis, will not allow its Tangible Capital Funds to be less than:
(i) $5,900,000.00 from June 30, 1997 through
September 29, 1997, (ii) $6,250,000.00 from September
30, 1997 through December 30, 1997, (iii)
$6,750,000.00 from December 31, 1997 through December
30, 1998; (iv) $8,500,000.00 from December 31, 1998
through December 30, 1999; and (v) $10,250,000.00 on
December 31, 1999 and thereafter.
(B) Cash Flow Leverage Ratio. Borrower, on a consolidated
basis, will not allow its Cash Flow Leverage Ratio, calculated at the end of
each fiscal quarter to be more than 4.6 to 1.0 at all times.
(C) Capital Expenditures. Borrower, on a consolidated basis,
will not (i) in the fiscal year ending December 31, 1997 make Capital
Expenditures in excess of Three Million Six Hundred Thousand Dollars
($3,600,000.00), and (ii) in each fiscal year ending December 31, 1998 and
thereafter make Capital Expenditures in excess of Three Million Two Hundred
Thousand Dollars ($3,200,000.00) in the aggregate per annum.
(D) Fixed Charge Coverage Ratio. Borrower, on a consolidated
basis, will not allow its Fixed Charge Coverage Ratio, calculated at the end of
each fiscal quarter to be less than 1.0 to 1.0 at any time.
Compliance with the foregoing covenants, other than the
Tangible Capital Funds covenant, shall be calculated on the financial statements
of Borrower as of the end of each fiscal quarter and of the Borrower on a
consolidated basis. Compliance with the Tangible Capital Funds covenant shall be
calculated based on the monthly financial statements of Borrower on a
consolidated basis.
7.3 LIENS Borrower will not allow or suffer any Lien to exist on
any of its assets except for Permitted Encumbrances.
7.4 LIMITATION ON INDEBTEDNESS Borrower will not, without the prior
written consent of Lender, create, incur, assume or suffer to exist any
Indebtedness except Permitted Indebtedness.
7.5 CERTIFICATE OF INCORPORATION AND BY-LAWS Borrower will not amend or
otherwise modify its Certificate of Incorporation or By-Laws which restricts or
limits or conditions Borrower from obtaining loans and advances from or granting
liens to Lender, or the performance of the Obligations of Borrower under the
Loan Documents.
7.6 TRANSACTIONS AMONG AFFILIATES Except for transactions among the
Borrowers, Borrower will not become a party to any transaction with an Affiliate
of Borrower unless the terms and conditions relating to such transaction are as
favorable to Borrower as would be obtainable at the time in a comparable
arms-length transaction with a Person other than an Affiliate or pay or incur
any obligation to pay any management, service, consulting or similar fees to any
Affiliate.
7.7 SPECIAL COVENANTS AS TO ASSETS Borrower covenants that until
satisfaction in full of all Obligations of Borrower to Lender and until
termination of this Agreement: (A) no Inventory, if any, shall be stored with a
bailee, warehouseman or similar party without Lender's prior written reasonable
consent and, if Lender gives such consent, Borrower will concurrently therewith
cause any such bailee, warehouseman or similar party to issue and deliver to
Lender, in form and substance acceptable to Lender, warehouse receipts therefor
in Lender's name. (B) Except as set forth on Exhibit "A" none of Borrower's
Inventory will be of a nature that contains any labels, trademarks, trade names,
or other identifying characteristics which are the property of third parties,
and the use of which by Borrower is in violation of the rights of such third
parties or a violation of any license, royalty or similar agreements with any
third parties. (C) Except as set forth on Exhibit "A", Borrower will not allow
any Equipment of Borrower to be held by any Person in the future without the
prior written consent of Lender. (D) Except upon prior written notice to Lender,
Borrower will not in the future purchase any Equipment except in the ordinary
course of business from Persons customarily in the business of selling such
Inventory or Equipment. (E) Borrower will not, without prior written consent of
Lender, remove the Collateral from its present location, except for the removal
of Inventory upon its sale; (F) Borrower will not sell, lease or transfer any of
its Equipment or other assets without the prior written consent of Lender except
for sales of Inventory in the ordinary course of business to good faith
purchasers for value; (G) Borrower will not cause any surety bonds to be issued
on its behalf in connection with any contracts or purchase orders except upon
not less than ten (10) days prior written notice to Lender.
