MODIFICATION AGREEMENT
THIS MODIFICATION AGREEMENT, dated as of March 30, 2001 by and between
FIRST UNION COMMERCIAL CORPORATION, with a place of business at 1339 Chestnut
Street, Philadelphia, Pennsylvania 19107-3579 (hereinafter called "Lender") and
CD&L, Inc., CLAYTON/NATIONAL COURIER SYSTEMS, INC., NATIONAL EXPRESS COMPANY,
INC., CLICK MESSENGER SERVICE, INC., CLICK MESSENGER SERVICE OF N.Y., INC.,
OLYMPIC COURIER SYSTEMS, INC., SECURITIES COURIER CORPORATION, SILVER STAR
EXPRESS, INC., KBD SERVICES, INC., FIRST CHOICE COURIER AND DISTRIBUTION
SYSTEMS, INC. ("First Choice"), REGIONAL EXPRESS III, INC. ("REI") and MANTECA
ENTERPRISES, INC. ("Manteca"), (hereinafter sometimes individually and
collectively called "Borrower").
BACKGROUND
A. The Lender and the Borrower are parties to that certain Loan and
Security Agreement dated July 14, 1997 (as amended from time to time, the "Loan
Agreement').
B. As of the date hereof, the Lender has agreed to waive certain
existing financial covenant defaults related to Cash Flow Leverage Ratio,
Minimum EBITDA, and Fixed Charge Coverage Ratio (collectively, the "Existing
Events of Default") and the Lender and the Borrower have agreed to amend certain
of the financial covenants set forth in the Loan Agreement and to otherwise
modify the provisions of the Loan Agreement and the other Loan Documents as set
forth herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto adopt the above recitals and agree as
follows:
1. Capitalized terms not defined herein but defined in the Loan Agreement shall
have the same meanings ascribed to such terms in the Loan Agreement.
2. The definition of "Authorized Asset Sale" set forth in Section 1.6A of the
Loan Agreement is hereby amended and restated in its entirety to read as
follows:
1.6A "Authorized Asset Sale" means the sale by the
Borrower on or before March 31, 2001 of the assets of Sureway
Air Traffic Corporation including the stock of Sureway
Logistics Corporation and Darobin Freight Forwarding Company,
Inc. (together, "Sureway") for an aggregate gross price in
cash of no less than $11,300,000 and otherwise on terms and
conditions satisfactory to the Lender in its sole discretion.
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3. The definition of "Advance Dollar Limit " as set forth in Section 1.4 of the
Loan Agreement is hereby is hereby amended and restated in its entirety as
follows:
1.4 "Advance Dollar Limit" means (A) Fifteen Million
and no/100 ($15,000,000) Dollars; or (B) 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.
4. The definition of "Borrowing Base" as set forth in Section 1.9 of the Loan
Agreement is hereby amended and restated in its entirety as follows:
1.9 "Borrowing Base" means the lesser of: (A) the
Advance Dollar Limit; or (B) the net of (i) the Eligible Loan
Value of Eligible Accounts, minus (ii) the Debenture Reserve
Amount, minus (iii) the Excess Availability Reserve.
5. The definition of "Expiration Date" as set forth in Section 1.29 of the Loan
Agreement is hereby amended and restated in its entirety as follows:
1.29 "Expiration Date" means the earlier to occur of:
(a) the date upon which the Lender shall declare an Event of
Default under the Obligations and accelerate the same in
accordance with this Agreement; or (b) July 31, 2002.
6. The definition of "Aggregate Advance Dollar Limit" set forth in Section 1.83
of the Loan Agreement is hereby amended and restated in its entirety to read as
follows:
1.83 "Aggregate Advance Dollar Limit" means Fifteen
Million and no/100 Dollars ($15,000,000.00).
7. Paragraph 2.7(f) of the Loan Agreement is hereby amended and restated in its
entirety as follows:
(f) Excess Availability. After each proposed Advance
(after taking into consideration such proposed Advance)
Borrower shall have Excess Availability (the "Excess
Availability Reserve") of Five Million Dollars ($5,000,000).
The amount of the Excess Availability Reserve will be deducted
from the Advance Dollar Limit for purposes of calculating the
Unused Commitment Fee.
