FORM 10-Q
________________________________________________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000.
Commission File No. 1-8129.
US 1 INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Indiana 95-3585609
(State of Incorporation) (I.R.S. Employer Identification No.)
1000 Colfax, Gary, Indiana 46406
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (219) 944-6116
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
As of March 15,2000, there were 10,618,224 shares of registrant's common stock
were outstanding.
<PAGE>
Part I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
<TABLE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999
<CAPTION>
ASSETS
March 31, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Accounts receivable-trade, less allowance for
doubtful accounts of $77,478 and $66,648
respectively $5,164,736 $4,972,846
Other receivables 515,492 105,770
Deposits 162,211 162,173
Prepaid expenses 17,812 9,245
---------- ----------
Total current assets 5,860,251 5,250,034
FIXED ASSETS:
Equipment 104,220 100,738
Less accumulated depreciation and amortization 56,853 52,756
---------- ----------
Net fixed assets 47,367 47,982
---------- -----------
ASSETS HELD FOR SALE:
Land 195,347 195,347
Valuation allowance (141,347) (141,347)
---------- -----------
Net assets held for sale 54,000 54,000
---------- -----------
TOTAL ASSETS $ 5,961,618 $ 5,352,016
========== ===========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited)
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 1,300,798 $ 1,341,134
Bank overdraft 246,263 345,719
Accrued expenses 227,448 215,505
Short-term debt 2,566,340 3,173,990
Insurance and claims 362,865 204,592
Accrued compensation 25,623 17,314
Accrued interest 646,284 613,567
Fuel and other taxes payable 31,097 49,948
----------- ------------
Total current liabilities 5,406,718 5,961,769
----------- ------------
LONG-TERM DEBT TO RELATED PARTIES 3,533,341 2,451,028
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK:
Authorized 5,000,000 shares; no par value,
Series A shares outstanding:
1999 and 1998 - 1,094,224
Liquidation preference $0.3125 per share 930,683 907,540
SHAREHOLDERS' DEFICIENCY:
Common stock, authorized 20,000,000 shares;
no par value; shares outstanding 10,618,224 40,844,296 40,844,296
Accumulated deficit (44,753,720) (44,812,617)
----------- -----------
Total shareholders' deficiency (3,909,124) (3,968,321)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
DEFICIENCY $ 5,961,618 $5,352,016
=========== ============
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
MARCH 31, 2000 AND MARCH 31, 1999 (UNAUDITED)
<CAPTION>
MARCH 31, MARCH 31,
2000 1999
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING REVENUES $ 9,030,927 $ 7,391,858
----------- -----------
OPERATING EXPENSES:
Purchased transportation 7,014,075 5,659,825
Insurance and claims 324,628 200,440
Salaries, wages, and other 389,311 327,692
Commissions 808,708 725,749
Operating supplies and expense 163,401 215,817
Other expenses 93,751 80,490
------------ ------------
Total operating expenses 8,793,874 7,210,013
------------ ------------
OPERATING INCOME 237,053 181,845
------------ ------------
NON-OPERATING INCOME (EXPENSE):
Interest income 2,007 1,010
Interest expense (165,675) (149,783)
Other income 8,955 10,399
------------ ------------
Total non-operating (expense) (154,713) (138,374)
------------ ------------
NET INCOME $ 82,340 $ 43,471
DIVIDENDS ON PREFERRED SHARES (23,143) (18,000)
------------ ------------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 59,197 $ 25,471
============ ============
INCOME PER COMMON SHARE:
Net Income:
Basic $0.01 $0.00
Diluted $0.01 $0.00
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -
BASIC AND DILUTED 10,618,224 10,618,224
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
MARCH 31, 2000 (UNAUDITED) AND MARCH 31, 1999 (UNAUDITED)
<CAPTION>
Three Months Ended March 31,
2000 1999
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income 82,340 43,471
Adjustments to reconcile net income to net
cash used in operations:
Depreciation and amortization 4,097 10,419
Changes in operating assets and liabilities:
Accounts receivable - trade (191,890) (292,287)
Other receivables (409,722) (251,475)
Prepaid assets (8,567) 16,018
Deposits (38) 3,663
Accounts payable (40,336) 71,455
Accrued expenses 11,943 (27,681)
Accrued interest 32,717 62,376
Insurance and claims 158,273 33,749
Other accrued compensation 8,309 1,357
Fuel and other taxes (18,851) 528
--------- --------
Net Cash used in operating activities (371,725) (328,405)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (3,482) (1,960)
-------- --------
Net cash used in investing activities (3,482) (1,960)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under line of credit (597,672) 218,896
Proceeds from other related party loans 1,083,475 72,992
Principal payments on long term debt (11,140) (38,555)
(Decrease) Increase in bank overdraft (99,456) 77,032
--------- --------
Net cash provided from financing activities 375,207 330,365
--------- --------
NET DECREASE IN CASH 0 0
CASH, BEGINNING OF PERIOD 0 0
--------- --------
CASH, END OF PERIOD 0 0
========= ========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
1. BASIS OF PRESENTATION
The accompanying consolidated balance sheet as of March 31, 2000, and the
consolidated statements of operations and cash flows for the three month periods
ended March 31, 2000 and 1999 are unaudited, but, in the opinion of management,
include all adjustments (consisting of normal, recurring accruals) necessary
for a fair presentation of the financial position and the results of operations
for such periods. The year-end balance sheet data was derived from audited
financial statements. These statements should be read in conjunction with the
Company's audited consolidated financial statements for the year ended December
31, 1999, and the notes thereto included in the Company's annual report on
Form 10-K. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted, as permitted by the requirements of the
Securities and Exchange Commission, although the Company believes that the
disclosures included in these financial statements are adequate to make the
information not misleading. The results of operations for the three months
ended March 31, 2000, and 1999 are not necessarily indicative of the results
for a full year.
2. EARNINGS PER COMMON SHARE
The Company calculates earnings per share in accordance with the Financial
Accounting Standards No. 128 effective for both interim and annual financial
statement periods. Following are the reconciliation of the numerators and
denominators of the basic and diluted EPS. The average market price of the
common stock was greater than the exercise price of the outstanding options.
<TABLE>
<CAPTION>
Numerator 2000 1999
<S> <C> <C>
Net Income $ 82,340 $ 43,471
---------- ------------
Net income (loss) $ 82,340 $ 43,471
Dividends on preferred shares (23,143) (18,000)
---------- ------------
Net income available to common
Shareholders for basic and diluted EPS 59,197 25,471
---------- ------------
59,197 25,471
Denominator
Weighted average common shares 10,618,224 10,618,224
Outstanding for basic and diluted EPS
</TABLE>
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. SHORT-TERM DEBT
Short-term debt at March 31, 2000, and December 31, 1999, comprises:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- ----------
<S> <C> <C>
Line of credit 2,479,934 $3,077,606
Current portion of long-term debt 86,406 96,384
---------- ----------
Total 2,566,340 $3,173,990
========== ==========
</TABLE>
During 1999, the Company was in default of certain financial covenants
required by the revolving line-of-credit agreement. As a result of the default
status, the lender increased the interest rate to the prime rate plus 4.75%
(13.25% at March 31, 2000, and December 31, 1999, respectively). In December
1999, the lender issued a notice of acceleration requiring payment of the
outstanding balance of the line of credit no later than April 29, 2000. As a
result, in April 2000, the Company refinanced its existing debt with a new
lender. The Company received a $2,000,000 line-of-credit. Advances under this
new line-of-credit are limited to 70% of eligible accounts receivable. Advances
bear interest at the lender's prime rate plus .5%. This new line of credit is
secured by substantially all of the Company's assets and required personal
guarantees from the Company's Chief Executive Officer and Chief Financial
Officer.
The difference between the amount outstanding on the former line of credit
agreement and the amount of the new line of credit has been financed through
subordinated debt from the Company's Chief Executive Officer and Chief
Financial Officer or entities controlled by them. Through April 30, 2000,
these officers have advanced $1,777,321 to the Company to fund the difference
between the former line of credit and the new line of credit agreement. This
subordinated debt will bear interest at prime plus 1%.
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. LONG-TERM DEBT TO RELATED PARTIES
Long-term debt at March 31, 2000, and December 31, 1999, comprises:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
<S> <C> <C>
Note payable to August Investment
Partnership, interest at prime + .75%,
interest only payments required, principal
balance due October 2001 $ 250,000 $ 250,000
Mortgage note payable to the Chief Executive
Officer and Chief Financial Officer
collateralized by land, interest at
prime + .75%, interest only payments
required, principal balance due
July 2003 500,000 500,000
Note payable, collateralized by equipment,
monthly payments of $3,985 including
interest at 7.8% through February, 2001 33,975 45,115
Mortgage note payable to ITE,
Monthly payments of $2,850 including
Interest at 9% through March 2002 61,380 68,443
Mortgage note payable to AIFE,
monthly payments of $2,150 including
interest at 9% through March 2002 46,363 51,689
Mortgage note payable to August Investment
Partnership, interest at prime + .75%, interest
only payments required, principal balance due
October, 2001 100,000 100,000
Note payable to the Chief Executive Officer
And Chief Financial Officer, interest at
prime + 1%, interest only payments required,
principal balance due October, 2001 2,628,029 1,532,165
--------- ----------
Total debt 3,619,747 2,547,412
Less current portion 86,406 96,384
--------- ----------
Total long-term debt $ 3,533,341 $ 2,451,028
========== ==========
</TABLE>
PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. COMMITMENTS AND CONTINGENCIES
Cam Regional Transport has filed a complaint against the Company which
alleges breach of contract, claiming that Trailblazer Transportation, Inc., a
subsidiary of the Company which filed bankruptcy, failed to abide by a purchase
agreement entered into with Cam Regional Transport, Inc. and Laurel Mountain
Leasing, Inc. The complaint seeks damages of $284,000 plus interest from
November 1992. At this time, the Company and its legal counsel are unable to
assess the outcome of this complaint. The Company intends to vigorously defend
itself in this matter.
The Company is involved in other litigation in the normal course of its
business. Management intends to vigorously defend these cases. In the opinion
of management, the litigation now pending will not have a material adverse
effect on the consolidated financial position of the Company.
The Company has entered into an agreement with certain key employees of
Carolina National Transportation, Inc.("Carolina"), a wholly owned subsidiary
of the Company, in which these employees will receive up to 40% ownership in
Carolina. These key employees will earn the 40% ownership interest in Carolina
over a three-year period beginning in the year in which Carolina achieves
positive net worth. Carolina has a negative net worth of $417,000 at March 31,
2000, and as opposed to the negative net worth of $482,000 at December 31,
1999, respectively.
The Company carries insurance for public liability and property damage, and
cargo loss and damage through various programs. The Company's insurance
liabilities are based upon the best information currently available and are
subject to revision in future periods as additional information becomes
available. Management believes it has adequately provided for insurance claims.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.
Results of Operations
The financial statements and related notes contained elsewhere in this Form
10Q and in the Company's Form 10-K for its fiscal year ended December 31, 1999,
are essential to an understanding of the comparisons and are incorporated by
reference into the discussion that follows.
Period 2000 Compared to 1999
The Company's operating revenues increased from $7.4 million for the first
quarter of 1999 to $9.0 million for the same period in 2000. The Company's
operating revenues are generated principally from two truckload carriers
Keystone, and Carolina National Transportation. Sales are generated through
independent agents who originate shipments that then are transported by
independent contractors who own their own equipment.
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The company contracts with third parties for most services and as a
matter of contract agrees to pay certain percentages of revenue for services
rendered. The three major items so managed are:
<TABLE>
<CAPTION>
Item: Average Percent
<S> <C>
Purchased Transportation (PURTRANS) 76.3%
Commissions to agents 9.0%
Insurance (Liability & Cargo) 4.2%
Total 89.5%
</TABLE>
CAPTION>
Item:
2000 1999
Purchased Transportation 77.7% 76.6%
Commissions to agents 7.0% 9.8%
Insurance (Liability & Cargo) 3.6% 2.7%
Total 90.3% 89.1%
Purchased transportation has increased 1% as a percentage of revenues for the
three months ended March 31,2000, compared to the three months ended March 31,
1999. Certain revenues billed to the customer are payable 100% to the owner
operators. Fuel surcharge is one such item and increased diesel fuel prices
have led to increased fuel surcharges. The increase in this type of revenue
paid at a rate of 100% to the owner operators distorts purchased transportation
as a percentage of revenues has caused the increase in purchased transportation
as a percentage of revenues.
Commissions to agents have decreased .8% as a percentage of revenues for the
three months ended March 31, 2000, compared to the three months ended March 31,
1999. This is primarily due to the increase in revenues paid 100% to the owner
operators leading to increased revenues with no corresponding increase in
commissions paid to agents.
Insurance has increased .9% as a percentage of revenues for the three months
ended March 31, 2000, compared to the three months ended March 31, 1999, due to
an increase in the rate for cargo insurance and an increase in accident claims
incurred during the first quarter of 2000.
The remaining operating expenses have increased by approximately $22,000 for the
three months ended March 31, 2000, compared to the three months ended March 31,
1999. The majority of this increase is the result of additional personnel hired
due to Company growth as well as a general increase in employee salaries.
Partially offsetting the increased salary cost is a decrease in operating
supplies and expenses of approximately $52,000. In the first quarter of 1999,
operating supplies and expenses were high due to cost incurred to modify the
company's software for Year 2000 issues.
Due to increased revenues and decreased operating supplies and expense,
operating income increased $55,208 from $181,845 for the three months ended
March 31, 1999, to $237,053 for the three months ended March 31, 2000.
Interest expense increased $15,892 from $148,783 for the three months ended
March 31, 1999, to $165,675 for the three months ended March 31, 2000, due to
increased interest rates and an increase in the amount of outstanding debt
during the first quarter of 2000.
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Liquidity and Capital Resources
As of December 31, 1999, the Company's financial position remained poor.
The Company had a net deficiency in shareholders'equity of $3.9 million.
Working capital deficiency at December 31, 1999, was ($0.7) million, compared to
a positive working capital at March 31, 2000, of $0.5 million.
Accounts receivable at March 31, 2000, were $5.2 million, up from the
balance of $5.0 million at year-end December 31, 1999. The increase was due to
increased revenues in the first quarter of 2000.
The bank overdraft and balance of the revolving line of credit has
decreased by $0.7 million from December 31, 1999, to March 31,
2000, due to additional investments from the Company's Chief Executive Officer
and Chief Financial Officer.
During the first quarter of 2000 and 1999, the Company's principal source
of liquidity was its $3.3 million line of credit with FINOVA. The availability
of the line of credit is based on 72% of Keystone's, Gulf Line's and Carolina
National's eligible accounts receivable. At March 31, 2000, the outstanding
borrowings were $2.5 million.
During 1999, the Company was in default of certain financial covenants
required by the revolving line-of-credit agreement. As a result of the default
status, the lender increased the interest rate to the prime rate plus 4.75%
(13.75% and 13.25% at March 31, 2000, and December 31, 1999, respectively).
In December 1999, the lender issued a notice of acceleration requiring payment
of the outstanding balance of the line of credit no later than April 29, 2000.
As a result, in April 2000, the Company refinanced its existing debt with a new
lender. The Company received a $2,000,000 line-of-credit. Advances under this
new line-of-credit are limited to 70% of eligible accounts receivable. Advances
bear interest at the lender's prime rate plus .5%. This new line of credit is
secured by substantially all of the Company's assets and required personal
guarantees from the Company's Chief Executive Officer and Chief Financial
Officer.
The difference between the amount outstanding on the former line of credit
agreement and the amount of the new line-of-credit has been financed through
subordinated debt from the Company's Chief Executive Officer and Chief
Financial Officer or entities controlled by them. Through April 30, 2000,
these officers have advanced $ 1,777,321 to the Company to fund the difference
between the former line-of-credit and the new line-of-credit agreement. This
subordinated debt will bear interest at prime plus 1%.
As a result, related party loans from AIP and Messrs. Kibler and Antonson
have increased by $1,083,475 between December 31, 1999, and March 31, 2000.
Quantitative and Qualitative Disclosures About Market Risk
The Company had a credit agreement with FINOVA Capital Corporation that
provided $3,300,000 of borrowing capacity to finance operations. Borrowings
under the agreement bear interest at the prime rate plus 2.75%. The average
outstanding balance under the credit agreement for the first quarter 2000 was
$2,299,816. During 1999, FINOVA issued a letter of default and increased the
interest rate on outstanding advances under the credit agreement to the prime
rate plus 4.75%. Based on the default status of the Company with FINOVA, the
fair value of the outstanding borrowings as of December 31, 1999, was estimated
to approximate carrying value.
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Inflation
Changes in freight rates charged by the Company to its customers are
generally reflected in the cost of purchased transportation and commissions
paid by the Company to independent contractors and agents, respectively.
Therefore, management believes that future operating results of the Company
will be affected primarily by changes in volume of business. However, due to
the highly competitive nature of the truckload motor carrier industry, it is
possible that future freight rates and cost of purchased transportation may
fluctuate, affecting the Company's profitability.
Certain Relationships and Related Transactions.
The company leases office space for its headquarters in Gary, Indiana, for
$2,200 per month from Michael E. Kibler, the president and Chief Executive
Officer and a director of the Company, and Harold E. Antonson, the Chief
Financial Officer of the company and beneficial owner of more than five percent
of the outstanding Common Stock. Messrs. Kibler and Antonson own the property
as joint tenants.