7.8 PREPAYMENTS OF INDEBTEDNESS Borrower will not prepay or obligate
itself to prepay in whole or in part, or redeem the Subordinated Convertible
Debentures or any Capital Leases except that provided no Event of Default exists
Borrower may prepay its obligations under Capital Leases in conjunction with and
from the proceeds of a refinancing of said Capital Leases which refinancing is
on financial and other terms more favorable to Borrower than the Capital Leases
being so refinanced. Borrower shall notify Lender in writing of any such
refinancing.
7.9 FISCAL YEAR Borrower will not change its fiscal year.
7.10 ISSUANCE OF ADDITIONAL CAPITAL STOCK Borrower will not, without
the prior written consent of Lender, issue any additional stock or other equity
interest of Borrower or options or warrants for the issuance of stock or other
equity interest of Borrower unless (A) the proceeds from any such issuance are
remitted to Lender to be applied to the Obligations of Borrower to Lender and
(B) at the Borrowers option it shall have the right, to reduce or terminate the
revolving credit facility under paragraph 2.1 hereof in any amount up to the
proceeds realized from said issuance upon not less than five (5) Business Days'
prior written notice to Lender, which notice shall specify the effective date
thereof and the amount of such reduction. Any partial reduction shall be in
whole multiples of Two Hundred Fifty Thousand and 00/100 ($250,000.00) Dollars,
and shall be irrevocable and effective only upon receipt by Lender. If the
outstanding amount of the loans under the revolving credit facility is greater
than the remaining amount of the maximum amount of said revolving credit
facility, Borrower shall, on the effective date of such reduction or
termination, prepay the outstanding loans by an amount necessary so as to have
the outstanding amount of the loans not exceed the remaining amount of the
maximum amount of said revolving credit facility. Borrower shall also pay to
Lender on the effective date of such reduction or termination, an Early
Termination Fee calculated in accordance with paragraph 2.4(C) hereof based on
the amount of such reduction or termination.
7.11 CHANGE IN ACCOUNTING PRINCIPLES Borrower will not change or permit
any change in accounting principles applied to Borrower, except as required by
GAAP.
7.12 SALE AND LEASEBACK Borrower will not enter into any arrangement
with any Person providing for the leasing by Borrower of property which has been
or is to be sold or transferred by Borrower to such Person or to any other
Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of Borrower.
7.13 MAINTAIN CORPORATE EXISTENCE AND NATURE OF BUSINESS (A) Borrower
will not allow its corporate existence to be other than in good standing and
will not, without the prior written consent of Lender, dissolve or liquidate, or
merge or consolidate with or acquire or affiliate with any other business entity
including any acquisition of the assets of any other Person or form any
Subsidiary provided that upon not less than ten (10) days prior written notice
to Lender (i) any Borrower may be merged into any other Borrower, and (ii) any
Borrower may be dissolved if the business of such Borrower is to continued by
any other Borrower.
(B) Borrower will not change its name without furnishing to Lender at
least ten (10) days prior written notice thereof.
(C) Borrower will not utilize any trade name not set forth on
Exhibit "A" without furnishing to Lender at least ten (10) days prior written
notice thereof.
(D) Borrower will not change the nature of its business.
7.14 DIVIDENDS; REDEMPTION'S
(A) Borrower will not, without the prior written consent of Lender, pay
or declare any cash or property dividends, nor otherwise make a distribution of
capital or income provided that any Borrower other than Consolidated Delivery
and Logistics, Inc. may declare and pay dividends to its parent corporation.
(B) Borrower will not, without the prior written consent of Lender,
redeem, retire or repurchase any stock of Borrower, such consent not to be
unreasonably withheld or delayed provided that (i) no Default or Event of
Default exists, (ii) no Default or Event of Default would exist, including
without limitation a violation of any financial covenants set forth herein, if
such redemption, retirement or repurchase would occur, (iii) Borrower's
financial condition and results of operations are reasonably consistent with the
projections furnished from time to time by Borrower to Lender, (iv) Borrower
furnishes to Lender such information relative to such proposed redemption,
retirement or repurchase as Lender may request, and (v) the amount of any
treasury stock Borrower may hold as a consequence of such redemption, retirement
or repurchase will be deducted from Total Assets for the purpose of calculating
the Tangible Net Worth of Borrower in addition to other items to be so deducted
from Total Assets for the purpose of calculating Tangible Net Worth.
7.15 DISPOSAL OF ASSETS Except for transactions between the Borrowers,
Borrowers will not sell, lease, transfer or otherwise dispose of (A) any of the
Collateral or (B) any of its other assets except in the ordinary course of
business to third parties unaffiliated with Borrower in arms length
transactions. Borrower will not sell, discount or otherwise dispose of any of
its notes or Accounts Receivable or other obligations owing to Borrower except
for the purpose of collection in the ordinary course of business.
