FORM 10-Q
________________________________________________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 August 10, 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
JUNE 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999
<CAPTION>
ASSETS
June 30, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Accounts receivable-trade, less allowance for
doubtful accounts of $89,976 and $66,648
respectively $6,179,426 $4,972,846
Other receivables 427,377 105,770
Deposits 162,461 162,173
Prepaid expenses 22,163 9,245
---------- ----------
Total current assets 6,791,427 5,250,034
FIXED ASSETS:
Equipment 199,620 100,738
Less accumulated depreciation and amortization 63,615 52,756
---------- ----------
Net fixed assets 136,005 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 $ 6,981,432 $ 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
JUNE 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
<CAPTION>
June 30, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 1,712,904 $ 1,341,134
Bank overdraft 324,923 345,719
Accrued expenses 236,774 215,505
Short-term debt 2,294,459 3,173,990
Insurance and claims 303,914 204,592
Accrued compensation 19,013 17,314
Accrued interest 711,636 613,567
Fuel and other taxes payable 63,354 49,948
----------- ------------
Total current liabilities 5,666,977 5,961,769
----------- ------------
LONG-TERM DEBT TO RELATED PARTIES 4,122,984 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 953,826 907,540
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 (44,606,651) (44,812,617)
----------- -----------
Total shareholders' deficiency (3,762,355) (3,968,321)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
DEFICIENCY $ 6,981,432 $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 STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
2000 1999 2000 1999
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 11,593,128 $ 8,198,207 $ 20,624,055 $15,590,065
------------ ------------ ------------ -----------
OPERATING EXPENSES:
Purchased transportation 9,049,373 6,203,639 16,063,448 11,863,464
Insurance and claims 308,244 269,316 632,872 469,756
Salaries, wages, and other 465,530 304,229 854,841 631,921
Commissions 1,019,061 761,168 1,827,769 1,486,917
Operating supplies and expense 343,015 277,310 506,416 493,127
Other expenses 125,912 103,994 219,663 184,484
------------ ------------ ------------ ----------
Total operating expenses 11,311,135 7,919,656 20,105,009 15,129,669
------------ ------------ ------------ ----------
OPERATING INCOME 281,993 278,551 519,046 460,396
------------ ------------ ------------ ----------
NON-OPERATING INCOME (EXPENSE):
Interest income 23,067 2,337 25,074 3,347
Interest expense (160,958) (165,387) (326,631) (315,170)
Other income (expense) 25,810 (9,010) 34,763 1,389
------------ ------------ ------------ ----------
Total non-operating (expense) (112,081) (172,060) (266,794) (310,434)
------------ ------------ ------------ ----------
NET INCOME $ 169,912 $ 106,491 $ 252,252 $ 149,962
DIVIDENDS ON PREFFERRED SHARES 23,143 18,000 46,286 36,000
----------- ------------ ------------ -----------
NET INCOME AVAILABLE TO COMMON
SHARES 146,769 88,491 205,968 113,962
=========== ============ ============ ===========
EARNINGS PER COMMON SHARE -
BASIC AND DILUTED $ 0.01 $ 0.01 $ 0.02 $ 0.01
=========== ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES-
BASIC AND DILUTED 10,618,224 10,618,224 10,618,224 10,618,224
============ ============ ============ ============
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
Six Months Ended June 30,
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 252,252 $149,962
Adjustments to reconcile net income (loss) to net
cash provided from (used for) operations:
Depreciation and amortization 10,859 19,906
Loss from disposal of equipment 0 18,765
Changes in operating assets and liabilities:
Accounts receivable - trade (1,206,580) (64,262)
Other receivables (321,607) (163,824)
Prepaid assets (12,918) 16,961
Deposits (288) 6,279
Accounts payable 371,770 (29,326)
Accrued expenses 21,269 (18,369)
Accrued interest 98,069 124,185
Insurance and claims 99,322 (43,814)
Accrued compensation 1,699 (115)
Fuel and other taxes payable 13,406 (32,733)
--------- ----------
Net Cash used for operating activities (672,747) (16,385)
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (16,307) (5,183)
Proceeds from disposal of equipment 0 60,000
Sale of assets held for sale
--------- ----------
Net cash (used in) provided by investing activities (16,307) 54,817
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under line of credit (877,606) (172,286)
Principal payments on long term debt (26,792) (42,667)
Net proceeds from related party loans 1,614,248 40,644
(Decrease)Increase in bank overdraft (20,796) 135,876
--------- ----------
Net cash provided from (used for)financing activities 689,054 (38,433)
--------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
--------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD
========= ==========
Non Cash Financing and Investing Activities:
In April 2000, the Company purchased three trailers through the issuance of
debt in the amount of $82,575.
Redeemable preferred stock has been increased by $46,286 and $36,000 in 2000
and 1999 respectively for cumulative unpaid dividends on
preferred stock.
<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
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
1. BASIS OF PRESENTATION
The accompanying consolidated balance sheet as of June 30, 2000, and the
consolidated statements of operations and cash flows for the three month and
six month periods ended June 30, 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 six months ended June 30, 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 Statement of
Financial Accounting Standards No. 128. Following is the reconciliation of the
numerators and denominators of the basic and diluted earnings per share (EPS).
There were no outstanding common stock equivalents in these periods.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
<S> <C> <C> <C> <C>
Numerator 2000 1999 2000 1999
Income from continuing operations $ 169,912 $ 106,491 $ 252,252 $ 149,962
Dividends on preferred shares (23,143) (18,000) (46,286) (36,000)
---------- --------- -------- --------
Net income available to common
shareholders for basic and
diluted EPS $ 146,769 $ 88,491 $ 205,966 $ 113,962
---------- --------- -------- --------
Denominator
Weighted average common shares
outstanding for basic and
diluted EPS 10,618,224 10,618,224 10,618,224 10,618,224
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. SHORT-TERM DEBT
Short-term debt at June 30, 2000, and December 31, 1999, comprises:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------- ----------
<S> <C> <C>
Line of credit $2,200,000 $3,077,606
Current portion of long-term debt 94,459 96,384
---------- ----------
Total 2,294,459 $3,173,990
========== ==========
</TABLE>
In December 1999, the Company was in default of certain financial covenants
required by the Company's former lender. 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 which was subsequently increased to $3,500,000 in
June 2000. 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 original amount of the new line of credit issued in April
2000 has been financed through additional subordinated debt from the Company's
Chief Executive Officer and Chief Financial Officer or entities controlled by
them. At April 30, 2000, these officers had advanced approximately $1,600,000
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)
<TABLE>
4. LONG-TERM DEBT TO RELATED PARTIES
Long-term debt at June 30, 2000, and December 31, 1999, comprises:
<CAPTION>
June 30, 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 22,613 45,115
Note payable, collateralized by equipment,
monthly payments of $2,077 including
interest at 9.55% through April 2004 78,283
Mortgage note payable to ITE,
monthly payments of $2,850 including
Interest at 9% through March 2002 54,157 68,443
Mortgage note payable to AIFE,
monthly payments of $2,150 including
interest at 9% through March 2002 40,914 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 3,171,476 1,532,165
--------- ----------
Total debt 4,217,443 2,547,412
Less current portion 94,459 96,384
--------- ----------
Total long-term debt $ 4,122,984 $ 2,451,028
========== ==========
<FN>
This long term debt is subordinated to the line of credit agreement.
</FN>
</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 other 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.
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.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.
You should read the following discussion regarding the Company along with the
Company's financial statement and related notes included in this quarterly
report. The following discussion contains forward-looking statements that are
subject to risks, uncertainties and assumptions. The Company's actual results,
performance and achievements in 2000 and beyond may differ materially
from those expressed in, or implied by these forward-looking statements.
See cautionary note regarding forward-looking statements.
Results of Operations
The financial statements and related notes contained elsewhere in this Form 10Q
as of and for the six months ended June 30, 2000 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.
June 30, 2000 Compared to the six months ended June 30, 1999
The Company's operating revenues increased from $15.6 million for six months
ended June 30, 1999 to $20.6 million for the same period in 2000. This is an
increase of 32.3% from the second quarter of 1999. This increase is
attributable to the constant growth of existing agents and the addition of new
agents. The Company continues to experience success following its business
plan of working, almost exclusively, with agents and independent owner
operators.
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:
These expenses, as a result, remain relatively consistent (as a percent of
sales). Actual expenses as a percentage of revenues for the three major items
are as follows:
<TABLE>
<CAPTION>
Item:
2000 1999
<S> <C> <C>
Purchased Transportation and Commissions 86.8% 85.6%
Insurance (Liability & Cargo) 3.1% 3.0%
Total 89.9% 88.6%
</TABLE>
Purchased transportation and Commissions to agents in total has increased 1.2%
as a percentage of revenue for the six months ended June 30, 2000, compared to
the six months ended June 30, 1999. Due to the increase in diesel fuel prices,
the Company has begun to bill their customers a fuel surcharge that is
reimbursable to the owner operator at 100%. Because this portion of the
revenue is reimbursed at 100% to the owner operator, the purchased
transportation and commissions in total as a percentage of revenue will
appear distorted.
Insurance has increased .1% as a percentage of revenues for the six months
ended June 30, 2000, compared to the six months ended June 30, 1999, due to a
small 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 $271,000 for
the six months ended June 30, 2000, compared to the six months ended June 30,
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.
Interest expense increased $11,461 from $315,170 for the six months ended
June 30, 1999, to $326,631 for the six months ended June 30, 2000, due to an
increase in the amount of outstanding debt in the first six months of 2000
which was partially offset by decreased interest rates resulting from the
refinancing that took place in April 2000.
<PAGE>
The three months ended June 30, 2000 compared to the three months ended
June 30, 1999
The Company's operating revenue for the three months ended June 30, 2000
increased by $3.4 million in comparison to the three months ended June 30,
1999. This is an increase of 41.4% from the three months ended June 30, 1999.
This increase is attributable to the constant growth of existing agents and the
addition of new agents.
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:
These expenses, as a result, remain relatively consistent (as a percent of
sales). Actual expenses as a percentage of revenues for the three major items
are as follows:
<TABLE>
<CAPTION>
Item:
2000 1999
<S> <C> <C>
Purchased Transportation and Commissions 86.8% 85.0%
Insurance (Liability & Cargo) 2.7% 3.3%
Total 89.5% 88.3%
</TABLE>
Purchased transportation and Commissions as a total has increased 1.9% as a
percentage of revenue for the three months ended June 30, 2000 compared to the
three month's ended June 30, 1999. Due to the increase in diesel fuel prices,
the Company has begun to bill their customers a fuel surcharge that is
reimbursable to the owner operator at 100%. Because this portion of the
revenue is reimbursed at 100% to the owner operator, the purchased
transportation and commissions in total as a percentage of revenue will
appear distorted.
Insurance has decreased .6% for the three months ended June 30, 2000, compared
to the same period for 1999. This decrease in insurance cost for the three
months ended June 30, 2000, compared to the three months ended June 30, 1999
can be partially attributed to the decrease of liability insurance rates
effective with the liability insurance policy renewal on March 16,2000.
The remaining operating expenses have increased by approximately $249,000 for
the three months ended June 30, 2000, compared to the three months ended
June 30, 1999. The majority of this increase is the result of additional
personnel hired due to Company growth.
Interest expense has decreased by $4,429 from $165,387 for the three months
ended June 30, 1999 to $160,958 for the three months ended June 30, 2000, due
to the decreased interest rates from the new financing received in April 2000.
<PAGE>
Liquidity and Capital Resources
As of June 30, 2000, the Company's financial position continues to improve in
comparison to prior fiscal periods. The Company had a net deficiency in
shareholders' equity of $3.8 million at June 30, 2000. Working capital
deficiency at December 31,1999, was ($0.7) million, compared to a positive
working capital at June 30, 2000, of $1.1 million. The increase in working
capital is due primarily to refinancing a portion of the former line of credit
with long term subordinated debt from the Company's Chief Executive Officer and
Chief Financial Officer.
Accounts receivable at June 30, 2000, were $6.2 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 six months of 2000.
The balance of the revolving line of credit has decreased by $0.9 million from
December 31, 1999, to June 30, 2000, due to additional investments from the
Companys Chief Executive Officer and Chief Financial Officer of approximately
$1,600,000. The remainder of the advances were used to fund the working
capital requirements of the Company.
In December 1999, the Company was in default of certain financial covenants
required by the Company's former lender. 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 which was subsequently increased to $3,500,000 in
June 2000. 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 original amount of the new line of credit issued in April
2000 has been financed through additional subordinated debt from the Company's
Chief Executive Officer and Chief Financial Officer or entities controlled by
them. At April 30, 2000, these officers had advanced approximately $1,600,000
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 $1,614,248 between December 31, 1999, and June 30, 2000.
<PAGE>
Quantitative and Qualitative Disclosures About Market Risk
Inflation
Changes in freight rates charged by the Company to its customers are generally
reflected in the cost of purchased transportation and commissions paid by the
Company to independent contractors and agents, respectively. Therefore,
management believes that future operating results of the Company will be
affected primarily by changes in volume of business. However, due to the
highly competitive nature of the truckload motor carrier industry, it is
possible that future freight rates and cost of purchased transportation may
fluctuate, affecting the Company's profitability.
Certain Relationships and Related Transactions.
The company leases office space for its headquarters in Gary, Indiana, for
$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.
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
August 14, 2000
<PAGE>
AMENDMENT TO LOAN AGREEMENT
This AMENDMENT, dated as of June 12, 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"), US1 INDUSTRIES, INC., an Indiana corporation ("Guarantor") and
FIRSTAR BANK N.A., a national banking association ("Lender").
PRELIMINARY STATEMENT:
Borrowers have previously entered into a Loan Agreement with Lender
dated April 18, 2000 ("Agreement"). Lender has agreed to amend such Loan
Agreement to increase the amount of the Revolving Loan Commitment therein from
$2,000,000 to $3,500,000 on the conditions hereinafter set forth. Capitalized
terms not defined herein shall have the meanings ascribed to such terms in the
Loan Agreement as amended hereby.
NOW, THEREFORE, it is hereby agreed as follows:
1. Each of Borrowers and Guarantor represent and warrant that no Event of
Default or Incipient Default exists or will occur as a result of any
Advance and that each of their representations and warranties set
forth in the Loan Instruments is true and correct as of the date
hereof, except to the extent that any such representations or
warranties relate to an earlier date.
2. The parties hereby agree to amend and restate the following
definitions in Section 1.1 of the Agreement to read in their
entirety as follows:
Loan Instruments:
(i) Loan Agreement;
(ii) Revolving Loan Note;
(iii) Corporate Guaranty;
(iv) Security Instruments;
(v) Closing Certificate;
(vi) Subordination Agreements;
(vii) Uniform Commercial Code financing statements
required by Lender;
(viii) Personal Guaranties; and
(ix) such other instruments and documents as Lender
reasonably may require in connection with the
transactions contemplated by this Loan Agreement;
as the same may be amended from time to time, including but
without limitation as amended by or pursuant to that
certain Amendment to Loan Agreement dated June 12, 2000.
Revolving Loan Commitment: $3,500,000
Revolving Loan Note: the promissory note executed by
Borrowers payable to the order of Lender in the amount of the
Revolving Loan Commitment, dated as of the Closing Date, as
amended and restated as of June 12, 2000.
<PAGE>
3. Section 7.18 of the Agreement is hereby amended and restated in its
entirety to read as follows:
7.18 Minimum Net Worth. Fail to maintain Tangible Net Worth plus
Permitted Subordinated Indebtedness of at least $1,000,000, from the
date hereof until December 31, 2000, and of at least $1,250,000 from
and after December 31, 2000.
4. Simultaneously with the execution hereof, Borrowers and Guarantor
shall deliver to Lender the following, duly executed by the parties
thereto other than Lender:
(i) Amended and Restated Revolving Loan Note in the form
attached hereto as Exhibit "A";
(ii) Acknowledgements (Security Agreement) in the forms
attached hereto as Exhibits "B-1", "B-2", "B-3",
"B-4" and "B-5";
(iii) Uniform Commercial Code Financing Statement
Amendments in the forms attached hereto as Exhibit
"C-1", "C-2", "C-3", "C-4", "C-5" and "C-6";
(iv) Amended and Restated Personal Guaranties of Michael
Kibler and Harold Antonson in forms acceptable to
Lender;
(v) Amended and Restated Corporate Guaranty of US 1
Industries, Inc. in a form acceptable to Lender;
(vi) Certified Resolutions of the Board of Directors of
the respective Borrowers authorizing the execution
and delivery and performance of this Loan Agreement
and the Amended and restated Note;
(vii) Acknowledgements (Subordinated Debt) in the forms
attached hereto as Exhibits "D-1" and "D-2"; and
(viii) An opinion letter from the law firm of Borrowers'
counsel in a form reasonably satisfactory to
Lender's counsel regarding authorization, execution
and delivery of this Amendment and the documents
referenced herein.
5. Borrowers shall pay to Lender a fee of $5,000 upon the execution
hereby. In addition, Borrowers shall reimburse Lender for all of
Lender's out-of-pocket costs related to the transaction contemplated
herein, including without limitation any lien searches ordered by
Lender's counsel and legal fees incurred by Lender in connection with
the preparation of documents, due diligence review or closing
regarding the transaction contemplated herein or the enforcement of
the terms hereof or of any of the Loan Instruments.
6. From time to time, Borrowers and Guarantor shall execute and deliver
to Lender such additional documents as Lender reasonably may require
to carry out the purposes of this Amendment and the Loan Instruments
and to protect Lender's rights hereunder and thereunder, and shall not
take any action inconsistent with the purposes of the Loan
Instruments.
<PAGE>
7. Except as expressly amended hereby, the terms and conditions of the
Loan Agreement as originally set forth therein shall remain in full
force and effect.
IN WITNESS WHEREOF, the undersigned Borrowers have signed and Lender
has executed this Amendment as of the date first above written.
CAROLINA NATIONAL TRANSPORTATION INC., an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
KEYSTONE LINES, a California corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
GULF LINE TRANSPORT INC. an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
FIVE STAR TRANSPORT, INC., an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
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
<PAGE>
-4-
EXHIBIT "A"
REVOLVING LOAN NOTE
$3,500,000.00 Dated as of April 18, 2000
Chicago, Illinois Amended and Restated as of ___________, 2000
FOR VALUE RECEIVED, the undersigned, CAROLINA NATIONAL TRANSPORTATION
INC., an Indiana corporation ("Carolina"), KEYSTONE LINES, a California
corporation ("Keystone"), GULF LINE TRANSPORT INC., an Indiana corporation
("Gulf Line") and FIVE STAR TRANSPORT, INC., an Indiana corporation
("Five Star") (Carolina, Keystone, Gulf Line and Five Star hereinafter
collectively referred to as "Maker"), hereby promise, jointly and severally,
to pay to the order of FIRSTAR BANK N.A., a national banking association
("Lender"), the principal sum of THREE MILLION FIVE HUNDRED THOUSAND AND
NO/100ths DOLLARS ($3,500,000.00), or, if less, the aggregate unpaid amount of
the Revolving Loan made by Lender pursuant to and in accordance with the
applicable provisions of that certain Loan Agreement of even date herewith (as
the same may be amended, modified, supplemented or restated from time to time,
the "Loan Agreement") between Lender, Maker and US1 INDUSTRIES, INC., an
Indiana corporation ("Guarantor") and Lender, at the office of Lender at 30 N.
Michigan Avenue, Chicago, Illinois 60602, or at such other place as the holder
hereof may appoint, plus interest thereon as set forth below.
This Revolving Loan Note is delivered by Maker to Lender pursuant to
and in accordance with the applicable provisions of the Loan Agreement. All
capitalized terms used but not elsewhere defined herein shall have the
respective meanings ascribed to such terms in the Loan Agreement.
The Principal Balance of this Revolving Loan Note shall bear interest
at the per annum rate of interest set forth in subsection 2.3.1 of the Loan
Agreement.
Accrued and unpaid interest on, and the Principal Balance of, this
Revolving Loan Note shall be paid in the manner set forth in Section 2.4 of the
Loan Agreement.
Interest shall be: (i) computed on the basis of a year consisting of
360 days and (ii) charged for the actual number of days during the period for
which interest is being charged.
During a Default Rate Period, the Principal Balance of this Revolving
Loan Note shall bear interest at the Default Rate, which interest at such
Default Rate shall be paid by Maker to Lender immediately upon demand.
Subject to the provisions of Section 8.2 of the Loan Agreement, at the
election of the holder hereof, upon the occurrence of an Event of Default,
without further notice or demand, the Principal Balance of this Revolving Loan
Note, and all accrued and unpaid interest thereon, shall be and become
immediately due and payable in full. Failure to exercise this option shall not
constitute a waiver of the right to exercise the same in the event of any
subsequent Event of Default, and such failure shall not be deemed to
establish a custom or course of dealing or performance between Maker and Lender.
This Revolving Loan Note may be prepaid, in whole or in part, without
penalty and in accordance with the terms and conditions of the Loan Agreement
applicable thereto.
<PAGE>
All funds received by Lender during the existence of an Event of
Default shall be applied in the manner set forth in Section 8.4 of the Loan
Agreement.
All payments to be made by Maker pursuant to this Note shall be made
in accordance with the instructions therefor set forth in the Loan Agreement.
Payment shall not be deemed to have been received by Lender until Lender is in
receipt of Good Funds.
Notwithstanding any provision to the contrary contained herein or in
any other Loan Instrument, Lender shall not collect a rate of interest on any
obligation or liability due and owing by Maker in excess of the maximum
contract rate of interest permitted by applicable law ("Excess Interest"). If
any Excess Interest is provided for or determined by a court of competent
jurisdiction to have been provided for in this Revolving Loan Note or any other
Loan Instrument, then in such event (i) Maker shall not be obligated
to pay such Excess Interest, (ii) any Excess Interest collected by Lender shall
be, (A) if any Event of Default exists and is continuing, applied to the
Principal Balance or to accrued and unpaid interest not in excess of the
maximum rate permitted by applicable law or (B) if no Event of Default exists
and is continuing, refunded to the payor thereof, (iii) the interest rates
provided for herein (collectively the "Stated Rate") shall be automatically
reduced to the maximum rate allowed from time to time under applicable law
(the "Maximum Rate") and this Revolving Loan Note and the other Loan
Instruments, as applicable, shall be deemed to have been, and shall be,
modified to reflect such reduction, and (iv) Maker shall not have any action
against Lender for any damages arising out of the payment or collection of such
Excess Interest; provided, however, that if at any time thereafter the
Stated Rate is less than the Maximum Rate, Maker shall, to the extent permitted
by law, continue to pay interest at the Maximum Rate until such time as the
total interest received by Lender is equal to the total interest which Lender
would have received had the Stated Rate been (but for the operation of this
provision) the interest rate payable. Thereafter, the interest rate payable
shall be the Stated Rate unless and until the Stated Rate again exceeds the
Maximum Rate, in which event the provisions contained in this
paragraph again shall apply.
If any suit or action is instituted or attorneys are employed to
collect this Revolving Loan Note or any part thereof, Maker promises and
agrees, jointly and severally, to pay all costs of collection, including all
court costs and reasonable attorneys' fees.
Maker hereby waives presentment for payment, protest and demand and
notice of protest, demand, dishonor and nonpayment of this Revolving Loan Note,
and expressly agrees that this Revolving Loan Note, or any payment hereunder,
may be extended from time to time before, at or after maturity, without in any
way affecting the liability of Maker hereunder or any guarantor hereof.
This Revolving Loan Note shall be construed in accordance with and
governed by the laws and decisions of the State of Illinois, without regard to
conflict of laws principles. All funds disbursed to or for the benefit of Maker
will be deemed to have been disbursed in Chicago, Illinois.
<PAGE>
Maker hereby agrees that all actions or proceedings initiated by any
Maker and arising directly or indirectly out of this Revolving Loan Note shall
be litigated in either the Circuit Court of Cook County, Illinois or in the
United States District Court for the Northern District of Illinois, or, if
Lender initiates such action, in addition to the foregoing courts, any court in
which Lender shall initiate or to which Lender shall remove such action, to the
extent such court has jurisdiction. Maker hereby expressly submits and consents
in advance to such jurisdiction in any action or proceeding commenced by Lender
in or removed by Lender to any of such courts, and hereby agrees that personal
service of the summons and complaint, or other process or papers issued therein
may be made by registered or certified mail addressed to Maker at the address
to which notices are to be sent pursuant to Section 11.1 of the Loan Agreement.
Maker waives any claim that either the Circuit Court of Cook County, Illinois
or the United States District Court for the Northern District of Illinois is an
inconvenient forum or an improper forum based on lack of venue. To the extent
provided by law, should any Maker, after being so served, fail to appear or
answer to any summons, complaint, process or papers so served within
the number of days prescribed by law after the mailing thereof, Maker shall be
deemed in default and an order and/or judgment may be entered by the court
against Maker as demanded or prayed for in such summons, complaint, process or
papers. The exclusive choice of forum for Maker set forth in this paragraph
shall not be deemed to preclude the enforcement by Lender of any judgment
obtained in any other forum or the taking by Lender of any action to enforce
the same in any other appropriate jurisdiction, and Maker hereby waives
the right to collaterally attack any such judgment or action.
Maker acknowledges and agrees that any controversy which may arise
under this Revolving Loan Note would be based upon difficult and complex issues
and, therefore, Maker agrees that any lawsuit arising out of any such
controversy will be tried in a court of competent jurisdiction by a judge
sitting without a jury.
This Revolving Loan Note may not be changed or amended orally, but
only by an instrument in writing signed by the party against whom enforcement
of the change or amendment is sought.
This Revolving Loan Note shall be binding upon Maker and upon Maker's
successors and assigns, and shall inure to the benefit of the successors and
permitted assigns of Lender. If more than one party shall sign this Revolving
Loan Note as Maker, their obligations hereunder as Maker shall be joint and
several.
In the event that any provision hereof shall be deemed to be invalid
by reason of the operation of any law, or by reason of the interpretation
placed thereon by any court or any Governmental Body, this Revolving Loan Note
shall be construed as not containing such provision and the invalidity of such
provision shall not affect the validity of any other provisions hereof, and any
and all other provisions hereof which otherwise are lawful and valid shall
remain in full force and effect.
Time for the performance of Maker's obligations under this Revolving
Loan Note is of the essence.
This Revolving Loan Note is entitled to the benefit of certain
collateral security, all as more fully set forth in the Loan Agreement.
The Revolving Loan Note amends and restates, in its entirety, an
original Revolving Loan Note dated April 18, 2000 in the principal face amount
of $2,000,000 made by Borrowers and payable to the order of Lender.
<PAGE>
IN WITNESS WHEREOF, this Revolving Loan Note has been executed and
delivered by Maker by its duly authorized officer on the date first set forth
above.
CAROLINA NATIONAL TRANSPORTATION INC., an Indiana corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
KEYSTONE LINES, a California corporation
By: _____________________________
Name: ___________________________
Title: ____________________________
GULF LINE TRANSPORT INC., an Indiana corporation
By: ______________________________
Name: ____________________________
Title: _____________________________
FIVE STAR TRANSPORT, INC., an Indiana corporation
By: _______________________________
Name: _____________________________
Title: ______________________________
<PAGE>
ACKNOWLEDGEMENT
(Security Agreement)
The undersigned ("Borrower") hereby acknowledges that it has
previously entered into and executed a Security Agreement dated as of
April 18, 2000 ("Security Agreement"), with Firstar Bank N.A. ("Lender),
wherein property of Borrower was pledged to secure Borrowers' Obligations
(as that term is defined in that certain Loan Agreement dated as of April 18,
2000, between the undersigned and others and Lender providing for a loan
facility in the principal amount of $2,000,000 in favor of the Borrower and
related companies ("Loan Agreement")). Borrower hereby acknowledges that as
of the date hereof the Loan Agreement is being amended to increase the
Revolving Loan Commitment provided for therein to $3,500,000, and to make
certain other changes to the terms thereof. Borrower acknowledges that
Borrowers' Obligations as that term is used in the Loan Agreement and the
Security Agreement means Borrowers' Obligations under the Loan Agreement, as
amended by the Amendment to Loan Agreement of even date herewith, and includes
without limitation the obligation to repay as and when due any and all amounts
advanced by Lender to Borrowers (as defined in the Loan Agreement), or any of
them, together with interest thereon, as provided in the Revolving Loan Note
in the face amount of $3,500,000, as amended and restated as of the date
hereof, made by Borrowers and payable to Lender.
IN WITNESS WHEREOF, this Acknowledgement has been executed and
delivered by a duly-authorized officer of the Borrower as of June 9, 2000.
FIVE STAR TRANSPORT, INC.
By ______________________________
<PAGE>
ACKNOWLEDGEMENT
(Security Agreement)
The undersigned ("Borrower") hereby acknowledges that it has
previously entered into and executed a Security Agreement dated
as of April 18, 2000 ("Security Agreement"), with Firstar Bank N.A. ("Lender),
wherein property of Borrower was pledged to secure Borrowers' Obligations (as
that term is defined in that certain Loan Agreement dated as of April 18, 2000,
between the undersigned and others and Lender providing for a loan facility in
the principal amount of $2,000,000 in favor of the Borrower and related
companies ("Loan Agreement")). Borrower hereby acknowledges that as of the
date hereof the Loan Agreement is being amended to increase the Revolving Loan
Commitment provided for therein to $3,500,000, and to make certain other
changes to the terms thereof. Borrower acknowledges that Borrowers'
Obligations as that term is used in the Loan Agreement and the Security
Agreement means Borrowers' Obligations under the Loan Agreement, as amended by
the Amendment to Loan Agreement of even date herewith, and includes
without limitation the obligation to repay as and when due any and all amounts
advanced by Lender to Borrowers (as defined in the
Loan Agreement), or any of them, together with interest thereon, as provided in
the Revolving Loan Note in the face amount of
$3,500,000, as amended and restated as of the date hereof, made by Borrowers
and payable to Lender.
IN WITNESS WHEREOF, this Acknowledgement has been executed and
delivered by a duly-authorized officer of the Borrower as of June 9, 2000.
CAROLINA NATIONAL TRANSPORTATION INC.
By ________________________________________
<PAGE>
ACKNOWLEDGEMENT
(Security Agreement)
The undersigned ("Borrower") hereby acknowledges that it has
previously entered into and executed a Security Agreement dated
as of April 18, 2000 ("Security Agreement"), with Firstar Bank N.A. ("Lender),
wherein property of Borrower was pledged to secure Borrowers' Obligations (as
that term is defined in that certain Loan Agreement dated as of April 18, 2000,
between the undersigned and others and Lender providing for a loan facility in
the principal amount of $2,000,000 in favor of the Borrower and related
companies ("Loan Agreement")). Borrower hereby acknowledges that as of the
date hereof the Loan Agreement is being amended to increase the Revolving Loan
Commitment provided for therein to $3,500,000, and to make certain other
changes to the terms thereof. Borrower acknowledges that Borrowers'
Obligations as that term is used in the Loan Agreement and the Security
Agreement means Borrowers' Obligations under the Loan Agreement, as amended by
the Amendment to Loan Agreement of even date herewith, and includes without
limitation the obligation to repay as and when due any and all amounts advanced
by Lender to Borrowers (as defined in the Loan Agreement), or any of them,
together with interest thereon, as provided in the Revolving Loan Note in the
face amount of $3,500,000, as amended and restated as of the date hereof, made
by Borrowers and payable to Lender.
IN WITNESS WHEREOF, this Acknowledgement has been executed and
delivered by a duly-authorized officer of the Borrower as of June 9, 2000.
KEYSTONE LINES
By ______________________________
<PAGE>
ACKNOWLEDGEMENT
(Security Agreement)
The undersigned ("Borrower") hereby acknowledges that it has
previously entered into and executed a Security Agreement dated as of
April 18, 2000 ("Security Agreement"), with Firstar Bank N.A. ("Lender),
wherein property of Borrower was pledged to secure Borrowers' Obligations
(as that term is defined in that certain Loan Agreement dated as of April 18,
2000, between the undersigned and others and Lender providing for a loan
facility in the principal amount of $2,000,000 in favor of the Borrower and
related companies ("Loan Agreement")). Borrower hereby acknowledges that as of
the date hereof the Loan Agreement is being amended to increase the Revolving
Loan Commitment provided for therein to $3,500,000, and to make certain other
changes to the terms thereof. Borrower acknowledges that Borrowers'
Obligations as that term is used in the Loan Agreement and the Security
Agreement means Borrowers' Obligations under the Loan Agreement, as amended by
the Amendment to Loan Agreement of even date herewith, and includes without
limitation the obligation to repay as and when due any and all amounts advanced
by Lender to Borrowers (as defined in the Loan Agreement), or any of them,
together with interest thereon, as provided in the Revolving Loan Note in the
face amount of $3,500,000, as amended and restated as of the date hereof, made
by Borrowers and payable to Lender.
IN WITNESS WHEREOF, this Acknowledgement has been executed and
delivered by a duly-authorized officer of the Borrower as of June 9, 2000.
GULF LINE TRANSPORT INC.
By ______________________________
<PAGE>
ACKNOWLEDGEMENT
(Security Agreement)
The undersigned ("Guarantor") hereby acknowledges that it has
previously entered into and executed a Security Agreement dated as of April 18,
2000 ("Security Agreement"), with Firstar Bank N.A. ("Lender), wherein property
of Guarantor was pledged to secure Borrowers' Obligations (as that term is
defined in that certain Loan Agreement dated as of April 18, 2000, between the
undersigned and certain of its subsidiaries ("Borrowers") and Lender providing
for a loan facility in the principal amount of $2,000,000 in favor of the
Borrowers ("Loan Agreement")), and Guarantor's obligations under that certain
Corporate Guaranty in favor of Lender dated April 18, 2000, which is being
amended and restated in its entirety as of the date hereof. Guarantor hereby
acknowledges that as of the date hereof the Loan Agreement is being amended to
increase the Revolving Loan Commitment provided for therein to $3,500,000, and
to make certain other changes to the terms thereof. Guarantor acknowledges
that "Borrowers' Obligations" as that term is used in the Loan Agreement and
the Security Agreement means Borrowers' Obligations under the Loan Agreement,
as amended by the Amendment to Loan Agreement of even date herewith, and that
"Obligations" as that term is used in said Corporate Guaranty as amended and
restated as of the date hereof includes without limitation to obligation to pay
all amounts due under the Revolving Loan Note in the face amount of $3,500,000,
as amended and restated in its entirety as of the date hereof.
IN WITNESS WHEREOF, this Acknowledgement has been executed and
delivered by a duly-authorized officer of the Borrower as of June 9, 2000.
US 1 INDUSTRIES, INC.
By ______________________________
<PAGE>
ACKNOWLEDGEMENT
(Subordination Agreement)
The undersigned, Harold Antonson and Michael Kibler, hereby
acknowledge that Firstar Bank N.A. ("Lender") has agreed to loan
additional sums to Carolina National Transportation Inc., Keystone Lines, Gulf
Line Transport Inc. and Five Star Transport, Inc. (collectively "Borrowers")
pursuant to an Amendment to Loan Agreement dated as of the date hereof between
Borrowers and Lender and US
1 Industries, Inc., the parent of Borrowers ("Borrowers' Parent"), and further
acknowledge and agree that the Subordinated Debt (as defined in that certain
Subordination Agreement dated April 18, 2000 between Lender and (the
undersigned the "Subordination Agreement")) is and shall continue to be
subordinate, all as provided in the Subordination Agreement, to any such
additional sums loaned to the Borrowers or any of them as provided in such
Amendment to Loan Agreement in addition to being subordinate to any amounts
otherwise advanced to Borrowers or any of them by Lender prior to or subsequent
to the date hereof under that certain Loan Agreement among Borrowers and Lender
and Borrowers' Parent dated April 18, 2000, and that any amounts advanced to
any of Borrowers prior to or subsequent to the date hereof under said Loan
Agreement, as amended by such Amendment to Loan Agreement, shall constitute
Senior Debt for purposes of the Subordination Agreement.
IN WITNESS WHEREOF, this Acknowledgement has been executed and
delivered as of June 9, 2000.
______________________________
Harold Antonson
______________________________
Michael Kibler
<PAGE>
12
ACKNOWLEDGEMENT
(Subordination Agreement)
The undersigned, August Investment Partnership, hereby acknowledges
that Firstar Bank N.A ("Lender") has agreed to loan additional sums to Carolina
National Transportation Inc., Keystone Lines, Gulf Line Transport Inc. and Five
Star Transport, Inc. (collectively "Borrowers") pursuant to an Amendment to
Loan Agreement dated as of the date hereof between Borrowers and Lender and US
1 Industries, Inc., the parent of Borrowers ("Borrowers' Parent"), and further
acknowledges and agrees that the Subordinated Debt (as defined in that certain
Subordination Agreement dated April 18, 2000 between Lender and the undersigned
(the "Subordination Agreement")) is and shall continue to be subordinate, all
as provided in the Subordination Agreement, to any such additional sums loaned
to the Borrowers or any of them as provided in such Amendment to Loan Agreement
in addition to being subordinate to any amounts otherwise advanced to Borrowers
or any of them by Lender prior to or subsequent to the date hereof under that
certain Loan Agreement among Borrowers and Lender and Borrowers' Parent dated
April 18, 2000, and that any amounts advanced to any of Borrowers prior to or
subsequent to the date hereof under said Loan Agreement, as amended by such
Amendment to Loan Agreement, shall constitute Senior Debt for purposes of the
Subordination Agreement.
IN WITNESS WHEREOF, this Acknowledgement has been executed and
delivered as of June 9, 2000.
AUGUST INVESTMENT PARTNERSHIP
By: ______________________________
General Partner
By: ______________________________
General Partner