One of the Company's subsidiaries provides safety, management, and
accounting services to companies controlled by the President and Chief
Financial Officer of the Company. These services are priced to cover the
cost of the employees providing the services.
One of the Company's insurance providers, American Inter-Fidelity Exchange
(AIFE) is managed by a Director of the Company and the Company has an
investment in the provider. In addition, that Director also manages an
affiliated insurance carrier, Indiana Truckers Exchange (ITE).
The Company has notes payable due to its Chief Executive Officer, Chief
Financial Officer, and August Investment Partnership, an affiliated entity
through common ownership as described in Note 4.
<PAGE>
PART II. OTHER INFORMATION
Item 6(b). Reports on Form 8-K
No Reports on Form 8-K have been filed during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
US 1 Industries, Inc.
Michael E. Kibler
President
Harold E. Antonson
Chief Financial Officer
May 12, 2000
<PAGE>
Exhibit 1
LOAN AGREEMENT
between
CAROLINA NATIONAL TRANSPORTATION, INC.,
KEYSTONE LINES,
GULF LINE TRANSPORT, INC.,
and
FIVE STAR TRANSPORT, INC.
as Borrower
and
US 1 INDUSTRIES, INC.,
as Guarantor
and
FIRSTAR BANK N.A.,
as Lender
Dated as of April ____, 2000
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I....................................................................1
DEFINITIONS AND DETERMINATIONS............................................1
1.1 Definitions......................................................1
1.2 Time Periods.....................................................10
1.3 Accounting Terms and Determination...............................11
1.4 References.......................................................11
1.5 Lender's Discretion..............................................11
1.6 Borrower's or Guarantor's Knowledge..............................11
ARTICLE II...................................................................11
REVOLVING LOANS AND TERMS OF PAYMENT......................................11
2.1 Revolving Loan...................................................11
2.1.1 Amount and Disbursement....................................11
2.1.2 Revolving Loan Note........................................12
2.1.3 Reborrowing................................................12
2.1.4 Conditions of Advances of the Revolving Loan...............12
2.2 Use of Proceeds of the Revolving Loan............................13
2.3 Interest.........................................................13
2.3.1 Interest Rate..............................................13
2.3.2 Interest Computation.......................................13
2.3.3 Maximum Interest...........................................13
2.3.4 Increased Costs............................................14
2.4 Principal and Interest Payments..................................14
2.4.1 Interest...................................................14
2.4.2 Principal..................................................15
2.5 Mandatory Prepayments of the Revolving Loan......................15
2.6 Payments after Event of Default..................................15
2.7 Method of Payment................................................15
ARTICLE III..................................................................15
SECURITY..................................................................15
ARTICLE IV...................................................................15
CONDITIONS OF CLOSING.....................................................15
4.1 Representations and Warranties...................................15
4.2 Delivery of Documents............................................16
4.3 Performance; No Default..........................................16
4.4 Opinions of Counsel..............................................17
4.5 Approval of Loan Instruments and Security Interests; Consents....17
4.6 Security Interests...............................................17
4.7 Financial Statements, Reports and Projections....................17
4.8 Year 2000 Compliance.............................................17
4.9 Material Adverse Change..........................................17
4.10 Use of Assets....................................................17
4.11 Fees and Expenses................................................18
4.12 Insurance........................................................18
4.13 Existing Indebtedness............................................18
<PAGE>
ARTICLE V....................................................................18
REPRESENTATIONS AND WARRANTIES............................................18
5.1 Existence and Power..............................................18
5.2 Authority........................................................18
5.3 Binding Agreements...............................................18
5.4 Business and Property of Borrower and Guarantor..................19
5.4.1 Business and Property......................................19
5.4.2 Operating Agreements.......................................19
5.4.3 Facility Sites.............................................19
5.4.4 Leases.....................................................19
5.4.5 Real Property..............................................19
5.4.6 Operation and Maintenance of Equipment.....................20
5.4.7 Existing Indebtedness......................................20
5.5 Title to Property; Liens.........................................20
5.6 Financial Statements.............................................20
5.7 Litigation.......................................................20
5.8 Defaults in Other Agreements; Consents; Conflicting Agreements...21
5.9 Taxes............................................................21
5.10 Compliance with Applicable Laws..................................21
5.11 Patents, Trademarks, Franchises and Agreements...................22
5.12 Regulatory Matters...............................................22
5.13 Environmental Matters............................................22
5.14 Application of Certain Laws and Regulations......................22
5.14.1 Investment Company Act.....................................22
5.14.2 Holding Company............................................22
5.14.3 Foreign or Enemy Status....................................23
5.14.4 Regulations as to Borrowing................................23
5.15 Margin Regulations...............................................23
5.16 Other Indebtedness...............................................23
5.17 No Misrepresentation.............................................23
5.18 Employee Benefit Plans...........................................24
5.18.1 No Other Plans.............................................24
5.18.2 ERISA and Code Compliance and Liability....................24
5.18.3 Funding....................................................24
5.18.4 Prohibited Transactions and Payments.......................24
5.18.5 No Termination Event.......................................25
5.18.6 ERISA Litigation...........................................25
5.19 Employee Matters.................................................25
5.19.1 Collective Bargaining Agreements; Grievances...............25
5.19.2 Claims Relating to Employment..............................25
5.20 Burdensome Obligations...........................................25
5.21 Subsidiaries.....................................................26
<PAGE>
ARTICLE VI...................................................................26
AFFIRMATIVE COVENANTS.....................................................26
6.1 Legal Existence; Good Standing...................................26
6.2 Inspection.......................................................26
6.3 Financial Statements and Other Information.......................26
6.3.1 Monthly Statements.........................................26
6.3.2 Quarterly Statements.......................................27
6.3.3 Annual Statements..........................................27
6.3.4 Compliance Certificate.....................................27
6.3.5 Accountants' Certificate...................................28
6.3.6 Audit Reports..............................................28
6.3.7 Notice of Defaults; Loss...................................28
6.3.8 Notice of Suits; Adverse Events............................28
6.3.9 Reports to Members, Creditors and Governmental Bodies......29
6.3.10 ERISA Notices and Requests.................................29
6.3.11 Other Information..........................................30
6.4 Reports to Governmental Bodies and Other Persons..............30
6.5 Maintenance of Licenses and Other Agreements.....................30
6.6 Insurance........................................................30
6.6.1 Maintenance of Insurance...................................30
6.6.2 Claims and Proceeds........................................31
6.7 Future Leases....................................................31
6.8 Environmental Matters............................................31
6.9 Compliance with Laws.............................................32
6.10 Taxes and Claims.................................................32
6.11 Maintenance of Properties........................................32
6.12 Governmental Approvals...........................................32
6.13 Payment of Indebtedness..........................................33
6.14 Maintenance of Accounts..........................................33
ARTICLE VII..................................................................33
NEGATIVE COVENANTS........................................................33
7.1 Borrowing........................................................33
7.2 Liens............................................................33
7.3 Merger and Acquisition...........................................33
7.4 Contingent Liabilities...........................................33
7.5 Dividends and Distributions......................................33
7.6 Capital Expenditures.............................................34
7.7 Payments of Indebtedness for Borrowed Money......................34
7.8 Investments, Revolving Loans.....................................34
7.9 Fundamental Business Changes.....................................34
7.10 Facility Sites...................................................34
7.11 Sale or Transfer of Assets.......................................35
7.12 Amendment of Certain Agreements..................................35
7.13 Acquisition of Additional Properties.............................35
7.14 Transactions with Affiliates.....................................35
7.15 Compliance with ERISA............................................35
<PAGE>
7.16 Unsubordinated Indebtedness to Tangible Net Worth Ratio..........36
7.17 Net Income for 1999..............................................36
7.18 Minimum Net Worth................................................36
7.19 Minimum Debt Service Ratio.......................................36
7.20 Testing of Financial Covenants...................................37
ARTICLE VIII.................................................................37
DEFAULT AND REMEDIES......................................................37
8.1 Events of Default................................................37
8.1.1 Default in Payment.........................................37
8.1.2 Breach of Covenants........................................37
8.1.3 Breach of Warranty.........................................37
8.1.4 Default Under Other Indebtedness for Borrowed Money........37
8.1.5 Bankruptcy.................................................38
8.1.6 Judgments..................................................38
8.1.7 Impairment of Licenses; Other Agreements...................38
8.1.8 Collateral.................................................39
8.1.9 Plans......................................................39
8.1.10 Change in Control; Sale of Borrower........................39
8.1.11 Material Adverse Effect....................................39
8.2 Acceleration of Borrower's Obligations...........................40
8.3 Remedies on Default..............................................40
8.3.1 Enforcement of Security Interests..........................40
8.3.2 Other Remedies.............................................40
8.4 Application of Funds.............................................40
8.4.1 Expenses...................................................41
8.4.2 Borrowers' Obligations.....................................41
8.4.3 Surplus....................................................41
8.5 Performance of Borrower's Obligations............................41
ARTICLE IX...................................................................42
CLOSING...................................................................42
ARTICLE X....................................................................42
EXPENSES AND INDEMNITY....................................................42
10.1 Attorney's Fees and Other Fees and Expenses......................42
10.1.1 Fees and Expenses for Preparation of Loan Instruments......42
10.1.2 Fees and Expenses in Enforcement of Rights or Defense of
Loan Instruments...........................................42
10.2 Indemnity........................................................43
10.2.1 Brokerage Fees.............................................43
10.2.2 General....................................................43
10.2.3 Operation of Collateral; Joint Venturers...................43
10.2.4 Environmental Indemnity....................................43
<PAGE>
ARTICLE XI...................................................................44
MISCELLANEOUS.............................................................44
11.1 Notices..........................................................44
11.2 Survival of Loan Agreement; Indemnities..........................45
11.3 Further Assurance................................................45
11.4 Taxes and Fees...................................................45
11.5 Severability.....................................................46
11.6 Waiver...........................................................46
11.7 Modification of Loan Instruments.................................46
11.8 Captions.........................................................46
11.9 Successors and Assigns...........................................46
11.10 Remedies Cumulative...........................................46
11.11 Entire Agreement; Conflict....................................47
11.12 Applicable Law................................................47
11.13 JURISDICTION AND VENUE........................................47
11.14 WAIVER OF RIGHT TO JURY TRIAL.................................48
11.15 Time of Essence...............................................48
11.16 Estoppel Certificate..........................................48
11.17 Consequential Damages.........................................48
11.18 Counterparts..................................................48
11.19 No Fiduciary Relationship.....................................49
</TABLE>
<PAGE>
LOAN AGREEMENT
This LOAN AGREEMENT, dated as of April _, 2000, is between CAROLINA
NATIONAL TRANSPORTATION, INC., an Indiana corporation, ("Carolina"), KEYSTONE
LINES, a California corporation, ("Keystone"), GULF LINE TRANSPORT, INC., an
Indiana corporation, ("Gulf Line") and FIVE STAR TRANSPORT, INC., an Indiana
corporation, ("Five Star") (Carolina, Keystone, Gulf Line and Five Star
hereinafter collectively referred to as "Borrowers" or individually as
"Borrower"), US 1 INDUSTRIES, INC., an Indiana corporation ("Guarantor")
and FIRSTAR BANK N.A., a national banking association ("Lender").
PRELIMINARY STATEMENT:
Borrowers desire to borrow the Revolving Loan from Lender, the proceeds
of which shall be used (i) to refinance Borrowers' and Guarantor's secured loan
obligations to Finova Capital Corporation ("Finova"); (ii) for Borrowers'
working capital; and (iii) to pay related transactions costs. Lender has agreed
to make the Revolving Loan upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, it is hereby agreed as follows:
5.
DEFINITIONS AND DETERMINATIONS
6. Definitions.
As used in this Loan Agreement and in the other Loan Instruments,
unless otherwise expressly indicated herein or therein, the following terms
shall have the following meanings (such meanings to be applicable equally to
both the singular and plural forms of the terms defined):
Accountants: any independent certified public accounting firm selected
by Borrower and reasonably satisfactory to Lender, and shall include Borrower's
current independent public accounting firm.
Accounting Changes: as defined in Section 1.3.
Accounts: all presently existing and hereafter arising accounts
receivable and other rights to payment owing to any of Borrowers or Guarantor
for goods sold or leased or services rendered by any of Borrowers or Guarantor,
whether or not earned by performance, and any and all credit insurance,
guaranties or security therefor.
Advance: any advance of the Revolving Loan.
Affiliate: any Person that directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with
another Person. The term "control" means having the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities or
equity interests, by contract or otherwise. For the purposes hereof any Person
which owns or controls, directly or indirectly, 10% or more of the securities
or equity interests, as applicable, whether voting or non-voting, of any other
Person shall be deemed to "control" such Person.
Bankruptcy Code: the United States Bankruptcy Code and any successor
statute thereto, and the rules and regulations issued thereunder, as in effect
from time to time.
Basic Financial Statements: as defined in subsection 6.3.3.
Borrowers: has the meaning assigned to that term in the Preamble to
this Revolving Loan Agreement.
<PAGE>
Borrowers' Obligations: (i) any and all Indebtedness due or to become
due, whether contingent or otherwise, now existing, or hereafter arising, of
Borrowers to Lender pursuant to the terms of this Loan Agreement or any other
Loan Instrument, and (ii) the performance of the covenants of Borrowers
contained in the Loan Instruments, for all of which each of Borrowers shall be
jointly and severally liable.
Business Day: any day other than a Saturday, Sunday or other day on
which banks in Chicago, Illinois are required or authorized to close.
Business Insurance: such property, casualty, liability, business
interruption and other insurance as Lender from time to time requires Borrowers
and Guarantor to maintain other than cargo insurance insuring the value of
goods being transported by Borrowers.
Capital Expenditures: payments that are made or liabilities that are
incurred by a Person for the lease, purchase, improvement, construction or use
of any Property, the value or cost of which under GAAP is required to be
capitalized and appears on such Person's balance sheet in the category of
property, plant or equipment, without regard to the manner in which such
payments or the instruments pursuant to which they are made are characterized,
and shall include, without limitation, payments for or liabilities incurred
with respect to the installment purchase of Property and payments under
Capitalized Leases.
Capitalized Lease: any lease of Property, the obligations for the
rental of which are required to be capitalized in accordance with GAAP.
Closing: the initial disbursement of the Revolving Loan.
Closing Certificate: a closing certificate executed by each Borrower
to Lender.
Closing Date: the date upon which the Closing occurs.
Code: the Internal Revenue Code of 1986, as amended, and any successor
statute thereto, and the rules and regulations issued thereunder, as in effect
from time to time.
Collateral: the Accounts and all existing and after-acquired Property
of Borrowers and Guarantor (other than the real property in Arizona currently
owned by Guarantor or a Borrower), including without limitation all existing
and after-acquired, equipment, inventory and general intangibles, and all
proceeds of the foregoing.
Compliance Certificate: a compliance certificate executed by Borrowers
in the form of Exhibit 1.1(A) attached hereto.
Corporate Guaranty: the unlimited secured corporate guaranty of US1
Industries, Inc., Borrowers' parent company, in form and substance satisfactory
to Lender, wherein Guarantor shall guarantee all of Borrowers' Obligations.
Default Rate: the Interest Rate, as defined herein, plus 2.0% per annum.
Default Rate Period: a period of time commencing on the date that an
Event of Default has occurred and ending on the date that such Event of Default
is cured or waived.
Dollars: lawful currency of the United States.
EBITDA: for any period, without duplication, the Net Income of
Borrowers or Guarantor for such period:
7. plus the sum of the following, to the extent deducted in determining
such Net Income for such period:
<PAGE>
8. losses from sales, exchanges and other dispositions of Property not in
the ordinary course of business;
9. interest paid or accrued on Indebtedness, including, without
limitation, interest on Capitalized Leases that is imputed in
accordance with GAAP;
10. depreciation and amortization of assets during such period; and
11. charges against net income for taxes;
12. minus gains from sales, exchanges and other dispositions of Property or
other extraordinary gains not in the ordinary course of business.
Eligible Accounts Receivable: the total amount of the Accounts from
completed transactions after deducting (i) Accounts over 75 days past invoice
date, (ii) intercompany Accounts, (iii) foreign Accounts, (iv) Accounts to the
extent subject to customer setoffs (v) Accounts for which the portion of the
Account aged 75 days past the invoice date is in excess of 25% of the total
indebtedness owed to any of Borrowers by the account debtor, and (vi) such
other reserves as Lender may reasonably deem appropriate.
Employee Benefit Plan: any employee benefit plan within the meaning of
Section 3(3) of ERISA which (i) is maintained for employees of any of Borrowers
or any ERISA Affiliate or (ii) has at any time within the preceding six years
been maintained for the employees of any of Borrowers or any current or former
ERISA Affiliate.