7.16 PAYMENT OF SUBORDINATED DEBT Borrower shall not make any payments
on account of principal and/or interest on Subordinated Debt if a Default or
Event of Default exists.
VIII
EVENTS OF DEFAULT
The occurrence of any of the following shall constitute an Event of
Default:
8.1 NON-PAYMENT Failure on the part of any Obligor to pay any
Obligation to Lender or any Lender Affiliate when due.
8.2 NON-PERFORMANCE Failure on the part of any Obligor to perform when
such performance is due any term, covenant or condition contained in any Loan
Document or any other agreement now existing or hereafter entered into with
Lender or any Lender Affiliate, including without limitation any swap agreement
(as defined in 11 U.S.C. ss.101) or in any document executed in connection with
any such agreements and with respet to a failure to comply with paragraphs 6.3,
6.4, 6.5, 6.7 and 6.13 hereof such failure remains uncured for ten (10) days
after notice from Lender to Borrower specifying such failure to perform.
8.3 MISREPRESENTATION Any representation, covenant or warranty made by
any Obligor in this Agreement, or any Loan Document, or in connection with any
instrument of guaranty or security or other writing supplementary or ancillary
hereto or thereto furnished to Lender or any Lender Affiliate shall have proved
to have been inaccurate in any substantial or material respect as of the date or
dates with respect to which it is deemed to have been made.
8.4 OTHER LIEN Borrower shall have caused or permitted a security
interest or Lien, perfected or otherwise, other than the security interest and
Liens specifically provided for or permitted hereunder, to be created in any of
its assets, or shall have failed to take any action requested by Lender to
perfect or protect the security interests and Liens provided for herein and with
respect to involuntary Liens same remains undischarged for thirty (30) days,
provided no such Lien is superior to the Lien in favor of Lender.
8.5 INSOLVENCY Any Obligor shall have applied for or consented to the
appointment of a custodian, receiver, trustee or liquidator of all or a
substantial part of its assets; a custodian shall have been appointed with or
without consent of any Obligor; any Obligor is generally not paying its debts as
they become due; has made a general assignment for the benefit of creditors; has
been adjudicated insolvent; or has filed a voluntary petition in Bankruptcy, or
a petition or an answer seeking reorganization or an arrangement with creditors
or to take advantage of any insolvency law, or an answer admitting the material
allegations of a petition in any Bankruptcy, reorganization or insolvency
proceeding; or taken corporate action for the purpose of effecting any of the
foregoing; or an order, judgment or decree shall have been entered, without the
application, approval or consent of any Obligor by any court of competent
jurisdiction approving a petition seeking reorganization of any Obligor, or
appointing a receiver, trustee, custodian or liquidator of any Obligor, or a
substantial part of its assets and such order, judgment or decree shall have
continued unstayed and in effect for any period of sixty (60) consecutive days;
or a petition in Bankruptcy shall have been filed against any Obligor and shall
not have been dismissed for a period of sixty (60) consecutive days, or if an
Order for Relief has been entered under the Bankruptcy Code, or if any Obligor
shall have suspended the transaction of its usual business.
8.6 CHANGE IN MANAGEMENT If all of Albert W. VanNess, Jr., William
Brannan and Joseph Wojak cease to be actively engaged in the management of
Borrower and there is not substitute management acceptable to Lender in its good
faith discretion.
8.7 JUDGMENT OR LIEN Entry of a judgment, issuance of any garnishment,
attachment or distraint, the filing of any lien or of any governmental
attachment against any property of Borrower which entry, issuance, attachment or
filing shall have continued unstayed and in effect for a period of thirty (30)
consecutive days.
8.8 NONCOMPLIANCE WITH LEASES OR LAWS Failure of Borrower to comply
with the terms and conditions of any lease covering the premises where any of
its assets are located, including the Collateral, or with any orders,
ordinances, laws or statutes of any city, state or other governmental department
having jurisdiction with respect to such premises or the conduct of business
thereon.
8.9 INSECURITY. The good faith determination of Lender that
the prospect of payment and performance of Borrowers obligations to Lender
is materially impaired.
8.10 ADVERSE CHANGE A Material Adverse Change has occurred of
Borrower on a consolidated basis.
