FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment"),
dated as of December 3, 1996, is entered into among FINOVA CAPITAL CORPORATION,
a Delaware corporation ("FINOVA"), with a place of business at 000 Xxxxx Xxxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000,xxx 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, individually, a "Borrower", and collectively, the "Borrowers") with
their chief executive office located at 1000 Xxxxxx, Xxxx, Xxxxxxx 00000, and
L.R.S. TRANSPORTATION, INC., an Indiana corporation ("LRS").
RECITAL
A. Keystone, LRS and FINOVA have previously entered into that certain
Loan and Security Agreement dated as of May 31, 1995 (the "Loan Agreement"),
pursuant to which FINOVA has made certain loans and financial accommodations
available to Keystone and LRS. Terms used herein without definition shall have
the meanings ascribed to them in the Loan Agreement.
B. US 1 Industries, Inc., an Indiana corporation ("US1") is the parent
of Keystone and Keystone is the parent of LRS.
C. LRS has ceased business operations and desires to withdraw as a
Borrower under the Loan Agreement, there being no Revolving Loan advances under
the Loan Agreement currently outstanding to LRS.
D. US1 has formed additional transportation subsidiaries, CNL, CNT,
GLT and GLB (the "Additional Subsidiaries, and, together with Keystone, the
"Constituent Entities") and Keystone acting on instructions from US1, has
requested that FINOVA agree to add the Additional Subsidiaries as co-borrowers
under the Loan Agreement.
E. Keystone and the Additional Subsidiaries, as sister corporations to
Keystone, and wholly owned subsidiaries of US1, are inter-related entities
which, collectively, constitute an integrated provider of transportation
services, with US1 providing all administrative services for Keystone and the
Additional Subsidiaries.
F. The Constituent Entities are sufficiently dependent upon each other
and so interrelated, that any advances made by FINOVA under the Loan Agreement
to any of them would directly benefit all of the other Constituent Entities as
a result of their consolidated operations and identity of interests, and that
the Constituent Entities rely on each other for management and/or financial
resources.
G. The Constituent Entities have requested that FINOVA treat them as
co-borrowers under the Loan Agreement, as a single, consolidated business
enterprise, jointly and severally responsible for the Obligations under the
Loan Agreement, so as to permit advances to be allocated among the Constituent
Entities as they shall decide, from time to time, to be in their best
interests.
H. FINOVA is willing to proceed on the basis of treating all of the
Constituent Entities as a single, consolidated business enterprise, and view
their operations on a consolidated basis as requested by Keystone, to add the
Additional Subsidiaries as co-Borrowers under the Loan Agreement, and to delete
LRS as a Borrower under the Loan Agreement.
I. FINOVA is willing to further amend the Loan Agreement under the
terms and conditions set forth in this Amendment. The Constituent Entities are
entering into this Amendment with the understanding and agreement that, except
as specifically provided herein, none of FINOVA's rights or remedies as set
forth in the Loan Agreement are being waived or modified by the terms of this
Amendment.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. The definitions of "Borrower" and "Borrowers" set forth in the
preamble to the Loan Agreement are hereby amended to delete LRS as a Borrower
under the Loan Agreement and to include the Additional Subsidiaries, as jointly
and severally responsible with Keystone for all Obligations now or hereafter
outstanding under the Loan Agreement, and by its execution of this Amendment,
LRS withdraws as a Borrower under the Loan Agreement, and by their execution of
this Amendment, the Additional Subsidiaries assume all of the rights, duties
and obligations of a Borrower under the Loan Agreement as if they had initially
been parties thereto.
2. Section 14.2 of the Loan Agreement is hereby amended to read in its
entirety as follows:
"14.2 Loans. Make advances, loans or extensions of credit to, or
invest in, any Person, except for (i) advances, loans or extensions
of credit to the other Borrower(s) in an aggregate amount
outstanding at any time of not greater than Two Hundred Thousand
Dollars ($200,000); provided, however, that no such advance, loan
or extension of credit shall be made by a Borrower to any other
Borrower if an Event of Default had occurred and was continuing
hereunder or would occur with notice or the passage of time, or
both, or would result from such payment; provided further, however,
that after giving effect to each such advance, loan or extension of
credit, the Borrower making such advance, loan or extension of
credit shall have Excess Availability in an amount not less than
twenty percent (20%) of that amount equal to eighty percent (80%)
of the net amount of the then Eligible Receivables of such
Borrower; and provided further, however, that Borrowers shall
provide to FINOVA no later than the next succeeding Business Day
after the date of any such advance, loan or extension of credit, a
report, in form and substance satisfactory to FINOVA, setting forth
the calculation, in the manner provided in Schedule 14.2 attached
hereto, demonstrating that after giving effect to any such advance,
loan or extension of credit, Borrowers have Excess Availability in
the minimum amount required by the preceding proviso; (ii)
advances, loans or extensions of credit to US 1 in an aggregate
principal amount outstanding at any time of not greater than One
Hundred Thousand Dollars ($100,000), and (iii) advances to
owners/operators in the ordinary course of business in an amount
not to exceed either Five Thousand Dollars ($5,000) to any
owner/operator, or Three Hundred Fifty Thousand Dollars ($350,000)
to all owners/operators;"
3. Section 14.5 of the Loan Agreement is hereby amended to read in its
entirety as follows:
"14.5 Indebtedness of Others. Become directly or contingently
liable for the Indebtedness of any Person, except by endorsement of
instruments for deposit, except for (i) Indebtedness of the other
Borrower(s) in an aggregate amount outstanding at any time of not
greater than Two Hundred Thousand Dollars ($200,000), and (ii)
Indebtedness of US 1 in an aggregate principal amount outstanding
at any time of not greater than One Hundred Thousand Dollars
($100,000);"
4. The section in the Schedule to the Loan Agreement entitled "Loans
(Section 1.2)" is hereby amended to read in its entirety as follows:
"LOANS (Section 1.2): Revolving Loans: A revolving line of credit
consisting of loans against the Borrowers' Eligible Receivables
("Receivable Loans"), accounted for on the basis of each individual
Borrower, in an aggregate outstanding principal amount at any time
which shall not exceed the lesser of:
(a) the amount of the Total Facility; or
(b) the sum of (i) with respect to loans to Keystone, the
lesser of (A) Two Million Dollars ($2,000,000) or (B)
an amount equal to eighty percent (80%) of the net
amount of Eligible Receivables of Keystone only, and
(ii) with respect to loans to each of CNL, CNT, GLT or
GLB, the lesser of (A) One Million Dollars ($1,000,000)
or (B) an amount equal to eighty percent (80%) of the
respective net amount of Eligible Receivables of each
of GLT or GLB, or seventy-five percent (75%) of the
respective net amount of Eligible Receivables of each
of CNL or CNT, as the case may be; provided, however,
that in the event FINOVA receives a field audit of CNL
and CNT, such field audit anticipated to be commenced
approximately thirty (30) days after the initial
advance to CNL or CNT hereunder, satisfactory to
FINOVA, the advance rate against the Eligible
Receivables of CNL and CNT shall increase from seventy-
five percent (75%) to eighty percent (80%); and
provided further, however, that at no time shall
aggregate advances to CNL, CNT, GLT and GLB exceed One
Million Dollars ($1,000,000).
Each Revolving Loan advance hereunder shall be advanced
by FINOVA to a specified Borrower based upon the net
amount of the Eligible Receivables of the specific
Borrower to whom the Revolving Loan advance is to be
made. The Borrowers shall reconcile, by Borrower,
Revolving Loan Advances to the net amount of Eligible
Receivables on a monthly basis, by providing FINOVA
with a consolidating borrowing base certificate
pursuant to Section 5.1(1) hereof."
5. (a) The first subparagraph of the section in Schedule to the Loan
Agreement entitled "Reporting Requirements (Section 5.2)" is hereby amended to
read in its entirety as follows:
"1. Each of the Borrowers shall provide FINOVA with monthly
agings aged by invoice date and reconciliations of
receivables within ten (10) days after the end of each month,
which aging reports shall be accompanied by a consolidating
borrowing based certificate dated as of the last day of the
preceding month showing the calculation of the net amount of
Eligible Receivables by Borrower, the outstanding Revolving
Loan advances to each such Borrower, and the resulting net
borrowing availability to each Borrower as of the end of the
preceding month, such consolidating borrowing based
certificate to be in form satisfactory to FINOVA."
(b) The following provision is added at the end of the Section in
the Schedule entitled "Reporting Requirements (Section 5.2)":
"In the event that any Borrower is not in compliance with any
of the reporting requirements set forth in Section 5.2 of the
Loan Agreement and the Schedule, FINOVA may, in addition to
its right to exercise any other rights or remedies hereunder
in response to such non-compliance, charge the Borrowers a
fee for such failure to comply of Two Hundred Dollars ($200)
per day from the date of the occurrence of such failure to
comply with the reporting requirements hereunder until such
failure is either cured or waived by FINOVA as provided
herein (the 'Late Reporting Charge'); provided, however, that
the Late Reporting Charge will not be assessed for a late
submission of the reconciliation of Receivables as required
by subparagraph 1 of Section 5.2 of the Schedule unless such
report is not submitted within fifteen (15) days after the
end of the applicable month.
6. The section on the Collateral Monitoring Fee, set forth under
"Interest and Fees" (Section 3.1) in the Schedule to the Loan and Security
Agreement, is hereby amended to read in its entirety as follows:
"Collateral Monitoring Fee. Commencing December 1, 1996, and
on the first day of each calendar month thereafter, the
Borrowers shall pay FINOVA a Collateral Monitoring Fee of
Five Hundred Dollars ($500) which shall be deemed fully
earned as of the time of each payment."
7. The following changes are made to the section entitled "Borrower
Information" in the Schedule to the Loan Agreement:
Borrowers' States of Incorporation (Section 12.1):
Keystone Lines - California
Carolina National Logistics, Inc. - Indiana
Carolina National Transportation, Inc. - Indiana
Gulf Line Transport, Inc. - Indiana
Gulf Line Brokerage, Inc. - Indiana
Borrowers' Location (Section 12.16): 1000 Xxxxxx
Xxxx, Xxxxxxx 00000
8. The Financial Covenants (Section 13.14), as set forth in the
Schedule to Loan and Security Agreement, are hereby amended to read in their
entirety as follows:
"The Borrowers shall comply with the following financial
covenants. Compliance shall be determined individually for
each Borrower, and on a consolidated basis at the US1 level,
as of the end of each month, as specifically provided below:
Net Worth: The Borrowers shall maintain Net Worth of not less than the
correlative amounts set forth below for the periods stated:
Period
December 3, January 1, 1997 July 1, 1997 and
1996 through through June 30, thereafter
December 31, 1997
Borrower(s) 1996
Consolidated (-$4,400,000)* (-$4,100,000)* (-$3,800,000)*
Keystone $ 900,000 $ 950,000 $ 1,000,000
CNL $ 1,000** $ 1,000** $ 1,000**
CNT $ 1,000** $ 9,000** $ 250,000**
GLT $ 1,000 $ 9,000 $ 75,000
GLB $ 1,000 $ 35,000 $ 1,000
* The minimum Net Worth requirement for the applicable period shall be reduced
(if negative) or increased (if positive), at such time, and from time to time,
as US1 shall have received additional cash equity capital, in an amount equal
to one hundred percent (100%) of the additional cash equity capital up to an
amount of Two Hundred Thousand Dollars ($200,000), and fifty percent (50%) of
any additional cash equity capital in excess of such amount.
**The minimum Net Worth requirement for the applicable period shall be reduced
(if negative) or increased (if positive), at such time, and from time to time,
as CNL or CNT, as the case may be, shall have received additional cash equity
capital, in an amount equal to fifty percent (50%) of the additional cash
equity capital.
Total Debt Service
Coverage Ratio: The Borrowers shall maintain Total Debt Service
Coverage ratios of not less than the correlative
ratios set forth for the periods stated.
Compliance with this covenant shall be measured
on a cumulative monthly rolling basis of twelve
(12) months (or for such lesser period as a
Borrower has been in operation). All
calculations shall be based on the profit and
loss statements for each borrower and on a
consolidated basis for all Borrowers at the US1
level prepared in accordance with generally
accepted accounting principles consistently
applied:
Period
December 3, June 1, 1997 July 1, 1997 and
1996 through through June 30, thereafter
December 31, 1997
Borrower(s) 1996
Consolidated 1.25:1.00 1.25:1.00 1.25:1.00
Keystone 1.10:1.00 1.10:1.00 1.10:1.00
CNL 1.10:1.00 1.10:1.00 1.10:1.00
CNT 1.10:1.00 1.10:1.00 1.10:1.00
GLT 1.10:1.00 1.10:1.00 1.10:1.00
GLB 1.10:1.00 1.10:1.00 1.10:1.00
9. The following definitions set forth in Section 18 of the Loan
Agreement are hereby amended to read as follows:
"Current Assets" at any date means the amount at which the
current assets of an individual Borrower, or of all of the
Borrowers on a consolidated basis determined at the US1
level, would be shown on a balance sheet of the individual
Borrower or of all of the Borrowers, as the case may be, as
of such date, prepared in accordance with generally accepted
accounting principles, consistently applied, provided that
amounts due from Affiliates and investments in Affiliates
shall be excluded therefrom."
"Current Liabilities" at any date means the amount at which
the current liabilities of an individual Borrower, or of all
of the Borrowers on a consolidated basis determined at the
US1 level, would be shown on a balance sheet of the
individual Borrower or of all of the Borrowers on a
consolidated basis, as the case may be, as of such date,
prepared in accordance with generally accepted accounting
principles, consistently applied."
"Excess Availability" means, on an individual Borrower
basis, the amount, as determined by FINOVA, calculated at any
time, equal to: (a) the amount of the Revolving Loans
available to a Borrower as of such time based on the
applicable lending formulas multiplied by the net amount of
Eligible Receivables, as determined by FINOVA, and subject to
the sublimits and availability reserves from time to time
established by FINOVA hereunder, minus (b) the sum of: (i)
the amount of all then outstanding and unpaid Revolving Loan
advances made by FINOVA to such Borrower, (ii) the aggregate
amount of all trade payables of such Borrower which are more
than sixty (60) days past due as of such time, and (iii) the
aggregate amount of such Borrower's bank overdrafts.
"Net Worth" at any date means an individual Borrower's net
worth, or the net worth of all of the Borrowers determined on
a consolidated basis at the US1 level, as the case may be, in
each case determined in accordance with generally accepted
the accounting principles, consistently applied."
"Total Debt Service Coverage Ratio" means, as to each
Borrower and as to all Borrowers on a consolidated basis at
the US1 level, the ratio of each Borrower's or all of the
Borrowers', as the case may be, (i) net profit after taxes
but before any extraordinary items or non-recurring events,
plus depreciation, plus amortization, plus interest, minus
cash Capital Expenditures, to (ii) principal, plus interest,
plus dividends and distributions to US 1."
10. The following definitions are added to Section 18 of the Loan
Agreement:
"KL" means Keystone Logistics, Inc., an Indiana corporation
and a co-borrower hereunder.
"CNL" means Carolina National Logistics, Inc., an Indiana
corporation and a co-borrower hereunder.
"CNT" means Carolina National Transportation, Inc., an
Indiana corporation and a co-borrower hereunder.
"GLT" means Gulf Line Transport, Inc., an Indiana corporation
and a co-borrower hereunder.
"GLB" means Gulf Line Brokerage, Inc., an Indiana corporation
and a co-borrower hereunder.
11. Remedies. The second sentence of Section 17.2 of the Loan
Agreement is hereby amended to read as follows:
"Borrowers agree that FINOVA shall have all of its rights and
remedies under applicable law, including, without limitation,
the default rights and remedies of a secured party under the
Code, and upon the occurrence of an Event of Default
Borrowers hereby consent to the appointment of a receiver by
FINOVA in any action initiated by FINOVA pursuant to this
Agreement and to the jurisdiction and venue as set forth in
Section 19.7 hereof, and Borrowers waive notice and posting
of a bond in connection thereof".
12. Effectiveness of this Amendment. FINOVA must have received the
following items, in form and content acceptable to FINOVA, before this
Amendment is effective and before FINOVA is required to extend any credit to
the Borrowers (with the exception of advances to CNL and CNT for which the
additional requirements of Paragraph 13 shall apply) as provided for by this
Amendment. The date on which all of the following conditions have been
satisfied is the "Closing Date".
(a) Amendment. This Amendment fully executed in a sufficient
number of counterparts for distribution to FINOVA and the Borrowers.
(b) Authorizations. Evidence that the execution, delivery and
performance by each Borrower and each guarantor or subordinating creditor
of this Amendment or consents thereto and of any other instrument or
agreement required by FINOVA in connection therewith have been duly
authorized.
(c) Representations and Warranties. The Representations and
Warranties set forth in the Loan Agreement must be true and correct.
(d) Other Required Documentation. All other documents and legal
matters in connection with the transactions contemplated by this
Agreement, including all items set forth on the Document Checklist
attached as Exhibit A hereto and incorporated herein by this reference
shall have been delivered or executed or recorded and shall be in form
and substance satisfactory to FINOVA.
(e) Payment of Modification Fee. FINOVA shall have received from
the Borrowers a Modification Fee of $1,000 for the processing and
approval of this Amendment.
(f) Credit Policies. The Borrowers shall have demonstrated to
the satisfaction of FINOVA the policies and procedures by which they
screen and approve the credit quality of new account debtors.
(g) Employment Contracts. The Borrowers shall have provided
FINOVA with copies of all employee employment contracts or other
agreements and such contracts and agreements shall be acceptable in form
and substance to FINOVA.
(h) Projections. The Borrowers shall have provided to FINOVA, in
form and substance satisfactory to FINOVA, projected consolidating
financial statements through December 31, 1997.
13. Effectiveness of this Amendment with Respect to Advances to CNL and
CNT.
FINOVA shall have received the following items, in addition to the items set
forth in Paragraph 12 above, in form and content acceptable to FINOVA, before
this Amendment is effective with respect to advances to CNL and CNT and before
FINOVA is required to extend any credit to CNL and CNT as provided for by this
Amendment.
(a) US1 Equity. US1 shall have raised additional cash equity
capital in the minimum amount of Two Hundred Thousand Dollars ($200,000).
(b) CNL and CNT Equity. CNL and CNT, individually or in the
aggregate, shall have received additional cash equity capital in the minimum
amount of One Hundred Thousand Dollars ($100,000) which amount shall be in
addition to the minimum amount of cash equity capital required to be raised by
US1 as provided in subparagraph (a) above.
(c) Lockbox. CNL and CNT shall have established lockbox or
dominion accounts as provided by Section 7.3 of the Loan Agreement.
(d) Field Audit. FINOVA shall have received and reviewed its
field audit of the Borrowers for the period ending September 30, 1996 and as a
result of such review, FINOVA shall have determined that Borrowers are in
compliance with the financial reporting and other requirements of the Loan
Agreement.
(e) Background Report. FINOVA shall have received such credit
and background reviews as FINOVA considers appropriate on Xx. Xxxxxx X. Xxxxxx,
Xx., and of such reports shall be satisfactory to FINOVA.
(f) Delivery Receipts. Notwithstanding any other provision of
this Agreement to the contrary, Receivables of CNL and CNT in excess of One
Thousand Dollars ($1,000) each shall not be considered Eligible Receivables
until such time as FINOVA shall have received and approved the delivery
receipts with respect to the shipment giving rise to the Receivables.
14. Choice of Law. The validity of this Amendment, its construction,
interpretation and enforcement, the rights of the parties hereunder, shall be
determined under, governed by, and construed in accordance with the internal
laws of the State of Arizona governing contracts only to be performed in that
State.
15. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties and separate counterparts, each of which
when so executed and delivered, shall be deemed an original, and all of which,
when taken together, shall constitute one and the same instrument.
16. Due Execution. The execution, delivery and performance of this
Amendment are within the power of the Borrowers, have been duly authorized by
all necessary corporate action, have received all necessary governmental
approval, if any, and do not contravene any law or any contractual restrictions
binding on the Borrowers.
17. Effect of Amendment. Except as set forth expressly herein, all
terms of the Loan Agreement and the other Loan Documents shall be and remain in
full force and effect and shall constitute the legal, valid, binding and
enforceable obligations of the Borrowers to FINOVA. To the extent that any
terms and conditions in any of the Loan Documents shall contradict or be in
conflict with any terms or conditions of the Loan Agreement, after giving
effect to this Amendment, such terms and conditions are hereby deemed modified
and amended accordingly to reflect the terms and conditions of the Loan
Agreement as modified and amended hereby.
18. Ratification. Borrowers hereby restate, ratify and reaffirm each
and every term and condition set forth in the Loan Agreement, as amended
hereby, and the Loan Documents effective as of the date hereof.
19. Estoppel. To induce FINOVA to enter into this Amendment and to
continue to make advances to Borrowers under the Loan Agreement, Borrowers
hereby acknowledge and agree that, after giving effect to this Amendment, as of
the date hereof, there exists no Event of Default and no right of offset,
defense, counterclaim or objection in favor of any Borrower as against FINOVA
with respect to the Obligations.
20. Waiver. The Borrowers acknowledge that FINOVA may not have
strictly enforced the reporting requirements, or financial covenants or other
terms and conditions of the Loan Agreement. Any such prior failure by FINOVA,
pursuant to Section 19.2 of the Loan Agreement, shall not operate as a waiver
of Borrowers' required future compliance with all of the terms and conditions
of the Loan Agreement. The Borrowers agree that FINOVA may strictly enforce
all of the terms and conditions of the Loan Agreement including, but not
limited to, the reporting requirements as amended by this Amendment and that
any past leniency by FINOVA shall not be deemed a waiver of the Borrowers
requirements for future performance. In furtherance of the foregoing, the
Borrowers acknowledged that FINOVA has been advancing against Receivables shown
on Borrowers' aging reports as outstanding for the period of from 60 to 90 days
of invoice date, notwithstanding the fact that the definition of Eligible
Receivables considers Receivables unpaid after 75 days after invoice date to be
ineligible. Commencing with Borrowers' reporting period ending December 31,
1996, FINOVA shall no longer advance against any Receivables shown under a
category in a monthly aging report as outstanding for a period longer than 75
days after invoice date, or against any Receivables shown in a aging category
that includes the 75th day after invoice date, such as a reporting category of
from 60 to 90 days.
IN WITNESS WHEREOF, the parties have entered into this Amendment as of
the date first above written.
KEYSTONE LINES,
a California corporation
By:______________________________
Title:____________________________
L.R.S. TRANSPORTATION, INC.,
an Indiana corporation
By:_____________________________
Title:___________________________
CAROLINA NATIONAL LOGISTICS, INC.,
an Indiana corporation
By:______________________________
Title:___________________________
CAROLINA NATIONAL
TRANSPORTATION INC.,
an Indiana corporation
By:_______________________________
Title:____________________________
GULF LINE TRANSPORT INC.,
an Indiana corporation
By:______________________________
Title:___________________________
GULF LINE BROKERAGE INC.,
an Indiana corporation
By:______________________________
Title:___________________________
FINOVA CAPITAL CORPORATION,
a Delaware corporation
By:______________________________
Title:___________________________
Schedule 14.2
Date of Intercompany Advance,
Loan or Extension of Credit: _______________, 19__
(a) Net Amount of Eligible
Receivables (gross
Eligible Receivables
less returns, allowances
and other adjustments) $____________________
(b) Eighty Percent (80%) of
the net amount of
Eligible Receivables $____________________
(c) Twenty Percent (20%) of (b) $____________________
(d) Total Excess Availability
(as defined in the Schedule
to Loan and Security Agreement) $____________________
(e) (d) > (c) ? yes
? no
I hereby certify that the foregoing calculations are true and correct to
the best of my knowledged after due inquiry as of the date hereof.
Dated:________________ ________________________________
Chief Financial Officer