8. Article IIA is hereby amended and restated in its entirety as follows:
IIA
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Authorized Asset Sales
2A.1 Authorized Asset Sales. Notwithstanding anything
to the contrary set forth in the Loan Agreement, from time to
time on or before March 31, 2001 the Borrower may propose to
sell Sureway for an aggregate gross cash price of no less than
$11,300,000 and otherwise on terms and conditions satisfactory
to the Lender in its sole discretion.
2A.2 Cash Proceeds of Authorized Asset Sales. The
cash proceeds of the Authorized Asset Sales shall be utilized
by the Borrower as follows:
(a) The balance of proceeds after taking
into account authorized expenditures as set forth below shall
be applied by the Borrower as a reduction to the Obligations.
(b) As of April 2, 2001, $1,000,000 to
reduce the Borrower's obligations to the holders of
Subordinated Debt outstanding pursuant to that certain Senior
Subordinated Loan Agreement dated January 29, 1999
(collectively, the "Senior Subordinated Noteholders") with an
additional one million dollars ($1,000,000.00) authorized to
be paid by the Borrower in future to the Senior Subordinated
Noteholders from availability, if any, under the Credit
Agreement if: (i) no Event of Default has occurred under the
Credit Agreement; and (ii) the Borrower has at all times
maintained the Excess Availability Reserve, in four equal
quarterly installments of $250,000 on each of August 15, 2001,
November 15, 2001, May 15, 2002, and August 15, 2002.
Notwithstanding the foregoing, the payments to the Senior
Subordinated Noteholders as authorized herein shall not in any
way be deemed to have modified the validity and effect of the
subordination agreements in place relative to the Subordinated
Debt and the Lender shall continue to have all rights and
remedies available to it as a senior creditor thereunder.
9. Paragraphs 7.2(B) and (D) of the Loan Agreement are hereby amended and
restated in their entirety as follows:
(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:
(i) 4.98 to 1.0 for the reporting period
ending March 31, 2001;
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(ii) 4.36 to 1.0 for the reporting period
ending June 30, 2001;
(iii) 4.02 to 1.0 for the reporting period
ending September 30, 2001;
(iv) 3.63 to 1.0 for the reporting period
ending December 31, 2001; and
(v) 3.25 to 1.0 for each reporting
period thereafter.
Such ratios shall be calculated on a rolling
four quarter basis; provided, however, that
with respect to fiscal quarters of the
Borrower ending on March 31, 2001 through
September 30, 2001, notwithstanding the
definition of EBITDA, for purposes of
calculating the foregoing ratio, EBITDA
shall be calculated on an annualized basis
for the quarters ending on and after March
31, 2001; for example:
(i) for the quarter ending March 31,
2001, 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 March 31, 2001;
(ii) for the quarter ending June 30,
2001, EBITDA shall be calculated
based upon the income and expenses
of Borrower for the quarters ending
March 31, 2001 and June 30, 2001
times 2; and
(iii) for the quarter ending September 30,
2001, EBITDA shall be calculated
based upon the income and expenses
of Borrower for the quarters ending
March 31, 2001 and June 30, 2001 and
September 30, 2001 divided by 3 and
multiplied by 4.
For the quarter ending December 31, 2001,
and each quarter thereafter, EBITDA shall be
calculated on the income and expenses of
Borrower for the 4 quarters ending on such
date.
(D) Fixed Charge Coverage 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:
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(i) 0.94 to 1.00 for the reporting period
ending March 31, 2001;
(ii) 0.68 to 1.00 for the reporting period
ending June 30, 2001;
(iii) 0.55 to 1.00 for the reporting period
ending September 30, 2001;
(iv) 0.55 to 1.00 for the reporting
period ending December 31, 2001; and
(v) 1.40 to 1.00 for each reporting
period thereafter.