Environmental Laws: any and all federal, state and local laws that
relate to or impose liability or standards of conduct concerning public or
occupational health and safety or protection of the environment, as now or
hereafter in effect and as have been or hereafter may be amended or
reauthorized, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. S9601 et seq.), the
Hazardous Materials Transportation Act (42 U.S.C. S1802 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. S1251 et seq.), the Toxic Substances Control
Act (15 U.S.C. S2601 et seq.), the Clean Air Act (42 U.S.C. S901 et seq.),
the National Environmental Policy Act (42 U.S.C. S4231, et seq.), the Refuse
Act (33 U.S.C. S407, et se .), the Safe Drinking Water Act (42 U.S.C. S300(f)et
seq.), the Occupational Safety and Health Act (29 U.S.C. S651 et seq.), and all
rules, regulations, codes, ordinances and guidance documents promulgated or
published thereunder, and the provisions of any licenses, permits, orders and
decrees issued pursuant to any of the foregoing.
ERISA: the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute thereto, and the rules and regulations issued
thereunder, as in effect from time to time.
ERISA Affiliate: any Person who is a member of a group which is under
common control with Borrowers or Guarantor, who together with Borrowers or
Guarantor is treated as a single employer within the meaning of Section 414(b),
(c) and (m) of the Code.
<PAGE>
Event of Default: any of the Events of Default set forth in Section
8. 1.
Excess Interest: as defined in subsection 2.3.3.
Existing Indebtedness: all Indebtedness for Borrowed Money owed by any
of Borrowers or Guarantor, immediately prior to the Closing.
Funding Date: the date of disbursement of any Advance, which shall be
a Business Day.
GAAP: generally accepted accounting principles in effect from time to
time, which shall include but shall not be limited to the official
interpretations thereof by the Financial Accounting Standards Board or
any successor thereto.
Good Funds: Dollars available in federal funds to Lender at or before
2:00 p.m., Chicago time, on a Business Day.
Governmental Body: any foreign, federal, state, municipal or other
government, or any department, commission, board, bureau, agency,
public authority or instrumentality thereof or any court or arbitrator.
Hazardous Materials: any hazardous, toxic, dangerous or other waste,
substance or material defined as such in, regulated by or for purposes
of any Environmental Law.
Incipient Default: any event or condition which, with the giving of
notice or the lapse of time, or both, would become an Event of Default.
Indebtedness: all liabilities, obligations and reserves, contingent or
otherwise, which, in accordance with GAAP, would be reflected as a
liability on a balance sheet or would be required to be disclosed in a
financial statement, including, without duplication: (i) Indebtedness
for Borrowed Money,(ii) obligations secured by any Lien upon Property,
(iii) guaranties and letters of credit, and(iv) liabilities in respect
of unfunded vested benefits under any Pension Plan or in respect of
withdrawal liabilities incurred under ERISA by any of Borrowers,
Guarantor or any ERISA Affiliate to any Multi-employer Plan.
Indebtedness for Borrowed Money: without duplication, all Indebtedness
(i) in respect of money borrowed, (ii) evidenced by a note, debenture
or other like written obligation to pay money (including, without
limitation, all of Borrowers' Obligations, Permitted Senior
Indebtedness and Permitted Subordinated Indebtedness),(iii) in respect
of rent or hire of Property under Capitalized Leases or for the
deferred purchase price of Property, (iv) in respect of obligations
under conditional sales or other title retention agreements, and (v)
all guaranties of any or all of the foregoing.
Instruments: the Loan Instruments.
Intellectual Property: collectively, all of Borrowers' and Guarantor's
patents, trademarks, service marks, trade names, copyrights,
franchises and all other intellectual property rights with respect
thereto.
Interest Rate: the interest which the Revolving Loan bears, other than
during a Default Rate Period, as provided in subsection 2.3.1
hereunder.
<PAGE>
Inventory: all present and future inventory in which any Borrower has
any interest, including, without limitation, all goods held for sale,
lease or other disposition by a Borrower, or to be furnished under a
contract of service, and all of Borrowers' present and future raw
materials, work in process, finished goods, goods consigned to any
Borrower to the extent of such Borrower's interest therein as
consignee, materials and supplies of any kind, nature or description
which are or might be used in connection with the manufacture,
packing, shipping, advertising, selling or furnishing of any such
goods and all documents of title or other documents representing the
same.
Landlord: a lessor under a Lease.
Landlord's Consent: a landlord's consent in form and substance
reasonably satisfactory to Lender.
Lease: any lease of real estate under which a Borrower or Guarantor
is, or will be, the lessee.
Leasehold Property: any real estate which is the subject of a Lease.
Lender: Firstar Bank N.A., a national banking association, its
successors and assigns.
Lien: any mortgage, deed of trust, pledge, assignment, lien, charge,
encumbrance or security interest of any kind, or the interest of a
vendor or lessor under any conditional sale agreement, Capitalized
Lease or other title retention agreement.
Loan Agreement: this Loan Agreement and any amendments or supplements
hereto.
Loan Instruments:
13. Loan Agreement;
14. Note;
15. Corporate Guaranty;
16. Security Instruments;
17. Closing Certificate;
18. Subordination Agreements;
19. Uniform Commercial Code financing statements required by Lender;
20. the Personal Guaranties; and
21. such other instruments and documents as Lender reasonably may require
in connection with the transactions contemplated by this Loan
Agreement.
Material Adverse Effect: (i) a material adverse effect upon the
business, operations, Property, prospects, profits or financial
condition of any Borrowers or Guarantor or upon the validity,
enforceability or priority of the Security Interests or (ii) a
material impairment of the ability of any Borrower or Guarantor to
perform its obligations under any Loan Instrument to which it is
a party or of Lender to enforce or collect any of Borrowers'
Obligations or the Obligations (as defined in the Corporate Guaranty)
of Guarantor.
Maximum Rate: as defined in subsection 2.3.3.
Multiemployer Plan: any multiemployer plan as defined pursuant to
Section 3(37) of ERISA to which a Borrower or Guarantor or any ERISA
Affiliate makes, or accrues an obligation to make, contributions, or
has made, or been obligated to make, contributions within the
preceding six years.
<PAGE>
Net Income: shall have the meaning accorded to such term by GAAP.
Operating Agreement: any joint venture agreement, supply agreement,
requirements contracts, equipment lease, right-of-entry agreement,
access agreement, vendor agreement, distributing agreement, service
agreement, advertising contract, employment agreement, management
agreement, collective bargaining agreement or other similar agreement
relating to the operation of a Borrower's or Guarantor's business.
Overadvance: as defined in subsection 2.5.
Pay-Off Letter: a pay-off letter from each holder of the Existing
Indebtedness addressed to Lender.
PBGC: the Pension Benefit Guaranty Corporation or any Governmental
Body succeeding to the functions thereof
Pension Plan: any Employee Benefit Plan, other than a Multiemployer
Plan, which is subject to the provisions of Part 3 of Title I of ERISA,
Title IV of ERISA, or Section 412 of the Code and which (i) is
maintained for employees of any Borrower or Guarantor or any ERISA
Affiliate, or (ii) has at any time within the preceding six years been
maintained for the employees of any Borrower or Guarantor or any of its
current or former ERISA Affiliates.
Permitted Liens: any of the following Liens:
(i) the Security Interests;
(ii) the Permitted Senior Indebtedness Liens;
(iii) Liens for taxes or assessments and similar charges, which
either are (A) not delinquent or (B) being contested
diligently and in good faith by appropriate proceedings, and
as to which Borrowers and Guarantor have set aside reserves on
its books in accordance with GAAP;
(iv) statutory Liens, such as mechanic's, material-man's,
repairmen's, warehouseman's, carrier's, landlord's, banks and
related rights of set-off, or other like Liens, incurred in
good faith in the ordinary course of business, provided that
the underlying obligations relating to such Liens are paid
in the ordinary course of business, or are being contested
diligently and in good faith by appropriate proceedings and as
to which Borrowers and Guarantor have set aside reserves on
its books in accordance with GAAP, or the payment of which
obligations are otherwise secured in a manner satisfactory to
Lender;
(v) zoning ordinances, easements, licenses, reservations,
provisions, covenants, conditions, aivers or restrictions on
the use of Property and other title exceptions, in each case,
that are acceptable to Lender;
(vi) Liens in respect of judgments or awards with respect to which
no Event of Default would exist pursuant to subsection 8.1.6;
(vii) Liens to secure payment of insurance premiums (A) to be paid in
accordance with applicable laws in the ordinary course of
business relating to payment of worker's compensation, or (B)
that are required for the participation in any fund in
connection with worker's compensation, unemployment insurance,
old-age pensions or other social security programs; and
(viii) the interest or title of a lessor under the stated terms of
any Lease to which a Borrower is a party.
<PAGE>
Permitted Prior Liens: any of the following Liens:
(i) the Permitted Senior Indebtedness Liens;
(ii) the Permitted Liens described in clauses (iii), (iv) and
(viii) of the definition of Permitted Liens that are accorded
priority to the Security Interests by law; and
(iii) the Permitted Liens described in clauses (v) and (vii) of the
definition of Permitted Liens, subject to the limitations or
requirements set forth therein.
Permitted Senior Indebtedness: Existing Indebtedness, other than
Borrowers' Obligations, and less Indebtedness to Finova Capital Corp. and
Permitted Subordinated Indebtedness ("Permitted Senior Existing Indebtedness"),
together with any other Indebtedness for Borrowed Money incurred after the date
hereof, provided (i) no Event of Default exists at the time or will be caused
as a result of the incurrence of any Indebtedness, and (ii) the aggregate
amount of Permitted Senior Indebtedness at any one time outstanding may not
exceed the sum of the Permitted Senior Existing Indebtedness as of the date
hereof plus $50,000.
Permitted Senior Indebtedness Liens: Liens that secure Permitted Senior
Indebtedness, provided that (i) each such Lien attaches only to the Property
purchased or leased with the proceeds of the Permitted Senior Indebtedness
incurred with respect to such Property and (ii) Lender is granted a Lien upon
such Property, subordinate only to the Lien granted to the holder of the
applicable Permitted Senior Indebtedness.
Permitted Subordinated Indebtedness: means the indebtedness of any
Borrower or Guarantor to Michael Kibler and/or Harold Antonson or August
Investment Partnership as set forth in Schedule 5.16 hereto, which the holders
of such indebtedness have agreed to subordinate to the senior rights of Lender,
pursuant to Subordination Agreements of even date between Lender and the
holders of such indebtedness, and any additional indebtedness of any Borrower
or Guarantor to Michael Kibler and/or Harold Antonson or August Investment
Partnership which has been made expressly subordinate to the senior rights of
Lender by execution of subordination agreements between Lender and the holders
of such indedebtedness having the same terms and conditions as the
Subordination Agreements.
Person: any individual, firm, corporation, limited liability company,
business enterprise, trust, association, joint venture, partnership,
Governmental Body or other entity, whether acting in an individual, fiduciary
or other capacity.
Personal Guaranties: the individual guaranties of Michael Kibler and
Harold Antonson limited to $500,000 per guaranty.
Personal Guarantors: Michael Kibler and Harold Antonson, both of whom
are directors and officers and who together, indirectly or directly, hold or
control in the aggregate at least 22% of the outstanding voting stock of
Guarantor and each of Borrowers.
Prime Rate: the per annum rate of interest announced or published
publicly from time to time by Lender as its corporate base (or equivalent) rate
of interest, which rate shall change automatically without notice and
simultaneously with each change in such corporate base rate. The Prime Rate is
a reference rate and does not necessarily represent the lowest or prime rate
actually charged to any customer by Lender.
Principal Balance: the unpaid principal balance of the Revolving Loan
or any specified portion thereof outstanding from time to time.
Property: all types of real, personal or mixed property and all types
of tangible or intangible property.
<PAGE>
Qualified Depository : a member bank of the Federal Reserve System
having a combined capital and surplus of at least $100,000,000.
Real Property: all interests in real estate owned, or which, upon the
Closing Date, will be owned, by Borrower other than the Leasehold Property.
Revolving Loan: the revolving loan made by Lender to Borrower pursuant
to Section 2.1.
Revolving Loan Commitment: $2,000,000.
Revolving Loan Maturity Date: the earlier of (i) September 30, 2001, or
(ii) the date on which Borrowers' Obligations are accelerated pursuant to this
Loan Agreement.
Revolving Loan Note: the promissory note executed by Borrower payable
to the order of Lender in the amount of the Revolving Loan Commitment, dated as
of the Closing Date and in form and substance satisfactory to Lender.
Securities Act: the Securities Act of 1933, as amended, or any similar
Federal statute, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder, as in effect from time to time.
Security Agreements: the security agreements executed by Borrowers
and Guarantor in favor of Lender.
Security Instruments: collectively, the Security Agreements and any
other document now or hereafter executed by Borrowers or Guarantor which
purports to create a Lien on the Property of any of Borrowers or Guarantor in
favor of Lender.
Security Interests: the Liens in the Collateral granted to Lender
pursuant to the Security Instruments.
Stated Rate: as defined in subsection 2.3.3.
Subordinated Indebtedness: Indebtedness for Borrowed Money at any date
of Guarantor and all of its subsidiaries (on a consolidated basis) which is
subordinated to Borrowers' Obligation by written agreement of the obligees
thereof.
Subordination Agreements: means subordination agreements of even date
between Lender and the holders of the Permitted Subordinated Indebtedness,
wherein the holders of such junior and subordinate indebtedness have agreed to
subordinate their rights and claims to the senior rights of Lender.
Tangible Net Worth: at any date means Guarantor's net worth at such
date after subtracting therefrom the aggregate amount at such date of any
intangible assets of Borrowers and any other subsidiaries of Guarantor,
including, without limitation, prepaid amounts, goodwill, franchises, licenses,
patents, trademarks, trade names, copyrights, service marks and brand names.
Termination Event: (i) a "Reportable Event" described in Section 4043
of ERISA and the regulations issued thereunder; or (ii) the withdrawal of any
Borrower, Guarantor or any ERISA Affiliate from a Pension Plan during a plan
year in which it was a "substantial employer" as defined in Section 4001(a)(2);
or (iii) the termination of a Pension Plan, the filing of a notice of intent
to terminate a Pension Plan or the treatment of a Pension Plan amendment as a
termination under Section 4041 of ERISA; or (iv) the institution of proceedings
to terminate, or the appointment of a trustee with respect to, any Pension Plan
by the PBGC; or (v) any other event or condition which would constitute grounds
under Section 4042(a) of ERISA for the termination of, or the appointment of
a trustee to administer, any Pension Plan; or (vi) the partial or complete
withdrawal of any Borrower, Guarantor or any ERISA Affiliate from a
Multiemployer Plan; or(vii) the imposition of a lien pursuant to Section 412 of
the Code or Section 302 of ERISA; or (viii) any event or condition which
results in the reorganization or insolvency of a Multiemployer Plan under
Sections 4241 or 4245 of ERISA; or (ix) any event or condition which results in
the termination of a Multiemployer Plan under Section 4041A of ERISA or the
institution by the PBGC of proceedings to terminate a Multiemployer Plan under
Section 4042 of ERISA.
<PAGE>
Unsubordinated Indebtedness: Indebtedness for Borrowed Money at any
date of Guarantor and all of its subsidiaries (on a consolidated basis) other
than Subordinated Indebtedness.
22. Time Periods.
In this Loan Agreement and the other Loan Instruments, in the
computation of periods of time from a specified date to a later specified date,
(i) the word "from" means "from and including," (ii) the words "to" and "until"
each mean "to, but excluding" and (iii) the words "through," "end of' and
"expiration" each mean "through and including." Unless otherwise specified, all
references in this Loan Agreement and the other Loan Instruments to (i) a
"month" shall be deemed to refer to a calendar month, (ii) a "quarter" shall be
deemed to refer to a calendar quarter and (iii) a "year" shall be deemed to
refer to a calendar year.
23. Accounting Terms and Determinations.
All accounting terms not specifically defined herein shall be construed,
all accounting determinations hereunder shall be made and all financial
statements required to be delivered pursuant hereto shall be prepared in
accordance with GAAP as in effect at the time of such interpretation,
determination or preparation, as applicable. In the event that any Accounting
Changes occur and such changes result in a change in the method of calculation
of financial covenants, standards or terms contained in this Loan Agreement,
then Borrower and Lender agree to enter into negotiations to amend such
provisions of this Loan Agreement so as to reflect such Accounting Changes with
the desired result that the criteria for evaluating the financial condition of
Borrower shall be the same after such Accounting Changes as if such Accounting
Changes had not been made. For purposes hereof, "Accounting Changes" shall mean
(i) changes in GAAP required by the promulgation of any rule, regulation,
pronouncement or opinion by the Financial Accounting Standards Board of the
American Institute of Certified Public Accountants (or any successor thereto)
or other appropriate authoritative body and (ii) changes in accounting
principles as approved by the Accountants.
24. References.
All references in this Loan Agreement to "Article," "Section,"
"subsection," "subparagraph," "clause" or "Exhibit," unless otherwise
indicated, shall be deemed to refer to an Article, Section, subsection,
subparagraph, clause or Exhibit, as applicable, of this Loan Agreement.
25. Lender's Discretion.
Whenever the terms "satisfactory to Lender," "determined by Lender,"
"acceptable to Lender," "Lender shall elect," "Lender shall request," "at the
option or election of Lender," or similar terms are used in the Loan
Instruments, except as otherwise specifically provided therein, such terms
shall mean satisfactory to, at the election or option of, determined by,
acceptable to or requested by Lender, in its sole and unlimited discretion.
