-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IjYUUT+3AeV4U72bFhcfe+pz/IcRfVCEflprSAZvIn3/kC5aYIdNqB+BOp9RCBw2 AtM9jzYKRY/jwe32gwQyLg== 0000911916-96-000024.txt : 19981229 0000911916-96-000024.hdr.sgml : 19981229 ACCESSION NUMBER: 0000911916-96-000024 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960313 DATE AS OF CHANGE: 19981228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTRENET INC CENTRAL INDEX KEY: 0000778161 STANDARD INDUSTRIAL CLASSIFICATION: 4213 IRS NUMBER: 351597565 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-14060 FILM NUMBER: 96534294 BUSINESS ADDRESS: STREET 1: 400 TECHNECENTER DRIVE SUITE 200 CITY: MILFORD STATE: OH ZIP: 45150 BUSINESS PHONE: 5135766666 FORMER COMPANY: FORMER CONFORMED NAME: CIRCLE EXPRESS INC DATE OF NAME CHANGE: 19900702 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to . Commission file number 0-14060 Intrenet, Inc. (Exact name of registrant as specified in its charter) Indiana 35-1597565 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 400 TechneCenter Drive, Suite 200 Milford, Ohio 45150 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (513)576-6666 Securities registered pursuant to Section 12(b) of the Act: None Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, without par value (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the common stock (based upon the closing sale price on such date) held by non-affiliates of the registrant as of March 1, 1996, was approximately $ 4,745,966. Applicable only to registrants involved in bankruptcy proceedings during the preceding five years: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No (Applicable only to corporate registrants) Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. As of March 1, 1996, there were 13,227,338 shares issued and outstanding. Documents Incorporated By Reference: Portions of the following documents have been incorporated by reference into this report: Identity of Document Parts of Form 10 - K into Proxy Statement to be filed for the Which Document is Incorporated 1996 Annual Meeting of Shareholders of Part III Registrant Page 1 of ___ pages INTRENET, INC. 1995 Annual Report on Form 10-K Table of Contents Part I Page Item 1. Business 3 Item 2. Properties 6 Item 3. Legal Proceedings 7 Item 4. Submission of Matters to a Vote of Security Holders 7 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 7 Item 6. Selected Financial Data 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 8. Financial Statements and Supplementary Data 12 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures 12 Part III Item 10. Directors and Executive Officers of the Registrant 12 Item 11. Executive Compensation 12 Item 12. Security Ownership of Certain Beneficial Owners and Management 12 Item 13. Certain Relationships and Related Transactions 12 Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 13 Signatures 14 Index to Exhibits 15 PART I Item 1. Business. General The Company was incorporated in 1983 under the laws of the State of Indiana, as a holding company for truckload carrier subsidiaries. The Company owns, directly or indirectly, 100% of four licensed truckload carrier subsidiaries (the Operating Subsidiaries), which provide general and specialized regional truckload carrier services throughout North America. The Operating Subsidiaries are Roadrunner Trucking, Inc., (RRT); Eck Miller Transportation Corporation, (EMT); Advanced Distribution System, Inc., (ADS); and, Roadrunner Distribution Services, Inc., (RDS). In addition, the Company owns an intercompany employee leasing subsidiary, and an inactive Bermuda captive-insurance subsidiary. The Company's Operating Subsidiaries presently operate more than 2,100 tractors, including tractors provided by owner-operators. Some of the Company's Operating Subsidiaries rely partially upon a network of commissioned agents and independent contractors who own and operate tractors and trailers. Other Operating Subsidiaries primarily use company-operated equipment. In 1995, the Company's fleet traveled over 150 million revenue miles delivering approximately 234,000 loads for Company customers. The Company also brokered over 12,000 loads to other carriers. The Company's executive offices are located at 400 TechneCenter Drive, Suite 200, Milford, Ohio 45150 and its telephone number is (513) 576-6666. Except as otherwise indicated by the context, the term Company, as used herein, means Intrenet, Inc. and its consolidated subsidiaries. Operating Subsidiaries Select operating statistics as of December 31, 1995 are as follows: RRT EMT ADS RDS Total Company Tractors 532 372 192 181 1,277 Owner-Operator Tractors 68 414 322 55 859 Total