8.11 ERISA If (A) any Reportable Event occurs and shall be
continuing for thirty (30) days after notice from Lender to Borrower, or (B) any
Plan shall be terminated, or (C) the Plan administrator of any Plan shall file
with the Pension Benefit Guaranty Corporation ("PBGC") a notice of intention to
terminate such Plan, or (D) the PBGC shall institute proceedings to terminate
any Plan or appoint a trustee to administer any Plan, and, if in any of the
cases set forth in (A) through (D) above, Lender reasonably determines in good
faith that any Plan will be terminated and that the amount of the unfunded
guaranteed benefits (within the meaning of Title IV of ERISA) resulting upon
termination of such Plan would have a material adverse effect on the financial
condition and properties or operation of Borrower if a lien against the assets
of Borrower were to result under ERISA.
8.12 DEFAULT IN OBLIGATIONS TO THIRD PARTIES Borrower or any Obligor is
in default beyond any applicable grace or cure period of any material obligation
to any third party including without limitation the Subordinated Convertible
Debentures and the Seller Indebtedness.
8.13 LICENSES If any license or permit necessary for the continued
operation of Borrower's or any Obligor's customary business is revoked,
suspended, terminated or not renewed.
8.14 TRANSFER OF ASSETS. Any Obligor transfers or sells all or
substantially all of its assets, without the prior written consent of Lender
except as expressly permitted hereunder.
8.15 TERMINATION OF GUARANTY. Any guarantor, if any, of the
Obligations of Borrower to Lender revokes or terminates his (its) guaranty of
the Obligations.
8.16 LOAN DOCUMENTS. Any Loan Document ceases to be in full
force and effect or the validity or enforceability thereof is contested by any
Obligor or any representative thereof.
IX
CONSEQUENCE OF EVENT OF DEFAULT
In case any Event of Default shall have occurred, and remains uncured
beyond any grace or cure period, then and in every such Event of Default, Lender
may take any or all of the following actions, at the same time or at different
times and in such order as the Lender may determine, provided that upon the
occurrence of an Event of Default under paragraph 8.5 hereof the credit
facilities under this Agreement shall automatically terminate and all
Obligations shall automatically be immediately due and payable.
9.1 ACCELERATION Declare all loans, sums and Obligations owing Lender
from Borrower under this Agreement or any other agreement or loan between Lender
and Borrower and Lender Affiliate to be forthwith due and payable, whereupon all
such sums shall forthwith become due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
Borrower
9.2 POSSESSION Proceed with or without judicial process to take
possession of all or any part of the Collateral provided for herein not already
in the possession of Lender and Borrower agrees that upon receipt of notice of
Lender's intention to take possession of all or any part of said Collateral,
Borrower will do everything reasonably necessary to assemble the Collateral and
make same available to Lender at a place to be designated by Lender.
9.3 METHODS OF SALE So long as Lender acts in a commercially reasonable
manner, assign, transfer and deliver at any time or from time to time the whole
or any portion of the Collateral or any rights or interest therein in accordance
with the Uniform Commercial Code, and without limiting the scope of Lender's
rights thereunder, Lender may sell the Collateral at public or private sale, or
in any other manner, at such price or prices as Lender may deem best, and either
for cash or credit, or for future delivery, at the option of Lender, in bulk or
in parcels and with or without having the Collateral at the sale or other
disposition. Lender shall have the right to be the purchaser at any public sale.
Lender shall have the right to conduct such sales on Borrower's premises or
elsewhere and shall have the right to use Borrower's premises without charge for
such sales for such time or times as Lender may see fit. Lender is hereby
granted license or other right to use, without charge, Borrower's labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in advertising for sale and selling any Collateral
and Borrower's rights under all licenses and franchise agreements shall inure to
Lender's benefit. Borrower agrees that a reasonable means of disposition of
Accounts shall be for Lender to hold and liquidate any and all Accounts. In the
event of a sale of the Collateral, or any other disposition thereof, Lender
shall apply all proceeds first to all costs and expenses of disposition,
including attorneys' fees, and then to interest, then to the principal component
of the Obligations of Borrower to Lender in such order as Lender deems
appropriate.
9.4 RETENTION OF COLLATERAL Elect to retain the Collateral or any part
thereof in satisfaction of all Obligations due from Borrower to Lender upon
notice of such proposed election to Borrower and any other party as may be
required by the Uniform Commercial Code.
9.5 SET-OFF Lender shall have the right immediately, and without notice
or other action to set-off against any of the Obligor's Obligations to Lender
any sum owed by Lender in any capacity to any Obligor whether due or not, and
Lender shall be deemed-to have exercised such right of set-off and to have made
a charge against any such sum immediately upon the occurrence of such event of
default, even though the actual book entries may be made at some time subsequent
thereto.