26. Borrower's or Guarantor's Knowledge.
Any statements, representations or warranties that are based upon the
best knowledge of Borrowers or Guarantor or an officer thereof shall be deemed
to have been made after due inquiry by Borrowers, Guarantor or such officer, as
applicable, with respect to the matter in question.
27. REVOLVING LOANS AND TERMS OF PAYMENT
28. Revolving Loan.
29. Amount and Disbursement.
Upon the terms and subject to the conditions herein set forth, Lender
agrees to make Advances of the Revolving Loan to Borrowers from time to
time from the Closing Date to the Revolving Loan Maturity Date in an
aggregate amount outstanding at any one time not in excess of the
Revolving Loan Commitment then in effect. If at any time, however,
Borrowers' Obligations exceed the Revolving Loan Commitment then in
effect, all of such excess nevertheless shall constitute a part of
Borrowers' Obligations and shall be secured by the Security
Interests. Each of Borrower shall remain jointly and severally
liable with the other Borrowers for all of Borrowers' Obligations.
<PAGE>
30. Revolving Loan Note.
The Revolving Loan shall be evidenced by the Revolving Loan Note.
31. Reborrowing.
Subject to the conditions set forth in this Section 2.1, Borrowers may
from time to time prior to the Revolving Loan Maturity Date reborrow
all or any portion of any Advance of the Revolving Loan which is
repaid.
32. Conditions of Advances of the Revolving Loan.
The obligation of Lender to disburse any Advance of the Revolving Loan
is subject to the satisfaction of the following conditions precedent:
33. no Event of Default or Incipient Default shall exist or would be
created by the making of any such Advance;
34. each such Advance shall be in a minimum amount of $1,000 and integral
multiples of $1,000 in excess of that amount;
35. Lender shall have received, no later than 2:00 p.m., Chicago time,
on the applicable Funding Date, a Notice of Borrowing from Borrower in
the form of Exhibit 2.1.4 with respect to such Advance;
36. on the applicable Funding Date, each of Borrowers' and Guarantor's
representations and warranties set forth in the Loan Instruments shall
be true and correct in all material respects when made and at and as
of the time of the Funding Date, except to the extent that any such
representations and warranties expressly relate to an earlier date; and
37. availability shall be limited to Lender's advance of funds not
exceeding seventy percent (70%) of Borrowers' Eligible Accounts
Receivable.
38. Use of Proceeds of the Revolving Loan.
The proceeds of the Revolving Loan shall be used (i) to refinance
Borrowers' and Guarantor's secured loan obligations to Finova; (ii) for
Borrowers' working capital; and (iii) to pay related transactions
costs.
39. Interest.
40. Interest Rate.
The Principal Balance shall bear interest in an amount equal to: (i)
the Prime Rate in effect from time to time; plus (ii) 0.5% per annum,
provided, however, that during a Default Rate Period, Borrowers'
Obligations shall bear interest at the applicable Default Rate.
41. Interest Computation.
Interest shall be computed on the basis of a year consisting of 360
days and charged for the actual number of days during the period for
which interest is being charged. In computing interest, the Funding
Date shall be included and the date of payment shall be excluded.
<PAGE>
42. Maximum Interest.
Notwithstanding any provision to the contrary contained herein or in
any other Loan Instrument, Lender shall not collect a rate of interest
on any obligation or liability due and owing by Borrowers to Lender in
excess of the maximum contract rate of interest permitted by
applicable law ("Excess Interest"). If any Excess Interest is provided
for or determined by a court of competent jurisdiction to have been
provided for in this Loan Agreement or any other Loan Instrument, then
in such event (i) Borrowers shall not be obligated to pay such Excess
Interest, (ii)any Excess Interest collected by Lender shall be, at
Lender's option, (A) applied to the Principal Balance or to accrued
and unpaid interest not in excess of the maximum rate permitted by
applicable law or (B) refunded to the payor thereof, (iii) the
interest rates provided for herein (collectively the "Stated Rate")
shall be automatically reduced to the maximum rate allowed from time
to time under applicable law (the "Maximum Rate") and this Loan
Agreement and the other Loan Instruments, as applicable, shall be
deemed to have been, and shall be, modified to reflect such reduction,
and (iv) Borrowers shall not have any action against Lender for any
damages arising out of the payment or collection of such Excess
Interest; provided, however, that if at any time thereafter the Stated
Rate is less than the Maximum Rate, Borrowers shall, to the extent
permitted by law, continue to pay interest at the Maximum Rate until
such time as the total interest received by Lender is equal to the
total interest which Lender would have received had the Stated Rate
been (but for the operation of this provision) the interest rate
payable. Thereafter, the interest rate payable shall be the Stated
Rate unless and until the Stated Rate again exceeds the Maximum Rate,
in which event the provisions contained in this subsection 2.3.3 again
shall apply.
43. Increased Costs.
If, after the Closing Date, either (i) any change in or in the inter-
pretation of any law or regulation is introduced (other than changes
in taxation of the net income of Lender), including, without
limitation, with respect to reserve requirements applicable to Lender,
(ii) Lender complies with any future guideline or request from any
central bank or other Governmental Body proposed or promulgated after
the Closing Date or (iii) Lender determines that the adoption of any
applicable law, rule or regulation (other than changes in taxation of
the net income of Lender) regarding capital adequacy or any change
therein, or any change in the interpretation or administration thereof
by any Governmental Body, central bank or comparable agency charged
with the interpretation or administration thereof announced after the
Closing Date has or would have the effect described below, or Lender
complies with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such Governmental
Body, central bank or comparable agency announced after the Closing
Date and in case of any event set forth in this clause (iii), such
adoption, change or compliance has or would have the direct or
indirect effect of reducing the rate of return on any of Lender's
capital as a consequence of its obligations here-under to a level
below that which Lender could have achieved but for such adoption,
change or compliance (taking into consideration Lender's policies with
respect to capital adequacy) by an amount deemed by Lender to be
material, and any of the foregoing events described in clauses (i),
(ii) or (iii) increases the cost to Lender of (A) funding
or maintaining the Revolving Loan or the Revolving Loan Commitment or
(B) issuing, causing the issuance of making or maintaining any Letter
of Credit, or reduces the amount receivable in respect thereof by
Lender, then Borrowers shall upon demand by Lender at any time within
180 days after the date on which an officer of Lender responsible for
overseeing this Loan Agreement knows or has reason to know of its
right to additional compensation under this Section 2.3.4, pay to
Lender additional amounts sufficient to reimburse Lender against such
increase in cost or reduction in amount receivable; provided, however,
such entity shall only be entitled to additional compensation for any
such costs incurred from and after the date that is 30 days prior to
the date Borrowers receive such demand. A certificate as to the amount
of such increased cost, and setting forth in reasonable detail the
calculation thereof, shall be submitted to Borrowers by Lender, and
shall be conclusive absent manifest error. Lender will promptly notify
Borrowers of any event of which it has knowledge that would entitle
Lender to additional compensation under this subsection 2.3.4. Lender
shall not request any additional compensation under this subsection
2.3.4 unless it is generally making similar requests of other
borrowers similarly situated, and Lender agrees to use a reasonable
basis for calculating amounts allocable to its Commitments
hereunder.
<PAGE>
44. Principal and Interest Payments.
45. Interest.
Interest on (i) the Revolving Loan shall be payable monthly in arrears
on the first Business Day of each month beginning with May 1, 2000.
46. Principal.
The Principal Balance of the Revolving Loan, together with all other
sums due to Lender pursuant to the terms of the Loan Instruments,
shall be due and payable in full on the Revolving Loan Maturity Date.
47. Mandatory Prepayments of the Revolving Loan.
If at any time or for any reason, Borrowers' Obligation exceeds the
Revolving Loan Commitment or, if for any reason, Borrowers' Obligation
exceeds the availability requirements set forth in Section 37 hereof
(any such excess being referred to herein as an "Overadvance"),
Borrowers shall immediately pay to Lender, in Good Funds, the amount
of such Overadvance.
48. Payments after Event of Default.
All payments received by Lender during the existence of an Event of
Default shall be applied in accordance with Section 8.4.
49. Method of Payment.
All payments to be made pursuant to the Loan Instruments by Borrowers
to Lender shall be made by (i) direct debit from Borrowers' operating
account; or (ii) wire transfer of Good Funds to Lender.
50. SECURITY
Borrowers' Obligations shall be secured by a Lien upon all of the
Collateral, which Lien at all times shall be superior and prior to all
other Liens, except Permitted Prior Liens.
51. CONDITIONS OF CLOSING
The obligation of Lender to make the Revolving Loan shall be subject
to the satisfaction or waiver of all of the following conditions in a
manner, form and substance satisfactory to Lender:
52. Representations and Warranties.
On the Closing Date, Borrowers', Guarantor's and Personal Guarantors'
representations and warranties set forth in the Loan Instruments shall
be true and correct.
53. Delivery of Documents.
The following shall have been delivered to Lender, each duly
authorized and executed, where applicable, and in form and substance
satisfactory to Lender:
54. the Loan Instruments;
55. a certificate of good standing or similar certification for each
Borrower and Guarantor from the states in which each Borrower and
Guarantor are organized and from all states in which the laws thereof
require each Borrower and Guarantor to be licensed and/or qualified to
do business, except any state where the failure to be so qualified
could not reasonably be expected to result in a Material Adverse
Effect, in each case dated not more than 10 days prior to the Closing
Date;
<PAGE>
56. copies of the corporate charter or articles of incorporation for each
Borrower and Guarantor, certified by the Secretary of State of the
state of each Borrower's and Guarantor's organization, together with
all effective and proposed amendments thereto;
57. certified copies of resolutions adopted by the board of directors of
each Borrower and Guarantor, authorizing the execution and delivery of
the Loan Instruments and the consummation of the transactions
contemplated therein;
58. signature and incumbency certificates for each Borrower and Guarantor;
59. copies of each of the following, certified as true, correct and
complete by a duly authorized officer of each Borrower and Guarantor:
all instruments and documents evidencing Permitted Senior Indebtedness
and Permitted Subordinated Indebtedness existing as of the Closing
Date;
60. a Landlord's Consent from the Landlord under the Lease for Borrowers'
headquarters;
61. the Pay-Off Letter; and
62. such other instruments, documents, certificates, consents, waivers and
opinions as Lender reasonably may request.
63. Performance; No Default.
Borrower and Guarantor shall have performed and complied with all
agreements and conditions contained in the Loan Instruments to be
performed by or complied with by such Person prior to or at the
Closing, and no Event of Default shall then exist or result from the
making of the initial disbursement of the Revolving Loan.
64. Opinions of Counsel.
Lender shall have received the opinion of Borrowers' and Guarantor's
counsel, Troutman Sanders, dated the Closing Date and any special
counsel required by Lender, each addressed to Lender, in such form and
covering such matters as Lender may require.
65. Approval of Loan Instruments and Security Interests; Consents.
Lender shall have received evidence that the approval or consent shall
have been obtained from all Governmental Bodies and all other Persons
whose approval or consent is required to enable (i) each Borrower to
enter into and perform its obligations under the Loan Instruments; and
(ii) each Borrower and Guarantor to grant to Lender the Security
Interests contemplated in the Security Instruments.
66. Security Interests.
All filings of Uniform Commercial Code financing statements and all
other filings and actions necessary to perfect and maintain the
Security Interests as first, valid and perfected Liens in the Property
covered thereby, subject only to Permitted Prior Liens, shall have
been filed or taken and Lender shall have received such UCC, state and
federal tax Lien, pending suit, judgment and other Lien searches as it
deems reasonably necessary to confirm the foregoing.
67. Financial Statements, Reports and Projections.
Lender shall have received such financial reports and other
information with respect to each Borrower and Guarantor as Lender
shall request, all in form and substance satisfactory to Lender.
<PAGE>
68. Year 2000 Compliance.
Lender shall be satisfied that there are no material Year 2000
compliance issues pertaining to any Borrower or Guarantor.
69. Material Adverse Change.
No event shall have occurred since February 28, 2000, which has had or
could have a Material Adverse Effect, and no laws, statute, rule,
regulation, order or decree shall be in effect or proceedings pending
which prevent or enjoin the Closing.
70. Use of Assets.
Lender shall be satisfied that each Borrower and Guarantor at all
times shall be entitled to the use and quiet enjoyment of all Property
necessary for the continued ownership and operation of its business,
including, without limitation, the use of equipment, fixtures,
licenses, offices and means of ingress and egress thereto, and any
easements or rights-of-way necessary to reach any equipment or other
items necessary for the operation of such business.
71. Fees and Expenses.
Lender shall have received evidence that all fees and expenses
described in subsection 10.1.1 have been paid in full.
72. Insurance.
At least two (2) Business Days prior to the Closing Date, Borrowers
shall have delivered to Lender evidence satisfactory to Lender that all
Business Insurance coverage required pursuant to Section 6.6 is in
full force and effect and all premiums then due thereon have been paid
in full.
73. Existing Indebtedness.
Lender shall have received evidence that the Existing Indebtedness
(including all indebtedness owed to Finova) has been paid in full or
will be paid in full concurrently with the Closing.
74. REPRESENTATIONS AND WARRANTIES
Borrowers and Guarantor, jointly and severally, represent and warrant
to Lender as follows:
75. Existence and Power.
Each Borrower and Guarantor are business corporations, duly formed and
validly existing under the laws of the jurisdiction of their
respective formation. Each Borrower and Guarantor are in good
standing under the laws of each other jurisdiction in which the
failure to be in good standing could have a Material Adverse Effect.
Each Borrower and Guarantor have all requisite power and authority to
own their Property and to carry on their business as has been
conducted prior to the Closing Date and as proposed to be conducted by
each Borrower and Guarantor following the Closing Date.
<PAGE>
76. Authority.
Each Borrower and Guarantor have full power and authority to enter
into, execute, deliver and carry out the terms of the Loan Instruments
and to incur the obligations provided for therein, all of which have
been duly authorized by all proper and necessary action and, are not
prohibited by the organizational instruments of any Borrower or
Guarantor.
77. Binding Agreements.
This Loan Agreement and the other Loan Instruments, when executed and
delivered, will constitute the valid and legally binding obligations
of each Borrower and Guarantor, enforceable against each Borrower and
Guarantor in accordance with their respective terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect
affecting the enforcement of creditors' rights generally and (ii)
equitable principles (whether or not any action to enforce such
document is brought at law or in equity).
78. Business and Property of Borrower and Guarantor.
79. Business and Property.
Each Borrower and Guarantor (i) own, and upon the Closing Date, will
own, all Property necessary to conduct their business as presently
conducted and as has been conducted prior to the Closing Date and (ii)
have not engaged in and do not propose to engage in any business
activity other than the business in which they are presently engaged,
provided Borrowers or Guarantor may acquire or initiate additional
trucking brokerage businesses within the United States provided any
such action does not cause a violation of any other term or covenant
of this Agreement including without limitation Sections 7.1, 7.2 and
7.6 hereunder, and further provided that, to the extent such business
is conducted in an entity other than one of Borrowers or Guarantor,
such entity is added as a Borrower under this facility and agrees to
be bound by the terms hereof and executes a Security Agreement in
favor of Lender and appropriate financing statements granting a lien
in its Property junior only to Permitted Senior Indebtedness Liens.
80. Operating Agreements.
All Operating Agreements are in full force and effect and no event has
occurred which could result in the cancellation or termination of any
such Operating Agreement or the imposition thereunder of any liability
upon any Borrower or Guarantor which could have a Material Adverse
Effect.
81. Facility Sites.
There is set forth in Schedule 5.4.3 the locations of Borrowers' and
Guarantor's (i) chief executive office, (ii) Property and (iii) books
and records.
82. Leases.
There is set forth in Schedule 5.4.4 a list of all Leases, together
with a complete and accurate address and legal description of each
parcel of Leasehold Property subject to such Leases. Each Lease is in
full force and effect, there has been no default in the performance of
any of its terms or conditions by any Borrower or Guarantor or, to the
best knowledge of any Borrower or Guarantor, any other party thereto,
and, to the best knowledge of any Borrower or Guarantor, no claims of
default have been asserted with respect thereto.
<PAGE>
83. Real Property.
Except for certain Real Property owned in Arizona which has been
identified to Lender, none of Borrowers or Guarantors own any Real
Property.
84. Operation and Maintenance of Equipment.
No equipment owned or operated will be owned or operated by a Borrower
which is necessary for the operation of its business has been used,
operated or maintained in a manner which now or hereafter could result
in the cancellation or termination of the right of a Borrower to use
or make use of the same or which could be expected to result in any
material liability of a Borrower for damages in connection therewith.
All of the equipment and other tangible personal property which will
be owned by Borrowers upon the Closing Date and necessary to the
operation of each Borrowers' businesses is, in all material respects,
in good operating condition and repair (subject to normal wear and
tear) and has been used, operated and maintained in substantial
compliance with all applicable laws, rules and regulations.
85. Existing Indebtedness.
There is set forth in Schedule 5.4.7 a complete description of the
Existing Indebtedness.
86. Title to Property; Liens.
Each Borrower has (i) good and marketable title to all of its Property,
except the portion thereof consisting of a leasehold estate and (ii) a
valid leasehold estate in each portion of its Property which consists
of a leasehold estate. All of such Property is free and clear of all
Liens, except Permitted Liens. Upon the proper filing with the
appropriate Governmental Bodies of appropriate Uniform Commercial Code
financing statements, the applicable Loan Instruments will create valid
and perfected first Liens in the Collateral, subject only to Permitted
Prior Liens.
