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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION
OF SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
Gasel Transportation Lines, Inc.
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Ohio 31-1239328
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(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization
County Road 10 , Route 4, Box 181A
Marietta, Ohio 45750
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(Address of principal executive offices) (Zip Code)
(740) 373-6479
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Issuer's Telephone number
Securities to be registered pursuant to Section 12(b) of the Act
Title of each class Name of each exchange on which registered
-------------------------- ----------------------------------
-------------------------- ----------------------------------
Securities to be registered pursuant to Section 12(g) of the Act.
Common, no par value
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(Title of Class)
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(Title of Class)
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ITEM 1. DESCRIPTION OF BUSINESS.
Gasel Transportation Lines, Inc. (the "Company") is a corporation that was
organized under the laws of the State of Ohio on January 27, 1988. The Company
was initially formed for the purpose of becoming a transportation freight broker
hauling freight under the authority of other motor carriers on a commission
basis with its sole offices located in Marietta, Ohio. Shortly after its
inception, the Company evolved its business to obtain licensing with the
Interstate Commerce Commission ("ICC") as a common and contract general
commodities motor freight carrier in the 48 contiguous United States and Canada
and to operate its own tractors and trailers. In September 1988, the Company
received licensing from the ICC authorizing it to transport in interstate
commerce both as a common and contract carrier, and the Company obtained
licenses in the 48 contiguous United States to operate under such licenses.
Shortly thereafter, the Company sought approval to operate in Canada, and it was
licensed to operate there, too. The Company also maintains its authority to
broker freight. In December, 1995, the ICC ceased operations and its regulatory
functions and jurisdiction over motor carriers was transferred to the United
States Department of Transportation.
In July, 1995, the Company acquired a trucking terminal and offices on County
Road 10, Rt. 4, Box 181A, Marietta, Ohio. This facility is now the principal
office and main terminal for the Company. The actual mailing address is P.O. Box
1199, Marietta, Ohio 45750, and the telephone is (740) 373-6479.
In July, 1996, the Company acquired the assets of a Florida based trucking
company, Earl W. Kersey Trucking, Inc. that included a terminal and offices
located on Highway 301 N, Dade City, Florida. During 1999, the Company purchased
5 acres of land adjoining the Dade City, Florida terminal.
The Company operates primarily as a truckload contract carrier with various
customers which ship truckload quantities of freight from one point to another.
As a contract carrier, the freight rates are negotiated with the shipper and are
dependent upon competition, place of origin and destination, and the type of
commodity being hauled. Most trips start in the area of one of the Company owned
terminals as most of the tractors are based out of these terminals.
Additionally, the Company has small offices in Paulsboro, New Jersey, and until
very recently also had them in Houston, Texas and Peru, Illinois, from where a
few tractors were based. Most of the Company freight lanes are located between
the terminal areas, although the Company regularly operates hauling freight to
the West Coast and back-hauls fruits and vegetables from there to the East
Coast. The Company uses many refrigerated trailers on these trips so that it can
facilitate this part of its business. In addition to its primary business, the
Company operates two driver training schools, one located in Marietta, Ohio and
one in Nelsonville, Ohio. Operation of these schools is licensed by the Ohio
Department of Highway Patrol.
The Company has had a steady growth in revenues and owned equipment over the
past five years. During that time it has increased the number of owned, either
directly or by capital lease, tractors from 23 to its current number of 103, its
dry van box trailers from 31 to 102, and its refrigerated climate control
trailers from 11 to 52. Annual freight revenues went from $3,325,606 for
calendar year 1994 to $11,197,869 for calendar year 1999, which represents
average annual revenue growth of 47%.
The Company recently announced that it has completed its ISO 9002 certification
by American Systems Registrar. This certification means that the Company has
been audited and verified to have written policies and procedures for everything
that the Company does, plus a backup procedure in the event of a failure. The
Company also announced that it will be opening another driver training school in
Sandusky, Ohio, and that school will commence operations in mid March of 2000.
The Company is in direct competition with other motor freight carriers,
including many companies that are significantly larger than the Company. The
Company is able to compete with these other carriers by having its terminals,
together with equipment that is based out of them, located in areas where there
are fewer competitors domiciled, by attempting to provide better and more timely
service, by operating new and specialized equipment, and by catering to certain
major shippers. Although only one shipper accounted for more than 10% of Company
revenues in 1999, the top ten customers accounted for better than 60% of the
Company revenues.
As a licensed carrier with the U. S. Department of Transportation and the
various states and Canada, the Company business is dependent upon maintaining
such operating authority. One condition of retaining such authority is that the
Company must maintain liability insurance for protection of the public. Another
is that
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the Company meet the safety fitness regulations as evidenced by a
"satisfactory" by the U. S. Department of Transportation.
Each of the owned terminals are required to comply with various state and
federal environmental regulations with regard to the storage of fuel and oil and
the disposal of waste oil and tires. There is no significant cost associated
with operating under these regulations; however, in the event of a major fuel or
oil spillage, the cost of clean up could be significant.
The Company does not have any employees that work for it directly because it
leases all of them from PeopLease Corporation. As of February 25, 2000, there
were 105 leased drivers, 12 yard and shop personnel, and 20 office and clerical
personnel, including corporate officers who work in those areas.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
During the past two years, being 1998 and 1999, Company revenues continued to
grow as the result of purchasing and operating additional transportation
equipment. Freight revenues increased 20.8% in 1998 from 1997, and by 45.4% from
1998 through 1999. However, the gross profit margins went from 8.2% in 1998 to
6.7% in 1999, which helped account for the decrease in net income before taxes
from $357,233 in 1998 to $150,697 in 1999. As new tractors were purchased, there
were fuel economies recognized over operating older equipment, but generally the
cost of purchasing new equipment has continued to increase annually, which has
driven up the cost of financing the equipment. However, the Company was able to
purchase 20 new Freightliner tractors in late 1999 for the same price as those
it purchased in 1998. The increase in equipment did result in increased interest
expense of $186,996 from 1998 to 1999.
To date, the ability of the Company to operate has been dependent on its ability
to finance the purchase of its rolling stock, i.e., its tractors and trailers,
from outside lending sources at approximately 100% of acquisition costs, and to
fund operations through the borrowing of funds from lending institutions
utilizing the accounts receivable as collateral. The Company currently has in
place a line of credit of up to $2,000,000 available for financing its
receivables, which management believes is adequate to handle current and the
immediate future needs.
Because most of the transportation equipment is financed, the Company has very
significant monthly payments that must be made. The result of heavily financing
the equipment is that the cash flow from operating profits of the Company is
required to make the payments. Acquiring additional new equipment is also a cash
requirement because of licensing and other costs that cannot be financed. The
amount of depreciation on the equipment that is taken on the financial
statements correlates to being a significant portion of the principal
amortization on the equipment loans from a cash flow standpoint. However, it
does not totally provide cash for such needs and the Company generally needs to
show operating profits before tax of at least $350,000 per year to make such
payments without having to obtain capital from other sources. To the extent that
operating profits are not available, the Company must obtain such funds through
additional capitalization, sales of equipment, refinancing of equipment or other
borrowings.
For the year 2000, the Company has an even greater need for capital because some
of its loans for equipment had balloon payments coming due during the year. The
Company was able to refinance these loans over more than the current year, so
that capital need has already been satisfied.
The cost of drivers wages and benefits have been steadily increasing over the
past two years as the Company has had to compete with others in the trucking
industry to hire new or retain existing drivers, and these increased costs have
had a negative impact on earnings.
More recently, fuel costs have gone up dramatically from early 1999 and
especially in the beginning of 2000, and have caused the Company to operate at a
loss since October, 1999. These losses have been a cash drain on the Company and
have reduced the Company's available working capital to a minimum. The Company
has tried to combat these fuel cost increases with freight surcharges, but they
have not yet been able to keep up with them. In order to continue operations,
the Company is going to either need to borrow additional working capital, need
to operate at a profit to generate working capital, or need to raise additional
capital. Otherwise, the Company may need to sell off equipment to generate
working capital, which may not be feasible if the market for used equipment is
not good. Because of the fuel price increases,
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the trucking industry is suffering and many companies are going out of
business, which has caused the market for used equipment to be reduced.
If the cost of fuel comes under control and gets reduced, the prospects for
the Company to generate profits and working capital continue to be good. The
shippers for whom the Company hauls have prospects of continuing their
growth, and the Company believes that it has adequate equipment to service
them. With the amount of equipment that the Company now operates, the fixed
operating costs are now believed to be spread over a sufficient number so
that the Company can operate more profitably than in the past years.
ITEM 3. DESCRIPTION OF PROPERTY.
The principal offices and terminal for the Company are Company owned and located
on 12.5 acres adjacent to State Route 4, approximately 4 miles southwest of
Marietta, Ohio. The property has four buildings on it, the major one of which is
constructed of cement block and steel, is in good condition, and has the
corporate offices, a drivers lounge, and three maintenance bays located therein.
Other buildings include a freight transfer building made out of steel that is in
fair to good condition, a wood building for the drivers school and lounge that
was recently remodeled and is in good condition, and a cement block supply
storage building that is in good condition. The lot is used for parking the
Company transportation equipment and for operating a driving school practice
area.
The other major terminal operated by the Company is at the Company owned
facility in Dade City, Florida. There is a pre-engineered steel terminal and
office building located thereon that has three maintenance bays as well as
offices and supply storage. The building is in good condition. The total area
for this facility is 8.5 acres.
The Marietta, Ohio terminal has above ground fuel storage that is regulated by
the EPA. Additionally, both terminals have waste oil storage facilities that are
also regulated.
Both properties are subject to mortgages with the usual conditions that the
Company is entitled to use of the properties for its business needs so long as
they are operated in a lawful manner and the mortgage notes are paid and not in
default. There are no other operating or use restrictions.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a). The following is a table of all persons known to the Company to be the
beneficial owner of more than 5% of the Company's voting securities.
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TITLE OF CLASS NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF CLASS
BENEFICIAL OWNER BENEFICIAL OWNER
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<S> <C> <C> <C>
Common shares Michael J. Post 1,450,544(1) 59.8
118 Merryhill Street
Marietta, Ohio 43750
- ---------------------------- -------------------------- -------------------------- --------------------------
</TABLE>
(1) Includes 4,100 shares held by Mrs. Lee Post, the mother of Michael J. Post,
7,900 shares held by the Company and options to acquire 186,000 shares.
(b). The following is a table setting forth for management the beneficial
ownership of the voting securities of the Company as of February 22, 2000.
<TABLE>
<CAPTION>
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TITLE OF CLASS NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF CLASS
BENEFICIAL OWNER BENEFICIAL OWNER
- ---------------------------- -------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
Common shares Michael J. Post 1,450,544(1) 59.8
118 Merryhill Street
Marietta, Ohio 43750
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Common shares Allan M. Blue 110,448(2) 4.8
1130 Berlin Station Rd.
Delaware, Ohio 43015
- ---------------------------- -------------------------- -------------------------- --------------------------
Common shares Ronald K. Bishop 69,272(3) 3.0
305 Ohio Street
Marietta, Ohio 45750
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<S> <C> <C> <C>
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Common shares John Jackson 45,780 2.0
Route 2, Box 344
Belpre, Ohio 45714
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Common shares Directors and officers 1,676,044(4) 65.8
as a group
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</TABLE>
(1) Includes 4,100 shares held by Mrs. Lee Post, the mother of Michael J.
Post, 7,900 shares held by the Company and options to acquire 186,000 shares.
(2) Includes 26,420 shares held by Joyce M. Blue, wife of Allan M. Blue, and
options to acquire 62,000 shares.
(3) Includes options to acquire 62,000 shares.
(4) Includes options to acquire 310,000 shares.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The Officers and Directors of the Company are as follows:
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Name Age Position With Company
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Michael J. Post 53 Chief Executive Officer, President, Treasurer, and
Director
John Jackson 54 Executive Vice President, Secretary, and General
Manager
Sherman E. Crum 32 Assistant Vice President-Administration
Fred E. Malone 33 Assistant Vice President-Fleet Maintenance
David R. Pierce 49 Assistant Vice President-Safety
Allan M. Blue 58 Director and Assistant Secretary
Ronald K. Bishop 47 Director
</TABLE>
Michael J. Post has been in all of such capacities from the formation of the
Company in January 1988 to date. He also serves as a board member of Selby
General Hospital, Marietta, Ohio.
John Jackson has been involved in such capacities since the formation of the
Company in 1988.
Sherman E. Crum has been with the Company in charge of office administration
since August 8, 1994. In July, 1999 he was promoted to his current executive
position.
Fred E. Malone has been with the Company in charge of fleet maintenance since
July, 1995. In July, 1999, he was promoted to his position as an assistant
vice president.
David R. Pierce has been with the Company in various capacities since September
1988, including being in charge of driver safety and compliance. In July, 1999,
he was elected to his position as Assistant Vice President of Safety.
Allan M. Blue has been a director since 1995 and Assistant Secretary since 1997.
Mr. Blue is a practicing attorney in the Columbus Ohio area where he has been
engaged in private law practice since 1971. In addition to practicing law, Mr.
Blue is actively engaged in several businesses as owner, officer, and director.
These businesses include The Oak Furniture Showroom, Inc., Held Team
Partnership, d/b/a Hold More Self Storage, Capitol Stock Transfer Company and
Team Investors, Ltd.
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Ronald K. Bishop, Director since 1994. Since 1987, he has worked for Bennco
Incorporated as General Manager of 3 radio stations, WDMX, WNUS, and WLTP, in
Parkersburg, West Virginia; recently he also became General Manager of 2
additional stations, WRVB, and WRZZ. He also serves as a board member of Selby
General Hospital, Marietta, Ohio, Ohio Valley Chamber of Commerce, and for the
Marietta Community Foundation, Easter Seals and the American Heart Association
in the Marietta area.
The position of director is for a one year term and until a successor is
elected.
ITEM 6. EXECUTIVE COMPENSATION.
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SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
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ANNUAL COMPENSATION AWARDS
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Name and Principal Year Salary Securities Underlying Options/SAR
Position
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<S> <C> <C> <C>
Michael J. Post, President 1997 $39,480 126,000(1)
1998 $49,742 60,000(2)
1999 $63,750(3)
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(1) Adjusted for a 5% stock dividend and two 2 for 1 stock splits.
(2) Adjusted for two 2 for 1 stock splits.
(3) In addition, the Company provides a 1998 Lincoln Navigator sport utility
vehicle for use by Michael J. Post; because he uses the vehicle primarily for
Company business, no value is assigned as compensation for use of the vehicle.
The Company pays its Directors' a fee of $250.00 for each meeting
attended. The Company's Code of Regulations authorizes the Board of Directors
to fix Directors' compensation without shareholder approval.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Until February 1, 2000, the Company had purchased key man life insurance on
Michael J. Post under a reverse split-dollar arrangement with the owner of the
policy, Michael J. Post. Under this arrangement, the Company owned the life
insurance benefit of $1,000,000 for the years in which it paid premiums in an
amount equal to the P.S. 58 costs, which is an approved Internal Revenue Service
schedule, to Michael J. Post. Any cash value accrued in the policy belongs to
the owner of the policy, Michael J. Post. The Company paid Michael J. Post
premiums of $16,880 in 1998 and $18,287 in 1999.
Michael J. Post, Director, CEO, President, Treasurer, and majority shareholder
of the Company, is the sole shareholder of Zip Services, Inc., a corporation
from which the Company formerly leased its employees and had other business
relationships in the past. At year end 1999, Zip Services, Inc. owed the Company
$61,356, and at year end 1998, $64,856.
In October 1998, the Company purchased from Michael J. Post a 1994 GMC Special
Edition Southern Comfort pickup truck for the then fair market value of $12,200.
Allan M. Blue, Director, also acts as legal counsel for the Company.
The Company has retained Capitol Stock Transfer Company as its transfer agent
and registrar. Allan M. Blue, Director, is a 50% shareholder and President of
such company. The terms of the arrangements between the Company and Capitol
Stock Transfer Company were no less favorable to the Company than could have
been obtained from independent third parties.
ITEM 8. DESCRIPTION OF SECURITIES.
The authorized capitalization of the Company consists of 3,000,000 common shares
without par value, of which 2,237,966 shares are currently issued and
outstanding. Each holder of common shares is entitled to one vote for each share
held on any matter properly submitted to the shareholders for a vote. The
holders of common shares are entitled to receive dividends as declared by the
Board of Directors. Upon liquidation,
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dissolution or winding up of the Company, shareholders are entitled to share
ratably in all assets remaining after payment of all liabilities. The holders
of the common shares do not have any preemptive, subscription, redemption,
conversion, or cumulative voting rights. All common shares now outstanding
are fully paid and non-assessable.
Each common share entitles the holder thereof to receive cash dividends as the
Board of Directors may declare from funds legally available therefor.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDERS MATTERS.