9.6 ATTORNEYS' FEES AND EXPENSES Add to the Obligations of Borrower,
Lender's reasonable expenses to obtain or enforce payment of any Obligations
hereunder or in connection with any insolvency proceedings of Borrower or any
Obligor and the enforcement or liquidation of any debt hereunder shall include
reasonable attorneys' fees plus other legal expenses incurred by Lender.
9.7 DEFAULT INTEREST Increase the rate of interest under any
Obligations to a rate of four (4%) percent in excess of the Prime Rate in effect
from time to time. Unless otherwise agreed by Lender, this increase in interest
rate shall be retroactive to the date of the first occurrence of an Event of
Default.
9.8 LENDER'S PERFORMANCE OF BORROWER'S OBLIGATION If Borrower fails to
comply with any of the covenants or perform any of its obligations set forth
herein or in any other Loan Document, Lender may, but shall have no obligation
to, perform any such obligations or undertake any act to cause such covenant to
be complied with, including, but not limited to, discharging any Lien on any
asset other than Permitted Encumbrances. Any and all sums, and all costs and
expenses incurred by Lender in so performing or causing compliance, shall be
payable on demand together with interest at the default rate provided for in
paragraph 9.7 hereof from the date of any such payment by Lender until the date
paid by Borrower. Any such performance by Lender shall not cure any Default or
Event of Default by Borrower.
9.9 OTHER REMEDIES Exercise any other remedies under the Uniform
Commercial Code or other applicable law, or any other Loan Document, including
but not limited to proceeding to enforce its right by suit in equity, action at
law or other appropriate proceeding, whether for payment or the specific
performance of the covenants or agreements contained in this Agreement or any
other Loan Document.
X
MISCELLANEOUS
10.1 NO WAIVER Borrower agrees that no delay on the part of Lender in
exercising any power or right hereunder or any other Loan Document shall operate
as a waiver of any such power or right, nor act as a consent to any departure by
Borrower from any of the terms or conditions hereof or thereof, preclude other
or further exercise thereof, or the exercise of any other power or right. No
waiver whatsoever shall be valid unless in writing signed by Lender and then
only to the extent set forth therein.
10.2 MODIFICATION OR AMENDMENT This Agreement and every other Loan
Document cannot be changed orally and cannot be changed by an executory
agreement unless such agreement is in writing and signed by all parties hereto
by their duly authorized officers.
10.3 CERTAIN WAIVER(S) (A) Borrower waives presentment, dishonor and
notice of dishonor, protest and notice of protest of all commercial papers at
any time held by Lender on which Borrower is in any way liable.
(B) Borrower waives any right, if any, it may have to require
Lender to proceed against any Collateral or any other Obligor before proceeding
against Borrower in enforcing any of its rights or remedies, and waives any
right, if any, to claim a fair market value credit with respect to any
Collateral whether before or after the sale or other disposition of any
Collateral.
10.4 ONE INSTRUMENT The provisions of this Agreement shall be in
addition to those of any notes or other evidence of the Obligations held by
Lender relating to this particular transaction, all of which shall be construed
as one instrument.
10.5 LAW OF NEW JERSEY This Agreement and all other Loan Documents and
the rights of the parties hereto and thereto shall be governed by the internal
laws of the State of New Jersey without regard to conflict of laws.
10.6 JURISDICTION Subject to paragraph 10.19 hereof Borrower hereby
irrevocably consents to the jurisdiction of the Courts of the State of New
Jersey or any Federal Court in such State in connection with any action or
proceeding arising out of or related to this Agreement or any other Loan
Document. In any such litigation, Borrower waives personal service of any
summons, complaint or other process and agrees that service may be made by
certified or registered mail to it, at the address provided herein. The Borrower
agrees that any action brought by Borrower shall be commenced and maintained
only in a court in the Federal judicial district in New Jersey or in Essex
County, New Jersey.
10.7 SUCCESSORS OR ASSIGNS; JOINT AND SEVERAL LIABILITY This Agreement
and all other Loan Documents shall be binding upon and shall inure to the
benefit of the parties hereto, their respective successors and assigns,
provided, however, that Borrower shall not have any right to assign any of its
rights hereunder or under any other Loan Documents. The obligations of each
Borrower hereunder and under each other Loan Document shall be joint and
several.
10.8 RIGHTS CUMULATIVE The rights and remedies herein expressed or in
any other Loan Document to be vested in or conferred upon Lender shall be
cumulative and shall be in addition to and not in substitution for or in
derogation of the rights and remedies conferred upon secured creditors by the
Uniform Commercial Code or any other applicable law.
