SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14060
INTRENET, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1597565
(State or other jurisdiction of (IRS Employer Identification No)
incorporation or organization)
400 TechneCenter Drive, Suite 200, Milford, Ohio 45150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (513)576-6666
Not Applicable
Former name, former address and former fiscal year,
if changed since last report
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
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common Stock, without par value, 13,550,638 shares issued and
outstanding at May 1, 1998
INTRENET, INC.
FORM 10-Q
MARCH 31, 1998
INDEX
Page
Part I - Financial Information:
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
March 31, 1998 and December 31, 1997 .... 3
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1998 and 1997 .... 4
Condensed Consolidated Statement of Shareholders' Equity
Three Months Ended March 31, 1998 .... 5
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997 .... 6
Notes to Condensed Consolidated Financial Statements .... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .... 9
Part II - Other Information:
Item 1. Legal Proceedings .... 12
Item 2. Changes in Secutities .... 12
Item 3. Defaults Upon Senior Securities .... 12
Item 4. Submission of Matters to a Vote of Security Holders .12
Item 5. Other Information .... 12
Item 6. Exhibits and Reports on Form 8-K .... 12
<TABLE>
INTRENET, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, 1998 and December 31, 1997
(In Thousands of Dollars)
<CAPTION>
Assets 1998 1997
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 813 $ 598
Receivables, principally freight revenue less
allowance for doubtful accounts of $1,130 in 1998
and $1,110 in 1997 30,420 30,474
Prepaid expenses and other 6,837 4,697
Total current assets 38,070 35,769
Property and equipment, at cost, less accumulated
depreciation 29,258 30,248
Reorganization value in excess of amounts allocated
to identifiable assets, net of accumulated amortization 5,784 5,889
Deferred income taxes, net 2,723 2,723
Other assets 1,419 1,335
Total assets $ 77,254 $ 75,964
Liabilities and Shareholders' Equity
Current liabilities:
Current debt and capital lease obligations $ 5,728 $ 5,167
Accounts payable and cash overdrafts 9,587 7,772
Current accrued claim liabilities 8,219 8,829
Other accrued expenses 7,569 7,525
Total current liabilities 31,103 29,293
Long-term debt and capital lease obligations 21,488 22,401
Long-term accrued claim liabilities 2,800 2,800
Total liabilities 55,391 54,494
Shareholders' equity:
Common stock, without par value; 20,000,000
shares authorized; 13,550,638 and 13,548,138 shares
issued and outstanding, respectively 16,856 16,851
Retained earnings since January 1, 1991 5,007 4,619
Total shareholders' equity 21,863 21,470
Total liabilities and shareholders' equity $ 77,254 $ 75,964
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
INTRENET, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1998 and 1997
(Unaudited)
(In Thousands of Dollars, Except Per Share Data)
<CAPTION>
1998 1997
<S> <C> <C>
Operating revenues $ 60,676 $ 57,663
Operating expenses:
Purchased transportation
and equipment rents 27,237 23,835
Salaries, wages, and benefits 14,464 14,480
Fuel and other operating expenses 11,199 12,274
Operating taxes and licenses 2,514 2,618
Insurance and claims 1,971 1,981
Depreciation 987 1,178
Other operating expenses 1,020 702
59,392 57,068
Operating income 1,284 595
Interest expense (660) (742)
Other expense, net (105) (105)
Earnings (loss) before income taxes 519 (252)
Provision for income taxes (131) 0
Net earnings (loss) $ 388 $ (252)
Earnings (loss) per common and common
equivalent share
Basic $ 0.03 $ (0.02)
Diluted $ 0.03 $ (0.02)
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
INTRENET, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Shareholders' Equity
For the Three Months Ended March 31, 1998
(In Thousands of Dollars)
<CAPTION>
Retained Shareholders'
Common Stock Earnings Equity
Shares Dollars
<S> <C> <C> <C> <C>
Balance, December 31, 1997 13,548,138 $ 16,851 $ 4,619 $ 21,470
Exercise of stock options 2,500 5 - 5
Net earnings for 1998 - - $ 388 388
Balance, March 31, 1998 13,550,638 $ 16,856 $ 5,007 $ 21,863
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
INTRENET, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 388 $ (252)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Deferred income taxes 131 0
Depreciation and amortization 1,107 1,283
Provision for doubtful accounts 59 127
Changes in assets and liabilities, net:
Receivables (6) (2,610)
Prepaid expenses (2,140) (1,142)
Accounts payable and accrued expenses 1,035 1,216
Net cash provided by (used in)
operating activities 574 (1,378)
Cash flows from financing activities:
Net borrowings on line of
credit, net 619 4,449
Principal payments on long-term debt (972) (2,192)
Proceeds from exercise of stock options 5 52
Net cash provided by (used in)
financing activities (348) 2,309
Cash flows from investing activities:
Additions to property and equipment (89) (522)
Disposals of property and equipment 78 503
Net cash (used in)
investing activities (11) (19)
Net increase in cash
and cash equivalents 215 912
Cash and cash equivalents:
Beginning of period 598 410
End of period $ 813 $ 1,322
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
INTRENET, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 1998
(Unaudited)
(1) Unaudited Condensed Consolidated Financial Statements
The accompanying unaudited Consolidated Financial Statements
include the accounts of Intrenet, Inc. and all of its
subsidiaries (collectively, the "Company"). Truckload carrier
subsidiaries at March 31, 1998, were Roadrunner Trucking, Inc.
(RRT), Eck Miller Transportation Corporation (EMT), Advanced
Distribution System, Inc. (ADS), and Roadrunner Distribution
Services, Inc. (RDS). Also included is the Company's intermodal
broker and logistics manager, INET Logistics, Inc. (INL). All
significant intercompany transactions are eliminated in
consolidation. Through its subsidiaries, the Company provides
general and specialized regional truckload carrier, brokerage
and logistics management services throughout North America.
The consolidated financial statements included herein have been
prepared pursuant to the rules and regulations of the Securities
and Exchange Commission (SEC). In management's opinion, these
financial statements include all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation
of the results of operations for the interim periods presented.
Pursuant to SEC rules and regulations, certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted from these statements
unless significant changes have taken place since the end of the
most recent fiscal year. For this reason, the accompanying
Consolidated Financial Statements and Notes thereto should be
read in conjunction with the financial statements and notes for
the year ended December 31, 1997, included in the Company's 1997
Annual Report on Form 10-K.
The results for the three month period ended March 31, 1998,
are not necessarily indicative of the results to be expected for
the entire year.
(2) Earnings Per Common and Common Equivalent Share
Earnings per common and common equivalent share have been
computed on the basis of the weighted average common shares
outstanding during the periods. The Company has adopted the
Financial Accounting Standard Board issue of SFAS No. 128,
"Earnings Per Share", and restated its computation of EPS for
all prior periods. The adoption of this new standard resulted
in an immaterial difference in its computation of basic and
diluted EPS.
(3) Income Taxes
Income taxes in interim periods are generally provided on the
basis of the estimated effective tax rate for the year.
(4) Contingent Liabilities
On June 13, 1997, the Company received notice from the
Central States Southeast and Southwest Areas Pension Fund (the
"Fund") of a claim pursuant to the Employee Retirement Income
Security Act of 1974, as amended by the Multi-employer Pension
Plan Amendments Act of 1980 ("MPPAA"). MPPAA provides that, if
an employer withdraws from participation in a multi-employer
pension plan, such as the Fund, the employer and members of the
employer's "controlled group" of businesses are jointly and
severally liable for a portion of the plan's underfunding. The
claim is based on the withdrawal of R-W Service System, Inc.
("RW") from the Fund in 1992. The Company's records indicate
that RW was an indirect subsidiary of the Company's predecessor,
Circle Express, Inc., from March 1985 through April 1988, when
it and certain other subsidiaries were sold. The Fund currently
claims that RW's withdrawal liability is approximately $3.7
million plus accrued interest in the amount of approximately
$1.7 million. Based on its investigation to date, and, after
consultation with counsel, management believes that the Company
is not liable to the Fund for any of RW's withdrawal liability.
The Company has filed a formal request for review of the claim
as provided by MPPAA, and the Fund rejected that request on
January 28, 1998. The Company is in the process of seeking
resolution of the claim in binding arbitration. The Company is
obligated to make interim payments to the Fund until the issue
of liability is resolved. The interim payment obligation is
currently approximately $88,500 per month. The Company has made
payments to the Fund that total approximately $1,000,000 as of
March 31, 1998, which are included in other assets on the
Company's balance sheet. There can be no
assurance that either the need to make interim payments to the
Fund or the ultimate resolution of this matter will not have a
material adverse effect on the Company's liquidity, results of
operation or financial condition.