Tractors 600 786 514 236 2,136 Company Trailers 864 458 210 428 1,960 Company Drivers 566 375 186 198 1,325 Total Employees 744 515 270 248 1,777 Sales Agents 20 184 134 14 352 Length of Haul 789 563 519 1,002 660 miles miles miles miles miles Roadrunner Trucking, Inc. RRT is a truckload carrier transporting a wide variety of general commodities, including machinery, building materials, steel, paper, cable and wire. RRT's primary traffic flows are in the western two-thirds of the United States where it operates one of the largest fleets of flatbed trailers in its market area. RRT also operates a nationwide freight brokerage business. RRT is a New Mexico corporation, headquartered in Albuquerque, New Mexico. Eck Miller Transportation Corporation. EMT is a truckload carrier that transports a variety of general commodity freight, including aluminum, steel, automotive products, and building materials over routes primarily in the Great Lakes, Central and Southeastern regions of the United States. EMT is an Indiana corporation, headquartered in Rockport, Indiana. EMT depends in part on commissioned agents as sources for business and on owner-operators to provide equipment and drivers to haul shipments. The utilization of owner-operators limits EMT's investment in labor and equipment. Advanced Distribution System, Inc. ADS is a truckload carrier that transports general commodity freight, including iron, steel, pipe, heavy machinery and building products, throughout service lanes in the Southeast, Midwest and Central States on flatbed trailers. ADS is a Florida corporation, headquartered in Columbus, Ohio. ADS is primarily dependent upon commissioned agents as sources for business. ADS also depends in part on owner-operators to provide equipment and drivers to haul shipments. The utilization of owner-operators limits ADS' investment in labor and equipment. Roadrunner Distribution Services, Inc. RDS is a van truckload carrier that transports a wide variety of general commodities, including electronics, auto parts, sportswear and consumer goods throughout service lanes in the Central and Southwestern regions of the United States. RDS is a Texas corporation, headquartered in Indianapolis, Indiana. Other Factors The Operating Subsidiaries which use commissioned agents and independent owner-operators generally do not have long-term contractual agreements with their agents or owner-operators. Working relationships with such persons are dependent upon mutually beneficial characteristics including confidence in service levels, support in customer relations, compensation levels and systems and opportunities for growth. Many of the Company's agreements with commissioned agents are non-exclusive. No customer accounted for more than 10% of the Company's revenues in 1995. Revenue Equipment At December 31, 1995, the Company owned or leased 1,277 tractors, 1,496 flatbed trailers and 464 dry van trailers. The following is a summary of Company owned and leased revenue equipment at December 31, 1995: Trailers Tractors Flatbed Dry Van Model year prior to 1993 106 708 452 1993 510 243 12 1994 255 261 0 1995 361 153 0 1996 45 131 0 1,277 1,496 464 In addition, at the same date owner-operators under contract provided 859 tractors for Company operations. Employees At December 31, 1995, the Company employed 1,777 individuals, of whom 1,325 were drivers. Management considers its relationship with employees to be good. None of the Company's employees are represented by a collective bargaining unit. Competition and Availability of Drivers The trucking industry is characterized by intense competition, resulting from the presence of many carriers in the market, low barriers to entry, and the commodity nature of the services provided by many carriers. The Company competes with other irregular route, long-haul carriers and, to a lesser extent, with medium-haul carriers, railroads, less-than-truckload carriers, freight brokers and proprietary transportation systems. The Federal Aviation Administration Authorization Act of 1994 (the FAA Act) preempts, effective January 1, 1995, certain state and local laws regulating the prices, routes, or services of motor carriers, thereby deregulating intra-state transport, and increasing competitive conditions. Competition for drivers is intense in the trucking industry, and the Company has at times experienced difficulty attracting and retaining sufficient qualified drivers. From time to time, there have been industry wide shortages of qualified drivers and there can be no assurance that the Company will not be affected by a shortage of qualified drivers in the future. Prolonged difficulty in attracting or retaining qualified drivers could have a material adverse effect on the Company's operations and limit its growth. Regulation Each of the Operating Subsidiaries is a motor carrier regulated by various federal and state agencies. Effective January 1, 1996, the ICC Termination Act of 1995 (the Act) abolished the Interstate Commerce Commission (ICC) and established within the Department of Transportation (DOT) the Surface Transportation Board. The Surface Transportation Board will perform a number of functions previously performed by the ICC. The Act eliminates most tariff filings and rate regulation, but retains most other regulations issued by the ICC, until modified or terminated by the Surface Transportation Board. Each of the Operating Subsidiaries is subject to safety requirements prescribed by the DOT. Such matters as weight and dimension of equipment are also subject to federal and state regulations. All of the Company's drivers are required to obtain national commercial driver's licenses pursuant to the regulations promulgated by the DOT. Also, DOT regulations impose mandatory drug and alcohol testing of drivers. Each of the Operating Companies had a Satisfactory safety rating with the DOT at December 31, 1995. The trucking industry is subject to possible regulatory and legislative changes (such as increasingly stringent environmental regulations or limits on vehicle weight and size) that may affect the economics of the industry by requiring changes in operating practices or by changing the demand for common or contract carrier services or the cost of providing truckload services. These future regulations may unfavorably affect the Company's operations. Risk Management and Insurance The Company's risk management programs provide protection of its assets and interests through a combination of insurance and self-insurance. The Company maintains both primary and excess auto liability insurance with limits and deductibles in amounts customary for the industry, and in amounts management believes to be adequate. Workers' compensation and employer's liability exposure is covered by a combination of large-deductible insurance policies, a state approved self-insurance program, monopolistic state workers compensation funds, and a self-insured ERISA accident indemnity plan. Coverage is for statutory limits, with deductibles generally for the first $ 250,000 of exposure. The Company also maintains insurance with varying deductibles for cargo, property, and physical damage exposures. Fuel As part of the Company's ongoing program to reduce fuel costs, drivers are required to refuel at one of the Company's bulk fuel storage facilities whenever possible. When impractical to fuel at a Company location, drivers purchase fuel with a Company credit card at pre-authorized truckstops and fueling locations. While shortages of fuel, increases in fuel prices or rationing of petroleum products could have a material adverse effect on the trucking industry, including the Company, management believes that the Company's operations and profits are no more susceptible to such conditions than those of its competitors. In the past, sharp increases in fuel prices have been partially recovered from customers through increased rates or surcharges. However, there can be no assurance that the Company will be able to recover increased fuel costs and fuel taxes through increased rates in the future. The Company does not presently hedge its future fuel purchase requirements. The Company's fuel storage facilities are subject to environmental regulatory requirements imposed by the U.S. Environmental Protection Agency which imposes standards and requirements for regulation of underground storage tanks of petroleum and certain other substances, and by state law in some of the jurisdictions in which the Company maintains fuel terminals. The Company believes that it is in material compliance with such requirements that are applicable to tanks it owns or operates, and believes that future compliance-related expenditures, in the aggregate, will not be material to the Company's financial or competitive position. Item 2. Properties. The Company leases its headquarters facility, which consists of approximately 4,000 square feet of office space. The lease provides for rent at approximately $ 5,000 per month and is presently for a three year period expiring in August, 1996, with an option for an additional two year period. The following table provides information concerning other significant properties owned or leased by the Operating Subsidiaries. Owned Operating Type of or Approximate Location Subsidiary Facility Leased Acreage Albuquerque, NM RRT Company Headquarters, Owned 15 Terminal, Maintenance Facility and Bulk Fueling Station Albuquerque, NM RRT Terminal and Office Facility Owned 6 (Under lease to others) Snowflake, AZ RRT Terminal & Bulk Fueling Leased 1 Station Vinton, TX RRT Terminal, Maintenance Leased 4 Facility and Bulk Fueling Station Fontana, CA RRT/RDS Terminal and Bulk Fueling Leased 4 Station Indianapolis, IN. RDS Company Headquarters Leased 4 and Terminal El Paso, TX RDS Terminal, Maintenance Owned 4 Facility and Bulk Fueling Station Rockport, IN. EMT Company Headquarters, Owned 13 Terminal, Maintenance Facility and Bulk Fueling Station Columbus, OH ADS Company Headquarters Leased 2 Rock Hill, SC ADS Terminal Leased 2 All properties owned by the Company and the Operating Subsidiaries are subject to liens in favor of the Company's primary lender or independent mortgage lenders. See Note 2 of Notes to Consolidated Financial Statements. Item 3. Legal Proceedings. Except as discussed below, there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject, other than routine litigation incidental to its business, primarily involving claims for personal injury and property damage incurred in the transportation of freight. The Company maintains insurance which covers liability resulting from such transportation related claims in amounts customary for the industry and which management believes to be adequate. The Company is not aware of any claims or threatened claims that are likely to materially affect the Company's operating results or financial condition. On January 2, 1996, Compton Management Corporation ("Compton") commenced an action in the United States District Court for the District of New Jersey against the Company for alleged violations of federal securities laws, fraudulent misrepresentation and breach of contract arising out of Compton's option to purchase 264,212 shares of the Company's common stock and subsequent sale of the stock pursuant to a registration statement filed by the Company at Compton's request. Compton provided management services to the Company from January 1991 to January 1993. Compton alleged that the Company wrongfully delayed filing the registration statement and that the delay prevented Compton from selling its shares at favorable market prices. The complaint seeks compensatory damages of not less than $1,000,000 and punitive damages of at least $5,000,000. The Complaint was only filed recently and the Company has not yet been required to respond. Management believes that the Company has no liability to Compton and intends to vigorously defend the claims. Item 4. Submission of Matters to a Vote of Security Holders. No matters were submitted to a vote of security holders of the Company during the three months ended December 31, 1995. Executive Officers of the Registrant. Pursuant to federal Instruction G(3) of Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K, the following information is included in lieu of being included in the Proxy Statement for its Annual Meeting of Stockholders: Certain information concerning the executive officers of the Company as of December 31, 1995 is set forth below. Name and Position Age Jackson A. Baker 57 President and Chief Executive Officer James V. Davis 55 Executive Vice President Jonathan G. Usher 41 Vice President-Finance , Chief Financial Officer, Secretary and Treasurer Officers of the Company serve at the discretion of the Board of Directors. Jackson A. Baker has been a Director and President and Chief Executive Officer since January, 1993. Prior to joining the Company, Mr. Baker was self-employed as a transportation consultant from January 1990 to December 1992. Mr. Baker was President and Chief Operating Officer of Sea-Land Service, Inc. (a container shipping company) from February 1987 to December 1989. James V. Davis has been Executive Vice President since August, 1993. Prior to joining the Company, Mr. Davis was Executive Vice President and Chief Operating Officer of Mitsui O.S.K. Lines (America), Inc. from April, 1990. Prior to Mitsui, he held several positions at Sea-Land Service, Inc., including Vice President for the Atlantic Division. Jonathan G. Usher has been Vice President - Finance and Chief Financial Officer of the Company since June 1989. Previously, Mr. Usher was a manager in the audit division of Arthur Andersen LLP in the Indianapolis, Indiana office. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. The Common Stock is traded on The NASDAQ Small-Cap Market (NASDAQ) under the symbol INET. The following table sets forth the high and low sales prices as reported by NASDAQ. 1994 HIGH LOW First Quarter 4.500 3.125 Second Quarter 4.375 3.375 Third Quarter 3.875 3.250 Fourth Quarter 4.500 3.250 1995 First Quarter 6.000 3.562 Second Quarter 4.375 3.000 Third Quarter 4.125 3.250 Fourth Quarter 3.250 1.625 1996 First Quarter (through February 28) 2.625 1.750 On March 1, 1996, there were 253 holders of record of Common Stock. The Company has never paid a cash dividend on its Common Stock. The Company's bank agreement contains covenants which restrict the Company's ability to pay cash dividends. See Note 2 of Notes to Consolidated Financial Statements. The Company does not anticipate paying cash dividends on Common Stock in the foreseeable future.