10.9 NOTIFICATION OF DISPOSITION OF COLLATERAL Any notification of a
sale or other disposition of the Collateral will be sufficient if given in the
manner set forth in Paragraph 10.10 hereof not less than five (5) days prior to
the day on which such sales or other disposition will be made, and such
notification shall be deemed reasonable notice.
10.10 ADDRESSES OF NOTICES Any written notice required or permitted to
be given by this Agreement shall be given or made in writing, including
telecopy, and shall be, as elected by the party giving such notice, served
personally by messenger or courier service, telecopied (followed up by a
mailing), or mailed in the United States by prepaid, registered or certified
mail, return receipt requested, to the following:
If to Borrower: Consolidated Delivery & Logistics, Inc.
380 Allwood Road
Clifton, NJ 07012
ATTN: Joseph Wojak
Fax No.: (973) 471-5519
with a copy (except Lowenstein, Sandler, Kohl, Fischer & Boylan, P.A.
for routine notices with 65 Livingston Avenue
respect to borrowings Roseland, NJ 07068
hereunder and the like) ATTN: Alan Wovsaniker, Esq.
to: Fax No.: (973) 992-5820
If to Lender: FIRST UNION COMMERCIAL CORPORATION
123 South Broad Street, PA 1221
Philadelphia, PA 19101
ATTN: Leveraged Finance Division -
Portfolio Management
Fax # (215) 985-6079
with a copy (except STRYKER, TAMS & DILL LLP
for routine notices with Two Penn Plaza East
respect to borrowings Newark, New Jersey 07105
hereunder and the like) to ATTN: Alan D. Wiener, Esq.
Fax # (973) 491-9692
Any notice given in accordance with the provisions of this paragraph shall be
deemed effective, if hand delivered, on the date of such delivery, or on the
date telecommunicated if telecopied, or if mailed, on the date upon which the
return receipt is signed or delivery refused or the notice is designated by the
postal authorities as not deliverable, as the case may be. Each party may give
notice to each of the other parties of a change of its address for the purpose
of giving notice under this paragraph which, thereafter until changed by like
notice, shall be the address of such party for purposes of this Agreement.
10.11 TITLES The titles and headings indicated herein are inserted for
convenience only and shall not be considered a part of this Agreement or in any
way limit the construction or interpretation of this Agreement.
10.12 DISCLOSURE Lender is hereby authorized to disclose any financial
or other information it may have about Borrower to any Lender Affiliate, to any
present or future participant or prospective participant, any regulatory body or
agency having jurisdiction over Lender, or to any Person which succeeds to all
or any part of Lender's interest herein.
10.13 SALE, ASSIGNMENT OR PARTICIPATION'S. The Lender may from time to
time sell or assign, in whole or in part, or grant participations in some or all
of the Loan Documents and/or the obligations evidenced hereby. Nothing in this
Agreement or other Loan Documents shall prohibit the Lender from pledging or
assigning this Agreement and other Loan Documents including Collateral and all
rights related thereto to any Federal Reserve Bank in accordance with applicable
law. The holder of any such sale, assignment, pledge or participation, if the
applicable agreement between the Lender and such holder so provides, (i) shall
be entitled to all of the rights, obligations and benefits of the Lender and
(ii) shall be deemed to hold and may exercise the rights of setoff or Banker's
lien with respect to any and all obligations of such holder to the Borrower, in
each case as fully as though the Borrower were directly indebted to such holder.
The Lender may in its discretion, give notice to the Borrower of such sale,
assignment, pledge or participation; however, the failure to give such notice
shall not affect any of the Lender's or such holder's rights hereunder. The
Borrower authorizes the Lender to provide information concerning the Borrower to
any prospective purchaser, assignee, pledgee or participant provided such Person
agrees to keep such information confidential. The information provided may
include, but is not limited to, amounts, terms, balances, payment history,
return item history and any financial or other information about the Borrower.
The Borrower agrees to indemnify, defend, release the Lender, and hold the
Lender harmless, at the Borrower's cost and expense, from and against any and
all lawsuits, claims, actions, proceedings, or suits against the Lender or
against the Borrower and the Lender, arising out of or relating to the Lender's
reporting or disclosure of such information. Notwithstanding the foregoing, if
Lender assigns or otherwise transfers an interest in this Agreement or other
Loan Documents to a Person which Lender is aware is a "Non US Taxpayer", Lender
shall endeavor to promptly notify Borrower of such assignment or transfer and no
additional sums shall be payable by Borrower under the Loan Documents because of
any withholding of federal income tax such Person is subject to. For the
purposes of this paragraph 10.13 "Non US Taxpayer" means a person, as defined in
Section 7701(a)(1) of the Internal Revenue Code of 1986, as amended (the "IRS
Code"), which is not a "United States person" as defined in Section 7701(a)(30)
of the IRS Code and is subject to withholding of federal income tax under
Subtitle A, Chapter 3, SubChapter A of the IRS Code (Section 1441, et seq.).