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
Introduction
The following discussion should be read in conjunction with the
Condensed Consolidated Financial Statements and Notes thereto
appearing elsewhere in this report. Certain statements made in
this report relating to trends in the Company's business, as
well as other statements including words such as "believe",
"expect", "estimate", "anticipate" and similar expressions,
constitute forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. For a
description of risks and uncertainties relating to forward
looking statements, see the discussion in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
The Company reported net earnings of $388,000 on revenues of
$60.7 million in the three month period ended March 31, 1998.
This compares with a net loss of $252,000 on revenues of $57.7
million in the comparable period of 1997. The Company's revenue
grew by 5.2 percent compared to the first quarter of 1997 and
three of its four largest wholly owned subsidiaries, EMT, RRT
and ADS, reported revenue improvements. The overall improvement
resulted from greater customer demand for high quality
transportation services and reduced operating expenses. Fuel
prices declined during the first quarter and are currently lower
than the Company experienced in the first quarter of 1997.
Barring any unforeseen changes in the overall economy or in the
price of fuel, management expects the Company will benefit from
continuing cost reduction programs in the areas of safety, fuel
purchasing and insurance costs. In addition, the Company
expects to experience growth in revenue from greater equipment
utilization and an expanded fleet. As a result, management
expects the Company will continue to operate profitably in 1998.
The Company reported revenue miles for the first quarter of
1998 of 40.0 million miles, approximately the same as reported
in the first quarter of 1997. Revenue per mile in the first
quarter of 1998 improved by 1.5 percent to $1.35 per mile, up
from $1.33 compared to first quarter 1997 results.
Intrenet's total operating fleet as of the end of the quarter,
including owner-operators, decreased about 2.0 percent during the first
quarter of 1998 to 2,203 tractors from 2,254 tractors in 1997. The decrease
in the Company's fleet is due to 29 fewer Company owned tractors and 22
fewer owner-operator tractors as compared with the first quarter
of 1997.
A discussion of the impact of the above and other factors on
the results of operations in the three months ended March 31,
1998, as compared to the comparable period of 1997 follows.
1998 Compared to 1997
Three Months Ended March 31
Key Operating Statistics 1998 1997 %Change
Operating Revenues ($ millions) $ 60.7 $ 57.7 5.2%
Net Earnings (Loss) ($ 000's) $ 388 ($ 252) NM
Average Number of Tractors 2,198 2,205 (0.3)%
Total Loads (000's) 83.8 68.3 22.7%
Revenue Miles (millions) 40.0 40.4 (1.0)%
Average Revenue per Revenue Mile* $ 1.35 $ 1.33 1.5%
* Excluding brokerage revenue
Operating Revenues
Operating revenues for the three months ended March 31, 1998,
totaled $60.7 million as compared to $57.7 million for the same
period in 1997, reflecting better freight availability than the
prior year. Three of the company's four motor carrier
subsidiaries ( EMT, RRT and ADS) reflected revenue growth in
the first quarter of 1998 by comparison to the prior year.
The $3.0 million in revenue growth resulted from an increase in
revenue from owner operators ($1.2 million) and freight brokered
to other carriers ($2.8 million), offset by a decline in the
revenue generated by Company owned tractors ($1.0 million). The
average number of Company owned tractors declined 4.0% from
1,214 to 1,169, but the average owner-operator tractor count
increased from 991 to 1,029. Approximately 51% of the Company's
revenue in the three month period ended March 31, 1998, was
generated by Company owned equipment, and 38% by owner-operator
equipment. This compares to approximately 55% and 37%,
respectively in the 1997 period. The remaining revenues were
from freight brokered to other carriers.
The Company experienced a slight, 1.5%, improvement in the
average revenue per revenue mile in 1998 as compared to 1997.
Operating Expenses
The following table sets forth the percentage relationship of
operating expenses to operating revenues for the three months
ended March 31.
Three Months Ended March 31
1998 1997
Operating revenues 100% 100%
Operating expenses:
Purchased transportation and
equipment rents 44.9 41.3
Salaries, wages and benefits 23.8 25.1
Fuel and other operating expenses 18.5 21.3
Operating taxes and licenses 4.1 4.6
Insurance and claims 3.3 3.5
Depreciation 1.6 2.0
Other operating expenses 1.7 1.2
Total operating expenses 97.9% 99.0%
Purchased transportation and equipment rents increased as a
percentage of revenue due to the Company's proportionately
higher use of owner-operators. Correspondingly, salaries, wages
and benefits decreased as a percentage of revenue because of the
relatively smaller portion of the Company's total revenue
generated by Company owned equipment and the growing portion of
the Company's total revenue from freight brokered to other
carriers. Fuel and other operating expenses are attributable to
Company owned equipment and these expenses also declined in
relation to the growth in the use of owner-operators and freight
brokered to other carriers. Declining diesel fuel prices have
also been a significant factor relating to this expense
decrease. Other operating expenses increased in 1998 over 1997
due to slightly higher communication cost and increased
professional fees as a result of the MPPAA litigation.
Interest Expense
Interest expense decreased in 1998, primarily as a result of
the decreased borrowings under capital lease obligations as
equipment is replaced with operating leases. Interest expense
on bank borrowings were slightly higher in 1998 due to a higher
average borrowing base.
Provision for Income Taxes
Income taxes in interim periods are generally provided on the
basis of the estimated effective tax rate for the year.
Liquidity and Capital Resources
The Company generated $0.2 million in cash in the first three
months of 1998. As reflected in the accompanying Condensed
Consolidated Statement of Cash Flows, $0.6 million of cash was
provided by operating activities as compared to a use of $1.4
million in the first quarter of 1997. Historically, the
Company's cash needs are greatest in the first quarter when the
plates and permits are purchased for the Company's fleet.
Borrowing under the Company's bank credit facility increased by
over $0.6 million primarily to fund principal payments on long
term debt.
The Company's day-to-day financing is provided by borrowings
under a bank credit facility. The credit facility consists of a
$5.0 million term loan, $2.2 million of which is currently
outstanding, with a final maturity of December 31, 1999, and a
$28.0 million revolving line of credit which expires January 1,
2000. Quarterly principal payments of $312,500 on the term loan
are required. The line of credit includes provisions for the
issuance of stand-by letters of credit which, as issued, reduce
available borrowings under the line of credit. Borrowings under
the line of credit are limited to amounts determined by a
formula tied to the Company's eligible accounts receivable and
inventories, as defined in the credit facility. Borrowings
under the line of credit totaled $6.9 million at March 31, 1998,
and outstanding letters of credit totaled $7.0 million at that
date. The combination of these two totaled $13.9 million,
leaving approximately $8.8 million of borrowing capacity
available at March 31, 1998.
During the first quarter, the Company's bank agreement was
amended, resulting in a reduction of the borrowing rate on the
Company's credit facility from the bank's prime rate plus one
half percent to, at the election of the Company, the prime rate
or 250 basis points over the 30 day LIBOR rate. The bank also
reduced the rate on the term loan from the prime rate plus one
half to, at the election of the Company, one quarter percent
plus the prime rate or 275 basis points in excess of the 30, 90,
or 120 day LIBOR rate. Among other changes, the bank increased
the ratio of adjusted liabilities from 3:1 to 4:1, removed
limitations on capital expenditures for tractors and trailers,
but added a "Fixed Charge Coverage Ratio" defined by EBITDA plus
Historical Operating Lease payments divided by Fixed Charges
plus Prospective Operating Lease payments.
Management believes that cash generated from operations, and
cash available to the Company under the bank credit facility
will be sufficient to meet the Company's needs for the
foreseeable future.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On June 13, 1997, the Company received notice from the
Central States Southeast and Southwest Areas Pension Fund (the
"Fund") of a claim pursuant to the Employee Retirement Income
Security Act of 1974, as amended by the Multi-employer Pension
Plan Amendments Act of 1980 ("MPPAA"). MPPAA provides that, if
an employer withdraws from participation in a multi-employer
pension plan, such as the Fund, the employer and members of the
employer's "controlled group" of businesses are jointly and
severally liable for a portion of the plan's underfunding. The
claim is based on the withdrawal of R-W Service System, Inc.
("RW") from the Fund in 1992. The Company's records indicate
that RW was an indirect subsidiary of the Company's predecessor,
Circle Express, Inc., from March 1985 through April 1988, when
it and certain other subsidiaries were sold. The Fund currently
claims that RW's withdrawal liability is approximately $3.7
million plus accrued interest in the amount of approximately
$1.7 million. Based on its investigation to date, and, after
consultation with counsel, management believes that the Company
is not liable to the Fund for any of RW's withdrawal liability.
The Company has filed a formal request for review of the claim
as provided by MPPAA, and the Fund rejected that request on
January 28, 1998. The Company is in the process of seeking
resolution of the claim in binding arbitration. The Company is
obligated to make interim payments to the Fund until the issue
of liability is resolved. The interim payment obligation is
currently approximately $88,500 per month. There can be no
assurance that either the need to make interim payments to the
Fund or the ultimate resolution of this matter will not have a
material adverse effect on the Company's liquidity, results of
operation or financial condition.
There are no other material pending legal proceedings to which
the Company or any of its subsidiaries is a party or of which
any of their property is the subject, other than routine
litigation incidental to its business, primarily involving
claims for personal injury and property damage incurred in the
transporting of freight. The Company maintains insurance which
covers liability resulting from transportation related claims in
amounts management believes are prudent and consistent with
accepted industry practices, subject to deductibles for the
first $100,000 to $250,000 of exposure for each incident. The
Company is not aware of any claims or threatened claims that
might materially affect the Company's operating or financial
results.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 10.1 - Third Amendment to Fourth Amended and Restated Loan Agreement
Exhibit 11 - Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
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 thereunto duly authorized.
INTRENET, INC.
(Registrant)
May 14, 1998 /s/ John P. Delavan
John P. Delavan,
President and Chief
Executive Officer
/s/ Roger T. Burbage
Roger T. Burbage,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
THIRD AMENDMENT TO FOURTH AMENDED AND
RESTATED LOAN AGREEMENT
THIS THIRD AMENDMENT (this "Amendment") to the Fourth Amended
and Restated Loan Agreement is entered into as of the 31st day
of March, 1998, by and between The Huntington National Bank (the
"Bank") as lender, and Intrenet, Inc. (the "Borrower"), and
Advanced Distribution System, Inc., Eck Miller Transportation
Corporation, INET Logistics, Inc., Mid-Western Transport, Inc.,
Roadrunner Enterprises, Inc., Roadrunner Trucking, Inc.,
Roadrunner Distribution Services, Inc. and Roadrunner
International Services, Inc. (herein collectively referred to as
the "Subsidiaries"; the Borrower and the Subsidiaries are herein
collectively and separately referred to as a "Company" or the
"Companies", as borrowers.
RECITALS:
A. On or about January 15, 1996, the Companies (with the
exception of INET Logistics, Inc.) and the Bank executed a
certain Fourth Amended and Restated Loan Agreement that was
amended by a certain First Amendment to Fourth Amended and
Restated Loan Agreement between the Companies (with the
exception of INET Logistics, Inc.) and the Bank dated as of
March 31, 1996, and by a certain Second Amendment to Fourth
Amended and Restated Loan Agreement dated as of March 7, 1997
(collectively, the "1996 Loan Agreement"), setting forth the
terms of certain extensions of credit to the Companies; and
B. In connection with the 1996 Loan Agreement, the Companies
executed and delivered to the Bank certain other loan documents,
promissory notes, amendments to open-end mortgages, assignment
of rents and security agreements, consents, assignments,
security agreements, agreements, instruments and financing
statements in connection with the indebtedness referred to in
the 1996 Loan Agreement (all of the foregoing, together with the
1996 Loan Agreement, are hereinafter collectively referred to as
the "1996 Loan Documents") (the 1996 Loan Documents together
with the 1988 Loan Documents, the 1989 Loan Documents, the 1991
Loan Documents and the 1993 Loan Documents (as those terms are
defined in the 1996 Loan Agreement) are hereinafter collectively
referred to as the "Loan Documents"); and
C. The Companies have requested that the Bank amend and modify
certain terms in the 1996 Loan Agreement, and the Bank is
willing to do so upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements and promises contained herein, the receipt and
sufficiency of which are hereby acknowledged, and intending to
be legally bound, the parties hereto for themselves and their
successors and assigns do hereby agree, represent and warrant as
follows:
1. Definitions. All capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the 1996 Loan
Agreement.
2. Section 1.1, "Revolving Loan," of the 1996 Loan Agreement is
hereby amended to recite in its entirety as follows:
1.1 Revolving Loan.
The Bank agrees to extend credit to the Companies pursuant
to a revolving credit facility up to the maximum principal
amount of $28,000,000.00 (herein referred to as the "Revolving
Loan"), subject to paragraphs 1.3 and 1.4 below and to the terms
and conditions of this Agreement; provided, however, that the
outstanding principal balance of the Revolving Loan, plus the
aggregate outstanding stated amounts of the Letters of Credit
(as defined below) shall never exceed $28,000,000.00. The
outstanding principal of the Revolving Loan may be increased and
decreased an unlimited number of times prior to January 1, 2000
(the Revolving Loan Termination Date"). The Companies' right to
obtain advances pursuant to the Revolving Loan shall terminate
on, and the unpaid principal balance plus all accrued interest
on the Revolving Loan shall be due and payable on, the Revolving
Loan Termination Date; provided, however, that the Bank shall
have no obligation to advance or re-advance any sums pursuant to
the Revolving Loan at any time when there exists any set of
facts or circumstances that, by itself, upon the giving of
notice, the lapse of time, or any one or more of the foregoing,
would constitute an Event of Default under this Agreement.
3. The first, second and third paragraphs of Section 1.6,
"Lending Formula," of the 1996 Loan Agreement are hereby amended
to recite as follows:
The aggregate stated amount outstanding pursuant to the
Letters of Credit plus the aggregate unpaid principal balance of
the Revolving Loan shall not exceed (a) 80% of the Companies'
"Eligible Accounts," plus (b) 70% of the Companies' "Eligible
Unbilled Accounts," plus (c) the lesser of up to 50% of
"Eligible Maintenance Inventory" or $1,000,000.00 (collectively
the "Borrowing Base"), as defined below.
The term "Eligible Unbilled Accounts" means the portion of
the Companies' unbilled accounts (excluding any unbilled
accounts of Advanced Distribution System, Inc.) that the Bank
determines in good faith from time to time, based on credit
policies, market conditions, the Companies' business or the
creditworthiness of the Companies' account debtors is eligible
for use in calculating the Borrowing Base. Without limiting the
Bank's right to determine which unbilled accounts are Eligible
Unbilled Accounts, no unbilled account will be eligible for use
in calculating the Borrowing Base, unless, at a minimum, such
unbilled account is an unbilled account arising in the ordinary
course of the Companies' business owing to the Companies
(excluding sales or other taxes) from a party (the "Account
Debtor") which meets all the following requirements until it is
lawfully invoiced to the Account Debtor (a) the account arises
from the Companies' completed performance of services that have
not yet been invoiced to the Account Debtor; (b) not more than
15 days have elapsed from the dispatch date, as indicated in the
end of month accrual report; (c) the unbilled account is not
subject to any prior assignment, claim, lien, security interest,
setoff, credit, contra account, allowance, adjustment, levy,
return of goods, or discount; (d) the unbilled account did not
arise from a transaction with a person, corporation or entity
affiliated with the Companies; (e) the Companies have not
received notice of bankruptcy or insolvency of the Account
Debtor; (f) the unbilled account is not evidenced by any chattel
paper, promissory note, payment instrument or written agreement;
(g)except for unbilled accounts that arise from an Account
Debtor whose mailing address or executive office is located in
Canada (other than the province of Quebec) and that do not arise
from a contract with any government or agency thereof or from a
consumer, the unbilled account does not arise from an Account
Debtor whose mailing address or executive office is located
outside the United States; (h) the unbilled account does not
arise from an Account Debtor who has more than 20% of its
accounts with the Companies more than 45 days past due; and (i)
the Bank has not notified the Companies that the unbilled
account or the Account Debtor is unsatisfactory or unacceptable
(although the Bank reserves the right to do so in good faith and
in its sole discretion at any time).