(a) During the past two years, the common shares of the Company have been
traded in the over-the-counter market and been included on the OTC Bulletin
Board under the trading symbol GSEL. The following table sets forth the range
of the high and low bid prices for the common shares of the Company for each
quarter during the past two years, as reported by the The Nasdaq Stock
Market, Inc. These prices reflect inter-dealer prices, without retail
mark-up, mark-down, or commission and may not represent actual transactions.
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Bid Prices
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High Low
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Calendar Year 1999
First Quarter $4.25 $3
Second Quarter $3.75 $2.5
Third Quarter $5 $3
Fourth Quarter $5 $2.75
Calendar Year 1998
First Quarter $5 $3.625
Second Quarter $6.375 $3.25
Third Quarter $3.5 $1.25
Fourth Quarter $7.75 $1.25
</TABLE>
(b) On February 22, 2000, there were 74 shareholders of record of the common
shares. There are also an estimated 120 shareholders who hold their shares in
street name.
(c) The Company has never declared a cash dividend on its common shares and no
assurance can be given that the Company will declare any cash dividend on its
common shares in the future. Payments of dividends are within the discretion of
the Company's Board of Directors and depend upon the earnings, capital
requirements, and operating and financial condition of the Company, among other
factors. The Company currently expects to retain its earnings to finance the
growth of the Company and does not expect to pay cash dividends in the
foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
The Company is a party to routine litigation incidental to its business,
primarily involving claims for personal injury incurred in the transportation
of freight. The amount of the claims are within the policy limits of the
Company liability insurance. The Company is not aware of any claims or
threatened claims that might have a material adverse effect on the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
There have been no changes in Accountants during the past two years, nor have
there been any disagreements with the Accountants in their accounting and
financial presentations regarding the Company.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On October 20, 1998, the Company granted warrants to Merchants Financial for the
right to purchase 25,000 common shares at $5.50 per share. These warrants were
sold to Merchants Financial for $0.50 per warrant, for total compensation of
$12,500. The warrants were purchased for cash without underwriting
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expense. The warrants were issued pursuant to Section 4 (2) of the Securities
Act of 1933, as amended, and Rule 701 promulgated thereunder.
In October, 1998, Merchants Financial exercised warrants to purchase 5,000
shares at $5.50 per share. From January to June, 1999, Merchants Financial
exercised the balance of the warrants and purchased a total of 40,000 common
shares at a price of $2.75 per share, which number of shares and price had been
adjusted to account for a 2 for 1 stock split in December 1998. The shares were
issued pursuant to Regulation D, Rule 504, and a Form D was filed with the
Securities and Exchange Commission. The shares were also registered under Ohio
law.
In June, 1998, Corna Securities, Inc. exercised warrants to purchase 10,749
shares at a price of $4.99 per share. The shares were issued pursuant to
Regulation D, Rule 504, and a Form D was filed with the Securities and Exchange
Commission. The shares were also registered under Ohio law.
In July, 1999, Corna Securities, Inc. exercised warrants to purchase 15,435
shares at a price of $2.27 per share. The shares were issued pursuant to
Regulation D, Rule 504, and a Form D was filed with the Securities and Exchange
Commission. The shares were also registered under Ohio law.
On October 1, 1998, the Company granted options pursuant to the Gasel
Transportation Lines, Inc. 1997 Stock Option Plan for 25,000 common shares to
the directors of the Company at an exercise price of $2.00 per share. Michael
J. Post received options to purchase 15,000 common shares and Allan M. Blue
and Ronald D. Bishop each options to purchase 5,000 common shares. No
consideration was paid for the options. The options were issued pursuant to
the exemption from registration under the Securities Act of 1933, as amended,
set forth in Rule 701 promulgated thereunder.
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Code of Regulations for the Company provides that, in accordance with the
provisions of the Ohio statute, directors are indemnified by the Company
against expenses, judgments, decrees, fines or penalties with respect to any
threatened, pending, or completed action, suit or proceeding, whether civil
or criminal, administrative, or investigative, provided that such director
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Company, and with respect to a criminal
action or proceeding, he had no reasonable cause to believe his conduct was
unlawful. Such indemnification may not be applicable to suits brought by the
Company against the director if he is adjudicated to be negligent or of
misconduct in the performance of his duties to the Company unless the court
shall determine that such person is fairly and reasonably entitled to
indemnification of expenses as the court shall deem proper.
PART F/S
FINANCIAL STATEMENTS
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GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
AUDITED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
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INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Consolidated Balance Sheet 2-3
Statements of Consolidated Income 4
Statements of Consolidated Stockholders' Equity 5-6
Statements of Consolidated Cash Flows 7-8
Notes to Consolidated Financial Statements 9-20
</TABLE>
<PAGE>
VAN KREVEL & COMPANY
Certified Public Accountants
P. O. Box 1432
Dublin, Ohio 43017-6432
614/761-3743
To the Board of Directors and Stockholders
Gasel Transportation Lines, Inc.
Marietta, Ohio
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheet of Gasel
Transportation Lines, Inc., and its subsidiary, as of December 31, 1999, and the
related statements of consolidated income, stockholders' equity and cash flows
for the years ended December 31, 1999 and 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gasel Transportation Lines,
Inc., and its subsidiary, as of December 31, 1999, and the results of their
operations and their cash flows for the years ended December 31, 1999 and 1998,
in conformity with generally accepted accounting principles.
Dublin, Ohio
January 26, 2000
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31, 1999
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 20,612
Accounts Receivable-Trade 1,383,841
Accounts Receivable-Affiliate 61,356
Securities 5,000
Inventory 223,252
Prepaid Licenses 75,808
Prepaid Insurance 58,183
Other Prepaid Expenses 25,077
-----------
Total Current Assets 1,853,129
PROPERTY AND EQUIPMENT
Land and Buildings 983,354
Tractors 8,458,315
Trailers 3,621,918
Shop Equipment 274,149
Office Equipment 141,014
-----------
13,478,750
Less Accumulated Depreciation 4,494,037
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Net Property and Equipment 8,984,713
DEFERRED INCOME TAXES 542,823
OTHER ASSETS
ICC Certificate 4,321
Prepaid Expenses 24,438
Investment 5,000
Deposits 2,712
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Total Other Assets 36,471
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TOTAL ASSETS $11,417,136
===========
</TABLE>
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See accompanying notes to consolidated financial statements.
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES
Note Payable-Bank $ 967,047
Accounts Payable 99,799
Accrued Contract Labor 165,942
Current Portion of Long Term Debt 2,217,776
-----------
Total Current Liabilities 3,450,564
LONG TERM DEBT 4,742,572
DEFERRED INCOME TAXES 1,074,979
Total Liabilities 9,268,115
STOCKHOLDERS' EQUITY
Common Stock, no par value, 3,000,000
shares authorized, 2,237,966 issued
and outstanding 1,277,140
Additional Paid in Capital 227,014
Retained Earnings 728,700
Less: Treasury Stock, at cost, 7,900 shares (17,833)
Less: Notes Receivable (66,000)
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Total Stockholders' Equity 2,149,021
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,417,136
===========
</TABLE>
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See accompanying notes to consolidated financial statements.
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
REVENUES
Freight Income $11,197,869 $8,735,239
Rental Income 14,400 21,000
Training School Revenue 287,603 156,473
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11,499,872 8,912,712
Cost of Revenue 9,255,161 7,136,384
----------- ----------
Gross Profit 2,244,711 1,776,328
OPERATING EXPENSES
Garage Expenses 364,485 205,632
General and
Administrative Expenses 1,107,351 856,823
----------- ----------
1,471,836 1,062,455
Operating Income 772,875 713,873
OTHER INCOME (EXPENSE)
Other Income 40,534 92,192
Interest Income 11,136 15,120
Interest Expense (708,684) (521,688)
Gain on Sale of Equipment 34,836 57,736
----------- ----------
(622,178) 356,640
Income Before Tax Provision 150,697 357,233
Provision for Income Taxes 50,000 127,216
----------- ----------
Net Income $ 100,697 $ 230,017
=========== ==========
Earnings per Weighted
Average Share of
Common Stock Outstanding $ .0885 $ .3779
=========== ==========
Weighted Average
Number of Common
Shares Outstanding 1,137,256 608,708
=========== ==========
</TABLE>
-4-
See accompanying notes to consolidated financial statements.
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Additional
Common Stock Paid in Retained Treasury Notes
------------
Shares Amount Capital Earnings Stock Receivable
-------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1997 491,327 $ 924,025 $ 200,062 $523,505 $ $
Net Income 230,017
Stock Issuance Cost (2,535)
Stock Dividends 25,086 125,430 (125,430)
Dividends Paid (89)
Stock Repurchased (388) (1,940)
Issuance of Warrant, Oct 1998 12,500
Exercise of Nov 1994 Warrant 10,749 53,625
Exercise of Oct 1998 Warrant 5,000 27,500
Stock Split (2 for 1) 531,774
Purchase of 16,049 Shares
Of Treasury Stock (48,013)
Sale of 6,515 Shares of
Treasury Stock 6,368 19,774
--------- ---------- ---------- -------- -------- ---------
Balances, December 31, 1998 1,063,548 $1,128,640 $ 216,395 $628,003 $(28,239) $ --
========= ========== ========== ======== ======== =========
</TABLE>
-5-
See accompanying notes to consolidated financial statements.
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Additional
Common Stock Paid in Retained Treasury Notes
------------
Shares Amount Capital Earnings Stock Receivable
-------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1998 1,063,548 $1,128,640 $216,394 $628,003 $(28,239) $
Net Income 100,697
Exercise of Nov 1996 Warrant 15,435 38,500 (38,500)
Exercise of Oct 1998 Warrant 40,000 110,000 (27,500)
Purchase of 11,457 Shares
of Treasury Stock (46,526)
Sale of 17,041 Shares of
Treasury Stock 10,620 56,932
Stock Split (2 for 1) 1,118,983
--------- ---------- -------- -------- -------- ---------
Balances, December 31, 1999 2,237,966 $1,277,140 $227,014 $728,700 $(17,833) $ (66,000)
========= ========== ======== ======== ======== =========
</TABLE>
-6-
See accompanying notes to consolidated financial statements.
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 100,697 $ 230,017
Adjustments to reconcile net income to
cash provided by operating activities:
Deferred Taxes 50,000 127,216
Depreciation 1,615,219 1,172,393
Gain on Sale of Equipment (34,836) (57,736)
(Increase) Decrease in:
Accounts Receivable-Trade (228,984) (354,337)
Accounts Receivable-Affiliate 3,500 (13,099)
Inventory (85,037) (39,491)
Prepaid Expenses 15,187 (79,510)
Increase (Decrease) in:
Accounts Payable and
Accrued Expenses 181,415 21,360
----------- ----------
Net Cash Provided
by Operating Activities 1,617,161 1,006,813
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Property and Equipment (259,479) (347,262)
Decrease in Certificates of Deposit -- 67,585
Proceeds from Sale of Equipment 118,132 703,414
Purchase of Securities (5,000)
----------- ----------
Net Cash Provided (Used)
by Investing Activities (146,347) 423,737
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds under Line of Credit 11,256,164 6,250,021
Proceeds from Long Term Borrowing -- 225,000
Common Stock Repurchased -- (1,940)
Proceeds from Warrant Exercise
and Sale of Treasury Stock 185,052 77,230
Purchase of Treasury Shares (46,526) (48,013)
Principal Payments on Long
Term Borrowing (1,446,120) (706,630)
Principal Payments on
Line of Credit (10,987,873) (6,038,265)
</TABLE>
-7-
See accompanying notes to consolidated financial statements.
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS (continued)
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Principal Payments Under
Capital Lease Agreements (572,435) (1,072,846)
Dividends Paid -- (89)
----------- ----------
Net Cash Used by
Financing Activities (1,611,738) (1,315,532)
----------- ----------
Net Increase (Decrease) in Cash (140,924) 115,018
Cash & Cash Equivalents-January 1 161,536 46,518
----------- ----------
Cash & Cash Equivalents-December 31 $ 20,612 $ 161,536
=========== ==========
Supplemental Disclosures:
Interest Paid $ 708,684 $ 521,688
=========== ==========
Non-Cash Investing
and Financing Activities
Purchases of Property
and Equipment with
Proceeds of Notes Payable $ 2,211,898 $4,334,613
=========== ==========
Issuance of Stock Warrants
and Common Stock with
Proceeds of Notes Receivable $ 148,500 $ 40,000
=========== ==========
</TABLE>
-8-
See accompanying notes to consolidated financial statements.
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Gasel Transportation Lines,
Inc., and its subsidiary, Gasel Driver Training Schools, Inc., is presented to
assist in understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management who is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
NATURE OF OPERATIONS
The Company is engaged in the trucking industry, acting as a licensed common and
contract general commodities motor freight carrier, handling freight throughout
the continental United States and Canada. The principal offices of the Company
are located in Marietta, Ohio. In addition, the Company has motor terminal and
maintenance facilities located in Marietta, Ohio and Dade City, Florida, and
motor terminals located in Paulsboro, New Jersey, and Peru, Illinois. The
subsidiary is a state-licensed Class A truck driver training school.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts and operations of the
Company and its subsidiary. All significant inter company accounts and
transactions have been eliminated.
REVENUE RECOGNITION
The Company recognizes revenue and direct shipment costs upon delivery of the
related freight.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
-9-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ACCOUNTS RECEIVABLE
No provision for doubtful accounts has been made since all receivables were
considered collectible.
INVENTORY
Inventories consist primarily of maintenance supplies and fuel and are stated at
the lower of cost (first-in, first-out) or market value.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. For financial reporting purposes,
the cost of such property is depreciated principally by the straight-line method
over the estimated useful lives of 3-10 years for tractors and trailers, 40
years for buildings and 3-10 years for shop and office equipment. Amortization
of equipment purchased under capitalized lease obligations is included in
depreciation expense. For tax reporting purposes, accelerated depreciation or
applicable cost recovery methods are used. Gains and losses are recognized in
the year of disposal. Tires purchased with tractors and trailers are capitalized
as a part of the cost of such equipment, with replacement tires being
inventoried and expensed when placed in service.
INCOME TAXES
Deferred income taxes are reported using the liability method. Deferred tax
assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance, when in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
-10-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
EARNINGS PER SHARE
Earnings per share are computed by dividing net income by the weighted average
number of shares issued and outstanding during the reporting period.
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
CREDIT RISK
The Company maintains cash in demand deposit accounts with federally insured
banks. At times, the balances in the accounts may be in excess of federally
insured limits.
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of trade receivables. Credit risk is generally
diversified due to the large number of entities comprising the Company's
customer base and their dispersion across many different industries and
geographic regions.
-11-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 2 - NOTES RECEIVABLE
Notes receivable consists of:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Unsecured notes receivable, dated
October, 1998, Merchants Financial,
10% due on demand $ -- $40,000
Unsecured note receivable, dated
June, 1999, Merchants Financial,
10% due on demand 27,500
Unsecured note receivable, dated
August, 1999, Corna Securities,
10% due on demand 38,500
------- -------
$66,000 $40,000
======= =======
</TABLE>
(See Note 9.)
NOTE 3 - LONG TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Mortgages Payable $ 737,418 $ 759,522
Notes Payable 5,180,986 4,393,103
Capital Lease Obligations 1,041,944 1,614,379
---------- ----------
6,960,348 6,767,004
Less Current Maturities 2,217,776 1,670,650
---------- ----------
$4,742,572 $5,096,354
========== ==========
</TABLE>
-12-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 3 - LONG TERM DEBT (continued)
Notes payable and capitalized lease obligations are collateralized by property
and equipment with a net book value of $7,237,886 at December 31, 1999 and
$6,739,141 at December 31, 1998. The mortgages payable are collateralized by
land and building with a net book value of $831,192 at December 31, 1999, and
$872,205 at December 31, 1998, as well as a first security interest in all shop
and office equipment. One of the mortgages is personally guaranteed by Michael
J. Post, President, CEO, and majority stockholder, and by his wife. Interest
rates range from 7.25 to 10.6% during 1999 and 7.5 to 12.5% during 1998 for the
notes. Rates for the mortgages ranged from 8.25% to 9.0% for 1999 and 8.5% to
1.5% over prime (9.0% at December 31, 1998) in 1998.
Annual maturities on long term debt, excluding capital lease obligations, for
the five years ending after December 31, 1999, are as follows:
<TABLE>
<S> <C>
2000 $1,482,745
2001 1,485,546
2002 1,746,568
2003 556,639
Thereafter 646,906
------------
$5,918,404
============
</TABLE>
NOTE 4 - LINE OF CREDIT AGREEMENT
The Company has available a $2,000,000 line of credit with Associates
Transcapital Services of Irving, Texas at December 31, 1999 and $1,000,000 at
December 31, 1998. At December 31, 1999, $967,047 was outstanding on this line,
with an interest rate of 9.5%. At December 31, 1998, $698,756 was outstanding on
this line, with an interest rate of 9.0%. Interest is charged at 1% over prime
and is due monthly. This line of credit agreement matures in May, 2002, with a
one year renewal. This line of credit is collateralized by accounts receivable
and deposit accounts and is personally guaranteed by the Company's majority
stockholder (see Note 11).
-13-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 5 - LEASES
The Company leases tractors and trailers under leases that expire from 1999
through 2001. These assets are included in property and equipment as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Tractors $2,072,268 $2,072,268
Trailers 530,756 545,543
---------- ----------
2,603,024 2,617,811
Less Accumulated Depreciation (1,211,145) (840,682)
---------- ----------
$1,391,879 $1,777,129
========== ==========
</TABLE>
Future minimum annual lease payments as of December 31, 1999, are as follows:
<TABLE>
<CAPTION>
Capital
Leases
-------
<S> <C>
2000 $ 792,270
2001 325,135
----------
1,117,405
Less amount representing interest
at rates ranging from 6.5 to 9.8% (75,461)
----------
Present value of net minimum
lease payments 1,041,944
Less current portion (735,030)
----------
Total $ 306,914
==========
</TABLE>
During 1999, the Company leased terminals located in Peru, Illinois and
Paulsboro, New Jersey on a month to month basis. Rent expense paid in 1999 was
$42,251 and $32,248 in 1998. In addition, during 1998, the Company leased
terminals in Laredo and Houston, Texas.
-14-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 5 - LEASES (continued)
In August, 1998, the Company entered into a one year employee leasing agreement
with Employee Solutions, Inc., (ESI), an Arizona corporation. ESI provides the
Company with all of its drivers, mechanics and office workers. In 1998, the
Company paid ESI $1,101,722 for its leased employees. In 1999, the Company paid
ESI $4,212,736 for its leased employees.
In December, 1999, the Company entered into a one year employee leasing
agreement with PeopLease Corporation, a South Carolina Corporation. PeopLease
will provide the Company with all of its drivers, mechanics and office workers.
In 1999, the Company made no payments to PeopLease.
NOTE 6 - INCOME TAXES
A summary of the provision for income taxes is as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Deferred-Federal $ 50,000 $ 127,216
========= ==========
</TABLE>
Deferred income taxes are provided for the temporary differences between the
financial reporting basis and the tax basis. The temporary differences that give
rise to the deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Depreciation $3,432,146 $2,154,543
Net operating loss carryforwards 1,719,761 538,300
Contribution carryforwards 13,341 16,080
</TABLE>
The total deferred tax liabilities (assets) are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Deferred tax liabilities $1,074,979 $ 670,645
Deferred tax assets (542,823) (188,489)
---------- ----------
Net deferred tax liability $ 532,156 $ 482,156
========== ==========
</TABLE>
-15-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 7 - STOCKHOLDERS' EQUITY
On April 23, 1998, a 5% stock dividend was declared to stockholders of record as
of May 31, 1998 and payable on June 15, 1998. No fractional shares were issued
in connection with this transaction. Cash of $89 was paid to whose stockholders
who would otherwise have received fractional shares. The dividends were deducted
from retained earnings based on an estimated fair value of $5.00 per share. As a
result of the stock dividend, 25,086 shares were issued in 1998.
On October 1, 1998, the Company authorized a 2 for 1 stock split for
stockholders of record at November 1, 1998, and payable December 1, 1998.
On November 26, 1999, the Company authorized a 2 for 1 stock split for
stockholders of record at December 10, 1999 and delivered the split shares on
December 20, 1999.
NOTE 8 - STOCK OPTIONS
The Company has adopted a stock option plan which provides for the granting of
options to certain officers, directors and key employees of the Company.
Currently, options for 310,000 shares of common stock have been issued under
this plan. The option price, number of shares and grant date are determined at
the discretion of the Company's board of directors. Options are
non-transferable.
A summary of option transactions during the years ended December 31, 1999 and
1998,is shown below:
<TABLE>
<CAPTION>
Weighted
Average
No. of Exercise
Shares Price
-------- --------
<S> <C> <C>
Outstanding at January 1, 1998 50,000 $4.00
Granted 25,000 2.00
Exercised -- --
Canceled -- --
Stock Split & Dividend 80,000 --
------- -----
Outstanding at December 31, 1998 155,000 $1.61
</TABLE>
-16-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 8 - STOCK OPTIONS (continued)
<TABLE>
<S> <C> <C>
Outstanding at January 1, 1999 155,000 $1.61
Granted -- --
Exercised -- --
Canceled -- --
Stock Split 155,000
------- -----
Outstanding at December 31, 1999 310,000 $ .81
======= =====
Exercisable at December 31, 1999 310,000 $ .81
======= =====
</TABLE>
NOTE 9 - WARRANTS
As part of the November, 1994 securities offering, the underwriter was granted
warrants to purchase 4,875 shares of common stock at $11.00 per share. Under
this agreement, warrants to purchase 10,749 equivalent shares at $4.99 were
exercised in June, 1998 for a total of $53,625.
As part of the July, 1996 securities offering, the underwriter was granted
warrants to purchase 7,000 shares of common stock at $5.50 per share. Under this
agreement, warrants to purchase 15,435 equivalent shares of common stock at
$2.49 were exercised in August, 1999, by executing a 10% cognovit demand note in
the amount of $38,500, of which $38,500 was outstanding at December 31, 1999.
As part of a consulting agreement dated October, 1998, Merchants Financial
purchased a warrant at $.50 per share for the right to purchase 25,000 shares of
the Company's common stock at a purchase price of $5.50 per share, such warrant
to be exercisable within one year of the issuance of the warrant. A 10% cognovit
demand note in the amount of $12,500 was executed on October 20, 1998. In
addition, Merchants Financial exercised the option to acquire 5,000 shares of
common stock on October 28, 1998, by executing a 10% cognovit demand note in the
amount of $27,500. Under this agreement, cognovit notes totaling $40,000 were
outstanding at December 31, 1998.
-17-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 9 - WARRANTS (continued)
Subsequent to a stock split in November, 1998, there were 40,000 common shares
available under the consulting agreement dated October, 1998. During 1999,
Merchants Financial acquired 40,000 shares of the Company's common stock by
executing cognovit demand notes totaling $110,000. At December 31, 1999, $27,500
of these cognovit notes were outstanding.
NOTE 10 - 401(k) PLAN
The Company terminated its 401(k) profit sharing plan in 1998. The Company made
no contributions to the Plan for the year ended December 31, 1998.
NOTE 11 - RELATED PARTY TRANSACTIONS
In 1999, the Company paid $18,287 in life insurance premiums on a key man
life insurance policy on the president, Michael J. Post. This policy is owned
by Michael J. Post. Premiums for 1998 totaled $16,880.
Michael J. Post, President and majority stockholder of the Company, is the
sole stockholder of Zip Services, Inc., a West Virginia Corporation from
which the Company leased its tractor drivers. Zip Services, Inc., charged the
Company for the leased drivers approximately the same amount as its costs for
such drivers.
At December 31, 1999 and 1998, the Company had accounts receivable due from
Zip Services in the amounts of $61,356 and $64,856, respectively.
In September, 1998, the Company discontinued its leasing arrangement with Zip
Services, Inc. (See Note 5.)
During 1998, the Company paid Zip Services, Inc., $1,700,925 for the leasing of
drivers.
-18-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 12 - MAJOR CUSTOMERS
During 1999, the Company had one major customer, sales to which exceeded 10% of
the Company's total sales. Sales to this customer totaled $1,639,082 for the
year ended December 31, 1999.
During 1998, the Company had two major customers, sales to each of which
exceeded 10% of the Company's total sales. Sales to these customers totaled
$3,412,785, for the year ended December 31, 1998.
NOTE 13 - FUEL AVAILABILITY AND COST
The Company is dependent upon the availability of diesel fuel. Increases in the
cost of fuel may, in the future, adversely affect the profitability of the
Company. There can be no assurance that diesel fuel prices will not increase.
There also can be no assurance that the Company will be able to recover any
future increase in fuel costs and fuel taxes through increased freight rates.
NOTE 14 - DRIVERS
The Company offers a driver training program through its subsidiary's operations
which offers incentives to attract and retain qualified drivers. Although the
Company has experienced no significant downtime due to inability to secure
qualified drivers, no assurance can be given that a shortage will not adversely
affect the Company in the future.
NOTE 15 - CONTINGENCIES
The Company is subject to various other claims, legal proceedings and
investigations covering a wide range of matters that may arise in the ordinary
course of business. In the opinion of management, all such matters are
adequately covered by insurance or accruals, and if not so covered, are without
merit or are of such kind or involve such amounts, as would not have a
significant effect on the financial position or results of operations of the
Company, if disposed of unfavorably.
-19-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 16 - SUBSEQUENT EVENT
On January 3, 2000, the Company financed the purchase of (20) 2000 Freightliner
units for $1,787,500.
-20-
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
3(a). Articles of Incorporation as Amended.
3(b). Code of Regulations as Amended.
10(a) Employee Lease Agreement with PeopLease Corporation.
10(b) Transportation Accounts Financing and Security Agreement with
Associates Transcapital Services.
10(c) Company Stock Option Plan.
10(d) Standard Form of Director Stock Option.
10(e) Agreement with Merchants Financial for the promotion of Company and
its common shares.
11 See Note 1 to the Financial Statements.
21 List of Subsidiary Corporations.
27. Financial Data Schedule
ITEM 2. DESCRIPTION OF EXHIBITS.
9
<PAGE>
3(a). Articles of Incorporation as Amended.
3(b). Code of Regulations as Amended.
10(a) Employee Lease Agreement with PeopLease Corporation.
10(b) Transportation Accounts Financing and Security Agreement with
Associates Transcapital Services.
10(c) Company Stock Option Plan.
10(d) Standard Form of Director Stock Option.
10(e) Agreement with Merchants Financial for the promotion of Company and its
common shares.
11 See Note 1 to the Financial Statements.
21 List of Subsidiary Corporations.
27. Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto authorized.
Gasel Transportation Lines, Inc.
-----------------------------------------
(Registrant)
Date: March 28, 2000 By: /s/ Michael J. Post
------------------------------ --------------------------------------
Print name and title of person signing
Michael J. Post, President
10
<PAGE>
ARTICLES OF INCORPORATION
OF
GASEL TRANSPORTATION LINES, INC.
The undersigned, desiring to form a corporation for profit under
Sections 1701.01 et seq. of the Revised Code of Ohio, does hereby certify:
FIRST; The name of said corporation shall be GASEL TRANSPORTATION
LINES, INC.
SECOND: The place in Ohio where its principal office is to be
located is Marietta, Washington County.
THIRD: The purposes for which it is formed are:
To engage in any lawful act or activity for which corporations may
be formed under Sections 1701.01 to 1701.98, inclusive, of the Ohio
Revised Code.
FOURTH: The number of shares which the corporation is authorized to
have outstanding is Seven Hundred Fifty (750) shares, all of which shall be
common shares without par value.
FIFTH: The corporation, through its Board of Directors, shall have the
right and power to repurchase any of its outstanding shares at such price and
upon such terms as may be agreed upon between the corporation and the selling
shareholder or shareholders.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 27th day
of January, 1988.
GASEL TRANSPORTATION LINES. INC.
/s/ M. J. POST
-------------------------------
<PAGE>
CERTIFICATE OF AMENDMENT TO
ARTICLES OF INCORPORATION
OF GASEL TRANSPORTATION LINES, INC
Michael J. Post, President of Gasel Transportation Lines, Inc., an
Ohio corporation with its principal office located in Washington County,
Ohio, does hereby certify that a meeting of the shareholders was duly called
for the purpose of adopting these Amended Articles of Incorporation and held
on October 14, 1994, at which meeting a quorum of shareholders was present in
person or by proxy, and by the affirmative vote of the holders of shares
entitling them to exercise 100% of the voting power of the Corporation, the
following amendment was adopted to supersede and to take the place of the
existing Article Fourth to the Articles of Incorporation:
"FOURTH: The maximum number of shares of all classes which the
corporation is authorized to have outstanding is 250,000 common shares without
par value.
No holder of stock in this corporation shall be entitled as of right
to subscribe for any part of any stock of the corporation to be issued under
the authorization contained in these Articles of Incorporation or by reason
of any increase of authorized capital stock of the corporation. It shall be
optional with the Board of Directors as to how and to whom any such shares
shall be sold."
IN WITNESS WHEREOF, the above-named officer, acting for and on
behalf of the Corporation, has subscribed his name this 14 day of October,
1994.
Gasel Transportation Lines, Inc.
By /s/ Michael J Post
---------------------------
Michael J Post, President
By /s/ John Jackson
---------------------------
John Jackson, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT TO
ARTICLES OF INCORPORATION
OF GASEL TRANSPORTATION LINES, INC
Michael J. Post, President, and John Jackson, Secretary of Gasel
Transportation Lines, Inc., an Ohio corporation with its principal office
located in Washington County, Ohio, does hereby certify that a meeting of the
shareholders was duly called for the purpose of adopting these Amended
Articles of Incorporation and held on April 30, 1996, at which meeting a
quorum of shareholders was present in person or by proxy, and by the
affirmative vote of the holders of shares entitling them to exercise 100% of
the voting power present at the meeting, the following amendment was adopted
to supersede and to take the place of the existing Article Fourth to the
Articles of Incorporation:
"FOURTH: The maximum number of shares of all classes which the
corporation is authorized to have outstanding is 500,000 common shares without
par value.
No holder of stock in this corporation shall be entitled as of right
to subscribe for any part of any stock of the corporation to be issued under
the authorization contained in these Articles of Incorporation or by reason
of any increase of authorized capital stock of the corporation. It shall be
optional with the Board of Directors as to how and to whom any such shares
shall be sold."
IN WITNESS WHEREOF, the above-named officers, acting for and on
behalf of the Corporation, has subscribed his name this 2nd day of May 1996.
Gasel Transportation Lines, Inc.
Michael J. Post, President
John Jackson, Secretary
/s/ Michael J. Post
<PAGE>
CERTIFICATE OF AMENDMENT TO
ARTICLES OF INCORPORATION
OF GASEL TRANSPORTATION LINES. INC
Michael J. Post, President, and John Jackson, Secretary of Gasel
Transportation Lines, Inc., an Ohio corporation with its principal office
located in Washington County, Ohio, does hereby certify that a meeting of the
shareholders was duly called for the purpose of adopting these Amended
Articles of Incorporation and held on May 22,1997, at which meeting a quorum
of shareholders was present in person or by proxy, and by the affirmative
vote of the holders of shares entitling them to exercise 100% of the voting
power present at the meeting, the following amendment was adopted to
supersede and to take the place of the existing Article Fourth to the
Articles of Incorporation:
"FOURTH: The maximum number of shares of all classes which the
corporation is authorized to have outstanding is 1,500,000 common shares,
without par value.
No holder of stock in this corporation shall be entitled as of right
to subscribe for any part of any stock of the corporation to be issued under
the authorization contained in these Articles of Incorporation or by reason
of any increase of authorized capital stock of the corporation. It shall be
optional with the Board of Directors as to how and to whom any such shares
shall be sold."
IN WITNESS WHEREOF, the above-named officers, acting for and on behalf
of the Corporation, have subscribed their names this 22nd day of May, 1997.
Gasel Transportation Lines, Inc.
By /s/ Michael J. Post
-------------------
Michael J. Post, President
By /s/ John Jackson
-------------------
John Jackson, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT TO
ARTICLES OF INCORPORATION
OF GASEL TRANSPORTATION LINES, INC
Michael J. Post, President, and Allan M. Blue, Assistant Secretary
of Gasel Transportation Lines, Inc., an Ohio corporation with its principal
office located in Washington County, Ohio, does hereby certify that a meeting
of the shareholders was duly called for the purpose of adopting these Amended
Articles of Incorporation and held on July 19,1999, at which meeting a quorum
of shareholders was present in person or by proxy, and by the affirmative
vote of the holders of shares entitling them to exercise 100% of the voting
power present at the meeting, the following amendment was adopted to
supersede and to take the place of the existing Article Fourth to the
Articles of Incorporation:
"FOURTH: The maximum number of shares of all classes which the
corporation is authorized to have outstanding is 3,000,000 common shares,
without par value.
No holder of stock in this corporation shall be entitled as of right
to subscribe for any part of any stock of the corporation to be issued under
the authorization contained in these Articles of Incorporation or by reason
of any increase of authorized capital stock of the corporation. It shall be
optional with the Board of Directors as to how and to whom any such shares
shall be sold."
IN WITNESS WHEREOF, the above-named officers, acting for and on
behalf of the Corporation, have subscribed their names this 26th day of
November, 1999.
Gasel Transportation Lines, Inc.
/s/ Michael J. Post
- -------------------
Michael J. Post. President
/s/ Allan M. Blue
-----------------
Allan M. Blue, Assistant Secretary
<PAGE>
CODE OF REGULATIONS
OF
GASEL TRANSPORTATION LINES, INC.
ARTICLE 1. MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING. An Annual Meeting of the shareholders for
the election of directors, the consideration of the reports to be laid before
such meeting and the transaction of such other business as may come before
the meeting, shall be held in the month of April of each year on such day and
at such hour as determined by the Board of Directors. When the Annual Meeting
is not held or directors are not elected thereat, they may be elected at a
Special Meeting called and held for that purpose.
SECTION 2. SPECIAL MEETINGS. A Special Meeting of the shareholders
may be called by the President, or a Vice President, or by a majority of the
members of the Board of Directors acting with or without a meeting, or by the
persons who hold 25% of all outstanding shares entitled to vote thereat. Upon
the request in writing delivered to the President or Secretary by any persons
entitled to call a meeting of Shareholders, it shall be the duty of the
President or Secretary to give notice to Shareholders and if such request be
refused, then the persons making such request may call a meeting by giving
notice in the manner provided herein.
SECTION 3. PLACE OF MEETING. The meetings of Shareholders shall be
held at such place within or without the State of Ohio as may be designated
in the notice of the meeting. If no designation is made, the place of meeting
shall be the principal office of the Corporation in the State of Ohio.
SECTION 4. NOTICE OF MEETINGS. Written or printed notice stating the
place, date and hour of the meeting shall be delivered not less than seven
nor more than forty days before the date of the meeting, either personally
<PAGE>
or by mail, by or at the direction of the President or the Secretary or the
officer or persons calling the meeting, to each shareholder of record
entitled to vote at such meeting. If mailed, such notice shall be delivered
or deposited in the United States mail, addressed to the shareholder at the
address as it appears on the stock transfer books of the Corporation, with
postage thereon prepaid. In the event of the transfer of shares after notice
has been given and prior to the holding of the meeting, it shall not be
necessary to serve notice upon the transferee. If any meeting is adjourned to
another time or place, no further notice as to such adjourned meeting need be
given, other than by announcement at the meeting at which such adjournment is
taken.
SECTION 5. QUORUM. The shareholders present in person or by proxy at
any meeting for the election of directors shall constitute a quorum for that
purpose. To constitute a quorum at any meeting of shareholders for any other
purpose, there shall be present, in person or by proxy, the holders of shares
entitling them to exercise a majority of the voting power. Less than such
majority may adjourn the meeting of shareholders from time to time and at any
such adjourned meeting any business may be transacted as if the meeting had
been held as originally called.
SECTION 6. CLOSING OF TRANSFER BOOKS. The Share Transfer Books of
the corporation may be closed by order of the Board of Directors for a period
not exceeding ten days prior to any meeting of shareholders and for a period
not exceeding ten days prior to the payment of any dividend.
SECTION 7. PROXY. Any shareholder entitled to vote at a meeting of
shareholders may be represented and vote thereat by proxy appointed by an
instrument in writing subscribed by such shareholder or by his duly
<PAGE>
authorized attorney and submitted to the Secretary at or before such meeting.
ARTICLE II. BOARD OF DIRECTORS
SECTION 1. NUMBER AND TENURE. The number of directors of the
corporation shall be determined from time to time by the shareholders
entitled to vote but shall not be less than three, provided that where all
shares are owned of record by one or two shareholders, the number of
directors may be less than three but not less than the number of
shareholders. The election of directors shall be held at the Annual Meeting
of the shareholders or at a Special Meeting called for that purpose. No
director need be a shareholder. Each director shall hold office until the
next Annual Meeting of shareholders following his election and until his
successor shall have been elected and qualified.
SECTION 2. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held immediately after and at the same place as the First
Meeting of Shareholders. The Board of Directors may provide, by resolution,
the time and place within or without the State of Ohio for the holding of
additional regular meetings without other notice than such resolution.
SECTION 3. SPECIAL MEETINGS. Special Meetings of the Board of
Directors may be called by or at the request of the President or any two
directors. The person or persons authorized to call the special meeting may
fix the place within or without the State of Ohio for holding any special
meeting of the Board of Directors called by them.
SECTION 4. NOTICE. Notice of any Special Meeting shall be given at
least three days before the meeting by oral, telegraphic or written notice.
If mailed, such notice shall be deemed to be delivered when deposited in The
United States mail addressed to the Director at his residence or business
<PAGE>
address, with postage thereon prepaid. If notice is given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any director may waive notice of any meeting by written
statement signed before or after the holding of the meeting. The attendance
of a director at a meeting shall constitute a waiver of notice of such
meeting except where a director attends for the express purpose of objecting
to the transaction of any business because the meeting was not lawfully
called or convened.
SECTION 5. QUORUM. A majority of the members of the Board of
Directors shall constitute a quorum for the transaction of business.
SECTION 6. AUTHORITY. All the capacity of the Corporation shall be
vested in and all its powers and authority, except as otherwise provided by
law, shall be exercised by the Board of Directors which shall manage and
conduct the business of the Corporation.
SECTION 7. MANNER OF ACTING. The act of the majority of the
directors present at a meeting, at which a quorum is present, shall be the
act of the Board of Directors. Any action which may be taken at a meeting of
the board of Directors, may be taken without a meeting if a consent in
writing setting forth the action so taken shall be signed severally or
collectively by all of the directors entitled to vote with respect to the
subject matter thereof.
SECTION 8. VACANCY. Any vacancy in the Board of Directors shall be
filled by a majority vote of the remaining directors, even though less than a
quorum. A director elected to fill a vacancy shall be a director until his
successor is elected by the shareholders who may make such election at the
next Annual Meeting of Shareholders or at any special meeting prior thereto.
<PAGE>
SECTION 9. COMPENSATION. By resolution of the Board of Directors,
the directors may be paid their expenses of attendance at meetings of the
Board of Directors and may be paid a fixed sum for attendance at each meeting
of the Board or a stated salary as director. No such payment shall preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor.
SECTION 10. COMMITTEES. The Board of Directors may, from time to
time, appoint certain members to act in the intervals between meetings of the
Board of Directors as a committee and may delegate to such committee, powers
and/or duties to be exercised and performed under the control and direction
of the Board of Directors. In particular, the Board of Directors may create
from its membership and define the powers and duties of an Executive
Committee of not less than three members. During the intervals between the
meetings of the Board of Directors, the Executive Committee, unless
restricted by resolution of the Board, shall possess and may exercise under
the control and direction of the Board of Directors, all of the powers of the
Corporation. All action taken by the executive Committee shall be reported to
the Board of Directors at its first meeting thereafter and shall be subject
to revision or rescission by the Board of Directors provided, however, that
rights of third parties shall not be adversely affected by any such action of
the Board of Directors. In every case, the affirmative vote of the majority
or consent of all the members of the Executive Committee shall be necessary
for the approval of any action, but action may be taken by the Executive
Committee without a formal meeting. The Executive Committee shall meet at the
call of any members thereof and shall keep a written record of all actions
taken by it.
<PAGE>
SECTION II. INDEMNIFICATION. Each director (and his heirs, executors
and administrators) shall be indemnified by the Corporation against expenses,
judgments, decrees, fines or penalties to the extent allowed by Section
1701.13 of the Revised Code.
SECTION 12. BYLAWS. The Board of Directors shall have power and
authority to make such Bylaws, not inconsistent with the Articles, Code of
Regulations or the Laws of Ohio, as the Board shall deem proper or desirable.
ARTICLE III. OFFICERS.
SECTION 1. ELECTION. The Board of Directors shall elect a President,
a Treasurer, a Secretary and such Vice Presidents, Assistant Secretaries,
Assistant Treasurers and such other officers, agents and employees, as the
Board may deem proper. Such officers shall be elected annually by the Board
of Directors at the first meeting of the Board following the Annual Meeting
of Shareholders. If the election of officers shall not be held at such
meetings, such election shall be held as soon thereafter as conveniently
possible. Each officer shall hold office until his successor shall have been
duly elected and qualified or until his death, resignation or removal. The
President must be a director of the Corporation.
SECTION 2. REMOVAL. Any officer elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever in the judgment
of the Board the best interest of the Corporation would be served thereby.
SECTION 3. VACANCY. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise may be filled by the
Board of Directors for the unexpired term.
SECTION 4. POWERS AND DUTIES OF OFFICERS. The chief executive
officer of the Corporation shall be the President. Subject to the
<PAGE>
foregoing, the officers of the Corporation shall each have such powers and
perform such duties as generally pertain to the respective offices and such
further powers and duties as may be conferred from time to time by the Board
of Directors.
SECTION 5. SALARIES. The salaries of the officers shall be fixed
from time to time by the Board of Directors, and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
director of the Corporation.
ARTICLE IV. CERTIFICATES FOR SHARES
SECTION 1. CERTIFICATES. Every shareholder in the Corporation shall
be entitled to have a certificate of shares signed in the name of the
Corporation by the President and Secretary, certifying the number and class
of shares represented by such certificate and such recitals as may be
required by law. The Board of Directors may, by resolution, provide that any
Vice President may sign such certificate instead of the President and that an
Assistant Secretary, Treasurer or Assistant Treasurer, if any, may sign
instead of the Secretary. Certificates of shares in all other respects shall
be in such form as shall be determined by the Board of Directors and shall be
consecutively numbered or otherwise identified. The names and addresses of
the persons to whom the stock is issued with the number of shares and date of
issue shall be entered on the Stock Transfer Books of the Corporation.
SECTION 2. TRANSFER OF SHARES. The shares may be transferred on the
proper books of the Corporation by the holder of record thereof, or by his
attorney legally constituted, or his legal representative, by surrender of
the certificate therefor for cancellation and a written assignment of the
shares evidenced thereby. The Board of Directors may, from time to time,
<PAGE>
appoint such transfer agents or registrars of shares as it may deem advisable
and may define their powers and duties.
SECTION 3. (Deleted 10/16/94)
SECTION 4. SUBSTITUTED CERTIFICATES. In case a certificate of shares is
lost, stolen or destroyed, a new certificate may be issued therefor upon
<PAGE>
such terms and indemnity to the Corporation as the Board of Directors may
prescribe. The Board of Directors may, in its discretion, refuse to issue
such new certificate save upon the order of a Court having jurisdiction in
such matters pursuant to the statutes made and provided.
ARTICLE V. SEAL
The Board of Directors may provide for a corporate seal which shall
be circular in form and contain such legend as the Board of Directors shall
determine, consistent with the laws of Ohio. In the absence of such provision
by the Board of Directors, the Corporation shall not have a seal.
ARTICLE VI. AMENDMENTS
These Regulations may be adopted and changed by the affirmative vote
of the holders of record of shares entitling them to exercise a majority of
the voting power on such proposal, or without a meeting by the written
consent of the holders of record of shares entitling them to exercise
two-thirds of the voting power on such proposal.
<PAGE>
SERVICE AGREEMENT
This Service Agreement is made as of the 1st day of January, 2000,
by and between PeopLease Corporation, a South Carolina corporation qualified
and licensed to do business in South Carolina (hereinafter referred to as
"PLC") and Gasel Transportation, Inc. (hereinafter referred to as "Customer")
and whose Federal Tax Identification No. is: 31-1239328.
WITNESSETH:
A. PLC is in the business of leasing its employees to various
businesses.
B. Customer desires to lease employees of PLC to assist Customer in the
operation of its business on the terms and conditions herein contained.
C. PLC desires to lease its employees to Customer on the terms and
conditions herein contained.
NOW, THEREFORE, PLC and Customer agree as follows:
1. Lease of Employees
1.1 Term of Lease Period
Commencing on the 1st day of January, 2000 Customer shall lease from
PLC, PLC's employees in accordance with the terms and conditions set forth
herein. This Agreement shall continue in full force and effect for successive
one year terms until terminated by either party, subject to the provisions of
Section 6.8 herein.
2. Obligations of PLC
2.1 Supplying and Supervising of Personnel
PLC shall lease personnel to Customer in accordance with Customer's
expressed needs. PLC reserves its right to hire or refuse to hire any person
making application to PLC for employment, whether or not referred by Customer,
provided such refusal does not violate Sections 4.1 and 4.4 of this Agreement,
and Customer acknowledges PLC's status as employer of the employees leased by
Customer.
2.2
PLC shall be responsible for the payment, processing and issuance of the
employees' paychecks.
2.3 Payroll Taxes
PLC shall be responsible for withholding and payment of all payroll
taxes including income tax, social security tax, unemployment contribution
and other payroll taxes as may be required under State and Federal laws with
respect to employees leased to Customer. As to such payroll taxes, PLC shall
prepare and timely file with the proper governmental agencies or authorities,
all required returns and reports. PLC hereby agrees to indemnify Customer for
payments directly resulting from or incurred due to PLC's failure to comply
with its obligations stated herein, provided reasonable prior written notice
of such failure and request for payment is given to PLC by Customer.
2.4 Worker's Compensation Insurance
PLC shall obtain and pay the costs of providing all necessary and
legally required Worker's Compensation insurance and shall manage worker's
compensation claims. PLC shall furnish to Customer a Certificate of Insurance
evidencing the issuance to PLC and maintenance of PLC policies providing such
coverage. PLC hereby agrees to indemnify and save Customer harmless from and
against all worker's compensation claims brought against Customer by any
employee(s) leased by Customer from PLC.
<PAGE>
Customer shall notify PLC immediately upon becoming aware of any
injury that may result in a worker's compensation claim, and shall be
prohibited from administering or otherwise managing such claim. Claim
management and administration shall be the sole responsibility of PLC, with
Customer providing assistance as requested by PLC.
2.5 Medical Insurance
All PLC employees leased to Customer shall be eligible to procure
medical insurance through a group plan provided by PLC unless disqualified by
the insurer or unless insurance is otherwise made unavailable. The allocation
of the cost of said plan shall be in accordance with Schedule B attached
hereto. The provisions of this schedule will be reviewed and may be changed
following changes in insurance requirements or costs.
3. Obligations of Customer
3.1 Employee Information
For all former employees of Customer that Customer refers to PLC for
possible employment, Customer shall allow PLC to obtain information and
documentation regarding such former employees, including, but not limited to,
applications, W-4 forms, 1-9 forms, cafeteria plan election forms, and
information regarding each employee's job class, rate of pay, legally
required withholdings and deductions.
3.2 Payment
At the end of each work week, but in no event less than forty-eight
(48) hours prior to the date upon which PLC is obligated to issue payroll to
the employees covered hereby, Customer shall fax to PLC data which PLC
intends to use as a base for each employee's compensation. PLC shall then
send to Customer an invoice for payment of an amount calculated by
multiplying the total gross wages each classification of employee has earned
by the applicable factor set forth in Schedule A attached hereto. Within
twenty-four (24) hours of the telefax transmission of such invoice to
Customer, but in no event later than the time required for PeopLease to
receive funds by 4:00 P.M. Eastern time of the day the payroll is to be sent
to Customer, Customer shall, by wire transfer, pay the amount billed to PLC's
designated bank.
Payment of fees set forth in Schedule B will be payable on the first
day of each month for all eligible employees on the payroll and leased to
customer as of that date.
The factors set forth in Schedules A and B are subject to adjustment
by PLC, following notice thereof to Customer, based upon changes in local,
State and/or Federal employment laws or changes in insurance requirements or
costs.
3.3 Liability Insurance
Customer shall obtain and maintain in full force and effect during
the term of the Agreement, in limits of not less than $1,000,000 per
occurrence, comprehensive general liability and property damage insurance
with respect to the use or operation of equipment or property owned,
possessed, transported or leased by Customer, and Customer shall assume full
liability to the public for the use or operation thereof. If operating motor
vehicles, Customer shall maintain all such insurance, as well as property
damage/auto liability coverage, at limits as required by the Interstate
Commerce Commission. Customer shall have PLC named as an additional insured
on all general liability and auto liability policies.
3.4 Costs of Regulatory Compliance
Except as otherwise specified herein, as between PLC and Customer,
Customer shall bear the costs and expenses relating to keeping the work
environment and equipment in compliance with any and all federal, state and
local laws and regulations.
3.5 Employee Wages
<PAGE>
Customer warrants that it will gather and accurately report to PLC
data, including wage rates, hours worked or miles driven, bonuses, vacation
entitlement, etc., which forms the basis of each employee's compensation.
Customer further agrees to maintain such records for the periods of time
required by law.
3.6 Collective Bargaining
Customer and PLC shall agree as to each other's responsibility for
negotiating the terms of any necessary collective bargaining agreement with
bargaining representatives of employees and will handle any and all
administration or labor-related matters pursuant to such agreements
including, but not limited to, grievances, wages, benefits, hours, working
conditions and other related items. Customer shall immediately (within one
day whenever possible) notify PLC of all organizing and collective bargaining
matters.
4. Obligations of Both Parties
4.1 Regulatory Compliance
PLC and Customer shall comply with all federal, state and local
employment laws and regulations.
4.2 Unlawful Acts
Neither party hereto shall require any employee leased hereunder to
do any unlawful act.
4.3 Withholdings Not Permitted
Neither party shall make or effect any deduction or withholding from
the pay of any employee leased hereunder except for deduction or withholdings
required or permitted by law and except for any deduction or withholding to
which the employee consents by a signed writing which specifies the reason
for, date of, and amount of such deduction or withholding. This provision
shall not apply to any applicable per diem related adjustments.
4.4 Discrimination
The parties agree that as to employment covered by this Agreement,
there will be no unlawful discrimination against any employee or applicant on
the basis of age, race, creed, religion, sex, color, national origin,
handicap, veteran status, union affiliation, actual or perceived disability
of employee or applicant or family member thereof or any other similar
legally protected status.
4.5 Cooperation in Defense
To the extent that their interests do not conflict, the parties
agree to cooperate in the defense of any claim brought against either or both
of the parties on the basis of the relationship created by the parties
hereunder. However, this provision shall in no way alter the responsibilities
of each party as otherwise set forth herein.
4.6 Employee Notification
Upon inception or termination of this Agreement, PLC and Customer
shall immediately inform the employees leased hereunder of the status of the
relationship of the parties hereto.
4.7 Termination of a Specific Employee Lease
PLC shall have the exclusive right to terminate employees covered by
this Agreement. Immediately upon notice from Customer of its decision to no
longer lease any specific PLC employee, Customer shall provide fax notice to
PLC's operations department, listing the name, social security number and
reason for its decision. Immediately upon termination of any Employee by PLC,
for any reason, PLC shall provide fax notice to Customer's operations
department listing the name, social security number and reason for
termination of such employee.
5. Indemnifications
<PAGE>
5.1 Indemnification for Matters Relating to Persons who are not Employees
of Customer
PLC shall assume complete and exclusive responsibility for all
matters pertaining to all persons hired by PLC including, but not limited to,
those leased to Customer. PLC shall indemnify Customer from and against
damages directly resulting from claims or demands of such persons.
5.2 Indemnification for matters relating to Persons who are not Employees
of PLC
Customer shall assume complete and exclusive responsibility for all
matters pertaining to the following categories of persons: all persons (a)
hired by Customer and (b) on Customer's payroll. Customer shall
unconditionally indemnify PLC, its agents, shareholders, officers, directors,
assigns, and representatives, for and hold them harmless from and against any
costs, expenses, fees, settlements, judgments, losses or damages of
whatsoever nature incurred as a result of or arising from claims or demands
relating to such persons.
5.3 Indemnifications for Employee Benefit Matters.
Each party shall assume complete and exclusive responsibility for
all matters including, but not limited to, ERISA, tax and COBRA matters,
pertaining to employee welfare or benefit plans sponsored, offered, or
administered by such party. Each party shall unconditionally indemnify the
other party, its agents, shareholders, officers, directors assigns and
representatives for and hold them harmless from and against any and all
costs, expenses, fees, settlements, judgments, losses or damages of
whatsoever nature, incurred as a result of or arising from claims or demands
relating to such plans.
5.4 Indemnification of Certain Payroll Deductions
Customer acknowledges and agrees that certain non-tax related
deductions recorded on employee check stubs, including deductions for
Customer sponsored benefit plans, or certain advances, are for monies due
from the employee to Customer. Such deductions will be noted on the invoice
submitted by PLC to Customer and will be reimbursed to Customer by deducting
them from the gross amount due PLC by Customer. Customer is solely and
exclusively responsible for such monies. Customer further agrees to provide
certified proof to PLC upon request by PLC that such monies are properly
maintained and remitted to the appropriate persons or entities at the
appropriate times or otherwise demonstrated to the satisfaction of PLC that
Customer has maintained, deposited or remitted said monies to the appropriate
persons or entities at the appropriate times. Customer shall unconditionally
indemnify PLC, its agents, shareholders, nonleased employees, officers,
directors, assigns, insurers and representative for and hold them harmless
from and against any costs, expenses, fees, settlements, judgments, losses or
damages or whatever nature incurred as a result of or arising from claims or
demands relating to such monies.
5.5 Indemnification for Acts or Omissions of Customer
Customer agrees that it shall indemnify PLC for any of Customer's,
or its agent's, acts or omissions that result in damages, costs or expenses
for which PLC is or may be held liable. Such indemnification shall include
reimbursement to PLC of all PLC's expenditures and prepayment of all
expenditures reasonably expected to be incurred by PLC.
6. General Provisions
6.1 Independent Contractor Relationship
PLC shall be an independent contractor of Customer and shall not be
its principal, director, agent, master, servant, employer or employee.
6.2 Third Party Beneficiaries
The parties acknowledge and agree that no parties other than the
parties hereto are intended to benefit hereunder.
6.3 Direction and Control of Employees
<PAGE>
PLC shall have the right to direct, control, discipline, terminate,
promote, set wages for, reassign and reward each of the employees it leases
to Customer. Such actions will be governed by PLC's employee handbook. PLC
shall have at least one supervisor at the customer's principal place of
business who shall be responsible for the day to day direction, control and
supervision of all leased employees.
6.4 Condition for Becoming an Employee of PLC
No person shall become an employee of PLC until PLC's corporate
headquarters has received such person's signed and completed application, 1-9
and W-4 forms, payroll data and payment according to the rate assigned to
such person as provided on Schedule A.
6.5 Benefit or Welfare Plans
Customer acknowledges that PLC has an employee welfare plan
available for its employees. If Customer does not desire the employees leased
hereunder to enroll in such plan, it acknowledges that PLC will not offer
enrollment to any of the employees leased hereunder.
6.6 Limitation of Services
PLC will only provide those services specified herein and no other
services shall be provided or implied, including without limitation, any
strategic, operational or other business-related decisions with regard to
Customer business. PLC will provide no equipment to the employees.
6.7 Right to Inspect Premises
PLC or agents of PLC shall have the right but not the obligation to
inspect the premises of Customer at mutually agreeable times (but in any
event within three business days of such request) to make recommendations
pertaining to job safety. It is agreed and understood that PLC, in either
inspecting or not inspecting the Customer premises for safety purposes,
assumes neither liability nor responsibility for any unsafe working condition
which may exist. Should Customer fail to comply with any recommendations
pertaining to job safety made by PLC, such failure shall constitute grounds
for immediate termination of this Agreement.
6.8 Termination
Either PLC or Customer may immediately terminate this Agreement in
the event of breach by the other of any of the terms of this Agreement. In
addition, PLC may immediately terminate this Agreement if it, in its sole
discretion, determines that a material adverse change has occurred in the
financial condition of Customer, or that Customer is unable to pay its debts
as they become due in the ordinary course of business. Customer agrees to
notify PLC of its insolvency or its intention to file bankruptcy or close its
business.
Either party may terminate this Agreement without cause upon thirty
(30) days written notice.
The obligation of either party to notify, defend and save harmless
the other under the terms of this Agreement shall continue after the
termination hereof with respect to events occurring prior to such termination.
Upon the voiding of this Agreement or the termination hereof by
either party, both parties agree to promptly surrender and return to the
other party any and all certificates or binders of insurance previously
received from the other party.
6.9 Notices
All notices which are required or may be given with respect to this
Agreement shall be properly made if delivered in writing personally, or sent
by facsimile transmission with a hard copy to also be sent by US Mail, or
sent by US Mail addressed to the party at its address shown below:
PLC
PeopLease Corporation Suite 7 1470 Ben Sawyer Boulevard Mount Pleasant, SC
29464
<PAGE>
Customer
Gasel Transportation, Inc. P. 0. Box 1199 Route 4, Box 181-A Marietta. OH 45750
6.10 Assignability
This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto, but may not be assigned by
either party until such assignment shall have been consented to in writing
signed by the parties.
6.11 No Waiver of Rights
The failure of either party strictly to enforce any provision hereof
shall not be construed as a waiver thereof or as excusing either party from
future performances in strict accordance with the provisions of this
Agreement.
6.12 Applicable Law
This Agreement shall be determined to be a contract made within the
State of South Carolina and for all purposes shall be governed and construed
under and in accordance with the laws of the State of South Carolina.
6.13 Business Interruption
Neither party shall be liable to the other for any loss of business
or any other damage, including but not limited to, profits, goodwill,
special, incidental or consequential damage, which results from performance
of each party's obligations hereunder.
6.14 Time of Performance
Time is of the essence with respect to performance of all
obligations set forth herein.
6.15 Integration
This document, together with the schedules attached hereto,
constitutes the full, complete, absolute and entire agreement between the
parties. There are no oral representations, agreements or understandings
affecting the same and any further such representations, agreements,
understandings or waivers, in order to be binding upon the parties thereto,
must be reduced to writing and signed by the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year set forth above.
PeopLease Corporation
Attest:
Charles R. Schellenger, President D.W. Speer, Secretary
Gasel Transportation, Inc.
Attest:
President Secretary or Witness
[Print name of President] [Print name of Secretary or Witness]
[SCHEDULE "A") VARIABLE COST
The following formula shall be used in calculating the Variable Cost of
employment services on a weekly basis:
<PAGE>
Total employees' gross payroll multiplied by a factor of:
<TABLE>
<CAPTION>
Factor Description
<S> <C>
1.1758 (7219) Local Drivers (No Per Diem)
1.1323 (7219) OTR Drivers (With Per Diem)
1.1546 (8380) Shop
1.1149 (8810) Clerical
N/A Other
</TABLE>
PeopLease Corporation
Attest:
Charles R. Schellenger, President D.W. Speer, Secretary
Gasel Transportation, Inc.
Attest:
President Secretary or Witness
{Print name of President] [Print name of Secretary or Witness]
<PAGE>
TRANSPORTATION ACCOUNTS FINANCING AND SECURITY AGREEMENT
This Transportation Accounts Financing and Security Agreement dated as of May
27, 1998 is by and between Associates Transcapital Services, a division of
ASSOCIATES COMMERCIAL CORPORATION ("Associates"), a Delaware corporation
having a place of business at 300 East Carpenter Freeway, lrving, Texas 75062
and Gasel Transportation Lines, Inc. ("Borrower"), an Ohio corporation having
its chief executive office at Rt. 4 Box 181A County Road 10 Marietta, Ohio
45750.
ARTICLE I - Definitions
1.01 As used in this Agreement, the words and phrases defined in this
Article I shall have the meanings so ascribed to them.
1.02 "Account" shall mean and refer to all of Borrower's accounts,
contract rights, instruments, documents, chattel paper, notes, drafts and
other forms of obligations owing to Borrower, however created.
1.03 "Agreement" shall mean and refer to this Accounts Financing and
Security Agreement and any supplement or amendment thereto.
1.04 "Applicable Jurisdiction" shall mean and refer to that
jurisdiction in which this Agreement is accepted by Associates.
1.05 "Business Day" shall mean calendar days other than Saturdays,
Sundays and legal holidays in the Applicable Jurisdiction.
1.06 "Collateral" shall mean and refer to all of Borrower's Accounts,
General Intangibles, acceptances, deposits, Deposit Accounts, and Records,
whether now existing or hereafter arising or acquired, and all cash and
non-cash proceeds of any of the foregoing, including, without limitation,
proceeds of insurance including returned and unearned premiums. There is also
included within the term "Collateral" all guaranties, liens and security
granted to or held by Borrower with respect to an Account or any other
obligation owing to Borrower.
1.07 "Deposit Accounts" shall mean and refer to any demand, time,
savings, passbook or like account maintained by Borrower with a bank, savings
and loan association, credit union or like organization other than an account
evidenced by a certificate of deposit.
1.08 "Eligible Accounts" shall mean and refer to those Accounts which
in the sole discretion of Associates are eligible for loans made by
Associates under this Agreement. Without limiting Associates' discretion, the
following Accounts are not Eligible Accounts and shall be ineligible for
Loans made by Associates under this Agreement: (a) Accounts which are sixty
(60) days or more past due; (b) Accounts which are more than ninety (90) days
old; (c) Accounts owing by a single account debtor if twenty percent (20%) or
more of such Accounts are sixty (60) days or more past due: (d) Accounts
owing by a single account debtor in excess of an amount equal to thirty
percent (30%) of all Accounts owing by all account debtors; (e) Accounts with
respect to which the account debtor is a subsidiary of, related to, or
affiliated with Borrower or has common shareholders, officers or directors
with Borrower; (f) Accounts in which Borrower is or may become liable to the
account debtor thereof for goods sold or services rendered by such account
debtor: (g) Accounts owing by the United States Government unless the amounts
due thereunder are to be paid to Associates under appropriate notifications
under the Assignment of Claims Act; (h) Accounts in which the account debtor
has raised any dispute or defense to payment of any kind; or (i) Accounts
owing by any account debtors not deemed by Associates to be credit worthy.
<PAGE>
1.09 "General Intangibles" shall mean and refer to Borrower's general
intangibles, including, without limitation, all tax refunds of every kind and
nature to which Borrower is now or hereafter may be come entitled, no matter
however arising, all other refunds, goodwill, trade secrets, computer
programs, customer lists, trade names, trademarks, licenses and patents.
1. 10 "Obligations" shall mean and refer to all loans from time to time
made by Associates to Borrower and to others at the request of or for the
account of or for the benefit of Borrower, all other debts, liabilities and
obligations of Borrower to Associates of every kind and description (whether
or not evidenced by a note or other instrument and whether or not for the
payment of money), direct or indirect, absolute or contingent, joint or
several, primary or secondary, due or to become due, now existing or
hereafter arising, including, without limiting the generality of the
foregoing, any liability of Borrower to Associates as a guarantor of
indebtedness or liabilities of others and all interest, fees, charges and
expenses payable by Borrower hereunder, or any supplement or amendment hereto
or any other agreement between Borrower or Associates or any instrument
evidencing any of the foregoing.
1.11 "Person" or "Party" shall include individuals, firms,
corporations and all other entities, including, without limitation,
governments, governmental agencies and instrumentalities.
1.12 "Prime Rate" shall mean the per annum lending rate publicly
announced from time to time by The Chase Manhattan Bank, N.A. as its prime
rate, base rate or reference rate for unsecured loans of the shortest
maturity to corporate borrowers.
1.13 "Records" shall mean and refer to all of Borrower's books of
account of every kind and nature, including, without limitation, all
electronically recorded data relating to Borrower or its business and all
receptacles and containers for such records and all of Borrower's files and
correspondence.
1.14 "Receivable Loan Balance" shall mean and refer to that portion of
the Obligations which, on Associates' book of account, reflects the principal
and other charges owing from Borrower to Associates by reason of loans made
under this Agreement, or pursuant to any supplement hereto, or under any
other agreement which provides that loans thereunder shall constitute a
portion or the Receivable Loan Balance.
1.15 "Annual Period" shall mean and refer to the twelve month period
commencing on the first day of January and ending on the thirty first day of
December and each successive twelve month period thereafter.
1.16 All words and terms used in this Agreement and in any supplement
or amendment hereto other than those specifically defined in this Agreement
or such supplement or amendment shall be deemed to have the meanings accorded
to them in the Uniform Commercial Code as amended from time to time (herein
the "Code"), as in force in the Applicable Jurisdiction.
ARTICLE II - Loans. Fees and Interest
2.01 Subject to the terms and conditions of this Agreement, Associates
may from time to time lend to Borrower at Associates' sole discretion up to
85% of the face amount of Eligible Accounts outstanding from time to time or
such greater or lesser percentage as Associates may, from time to time,
establish: provided however, the aggregate amount of such outstanding loans
shall not exceed $1,000,000 ("Maximum Advance") at any time.
2.02 All loans made by Associates to Borrower pursuant to this
Agreement and all other Obligations which do not have a specific time for
payment shall be payable on demand at any time and for any reason with or
without the occurrence of any Event of Default (as hereinafter defined).
2.03 If the Receivable Loan Balance shall at any time exceed the then
effective percentage (as determined under Section 2.01) of the face amount of
Eligible Accounts, Borrower shall, on Associates'
<PAGE>
demand, either (as specified in such demand) pay to Associates such excess or
grant and deliver to Associates such additional security as may be
satisfactory to Associates.
2.04 Until all Obligations of Borrower to Associates are fully paid and
performed, Borrower shall pay to Associates monthly, as of the last day of
each calendar month, interest at a -rate which shall be equal to the lesser
of (i) the sum of (x) the Prime Rate, plus (y) 1.0% per annum, or (ii) the
lawful maximum, if any, in effect from time to time in the Applicable
Jurisdiction for loans to borrowers of the type, in the amount, for the
purposes and otherwise of the kind herein contemplated. Such rate of interest
shall be computed on the daily IReceivable Loan Balance from the date accrued
until the date of payment and calculated on the basis of a 360-day year for
the actual number of days elapsed. The rate of interest payable hereunder
shall not be less than 8.0% per annum. The maximum increase per Annual Period
shall not exceed 2.0%.
Notwithstanding any other provision to the contrary set forth herein, if at
any time implementation of any provision hereof shall raise the interest rate
herein above the lawful maximum rate of interest, if any, in effect from time
to time in the Applicable Jurisdiction which may be charged by Associates for
loans to borrowers of the type, in the amount, for the purposes and otherwise
of the kind herein contemplated, then such interest rate shall be limited to
such lawful maximum and any excess interest inadvertently collected shall be
deemed to be a partial prepayment of principal and so applied.
2.05 Any increase or decrease in the Prime Rate shall be effective as
of the next Business Day following such adjustment and such adjusted Prime
Rate shall be the applicable Prime Rate in determining the rate of interest
payable hereunder.
2.06 All payments to be made by Borrower hereunder shall be paid to
Associates at its office designated above or at such other address as
Associates may designate in writing and Borrower unconditionally promises to
repay all loans and other obligations to Associates in the manner set forth
in this Agreement without the necessity on Associates' part of resorting to
or having recourse to the Collateral.
2.07 Associates shall furnish to Borrower monthly an extract or a
statement of Borrower's account with Associates, prepared from Associates'
records showing all applicable credits and debits, including all loans, other
charges and payments since the last statement. Each such statement shall be
considered true and correct and to have been accepted by Borrower and shall
be conclusively binding upon Borrower with respect to all matters contained
therein, unless Borrower notifies Associates in writing of any discrepancy or
exception within thirty (30)) days from the mailing by Associates to Borrower
of any such monthly statement.
2.08 In the event Associates shall so request, Borrower agrees to
execute and deliver to Associates such promissory notes, an example of which
is attached hereto as Exhibit A, as Associates shall request in order to
evidence the loans. Notwithstanding the issuance of any such note, the
monthly statements of Borrower's account with Associates shall constitute
prima facie evidence of the loans and other amounts owing from Borrower to
Associates.
2.09 Borrower shall pay Associates on the date of this Agreement a
closing fee of $5,000.00. On the first Business Day of each month after such
date, Borrower shall also pay Associates a fee in the amount of (a) the
Maximum Advance, less (b) the sum of the average daily Receivable Loan
Balance during the preceding month, multiplied by (c) one eighth of one
percent (.125%) per annum.
2.10 Borrower shall pay Associates a wire transfer fee of $10.00 for
each wire transfer Associates initiates under this Agreement and reimburse
Associates for exchange on checks, charges for returned items and all other
bank charges.
ARTICLE III- Grant of Security interest
<PAGE>
3.01 As security for the payment and performance of all Obligations,
Borrower hereby assigns to Associates and grants to Associates a continuing
security interest in all Collateral.
3.02 Until all Obligations have been fully paid and performed, whether
or not this Agreement has been terminated as hereinafter provided, Associates
shall have and retain its security interest in and assignment of all
Collateral, whether or not any of such Collateral is deemed by Associates to
be eligible for loan purposes.
3.03 To the extent Borrower has heretofore granted or may hereafter
grant to Associates a security interest in or mortgage of any other real or
personal property, then such property shall, for the purposes of this
Agreement, be deemed to be "Collateral".
ARTICLE IV - Representations and Warranties
4.01 To induce Associates to enter into this Agreement and to make loans
hereunder, Borrower makes the representations and warranties contained in
this Article IV, each of which is acknowledged by Borrower to be a material
representation and warranty and each of which shall be deemed to be renewed
by Borrower upon each request to Associates to make a loan hereunder.
4.02 Borrower and each of its subsidiaries, if any, is a corporation
duly organized and existing under the laws of the state of its incorporation
and is in good standing
thereunder and is qualified to do business in every other state or
jurisdiction in which the nature of the business conducted or the property
owned therein requires it so to qualify.
4.03 The execution and delivery by Borrower of this Agreement and the
performance by Borrower of its Obligations hereunder are within Borrower's
corporate powers.
4.04 The execution and delivery of this Agreement has been duly
authorized by Borrower's Board of Directors and, to the extent required by
the laws of the state of its incorporation, by its stockholders.
4.05 There is no provision in the Articles of Organization, Agreement of
Association, Articles of Incorporation or the by-laws of Borrower or in any
indenture, contract or agreement to which Borrower is a party or by which
Borrower or Borrower's property is bound, which prohibits the execution and
delivery by Borrower of this Agreement or the payment and performance by
Borrower of the Obligations or pursuant to which such execution, delivery or
performance would, upon the giving of notice or the passage of time, or both,
result in a default thereunder.
4.06 Borrower has (or as to Collateral arising or acquired hereafter
will have) good, clear record and marketable title to the Collateral, free
and clear of all liens, pledges, charges, encumbrances and security interests
of every kind and nature.
4.07 All financial statements and information relating to Borrower and
each of its subsidiaries, if any, which have been furnished by Borrower to
Associates are true and correct, have been prepared in accordance with
generally accepted accounting principles consistently applied, and there has
been no material adverse change in the condition, financial or otherwise, of
Borrower or any of its subsidiaries, if any, since such submission.
4.08 There are no actions, suits, proceedings or investigations pending
or, to the knowledge of Borrower, its agents, servants or employees,
threatened against Borrower or any of its properties in any court, before any
other tribunal or before any federal, state, municipal or other governmental
authority. Neither Borrower nor any of its subsidiaries, if any, is in
default with respect to any order of any court,
<PAGE>
other tribunal or governmental authority. The execution, delivery and
performance of this Agreement will not be a default under any order of any
court, any other tribunal or any governmental authority.
4.09 Borrower and each of its subsidiaries, if any, has duly filed all
federal, state and other governmental tax returns which it is required by law
to file and has fully paid all taxes now due to be paid and Borrower and each
of its subsidiaries, if any, now has and shall hereafter maintain reserves
adequate in amount to fully pay all such tax liabilities which may hereafter
accrue.
4.10 Borrower and each of its subsidiaries, if any, is now solvent and
able to pay its debts as they mature.
4.11 All Accounts (i) are and will be bona fide existing obligations of
the account debtor thereof created by the rendition of services to the named
account debtor in the ordinary course of business, free of liens,
encumbrances and security interests and unconditionally owed in the face
amount thereof unless otherwise indicated in the schedule relating thereto,
to Borrower by the account debtor thereof without right of rejection or
return or defense, offset or counterclaim, or claim of discount or deduction,
(ii) are and will be valid, legal, enforceable obligations of the account
debtor thereof; and (iii) do not and will not arise out of transactions with
an employee, officer, agent, director, stockholder, affiliate or subsidiary
of Borrower.
4.12 Borrower's chief executive office is at the address set forth in
the preamble to this Agreement, and Borrower has no other place of business,
except as follows: Mt. Royal Plaza, Room #37 Paulsboro, New Jersey 08066;
20511 U.S. Highway 301 North Dade City, Florida 33526; 116 Industrial Road
LaSalle, Illinois 61301. If Borrower's books and records concerning the
Accounts are not at its chief executive office, such books and records are at
____________________________________________. Except as set forth herein,
Borrower conducts business and will continue to conduct business under no
names or tradestyles other than the name set forth above Borrower's execution
of this Agreement:
ARTICLE V - Affirmative Covenants
5.01 Borrower shall:
(a) duly and punctually, pay and perform all of the Obligations;
(b) at all times keep proper books of account in which full,
true and correct entries will be made of its transactions in accordance with
generally accepted accounting principles consistently applied:
(c) at all reasonable times, make its books and records
available, in its offices, for inspection, examination and copying by
Associates and Associates' representatives and will, at all reasonable times,
permit inspection of its properties by Associates and Associates'
representatives;
(d) from time to time, furnish Associates with such information
and statements as Associates may reasonably request and with copies of all
financial statements and reports that Borrower sends or makes available to
its stockholders or to any governmental authority;
(e) furnish Associates, within twenty (20) days after the close
of each monthly period of its fiscal year, a consolidated and consolidating
balance sheet of Borrower and its affiliates, if any, and statement of profit
and loss reflecting the financial condition of Borrower at the end of such
period and the results of its operations during each such period, with a
certificate by Borrower's president or treasurer to the effect that such
balance sheet and statement of profit and loss fairly present the financial
conditions at the end of such period and the results of its operation during
such period in accordance with generally accepted accounting principles
consistently applied;
<PAGE>
(f) furnish Associates annually, within ninety (90) days after
the close of each fiscal year, an audited consolidated and consolidating
balance sheet of Borrower and its affiliates, if any, and audited statement
of profit and loss reflecting the financial condition of Borrower and its
affiliates, if any, at the end of such fiscal year and the results of its
operations during each such fiscal year. Each such balance sheet and
statement of profit and loss is to be attested to by an independent certified
public accountant satisfactory to Associates and such certification shall be
in form and substance satisfactory to Associates;
(g) maintain its corporate existence and the corporate existence
of any and all subsidiaries in good standing and comply with all laws and
regulations of the United States or of any state or states thereof or of any
political subdivision thereof, or any governmental authority which may be
applicable to its or their business;
(h) maintain insurance at all times covering such risks and in
such amounts as Associates may require and all such insurance shall be in
such form, for such period and written by such companies as shall be
acceptable by Associates;
(i) annually, at the time of delivery to Associates of the
reports referred to in Section 5.01 (f) above, deliver to Associates
certificates signed by Borrower's president and treasurer certifying that
each such officer has reviewed the provisions of this Agreement and slating
in his opinion, if such be the fact, that Borrower has not been nor is then
in default as to any of the covenants contained in this Agreement or, in the
event of any such defaults, setting forth the details thereof;
(j) promptly notify Associates in writing of (i) any change of
its officers, directors, key employees, location of its chief executive
office or any other office or location where any books and records regarding
any Accounts are held, name or trade style, and (ii) any sale or purchase out
of the regular course of Borrower's business and any other material change in
the business or financial affairs of Borrower;
(k) pay or reimburse Associates on demand for all expenses
(including, without limitation, reasonable attorney fees and legal expenses)
incurred or paid by Associates (i) in connection with the preparation,
execution, interpretation or amendment of this Agreement and any instrument ,
agreement, or document executed and delivered pursuant thereto or in
connection therewith; (ii) for appraisers, examiners, auditors or similar
persons except for salaries of Associates' regularly employed personnel;
provided however, Borrower shall pay Associates an auditor's fee of $300.00
per day per auditor for each day Associates auditor(s) or any auditor(s)
designated by Associates is on site at Borrower's premises and reimburse
Associates for all out-of-pocket expenses incurred by such auditor(s) whom
Associates may engage with respect to rendering opinions concerning
Borrower's financial condition or the condition and/or value of the
Collateral; (iii) in connection with the enforcement by Associates of its
rights against Borrower or any other person primarily or secondarily liable
to Associates in respect to any Obligation; (iv) in connection with the
administration, supervision, protection of or realization on any Collateral
held by Associates as security for any Obligation, whether such security
interest was granted by Borrower or any other person primarily or secondarily
liable respect to any Obligation, the Collateral or this Agreement; (v) in
connection with the filing and recording of all documents required by
Associates to perfect the security interests granted to Associates in this
Agreement or in any other security interests granted to Associates,
including, without limitation, any documentary stamp tax or other taxes
incurred by Associates because of any related filing or recording; (vi) in
connection with the forwarding to Borrower or any other Person on Borrower's
behalf by Associates of proceeds of loans made by Associates to Borrower
pursuant to this Agreement and the depositing for collection by Associates of
any check or item of payment delivered to Associates on account of the
Obligations and for any claims asserted by any bank at which a blocked
account or lock box is established for the deposit of proceeds of Collateral
in connection with such blocked account or lock box or any returned or
uncollected checks received by such bank as proceeds of the Collateral; and
(vii) in establishing, maintaining and using any blocked account or lock box
for the deposit of checks and other items of payment from Borrower's
customers and account debtors under the Accounts, and
<PAGE>
(1) use the proceeds of all loans made by Associates to
Borrower under this Agreement for business purposes.
5.02 Borrower will and will cause each of its subsidiaries, if any, to
pay all real and personal property taxes, assessments and charges and all
franchise, income, unemployment, FICA, withholding, sales and other taxes
assessed against it or payable by it at such times and in such manner to
prevent any penalty from accruing or any lien or charge from attaching to its
properties. The provisions of this section, however, shall not preclude
Borrower or its subsidiaries from contesting in good faith any such tax by
appropriate proceedings, provided an adequate book reserve, determined in
accordance with generally accepted accounting practices, is set aside; nor
shall Borrower be in default under this section by reason of the existence of
a lien for taxes not then due.
5.03 Borrower will put and maintain, and will cause each of its
subsidiaries, if any, to put and maintain, its properties in good repair,
working order and condition and from time to time make all needful and proper
repairs, renewals and replacements.
5.04 Borrower and each of its subsidiaries, if any, will comply with
all laws and all acts, rules, regulations and orders of any legislative,
administrative or judicial body or official, applicable to any Collateral or
to the operation of the business or Borrower or its subsidiaries.
ARTICLE VI - Negative Covenants
6.01 Borrower will not, without the prior written consent of
Associates, (a) guaranty or otherwise become liable in any way with respect
to the obligations of any Person, except for endorsement of items of payment
for the purpose of collection thereof; (b) pay dividends, either in cash or
in kind on any class of its stock nor make any distribution on account of its
stock, nor redeem, purchase or otherwise acquire directly or indirectly any
of its stock in excess of $100,000 per Annual Period, (c) make any loans to
any individual, firm or corporation in excess of $50,000 per Annual Period,
including, without limitation, its officers and employees; provided, that
Borrower may make loans to its employees, including its officers, with
respect to expenses incurred by such employees, which expenses are
reimbursable by Borrower; (d) invest in or purchase any stock or securities
of any person; (e) merge or consolidate or be merged or consolidated with or
into any other corporation; (f) sell or dispose of any of its assets except
for sales of inventory in the ordinary and usual course of its business;
provided, that so long as Borrower has not granted Associates a security
interest in Borrower's equipment, Borrower may dispose of equipment which is
no longer required for the conduct of Borrower's business so long as Borrower
receives therefor a sum substantially equal to such equipment's fair value;
(g) grant or suffer to exist in the favor of any party other than Associates
any mortgage, pledge, title retention agreement, security interest, lien,
charge or encumbrance with respect to the Collateral or subject the
Collateral to the payment of any indebtedness, or transfer in any manner any
of such assets with the intent or purpose, directly or indirectly, of
subjecting the Collateral to the payment of indebtedness; and (h) engage in
any business other than the business in which it is currently engaged or a
business reasonably allied thereto.
6.02 Borrower will not, except on thirty (30) days prior written notice
to Associates, change either its principal place of business or its chief
executive office or establish any additional places of business.
ARTICLE VII - Operating Procedures
7.01 From time to time at intervals designated by Associates, Borrower
shall provide Associates with schedules describing all Accounts created or
acquired by Borrower and shall execute and deliver written assignments of
such Accounts to Associates; provided however, that Borrower's failure to
execute and deliver such schedules and/or Borrower assignments shall not
affect or limit Associates' security interest or other rights in and to the
Accounts. If requested by Associates, Borrower shall furnish copies of
customers' invoices or an equivalent writing that is acceptable to
Associates, and Borrower warrants the genuineness
<PAGE>
thereof. On demand of Associates, Borrower shall furnish to Associates the
original shipping or delivery receipts of all services rendered.
7.02 Associates or its designee may at any time and at its sole
discretion (a) notify Borrower's customers or account debtors that Accounts
have been assigned to Associates or of Associates' security interest therein:
(b) collect the Accounts directly and charge the collection costs and
expenses to the Receivable Loan Balance but, unless and until Associates so
notifies or gives Borrower other instructions, Borrower shall collect all
Accounts for Associates; provided however, Borrower shall direct its
customers and account debtors to send all payments thereon to such lock box
or blocked account as Associates may establish and designate in writing to
Borrower; (c) verify the validity and amount or any other matter relating to
any Account by mail, telephone, telecopy, telegraph or otherwise; (d) in the
name of Associates, Borrower or otherwise, enforce payment and collect by
legal proceedings or otherwise the Accounts and take control in any manner of
any cash or non-cash items of payments or proceeds of Accounts; and (e)
require Borrower to give notice of Associates' security interest in the
Accounts or any other obligation owing to Borrower to the account debtor or
other obligor with notice requiring such account debtor or other obligor to
pay the Account or other obligation directly to Associates.
7.03 All checks and other instruments received by Associates as
proceeds of Accounts will be credited (conditional upon final collection)
upon receipt to the Receivable Loan Balance; provided, however, that for
purposes of calculation of interest, such conditional credit will be made
after allowing two (2) Business Days for collection.
7.04 Borrower appoints any person Associates may from time to time
designate as Borrower's attorney with power to (a) endorse Borrower's name on
any checks, notes, acceptances, money orders, drafts or other forms of
payment or security that may come into Associates' possession; (b) sign
Borrower's name on any invoice or bill of lading relating to any Account, on
drafts against customers, on schedules and assignments of Accounts, on
notices of assignment, financing statements and other public records, on
verifications of Accounts and on notices to customers; (c) sign Borrower's
name to the proof of claim against any account debtor on behalf of Borrower;
(d) notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Associates; (e) receive, open and
dispose of all mail addressed to Borrower: and (f) send requests for
verification of Accounts to customers or account debtors and to do all things
necessary to carry out this Agreement. Borrower ratifies and approves all
acts of the attorney. Neither Associates nor the attorney will be liable for
any acts or omissions nor for any error of judgment or mistake of fact or
law. This power, being coupled with an interest, is irrevocable so long as
any Accounts assigned to Associates or in which Associates has a security
interest remain unpaid or until the Obligations have been fully satisfied.
Associates may file one or more financing statements disclosing Associates'
security interest without Borrower's signature appearing thereon. If
permitted by law, Borrower agrees that a carbon, photographic or other
reproduction of this Agreement or of a financing statement may be filed as a
financing statement.
7.05 Until Borrower's authority to do so is terminated by written
notice from Associates, which notice Associates may give at any time when
Borrower's selling or collection results are not reasonably satisfactory to
Associates, or at any time after the occurrence of any Event of Default
specified in Section 8.01 herein, Borrower may grant such allowances or other
adjustments to account debtors as Borrower may reasonably deem to accord with
sound business practice; provided, however, no extension of time for payment
shall be granted without Associates' prior written consent. Borrower shall
give Associates immediate written notice of the grant of any such allowance
or other adjustment.
7.06 Associates may at all times settle Accounts or other obligations
owing to Borrower or adjust disputes and claims directly with customers or
account debtors or other obligors for such amounts and upon terms which
Associates considers advisable, and in all cases Associates will credit the
Receivable Loan Balance with only the net amounts received by Associates in
payment of Accounts.
<PAGE>
7.07 Any and all sums at any time credited by or due from Associates to
Borrower shall at all times constitute additional security of all Obligations
of Borrower to Associates and may be setoff against any Obligation at any
time whether or not other security held by Associates is deemed to be
adequate whether or not such Obligations are then due. Any and all
instruments, documents, policies and certificates of insurance, securities,
goods, accounts receivable, choses in action, chattel paper, cash, property
and the proceeds thereof owned by Borrower or in which Borrower has an
interest, which now or hereafter are at anytime in possession or control of
Associates or in transit by mail or carrier to or from Associates or in the
possession of any third party acting in Associates' behalf, without regard to
whether Associates received the same in pledge, for safe keeping, as agent
for collection or transmission or otherwise or whether Associates has
conditionally released the same, shall constitute additional security for
such Obligations, and may be applied at any time to such Obligations whether
due or not. Associates shall have the unrestricted right from time to time to
apply (or to change any application already made of) the proceeds of any of
the Collateral to any of the Obligations, as Associates in its sole
discretion may determine. Unless otherwise agreed to in writing by
Associates, no credits or cash in which Borrower has an interest which are in
the possession or control of Associates, or any sums otherwise due from
Associates to Borrower, shall bear interest or otherwise accrue profits.
7.08 In the event that Borrower at any time or times hereafter shall
become liable to, or any lien against Borrower shall arise in favor of, any
taxing authority, whether or not the amount of such liability shall have been
assessed against Borrower and whether or not notice of such lien shall have
been filed or recorded as may be required by law, or if Borrower shall fail
to discharge any lien, claim or encumbrance, or fail to obtain or maintain
any of the policies of insurance required hereunder, or to pay any premium,
in whole or in part relating thereto, then Associates shall have the right,
but not the obligation, to pay the amount of such liability (including
interest and/or penalties thereon) and also to pay any tax or liability by
virtue of which such lien shall have arisen, or obtain and maintain such
policies of insurance and pay such premiums and any amount or amounts paid
for the discharge of any such liability or lien shall be charged to the
Receivable Loan Balance.
7.9 Borrower will furnish Associates sworn statements of the value of
the Collateral in such form and as often as Associates requires.
7.10 Borrower will deliver to Associates, duly endorsed or assigned, all
instruments, chattel paper, guaranties or security agreements immediately
upon receipt by Borrower as evidence of, in payment of or as security for any
of the Collateral.
7.11 Borrower shall furnish Associates with an aging of accounts and an
aging of Borrower's accounts payable in such form and as often as Associates
may require.
ARTICLE VIII - Remedies
8.01 Any one or more of the following events shall constitute an event
of default ("Event of Default") under this Agreement: (a) If Borrower fails
to make payment of any of the Obligations when required of Borrower, or fails
to make any remittance required by this Agreement or commits any breach of
this Agreement, or any present or future supplement hereto, or any other
agreement between Borrower and Associates or any affiliate of Associates; (b)
any default by Borrower or Borrower's subsidiaries exists under any agreement
between Borrower or any of Borrower's subsidiaries, affiliates or parents and
Associates or any affiliate of Associates, whether such agreements are now
existing or are hereafter entered into; (c) any representative covenant or
warranty made by Borrower or in connection with this Agreement is breached;
(d) any statement or data furnished by or for Borrower relating to the
Collateral or to the operation or financial condition or business affairs of
Borrower proves to be false in any material respect; (e) Borrower becomes
insolvent or is unable to meet debts as they mature, suspends operations as
presently conducted, or discontinues doing business as an ongoing concern;
(f) if any of the Collateral or any of Borrower's other assets is attached,
seized, subject to a writ or distress warrant or levied upon or if a petition
under any section or chapter of the Bankruptcy Code or any similar law or
regulation shall be filed
<PAGE>
by or against Borrower or Borrower makes an assignment for the benefit of its
creditors or if any case or proceeding is filed by Borrower for its
dissolution or liquidation; (g) if Borrower is enjoined, restrained, or in
any way prevented by court order from (or voluntarily ceases) conducting all
or any material part of its business affairs or if a petition under any
section or chapter of the Bankruptcy Code or any similar law or regulation is
filed against Borrower or if any case or proceeding is filed against Borrower
for its dissolution or liquidation; (h) if a notice of lien, levy or
assessment is filed of record with respect to all or any of Borrower's assets
by the United States or any departments agency, or instrumentality thereof or
by any state. county, municipal or other governmental agency, including,
without limitation, the Pension Benefit Guaranty Corporation, or if any taxes
or debts owing at any time or times hereafter to any one of them becomes a
lien or encumbrance upon the Collateral or any other of Borrower's assets
unless Borrower, in good faith, shall be contesting the same in an
appropriate proceeding and Borrower has given Associates such additional
collateral and assurances as Associates deems necessary under the
circumstances; (i) if a custodian, trustee, receiver or assignee for the
benefit of creditors is appointed to take possession of any of the Collateral
or any of Borrower's other assets; (j) if there shall be a material change in
the stockholders or management of Borrower; or (k) if for any reason the
guaranty of any Person primarily or secondarily liable with respect to any of
the Obligations shall terminate without the consent of Associates.
8.02 Upon the occurrence of any Event of Default and at any time
thereafter so long as the default continues, Associates may, at its option,
with or without notice to Borrower, (a) declare this Agreement to be in
default; (b) declare all Obligations of Borrower to be immediately due and
payable; (c) cease advancing money or extending credit to or for the benefit
of Borrower under this Agreement or any other agreement; (d) cancel any
insurance and credit any refund to the Obligations; and/or (e) exercise all
of the rights and remedies of a secured party under the Code and any other
applicable laws, including, without Imitation, the right to require Borrower
to assemble the Collateral and deliver it to Associates at a place to be
designated by Associates which is reasonably convenient to both parties, and
to lawfully enter any premises where the Collateral is located without
judicial process and take possession thereof. Associates may sell and deliver
any or all Accounts and any or all other Collateral at public or private sale
for each, upon credit or otherwise, at such prices and upon such terms as
Associates deems advisable. Any requirement of reasonable notice shall be met
if such notice is mailed postage prepaid to Borrower at Borrower's address as
set forth herein at least five(5) days before the time of sale or other
disposition. The proceeds of sale shall be applied first to all costs and
expenses of sale, including attorneys' fees, and second to the payment (in
whatever order Associates elects) of all Obligations. Associates shall
dispose of any excess as required by law and Borrower shall remain liable to
Associates for any deficiency. Failure by Associates to exercise any right,
remedy or option under this Agreement or any present or future supplement
hereto or under any other agreement between Associates and Borrower, or delay
by Associates in exercising the same, will not operate as a waiver thereof.
8.03 Associates' rights and remedies under this Agreement shall be
cumulative and not alternative and shall not limit any other right or remedy
which Associates may have.
8.04 Associates shall not be required to have recourse to any
Collateral before enforcing its rights or remedies against Borrower or any
other Person primarily or secondarily liable with respect to any of the
Obligations.
8.05 Associates shall not, under any circumstances or in any event
whatsoever, have any liability for any error or omission or delay of any kind
occurring in the liquidation of any Collateral, including the settlement,
collection or payment of any Account, or for any damage resulting therefrom.
8.06 Borrower waives and releases all rights of redemption from any
sale of the Collateral and the benefit of all evaluation, appraisal and
exemption laws.
8.07 BORROWER AND ASSOCIATES EACH WAIVE THEIR RESPECTIVE RIGHT TO TRIAL
BY JURY IN ANY SUIT OR PROCEEDING ARISING UNDER OR RELATING TO THIS
AGREEMENT. <PAGE>
ARTICLE IX-Termination
9.01 This Agreement shall have an initial term of three (3) years from
the effective date hereof (the "Original Term") and shall be automatically
renewed for successive periods of one (1) year ("Renewal .Term"), unless
sooner terminated as hereinafter provided. Borrower may terminate this
Agreement as of the expiration of the Original Term or any Renewal Term by
giving Associates ninety (90) days prior written notice of its intention to
so terminate. Associates shall have the right to terminate this Agreement at
any time by giving Borrower at least ninety (90) days prior written notice of
its intention to terminate or at any time without notice because of the
occurrence of any Event of Default.
9.02 Upon the termination date, all Obligations shall immediately be
due and payable.
9.03 No termination hereunder shall in any way affect or impair any
right of Associates arising prior thereto or by reason thereof nor shall any
such termination relieve Borrower or any other party primarily or secondarily
liable as to the Obligations until all of the Obligations are fully paid.
9.04 Notwithstanding the provisions of Section 9.01, Borrower may
terminate this Agreement at any time upon ninety (90) days prior written
notice and by payment to Associates on the effective date of such termination
of an amount equal to the sum of (a) all Obligations, plus (b) (i) in the
event of such termination during the first two years of the Original Term,
two percent (2%) of the Maximum Advance, or (b)(ii) in the event of such
termination during the third year of the Original Term and any Renewal Term,
one percent (1%) of the Maximum Advance.
ARTICLE X - Miscellaneous
10.01 NOTWITHSTANDING THE FACT THAT THE CREDIT OF AN ACCOUNT DEBTOR
MUST BE SATISFACTORY TO ASSOCIATES, BORROWER RECOGNIZES AND AGREES THAT
BORROWER WILL MAKE ALL CREDIT DECISIONS WITH RESPECT TO BORROWER'S EXTENSION
OF CREDIT TO AN ACCOUNT DEBTOR; BORROWER WILL NOT RELY ON ASSOCIATES IN ANY
WAY FOR SUCH CREDIT DETERMINATION: NO REPRESENTATION OR AGREEMENT HAS BEEN
MADE BY ASSOCIATES THAT ASSOCIATES WILL PROVIDE CREDIT DECISIONS TO BORROWER
AND ALL REFERENCES TO CREDIT DECISIONS BY ASSOCIATES WITH RESPECT TO AN
ACCOUNT OR AN ACCOUNT DEBTOR REFER SOLELY TO ASSOCIATES' OWN DETERMINATION AS
TO THE ELIGIBILITY OF SUCH ACCOUNT OR SUCH ACCOUNT DEBTOR FOR THE PURPOSE OF
TREATING AN ACCOUNT AS AN ELIGIBLE ACCOUNT.
10.02 All loans made by Associates to Borrower under this Agreement and
under any other agreement between Associates and Borrower shall constitute
one loan secured by all of the Collateral and all other security granted to
Associates.
10.03 Borrower irrevocably (a) waives the right to direct the
application of any and all payments at any time or times hereafter which may
be received by Associates from or for the benefit of Borrower, and (b) agrees
that Associates shall have the continuing exclusive right to apply and
reapply any and all such payments received at any time or times hereafter in
such manner as Associates may deem advisable, notwithstanding any entry by
Associates upon any of its books and records.
10.04 To the extent that Borrower makes a payment(s) to Associates or
Associates enforces its security interest and lien or exercises its right of
setoff and such payment(s) or the proceeds of such enforcement or setoff or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver
or any other party under any bankruptcy law, state or federal law, common law
or equitable cause, then to the extent of such recovery, the liability or
part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment
<PAGE>
had not been made or such enforcement or setoff had not occurred and shall be
Obligations secured by the Collateral.
10.05 This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs and representatives or
successors and assigns. Borrower may not, however, without the prior written
consent of Associates, assign this Agreement to any other person.
10.06 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, this Agreement shall be construed
as not containing such provision and the invalidity of such provision shall
not affect the validity of any other provision hereof and any and all other
provisions hereof which are otherwise lawful and valid shall remain in full
force and effect The captions herein contained are for convenience only, do
not form a part of this Agreement and shall not be utilized in the
construction thereof.
10.07 Borrower will, from time to time, execute and deliver all
instruments, documents or other writings, and take or cause to be taken such
other and further action as Associates may request in order to effect and
confirm or vest more securely in Associates all rights contemplated in this
Agreement.
10.08 This Agreement may be amended and Borrower may take any action
herein prohibited or omit to perform any act herein required to be performed
by it, if Borrower shall obtain Associates' prior written consent to each
such amendment, action or omission to act. No waiver on the part of
Associates on any one occasion shall be deemed a waiver on' any subsequent
occasion. No waiver by Associates will be effective unless it is in writing
and then only to the extent specifically stated.
10.09 If any of the Collateral shall at any time consist of instruments
or documents, Associates shall have no obligation to preserve rights against
prior parties.
10.10 Associates may, at any time(s) pay, acquire, satisfy, or
discharge any security interest, lien, encumbrance or claim asserted by any
Person against the Collateral. Associates shall have no obligation to
determine the validity thereof. All sums paid by Associates under the
provisions of this section and any existing or other charges relating thereto
shall be repaid by Borrower on demand and shall be a charge to the Receivable
Loan Balance.
10.11 Except as otherwise provided for in this Agreement, Borrower
expressly waives presentment, demand and protest and notice of presentment,
protest, default, non-payment, maturity, release, compromise, settlement,
extension or renewal of any or all commercial paper, accounts, contract
rights, documents, instruments, chattel paper and guaranties at any time held
by Associates on which Borrower may in any way be liable and hereby ratifies
and confirms whatever Associates may do in this regard.
10.12 This Agreement shall be governed, construed and enforced in
accordance with the laws of the Applicable Jurisdiction and applicable
Federal laws. This Agreement shall take effect as an instrument under seal.
10.13 Any notice hereunder to Borrower or to Associates shall be in
writing and, if mailed, shall be deemed to be given four (4) Business Days
after deposit in the mail, postage prepaid, and addressed to Borrower or
Associates at its address set forth in the preamble to this Agreement or at
such address as the Borrower or Associates may, by written notice, designate
its address for purposes of notice hereunder.
10.14 This Agreement has been signed and delivered to Associates on the
day and year first above written. This Agreement shall become effective only
upon the written acceptance hereof by Associates under the signature of its
duly authorized officer. When so accepted, this Agreement shall supersede all
prior verbal or written
<PAGE>
agreements, commitments or understandings relating to Associates' loans to
Borrower measured and secured by this Agreement.
10.15 Borrower authorizes Associates to disclose such financial, credit
and other information regarding Borrower and Borrower's business as
Associates may deem appropriate to any of Associates' assignees, participants
or other persons making credit inquiries about Borrower.
19
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers duly authorized thereto.
GASEL TRANSPORTATION LINES, INC.
Borrower
By: /s/ M. J. Post
Title: President
Date: May 27, 1998
Accepted at Irving, Texas_____________ this 27th day of May, 1998
ASSOCIATES TRANSCAPITAL SERVICES, a division of ASSOCIATES COMMERCIAL
CORPORATION
By: /s/______________
Title: SENIOR VICE PRESIDENT
Date: May 27, 1998
<PAGE>
FIRST ADDENDUM TO TRANSPORTATION ACCOUNTS FINANCING AND SECURITY AGREEMENT
This Addendum is attached to and shall modify that certain Transportation
Accounts Financing and Security Agreement dated May 27,1998, as amended ( the
"Agreement"), by and between Associates Transcapital Services, a division of
Associates Commercial Corporation ("Associates"), and Gasel Transportation
Lines, Inc. ("Borrower").
For good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, Associates and Borrower agree to amend the Agreement as
follows:
1. The Maximum Advance, as defined in Article II Section 2.01 of the
Agreement, shall be changed from the current amount of $1,000,000.00 to the
new amount of $2,000,000.00.
2. The Current Renewal Term which is due to expire on May 27,2001 shall
be extended until May 27, 2002. Subsequent Renewal Terms shall be for one
year periods of time as provided in Section 9.01 of the Agreement.
Notwithstanding anything to the contrary contained in the Agreement, if
Borrower elects to terminate the Agreement at any time prior to May 27, 2002,
then instead of paying the amount required in Section 9.04(b)(ii), Borrower
shall pay Associates an amount equal to two percent (2%) of the Maximum
Advance.
3. Section 2.09 of the Agreement shall be changed from the current amount
of $5,000.00 to $10,000.00.
4. This Addendum is effective as of November 19,1999, (the "Effective
Date") and shall not have any retroactive effect on either party's rights and
obligations under the Agreement.
5. Except as specifically modified hereby, the terms and conditions of
the Agreement shall remain in full force and effect.
ASSOCIATES TRANSCAPITAL SERVICES a division of Associates Commercial Corporation
By: /s/______________
Title: Vice President
Date: November 19,1999
Gasel Transportation Lines, Inc.
By: /s/M. J. Post
Title: President
Date: 11-22-99
GUARANTOR CONSENT
<PAGE>
The undersigned Guarantor consents to the within Addendum to Transportation
Accounts Financing and Security Agreement and agrees that the execution
thereof by Associates and Borrower shall not impair or otherwise affect
Guarantor's obligations and duties to Associates with regard to the
Agreement, as amended.
GUARANTOR: Michael J. Post
Signature: /s/ M J Post
(Individually)
Date: 11-22-99
<PAGE>
GASEL TRANSPORTATION LINES. INC.
A. Purpose and Scope
The purposes of this Plan are to encourage stock ownership by key
management of the Gasel Transportation Lines, Inc. (herein called the
"Company") and its Subsidiaries, to provide an incentive for such person to
expand and improve the profits and prosperity of the Company and its
Subsidiaries, and to assist the Company and its Subsidiaries in attracting
and retaining key personnel through the grant of (1) Options to purchase
shares of the Company's common stock.
B. Definitions
1. "Board" shall mean the Board of Directors of the Company as appointed by
the shareholders.
2. "Company" shall mean Gasel Transportation Lines, Inc., an Ohio
corporation.
3. "Code" shall mean the Internal Revenue Code of 1954, as amended. 4.
4. "Option" shall mean a right to purchase Stock, granted pursuant to the
Plan.
5. "Option Price" shall mean the purchase price for Stock under an Option, as
determined in Section F below.
6. "Participant" shall mean an employee, officers or directors of the
Company, or of any Subsidiary of the Company, to whom an Option is granted
under the Plan.
7. "Plan" shall mean this Gasel Transportation Lines, Inc. Stock Option Plan.
8. "Stock" shall mean the common stock of the Company, no par value.
9. "Subsidiary" shall mean a subsidiary corporation of the Company, as
defined in Section 425(f) and 425(g) of the Code.
C. Stock to be Optioned
Subject to the provisions of Section L of the Plan, the maximum number
of shares of Stock that may be optioned or sold under the Plan is 100,000
shares. Such shares may be treasury, or authorized, but unused, shares of
Stock of the Company.
D. Administration
The Plan shall be administered by the Board of Directors. Two members
of the Board of Directors shall constitute a quorum for the transaction of
business. The Board of Directors shall be responsible to the Board for the
operation of the Plan, and shall make decision with respect to participation
in the Plan by key management of the Company and its Subsidiaries, and with
respect to the extent of that participation. The interpretation and
construction of any provision of the Plan by the Board of Directors shall be
final. No member of the Board shall be liable for any action or determination
made by him in good faith.
E. Eligibility
The Board, may grant Options to any key management personnel (including
directors and officers) of the Company or its Subsidiaries. Options may be
awarded by the Board at any time and from time to time to new Participants,
or to then Participants, or to a greater or lesser number of Participants,
and may include or exclude previous Participants, as the Board shall
determine. Options granted at different times need not contain similar
provisions.
F. Option Price
The purchase price for Stock under each Option shall be 100 percent of
the fair market value of the Stock at the time the Option is granted.
G. Terms and Conditions of Options
<PAGE>
Options granted pursuant to the Plan shall be authorized by the Board
and shall be evidenced by agreements in such form as a Board, upon
recommendation of the Committee, shall from time to time approve. Such
agreements shall comply with and be subject to the following terms and
conditions.
1. Employment Agreement. The Board may, in its discretion, include in any
Option granted under the Plan a condition that the Participant shall agree to
remain in the employ of, and/or to render services to, the Company or any of
its Subsidiaries for a period of time (specified in the agreement) following
the date the Option is granted. No such agreement shall impose upon the
Company or any of its Subsidiaries, however, any obligation to employ the
Participant for any period of time. 2. Time and method of Payment. The Option
Price shall be paid in full in cash at the time an Option is exercised under
the Plan, or the participant may pay the Option Price by tendering to the
Company a like number of common shares of the Company as the Participant is
exercising his Option to purchase. Otherwise, an exercise of any Option
granted under the Plan shall be invalid and of no effect. Promptly after the
exercise of an Option and the payment of the full Option Price, the
Participant shall be entitled to the issuance of a stock certificate
evidencing his ownership of such Stock. A Participant shall have none of the
rights of a shareholder until shares are issued to him; provided however
adjustment will be made for dividends or other rights for which the record
date is prior to the date such stock certificate is issued.
3. Number of Shares. Each Option shall state the total number of shares of
Stock to which it pertains.
4. Option Period and Limitations on Exercise of Options. The Board may, in
its discretion, provide that an Option may not be exercised in whole or in
part for any period or periods of time specified in the Option agreement.
Except as provided in the Option agreement, an Option may be exercised in
whole in part at any time during its term. No Option may be exercised after
the expiration of 10 years from the date it is granted. No Option may be
exercised for a fractional share of Stock.
H. Termination of Employment or Affiliation
Except as provided in Section I below, if a Participant ceases to be
employed by the Company or any of its Subsidiaries or his position as a
director of the Company is terminated, his Options shall terminate
immediately; provided, however, that if a Participant's cessation of
employment with the Company and its Subsidiaries is due to his retirement
with the consent of the Company or any of its Subsidiaries, or his
termination as a director is because of a voluntary resignation or because of
a failure to get reelected. the Participant may, at any time within three
months after such cessation of employment, or termination of his directorship
exercise his Options to the extent that he was entitled to exercise them on
the date of cessation of employment or termination of his directorship, but
in no event shall any Option be exercisable more than 10 years from the date
it was granted. The Board of Directors may cancel an Option during the
three-month period referred to in this paragraph, if the Participant engages
in employment or activities contrary, in the opinion of the Board, to the
best interests of the Company or any of its Subsidiaries. The Board shall
determine in each case whether a termination of employment shall be
considered a retirement with the consent of the Company or a Subsidiary, and,
subject to applicable law, whether a leave of absence shall constitute a
termination of employment. Any such determination of the Committee shall be
final and conclusive, unless overruled by the Board.
L Rights in Event of Death
If a Participant dies while employed by the Company or any of its
Subsidiaries, or is a director within three months after having retired with
the consent of the Company or any of its Subsidiaries, or within three months
after having retired with the consent of the Company or any of its
Subsidiaries, and without having fillly exercised his Options the executors
or administrators, or legatees or heirs, of his estate shall have the right
to exercise such Options and Stock Appreciation Rights to the extent that
such deceased Participant was entitled to exercise the Options on the date of
his death; provided, however, that in no event shall the Options be
exercisable more than 10 years from the date they were granted.
J. No Obligations to Exercise Option or Stock Appreciation Rights
<PAGE>
The granting of an Option shall impose no obligation upon the
Participant to exercise such Option.
K. Nonassignability
Options shall not be transferable other than by will or by the law of
descent and distribution, and during a Participant's lifetime shall be
exercisable only by such Participant.
L. Effect of Change in Stock Subject to the Plan
The aggregate number of shares of Stock available for Options under
the Plan, the shares subject to any Option, and the price per share, shall
all be proportionately adjusted for any increase or decrease in the number of
issued shares of Stock subsequent to the effective date of the Plan resulting
from (l)a subdivision or consolidation of shares or any other capital
adjustment, (2) the payment of a stock dividend, or (3) other increase or
decrease in such shares effected without receipt of consideration by the
Company. If the Company shall be the surviving corporation in any merger or
consolidation, any Option shall pertain, apply, and relate to the securities
to which a holder of the number of shares of Stock subject to the Company, or
upon a merger or consolidation in which the Company is not the surviving
corporation, all Options outstanding under the Plan shall terminate;
provided, however, that each Participant (and each other person entitled
under Section I to exercise an Option) shall have the right, immediately
prior to such dissolution or liquidation, or such merger or consolidation, to
exercise such Participant's Options in whole or in part, but only to the
extent that such Options are otherwise exercisable under the terms of the
Plan.
M. Amendment and Termination
The Board, by resolution, may terminate, amend, or revise the Plan
with respect to any shares as to which Options have not been granted. The
Board may not, without the consent of the holder of an Option, alter or
impair any Option previously granted under the Plan, except as authorized
herein. Unless sooner terminated, the Plan shall remain in effect for a
period of 10 years from the date of the Plan's adoption by the Board.
Termination of the Plan shall not affect any Option previously granted.
N. Agreement and Representation of Option Holders
As a condition to the exercise of any portion of an Option, the Company
may require the person exercising such Option to represent and warrant at the
time of such exercise that any shares of Stock acquired at exercise are being
acquired only for investment and without any present intention to sell or
distribute such shares, if, in the opinion of counsel for the Company, such
a-representation is required under the Securities Act of 1933 of any other
applicable law, regulation, or rule of any governmental agency.
0. Reservation of Shares of Stock
The Company, during the term of this Plan, will at all times reserve
and keep available, and will seek or obtain from any regulatory body having
jurisdiction any requisite authority necessary to issue and to sell, the
number of shares of Stock that shall
be sufficient to satisfy the requirements of this Plan. The inability of the
Company to obtain from any regulatory body having jurisdiction the authority
deemed necessary by counsel for the Company for the lawful issuance and sale
of its Stock hereunder shall relieve the Company of any liability in respect
of the failure to issue or sell Stock as to which the requisite authority has
not been obtained.
P. Effective Date of Plan.
The Plan shall be effective from the date that the Plan is approved by
the Board.
<PAGE>
<PAGE>
GASEL TRANSPORTATION LINES, INC.
A. A STOCK OPTION for a total of _____ common shares, no par value,
of Gasel Transportation Lines, Inc., an Ohio corporation (herein the
"Company") is hereby granted to _________________________ (herein the
"Optionee"), subject in all respects to the terms and provisions of the Gasel
Transportation Lines, Inc. Stock Option Plan (herein the "Plan"), dated May
22, 1997, which has been adopted by the Company and which is incorporated
herein by reference.
B. The option price as determined by the Board of Directors of the
Company is ___ Dollars ($_.00) per share.
C. This Option may not be exercised if the issuance of common shares
of the Company upon such exercise would constitute a violation of any
applicable Federal or State securities or other law or valid regulation. The
Optionee, as a condition to his exercise of this Option, shall represent to
the Company that the common shares of the Company that he acquires under this
Option are being acquired by him for investment and not with a present view
to distribution or resale, unless counsel for the Company is then of the
opinion that such a representation is not required under the Securities Act
of 1933 or any other applicable law, regulation, or rule of any governmental
agency.
D. This Option may not be transferred in any manner otherwise than
by will or the laws of descent and distribution, and may be exercised during
the lifetime of the Optionee only by him. The terms of this Option shall be
binding upon the executors, administrators, heirs, successors, and assigns of
the Optionee.
E. This Option may not be exercised more than ten (10) years from
the date of its grant, and may be exercised during such term only in
accordance with the terms of the Plan.
Dated: May 22, 1997.
Gasel Transportation Lines, Inc.
By:___________________________
President
ATTEST:
- -------------------------------
<PAGE>
The Optionee acknowledges receipt of a copy of the Plan, a copy of
which is annexed hereto, and represents that he is familiar with the terms
and provisions thereof.
The Optionee hereby accepts this Optionee subject to all of the
terms and provisions of the Plan. The Option hereby agrees to accept as
binding, conclusive, and final all decisions and interpretations of the Board
of Directors, upon any questions arising under the Plan. As a condition to
the issuance of common shares of the Company under this Option, the Optionee
agrees to remit to the Company at the time of any exercise of this Option any
taxes required to be withheld by the Company under Federal, State, or Local
law as a result of the exercise of this Option."
Dated: May 22, 1997.
--------------------------
Optionee
<PAGE>
AGREEMENT
THIS AGREEMENT made and entered into at Columbus, Ohio this ____ day
of __________, 1998, by and between Merchants Financial, an Ohio corporation
with its principal place of business located at 5302 McKitrick Boulevard,
Columbus, Ohio 43235 (herein referred to as "Merchants") and Gasel
Transportation Lines, Inc., an Ohio corporation, with its principal place of
business on State Route 7, Marietta, Ohio 45750 (hereinafter referred to as
"Gasel").
RECITALS:
1. Merchants has been engaged in the securities business for
approximately the past 10 years and has a vast experience in the
marketing and promotion of small capital company securities.
2. Merchants is engaged in the business of promoting small
capital companies to potential investors through communications with
securities broker-dealers, analysts, money managers, institutional
money managers, and financial publications, preparation of press
releases, consulting on shareholder relations and related items to help
promote and generate interest in small capital public companies and
their securities.
3. Gasel is a small capital company with publicly traded
common shares that is desirous of having information about the company
disseminated in order to help generate interest in and promote the
purchase and sale of its securities by the public.
NOW, THEREFORE, the parties hereto agree as follows:
1. Gasel hereby engages Merchant and Merchant hereby accepts such
engagement by Gasel to perform the services set forth hereinbelow.
2. Merchants agrees to provide to and/or for Gasel the following
consulting and promotional services: preparation of a research report about
Gasel and updating it quarterly comparing Gasel to other publicly traded
companies in a similar situation to Gasel with respect to the fundamentals of
the company and the price of its common shares in the market; dissemination
of the research report updates and other news releases about Gasel to
broker-dealers, securities analysts, money managers, institutional money
managers, financial publications, and other appropriate persons in the
Central Ohio, Marietta, Ohio and other areas that may have customers who
might be interested in purchasing common shares in Gasel; contacting NASD
broker dealers regarding Gasel and in an attempt to generate interest in such
broker-dealers having their customers buy and sell shares in Gasel;
consulting with Gasel regarding financial matters and shareholder relations,
including suggestions regarding shareholder communications and the
preparation thereof; and generally providing such other services as may
result in
<PAGE>
increasing the number of shareholders in Gasel and the volume in the number
of shares of Gasel being traded in the securities markets, and generally
doing such things as shall be necessary to accomplish such goals.
3. In consideration for providing such services to Gasel, Gasel
shall sell to Merchants a warrant at 50 cents ($0.05) per share for the right
to purchase 25,000 of its common shares from Gasel at a purchase price at
$5.50 per share, such warrant to be exercisable at any time within a year
from the date of the issuance of the warrant. Gasel shall be responsible for
the registration of the common shares of Gasel with The Securities and
Exchange Commission and/or the State of Ohio in the event that Merchants
shall desire to make such securities marketable to the public.
4. The term of this agreement shall be for a period of one year (1)
commencing with the execution of this agreement.
5. Upon request, Merchants shall furnish Gasel a list of persons
contacted by Merchants in Merchants promotional efforts on behalf of Gasel.
IN WITNESS WHEREOF, the parties hereto have executed this agreement
this ____ day of ____________, 1998.
Merchants Financial Gasel Transportation Lines, Inc.
By______________________________ By______________________________
Christopher A. Corna, President Michael J. Post, President
<PAGE>
LIST OF COMPANY SUBSIDIARIES
1. Gasel Driver Training Schools, Inc., an Ohio corporation.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
FINANCIAL STATEMENTS OF GASEL TRANSPORTATION LINES, INC AND ITS SUBSIDIARY AS OF
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 20,612
<SECURITIES> 0
<RECEIVABLES> 1,383,841
<ALLOWANCES> 0
<INVENTORY> 223,252
<CURRENT-ASSETS> 1,853,129
<PP&E> 13,478,750
<DEPRECIATION> 4,494,037
<TOTAL-ASSETS> 11,417,136
<CURRENT-LIABILITIES> 3,450,564
<BONDS> 4,742,572
0
0
<COMMON> 1,277,140
<OTHER-SE> 871,881
<TOTAL-LIABILITY-AND-EQUITY> 11,417,136
<SALES> 11,499,872
<TOTAL-REVENUES> 11,499,872
<CGS> 9,255,161
<TOTAL-COSTS> 9,255,161
<OTHER-EXPENSES> 1,471,836
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 708,684
<INCOME-PRETAX> 150,697
<INCOME-TAX> 50,000
<INCOME-CONTINUING> 100,697
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100,697
<EPS-BASIC> .089
<EPS-DILUTED> .078
</TABLE>