10.14 INTEREST LIMITATION It is the intention of Lender and Borrower to
conform strictly to the laws of the State of New Jersey or the laws of such
other jurisdiction which may be found to apply to the subject transaction
relating to the maximum rate of interest which may be lawfully contracted for or
charged. Nothing contained in this Agreement or any other Loan Document shall be
construed to mean that Borrower has contracted to pay or is obligated to pay any
sum or sums to Lender in excess of those which may lawfully be charged or
contracted for under applicable law of the State of New Jersey or other
applicable law. If any provision of this Agreement or any of the other Loan
Documents shall require payment of any sum or sums of interest in excess of the
maximum permitted rate which may be lawfully contracted for or charged, then
Borrower and Lender agree that such result is as a consequence of their
inadvertence and/or mistake, and the interest charge for which Borrower is
liable under this instrument shall be recomputed for the sole and limited
purpose of determining the extent of the obligations and liabilities of Borrower
to Lender so that the interest charges for which Borrower is liable shall not
exceed the maximum permitted rate which is determined to be applicable.
Additionally, any sums of interest which are collected by Lender from Borrower
or other source in connection with the loan evidenced hereby which are in excess
of the maximum permitted rate shall, for the sole and limited purpose of
determining the extent of the obligations and liabilities of Borrower to Lender,
be credited against the amount of principal for which Borrower is liable to
Lender after giving effect to any recomputation and adjustment required pursuant
to the foregoing provisions of this section, or if such outstanding principal
balance and interest are paid in full, any such excess shall be remitted by
Lender to Borrower.
10.15 INDEMNIFICATION Borrower hereby agrees to and does hereby
indemnify, protect, defend and save harmless Lender and any member, officer,
director, official, agent, employee and attorney of Lender, and its respective
heirs, successors and assigns (collectively, the "Indemnified Parties"), from
and against any and all losses, damages, expenses or liabilities of any kind or
nature and from any suits, claims or demands, including reasonable counsel fees
incurred in investigating or defending such claim, suffered by any of them and
caused by, relating to, arising out of, resulting from, or in any way connected
with the Loan Documents and the transactions contemplated therein or the
Collateral (unless caused by the gross negligence or willful misconduct of the
Indemnified Parties) including, without limitation: (i) losses, damages,
expenses or liabilities sustained by Lender in connection with any environmental
cleanup or other remedy required or mandated by any environmental law; (ii) any
untrue statement of a material fact contained in information submitted to Lender
by Borrower and/or any Obligor or the omission of any material fact necessary to
be stated therein in order to make such statement not misleading or incomplete;
(iii) the failure of Borrower and/or any Obligor to perform any obligations
herein required to be performed by Borrower and/or any Obligor; and (iv) the
ownership, construction, occupancy, operations, use and maintenance of any of
Borrower's and/or the Obligor's properties. The provisions of this paragraph
shall survive termination of this Agreement and the other Loan Documents.
10.16 SEVERABILITY AND CONSISTENCY The illegality, unenforceability or
inconsistency of any provisions of this Agreement or any instrument or agreement
required hereunder shall not in any way affect or impair the legality,
enforceability or consistency of the remaining provisions of this Agreement or
any instrument or agreement required hereunder. The Loan Documents are intended
to be consistent. However, in the event of any inconsistencies among any of the
Loan Documents, such inconsistency shall not affect the validity or
enforceability of Loan Document. The Borrower agrees that in the event of any
inconsistency or ambiguity in any of the Loan Documents, the Loan Documents
shall not be construed against any one party but shall be interpreted consistent
with the Lender's policies and procedures.
10.17 INTEGRATION; NO THIRD PARTY BENEFICIARY This Agreement and the
other Loan Documents constitute the sole agreement of the parties with respect
to the subject matter hereof and thereof and supersede all oral negotiations and
prior writings with respect to the subject matter hereof and thereof. The
Borrower and the Lender do not intend any of the benefits of this Agreement to
inure to any third party, and no third party shall have any status, right, or
entitlement under this Agreement.