Such ratios shall be calculated on a rolling four
quarter basis; provided, however, that with respect
to fiscal quarters of the Borrower ending on March
31, 2001 through September 30, 2001, notwithstanding
the definition of EBITDA, for purposes of calculating
the foregoing ratio, EBITDA shall be calculated as
follows:
(i) for the quarter ending March 31,
2001, the ratio shall be calculated
as (A)(i) EBITDA calculated based
upon the income and expenses of
Borrower for the three (3) months
ending on such date minus (ii) all
unfunded Capital Expenditures,
dividends, and taxes paid during the
three (3) 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 three (3) months ending on such
date plus (ii) the interest expense
for the three (3) months ending on
said date;
(ii) for the quarter ending June 30,
2001, the ratio shall be calculated
as (A)(i) EBITDA calculated based
upon the income and expenses of
Borrower for the six (6) months
ending on such date minus (ii) all
unfunded Capital Expenditures,
dividends, and taxes paid during the
six (6) 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 six (6) months ending on such
date plus (ii) the interest expense
for the six (6) months ending on
said date; and
(iii) for the quarter ending September 30,
2001, the ratio shall be calculated
as (A)(i) EBITDA
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calculated based upon the income and expenses of
Borrower for the nine (9) months ending on such date
minus (ii) all unfunded Capital Expenditures,
dividends, and taxes paid during the nine (9) 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 nine (9) months ending on such
date plus (ii) the interest expense for the nine (9)
months ending on said date;
10. Paragraphs 7.2A of the Loan Agreement are hereby amended and
restated in their entirety as follows
Minimum EBITDA
--------------
7.2A Minimum EBITDA. Borrower, on a consolidated
basis, will not allow its EBITDA calculated at the end of each
fiscal quarter, to be less than:
(i) $1,367,000 for the three-month
period ending March 31, 2001;
(ii) $1,712,000 for the three-month
period ending June 30, 2001;
(iii) $2,030,000 for the three-month
period ending September 30, 2001;
and
(iv) $2,397,000 for the three-month
period ending December 31, 2001.
Borrower will certify compliance with the Minimum EBITDA requirements
set forth above within forty five (45) days of the fiscal quarter ending March
31, 2001 and within forty five (45) days of each fiscal quarter ending
thereafter.
11. Notwithstanding anything to the contrary set forth in the Loan
Agreement or any other Loan Document, pricing of the Revolving Loans (including
letters of credit) will be set in accordance with the performance matrix
supplied by the Lender in connection with the Loan Agreement and, in addition,
will include an early termination fee of one quarter of one percent (0.25%) if
paid before the Expiration Date.
12. The Borrower shall not pay any fees or similar charges for the
modification of the Senior Subordinated Loan Agreement nor the waiver of any
covenant violations under the Senior Subordinated Loan Agreement as of March 30,
2001. As of March 30, 2001, the Borrower shall have agreed with the Senior
Subordinated Noteholders to: (i) waive any and all defaults
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occurring under the Senior Subordinated Loan Agreement and reduce the interest
rate on the Senior Subordinated Debt to twelve percent (12%) per annum if the
Borrower is in Compliance with the Senior Subordinated Loan Agreement as amended
on March 30, 2001.
13. Provided that the Borrower is in compliance with the Loan
Agreement: (a) the Borrower may draw Advances totaling no more than $50,000.00
to pay Subordinated Convertible Debentures coming due prior to the Expiration
Date; and (b) the Borrower may pay Seller Indebtedness coming due to the extent,
and only the extent, that: (A) the Borrower is in compliance with the Borrowing
Base and has borrowing availability after giving effect to any proposed Seller
Indebtedness payment of no less than $500,000.00; (B) the Borrower is current on
its account payables within stated terms; and (C) the Lender shall have received
a current accounts payable aging together with prior notice of no less than one
week of any proposed Seller Indebtedness payment and the Borrower shall have
permitted the Lender to conduct an accounts payables audit of such aging if
requested by the Lender prior to the payment of the proposed Seller
Indebtedness. Such allowance for the payment of subordinated debt will in no way
affect the provisions of existing subordination and related agreements in effect
with respect to the Subordinated Convertible Debentures and the Seller
Indebtedness.
14. The effectiveness of this Modification Agreement is expressly
conditioned upon the Borrower's satisfaction of each of the following conditions
precedent:
(a) the Borrower shall have obtained waivers of any covenant
violations as of March 30, 2001 under any agreement evidencing Subordinated
Debt, including the Senior Subordinated Loan Agreement, together with amendments
of such covenants on an ongoing basis, which amendments are acceptable to the
Lender;
(b) the Borrower shall have paid to the Lender a
non-refundable amendment fee of $50,000;
(c) the Borrower shall have paid and/or reimbursed the Lender
for the amount of any counsel, audit, or related fees and expenses accrued by
the Lender on or prior to the date the Borrower executes this Modification
Agreement; and
(d) the Borrower shall have assigned and delivered to the
Lender each of the original notes executed by the buyers in connection with the
Sureway transaction.
15. Release. Each of the Borrowers (collectively, jointly, and
severally, the "CDL Group"), on behalf of themselves, and all persons and
entities claiming by, through, or under any one or more of them, hereby release,
waive and forever discharge the Lender and all of the Lender's officers,
directors, attorneys, agents, affiliates, employees and successors and assigns
(collectively, the "Bank Group"), of, from, and with respect to any and all
manner of action and actions, cause and causes of actions, suits, disputes,
claims, counterclaims and/or
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liabilities, cross claims, defenses, and any claims for avoidance or other
remedies available to a debtor, its estate or any trustee or representatives
thereof, whether now known or unknown, suspected or unsuspected, past or
present, asserted or unasserted, contingent or liquidated, whether or not well
founded in fact or law, whether in contract, in tort or otherwise, at law or in
equity, which the CDL Group had or now has, claims to have had, now claims to
have or hereafter can, shall or may claim to have against the Bank Group, for or
by reason of any cause, matter, or thing whatsoever , including any claims based
upon, relating to or arising out of any and all transactions, relationships or
dealings with or loans made to the Borrower prior to the date hereof. This
provision shall survive any termination of this Modification Agreement.
16. Borrower represents that:
(a) each and every representation heretofore made by Borrower
in the Loan Agreement and the other Loan Documents is true and correct as of the
date of this Modification Agreement, except that the representations as to the
financial condition of the Borrower are deemed to be updated to reflect the
financial condition of Borrower as of the date of the most recent financial
statements furnished to Lender;
(b) no consent or approval of, or exemption by any Person is
required to authorize, or is otherwise required in connection with the execution
and delivery of this Modification Agreement and the other Loan Documents
provided for herein, which has not been obtained and which remains in full force
and effect;
(c) Borrower has the power to execute, deliver and carry out
this Modification Agreement and all documents executed in connection herewith,
and this Modification Agreement and such documents are valid, binding and
enforceable as against Borrower in accordance with their terms;
(d) to the best of the knowledge of the Borrower and its
senior management, no material adverse change in the financial condition of
Borrower has occurred since the date of the most recent financial statements of
Borrower submitted to Lender, and the information contained in said statements
and reports is true and correctly reflects the financial condition of Borrower
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; and
(e) after taking into account the Lender's waiver of the
Existing Covenant Defaults, no Default or Event of Default exists under the Loan
Agreement.
17. Borrower hereby confirms the security interests and liens granted
by Borrower to Lender in and to the Collateral in accordance with the Loan
Agreement and other Loan Documents as security for its Obligations to Lender.
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18. Borrower agrees to pay any and all expenses, including reasonable
counsel fees and disbursements, incurred by Lender in connection with the
preparation, negotiation and execution of this Modification Agreement and all
other Loan Documents provided for herein.
19. This Modification Agreement is intended to supplement and modify
the Loan Agreement as modified between Lender and Borrower and the rights and
obligations of the parties under the Loan Agreement shall not in any way be
vacated, modified or terminated except as herein provided. All terms and
conditions contained in each and every agreement or promissory note or other
evidence of indebtedness of Borrower to Lender are incorporated herein by
reference. If there is a conflict between any of the provisions heretofore
entered into and provisions of this Modification Agreement, then the provisions
of this Modification Agreement shall govern.
20. This Modification Agreement shall be construed in accordance with
the substantive laws of the State of New Jersey without regard to conflicts of
laws.
21. This Modification Agreement may be executed by one or more of the
parties on any number of separate counterparts and all of said counterparts
taken together shall be deemed to constitute one and the same document.
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IN WITNESS WHEREOF, the parties hereto have caused this Modification
Agreement to be executed and delivered by their duly authorized officers as of
the day and year first-above written.
CD&L, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
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CLAYTON/NATIONAL COURIER
SYSTEMS, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
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NATIONAL EXPRESS COMPANY, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
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CLICK MESSENGER SERVICE, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
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CLICK MESSENGER SERVICE OF
N.Y., INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
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OLYMPIC COURIER SYSTEMS, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
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SECURITIES COURIER CORPORATION
By:
------------------------------------------
Name:
----------------------------------------
Title:
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SILVER STAR EXPRESS, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
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KBD SERVICES, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
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FIRST CHOICE COURIER AND
DISTRIBUTION SYSTEMS, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
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REGIONAL EXPRESS III, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
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MANTECA ENTERPRISES, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
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FIRST UNION COMMERCIAL CORPORATION
By:
------------------------------------------
Name:
----------------------------------------
Title:
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