The term "Eligible Accounts" means the portion of the
Companies' accounts that the Bank determines in good faith from
time to time, based on credit policies, market conditions, the
Companies' business or the creditworthiness of the Companies'
account debtors is eligible for use in calculating the Borrowing
Base. Without limiting the Bank's right to determine which
accounts are Eligible Accounts, no account will be eligible for
use in calculating the Borrowing Base, unless, at a minimum,
such account is an account arising in the ordinary course of the
Companies' business owing to the Companies (excluding sales or
other taxes) from a party (the "Account Debtor" ) which meets
all the following requirements until it is collected in full:
(a) the account is due and payable not more than 15 days from
the date of the invoice therefor and is not more than 45 days
past-due; (b) the account arises from the Companies' completed
performance of services that have been lawfully invoiced to the
Account Debtor; (c) the account is not subject to any prior
assignment, claim, lien, security interest, setoff, credit,
contra account, allowance, adjustment, levy, return of goods, or
discount; (d) the account did not arise from a transaction with
a person, corporation or entity affiliated with the Companies;
(e) the Companies have not received notice of bankruptcy or
insolvency of the Account Debtor; (f) the account is not
evidenced by any chattel paper, promissory note, payment
instrument or written agreement; (g) except for accounts that
arise from an Account Debtor whose mailing address or executive
office is located in Canada (other than the province of Quebec)
and that do not arise from a contract with any government or
agency thereof or from a consumer, the account does not arise
from an Account Debtor whose mailing address or executive office
is located outside the United States; (h) the account does not
arise from an Account Debtor who has more than 20% of its
accounts with the Companies more than 45 days past due; (i) the
account does not arise from an Account Debtor to whom the
Company has determined to ship goods on a "cash on delivery" or
C.O.D. basis, unless the Bank determines in its sole discretion
that said account is acceptable and (j) the Bank has not
notified the Companies that the account or the Account Debtor is
unsatisfactory or unacceptable (although the Bank reserves the
right to do so in good faith and in its sole discretion at any
time).
The remainder of Section 1.6, "Lending Formula," of the 1996
Loan Agreement shall remain as originally written.
4. Section 2.1, "Prime Commercial Rate," of the 1996 Loan
Agreement is hereby amended to recite in its entirety as follows:
2.1 Prime Commercial Rate.
Subject to the provisions of this Agreement, the Companies,
jointly and severally, agree to pay to the Bank interest (a) on
all Prime Rate Advances under the Revolving Loan from the date
such advances are made until paid in full, and (b) on the unpaid
balance of Prime Rate Advances under the Term Loan, at a
variable rate of interest per annum equal to the Prime
Commercial Rate, from time to time in effect, plus the
applicable Prime Margin.
Interest shall be calculated on a 360 day year basis and
shall be based on the actual number of days which elapse during
the interest calculation period.
"Prime Commercial Rate" as used herein shall mean the rate
established by the Bank from time to time based on its
consideration of economic, money market, business and
competitive factors, and it is not necessarily the Bank's most
favored rate. Subject to any maximum or minimum interest rate
limitation specified herein or by applicable law, any variable
rate of interest on the Loan calculated with reference to the
Prime Commercial Rate shall change automatically without notice
to the Companies immediately with each change in the Prime
Commercial Rate.
"Prime Margin" as used herein shall mean (i) zero, in
respect of the Revolving Loan, and (ii) 25 basis points, in
respect of the Term Loan.
"Prime Rate Advance" shall mean any amount borrowed as part
of the Loan that bears interest at a rate calculated with
reference to the Prime Commercial Rate.
5. A new Section 2.2, entitled "Eurodollar Rate," is hereby
added to the 1996 Loan Agreement and shall recite in its
entirety as follows:
2.2. Eurodollar Rate.
Subject to the provisions of this Agreement, the Companies
from time to time prior to the Term Loan Maturity Date may elect
to have interest accrue on all or part of the outstanding
principal balance of the Term Loan at a rate of interest equal
to the Eurodollar Rate, plus the applicable Eurodollar Margin.
Each Eurodollar Advance shall be in a minimum amount of
$1,000,000.00 and integral multiples of $1,000,000.00 in excess
thereof. No more than two Eurodollar Advances shall be
outstanding at any one time.
"Eurodollar Rate" shall mean, with respect to any Eurodollar
Advance and the related Interest Period, the per annum rate that
is obtained by dividing: (a) the actual or estimated arithmetic
mean of the per annum rates of interest at which deposits in
U.S. dollars for the related Interest Period and in an aggregate
amount comparable to the amount of such Eurodollar Advance are
being offered to U.S. banks by one or more prime banks in the
London interbank market, as determined by the Bank in its sole
discretion based upon reference to information appearing in
Telerate, a service of Telerate Systems Incorporated, in the
section captioned "British Bankers Assoc. Interest Settlement
Rates," or any comparable index selected by the Bank, the
obtaining of rate quotations, or any other reasonable procedure,
at approximately 11:00 a.m. London, England, time, on the second
Eurodollar business day prior to the first day of the related
Interest Period; all as determined by the Bank, such interest
rate to be rounded up to the nearest whole multiple of 1/16 of
1% per annum, by (b) a percentage equal to 100%, minus the
Eurodollar Reserve Percentage. The Eurodollar Rate shall be
adjusted automatically on and as of the effective date of any
change in the Eurodollar Reserve Percentage.
"Eurodollar Reserve Percentage" means, for any day, that
percentage which is in effect on such day, as prescribed by the
Federal Reserve Board for determining the maximum reserve
requirement (including, without limitation, any emergency,
supplemental, or other marginal reserve requirement) for a
member bank of the Federal Reserve System in respect of
"Certificate of Deposit Liabilities" or in respect of any other
category of liabilities which includes deposits by reference to
which the interest rate on Eurodollar loans is determined or any
category of extensions of credit or other assets which includes
loans by a non-United States office of any bank to United States
residents), or with respect to any "Eurocurrency liabilities"
under Regulation D of the Board of Governors of the Federal
Reserve System, or any other regulations of any governmental
authority having jurisdiction with respect thereto.
"Eurodollar Advance" shall mean any amount borrowed as part
of the Term Loan that bears interest at a rate calculated with
reference to the Eurodollar Rate. "Eurodollar business day"
shall mean, with respect to any Eurodollar Advance or Daily
LIBOR Advance, a day which is both a day on which the Bank is
open for business and a day on which transactions in U.S. dollar
deposits are effected in the London interbank market.
"Eurodollar Margin" shall mean 275 basis points.
"Term Loan Maturity Date" shall mean, with respect to any
advances under the Term Loan, December 31, 1999.
6. A new Section 2.3, entitled "Daily LIBOR," is hereby added
to the 1996 Loan Agreement and shall recite in its entirety as
follows:
2.3. Daily LIBOR.
The Companies may from time to time prior to the Revolving
Loan Maturity Date elect to have interest accrue on all or part
of the outstanding principal balance of the Revolving Loan at a
rate of interest equal to the Daily LIBOR, plus the applicable
Daily LIBOR Margin.
"Daily LIBOR" shall mean the Eurodollar Rate for Interest
Periods of 30 days, provided, however, subject to any maximum or
minimum interest rate limitation specified herein or by
applicable law, Daily LIBOR shall change automatically without
notice to the Borrower immediately on each Eurodollar business
day with each change in Daily LIBOR or the Eurodollar Reserve
Percentage, as applicable, with any change thereto effective as
of the opening of business on such Eurodollar business day.
"Daily LIBOR Advance" shall mean any amount borrowed as part
of the Revolving Loan that bears interest at a rate calculated
with reference to the Daily LIBOR.
"Daily LIBOR Margin" shall mean 250 basis points (2.50%).
Subject to any maximum or minimum interest rate limitation
specified herein or by applicable law, the Daily LIBOR shall
change automatically without notice to the Companies immediately
on each Eurodollar business day with each change in the Daily
LIBOR or the Eurodollar Reserve Percentage, as applicable, with
any change thereto effective as of the opening of business on
such Eurodollar business day.
7. A new Section 2.4, entitled "Notice of Election," is hereby
added to the 1996 Loan Agreement and shall recite in its
entirety as follows:
2.4. Notice of Election.
Subject to the provisions of this Agreement, the Companies may
elect to request an advance of any type, continue an advance of
one type as an advance of the then existing type or convert an
advance of one type to an advance of another type, by giving
notice thereof to the Bank in writing in the form of Exhibit F-1
for the Revolving Loan and Exhibit F-2 for the Term Loan
attached to a certain Third Amendment to Fourth Amended and
Restated Loan Agreement dated as of March 31, 1998 (the "Third
Amendment"), not later than 10:00 a.m., Columbus, Ohio time,
three Eurodollar business days prior to the date any such
continuation of or conversion to a Eurodollar Advance is to be
effective, and not later than 10:00 a.m., Columbus, Ohio time on
the date such continuation or conversion is to be effective in
all other cases; provided, that an outstanding advance may only
be converted on the last day of the then current Interest Period
(if applicable) with respect to such advance, and provided,
further, that upon the continuation or conversion of an advance
such notice shall also specify the Interest Period (if
applicable) to be applicable thereto upon such continuation or
conversion. If the Companies shall fail to timely deliver such a
notice with respect to any outstanding advance, the Companies
shall be deemed to have elected to convert such advance to a
Prime Rate advance on the last day of the then current Interest
Period with respect to such advance.
8. A new Section 2.5, entitled "Interest Calculation and
Interest Payment Dates," is hereby added to the 1996 Loan
Agreement and shall recite in its entirety as follows:
2.5. Interest Calculation and Interest Payment Dates.
"Interest Period" shall mean:
(a) With respect to any Eurodollar Advance, an initial period
commencing, as the case may be, on the day such an Advance shall
be made by the Bank, or on the day of conversion of any then
outstanding advance to an advance of such type, and ending on
the date one (1), three (3) or four (4) months thereafter, all
as the Companies may elect pursuant to this Agreement; provided,
that (a) any Interest Period with respect to a Eurodollar
Advance that shall commence on the last Eurodollar business day
of the calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Eurodollar business day of
the appropriate subsequent calendar month; and (b) each Interest
Period with respect to a Eurodollar Advance that would otherwise
end on a day which is not a Eurodollar business day shall end on
the next succeeding Eurodollar business day or, if such next
succeeding Eurodollar business day falls in the next succeeding
calendar month, on the next preceding Eurodollar business day.
(b) With respect to a Prime Rate Advance or Daily LIBOR
Advance, an initial period commencing, as the case may be, on
the day such an advance shall be made by the Bank, or on the day
of conversion of any then outstanding advance to an advance of
such type, and ending on the last day of each month and on the
day of conversion to an advance of a different type.
Notwithstanding the provisions of (a) and (b) above, no
Interest Period shall be permitted which would end after the
Revolving Loan Maturity Date (with respect to an advance under
the Revolving Loan) or the Term Loan Maturity Date (with respect
to an advance under the Term Loan). Interest shall be
calculated on a 360 day year basis and shall be based on the
actual number of days which elapse during the interest
calculation period.
"Revolving Loan Interest Payment Dates" shall mean: the
last day of each Interest Period.
"Term Loan Interest Payment Dates" shall mean:
(a) the last day of each Interest Period in the case of a
LIBOR Advance; and
(b) in the case of a Prime Rate Advance, the first day of
each calendar quarter and on the date of conversion from a Prime
Rate Advance to a LIBOR Advance.
9. A new Section 2.6, entitled "Additional Costs," is hereby
added to the 1996 Loan Agreement and shall recite in its
entirety as follows:
2.6. Additional Costs.
In the event that any applicable law, treaty, rule or
regulation (whether domestic or foreign) now or hereafter in
effect, or any interpretation or administration thereof by any
governmental authority charged with the interpretation or
administration thereof, or compliance by the Bank with any
request or directive of any such authority (whether or not
having the force of law), shall (a) affect the basis of taxation
of payments to the Bank of any amounts payable by the Companies
for advances under this Agreement (other than taxes imposed on
the overall net income of the Bank by the jurisdiction, or by
any political subdivision or taxing authority of any such
jurisdiction, in which the Bank has its principal office), or
(b) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by the Bank, or (c)
shall impose any other condition, requirement or charge with
respect to this Agreement or the Loan (including, without
limitation, any capital adequacy requirement, any requirement
which affects the manner in which the Bank allocates capital
resources to its commitments or any similar requirement), and
the result of any of the foregoing is to increase the cost to
the Bank of making or maintaining the Loan or any advance
thereunder, to reduce the amount of any sum receivable by the
Bank thereon, or to reduce the rate of return on the Bank's
capital, then the Companies shall pay to the Bank, from time to
time, upon request of the Bank, additional amounts sufficient to
compensate the Bank for such increased cost, reduced sum
receivable or reduced rate of return to the extent the Bank is
not compensated therefor in the computation of the interest
rates applicable to the Loan. A detailed statement as to the
amount of such increased cost, reduced sum receivable or reduced
rate of return, prepared in good faith and submitted by the Bank
to the Companies, shall be conclusive and binding for all
purposes relative to the Bank, absent manifest error in
computation.
10. A new Section 2.7, entitled "Limitation on Requests and
Elections," is hereby added to the 1996 Loan Agreement and shall
recite in its entirety as follows:
2.7. Limitation on Requests and Elections.
Notwithstanding any other provision of this Agreement to the
contrary, if, upon receiving a request for an advance or a
request for a continuation of an advance as an advance of the
then existing type or conversion of an advance to an advance of
another type (a) in the case of any Eurodollar Advance or Daily
LIBOR Advance, deposits in dollars for periods comparable to the
Interest Period elected by the Companies are not available to
the Bank in the London interbank or secondary market, or (b) the
Eurodollar Rate or Daily LIBOR will not accurately cover the
cost to the Bank of making or maintaining the related advance,
or (c) by reason of national or international financial,
political or economic conditions or by reason of any applicable
law, treaty, rule or regulation (whether domestic or foreign)
now or hereafter in effect, or the interpretation or
administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance
by the Bank with any request or directive of such authority
(whether or not having the force of law), including without
limitation exchange controls, it is impracticable, unlawful or
impossible for the Bank (i) to make the relevant Eurodollar
Advance or Daily LIBOR Advance or (ii) to continue such Advance
as a Eurodollar Advance or a Daily LIBOR Advance or (iii) to
convert an advance to a Eurodollar Advance or a Daily LIBOR
Advance, then the Companies shall not be entitled, so long as
such circumstances continue, to request a Eurodollar Advance or
a Daily LIBOR Advance or a continuation of or conversion to such
advance from the Bank. In the event that such circumstances no
longer exist, the Bank shall again consider requests for
Eurodollar Advances or Daily LIBOR Advances of the affected type
and requests for continuations of and conversions to such
advances of the affected type.
11. A new Section 2.8, entitled "Illegality and Impossibility,"
is hereby added to the 1996 Loan Agreement and shall recite in
its entirety as follows:
2.8. Illegality and Impossibility.
In the event that any applicable law, treaty, rule or
regulation (whether domestic or foreign) now or hereafter in
effect, or any interpretation or administration thereof by any
governmental authority charged with the interpretation or
administration thereof, or compliance by the Bank with any
request or directive of such authority (whether or not having
the force of law), including without limitation exchange
controls, shall make it unlawful or impossible for the Bank to
maintain any Advance under this Agreement, the Companies shall
upon receipt of notice thereof from the Bank, repay in full the
then outstanding principal amount of all Advances made by the
Bank together with all accrued interest thereon to the date of
payment and all amounts due to the Bank under Section 2.9, (a)
on the last day of the then current Interest Period, if any,
applicable to such Advance, if the Bank may lawfully continue to
maintain such Advance to such day, or (b) immediately, if the
Bank may not continue to maintain such Advance to such day.
This Section 2.8 shall apply only as long as such illegality
exists. As an alternative to the repayment obligation provided
in this Section 2.8, the Companies may, at their option, and at
the time provided in this Section 2.8, convert any affected
Advance to a Prime Rate Advance.
12. A new Section 2.9, entitled "Compensation," is hereby added
to the 1996 Loan Agreement and shall recite in its entirety as
follows:
2.9. Compensation.
Subject to Section 2.8 above, in addition to all amounts
required to be paid by the Companies pursuant to this Section 2,
the Companies shall jointly and severally compensate the Bank,
upon demand, for all losses, expenses and liabilities
(including, without limitation, any loss or expense incurred by
reason of the liquidation or reemployment of deposits or other
funds acquired by the Bank to fund or maintain the Eurodollar
Advances) which the Bank may sustain (a) if for any reason an
advance, conversion into or continuation of such an Advance does
not occur on the date specified therefor given by the Companies
or in a telephonic request by them for borrowing or conversion
or continuation, or a successive Interest Period does not
commence after notice therefore is given to the Bank, (b) if for
any reason any Eurodollar Advance is prepaid on a date which is
not the last day of the applicable Interest Period, (c) as a
consequence of a required conversion of a Eurodollar Advance to
a Prime Rate Advance as a result of any of the events indicated
in Section 2.6, 2.7 or 2.8, or (d) as a consequence of any
failure by the Companies to repay a Eurodollar Advance when
required by the terms hereof. The Companies shall jointly and
severally reimburse the Bank on demand for any resulting loss or
expense incurred by the Bank, determined in the Bank's
reasonable opinion, including without limitation any loss
incurred in obtaining, liquidating or employing deposits or
other sources of funding from third parties or funding sources.
A detailed statement as to the amount of such loss or expense,
prepared in good faith and submitted by the Bank to the
Companies shall be conclusive and binding for all purposes
absent manifest error in computation.
13. A new Section 2.10, entitled "Survival of Obligations," is
hereby added to the 1996 Loan Agreement and shall recite in its
entirety as follows:
2.10. Survival of Obligations.
The provisions of Sections 2.6 and 2.9 shall survive the
termination of this Agreement and the payment in full of all
promissory notes outstanding pursuant hereto.
14. A new Section 2.11, entitled "Reduction of Applicable
Margins," is hereby added to the 1996 Loan Agreement and shall
recite in its entirety as follows:
2.11. Reduction of Applicable Margins.
The Prime Margin, the Eurodollar Margin and the Daily LIBOR
Margin shall each be reduced by 25 basis points (0.25%)
effective on the first day of the month (no sooner than July 1,
1998) following the Bank's receipt and acceptance of a
certificate signed by the president or chief financial officer
of the Borrower and delivered pursuant to Section 11 (b) of this
Agreement, certifying the compliance of the Companies with all
of the terms of this Agreement for the period ending June 30,
1998, and setting forth the calculation of the financial
covenants contained in Section 10 of this Agreement; provided,
however, that no such reduction shall be made if any set of
facts or circumstances exists that, by itself, upon the giving
of notice, the lapse of time, or any one or more of the
foregoing, would constitute an Event of Default hereunder.
15. Section 4, "Prepayment," of the 1996 Loan Agreement is
hereby amended to recite in its entirety as follows:
SECTION 4. PREPAYMENT.
Subject to the terms and conditions of this Agreement, the
Companies shall have the right to prepay at any time and from
time to time before maturity any amount or amounts due to the
Bank pursuant to this Agreement or to any notes or agreements
executed pursuant hereto or to seek cancellation of the Letters
of Credit; provided, that if the Companies prepay the Revolving
Loan and the Term Loan in full prior to the Revolving Loan
Termination Date, the Companies shall jointly and severally pay
to the Bank a prepayment fee equal to $200,000.00; provided,
however, that no such prepayment fee shall be due if the
Revolving Loan and the Term Loan are prepaid in full solely as a
result of the refinancing or restructuring of such obligations
by the Bank. If the Bank, in its sole and absolute discretion,
determines not to renew or extend the maturity of the Revolving
Loan, then the Term Loan shall be due and payable at the
maturity of the Revolving Loan.
16. Section 6.1, "Revolving and Term Loan Fee," of the 1996
Loan Agreement is hereby amended to recite in its entirety as
follows:
6.1 Revolving and Term Loan Fee.
The Companies shall jointly and severally pay to the Bank in
respect of the Revolving Loan and the Term Loan a monthly
service and collateral management fee (the "Revolving and Term
Loan Fee") in the amount of $5,000.00, payable on the first day
of each month during which any balance under the Revolving Loan
or Term Loan is outstanding.
17. A new Section 6.6, entitled "Collateral Audits," is hereby
added to the 1996 Loan Agreement and shall recite in its
entirety as follows:
6.6. Collateral Audits.
The Bank shall have the right, in its sole discretion, to
conduct audits of the Companies at least twice a year, and the
Companies will provide access to all of its books and records
and such other information which the Bank deems necessary to
evaluate the status of the Loans or of the collateral security
therefor.
18. Section 7, "SECURITY FOR LOAN," of the 1996 Loan Agreement
is hereby amended to recite in its entirety as follows:
SECTION 7. SECURITY FOR LOAN.
As security for the Loan, the Companies shall grant to the
Bank a first priority lien against all the Companies' accounts
receivable, contract rights, general intangibles, documents,
inventory, fixtures, equipment, instruments, licenses,
franchises, real estate, chattel paper, motor vehicles,
automobiles, trucks, vans and trailers, lease rentals, patents,
trademarks, trade names, intellectual property, stock,
securities, all of the Companies' real and personal property,
and the proceeds of all of the foregoing whether now owned or
hereafter acquired or created by the Companies subject only to
those liens and encumbrances set forth on Exhibit D to this
Agreement. As additional security for the Loan, each of the
Companies shall collaterally assign to the Bank all promissory
notes evidencing any Intercompany Loans described in Section
10.6 and all documents evidencing any collateral security
therefor. At the request of the Bank, the Companies shall
authorize and cause to be executed any and all documents which
the Bank shall reasonably require in order to effect the
foregoing. The Companies shall execute and deliver to the Bank
security agreements, mortgages, deeds of trust, assignments of
rents and leases and Uniform Commercial Code financing
statements in form and content reasonably satisfactory to the
Bank. In addition, the Companies shall provide the Bank with
any title insurance policies, surveys, environmental surveys,
appraisals and other documents or assurances reasonably required
by the Bank in form and content satisfactory to the Banks.
Nothing contained in this Agreement or in any security
agreement, mortgage, deed of trust or other document executed in
connection herewith shall affect or modify any security
interest, assignment, financing statement or mortgage previously
granted to the Bank prior to the date hereof. All such
interests and financing statements previously granted or
executed and delivered to the Banks shall remain in full force
and effect.
19. Section 10.1, "Payment of Taxes and Claims," of the 1996
Loan Agreement is hereby amended to recite in its entirety as
follows:
10.1. Payment of Taxes and Claims.
The Companies will pay before they become delinquent:
(a) all taxes, assessments and governmental charges or levies
imposed upon it or its property; and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords, bailee and other like persons which, if
unpaid, might result in the creation of a lien or encumbrance
upon its property,
provided that items of the foregoing description need not be
paid while being contested in good faith and by appropriate
proceedings and provided further that adequate book reserves
have been established with respect thereto; provided further
that the Companies' title to, and their right to use, their
property is not materially adversely affected thereby, and
provided further that no tax liens have attached to the
Companies' accounts, contract rights, chattel paper, general
intangibles, or inventory. In the case of any item of the
foregoing description involving in excess of the amount which
the Companies' independent public accountants shall fix as the
threshold of materiality for purposes of their audit of the then
current year, the appropriateness of the proceedings shall be
supported by an opinion of the independent counsel responsible
for such proceedings and the adequacy of such reserves shall be
supported by the opinion of the independent accountants. In
addition, the Companies, pursuant to the request of the
Companies, shall not be required to pay those delinquent taxes
identified to the Bank in that certain letter dated March 7,
1997, in the aggregate sum of $1,205,000.00, so long as no tax
liens have attached to any of the Companies' accounts, contract
rights, chattel paper, general intangibles, or inventory as a
result of such identified delinquent taxes.
20. Section 10.6, "Loans and Advances by the Companies," of the
1996 Loan Agreement is hereby amended to recite in its entirety
as follows:
10.6 Loans and Advances by the Companies.
The Companies will not make any loans or advances to any
inactive subsidiaries, including without limitation those
entities designated on Exhibit E to this Agreement as inactive
subsidiaries (the "Inactive Subsidiaries"), or to any other
person, corporation or entity; provided, however, the Companies
may make advances to owner-operators, trip lessors, and
commissioned agents in the ordinary course of business not to
exceed the aggregate amount outstanding at any one time of
$6,000,000. Notwithstanding the foregoing, (i) each of the
Companies shall be permitted to make loans and advances to
Intrenet, Inc., and (ii) Intrenet, Inc. and each of the
Companies which has a wholly owned Subsidiary which is also one
of the Companies shall be permitted to make loans to its
Subsidiary in such amounts, from time to time, as it may deem
necessary and appropriate; provided, however, that (a) any such
intercompany loan pursuant to clause (ii) above (an
"Intercompany Loan") from one Company to its Subsidiary (an
"Intercompany Borrower") shall be evidenced by a promissory note
executed by the Intercompany Borrower in form and content
satisfactory to the Bank and shall be secured by a perfected
security interest, wholly subordinate to that of the Bank, in
all personal property of the Intercompany Borrower, pursuant to
security documents in form and content satisfactory to the Bank;
(b) all such intercompany notes and collateral security therefor
shall be collaterally assigned to the Bank pursuant to documents
and instruments satisfactory to the Bank; and (c) the aggregate
principal sum of all Intercompany Loans owing from an
Intercompany Borrower shall not at any time exceed the amount of
such Intercompany Borrower's accounts receivable.
21. Section 10.9, "Sale of Accounts; No Consignment," is hereby
amended to recite in its entirety as follows:
10.9 Sale of Accounts; No Consignment.
The Companies shall not sell, assign, or encumber, except to
the Bank, any of their Accounts or notes receivable. The
Companies shall not permit any of their Inventory to be sold or
transferred on consignment or acquire or possess any of their
Inventory on consignment.
22. Section 10.13, "Ratio of Total Liabilities to Book Net
Worth," of the 1996 Loan Agreement is hereby amended to recite
in its entirety as follows:
10.13. Ratio of Total Liabilities (including Letters of
Credit) to Book Net Worth.
The Companies shall achieve a ratio of Total Liabilities to
Book Net Worth of not greater than 4.00 to 1.00 as of December
31, 1997, June 30, 1998, and as of each December 31 and June 30
thereafter.
23. Sections 10.23, "Capital Expenditures," and 10.24,
"Expenditures for Tractor and Trailer Fleet," are hereby deleted
in their entirety.
24. A new Section 10.26, "Fixed Charge Coverage Ratio," is
hereby added to the 1996 Loan Agreement and shall recite in its
entirety as follows:
10.26. Fixed Charge Coverage Ratio.
The Companies, on a consolidated basis, shall maintain at
all times specified below a ratio of (a) EBITDA plus Historical
Operating Lease Payments to (b) Fixed Charges plus Prospective
Operating Lease Payments (the "Fixed Charge Coverage Ratio") of
not less than (i) .85 to 1.00 for the period beginning March 31,
1998, through and including June 30, 1998, and (ii) 1.00 to 1.00
at all times thereafter. If the Companies or their auditors
make any adjustment in EBITDA, the Companies shall immediately
(i) provide notice of such adjustment to the Bank, (ii) reflect
such adjustment in the calculation of the Fixed Charge Coverage
Ratio, and (iii) provide financial statements to the Bank
reflecting such adjustments for all periods to which the
adjustments relate.
In determining the numerator of the Fixed Charge Coverage
Ratio, (i) EBITDA and Historical Operating Lease Payments shall
each be determined as of the last day of each month for the
twelve month period ending on such date. In determining the
denominator of the Fixed Charge Coverage Ratio, (i) Consolidated
Taxes, (ii) Consolidated Interest Expense, and (iii) Net
Investment in Fixed Assets (and each component thereof) shall
each be determined as of the last day of each month for the
twelve month period ending on such date; and (iv) Prospective
CMLTD, and (v) Prospective Operating Lease Payments shall each
be determined by calculating the scheduled payments due and to
become due during the twelve month period beginning on such
date.
"Consolidated Net Income" means, for any period on a
consolidated basis for the Companies, the net income (or loss)
after taxes for such period taken as a single accounting period,
determined in conformity with generally accepted accounting
principles.
"Consolidated Interest Expense" means, for any period on a
consolidated basis for the Companies, total interest expense,
whether paid or accrued or due and payable (without
duplication), including without limitation the interest
component of capital lease obligations for such period, all bank
fees, commissions, discounts and other fees and charges owed
with respect to letters of credit and net costs under interest
rate contracts, all as determined in conformity with generally
accepted accounting principles.
"Capital Expenditures" means, for any period on a
consolidated basis for the Companies, the aggregate of all
expenditures (whether paid in cash or accrued as liabilities)
that in accordance with GAAP are required to be included in or
reflected by the property, plant, equipment or similar fixed
asset accounts.
"EBITDA" means for any period, (i) the sum of the amounts
for such period of (A) Consolidated Net Income, (B) Consolidated
Interest Expense, (C) charges for federal, state, local and
foreign income taxes, and (D) depreciation, amortization expense
and non- cash charges which were deducted in determining
Consolidated Net Income, minus (ii) the sum of the amounts for
such period of (Y) other non-operating income not already
excluded from the determination of Consolidated Net Income, and
(Z) to the extent not deducted from Consolidated Interest
Expense, any net payments received during such period under
interest rate contracts and any interest income received in
respect of its cash investments.
"Fixed Charges" means with respect to any period for the
Companies on a consolidated basis, the sum of all amounts paid
or accrued or due and payable (without duplication), for (a)
federal, state, local and foreign income taxes ("Consolidated
Taxes") for such period, as determined in conformity with
generally accepted accounting principles, plus (b) Prospective
CMLTD, plus (c) Net Investment in Fixed Assets, plus (d)
Consolidated Interest Expense.
"Historical Operating Lease Payments" means, for any period,
all amounts paid or accrued or due and payable in respect of any
lease of any property (whether real, personal or mixed) by any
of the Companies as lessee for such period, other than in
respect of a lease which is a capital lease determined in
accordance with GAAP and reflected on the Companies' capital
lease schedule to their balance sheet.
"Net Cash Proceeds from Permitted Asset Dispositions" means
the proceeds received by any of the Companies in cash or cash
equivalents from the sale or other disposition of equipment or
fixed assets permitted by this Agreement, net of the amount of
payments pursuant to term indebtedness, capital leases, or
operating leases required to obtain the consent of any secured
creditor or lessor to such sale or disposition, and net of taxes
and other expenses associated therewith.
"Net Investment in Fixed Assets" means, for any period, the
difference of (i) Unfinanced Capex, minus (ii) the Net Cash
Proceeds from Permitted Asset Dispositions (which at no time
shall be less than zero);
"Prospective CMLTD" means, for any period, scheduled
principal payments on term obligations and capital leases for
such period.
"Prospective Operating Lease Payments" means, for any
period, scheduled payments to be made by the Companies in
respect of any lease of any property (whether real, personal or
mixed) by the any of the Companies as lessee for such period,
other than in respect of a lease which is a capital lease
determined in accordance with GAAP and reflected on the
Companies' capital lease schedule to their balance sheet.
"Unfinanced Capex" means for any period the sum of Capital
Expenditures net of the amount of such Capital Expenditures
financed by (i) the principal portion of term or capital lease
indebtedness, or (ii) purchase money indebtedness permitted by
this Agreement or approved by the Bank in writing prior to the
incurrence thereof.
25. Section 11, "Information as to the Companies," of the 1996
Loan Agreement is hereby amended to recite in its entirety as
follows:
SECTION 11. INFORMATION AS TO THE COMPANIES.
The Companies shall deliver for themselves and for the
Subsidiaries the following to the Bank:
(a) within 30 days after the end of each month, financial
statements, including a balance sheet, statements of income and
surplus, a statement of cash flows, and consolidated and
consolidating schedules, that fairly represent the Companies'
financial condition as of the end of such period;
(b) within 30 days after the end of each month, statements, in
form satisfactory to the Bank, signed by a president or chief
financial officer of the Borrower certifying the compliance of
the Companies with the terms of this Agreement and the
calculation of the financial covenants contained in Section 10
above;
(c) within 45 days after the end of each fiscal quarter, a
statement signed by the president or chief financial officer of
the Borrower certifying that the Companies are in compliance
with terms of this Agreement and that the financial statements
contained in the Companies' most recent report filed with the
Securities and Exchange Commission on Form 10-Q fairly represent
the Companies' financial condition as of the end of such period;
(d) within 90 days of the end of each fiscal year,
unqualified, audited financial statements prepared on a
consolidated basis in accordance with generally accepted
accounting principles and certified by independent public
accountants satisfactory to the Bank, containing a balance
sheet, statements of income and surplus, statements of cash
flows and reconciliation of capital accounts, along with (1) any
management letters written by such accountants, and (2) a lender
reliance letter from such accountants authorizing the Bank to
rely on such accountants' certifications;
(e) within 90 days of the end of each fiscal year, financial
statements prepared on a consolidating basis in accordance with
generally accepted accounting principles, containing a balance
sheet, statements of income and surplus;
(f) within 90 days of the end of each fiscal year, a statement
or letter signed by the Companies' independent public
accountants certifying that upon the basis of the procedures
described in such statement or letter, nothing has come to their
attention that would lead them to believe that the Companies are
in violation of the terms of this Agreement;
(g) within 5 days after the end of each calendar month, and
more frequently if requested by the Bank, a current loan and
collateral report, borrowing certificate, or other writings
satisfactory to the Bank for the calculation of, or setting
forth the calculation of, the Borrowing Base, which report or
writings shall include without limitation new invoices issued,
cash collected, credits issued;
(h) immediately upon the filing or release, as the case may
be, copies of any Securities and Exchange Commission
disclosures, filings, documents or any press releases;
(i) within 5 days after the end of each month, a report,
setting forth the number and dollar total of accounts receivable
of the Companies past due for not more than 30 days, the number
and dollar total past due for not more than 60 days, and the
number and dollar total past due for more than 60 days, which
report shall be reconciled to the loan and collateral report and
the corresponding balance sheet accounts;
(j) within 5 days after the end of each month, a report
including a detailed calculation and certification of the
accounts receivable that are not Eligible Accounts or Eligible
Unbilled Accounts;
(k) within 5 days after the end of each month, a report,
setting forth the number and dollar total of accounts receivable
of the Companies that have not yet been invoiced to the account
debtor; and
(l) within 5 days after the end of each month, a report,
setting forth the number, dollar amount and party of accounts
payable remaining due and payable (i) less than 31 days from the
date of the original invoice therefor, (ii) less than 61 days
from the date of the original invoice therefor, (iii) less than
91 days from the date of the original invoice therefor, (iv)
less than 121 days from the date of the original invoice
therefor, (v) and more than 121 days from the date of the
original invoice therefor, which report shall be reconciled to
the loan and collateral report and the corresponding balance
sheet accounts;
(m) within 5 days after the end of each month, an inventory
report of the Borrower, signed by a Financial Officer in form
satisfactory to the Bank and including a detailed calculation
and certification of the inventory that is not Eligible
Maintenance Inventory, which report shall be reconciled to the
loan and collateral report and the corresponding balance sheet
accounts;
(n) no later than 45 days after the end of each fiscal year,
financial projections, on a monthly basis, for the Companies for
their next fiscal year, including a projected income statement,
balance sheet, and cash flow and comparative information for the
comparative period of the preceding fiscal year;
(o) at the request of the Bank, such other information as the
Bank may from time to time reasonably require.
26. A new Section 14.9, "Accounting Treatment and Fiscal Year,"
is hereby added to the 1996 Loan Agreement and shall recite in
its entirety as follows:
14.9 Accounting Treatment and Fiscal Year.
The Companies shall not change their fiscal year for
accounting or tax purposes from a period consisting of the
twelve month period ending on December 31 of each calendar year.
None of the Companies shall make any material (as defined in
Generally Accepted Accounting Principles) change in accounting
treatment and reporting practices or tax reporting treatment,
except as required by Generally Accepted Accounting Principles
or law and disclosed in writing to the Bank at the address set
forth in the 1996 Loan Agreement. Each of the Companies shall
at all times keep accurate and complete records of any
collateral security for the Loan in accordance with Generally
Accepted Accounting Principles.
27. Conditions of Effectiveness. This Amendment shall become
effective as of March 31, 1998, upon satisfaction of all of the
following conditions precedent:
(a) The Bank shall have received two duly executed copies of
this Amendment and such other certificates, instruments,
documents, agreements, and opinions of counsel as may be
required by the Bank, each of which shall be in form and
substance satisfactory to the Bank and its counsel; and
(b) The Bank shall have received a duly executed copy of each
of the loan documents referenced on a certain Closing Memorandum
for the Third Amendment to Fourth Amended and Restated Loan
Agreement; and
(c) The representations contained in paragraph 28 below shall
be true and accurate.
28. Representations. Each of the Companies represents and
warrants that after giving effect to this Amendment (a) each and
every one of the representations and warranties made by or on
behalf of each of the Companies in the 1996 Loan Agreement or
the Loan Documents is true and correct in all respects on and as
of the date hereof, except to the extent that any of such
representations and warranties related, by the expressed terms
thereof, solely to a date prior hereto; (b) each of the
Companies has duly and properly performed, complied with and
observed each of its covenants, agreements and obligations
contained in the 1996 Loan Agreement and the Loan Documents; and
(c) no event has occurred or is continuing, and no condition
exists which would constitute an Event of Default.
29. Amendment to 1996 Loan Agreement. (a) Upon the
effectiveness of this Amendment, each reference in the 1996 Loan
Agreement to "Fourth Amended and Restated Loan Agreement," "Loan
and Security Agreement," "Loan Agreement," "Agreement," the
prefix "herein," "hereof," or words of similar import, and each
reference in the Loan Documents to the 1996 Loan Agreement,
shall mean and be a reference to the 1996 Loan Agreement as
amended hereby. (b) Except as modified herein, all of the
representations, warranties, terms, covenants and conditions of
the 1996 Loan Agreement, the Loan Documents and all other
agreements executed in connection therewith shall remain as
written originally and in full force and effect in accordance
with their respective terms, and nothing herein shall affect,
modify, limit or impair any of the rights and powers which the
Bank may have thereunder. The amendment set forth herein shall
be limited precisely as provided for herein, and shall not be
deemed to be a waiver of, amendment of, consent to or
modification of any of the Bank's rights under or of any other
term or provisions of the 1996 Loan Agreement, any Loan
Document, or other agreement executed in connection therewith,
or of any term or provision of any other instrument referred to
therein or herein or of any transaction or future action on the
part of the Companies which would require the consent of the
Bank, including, without limitation, waivers of Events of
Default which may exist after giving effect hereto. Each of the
Companies ratifies and confirms each term, provision, condition
and covenant set forth in the 1996 Loan Agreement and the Loan
Documents and acknowledges that the agreement set forth therein
continue to be legal, valid and binding agreements, and
enforceable in accordance with their respective terms.
30. Authority. Each of the Companies hereby represents and
warrants to the Bank that as to such Company (a) such Company
has legal power and authority to execute and deliver the within
Amendment; (b) the officer executing the within Amendment on
behalf of such Company has been duly authorized to execute and
deliver the same and bind such Company with respect to the
provisions provided for herein; (c) the execution and delivery
hereof by such Company and the performance and observance by
such Company of the provisions hereof do not violate or conflict
with the articles of incorporation, regulations or by-laws of
such Company or any law applicable to such Company or result in
the breach of any provision of or constitute a default under any
agreement, instrument or document binding upon or enforceable
against such Company; and (d) this Amendment constitutes a valid
and legally binding obligation upon such Company in every
respect.
31. Counterparts. This Amendment may be executed in two or
more counterparts, each of which, when so executed and
delivered, shall be an original, but all of which together shall
constitute one and the same document. Separate counterparts may
be executed with the same effect as if all parties had executed
the same counterparts.
32. Governing Law. This Amendment shall be governed by and
construed in accordance with the law of the State of Ohio.
IN WITNESS WHEREOF, the Companies and the Bank have hereunto
set their hands as of the date first set forth above.
THE BORROWER:
INTRENET, INC.
By: /s/Roger T. Burbage
Its: Chief Financial Officer, Secretary and Treasurer
THE SUBSIDIARIES:
ADVANCED DISTRIBUTION SYSTEM, INC.
By: /s/Roger T. Burbage
Its: Vice President and Assistant Secretary
ECK MILLER TRANSPORTATION CORPORATION
By: /s/Roger T. Burbage
Its: Vice President and Assistant Secretary
INET LOGISTICS, INC.
By: /s/Roger T. Burbage
Its: Vice President, Secretary and Treasurer
MID-WESTERN TRANSPORT, INC.
By: /s/Roger T. Burbage
Its: Vice President, Secretary and Treasurer
ROADRUNNER ENTERPRISES, INC.
By: /s/Roger T. Burbage
Its: Vice President and Assistant Secretary
ROADRUNNER TRUCKING, INC.
By: /s/Roger T. Burbage
Its: Vice President and Assistant Secretary
ROADRUNNER DISTRIBUTION SERVICES, INC.
By: /s/Roger T. Burbage
Its: Vice President and Assistant Secretary
ROADRUNNER INTERNATIONAL SERVICES, INC.
By: /s/Roger T. Burbage
Its: Vice President and Assistant Secretary
THE BANK:
THE HUNTINGTON NATIONAL BANK
By: /s/Bill Frazier
Its: Vice President
COLUMBUS/0419132.02
<TABLE>
INTRENET, INC.
STATEMENT RE: COMPUTATION
OF PER SHARE EARNINGS
<CAPTION>
Three Months Ended March 31,
1998 1997
<S> <C> <C>
Weighted average shares outstanding during period 13,549,221 13,437,804
Assumed exercise of options and warrants 375,872 139,624
Shares assumed for fully diluted earnings per share 13,925,093 13,577,428
Earnings for the period:
($ in Thousands)
Net earnings (loss) $ 388 $ (252)
Earnings per common and common
equivalent share:
Basic: $ 0.03 $ (0.02)
Diluted: $ 0.03 $ (0.02)
Exhibit 11
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000778161
<NAME> INTRENET, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 813
<SECURITIES> 0
<RECEIVABLES> 31,550
<ALLOWANCES> 1,130
<INVENTORY> 0
<CURRENT-ASSETS> 38,070
<PP&E> 29,258
<DEPRECIATION> 0
<TOTAL-ASSETS> 77,254
<CURRENT-LIABILITIES> 31,103
<BONDS> 21,488
0
0
<COMMON> 16,856
<OTHER-SE> 5,007
<TOTAL-LIABILITY-AND-EQUITY> 77,254
<SALES> 0
<TOTAL-REVENUES> 60,676
<CGS> 0
<TOTAL-COSTS> 59,392
<OTHER-EXPENSES> 105
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 660
<INCOME-PRETAX> 519
<INCOME-TAX> 131
<INCOME-CONTINUING> 388
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 388
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