10.18 JUDICIAL PROCEEDINGS; WAIVERS THE BORROWER AND THE LENDER
ACKNOWLEDGE AND AGREE THAT SUBJECT TO PARAGRAPH 10.19 HEREOF (i) ANY SUIT,
ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED BY
THE LENDER OR THE BORROWER OR ANY SUCCESSOR OR ASSIGN OF THE LENDER OR THE
BORROWER, OR ON WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
DEALINGS OF THE PARTIES WITH RESPECT HERETO OR THERETO SHALL BE TRIED ONLY BY A
COURT AND NOT BY A JURY AND EACH PARTY WAIVES THE RIGHT TO TRIAL BY JURY; (ii)
EACH WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER, IN ANY SUCH SUIT, ACTION
OR PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; AND (ii) THIS SECTION IS
A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND THE LENDER WOULD NOT
EXECUTE THIS AGREEMENT IF THE WAIVERS SET FORTH IN THIS SECTION WERE NOT A PART
OF THIS AGREEMENT.
10.19 ARBITRATION. Upon demand of any party hereto, whether made before
or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to this Agreement and
other Loan Documents ("Disputes") between or among the parties to this Agreement
and other Loan Documents shall be resolved by binding arbitration as provided
herein. Institution of a judicial proceeding by a party does not waive the right
of that party to demand arbitration hereunder. Disputes may include, without
limitation, tort claims, counterclaims, disputes as to whether a matter is
subject to arbitration, claims brought as class actions, claims arising from
Loan Documents executed in the future, or claims arising out of or connected
with the transaction reflected by this Agreement and other Loan Documents.
Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in the city of Newark, New Jersey. The
expedited procedures set forth in Rule 51 et seq. of the Arbitration Rules shall
be applicable to claims of less than $1,000,000.00. All applicable statutes of
limitation shall apply to any Dispute. A judgment upon the award may be entered
in any court having jurisdiction. The panel from which all arbitrators are
selected shall be comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general jurisdiction, state or federal, of the state where the hearing will
be conducted or if such person is not available to serve, the single arbitrator
may be a licensed attorney. Notwithstanding the foregoing, this arbitration
provision does not apply to disputes under or related to swap agreements.
Preservation and Limitation of Remedies. Notwithstanding the preceding
binding arbitration provisions, Lender and Borrower agree to preserve, without
diminution, certain remedies that any party hereto may employ or exercise
freely, independently or in connection with an arbitration proceeding or after
an arbitration action is brought. Lender and Borrower shall have the right to
proceed in any court of proper jurisdiction or by self-help to exercise or
prosecute the following remedies, as applicable: (i) all rights to foreclose
against any real or personal property or other security by exercising a power of
sale granted under Loan Documents or under applicable law or by judicial
foreclosure and sale, including a proceeding to confirm the sale; (ii) all
rights of self-help under applicable law including peaceful occupation of real
property and collection of rents, set-off, and peaceful possession of personal
property; and (iii) obtaining provisional or ancillary remedies including
injunctive relief, sequestration, garnishment, attachment, appointment of
receiver and filing an involuntary Bankruptcy proceeding. Preservation of these
remedies does not limit the power of an arbitrator to grant similar remedies
that may be requested by a party in a Dispute.
Borrower and Lender agree that they shall not have a remedy of punitive
or exemplary damages against the her in any Dispute and hereby waive any right
or claim to punitive or exemplary damages they have now or which may arise in
the future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
FIRST UNION COMMERCIAL CORPORATION
BY:
NAME:
TITLE:
CONSOLIDATED DELIVERY & LOGISTICS, INC.,
BY:
NAME:
TITLE:
CLAYTON/NATIONAL COURIER SYSTEMS, INC.
BY:
NAME:
TITLE:
NATIONAL EXPRESS COMPANY, INC.,
BY:
NAME:
TITLE:
AMERICAN COURIER, INC.,
BY:
NAME:
TITLE:
CLICK MESSENGER SERVICE, INC.,
BY:
NAME:
TITLE:
CLICK MESSENGER SERVICE OF N.Y., INC.,
BY:
NAME:
TITLE:
COURT COURIER SYSTEMS, INC.,
BY:
NAME:
TITLE:
OLYMPIC COURIER SYSTEMS, INC.,
BY:
NAME:
TITLE:
SECURITIES COURIER CORPORATION
BY:
NAME:
TITLE:
SILVER STAR EXPRESS, INC.
BY:
NAME:
TITLE:
SUREWAY AIR TRAFFIC CORPORATION
BY:
NAME:
TITLE:
SUREWAY LOGISTICS CORPORATION
BY:
NAME:
TITLE: