SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Second Amendment to Loan and Security Agreement (this "Amendment"),
is made and entered into effective as of the 1st day of November, 1997, by and
among FINOVA CAPITAL CORPORATION, a Delaware corporation, ("FINOVA") and
KEYSTONE LINES, a California corporation ("Keystone"), CAROLINA NATIONAL
LOGISTICS INC., an Indiana corporation ("CNL"), CAROLINA NATIONAL
TRANSPORTATION INC., an Indiana corporation ("CNT"), GULF LINE TRANSPORT INC.,
an Indiana corporation ("GLT") and GULF LINE BROKERAGE INC., an Indiana
corporation ("GLB"), jointly and severally (each of Keystone, CNL, CNT, GLT,
and GLB being individually referred to as a "Borrower" and collectively as the
"Borrowers"). This Amendment modifies and amends that certain Loan and
Security Agreement dated May 15, 1995, among FINOVA, Keystone, and L.R.S.
Transportation, Inc., an Indiana corporation ("LRS"; Keystone and LRS being
identified as the original "Borrowers" thereunder), as the same was
subsequently amended by that certain First Amendment to Loan and Security
Agreement dated as of December 3, 1996 (the "First Amendment"; the Loan and
Security Agreement, as amended by the First Amendment and by this Second
Amendment, and as the same may subsequently be modified, amended, renewed,
restated or replaced, shall hereinafter be referred to collectively as the
"Agreement"). All terms used herein with initial capital letters, unless
otherwise specifically defined herein, shall have the same meanings as set
forth in the Agreement. All references to the Agreement shall include the
Schedule.
R E C I T A L S:
WHEREAS, pursuant to the First Amendment, LRS was deleted as a Borrower
under the Agreement and each of CNL, CNT, GLT, and GLB were added as Borrowers
under the Agreement; and
WHEREAS, Borrowers have requested that FINOVA increase the maximum
permitted amount of the Receivable Loans, reduce the interest rate applicable
to the Total Facility, waive certain covenant defaults, adjust certain
covenants, and reset certain fees, in consideration for Borrowers' agreement
to pay a "Success Fee" to FINOVA, as hereinafter described, and to make other
adjustments to the Agreement as requested by FINOVA; and
WHEREAS, FINOVA has agreed to make the modifications to the Agreement as
described herein, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter stated, the parties hereto do hereby agree as follows:
1. Definitions.
1.1 Section 18.1 of the Agreement is hereby amended to add
the following as new definitions therein, in the correct alphabetical order
thereof:
"EBITDA" for any fiscal period of Borrowers means the
consolidated net income of US 1 and Borrowers for such fiscal period, plus
interest expense, depreciation and amortization and provision for income taxes
for such fiscal period, and minus non-recurring miscellaneous income and
expenses, all calculated in accordance with GAAP.
"Eligible Unbilled Freight Sales" shall mean those rights to
the payment of money for shipping services performed in favor of any Borrower
which satisfy the conditions set forth in the last sentence of this paragraph,
but as to which no invoice has yet been generated by the applicable Borrower.
For purposes of this Agreement, an unbilled freight sale shall not be deemed a
Receivable until an invoice has been generated. Unbilled freight sales shall
be Eligible Unbilled Freight Sales hereunder if: (i) all goods or products to
have been delivered by the applicable Borrower have been so delivered, and no
other performance by such Borrower is required for such Borrower to be
entitled to payment for the services performed; (ii) the applicable Borrower's
driver or other service representative has advised such Borrower verbally that
such person is in possession of a final signed xxxx of lading accepting
delivery of the goods or products to the final destination thereof; (iii) not
more than fifteen (15) days have elapsed since the date of such delivery (it
being FINOVA's intention that, prior to the expiration of said fifteen day
period, the applicable Borrower shall issue an invoice and the Eligible
Unbilled Freight Sale shall become a Receivable); and (iv) the Eligible
Unbilled Freight Sale, if treated as a Receivable hereunder, would otherwise
satisfy the standards for being an Eligible Receivable in accordance with the
criteria set forth herein.
"First Amendment" shall mean that certain First Amendment
to Loan and Security Agreement dated as of December 3, 1996, by and between
Borrowers and FINOVA.
"Reporting Reserve" shall mean a reserve against borrowing
availability under the Receivable Loans, which FINOVA shall establish and
adjust weekly in an amount equal to five percent (5%) of the sum of Borrowers'
Eligible Receivables and Eligible Unbilled Freight Sales, as shown by
reference to Borrowers' most recent Collateral and Loan Report.
"Second Amendment" shall mean that certain Second
Amendment to Loan and Security Agreement dated effective as of November 1,
1997, by and between Borrowers and FINOVA.
"Second Amendment Primary Effective Date" shall mean
November 1, 1997, or such later date as all conditions precedent described in
Section 8 of the Second Amendment have been satisfied.
"Second Amendment Secondary Effective Date" shall mean
the date upon which all conditions precedent described in Section 9 of the
Second Amendment have been satisfied.
"Success Fee" shall have the meaning given such term in
Section 4.5 of the Second Amendment.
1.2 The definition of "Eligible Receivables"
appearing in Section 18.1 of the Agreement is hereby amended to delete the
phrase "twenty-five percent (25%)" appearing in clause (ii) thereof, and to
substitute therefor the phrase "fifty percent (50%)".
1.3 All references in the Agreement to the Agreeme
(including the Schedule) shall mean and refer to the Agreement and Schedule
as amended through and including this Second Amendment, and as the same may
hereafter be modified, amended, renewed, restated or replaced. In addition,
all references to the Loan Documents appearing in the Agreement shall mean
and refer to such Loan Documents as the same may previously have been, or may
hereafter be, modified, amended, renewed, restated or replaced.
2. Total Facility. Section 1.1 of the Agreement, as set
forth in the Schedule, is hereby amended to delete the amount of "$3,000,000"
set forth therein and to substitute the amount "$3,300,000" therefor.
3. Loans. Section 1.2 of the Agreement, as set forth in
the Schedule and amended by the First Amendment, is hereby amended and
restated in its entirety to read to as follows:
"Revolving Loans: A revolving line of credit consisting
of loans against Borrowers' Eligible Receivables ("Receivable Loans"),
accounted for on a consolidated basis of all Borrowers (but exclusive of US
1), in an aggregate outstanding principal amount at any time which shall not
exceed the lesser of:
Three Million Three Hundred Thousand Dollars ($3,300,000) less the Reporting
Reserve and any other reserves which FINOVA has then established; o
(B) the sum of:
(i) an amount equal to eighty-five percent (85%) of the net amount of the
Eligible Receivables, plus
(ii) a revolving line of credit consisting of loans against Borrowers'
Eligible Unbilled Freight Sales in an aggregate outstanding principal amount
not to exceed the lesser of:
(a) an amount equal to eighty-five percent (85%) of the net amount of all
then outstanding Eligible Unbilled Freight Sales, or
(b) Two Hundred Fifty Thousand Dollars ($250,000), less
(iii) the Reporting Reserve and any other reserves which FINOVA has then
established."
4. Interest and Fees. The section entitled "Interest and Fees (Section
3.1)" as set forth in the Schedule is hereby amended as follows:
4.1 The paragraph entitled "Interest" is hereby amended to provide that, a
of the Second Amendment Primary Effective Date, interest shall accrue on the
daily outstanding balance of the Borrowers' loan account at a per annum rate
equal to the Base Rate plus two and three-quarters percent (2.75%). The
interest rate thereafter applicable to the daily outstanding balance of
Borrowers' loan account shall be subject to further adjustment as follows:
(A) upon the occurrence of the Second Amendment Secondary Effective Date,
interest shall accrue at a rate per annum equal to the Base Rate plus two and
one-half percent (2.50%); (B) such interest rate may thereafter decrease to
the Base Rate plus two percent (2.0%) following delivery to FINOVA of US 1's
annual audited financial statements (which audited financial statements are in
full compliance with the requirements of Section 5.2(iv) hereof) for its
fiscal year ending December 31, 1997 if no Event of Default then exists and
such audited financial statements demonstrate both (i) EBITDA of not less than
$300,000 and (ii) a Total Debt Service Coverage Ratio for the twelve month
period then ended of not less than 1.15:1.00, and in the event Borrowers fail
to qualify for the foregoing reduction in interest rate by reference to such
1997 audited financial statements, Borrowers shall be entitled to qualify for
the reduction in interest rate described in this clause (B) if US 1's annual
audited financial statements (which financial statements are in full
compliance with Section 5.2(iv) hereof) for its fiscal year ending December
31, 1998 satisfy the preceding two standards; (C) such interest rate may
thereafter be reduced to the Base Rate plus one and one-half percent (1.50%)
(whether or not Borrowers qualified for the reduction in interest rate
described in the preceding clause (B) by reference to US 1's 1997 audited
financial statements) following delivery to FINOVA of US 1's annual audited
financial statements (which audited financial statements are in full
compliance with the requirements of Section 5.2(iv) hereof) for its fiscal
year ending December 31, 1998 if no Event of Default then exists and such
audited financial statements demonstrate both (i) EBITDA of not less than
$450,000 and (ii) a Total Debt Service Coverage Ratio for the twelve months
then ended of not less than 1.25:1.0; and (D) such interest rate may
thereafter be reduced to the Base Rate plus one percent (1.0%) at any time
after January 1, 1999 when all of the following conditions are satisfied
concurrently: (i) no Event of Default then exists; (ii) for the immediately
preceding trailing six month period, based upon US 1's consolidated financial
statements, Borrowers have attained a Total Debt Service Coverage Ratio of not
less than 1.5:1.0; and (iii) Borrowers' average daily Excess Availability,
considered on a consolidated basis for the three months then ended, is not
less than $500,000, provided, that in calculating Excess Availability for
purposes of this clause (D)(iii), but only for purposes of this clause
(D)(iii), clause (b)(ii) of the definition of Excess Availability shall be
amended to read as follows: "(ii) the aggregate amount of all trade payables
of Borrowers which are past due as of such time, determined by reference to
the specific due dates applicable to each such trade payable".
4.2 The paragraph entitled "Minimum Interest Charge" is hereby amended
to increase the Minimum Interest Charge required thereunder from $10,000 to
$18,000. The foregoing notwithstanding, in the event Borrowers qualify for
reductions in the applicable interest rate after giving effect to the
reduction agreed upon as of the Second Amendment Primary Effective Date,
FINOVA shall propose corresponding reductions in the Minimum Interest Charge,
to take into account such reductions in the rate at which interest accrues on
the Borrowers' obligations.
4..3 The paragraph entitled "Collateral Monitoring Fee" shall be of no
further force and effect after the Second Amendment Primary Effective Date.
4.4 The paragraph entitled "Facility Fee" is hereby amended and restated
in its entirety to read as follows:
"Administrative Fee. Borrowers shall pay to FINOVA an administrative fee
equal to one percent (1.0%) per annum of the amount of the Total Facility.
The administrative fee shall be deemed fully earned at the time when due, and
is otherwise due and payable annually, commencing upon the first anniversary
of the Second Amendment Primary Effective Date and continuing on each
subsequent anniversary thereof, including without limitation the last day of
the Initial Term."
4.5 Success Fee. The following new paragraph is hereby added at the end
of such section:
"Success Fee. Borrowers shall pay to FINOVA a fee (the "Success Fee") to be
determined as follows, but which shall in no event be less than $87,000 nor
more than $350,000. The amount of the Success Fee within the preceding range
shall be determined by reference to the market prices for US 1's freely
trading common stock, including increases in the value of such stock which
occur after the Second Amendment Primary Effective Date. On the Second
Amendment Primary Effective Date, US 1 shall issue to FINOVA 250,000 shares of
unregistered US 1 common stock. The shares so issued to FINOVA shall be
referred to herein as the "Success Fee Shares," and shall in all respects be
the property of FINOVA. Following issuance of the Success Fee Shares to
FINOVA, FINOVA shall be entitled to receive the benefit of any stock splits,
stock dividends, reverse stock splits, or other forms of combination or
division of the outstanding number of shares of US 1 stock into a greater or
lesser number of shares (all such events being referred to herein as
"Recapitalizing Events"). Prior to the occurrence of any Recapitalizing
Event, Borrowers and US 1 shall notify FINOVA as to the number of shares which
the Success Fee Shares shall be converted into upon completion of the
Recapitalization Event, and shall provide FINOVA sufficient information in
order to permit FINOVA to confirm such amount. The foregoing notwithstanding,
in the event that any Recapitalizing Event would result in FINOVA holding in
excess of five percent (5%) of all issued and outstanding shares of US 1
common stock, FINOVA shall deliver to US 1 for cancellation that number of
shares from the Success Fee Shares as shall be sufficient to reduce the then
remaining Success Fee Shares held by FINOVA to not more than five percent (5%)
of all US 1 issued and outstanding common stock.
In addition to the foregoing rights, FINOVA shall be entitled to receive and
retain any cash dividends which are declared and paid with respect to the
Success Fee Shares, which dividends shall be taken into account in determining
the total amount of the Success Fee received by FINOVA hereunder.
At any time following the twenty-four (24) month anniversary of the Second
Amendment Primary Effective Date (the "Start Date"), and continuing until the
forty-eight (48) month anniversary of the Second Amendment Primary Effective
Date (the "Final Sale Date"), FINOVA shall be entitled to sell all or any part
of the Success Fee Shares at their then current market value, and to retain
the proceeds received from such sales, subject to the following conditions:
(i) at any time when sales of the Success Fee Shares have generated cash
proceeds to FINOVA (net of sales commissions) in an amount equal to $350,000,
FINOVA shall deliver any remaining Success Fee Shares to US 1 for
cancellation, without requirement for any further consideration being paid to
FINOVA in respect thereof; and (ii) on the Final Sale Date, FINOVA shall
likewise deliver any remaining unsold Success Fee Shares to US 1 for
cancellation, without further consideration. In the event that (1) either (a)
FINOVA has sold all of the Success Fee Shares or (b) the Final Sale Date has
occurred, whether or not FINOVA then continues to hold any Success Fee Shares,
and (2) at such time FINOVA has realized less than $87,000 in cash proceeds
(net of sales commissions) from the sale of Success Fee Shares, Borrowers
shall pay to FINOVA the amount necessary, after taking into account the net
cash proceeds actually received by FINOVA from the sale of Success Fee Shares,
to cause FINOVA to realize the minimum Success Fee of $87,000. The obligation
of Borrowers to pay the foregoing minimum Success Fee shall be for all
purposes an "Obligation" under the Agreement, and shall be guaranteed by each
of the Guarantors.
The following events shall be referred to as "Termination Events": (i) the
Second Amendment Secondary Effective Date has occurred, resulting in an
extension of the Initial Term in accordance with Section 12 of the Second
Amendment, and thereafter Borrowers elect to terminate the Loan; (ii) the
Second Amendment Secondary Effective Date has not occurred and the term of the
Loan expires without a renewal, in accordance with Section 16.4 as set forth
in the original Schedule to the Agreement (provided, however, that with
respect to an extension of the Loan beyond the Renewal Term in effect as of
the date of this Amendment, which is currently scheduled to expire May 31,
1998, but solely as to the existing Renewal Term, if no Event of Default then
exists and the term of the Loan expires without a renewal as a result of
FINOVA's decision not to renew, then FINOVA shall forfeit its rights to the
Success Fee and shall return all the Success Fee Shares to Borrowers); and
(iii) the Loan is terminated and all Obligations declared due and payable by
FINOVA following the occurrence of an Event of Default. If a Termination
Event occurs at a time when (a) FINOVA has not yet realized cash proceeds (net
of sales commissions) equal to the minimum Success Fee provided for herein and
(b) FINOVA continues to hold unsold Success Fee Shares, then the following
events shall occur: (I) upon the occurrence of the Termination Event,
Borrowers shall pay to FINOVA in cash (which payment shall be a guaranteed
Obligation of Borrowers hereunder), an amount necessary to cause the total
cash proceeds received by FINOVA (after taking into account the net cash
proceeds previously received from the sale of Success Fee Shares) to equal the
minimum Success Fee of $87,000 hereunder; (II) upon receipt of the
supplemental cash payment described in the preceding clause (I), Borrowers'
obligation for payment of the minimum Success Fee shall be deemed satisfied;
(III) regardless of when the Start Date would otherwise have occurred,
immediately upon the occurrence of the Termination Event FINOVA shall be
entitled, for a period of not to exceed eighteen months following date upon
which the termination of the Loan occurred, to sell the remaining Success Fee
Shares, applying the proceeds of such sales as follows: (A) the first cash
proceeds (net of sales commissions) received by FINOVA will be paid to
Borrowers in reimbursement of any supplemental Success Fee payment made by
Borrowers as required by clause (I) hereof; and (B) thereafter, cash proceeds
received by FINOVA, up to the maximum Success Fee provided for hereunder,
shall be retained by FINOVA as additional Success Fee hereunder; and (IV) at
such time as FINOVA has either received cash proceeds (net of sales
commissions) equal to the maximum Success Fee hereunder, or on the eighteen
month anniversary of the termination date of the Loan, FINOVA shall return any
unsold Success Fee Shares to US 1 for cancellation, without further
consideration to FINOVA. If a Termination Event occurs at a time when FINOVA
has realized cash proceeds (net of sales commissions) at least equal to the
minimum Success Fee hereunder, then the provisions of clause III(B) and (IV)
of the preceding sentence shall apply to any remaining unsold Success Fee
Shares then held by FINOVA.
FINOVA acknowledges and agrees that the Success Fee Shares originally issued
to FINOVA will not be registered in accordance with the rules and regulations
of the Securities and Exchange Commission, and accordingly that as of the date
of the issuance of the Success Fee Shares to FINOVA such shares are not freely
tradeable. Borrowers hereby agree and covenant to cause US 1, and by joining
in this Amendment for purposes of this provision US 1 hereby agrees and
covenants, that upon request of FINOVA, US 1 shall take such steps as are
necessary to register the resale by FINOVA of the Success Fee Shares, shall
file a registration statement for that purpose within thirty (30) days
following the request of FINOVA, and US 1 shall do everything reasonably
necessary to cause such registration statement to be declared effective as
early as is practicable, but in no event later than the earliest to occur of
the Start Date or sixty (60) days following a Termination Event. Borrowers
acknowledge and agree that the failure of US 1 to have registered the resale
of the Success Fee Shares by FINOVA on or before the Start Date shall
constitute an Event of Default under the Agreement. Borrowers and US 1
further agree that, following the occurrence of a Termination Event, then (i)
if registration of FINOVA's resale of the Success Fee Shares has not occurred
by the date sixty (60) days following such Termination Event, FINOVA's right
to resell the Success Fee Shares, as stated in clause (b)(III) of the
preceding paragraph shall automatically be extended such that FINOVA shall at
all times have not less than sixteen (16) months to dispose of the Success Fee
Shares following such registration; and (ii) in the event that no registration
of FINOVA's right to resell the Success Fee Shares has been declared effective
within the period of six (6) months following the Termination Event, then
FINOVA shall have no obligation, notwithstanding the provisions of clause
(b)(III)(A) of the preceding paragraph, to reimburse Borrowers for any
supplemental Success Fee payment made by Borrowers as required by clause
(b)(I) of the preceding paragraph. In lieu of the foregoing obligation to
register FINOVA's resale of the Success Fee Shares, Borrowers shall be deemed
to have satisfied the foregoing requirement if Borrowers cause there to be
provided to FINOVA an opinion of counsel, the identity of which counsel and
the form and substance of which opinion are acceptable to FINOVA, concluding
that FINOVA's resale of the Success Fee Shares is exempt from the registration
requirements of all applicable federal and state securities law and may be
completed subject to no restrictions other than a ceiling on the maximum
number of Success Fee Shares which FINOVA would be permitted to sell in any
month, but which maximum number of shares shall in no event be less than one
percent (1%) of US 1's total number of issued and outstanding shares.
The Success Fee shall be fully earned by FINOVA on and as of the Second
Amendment Primary Effective Date, in consideration for FINOVA's willingness to
enter into the Second Amendment and to continue to provide financing to
Borrowers upon the terms and conditions of the Agreement as modified thereby.
Payment of the Success Fee shall for all purposes be considered an Obligation
of Borrowers under the Agreement and shall be secured by FINOVA's security
interest in all the Collateral. Until the Success Fee, together with all the
other Obligations have been paid in full, FINOVA shall have no obligation to
release its lien on and security interest in any of the Collateral."
5. Reporting Requirements. Notwithstanding the provisions of clause
(i) of Section 5.2 in the Agreement, requiring Borrower to provide FINOVA's
standard form Collateral and Loan Report daily, and the provisions of the
first subparagraph of the Section in the Schedule entitled "Reporting
Requirements (Section 5.2)," which was amended by the First Amendment, the
following shall set forth Borrowers' obligations with respect to borrowing
base reporting. Borrowers shall provide FINOVA with borrowing base
calculations on a weekly basis, on Monday of each week (unless such Monday is
not a Business Day, in which case such calculations shall be provided on the
first Business Day of the week), on FINOVA's standard form Collateral and Loan
Report (referred to herein as the "C&L Report"), and shall further provide
FINOVA with a C&L Report on the last Business Day of each month. Each C&L
Report provided shall update calculations from the last C&L Report provided to
FINOVA, adding amounts for Eligible Receivables and Eligible Unbilled Freight
Sales generated subsequent to the date of the last C&L Report and reflecting
reductions in borrowing base availability as the result of collections
received subsequent to such date. Each C&L Report shall also indicate whether
Borrowers have any Excess Availability after adjusting the amount of the
Reporting Reserve to the full amount required hereunder, in light of the total
Eligible Receivables and Eligible Unbilled Freight Sales reflected on such C&L
Report. In the event that no Excess Availability remains after fully funding
the Reporting Reserve, such event shall be referred to as a "Shortfall." At
any time when Borrowers' most recent C&L Report has indicated the existence of
a Shortfall, Borrowers' borrowing availability under the Receivable Loans
shall be limited to an amount equal to the full amount necessary to fund the
Reporting Reserve minus the amount of the Shortfall. Anything else contained
in this Agreement to the contrary notwithstanding, the occurrence of one or
more Shortfalls shall not constitute an Overline unless one of the follow
three conditions exists: (i) Borrowers have experienced a Shortfall on two
consecutive weekly C&L Reports (without regard to interim C&L Reports provided
on the last Business Day of the month); (ii) Borrowers have experienced
Shortfalls on more than three C&L Reports submitted during any fiscal quarter
(but for purposes of this clause, not counting any Shortfall which exists by
reference to a C&L Report submitted on the last Business Day of a month unless
that day is also the first Business Day of the applicable week); or (iii) the
amount of such Shortfall equals or exceeds the amount necessary to fully fund
the Reporting Reserve. If any of the preceding conditions exist, then an
Overline shall be deemed to have occurred, and Borrowers shall be required to
repay such Overline immediately upon demand. During any month in which any
C&L Report submitted by Borrower (including the C&L Report submitted on the
last Business Day of such month) demonstrates the existence of a Shortfall,
FINOVA shall be entitled to charge Borrowers a collateral monitoring fee of
$500 for such month, in consideration for the additional administrative
monitoring which FINOVA will be required to undertake following the occurrence
of a Shortfall.
In addition for the foregoing, but without limiting FINOVA's right to require
more frequent reporting, in accordance with the Agreement (which discretion on
FINOVA's part is not limited by this Section 5), FINOVA shall be permitted, if
it deems the same to be appropriate, to modify the preceding reporting
requirements to allow Borrowers to submit C&L Reports on a bi-weekly basis
(i.e., such reports to be submitted on the first Business Day of every other
week).
Financial Covenants. The section entitled "Financial Covenants (Section
13.14)" as set forth in the Schedule is hereby amended and restated in its
entirety as follows:
"The Borrowers shall comply with the following financial covenants.
Compliance shall be determined on a consolidated basis at the US 1 level, as
of the end of each month, as specifically provided below:
Net Worth: Borrowers shall maintain a consolidated Net Worth of not less
($4,500,000) (i.e., a negative net worth which is not a negative amount in
excess of $4,500,000).
The minimum Net Worth requirement hereunder, tested on a consolidated basis,
shall hereafter be adjusted to equal the amounts set forth on the following
table:
Fiscal Period Required Minimum Net Worth
January 1, 1998 through December 31, 1998 $(4,400,000)
January 1, 1999 through December 31, 1999 $(4,300,000)
January 1, 2000 through December 31, 2000 $(4,200,000)
January 1, 2001 and thereafter $(4,100,000)
In the event Borrowers' consolidated financial statements demonstrate that, at
the end of any month, Borrowers shall have failed to have satisfied the
minimum Net Worth covenant set forth herein, notwithstanding the fact that an
Event of Default shall immediately occur as the result of such failure, the
Guarantors shall be permitted to terminate the continuance of such Event of
Default by contributing additional equity capital to one or more of Borrowers
in an amount sufficient to cause Borrowers to satisfy the minimum Net Worth
requirement set forth herein, provided that such additional capital is
contributed within thirty (30) days after the date such Event of Default
arose.
For purposes of applying the foregoing Net Worth covenant, in the event that
US 1's present "net benefit from net deferred tax asset," resulting from prior
net operating losses experienced by US 1 and presently described in footnotes
to US 1's audited financial statements as a result of the uncertainty of such
asset being utilized, becomes includable directly as an asset on US 1's
balance sheet in accordance with generally accepted accounting principles,
then the foregoing required minimum Net Worth amounts shall each be increased
by an amount equal to ninety-five percent (95%) of the increase in
consolidated Net Worth realized by US 1 as a result of such accounting change.
Total Debt Service The Borrowers shall maintain a Total Debt Service
Coverage Ratio: Coverage Ratio of not less than the ratios set forth in the
table below for the periods stated. Compliance with this covenant shall be
measured monthly on a cumulative monthly fiscal year to date basis (i.e.,
commencing January 1 of each year through the month most recently ended, or
for such lesser period as a Borrower has been in operation). All calculations
shall be based on the profit and loss statements on a consolidated basis for
all Borrowers at the US 1 level, prepared in accordance with generally
accepted accounting principles consistently applied:
Fiscal Table Total Debt Service Coverage Ration
Second Amendment Primary 1.00:100
Effective Date through December 31, 1997
January 1, 1998 through December 31, 1998 1.10:1.00
January 1, 1999 through December 31, 1999 1.15:1.00
January 1, 2000 and thereafter 1.25:1.00
In the event Borrowers' consolidated financial statements demonstrate that, at
the end of any month, Borrowers shall have failed to attain the Total Debt
Service Coverage Ratio required hereby, notwithstanding the fact that an Event
of Default shall immediately occur as the result of such failure, the
Guarantors shall be permitted to terminate the continuance of such Event of
Default by contributing additional equity capital to one or more of Borrowers
or by causing one or more of Borrowers to incur subordinated debt on terms and
conditions which are acceptable to FINOVA, and with respect to which the
holders have entered into a Subordination Agreement in form and substance
satisfactory to FINOVA, in each case in an amount which, when added to the
other amounts described in clause (i) of the definition "Total Debt Service
Coverage Ratio", would result in the required Total Debt Service Coverage
Ratio having been attained, provided that any such additional capital is
contributed within thirty (30) days after the date such Event of Default
arose.
7. Termination Fee. Section 16.4 of the Agreement, as set forth on the
Schedule, is hereby amended and restated in its entirety to read as follows:
"The Termination Fee provided in Section 16.4 shall be an amount equal to the
following percentage of the average daily outstanding balance of the
Obligations for the 180-day period (or lesser period if applicable) preceding
the date of termination:
(i) three percent (3%), if such early termination occurs on or prior to
the first anniversary of the Second Amendment Primary Effective Date;
(ii) two percent (2%), if such early termination occurs after the first
anniversary of the Second Amendment Primary Effective Date and on or prior to
the second anniversary of the Second Amendment Primary Effective Date;
(iii) one percent (1%), if such early termination occurs after the second
anniversary of the Second Amendment Primary Effective Date and on or prior to
the third anniversary of the Second Amendment Primary Effective Date; and
(iv) one-half of one percent (0.5%), if such early termination occurs after
the third anniversary of the Second Amendment Primary Effective Date and prior
to the expiration of the Initial Term.
The foregoing notwithstanding, nothing contained in this Section 16.4 shall
imply or create an extension of the term of the Agreement beyond the Renewal
Term in effect on the Second Amendment Primary Effective Date, as set forth in
the original Schedule to the Agreement, in the event that the conditions
precedent set forth in Section 9 of the Second Amendment are not satisfied and
the Second Amendment Secondary Effective Date never occurs. In that event,
the adjustment to the Termination Fee described in this Section 16.4 shall go
into effect as of the Second Amendment Primary Effective Date, and the
Termination Fee provided therein shall be payable upon the expiration of the
then current Renewal Term or any subsequent Renewal Term, or upon the earlier
termination of this Agreement pursuant to the terms of the Agreement."
8. Primary Conditions Precedent. The modifications described in this
Amendment (other than those set forth in Sections 10, 11, and 12 hereof, which
are governed by Section 9 hereof), and the agreements and obligations of
FINOVA set forth in this Amendment, will not become effective unless and until
each of the following conditions precedent have been satisfied, in form,
manner and substance satisfactory to FINOVA:
8.1 Borrowers shall have delivered or caused to be delivered to FINOVA
the following documents, all of which shall be properly completed, executed
and otherwise satisfactory to FINOVA:
(a) This Second Amendment;
(b) Amendments and Reaffirmations of each Guaranty;
(c) Any consents deemed necessary by FINOVA;
(d) A corporate resolution of each Borrower approving the transactions
contemplated hereby to which it is a party;
(e) An opinion from Borrowers' counsel, which counsel must be acceptable
to FINOVA, with respect to such matters as FINOVA shall require;
(f) Such other items as FINOVA may require.
8.2 FINOVA shall have received a certificate of good standing with respect
to each Borrower, dated within ten (10) days of the date hereof by the
applicable authority of the state of formation of such Borrower, which
certificate shall indicate that such Borrower is in good standing in such
state.
8.3 There shall not then exist an Event of Default or any act or event
which with notice, passage of time, or both would constitute an Event of
Default.
8.4 All the representations and warranties of Borrowers and Guarantors in
the Loan Documents shall be true and correct, in all material respects, before
and after giving effect to the making of this Amendment.
8.5 FINOVA shall be satisfied that it has a first priority lien on and
security interest in all assets of each Borrower.
8.6 There shall have occurred no material adverse change in the business
or financial condition of Borrowers since Borrowers' financial statements for
the period ending August 31, 1997.
8.7 FINOVA has received and found satisfactory the results of the
customer, vendor, and trade credit references, as well as UCC, tax lien,
litigation and judgment searches on each Borrower and each Guarantor.
8.8 Each Guarantor shall have delivered updated personal financial
statements, not earlier than sixty (60) days prior to the date of this Second
Amendment, together with copies of each such Guarantor's 1996 federal income
tax returns, including all schedules and attachments thereto.
8.9 FINOVA shall have received evidence that all approvals and/or
consents of or other actions by, any entity or person whose approval or
consent is necessary or required to enable Borrowers to perform their
obligations under this Amendment, have been obtained, including without
limitation the consent of any Affiliates of any Guarantors, which Affiliates
have loaned money to, or are otherwise owed money by, any Borrower.
8.10 Borrowers shall have provided FINOVA with a personal introduction to
Xx. Xxxxxx Xxxxxx, Xx., together with his key management.
8.11 Each of the Guarantors shall have entered into Subordination
Agreements, in form and substance satisfactory to FINOVA, subordinating any
amounts owed by any Borrower to such Guarantor to the payment of the
Obligations to FINOVA.
9. Secondary Conditions Precedent. The modifications described in
Sections 10, 11, and 12 of this Amendment, and the agreements and obligations
of FINOVA with respect to such provisions, will not become effective unless
and until each of the following additional conditions precedent have been
satisfied, in form, manner and substance satisfactory to FINOVA:
9.1 CNT has demonstrated one fiscal quarter of operation in which CNT
must, during such fiscal quarter, have satisfied both of the following
conditions: (i) generated EBITDA of not less than $100,000, and (ii) generated
net income before taxes of not less than $50,000.
9.2 The two most recent field audits or other examinations conducted by
FINOVA on all of Borrowers' operations shall have been found satisfactory to
FINOVA in its sole discretion.
9.3 There shall not then exist an Event of Default or any act or event
which with notice, passage of time, or both would constitute an Event of
Default.
9.4 All the representations and warranties of Borrowers and Guarantors in
the Loan Documents shall be true and correct, in all material respects, before
and after giving effect to the making of this Amendment.
9.5 There shall have occurred no material adverse change in the business or
financial condition of Borrowers since Borrowers' most recent annual financial
statements delivered to FINOVA pursuant to Section 5.2 of the Agreement.
10. Total Facility. Section 1.1 of the Agreement, as set forth on the
Schedule and as previously amended by Section 2 of this Amendment, is hereby
further amended to delete the amount of "$3,300,000" set forth therein and to
substitute the amount "$5,000,000" therefor.
11. Loans. Section 1.2 of the Agreement, as set forth in the Schedule
and as amended by the First Amendment and by Section 3 of this Amendment, is
hereby amended and restated in its entirety to read to as follows:
"Revolving Loans: A revolving line of credit consisting of loans against
Borrowers' Eligible Receivables ("Receivable Loans"), accounted for on a
consolidated basis of all Borrowers (but exclusive of US 1), in an aggregate
outstanding principal amount at any time which shall not exceed the lesser of:
(A) Five Million Dollars ($5,000,000) less the Reporting Reserve and any
other reserves which FINOVA has then established; or
(B) the sum of:
(i) an amount equal to eighty-five percent (85%) of the net amount of the
Eligible Receivables, plus
(ii) a revolving line of credit consisting of loans against Borrowers'
Eligible Unbilled Freight Sales in an aggregate outstanding principal amount
not to exceed the lesser of:
(a) an amount equal to eighty-five percent (85%) of the net amount of all
then outstanding Eligible Unbilled Freight Sales, or
(b) Two Hundred Fifty Thousand Dollars ($250,000), less
(iii) the Reporting Reserve and any other reserves which FINOVA has then
established."
12. Term. Section 16.1 of the Agreement, as set forth in the Schedule,
is hereby amended and restated in its entirety to read as follows:
"The initial term of this Agreement shall be from May 31, 1995 through the
fourth anniversary of the Second Amendment Primary Effective Date (the
"Initial Term") and shall be automatically renewed at the discretion of GFC
for successive periods of one (1) year each (each, a "Renewal Term"), unless
earlier terminated as provided in Section 16 or 17 above or elsewhere in this
Agreement."
13. Restructure and Line Increase Fees.
13.1 On or before December 31, 1997, Borrowers agree to pay FINOVA a "Loan
Restructure Fee" in the amount of $30,000, which amount is inclusive of the
facility fee, in the amount of $15,000, that was payable by Borrowers on May
31, 1997 and which, as of the date of this Amendment, has not been paid.
Borrowers acknowledge that the foregoing Loan Restructure Fee has been fully
earned by FINOVA (and a portion of such fee had previously been fully earned
by FINOVA) upon the execution of this Amendment in consideration for the
agreements made by FINOVA herein. FINOVA is hereby authorized to pay the Loan
Restructure Fee by making an advance against the Receivable Loans on December
31, 1997 (or, if such date is not a Business Day, on the last Business Day of
1997).
13.2 In addition to the foregoing, at such time as all the secondary
conditions precedent set forth in Section 9 of this Amendment have been
satisfied and the increase in the Total Facility described in Section 10
hereof has gone into effect, Borrowers shall pay to FINOVA a "Line Increase
Fee" in the amount of $20,000, which amount shall be due and payable (i) in
the event the Second Amendment Secondary Effective Date occurs on or before
December 31, 1997, concurrently with and in the same manner as the Loan
Restructure Fee, and (ii) in the event the Second Amendment Secondary
Effective Date occurs after December 31, 1997, on the Second Amendment
Secondary Effective Date.
13.3 The Loan Restructure Fee and the Line Increase Fee each represent
additional consideration to FINOVA for increasing the amount of the Total
Facility, extending the expiration date of the term of the loan then in
effect, adjusting certain covenants, and waiving certain covenant defaults,
and such fees shall not be applied toward or against principal, interest, or
any other amount owing by Borrowers to FINOVA. In addition to the foregoing
fees, Borrowers shall reimburse FINOVA for all costs and expenses incurred by
FINOVA in connection with this Amendment, including without limitation
attorneys' fees and costs incurred, and any filing or recording fees.
14. Waiver of Events of Default. FINOVA hereby waives the following
specific acts, occurrences and failures of Borrowers:
(i) the failure to maintain the minimum Net Worth set forth in Section
13.14 of the Agreement for all test periods during which such a failure
occurred ending through September 30, 1997;
(ii) the failure to meet the minimum Total Debt Service Coverage Ratio
set forth in Section 13.14 of the Agreement for all test periods during which
such a failure occurred ending through September 30, 1997; and
(iii) the failure to have provided financial statements, in accordance
with Section 5.2 of the Agreement, within the periods required thereunder, for
all reporting periods during which such a failure occurred ending through
September 30, 1997.
No other or future acts, events or occurrences which either constitute an
Event of Default or which, with the giving of notice or the passage of time,
or both, would constitute an Event of Default, are waived by FINOVA,
including, without limitation, any circumstances which are of a continuing
nature, the existence of which would independently give rise to an Event of
Default under any Agreement after giving effect to this Amendment; provided,
that with respect to any financial covenants or reporting obligations which
are only tested or to be complied with as of specified dates pursuant to the
Agreements, no Event of Default shall exist unless a breach occurs or exists
as of the time such covenants are to be tested or complied with next following
the date of this Amendment.
15. Confirmation of Liens. This Amendment in no way acts as a release
or relinquishment of any of the liens, security interests, rights or remedies
securing payment of the Loans or of the enforcement thereof. Such liens,
security interests, rights and remedies are hereby ratified, confirmed,
preserved, renewed and extended by Borrowers in all respects.
16 Events of Default. The events of default specified in the Agreement
and the other Loan Documents shall continue to be the events of default under
the Loan except as otherwise specifically agreed herein to the contrary.
FINOVA's remedies with respect to the occurrence of an Event of Default shall
continue to be as set forth in the Loan Documents.
17. Reaffirmation of Loan Documents. All terms, conditions and provisions
of the Agreement and the other Loan Documents are hereby reaffirmed and
continued in full force and effect and shall remain unaffected and unchanged
except as specifically amended hereby or by the documents executed and
delivered in connection herewith. Borrowers furthermore agree that they have
no defense, counterclaim, offset, cross-complaint, claim or demand of any
nature whatsoever which can be asserted as a basis to seek affirmative relief
or damages from FINOVA.
18. Further Assurances. FINOVA and Borrowers will execute such other
writings as may be necessary to confirm or carry out the intendments of FINOVA
and Borrowers evidenced by this Amendment.
19. Representations and Warranties. Borrowers represent and warrant to
FINOVA that the execution and delivery by Borrowers of this Amendment and all
other documents or instruments executed or delivered in connection herewith
(all such documents being collectively referred to herein as the "Amendment
Documents"), have been duly and properly made and authorized. The Loan
Documents, this Amendment, and the other Amendment Documents each constitute
valid and binding obligations of Borrowers, enforceable against each Borrower
party thereto in accordance with their respective terms.
20. Benefit of the Amendment. The terms and provisions of this
Amendment, the other Amendment Documents and the other Loan Documents shall be
binding upon and inure to the benefit of FINOVA and Borrowers and their
respective successors and assigns, except that Borrowers shall not have any
right to assign their rights under this Amendment, the other Amendment
Documents, or any of the Loan Documents or any interest therein without the
prior written consent of FINOVA.
21. Choice of Law. The Loan Documents, this Amendment, and the Amendment
Documents shall be performed and construed in accordance with the laws of the
State of Arizona.
22. Entire Agreement. Except as modified by the Amendment Documents, the
Loan Documents remain in full force and effect. The Loan Documents, as
modified by the Amendment Documents, embody the entire agreement and
understanding between Borrowers and FINOVA, and supersede all prior agreements
and understandings between said parties relating to the subject matter
thereof.
23. Counterparts; Telecopy Execution. This Amendment may be executed in
any number of separate counterparts, each of which, when taken together, shall
constitute one and the same agreement, admissible into evidence,
notwithstanding the fact that all parties have not signed the same
counterpart. Delivery of an executed counterpart of this Amendment by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of this Amendment. Any party delivering an executed counterpart
of this Amendment by telefacsimile shall also deliver a manually executed
counterpart of this Amendment, but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and binding effect
of this Amendment.
24. Effectiveness of Amendment. This Amendment shall not be effective
until the same is executed and delivered by the parties hereto and all
conditions set forth in Section 8 hereof have been satisfied (such date being
hereinafter referred to as the "Second Amendment Primary Effective Date").
IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective
as of the day, month, and year first above written.
FINOVA CAPITAL CORPORATION,
a Delaware corporation
By:
Name:
Title:
KEYSTONE LINES, a California corporation
By:
Name:
Title:
CAROLINA NATIONAL LOGISTICS INC., an Indiana corporation
By:
Name:
Title:
CAROLINA NATIONAL TRANSPORTATION INC., an Indiana corporation
By:
Name:
Title:
GULF LINE TRANSPORT INC., an Indiana corporation
By:
Name:
Title:
GULF LINE BROKERAGE INC., an Indiana corporation
By:
Name:
Title:
This Amendment is joined in by US 1 Industries, Inc., an Indiana corporation,
for purposes of evidencing its consent to and agreement to be bound by those
provisions of Section 4.5 of this Amendment relating to the issuance to
FINOVA, and the registration of FINOVA's right to resell, the Success Fee
Shares.
US 1 INDUSTRIES, INC., an Indiana corporation
By:
Name:
Title:
