EXHIBIT 7.1
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Xxxxxxxxx Environmental & Industrial Equity Partners, L.P.
Specialty Transportation Services, Inc.
$7.0 million Senior Subordinated Facility
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Xxxxx Transportation Services, Inc.
$2.25 million Inter-company Loan
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Summary of Terms and Conditions
This Summary of Terms and Conditions does not constitute a binding commitment or
contract, and the Investor's investment in Specialty Transportation Services,
Inc. ("STS") is contingent upon, among other things, execution of definitive
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agreements.
Senior Subordinated Facility
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Borrower: STS
Purpose: The investment will provide much-needed liquidity via a
better-suited capital structure to be utilized by the board
and management in execution of current turn-around efforts
and pursuit of future growth opportunities.
Facility: $7.0 million Senior Subordinated Facility, non-callable and
convertible at any time subsequent to funding
Investor: Xxxxxxxxx Environmental & Industrial Equity Partners, L.P.
("Xxxxxxxxx")
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Drawdown: $7.0 million to be invested at closing and used to pay down
the Mellon Bank revolver. Mellon will permit drawdowns on
the revolver up to $7.0 million without restriction, and the
funds will be used to meet the cash requirements of STS, as
established in a 90-day projected cash flow budget prepared
by STS which is satisfactory to Xxxxxxxxx.
Closing: As soon as practical
Maturity: Five-Year Note
Interest Rate: Floating at Mellon Prime Rate; Borrower will have PIK option
(subject to the limitation on equity ownership by Xxxxxxxxx
described below); customary default rate
Conversion Ratio: $7.0 million principal amount is convertible into 70% of STS
common stock on a fully diluted basis. Unpaid PIK interest
is convertible into additional common stock at the same
ratio as the principal conversion. The total ownership of
STS common stock on a fully diluted basis, from the
conversion of the principal amount and unpaid PIK interest,
is not to exceed 80%, except as provided below.
If STS does not achieve 2000 EBITDA of at least $7.3
million, Xxxxxxxxx'x maximum equity participation will be
increased according to the
following formula: the $7.0 million principal amount will be
convertible into an additional 1% of the total ownership of
STS common stock on a fully diluted basis for every $260,000
by which 2000 EBITDA is less than $7,300,000, to a maximum
5% additional total ownership. For example, if 2000 EBITDA
is $7,040,000, the $7.0 million principal amount will be
convertible into 71% of the total ownership of STS common
stock on a fully diluted basis; if 2000 EBITDA is
$6,520,000, the principal amount will be convertible into
73% of the total ownership of STS common stock on a fully
diluted basis; and if 2000 EBITDA is $6,390,000, the
principal amount will be convertible into 73.5% of the total
ownership of STS common stock on a fully diluted basis. The
80% limit on Xxxxxxxxx'x total direct ownership of STS
common stock described in the immediately preceding
paragraph will be revised upward, to a maximum of 85%, to
accommodate the application of the formula contained in this
paragraph in the event 2000 EBITDA of STS is less than $7.3
million.
Inter-company
Loan: $2.25 million inter-company loan to be allowed to be made by
STS to its parent, Xxxxx Transportation Services, Inc.
("ATS"), to be used in part to pay all transaction expenses.
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Up to an additional $600,000 will be used to repay the
inter-company amount due from STS to another ATS subsidiary.
(See terms and conditions below)
Security: Second priority security interest behind existing bank
creditors in all collateral (including real estate and
leasehold interests)
Fees: ATS shall pay a 3% closing fee, in addition to Xxxxxxxxx'x
legal and other professional fees incurred in connection
with the financing.
Covenants and
Default Provisions: Affirmative and Negative Covenants similar to existing bank
group loan documents and cross defaulted with existing STS
bank group loan document default provisions, customary
default and remedy provisions
Conditions: Subject to:
. Execution of satisfactory Inter-creditor agreement
. Satisfactory fairness opinion
. Satisfactory opinion of counsel
. No material adverse change
. Obtain all material consents
. Satisfactory documentation of inter-company loan
. Negotiate satisfactory forbearance, standstill and
waivers with STS and ATS bank group
. Acceleration of the adjustment to Xxxxxxxxx'x common
stock position in ATS under the 1999 investment
documents
. STS trade creditors exposure of $750,000 to be termed
out over 9-12 months, or settled for some discount
. Preparation of a three-year business plan for STS
(including financial projections) which is
acceptable to Xxxxxxxxx
STS Banks to agree to restructure existing exposure of $34.7
million (consisting of $18.0 million revolver, $14.1 million
term loan and $2.6 million over-advance) as follows:
New revolver $18.0 million
New term loan $16.7 million
Amortization schedule for new term loan:
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Year 1 $1.5 million (quarterly payments of $375,000 commencing 9/30/00)
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Year 2 $2.0 million (quarterly payments of $500,000)
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Year 3 $2.0 million (quarterly payments of $500,000)
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Year 4 $2.0 million (quarterly payments of $500,000)
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Year 5 $2.0 million (quarterly payments of $500,000)
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Year 6 $2.0 million (quarterly payments of $500,000)
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Year 7 $5.2 million balloon
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No change to interest rate
Priority: Senior Subordinated Facility shall be contractually
subordinated to STS bank group, provided that Xxxxxxxxx will
have priority to extent full $7.0 million is not drawn on
revolver
ATS Warrants: Xxxxxxxxx to receive 5-year warrants to acquire common stock
of ATS for an exercise price of $0.01 per share whereby
Xxxxxxxxx increases its ownership, on a fully diluted basis,
to 55% of ATS (including the acceleration of the equity
adjustment feature). Conversion feature assumes 55% interest
meets the criteria contained in Parent's articles/bylaws
concerning controlling interest.
Inter-company Loan
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Beneficiary: Xxxxx Transportation Services, Inc. ("ATS" or "Parent")
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Purpose: The inter-company loan will ease the immediate cash crisis
of the Parent and its subsidiaries and provide the platform
whereby management, at the direction of the board, may work
toward completion of the pending audit, initiate combining
the business units of Xxxxx Transfer, Inc. ("ATI") and AG
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Carriers, Inc. ("AGC") in pursuit of turn-around efforts and
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evaluation of future strategies.
Form: Inter-company loan
Source of Funds: Xxxxxxxxx via loan to Specialty Transportation Services,
Inc. (STS)
Drawdown: $ 2.25 million to be deposited with the American National
Bank on behalf of ATS, with up to an additional $600,000
being paid to ATI on account of inter-company amounts due to
ATI by STS. The total value of the loan is $2.25 million.
Draw down to be based on the cash requirements of ATI, ATS
and AGC, as established in 90 day projected cash flow budget
prepared by ATS, ATI and AGC, which is satisfactory to
Xxxxxxxxx.
Maturity: Three Year Note, with the proviso of the earlier of three
years or expiration of the ATI loan facility
Interest Rate: Equal to the Applicable Federal Rate in effect from time to
time
Closing: As soon as practical
Security: Second priority security interest in ATI and AGC assets
behind existing bank creditors in all collateral (including
real estate and leasehold interests)
Fees: ATS shall pay Xxxxxxxxx'x legal and other professional fees
in connection with the financing.
Default Provisions: Cross defaulted with existing bank loan document default
provisions
Conditions: Subject to:
. Execution of satisfactory Inter-creditor agreement
. Satisfactory fairness opinion
. Satisfactory opinion of counsel
. ATS, ATI and AGC trade credit exposure of $750,000 to
be termed out over 9-12 months, or settled for some
discount
. Preparation of a three-year business plan for ATS,
ATI and AGC (including financial projections) which
is acceptable to Xxxxxxxxx
Priority: Inter-company loan shall be contractually subordinate to the
ATI bank creditor.