87. Financial Statements.
Each of Borrowers and Guarantor have delivered to Lender the financial
statements described in Schedule 5.6. To the best of each of
Borrowers' and Guarantor's knowledge, such financial statements
present fairly in all material respects the results of their
operations for the periods covered thereby and their financial
condition as of the dates indicated therein. All of such financial
statements have been prepared in conformity with GAAP consistently
applied. Since the date of the most recent financial statement, there
has been no change which has had a Material Adverse Effect.
88. Litigation.
There is set forth in Schedule 5.7 a description of all actions, suits,
arbitration proceedings and claims pending or, to the best knowledge of
each Borrower and Guarantor, threatened against any Borrower or
Guarantor, at law or in equity or before any Governmental Body on the
Closing Date. There are no actions, suits, arbitration proceedings or
claims pending, or to the best knowledge of any Borrower or Guarantor,
threatened against any Borrower or Guarantor, at law or in equity or
before any Governmental Body, including the matters set forth in such
Schedule 5.8, which could reasonably be expected to have a Material
Adverse Effect.
<PAGE>
89. Defaults in Other Agreements; Consents; Conflicting Agreements.
No Borrower or Guarantor is in default under any agreement to which it
is a party or by which it or any of its Property is bound, the effect
of which default could reasonably be expected to have a Material
Adverse Effect. No authorization, consent, approval or other action by,
and no notice to or filing with, any Governmental Body or any other
Person which has not already been obtained, taken or filed, as
applicable, is required (i) for the due execution, delivery or
performance by each Borrower and Guarantor of any of the Instruments
to which any Borrower or Guarantor is a party or (ii) as a condition
to the validity or enforceability of any of the Instruments to which
any Borrower or Guarantor is a party or any of the transactions
contemplated thereby or the priority of the Security Interests, except
for certain filings to establish and perfect the Security Interests. No
Borrower or Guarantor or affecting its Property conflicts with, or
requires any consent which has not already been obtained under, or
would in any way prevent the execution, delivery or performance of the
terms of any of the Instruments or affect the validity or priority of
the Security Interests. The execution, delivery and performance of the
terms of the Instruments will not constitute a default under, or result
in the creation or imposition of, or obligation to create, any Lien
upon the Property of any Borrower or Guarantor pursuant to the terms
of any such mortgage, indenture, contract or agreement.
90. Taxes.
Borrowers and Guarantor have each filed all tax returns required to be
filed, and have paid, or made adequate provision for the payment of,
all taxes shown to be due and payable on such returns or in any
assessments made against it, and no tax liens have been filed and, to
the best knowledge of each Borrower and Guarantor, no claims are being
asserted in respect of such taxes which are required by GAAP to be
reflected in the financial statements of Borrowers and Guarantor and
are not so reflected therein. The charges, accruals and reserves on
the books of Borrowers and Guarantor with respect to all federal,
state, local and other taxes are considered by the management of
Borrowers and Guarantor to be adequate, and no Borrower or Guarantor
knows of any unpaid assessment which is or might be due and payable by
a Borrower or Guarantor or creates a Lien against any of a Borrowers'
or Guarantor's Property, except such assessments as are being
contested in good faith and by appropriate proceedings diligently
conducted, and for which adequate reserves have been set aside in
accordance with GAAP. None of the tax returns of any Borrower and
Guarantor are under audit.
91. Compliance with Applicable Laws.
None of Borrowers or Guarantor is in default in respect of any
judgment, order, writ, injunction, decree or decision of any
Governmental Body, which default could have a Material Adverse Effect.
Each Borrower and Guarantor is in compliance in all material respects
with all applicable statutes and regulations, including, without
limitation, all Environmental Laws, ERISA and all laws and regulations
relating to unfair labor practices, equal employment opportunity and
employee safety, of all Governmental Bodies. No material condemnation,
eminent domain or expropriation has been commenced or, to the best
knowledge of any Borrower or Guaranty, threatened against the Property
which any Borrower or Guarantor owns or will own upon the Closing.
<PAGE>
92. Patents, Trademarks, Franchises and Agreements.
There is set forth in Schedule 5.11 a complete and accurate list of all
of the Intellectual Property material to the operation of the business
of Borrowers and Guarantor. Each Borrower and Guarantor owns,
possesses or has the right to use such Intellectual Property (i) which
is necessary for the conduct of the business proposed to be conducted
by such Borrower after the Closing date and (ii) for which the failure
to own, possess or have the right to use could have a Material Adverse
Effect, in each case, without any known conflict with the rights of
others and free of any Liens other than the Security Interests.
93. Regulatory Matters.
Each Borrower and Guarantor have duly and timely filed all reports and
other filings which are required to be filed by each such Borrower and
Guarantor under any applicable law, rule or regulation of any
Governmental Body, the non-filing of which could have a Material
Adverse Effect, and is in compliance with all such laws, rules and
regulations, the noncompliance with which could have a Material Adverse
Effect.
94. Environmental Matters.
Each Borrower is in compliance in all material respects with all
applicable Environmental Laws and no portion of any of the Leasehold
Property or the Real Property has been used as a landfill. There
currently are not any known Hazardous Materials generated,
manufactured, released, stored, buried or deposited over, beneath, in
or on (or used in the construction and/or renovation of) the Real
Property or Leasehold Property in violation of applicable
Environmental Laws.
95. Application of Certain Laws and Regulations.
No Borrower is and Guarantor is not and no Affiliate of Borrower or
Guarantor is:
96. Investment Company Act.
An "investment company," or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as
amended.
97. Holding Company.
A "holding company," or a "subsidiary company" of a "holding company,"
or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended.
98. Foreign or Enemy Status.
(i) An "enemy" or an "ally of an enemy" within the meaning of Section 2
of the Trading with the Enemy Act, (ii) a "national" of a foreign
country designated in Executive Order No. 8389, as amended, or of any
"designated enemy country" as defined in Executive Order No. 9095, as
amended, of the President of the United States of America, in each case
within the meaning of such Executive Orders, as amended, or of any
regulation issued thereunder, (iii) a "national of any designated
foreign country" within the meaning of the Foreign Assets Control
Regulations or the Cuban Assets Control Regulations of the United
States of America (Code of Federal Regulations, Title 31, Chapter V,
Part 515, Subpart B, as amended) or (iv) an alien or a representative
of any alien or foreign government within the meaning of Section 310
of Title 47 of the United States Code.
<PAGE>
99. Regulations as to Borrowing.
Subject to any statute or regulation which regulates the incurrence of
any Indebtedness for Borrowed Money, including, without limitation,
statutes or regulations relative to common or interstate carriers or
to the sale of electricity, gas, steam, water, telephone, telegraph or
other public utility services.
100. Margin Regulations.
None of the transactions contemplated by this Loan Agreement or any of
the other Instruments, including the use of the proceeds of the
Revolving Loans, will violate or result in a violation of Section 7 of
the Securities Exchange Act of 1934, as amended, or any regulations
issued pursuant thereto, including, without limitation, Regulations
G, T, U and X, and no Borrower owns or intends to carry or purchase
any "margin security" within the meaning of such Regulation U or G.
101. Other Indebtedness.
Upon the Closing there will be no Indebtedness for Borrowed Money owed
by any Borrower to any Person, except (i) Borrowers' Obligations, and
(ii) Permitted Senior Indebtedness and Permitted Subordinated
Indebtedness permitted to exist as of the Closing Date pursuant to
this Loan Agreement. All such Permitted Subordinated Indebtedness is
listed and described in Schedule 5.16 hereto.
102. No Misrepresentation.
Neither this Loan Agreement nor any other Loan Instrument,
certificate, information or report furnished or to be furnished by or
on behalf of a Borrower or Guarantor to Lender in connection with any
of the transactions contemplated hereby or thereby, contains or will
contain a misstatement of material fact, or omits or will omit to
state a material fact required to be stated in order to make the
statements contained herein or therein, taken as a whole, not
misleading in the light of the circumstances under which such
statements were made. There is no fact, other than information known
to the public generally, known to any Borrower or Guarantor after
diligent inquiry, that could have a Material Adverse Effect that has
not expressly been disclosed to Lender in writing.
103. Employee Benefit Plans.
104. No Other Plans.
Neither any Borrower, Guarantor nor any ERISA Affiliate maintains or
contributes to, or has any obligation under, any Employee Benefit Plan
other than those identified on Schedule 5.18.1. Each Borrower has
provided Lender accurate and complete copies of all contracts,
agreements and documents described on Schedule 5.18.1.
105. ERISA and Code Compliance and Liability.
Each Borrower, Guarantor and each ERISA Affiliate are in compliance
with all applicable provisions of ERISA and the regulations and
published interpretations thereunder with respect to all Employee
Benefit Plans except where failure to comply would not result in a
material liability to any Borrower or Guarantor and except for any
required amendments for which the remedial amendment period as defined
in Section 401(b) of the Code has not yet expired. Each Employee
Benefit Plan that is intended to be qualified under Section 401(a) of
the Code has been determined by the Internal Revenue Service to be so
qualified, and each trust related to such plan has been determined to
be exempt under Section 401(a) of the Code. No material liability has
been incurred by any Borrower or Guarantor or any ERISA Affiliate
which remains unsatisfied for any taxes or penalties with respect to
any Employee Benefit Plan or any Multiemployer Plan.
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106. Funding.
No Pension Plan has been terminated, nor has any accumulated funding
deficiency (as defined in Section 412 of the Code) been insured
(without regard to any waiver granted under Section 412 of the Code),
nor has any funding waiver from the Internal Revenue Service been
received or requested with respect to any Pension Plan, nor has
Borrower or any ERISA Affiliate failed to make any contributions or to
pay any amounts due and owing as required by Section 412 of the Code,
Section 302 of ERISA or the terms of any Pension Plan prior to the due
dates of such contributions under Section 412 of the Code or Section
302 of ERISA, nor has there been any event requiring any disclosure
under Section 4041(c)(3)(C), 4063(a) or 4068 of ERISA with respect to
any Pension Plan.
107. Prohibited Transactions and Payments.
Neither any Borrower, Guarantor nor any ERISA Affiliate has: (i)
engaged in a nonexempt "prohibited transaction" as such term is defined
in Section 406 of ERISA or Section 4975 of the Code; (ii) incurred any
liability to the PBGC which remains outstanding other than the payment
of premiums and there are no premium payments which are due and
unpaid; (iii) failed to make a required contribution or payment to a
Multiemployer Plan; or (iv) failed to make a required installment or
other required payment under Section 412 of the Code.
108. No Termination Event.
No Termination Event has occurred or is reasonably expected to occur.
109. ERISA Litigation.
No material proceeding, claim, lawsuit and/or investigation is
existing or, to the best knowledge of any Borrower or Guarantor,
threatened concerning or involving any (i) employee welfare benefit
plan (as defined in Section 3(l) of ERISA) currently maintained or
contributed to by Borrower or any ERISA Affiliate, (ii) Pension Plan
or (iii) Multiemployer Plan.
110. Employee Matters.
111. Collective Bargaining Agreements; Grievances.
Except as set forth in Schedule 5.19.1, (i) none of the employees of
any Borrower or Guarantor is subject to any collective bargaining
agreement with such Borrower or Guarantor, (ii) no petition for
certification or union election is pending with respect to the
employees of any Borrower or Guarantor and no union or collective
bargaining unit has sought such certification or recognition with
respect to the employees of any Borrower and (iii) there are no
strikes, slowdowns, work stoppages, unfair labor practice complaints,
grievances, arbitration proceedings or controversies pending or, to
the best knowledge of any Borrower or Guarantor, threatened against
any Borrower or Guarantor by any of such Borrower's or Guarantor's
employees, other than employee grievances or controversies rising in
the ordinary course of business that could not in the aggregate be
expected to have a Material Adverse Effect.
112. Claims Relating to Employment.
Neither any Borrower or Guarantor is subject to any non-competition
agreement with any Person. To the best of Borrowers' or Guarantor's
knowledge, no employees of any Borrower or Guarantor is subject to an
employment agreement which would have a Material Adverse Effect due to
(i) any information which any Borrower or Guarantor would be
prohibited from using under the terms of such agreement or (ii) any
legal considerations relating to unfair competition, trade secrets or
proprietary information.
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113. Burdensome Obligations.
After giving effect to the transactions contemplated by the
Instruments (i) neither any Borrower nor Guarantor (A) will be a party
to or be bound by any franchise, agreement, deed, lease or other
instrument, or be subject to any restriction, which is so unusual or
burdensome so as to cause, in the foreseeable future, a Material
Adverse Effect or (B) intends to incur, or believes that it will
incur, debts beyond its ability to pay such debts as they become due.
No Borrower or Guarantor presently anticipates that future
expenditures needed to meet the provisions of federal or state
statutes, orders, rules or regulations will be so burdensome so as to
have a Material Adverse Effect.
114. Subsidiaries.
None of Borrowers have any subsidiaries.
115.
AFFIRMATIVE COVENANTS
Until all of Borrowers' Obligations and the Obligations of Guarantor
under the Corporate Guaranty are paid and performed in full, each of
Borrowers and Guarantor agree that they will:
116. Legal Existence; Good Standing.
Maintain their existence and their good standing in the jurisdiction of
their formation and maintain their qualification to transact business
in each jurisdiction in which the failure so to qualify would have a
Material Adverse Effect.
117. Inspection.
Permit representatives of Lender, at any time without notice, to (i)
visit their offices, (ii) examine their books and records and
Accountants' reports relating thereto, (iii) make copies or extracts
therefrom, (iv) discuss their affairs with their employees, (v) examine
and inspect their Property and (vi) meet and discuss their affairs with
the Accountants, and such Accountants, as a condition to their
retention by Borrowers and Guarantor, are hereby irrevocably authorized
by Borrowers and Guarantor to fully discuss and disclose all such
affairs with Lender.
118. Financial Statements and Other Information.
Maintain a standard system of accounting in accordance with GAAP and
furnish to Lender:
119. Monthly Statements.
As soon as is available and in any event within forty (40) days after
the close of each month (except the months of January and February, as
to which the following must be furnished within seventy-five (75) days
after the close of the month):
120. copy of the consolidating balance sheets of Borrowers and Guarantor, as
of the end of such month;
121. statements of operations and EBITDA of Borrower and Guarantor for such
month; and
122. an accounts receivable aging and borrowing base certificate from
Borrowers, as of the end of such month.
123. Quarterly Statements.
As soon as is available and in any event within forty-five (45) days
after the close of each quarter:
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124. copy of the balance sheet of Borrowers and Guarantor, as of the end of
such quarter;
125. statements of operations and EBITDA of Borrowers and Guarantor for such
quarter; and
126. such other financial information for the Borrowers and Guarantor as is
contained in Guarantor's 10-Q Report for such quarter.
127. Annual Statements.
As soon as available and in any event within 90 days after the close of
Guarantor's fiscal year:
128. the consolidated balance sheet of Guarantor and its subsidiaries as of
the end of such fiscal year and the statements of operations, cash
flows, shareholders' equity and EBITDA of Guarantor for such fiscal
year (collectively, the "Basic Financial Statements");
129. an opinion of the Accountants which shall accompany the Basic Financial
Statements which opinion (except the opinion as to 12/31/99 Basic
Financial Statement, which may be so qualified) shall be unqualified as
to going concern and scope of audit, stating that (i) the examination
by the Accountants in connection with such Basic Financial Statements
has been made in accordance with generally accepted auditing standards,
(ii) such Basic Financial Statements have been prepared in conformity
with GAAP and in a manner consistent with prior periods, and (iii)
such Basic Financial Statements fairly present in all material
respects the financial position and results of operations of Guarantor
and its subsidiaries;
130. a letter from the Accountants stating that the statements of EBITDA
were computed in accordance with the requirements of this Loan
Agreement; and
131. the personal financial statements of each of the Personal Guarantors
certified as true and correct by the respective Personal Guarantors.
132. Compliance Certificate.
As soon as is available and in any event within forty-five (45) days
after the close of each quarter, a Compliance Certificate as of the
end of such quarter.
133. Accountants' Certificate.
Simultaneously with the delivery of the certified Basic Financial
statements required by subsection 127, copies of a certificate of the
Accountants stating that (i) they have checked the computations
delivered by Guarantor in compliance with subsection 127, and (ii) in
making the examination necessary for their audit of the Basic
Financial Statements for such year, nothing came to their attention of
a financial or accounting nature that caused them to believe that (A)
Guarantor was not in compliance with the terms, covenants, provisions
or conditions of any of the Loan Instruments, or (B) there shall have
occurred any condition or event which would constitute an Event of
Default, or, if so, specifying in such certificate all such instances
of non-compliance and the nature and status thereof.
134. Audit Reports.
Promptly upon receipt thereof, a copy of each report, other than the
reports referred to in subsection 127, including any so-called
"Management Letter" or similar report, submitted to any Borrower or
Guarantor by the Accountants in connection with any annual, interim
or special audit made by the Accountants of the books of any Borrower
or Guarantor.
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135. Notice of Defaults; Loss.
Prompt written notice if: (i) any Indebtedness of any Borrower or
Guarantor is declared or shall become due and payable prior to its
declared or stated maturity, or called and not paid when due, (ii) an
event has occurred that enables the holder of any note, or other
evidence of such Indebtedness, certificate or security evidencing any
such Indebtedness of any Borrower or Guarantor to declare such
Indebtedness due and payable prior to its stated maturity, (iii) there
shall occur and be continuing an Event of Default, accompanied by a
statement setting forth what action a Borrower or Guarantor proposes
to take in respect thereof, or (iv) any event shall occur which has a
Material Adverse Effect, including the amount or the estimated amount
of any loss or adverse effect.
136. Notice of Suits; Adverse Events.
Prompt written notice of: (i) any citation, summons, subpoena, order to
show cause or other order naming any Borrower or Guarantor a party to
any proceeding before any Governmental Body which might reasonably be
expected to have a Material Adverse Effect, including with such notice
a copy of such citation, summons, subpoena, order to show cause or
other order,(ii) any lapse or other termination of any license,
permit, franchise, agreement or other authorization issued to any
Borrower or Guarantor by any Governmental Body or any other Person
that is material to the operation of the business of Borrower or
Guarantor, (iii) any refusal by any Governmental Body or any other
Person to renew or extend any such license, permit, franchise,
agreement or other authorization and (iv) any dispute between Borrower
or Guarantor and any Governmental Body or any other Person, which
lapse, termination, refusal or dispute referred to in clauses (ii) and
(iii) above or in this clause (iv) could have a Material Adverse
Effect.
137. Reports to Members, Creditors and Governmental Bodies.
138. Promptly upon becoming available, copies of all regular and periodic
reports sent by any Borrower or Guarantor to any of its creditors, and
all registration statements and prospectuses filed by Guarantor with
any securities exchange or with the Securities and Exchange Commission
or any Governmental Body succeeding to any of its functions, and of all
statements generally made available by a Borrower or Guarantor
concerning material developments in the business of such Borrower or
Guarantor.
139. Promptly upon becoming available, copies of any periodic or special
reports filed by a Borrower or Guarantor with any Governmental Body or
Person, if such reports indicate any material change in the business,
operations, affairs or condition of such Borrower or Guarantor, or if
copies thereof are requested by Lender, and copies of any material
notices and other communications from any Governmental Body or Person
which specifically relate to a Borrower or Guarantor.
140. ERISA Notices and Requests.
141. With reasonable promptness, and in any event within 30 days after
occurrence of any of the following, notice and/or copies of: (i) the
establishment of any new Employee Benefit Plan, Pension Plan or
Multiemployer Plan; (ii) the commencement of contributions to any
Employee Benefit Plan, Pension Plan or Multiemployer Plan to which a
Borrower or any of its ERISA Affiliates was not previously
contributing or any increase in the benefits of any existing Employee
Benefit Plan, Pension Plan or Multiemployer Plan; (iii) each funding
waiver request filed with respect to any Employee Benefit Plan and all
communications received or sent by a Borrower or any ERISA Affiliate
with respect to such request; and (iv) the failure of a Borrower or
any of its ERISA Affiliates to make a required installment or payment
under Section 302 of ERISA or Section 412 of the Code by the due date.
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142. Promptly and in any event within 10 days of becoming aware of the
occurrence of or forthcoming occurrence of any (i) Termination Event
or (ii) "prohibited transaction," as such term is defined in Section
406 of ERISA or Section 4975 of the Code, in connection with any
Pension Plan or any trust created thereunder, a notice specifying the
nature thereof, what action Borrower or Guarantor has taken, is
taking or proposes to take with respect thereto and, when known, any
action taken or threatened by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto.
143. With reasonable promptness but in any event within 10 days after the
occurrence of any of the following, copies of: (i) any favorable or
unfavorable determination letter from the Internal Revenue Service
regarding the qualification of an Employee Benefit Plan under Section
401 (a) of the Code; (ii) all notices received by a Borrower or any
ERISA Affiliate of the PBGC's intent to terminate any Pension Plan or
to have a trustee appointed to administer any Pension Plan; (iii) each
Schedule B (Actuarial Information) to the annual report (Form 5500
Series) filed by a Borrower or any ERISA Affiliate with the Internal
Revenue Service with respect to each Pension Plan; and (iv) all notices
received by Borrower or any ERISA Affiliate from a Multiemployer Plan
sponsor concerning the imposition or amount of withdrawal liability
pursuant to Section 4202 of ERISA; and written notice within two
Business Days of Borrower's or any ERISA Affiliate's filing of or
intention to file a notice of intent to terminate any Pension Plan
under a distress termination within the meaning of Section 4041(c) of
ERISA.
144. Other Information.
145. Immediate notice of any change in the location of any Property of any
Borrower or Guarantor which is material to or necessary for the
continued operation of Borrower's business, any change in the name of a
Borrower, any sale or purchase of Property outside the regular course
of business of a Borrower, any change in the residence of any Personal
Guarantor and any change in the business or financial affairs of
Borrower, which change could have a Material Adverse Effect.
146. Promptly upon request therefor, such other information and reports
relating to the past, present or future financial condition,
operations, plans and projections of Borrowers or Guarantor as Lender
reasonably may request from time to time.
147. Reports to Governmental Bodies and Other Persons.
Timely file all material reports, applications, documents, instruments
and information required to be filed pursuant to all rules and
regulations of any Governmental Body or other Person having
jurisdiction over the operation of the business of a Borrower
or Guarantor, including, but not limited to, such of the Loan
Instruments as are required to be filed with any such Governmental Body
or other Person pursuant to applicable rules and regulations
promulgated by such Governmental Body or other Person.
148. Maintenance of Licenses and Other Agreements.
Maintain in full force and effect at all times, and apply in a timely
manner for renewal of, all licenses, trademarks, trade names and
agreements necessary for the operation of their business, the loss of
any of which could have a Material Adverse Effect.
149. Insurance.
150. Maintenance of Insurance.
Maintain in full force and effect Business Insurance as may be required
by law or by the Loan Instruments and as may be customarily maintained
by a similarly situated business, all of which shall be written by
insurers and in amounts and forms satisfactory to Lender. Lender shall
be named as an additional insured on each policy of liability
insurance. Each policy of casualty insurance shall contain a standard
"Lender loss payable" endorsement in favor of Lender.
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151. Claims and Proceeds.
Each Borrower and Guarantor hereby direct all insurers under all
policies of Business Insurance to pay all proceeds payable thereunder
directly to Lender and each Borrower and Guarantor hereby authorize
Lender to collect all such proceeds. Each Borrower and Guarantor
irrevocably appoint Lender (and all officers, employees of Lender),
as such Borrower and Guarantor's true and lawful attorney and agent in
fact for the purpose of and with power to make, settle and adjust
claims under such policies of insurance, endorse the name of such
Borrower or Guarantor on any check, draft, instrument or other item
of payment for the proceeds of such policies of insurance, and to
make all determinations and decisions with respect to such policies
of insurance. Borrowers and Guarantor acknowledge that such appoint-
ment as attorney and agent in fact is a power, coupled with an
interest, and therefore is irrevocable. Borrowers and Guarantor shall
promptly notify Lender of any loss, damage, destruction or other
casualty to the Collateral. The insurance proceeds received on
account of any loss, damage, destruction or other casualty at the
option of Lender may be (i) applied to the payment of Borrowers'
Obligations in the following order of priority: (A) first, to the
payment of any and all sums which then are due and payable pursuant
to the terms of the Loan Instruments, other than the Principal
Balance and interest accrued thereon, (B) next, to accrued and unpaid
interest on the Principal Balance, and (C) then, to the Principal
Balance, or (ii) held by Lender and applied to pay for the cost of
repair or replacement of the Property which was the subject of such
loss, damage, destruction or other casualty, in which event such
proceeds shall be made available in the manner and under such
conditions as Lender reasonably may require. In the event such
proceeds are to be applied to the repair or replacement of Property,
the Property shall be repaired or replaced so as to be of at least
equal value and substantially the same character as prior to such
loss, damage, destruction or other casualty.
152. Future Leases.
Deliver to Lender, concurrently with the execution by any Borrower or
Guarantor, as lessee, of any lease pertaining to real property, (i) an
executed copy thereof, and (ii) a Landlord's Consent from the lessor
under such lease.
153. Environmental Matters.
At all times comply with, and be responsible for, their respective
obligations under all Environmental Laws applicable to the Real
Property and Leasehold Property and any other Property owned by any
Borrower or Guarantor or used by Borrower in the operation of
Borrowers' business. At their sole cost and expense, Borrowers and
Guarantor shall (i) comply in all respects with (A) any notice of any
violation or administrative or judicial complaint or order having been
filed against Borrower or Guarantor, any portion of any Real Property
or Leasehold Property or any other Property owned by any Borrowers or
Guarantor or used by any Borrower or Guarantor in the operation of
its business alleging violations of any law, ordinance and/or
regulation requiring any of Borrowers or Guarantor to take any action
in connection with the release, transportation and/or clean-up of any
Hazardous Materials, and (B) any notice from any Governmental Body or
any other Person alleging that any Borrower or Guarantor is or may be
liable for costs associated with a response or clean-up of any
Hazardous Materials or any damages resulting from such release or
transportation, or (ii) diligently contest in good faith by
appropriate proceedings any demands set forth in such notices,
provided (A) reserves in an amount reasonably satisfactory to Lender
to pay the costs associated with complying with any such notice are
established by any Borrower or Guarantor and (B) no Lien would or
will
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attach to the Property which is the subject of any such notice as a
result of any compliance by Borrowers or Guarantor which is delayed
during any such contest. Promptly upon receipt of any notice described
in the foregoing clause (i), a Borrower or Guarantor shall deliver to
Lender a copy thereof. At the request of Lender, a Borrower or
Guarantor shall deliver to Lender an environmental audit with respect
to any real estate acquired or leased by such Borrower or Guarantor.
154. Compliance with Laws.
Comply with all federal, state and local laws, ordinances, requirements
and regulations and all judgments, orders, injunctions and decrees
applicable to any Borrower or Guarantor and their operations, the
failure to comply with which would reasonably be expected to have a
Material Adverse Effect.
155. Taxes and Claims.
Pay and discharge all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits, or upon any
Property belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a Lien
(other than a Permitted Lien) upon the Property of any Borrower or
Guarantor, provided that neither Borrowers nor Guarantor shall be
required by this Section 6.10 to pay any such amount if the same is
being contested diligently and in good faith by appropriate
proceedings and as to which Borrowers and Guarantor have set aside
reserves on their books reasonably satisfactory to Lender.
156. Maintenance of Properties.
Maintain all of its Properties necessary in the operation of its
business in good working order and condition, ordinary wear and tear
excepted.
157. Governmental Approvals.
Upon the exercise by Lender of any power, right or privilege pursuant
to the provisions of any of the Loan Instruments requiring any consent,
approval or authorization of any Governmental Body, promptly execute
and cause the execution of all applications, certificates, instruments
and other documents that Lender may be required to obtain for such
consent, approval or authorization.
158. Payment of Indebtedness.
Except as to matters being contested in good faith and by appropriate
proceedings, promptly pay when due, or in conformance with customary
trade terms, all of its Indebtedness.
159. Maintenance of Accounts.
Commencing on the Closing Date, maintain its primary disbursement
account and all of its collection accounts (including all such
accounts for its affiliates) with Lender under Lender's customary
terms and conditions. No Borrower shall be required to maintain a
compensating balance in its disbursement accounts other than balances
sufficient to cover disbursement activities and to pay service
charges.
160. NEGATIVE COVENANTS
Until all of Borrowers' Obligations are paid and performed in full, no
Borrower or Guarantor shall:
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161. Borrowing.
Create, incur, assume or suffer to exist any liability for Indebtedness
for Borrowed Money except (i) Borrowers' Obligations; (ii) Permitted
Senior Indebtedness; and (iii) Permitted Subordinated Indebtedness.
162. Liens.
Create, incur, assume or suffer to exist any Lien upon any of its
Property, including Guarantor's capital stock ownership of Borrower,
whether now owned or hereafter acquired, except Permitted Liens.
163. Merger and Acquisition.
Consolidate with or merge with or into any Person, or acquire directly
or indirectly all or substantially all of the capital stock, equity
interests or Property of any Person without Lender's prior written
consent.
164. Contingent Liabilities.
Assume, guarantee, endorse, contingently agree to purchase, become
liable in respect of any letter of credit, or otherwise become liable
upon the obligation of any Person, except for liabilities arising from
the endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business.
165. Dividends and Distributions.
Make any dividends, distributions or other expenditures with respect
to any Borrower's or Guarantor's capital stock ownership interests or
apply any of its Property to the purchase, redemption or other
retirement of, or set apart any sum for the payment of, or make any
other distribution by reduction of capital or otherwise in respect of,
any Borrower's or Guarantor's capital stock ownership interests,
except that up to $50,000 in cash may be paid to shareholders of
Guarantor in connection with a reverse stock split.
166. Capital Expenditures.
In any year, make or incur, any Capital Expenditures, other than
Capital Expenditures not in excess of the sum of $150,000 without
Lender's prior written consent.
167. Payments of Indebtedness for Borrowed Money.
Make any voluntary or optional prepayment of any Indebtedness for
Borrowed Money other than Borrowers' Obligations and other than
interest payments due to the holders of the Permitted Subordinated
Indebtedness. Such interest payments with respect to the Permitted
Subordinated Indebtedness may only be made upon regular terms and
conditions and only so long as no Event of Default exists or has
been declared.
168. Investments, Revolving Loans.
At any time purchase or otherwise acquire, hold or invest in the
capital stock of, or any other interest in, any Person, or make any
loan or advance to, or enter into any arrangement for the purpose of
providing funds or credit to, or make any other investment, whether by
way of capital contribution or otherwise, in or with any Person,
including, without limitation, any Affiliate, except (i) investments
in direct obligations of, or instruments unconditionally guaranteed
by, the United States of America or in certificates of deposit issued
by a Qualified Depository, (ii) investments in commercial or finance
paper which, at the time of investment, is rated "A" or better by
Moody's Investors Service, Inc., or Standard & Poor's Corporation,
respectively, or at the equivalent rate by any of their respective
successors, (iii) any interests in any money market account maintained,
at the time of investment, with a Qualified Depository, the
investments of which, at the time of investment, are restricted to the
types specified in clause (i) above, and (iv) advances to sales agents
or other third parties not exceeding $200,000 in the aggregate to all
such parties at any point in time. All investments permitted pursuant
to clauses (i), (ii), (iii) and (iv) of this Section 7.8 shall have
a maturity date not exceeding one year.
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169. Fundamental Business Changes.
Materially change the nature of its business.
170. Facility Sites.
Change the locations of its chief executive office or other Property
used in the operation of its business unless (i) Lender shall have
received at least 30 days' prior written notice thereof, (ii) Lender
shall have received satisfactory evidence that such change could not
reasonably be expected to have a Material Adverse Effect and (iii)
each Borrower and Guarantor shall have executed and delivered to
Lender any documents Lender reasonably may require in order to
maintain the validity and priority of the Security Interests.
171. Sale or Transfer of Assets.
Sell, lease, assign, transfer or otherwise dispose of any Property
(other than in the ordinary course of business), including but not
limited to Guarantor's stock ownership interests in Borrower, except
for the sale or disposition of (A) Property which is not material to
or necessary for the continued operation of its business and (B)
obsolete or unusable items of equipment which promptly are replaced
with new items of equipment of like function and comparable value to
the unusable items of equipment when the same were new or not obsolete
or unusable, provided such replacement items of equipment shall become
subject to the Security Interests.
172. Amendment of Certain Agreements.
Amend, modify or waive any material term or provision of its articles
of organization, the Leases or any of the instruments, or agreements
relating to any of the Permitted Senior Indebtedness or Permitted
Subordinate Indebtedness.
173. Acquisition of Additional Properties.
Acquire any additional Property except such Property as is necessary
to or useful in the operation of its business, provided such
acquisitions shall be subject to the conditions and limitations set
forth in this Loan Agreement.
174. Transactions with Affiliates.
Sell, lease, assign, transfer or otherwise dispose of any Property to
any of its Affiliates, lease Property, render or receive services or
purchase assets from any such Affiliate, or otherwise enter into any
contractual relationship with any such Affiliate, except in the
ordinary course of business on terms no less favorable to any Borrower
or Guarantor than would be obtainable on an arm's-length basis by such
Borrower or Guarantor from a Person who is not an Affiliate of such
Borrower or Guarantor.
175. Compliance with ERISA.
176. Permit the occurrence of any Termination Event which would result in a
liability to any Borrower or any ERISA Affiliate in excess of $50,000;
177. Permit the present value of all benefit liabilities under all Pension
Plans to exceed the current value of the assets of such Pension Plans
allocable to such benefit liabilities by more than $50,000;
178. Permit any accumulated funding deficiency in excess of $50,000 (as
defined in Section 302 of ERISA and Section 412 of the Code) with
respect to any Pension Plan, whether or not waived;
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179. Fail to make any contribution or payment to any Multiemployer Plan
which any Borrower or any ERISA Affiliate may be required to make
under any agreement relating to such Multiemployer Plan, or any law
pertaining thereto which results in or is likely to result in a
liability in excess of $50,000;
180. Engage, or permit any ERISA Affiliate to engage, in any "prohibited
transaction" as such term is defined in Section 406 of ERISA or
Section 4975 of the Code for which a civil penalty pursuant to
Section 502(i) of ERISA or a tax pursuant to Section 4975 of the Code
in excess of $50,000 is imposed;
181. Permit the establishment of any Employee Benefit Plan providing post-
retirement welfare benefits or establish or amend any Employee Benefit
Plan which establishment or amendment could result in liability to any
Borrower or any ERISA Affiliate or increase the obligation of any
Borrower or any ERISA Affiliate to a Multiemployer Plan which
liability or increase, individually or together with all similar
liabilities and increases, is material to any Borrower or any ERISA
Affiliate; or
182. Fail, or permit any ERISA Affiliate to fail, to establish, maintain and
operate each Employee Benefit Plan in compliance in all material
respects with ERISA, the Code and all other applicable laws and
regulations and interpretations thereof.
83. Unsubordinated Indebtedness to Tangible Net Worth Ratio.
Permit the ratio of Unsubordinated Indebtedness to the sum of Tangible
Net Worth plus Subordinated Indebtedness to exceed 4 to 1.
184. Net Income for 1999.
Fail to report Net Income for Guarantor and its subsidiaries (on a
consolidated basis) of less than $200,000 for the year ending
December 31, 1999.
185. Minimum Net Worth.
Fail to Maintain Tangible Net Worth plus Permitted Subordinated
Indebtedness of at least $1,000,000.
186. Minimum Debt Service Ratio.
Fail to maintain a minimum debt service ratio for Grantor and its
subsidaries (on a consolidated basis) of 1.25:1 based on a rolling
four (4) quarter average, to be calculated as follows: the sum of
Net Income before taxes plus depreciation and amortization expense
plus interest expense minus taxes, dividends and distributions divided
by the sum of the current maturity of long term debt plus interest
expense. For purposes of testing the minimum debt service ratio,
interest expense in the denominator shall be defined as interest
expense on Unsubordinated Indebtedness plus interest paid on
Subordinated Indebtedness.
187. Testing of Financial Covenants.
All of the financial covenants set forth in paragraphs 183 through 186
shall be fully satisfied by Guarantor and Borrowers on a quarterly
reporting basis.
188. DEFAULT AND REMEDIES
189. Events of Default.
The occurrence of any of the following shall constitute an "Event of
Default" under the Loan Instruments:
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190. Default in Payment.
If any Borrowers shall fail to pay all or any portion of Borrowers'
Obligations when the same become due and payable.
191. Breach of Covenants.
192. If any Borrower or Guarantor shall fail to observe or perform any
covenant or agreement made by Borrower contained in Section 6.1, 6.2,
6.6, or in Article VII;
193. If any Borrower or Guarantor shall fail to observe or perform any
covenant or agreement contained in Section 6.3, and such failure shall
continue for 10 days after the occurrence of such Event of Default; or
194. If Borrower or Guarantor shall fail to observe or perform any covenant
or agreement (other than those referred to in subparagraph (a) or (b)
above or specifically addressed elsewhere in this Section 8.1) in any
of the Loan Instruments, and such failure shall continue for a period
of 30 days after the occurrence of such Event of Default.
195. Breach of Warranty.
If any representation or warranty made by or on behalf of any Borrower
or Guarantor in or pursuant to any of the Loan Instruments or in any
instrument or document furnished in compliance with the Loan
Instruments shall prove to be false or misleading in any material
respect.
196. Default Under Other Indebtedness for Borrowed Money.
If any Borrower or Guarantor at any time shall in default (as principal
or guarantor or other surety) in the payment of any principal of or
premium or interest on any Indebtedness for Borrowed Money (other
than Borrower's Obligations or the Permitted Subordinated
Indebtedness) beyond the grace period, if any, applicable thereto.
197. Bankruptcy.
198. If any Borrower, Guarantor or any Personal Guarantor shall (i)
generally not be paying its debts as they become due, (ii) file, or
consent, by answer or otherwise, to the filing against it of a
petition for relief or reorganization or arrangement or any other
petition in bankruptcy or insolvency under the laws of any
jurisdiction, (iii) make an assignment for the benefit of creditors,
(iv) consent to the appointment of a custodian, receiver, trustee or
other officer with similar powers for it or for any substantial part
of its Property, or (v) be adjudicated insolvent.
199. If any Governmental Body of competent jurisdiction shall enter an order
appointing, without consent of any Borrower or Guarantor, a custodian,
receiver, trustee or other officer with similar powers with respect to
it or with respect to any substantial part of its Property, or if an
order for relief shall be entered in any case or proceeding for
liquidation or reorganization or otherwise to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of any Borrower or Guarantor or
if any petition for any such relief shall be filed against it and such
petition shall not be dismissed or stayed within 60 days.
200. Judgments.
If there shall exist final judgments or awards against any Borrower
which shall have been outstanding for a period of 30 days or more from
the date of the entry thereof and shall not have been discharged in
full or stayed pending appeal, if the aggregate amount of all such
judgments and awards not covered by insurance exceeds $10,000.
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201. Impairment of Licenses; Other Agreements.
If (i) any Governmental Body shall revoke, terminate, suspend or
adversely modify any license of any Borrower, the adverse modification
or non-continuation of which could have a Material Adverse Effect, or
(ii) there shall exist any violation or default in the performance of,
or a material failure to comply with, any agreement, or condition or
term of any license, which violation, default or failure has a
Material Adverse Effect, or (iii) any agreement which is necessary to
the operation of the business of any Borrower shall be revoked or
terminated and not replaced by a substitute reasonably acceptable to
Lender within 30 days after the date of such revocation or termination,
and such revocation or termination and non-replacement could have a
Material Adverse Effect.
202. Collateral.
If any material portion of the Collateral shall be seized or taken by a
Governmental Body or Person, or any Borrower or Guarantor shall fail
to maintain or cause to be maintained the Security Interests and
priority of the Loan Instruments as against any Person, or the title
and rights of any Borrower or Guarantor to any material portion of the
Collateral shall have become the subject matter of litigation which
could reasonably be expected to result in impairment or loss of the
ecurity provided by the Loan Instruments.
203. Plans.
If an event or condition specified in subsection 140 hereof shall occur
or exist with respect to any Pension Plan or Multiemployer Plan and,
as a result of such event or condition, together with all other such
events or conditions, any Borrower or any ERISA Affiliate shall incur,
or in the opinion of Lender be reasonably likely to incur, a liability
to a Pension Plan or Multiemployer Plan or the PBGC (or any of them)
which, in the reasonable judgment of Lender, would have a Material
Adverse Effect.
204. Change in Control; Sale of Borrower.
If, absent consent of the Lender, at least (i) 22% of the Guarantor's
common stock and 100% of its preferred Class A stock is not owned by
the Personal Guarantors or if either of the Personal Guarantors dies
or resigns from his position as officer or director of any Borrower or
Guarantor or (ii) Guarantor ceases to own all of the stock of Borrower
or any of such stock is pledged, mortgaged, hypothecated or assigned
to anyone other than Lender, provided that, so long as the other one
of the Personal Guarantors survives, the death of one of the Personal
Guarantors shall not become an Event of Default until the 60th day
after such event, it being understood that the death of the last to
survive of the Personal Guarantors shall be an immediate Event of
Default.
205. Material Adverse Effect.
If, in Lender's reasonable opinion, the occurrence and continuance of
any event or condition, financial or otherwise, could reasonably be
likely to have a Material Adverse Effect.
206. Payments on Indebtness.
If Guarantor or any of its subsidiaries, including without limitation
TC Services, Inc. or any of Borrowers, shall (i) make any principal
payments with respect to any Indebtedness for Borrowed Money other than
Permitted Senior Indebtedness or (ii) make any interest payments or
agree to pay interest to the Personal Guarantors or either of them or
to anyone related to them or any entity in which either of Personal
Guarantors or anyone related to them have an interest, other than with
respect to Permitted Senior Indebtedness, at interest rates higher
than the interest rates provided for with respect to the Permitted
Subordinated Indebtedness as of the date of this Agreement.
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207. Affiliate Dividends.
If any subsidiary of Guarantor (other than a Borrower as permitted in
Section 7.5 above) shall make any distribution or pay any dividend or
the like to any of their respective shareholders .
208. Acceleration of Borrower's Obligations.
Upon the occurrence of:
209. any Event of Default described in clauses (ii), (iii), (iv) and (v) of
subsection 8.1.5(a) or in 8.1.5(b), the Revolving Loan Commitment
shall automatically terminate and all of Borrowers' Obligations at that
time outstanding automatically shall mature and become due; and
210. any other Event of Default, Lender, at any time, at its option, without
further notice or demand, may declare all of Borrowers' Obligations
due and payable, whereupon the Revolving Loan Commitment shall
automatically terminate and all of Borrowers' Obligations immediately
shall mature and become due and payable, all without presentment,
demand, protest or notice (other than notice of the declaration
referred to in clause (b) above), all of which hereby are waived.
211. Remedies on Default.
If Borrowers' Obligations have been accelerated pursuant to Section
8.2, Lender may:
212. Enforcement of Security Interests.
Enforce its rights and remedies under the Loan Instruments in
accordance with their respective terms; and/or
213. Other Remedies.
Enforce any of the rights or remedies accorded to Lender at equity or
law, by virtue of statute or otherwise.
214. Application of Funds.
Any funds received by Lender pursuant to the exercise of any rights
accorded to Lender pursuant to, or by the operation of any of the
terms of, any of the Loan Instruments, including, without limitation,
insurance proceeds, condemnation proceeds or proceeds from the sale of
Collateral, shall be applied to Borrowers' Obligations in the
following order of priority:
215. Expenses.
First to the payment of (i) all fees and expenses actually incurred,
including, without limitation, court costs, fees of appraisers, title
charges, costs of maintaining and preserving the Collateral, costs of
sale, and all other costs incurred by Lender in exercising any rights
accorded to such Persons pursuant to the Loan Instruments or by
applicable law, including, without limitation, reasonable attorney's
fees, and (ii) all Liens superior to the Liens of Lender except such
superior Liens subject to which any sale of the Collateral may have
been made.
216. Borrowers' Obligations.
Next, to Lender, in such order as Lender may determine, to repay the
Borrowers' Obligation.
217. Surplus.
Any surplus, to the Person or Persons entitled thereto.
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218. Performance of Borrower's Obligations.
If any Borrower or Guarantor fails to (i) maintain in force and pay for
any insurance policy or bond which any Borrower or Guarantor is
required to provide pursuant to any of the Loan Instruments, (ii)
keep the Collateral free from all Liens except for Permitted Liens,
(iii) pay when due all taxes, levies and assessments on or in respect
of the Collateral, except as otherwise permitted pursuant to the terms
hereof, (iv) make all payments and perform all acts on the part of any
Borrower or Guarantor to be paid or performed in the manner required
by the terms hereof and by the terms of the other Loan Instruments
with respect to any of the Collateral, including, without limitation,
all expenses of protecting, storing, warehousing, insuring, handling
and maintaining the Collateral, (v) keep fully and perform promptly
any other of the obligations of any Borrower or Guarantor hereunder or
under any of the other Loan Instruments, and (vi) keep fully and
perform promptly the obligations of any Borrower with respect to any
issue of Indebtedness for Borrowed Money secured by a Permitted Prior
Lien, then Lender may (but shall not be required to) procure and pay
for such insurance policy or bond, place such Collateral in good
repair and operating condition, pay, contest or settle such Liens or
taxes or any judgments based thereon or otherwise make good any other
aforesaid failure of such Borrower or Guarantor. Borrowers shall
reimburse Lender immediately upon demand for all sums paid or advanced
on behalf of any Borrower for any such purpose, together with costs
and expenses (including reasonable attorney's fees) paid or incurred
by Lender in connection therewith and interest on all sums advanced
from the date of advancement until repaid to Lender shall be
calculated at the Default Rate. All such sums advanced by Lender, with
interest thereon, immediately upon advancement thereof, shall be
deemed to be part of Borrowers' Obligations.
219. CLOSING
The Closing Date shall be such date as the parties shall determine, and
the Closing shall take place on such date, provided all conditions for
the Closing as set forth in this Loan Agreement have been satisfied or
otherwise waived by Lender. Unless the Closing occurs on or before
April ___, 2000, this Loan Agreement shall terminate and be of no
further force or effect and, except for any obligation of Borrowers to
Lender pursuant to Article X, none of the parties hereto shall have
any further obligation to any other party.
20. EXPENSES AND INDEMNITY
221. Attorney's Fees and Other Fees and Expenses.
Whether or not any of the transactions contemplated by this Loan
Agreement shall be consummated, Borrowers agree, jointly and severally
to pay to Lender on demand, except as otherwise expressly provided
hereunder, all expenses incurred by Lender in connection with the
transactions contemplated hereby (including, without limitation, any
appraisal fees, environmental audit fees and title and recording
charges) and in connection with any amendments, modifications or
waivers (whether or not the same become effective) under or in respect
of any of the Loan Instruments, including, without limitation:
222. Fees and Expenses for Preparation of Loan Instruments.
All expenses, disbursements (including, without limitation, charges for
required mortgagee's title insurance, lien searches, reproduction of
documents, long distance telephone calls and overnight express
carriers) and reasonable attorney's fees, actually incurred of special
counsel and other counsel retained by Lender in connection with (i)
the preparation and negotiation of the Loan Instruments or any
amendments, modifications or waivers hereto or thereto and (ii) the
administration of the Revolving Loan, except for one-half of the
Lender's legal fees relating to the initial documentation of the Loan
and Lender's due diligence review, which portion of such legal fees
shall be borne by Lender.
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223. Fees and Expenses in Enforcement of Rights or Defense of Loan
Instruments.
Any expenses or other costs, including reasonable attorney's fees
actually incurred by Lender, in connection with the enforcement or
collection against any Borrower or Guarantor of any provision of any
of the Loan Instruments, and in connection with or arising out of any
litigation, investigation or proceeding instituted by any Governmental
Body or any other Person with respect to any of the Loan Instruments,
whether or not suit is instituted, including, but not limited to, such
costs or expenses arising from the enforcement or collection against
any of Borrowers or Guarantor of any provision of any of the Loan
Instruments, in any workout or restructuring or in any state or
federal bankruptcy or reorganization proceeding, except that no
payment shall be due with respect to the expenses, costs and fees
attendant to litigation if a judgment is entered in favor of Borrowers
or Guarantor against Lender.
224. Indemnity.
Borrowers and Guarantor agree, jointly and severally, to indemnify and
save Lender harmless of and from the following:
225. Brokerage Fees.
The fees, if any, of brokers and finders engaged by any Borrower or
Guarantor.
226. General.
Any loss, cost, liability, damage or expense (including reasonable
attorneys' fees and expenses) incurred by Lender in investigating,
preparing for, defending against, providing evidence, producing
documents or taking other action in respect of any commenced or
threatened litigation, administrative proceeding, suit instituted by
any Person or investigation under any law, including any federal
securities law, the Bankruptcy Code, any relevant state corporate
statute or any other securities law, bankruptcy law or law affecting
creditors generally of any jurisdiction, or any regulation pertaining
to any of the foregoing, or at common law or otherwise, relating,
directly or indirectly, to the transactions contemplated by or
referred to in, or any other matter related to, the Loan Instruments,
whether or not Lender is a party to such litigation, proceeding or
suit, or is subject to such investigation, except to the extent of any
gross negligence or willful misconduct of Lender.
227. Operation of Collateral; Joint Venturers.
Any loss, cost, liability, damage or expense (including reasonable
attorneys' fees and expenses) incurred in connection with the
ownership, operation or maintenance of the Collateral, the
construction of Lender and Borrowers or Guarantor as having the
relationship of joint venturers or partners or the determination that
Lender has acted as agent for any Borrower.
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228. Environmental Indemnity.
Any and all claims, losses, damages, response costs, clean-up costs
and expenses suffered and/or incurred at any time by Lender arising
out of or in any way relating to the existence at any time of any
Hazardous Materials in, on, under, at transported to or from, or used
in the construction and/or renovation of, any of the Leasehold
Property, or otherwise with respect to any Environmental Law, and/or
the failure of any Obligor to perform its obligations and covenants
hereunder with respect to environmental matters, including, but not
limited to: (i) claims of any Persons for damages, penalties, response
costs, clean-up costs, injunctive or other relief, (ii) costs of
removal and restoration, including fees of attorneys and experts, and
costs of reporting the existence of Hazardous Materials to any
Governmental Body, and (iii) any expenses or obligations, including
attorney's fees and expert witness fees, incurred at, before and after
any trial or other proceeding before any Governmental Body or appeal
therefrom whether or not taxable as costs, including, without
limitation, witness fees, deposition costs, copying and telephone
charges and other expenses, all of which shall be paid by Borrower to
Lender when incurred by Lender.
229. MISCELLANEOUS
230. Notices.
All notices and communications under this Loan Agreement shall be in
writing and shall be (i) delivered in person, (ii) sent by telecopy,
or (iii) mailed, postage prepaid, either by registered or certified
mail, return receipt requested, or by overnight express carrier,
addressed in each case as follows:
To Lender:
......... Firstar Bank N.A.
......... 30 N. Michigan Avenue
......... Chicago, IL 60602
......... Attn: Craig B. Collinson
......... Senior Vice President
......... Telecopy: (312) 697-1397
Copy to:
......... Gould & Ratner
......... 222 N. LaSalle Street, 8th Floor
......... Chicago, IL 60601-1086
......... Attn: Christopher J. Horvay, Esq.
......... Telecopy: (312) 236-3241
To Borrowers and Guarantor:
......... US 1 Industries, Inc.
......... 1000 Colfax Street
......... Gary, IN 46406
......... Attn: Michael E. Kibler and Harold Antonson
......... Telecopy: (219) 977-5227
Copy to:
......... Troutman Sanders L L P
......... 600 Peachtree Street, N.E.
......... Atlanta, GA 30342
......... Attn: W. Brinkley Dickerson, Jr., Esq.
......... Telephone No.: (404) 885-3822
or to any other address or telecopy number, as to any of the parties hereto,
as such party shall designate in a written notice to the other parties hereto.
All notices sent pursuant to the terms of this Section 11. 1 shall be deemed
received (i) if personally delivered, then on the Business Day of delivery,
(ii) if sent by telecopy before 2:00 p.m. Chicago time, on the day sent if a
Business Day or if such day is not a Business Day or if sent after 2:00 p.m.
Chicago time, then on the next Business Day, (iii) if sent by overnight,
express carrier, on the next Business Day immediately following the day sent,
or (iv) if sent by registered or certified mail, on the earlier of the fifth
Business Day following the day sent or when actually received. Any notice by
telecopy shall be followed by delivery on the next Business Day by overnight,
express carrier or by hand.
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231. Survival of Loan Agreement; Indemnities.
All covenants, agreements, representations and warranties made in this
Loan Agreement and in the certificates delivered pursuant hereto shall
survive the making by Lender of the Revolving Loan and the execution
and delivery to Lender of the Revolving Note and of all other Loan
Instruments, and shall continue in full force and effect so long as
any of Borrowers' Obligations remain outstanding, unperformed or
unpaid. Notwithstanding the repayment of all amounts due under the
Loan Instruments, the cancellation of the Revolving Note and the
release and/or cancellation of any and all of the Loan Instruments or
the foreclosure of any Liens on the Collateral, the obligations of
Borrower and Guarantor to indemnify Lender with respect to the
expenses, damages, losses, costs and liabilities described in Section
10.2 shall survive until all applicable statute of limitations periods
with respect to actions which may be brought against Lender has run.
232. Further Assurance.
From time to time, Borrowers and Guarantor shall execute and deliver to
Lender such additional documents as Lender reasonably may require to
carry out the purposes of the Loan Instruments and to protect Lender's
rights thereunder, and not take any action inconsistent with the
purposes of the Loan Instruments.
233. Taxes and Fees.
Should any tax (other than taxes based upon the net income of Lender),
recording or filing fees become payable in respect of any of the Loan
Instruments, or any amendment, modification or supplement thereof,
Borrowers jointly and severally, agree to pay the same on demand,
together with any interest or penalties thereon attributable to any
delay by any Borrower in meeting Lender's demand, and agrees to hold
Lender harmless with respect thereto.
234. Severability.
In the event that any provision of this Loan Agreement is deemed to be
invalid by reason of the operation of any law or by reason of the
interpretation placed thereon by any court or any other Governmental
Body, as applicable, the validity, legality and enforceability of the
remaining terms and provisions of this Loan Agreement shall not in any
way be affected or impaired thereby, all of which shall remain in fall
force and effect, and the affected term or provision shall be modified
to the minimum extent permitted by law so as to achieve most fully the
intention of this Loan Agreement.
235. Waiver.
No delay on the part of Lender in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, and no single
or partial exercise of any right, power or privilege hereunder shall
preclude other or further exercise thereof, or be deemed to establish
a custom or course of dealing or performance between the parties
hereto, or preclude the exercise of any other right, power or
privilege.
236. Modification of Loan Instruments.
No modification or waiver of any provision of any of the Loan
Instruments shall be effective unless the same shall be in writing and
signed by Lender. Any such waiver or consent shall be effective only
in the specific instance and for the purpose for which given. No
notice to or demand on any Borrower or Guarantor in any case shall
entitle any Borrower or Guarantor to any other or further notice or
demand in the same, similar or other circumstances.
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237. Captions.
The headings in this Loan Agreement are for purposes of reference only
and shall not limit or otherwise affect the meaning hereof.
238. Successors and Assigns.
This Loan Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of the
parties hereto; provided that no Borrower may assign any of its rights
or delegate any of its duties hereunder to any other Person.
239. Remedies Cumulative.
All rights and remedies of Lender pursuant to this Loan Agreement, any
other Loan Instruments or otherwise, shall be cumulative and non-
exclusive, and may be exercised singularly or concurrently. Lender
shall not be required to prosecute collection, enforcement or other
remedies against any Person before proceeding against any Borrower or
Guarantor to enforce or resort to any security, liens, collateral or
other rights of Lender. One or more successive actions may be brought
against any Borrower and/or any other Person, either in the same
action or in separate actions, as often as Lender deems advisable,
until all of Borrowers' Obligations are paid and performed in full.
240. Entire Agreement; Conflict.
This Loan Agreement and the other Loan Instruments executed prior or
pursuant hereto constitute the entire agreement among the parties
hereto with respect to the transactions contemplated hereby or thereby
and supersede any prior agreements, whether written or oral, relating
to the subject matter hereof In the event of a conflict between the
terms and conditions set forth herein and the terms and conditions set
forth in any other Loan Instrument, the terms and conditions set forth
herein shall govern.
241. Applicable Law.
The Loan Instruments shall be construed in accordance with and governed
by the laws and decisions of the State of Illinois, without regard to
conflict of laws principles. For purposes of this Section 11. 12, the
Loan Instruments shall be deemed to be performed and made in the State
of Illinois.
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242. JURISDICTION AND VENUE.
BORROWERS AND GUARANTOR HEREBY AGREE THAT ALL ACTIONS OR PROCEEDINGS
INITIATED BY ANY BORROWER AND GUARANTOR AND ARISING DIRECTLY OR
INDIRECTLY OUT OF THE LOAN INSTRUMENTS SHALL BE LITIGATED IN EITHER
THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, OR IF LENDER
INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING COURTS, ANY COURT
IN WHICH LENDER SHALL INITIATE OR TO WHICH LENDER SHALL REMOVE SUCH
ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION. BORROWERS AND
GUARANTOR HEREBY EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED BY LENDER IN OR
REMOVED BY LENDER TO ANY OF SUCH COURTS, AND HEREBY AGREE THAT
PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OR
PAPERS ISSUED THEREIN MAY BE SERVED IN THE MANNER PROVIDED FOR NOTICES
HEREIN, AND AGREE THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER
PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWERS OR GUARANTOR, AS THE CASE MAY BE. AT THE
ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT TO SECTION 11.1.
BORROWERS AND GUARANTOR WAIVE ANY CLAIM THAT EITHER THE CIRCUIT COURT
OF COOK COUNTY, ILLINOIS OR THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS IS AN INCONVENIENT FORUM OR AN IMPROPER
FORUM BASED ON LACK OF VENUE. TO THE EXTENT PROVIDED BY LAW, SHOULD
ANY BORROWER OR GUARANTOR AFTER BEING SO SERVED, FAIL TO APPEAR OR
ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN
THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER THE MAILING THEREOF, ANY
SUCH BORROWER OR GUARANTOR SHALL BE DEEMED IN DEFAULT AND AN ORDER
AND/OR JUDGMENT MAY BE ENTERED BY THE COURT AGAINST SUCH BORROWER
AND/OR GUARANTOR AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT,
PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM FOR BORROWERS AND
GUARANTOR SET FORTH IN THIS SECTION 11.13 SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OBTAINED IN ANY
OTHER FORUM OR THE TAKING BY LENDER OF ANY ACTION TO ENFORCE THE
SAME IN ANY OTHER APPROPRIATE JURISDICTION, AND BORROWERS AND
GUARANTOR HEREBY WAIVE THE RIGHT TO COLLATERALLY ATTACK ANY SUCH
JUDGMENT OR ACTION.
243. WAIVER OF RIGHT TO JURY TRIAL.
LENDER, BORROWERS AND GUARANTOR ACKNOWLEDGE AND AGREE THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE LOAN INSTRUMENTS OR WITH
RESPECT TO THE TRANSACTIONS CONTEMPLATED THEREBY WOULD BE BASED UPON
DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE PARTIES AGREE THAT
ANY LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY WILL BE TRIED IN A
COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
244. Time of Essence.
Time is of the essence for the performance by Borrowers and Guarantor
of the obligations set forth in this Loan Agreement and the other Loan
Instruments.
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245. Estoppel Certificate.
Within 15 days after Lender requests Borrowers and Guarantor to do so,
Borrowers and Guarantor will execute and deliver to Lender a statement
certifying (i) that this Loan Agreement is in full force and effect
and has not been modified except as described in such statement, (ii)
the date to which interest and principal on the Note has been paid,
(iii) the Principal Balance, (iv) whether or not to its knowledge an
Incipient Default or Event of Default has occurred and is continuing,
and, if so, specifying in reasonable detail each such Incipient
Default or Event of Default of which it has knowledge, (v) whether to
its knowledge it has any defense, set off or counterclaim to the
payment of the Note in accordance with its terms, and, if so,
specifying each defense, set off or counterclaim of which it has
knowledge in reasonable detail (including where applicable the amount
thereof), and (vi) as to any other
246. Consequential Damages.
No party to this Agreement or attorney for such party shall be liable
to any other party to this Agreement for consequential damages arising
from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Borrowers'
Obligations.
247. Counterparts.
This Loan Agreement may be executed by the parties hereto in several
counterparts and each such counterpart shall be deemed to be an
original, but all such counterparts shall together constitute one and
the same agreement.
248. No Fiduciary Relationship.
No provision in this Loan Agreement or in any other Loan Instrument,
and no course of dealing among the parties hereto, shall be deemed to
create any fiduciary duty by Lender to Borrower or Guarantor.
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20
<PAGE>
IN WITNESS WHEREOF, this Loan Agreement has been executed and delivered
by each of the parties hereto by a duly authorized officer of each such party
on the date first set forth above.
CAROLINA NATIONAL TRANSPORTATION, INC., an Indiana corporation
......... By: _____________________________
......... Name: ___________________________
......... Title: ____________________________
KEYSTONE LINES, a California corporation
......... By: _____________________________
......... Name: ___________________________
......... Title: ____________________________
GULF LINE TRANSPORT, INC., an Indiana corporation
......... By: _____________________________
......... Name: ___________________________
......... Title: ____________________________
FIVE STAR TRANSPORT, INC., an Indiana corporation
......... By: _____________________________
......... Name: ___________________________
......... Title: ____________________________
US 1 INDUSTRIES, INC., an Indiana corporation
......... By: _____________________________
......... Name: ___________________________
......... Title: ____________________________
FIRSTAR BANK N.A., a national banking association
......... By: _____________________________
......... Name: Craig B. Collinson
......... Title: Senior Vice President
21
<PAGE>
Exhibit 1.1(A) ......... - Form of Compliance Certificate
Exhibit 2.1.4 ......... - Form of Notice of Borrowing
Schedule 5.4.3 ......... - Facility Sites, Locations of Property, Books
and Records
Schedule 5.4.4 ......... - Leases
Schedule 5.4.7 ......... - Existing Indebtedness
Schedule 5.6 ......... - Financial Statements
Schedule 5.7 ......... - Litigation
Schedule 5.11 ......... - Patents, Trademarks, Franchises and
Agreements
Schedule 5.16 ......... - Permitted Subordinated Indebtedness
Schedule 5.18.1 ......... - Employee Benefit Plans
Schedule 5.19.1 ......... - Collective Bargaining Agreements; Grievances
22
<PAGE>
EXHIBIT 1.1(A)
COMPLIANCE CERTIFICATE
Reference is made to that certain Loan Agreement dated as of
April _, 2000 (as the same may be amended, modified, supplemented or
restated from time to time, the "Loan Agreement"), between Carolina National
Transportation, Inc., Keystone Lines, Gulf Line Transport, Inc. and Five Star
Transport, Inc. and the undersigned, and Firstar Bank NA, a national banking
association. All capitalized terms used but not elsewhere defined herein shall
have the meanings ascribed to such terms in the Loan Agreement.
Pursuant to the Loan Agreement, the undersigned hereby certifies to
Lender that:
(1) as of _______________, 2000, ________________ is the [Chief
Financial Officer] of each Borrower;
(2) except as set forth below, each Borrower is in full
compliance with all terms and conditions of the Loan
Agreement; and
(3) attached hereto as Schedule I is the calculation of the
following:
(i) Total Unsubordinated Indebtedness (Tangible Net
Worth plus Subordinated Indebtedness);
(ii) Tangible Net Worth plus the amount of Permitted
Subordinated Indebtedness outstanding;
(iii) Minimum Debt Service Ratio calculated as provided in
Section 7.19 of the Loan Agreement; and
(iv) Ratio of Total Indebtedness to EBITDA.
Compliance Exceptions (if any):
With respect to any item identified as not being in compliance,
the undersigned has attached and certifies as to the accuracy of statements
specifying the violation, condition, or events which result in such non-
compliance, the nature and status thereof, and the actions which Borrowers
propose to take with respect thereto to bring Borrowers into full compliance
with the Loan
Agreement.
The foregoing certifications are made by, in his/her capacity as the
acting Chief Financial Officer of each Borrower, from his/her personal
knowledge, after due inquiry and with full knowledge that Lender will rely
thereon. This Certificate is given pursuant to and in compliance with
subsection 6.3.4 of the Loan Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Compliance
Certificate on this _________ day of ___________ 2000.
US 1 INDUSTRIES, INC.
By: _____________________________
Name: ___________________________
Title: ____________________________
23
<PAGE>
SCHEDULE I
Covenant Calculations
For the quarter beginning on and ending on
1. Total of Unsubordinated Indebtedness (Tangible Net Worth plus
Subordinated Indebtedness);
2. Tangible Net Worth plus the amount of Permitted Subordinated
Indebtedness Outstanding;
3. Minimum Debt Service Ratio.
4. Ratio of Indebtedness to EBITDA.
24
<PAGE>
EXHIBIT 2.1.4
FORM OF NOTICE OF BORROWING/DISBURSEMENT REQUEST
April _____, 2000
Firstar Bank N.A.
30 N. Michigan Avenue
Chicago, IL 60602
Dear Sir:
Reference is made to that certain Loan Agreement dated as of
April ____, 2000 (the "Loan Agreement") between CAROLINA NATIONAL
TRANSPORTATION, INC., KEYSTONE LINES, GULF LINE TRANSPORT, INC., and FIVE
TRANSPORT, INC., as Borrowers, US 1 INDUSTRIES, INC. as Guarantor and FIRSTAR
BANK N.A., a national banking association. Capitalized terms used but not
elsewhere defined herein all have the respective meanings ascribed to such
terms in the Loan Agreement.
Borrowers hereby notify Lender that on the date hereof, Borrowers
desires to borrow $___________ of the Revolving Loan and Borrowers hereby
directs Lender to disburse such principal amount in accordance with the payment
instructions attached hereto as Exhibit A.
Borrowers acknowledge that this Notice of Borrowing/Disbursement
Request and acceptance by any Borrower or Borrowers of the proceeds of the
disbursements contemplated hereby constitute a representation and warranty that
the conditions contained in subsection 2.1.4 of the Loan Agreement have been
satisfied in all material respects.
Very truly yours,
CAROLINA NATIONAL TRANSPORTATION, INC., an Indiana corporation
By: _________________________________
Name: _________________________________
Title: _________________________________
KEYSTONE LINES, a California corporation
By: _________________________________
Name: _________________________________
Title: _________________________________
GULF LINE TRANSPORT, INC., an Indiana corporation
By: _________________________________
Name: _________________________________
Title: _________________________________
FIVE STAR TRANSPORT, INC., an Indiana corporation
By: _________________________________
Name: _________________________________
Title: _________________________________
25
<PAGE>
EXHIBIT A
Entity, Payment Instructions Amount
Carolina National Transportation, Inc.,
Keystone Lines, Gulf Line Transport, Inc.,
and Five Star Transport, Inc.
By Wire Transfer to:
Bank Name: ......... __________________________
Bank Address: ......... __________________________
......... __________________________
Acct. No.: ......... __________________________
ABA No.: ......... __________________________
Attention: ......... __________________________
Telephone No.: ......... __________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000351498
<NAME> US1 INDUSTRIES, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 5,164,736
<ALLOWANCES> 144,126
<INVENTORY> 0
<CURRENT-ASSETS> 5,860,251
<PP&E> 17,812
<DEPRECIATION> 56,853
<TOTAL-ASSETS> 5,961,618
<CURRENT-LIABILITIES> 5,406,718
<BONDS> 0
0
930,683
<COMMON> 40,844,296
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,961,618
<SALES> 9,030,927
<TOTAL-REVENUES> 9,030,927
<CGS> 8,700,123
<TOTAL-COSTS> 8,700,123
<OTHER-EXPENSES> 93,751
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (165,675)
<INCOME-PRETAX> 82,340
<INCOME-TAX> 0
<INCOME-CONTINUING> 82,340
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82,340
<EPS-BASIC> .01
<EPS-DILUTED> 0
</TABLE>