Item 6. Selected Financial Data. Year Ended December 31, (In Thousands, Except Share and Per Share Amounts) 1995 1994 1993 1992 1991 STATEMENT OF OPERATIONS DATA Operating revenues $ 214,973 $ 214,838 $ 191,390 $ 174,801 $ 179,183 Operating expenses: Purchased transportation and equipment rents 80,997 79,946 73,071 73,741 79,559 Salaries, wages and benefits 58,733 53,281 44,245 37,486 38,660 Fuel and other operating expenses 46,610 44,777 41,196 36,177 34,678 Operating taxes and licenses 10,093 9,846 7,196 4,459 4,559 Insurance and claims 6,986 7,680 8,622 8,010 6,709 Depreciation 4,651 4,826 5,386 5,478 5,491 Other operating expenses 3,842 4,077 4,941 4,728 5,310 Total operating expenses 211,912 204,433 184,657 170,079 174,966 Operating income (loss) 3,061 10,405 6,733 4,722 4,217 Interest expense (2,886) (3,557) (3,949) (4,622) (4,861) Other income (expense), net (82) (357) (352) (344) 10 Earnings (loss) before income taxes and extraordinary items 93 6,491 2,432 (244) (634) Income taxes (305) (1,326) (922) - - Earnings (loss) before extraordinary items (212) 5,165 1,510 (244) (634) Extraordinary gain, net 0 0 1,188 - - Net earnings (loss) $ (212) $ 5,165 $ 2,698 $ (244) $ (634) Primary Before extraordinary items $ (0.02) $ 0.52 $ 0.16 $ (0.05) $ (0.13) Extraordinary items, net $ - $ - $ 0.12 $ - $ - Net earnings (loss) $ (0.02) $ 0.52 $ 0.28 $ (0.05) $ (0.13) Fully Diluted Before extraordinary items $ (0.02) $ 0.40 $ 0.14 $ (0.05) $ (0.13) Extraordinary items, net $ - $ - $ 0.09 $ - $ - Net earnings (loss) $ (0.02) $ 0.40 $ 0.23 $ (0.05) $ (0.13) BALANCE SHEET DATA Current assets $ 26,716 $ 29,320 $ 27,206 $ 24,099 $ 27,739 Current liabilities 27,339 28,329 24,170 29,014 37,437 Total assets 67,638 69,058 64,636 67,702 66,952 Long-term debt 14,981 22,291 26,223 33,258 23,041 Shareholders' equity 23,018 16,438 11,243 2,430 2,674
8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations Introduction The Company reported a net loss of $ (0.2) million ($ 0.02 per share) in 1995, on revenues of $ 215.0 million, as compared to net earnings of $ 5.2 million ($0.52 per share) on revenues of $ 214.8 million in 1994, and net earnings of $2.7 million ($0.28 per share) on revenues of $191.4 million in 1993. In 1995, particularly in the fourth quarter, the slower growth of the U.S. economy, coupled with increased trucking industry capacity, led to intense competitive pressures. These increased pressures reduced average freight rates per total mile by nearly 3 % for the year, and over 4 % in the fourth quarter, when compared to the same time periods of 1994, and made it more difficult to operate the fleet efficiently, leading to a higher proportion of empty miles to paid miles, and substantially lower operating margins. Further, continued competition for qualified drivers resulted in higher empty truck factors in 1995, and led the Company to increase driver wages and driver recruiting expenditures at a time of slowing volumes and declining rates. Lastly, the 1995 results were negatively impacted by $ 1.85 million of pre-tax losses, net of a $ 350,000 gain on sale, at the Company's former munitions specialty carrier, C. I. Whitten Transfer Company (CIW), which was sold on August 28, 1995. All of the above factors combined to reduce the Company's profitability significantly in 1995 when compared to the results achieved by the Company in 1994, which occurred at a time of an expanding U.S. economy, and record industry profits. The Company operated profitably during the first three quarters of 1995, despite the significant losses at CIW. Freight volumes and rates, however, declined sharply in the fourth quarter of 1995 as a result of the slowing U.S economy, and winter seasonal and holiday factors. The Company lost money in the fourth quarter of 1995 as a result of the reduced volumes and prices, and the less efficient operation of the fleet. These unprofitable competitive conditions continued into the first quarter of 1996, and have been compounded by the inclement weather experienced across much of the country in January and February. The Company is implementing a number of steps intended to increase the Company's competitiveness including disposing of excess tractors, realigning staffing levels, combining certain aspects of the operations of RRT and RDS, and increasing marketing efforts. Management is cautiously optimistic that these and other actions will strengthen the Company's operations, and return them to profitability. However, other factors outside of the Company's control, including the growth of the U.S. economy and actions of competitors, may adversely affect the Company in 1996 to a greater extent. The Company expects to report a loss for the first quarter of 1996. A discussion of the impact of the above and other factors on the results of operations in 1995 as compared to 1994, and 1994 as compared to 1993 follows. 1995 Compared to 1994 % Key Operating Statistics 1995 1994 Change Operating Revenues ($ millions) $215.0 $214.8 - % Net Earnings (0.2) 5.2 (100%) Average Tractors 2,063 1,840 12.1% Total Loads (000's) 246.9 233.1 5.9% Revenue Miles (millions) 155.3 155.3 - % Average Revenue per Revenue Mile $1.307 $ 1.322 (1.0%) Operating Revenues. Operating revenues were essentially unchanged in 1995 at $ 215.0 million versus $ 214.8 million in 1994. While total revenues remained unchanged, revenues generated with company-operated equipment increased $ 2.9 million or 2.3 %, and brokered revenues increased $ 2.5 million or 25.7 %. At the same time, owner operator revenues declined by $ 5.3 million, or 6.8 %. The decrease in owner operator revenues is primarily attributable to the sharply reduced owner operator revenues at CIW in 1995 over 1994. The 5.9% increase in total loads (volume) in 1995 is primarily attributable to an increase in the average number of Company trucks (up 11.4%), coupled with an increase in brokered traffic, offset by reduced loads hauled by owner operators. The 1.0% decrease in revenue per revenue mile (price) is a result of reduced traffic opportunities in 1995 due to the less robust U.S. economy, which required the Company to move more equipment with lower priced spot market loads. In addition, the lower revenue contribution by CIW in 1995 over 1994 reduced the average Company-wide rate per revenue mile. Operating Expenses. The following table sets forth the percentage relationship of operating expenses to operating revenues for the years ended December 31, 1995 and 1994. 1995 1994 Operating Revenues 100.0% 100.0% Operating Expenses: Purchased transportation and equipment rents 37.8 37.2 Salaries, wages and benefits 27.3 24.9 Fuel and other operating expenses 21.6 20.8 Operating taxes and licenses 4.7 4.6 Insurance and claims 3.2 3.6 Depreciation 2.1 2.2 Other operating expenses 1.8 1.9 Total Operating Expenses 98.5% 95.2% In 1995 and 1994, the mix of company-operated versus owner-operator equipment continued to shift, although less significantly than in recent years, toward company-operated equipment as a result of increased competition for qualified owner-operators, and the Company's ability to secure affordable financing and freight to operate additional Company tractors. Approximately 61% of the Company's revenue was generated with company-operated equipment in 1995, as compared to approximately 60% in 1994. The relatively higher use of company-operated equipment resulted in increases in salaries, wages and benefits, fuel and other operating expenses and fixed costs related to ownership or lease of the equipment, and decreases in owner operator purchased transportation as a percentage of revenue. In addition, the Company has raised the pay rates for its drivers in order to continue to be able to attract sufficient qualified drivers. Lastly, in February 1995, the Company commenced treating all driver pay as taxable compensation, and eliminated driver road expense payments. This increased taxable driver compensation, resulted in higher payroll-related taxes and insurance. The Company's insurance expense decreased to 3.2% of revenue in 1995 from 3.6% of revenue in 1994. This decrease results primarily from reduced liability insurance premium rates due to improved accident control over the past several years, and to higher deductible retentions by the Company. Approximately two-thirds of the Company's insurance expense in 1995 represented premium payments which are not susceptible to significant adjustment in the future. The remaining one-third of the expense is comprised of estimates for claim and deductible obligations as a result of accidents and claims. Operating taxes and licenses increased in 1995 as compared to 1994 as a result of the greater proportion of company-operated equipment in 1995, for which the Company is responsible for operating taxes and licenses. Depreciation expense decreased in 1995 as compared to 1994 as the Company has replaced owned or capital-leased tractors primarily with operating-leased tractors. Other operating expenses decreased to 1.8% of revenue in 1995 from 1.9% in 1994 due to reduced communication and other miscellaneous expenses, offset somewhat by increased expenditures for legal and professional fees in 1995 as compared to 1994. Interest Expense. Interest expense decreased by approximately $0.7 million in 1995 as compared to 1994, primarily as a result of 1) the replacement of capital-leased equipment with equipment financed under operating leases, coupled with 2) reduced bank interest and fees as a result of lower average bank borrowings, offset by higher average interest rates in 1995 as compared to 1994, and 3) the Company's 7% Convertible Subordinated Debentures were converted to common stock on March 31, 1995, thereby eliminating the related interest expense thereafter. Following is a summary of interest expense for the years ended December 31, (in millions): 1995 1994 Interest on Debentures $ 0.1 $ 0.4 Interest and fees on notes payable to banks 1.3 1.4 Interest on capital leases and other indebtedness 1.5 1.8 $ 2.9 $ 3.6 Provision For Income Taxes. A provision for income taxes of approximately $ 0.3 million, or approximately 328 % of pre-tax earnings, was provided in 1995. The higher than statutory effective tax rate results from the effect of certain non-deductible expenses. A provision for income taxes of approximately $ 1.3 million, or approximately 20% of pre-tax earnings, was provided in 1994. As more fully discussed in Note 5 of Notes to Consolidated Financial Statements, the Company's 1994 provision for income taxes was favorably influenced by the release of valuation allowances held against certain net deferred tax assets. 1994 Compared to 1993 % Key Operating Statistics 1994 1993 Change Operating Revenues ($ millions) $214.8 $191.4 12.2% Net Earnings 5.2 2.7 91.4% Average Tractors 1,840 1,708 7.7% Total Loads (000's) 233.1 208.1 12.0% Revenue Miles (millions) 155.3 142.5 9.0% Average Revenue per Revenue Mile $1.322 $ 1.281 3.1% Operating Revenues. Operating revenues increased in 1994 to $ 214.8 million from $191.4 million in 1993. This 12.2% increase in revenues in 1994 is attributable to an increase of approximately 12.0% in the total number of loads and approximately 9.0% in the number of revenue miles billed in 1994 as compared to 1993. The 9.0% increase in volume in 1994 is attributable to an increase in the average number and productivity of the Company's trucks, coupled with an overall improvement in general economic conditions. Management attributes this improvement to the strengthening of general economic activity in the full year of 1994 as compared to 1993. The 3.1% improvement in revenue per mile is a result of strong shipper demand for the Company's services, which allowed the Company to selectively choose loads that yield higher revenues, coupled with rate increases implemented in late 1993 and throughout 1994. Operating Expenses. The following table sets forth the percentage relationship of operating expenses to operating revenues for the years ended December 31, 1994 and 1993. 1994 1993 Operating Revenues 100.0% 100.0% Operating Expenses: Purchased transportation and equipment rents 37.2 38.2 Salaries, wages and benefits 24.9 23.1 Fuel and other operating expenses 20.8 21.5 Operating taxes and licenses 4.6 3.8 Insurance 3.6 4.5 Depreciation 2.2 2.8 Other operating expenses 1.9 2.6 Total Operating Expenses 95.2% 96.5% In 1994 and 1993, the mix of company-operated versus owner-operator equipment continued to shift toward company-operated equipment as a result of increased competition for qualified owner-operators, and the Company's improved access to financing for equipment, and additional drivers and freight. Approximately 60% of the Company's revenue was generated with company-operated equipment in 1994, as compared to approximately 56% in 1993. The relatively higher use of company-operated equipment results in increases in salaries, wages and benefits, fuel and other operating expenses and fixed costs related to ownership or lease of the equipment, and decreases in purchased transportation as a percentage of revenue. Fuel and other operating expenses declined as a percentage of revenue in 1994 as compared to 1993. While the total gallons consumed increased in 1994 as a result of the larger company-operated fleet, the average fuel economy improved, and the average cost of fuel per gallon decreased, offsetting the effect of the increased consumption. The Company's insurance expense decreased to 3.6% of revenue in 1994 from 4.5% of revenue in 1993. This decrease results primarily from reduced liability insurance premium rates due to improved accident control over the past several years. Approximately two-thirds of the Company's insurance expense in 1994 represented premium payments which are not susceptible to significant adjustment in the future. The remaining one-third of the expense is comprised of estimates for claim and deductible obligations as a result of accidents and claims. Depreciation expense decreased in 1994 as compared to 1993 as the Company has replaced owned or capital-leased tractors primarily with operating-leased tractors. Operating taxes and licenses increased in 1994 as compared to 1993 as a result of the greater proportion of company-operated equipment in 1994, for which the Company is responsible for operating taxes and licenses. Other operating expenses decreased to approximately 1.9% of revenue in 1994 from 2.6% in 1993, primarily as a result of reduced legal, professional and consulting expenses, coupled with reduced communication expenses. Also, the Company incurred certain management change costs in 1993 which were not incurred in 1994. Interest Expense. Interest expense decreased by approximately $0.3 million in 1994 as compared to 1993, primarily as a result of the replacement of capital-leased equipment with equipment financed under operating leases, coupled with reduced interest as a result of lower average bank borrowings, offset by higher average interest rates in 1994 as compared to 1993. Following is a summary of interest expense for the years ended December 31, (in millions): 1994 1993 Interest on Debentures $ 0.4 $ 0.4 Interest and fees on notes payable to banks 1.4 1.5 Interest on capital leases and other indebtedness 1.8 2.0 $ 3.6 $ 3.9 Provision For Income Taxes. A provision for income taxes of approximately $ 1.3 million, or approximately 20% of pre-tax earnings, was provided in 1994, as compared to a provision of approximately $ 1.5 million which was provided in 1993. As more fully discussed in Note 5 of Notes to Consolidated Financial Statements, the Company's 1994 provision for income taxes was favorably influenced by the release of valuation allowances held against net deferred tax assets. Extraordinary Gain On Retirement Of Debt, Net. On January 19, 1993, in connection with a private offering of $ 12 million of debt and equity securities, the Company retired approximately $7.2 million of bank debt for approximately $5.4 million, yielding an after-tax extraordinary gain of $1.2 million in 1993. No similar transaction occurred in 1994. Liquidity and Capital Resources The Company used $ 2.6 million of cash and cash equivalents in the year ended December 31, 1995, as compared to generating $0.4 million in 1994. As reflected in the accompanying Consolidated Statements of Cash Flows, in 1995, $ 6.1 million of cash was generated from operating activities, $ 5.1 million, net, was used in financing activities, and $ 3.6 million, net, was used in investing activities. The Company's cash balance was drawn down in 1995 as the Company's bank lenders allowed the Company to make term loan payments from certain restricted money market balances. The Company's day-to-day financing is provided by borrowings under a $ 33 million bank credit facility, as most recently amended on January 15, 1996. The credit facility consists of a $ 5 million term loan with a final maturity of December 31, 1999, and a $ 28 million revolving line of credit which expires January 15, 1999. Quarterly principal payments of $ 312,500 on the term loan commence April 1, 1996. The line of credit includes provisions for the issuance of up to $ 12 million in stand-by letters of credit which, as issued, reduce available borrowings under the line of credit. Borrowings under the line of credit are limited to amounts determined by a formula tied to the Company's eligible accounts receivable and inventories, as defined in the credit facility. The credit facility requires the Company to meet certain minimum net worth, debt to net worth and current ratio requirements, prohibits the payment of dividends, and limits capital expenditures to specified amounts which management believes are currently adequate. Borrowings under the credit facility totaled $ 5.0 million at December 31, 1995, and outstanding stand-by letters of credit totaled $ 7.7 million at that date. The combination of these two bank credits totaled $ 12.7 million, leaving $ 7.3 million of borrowing capacity available at December 31, 1995. Borrowing capacity under the amended credit facility as of March 1, 1996 was $ 5.5 million. The decreased availability results primarily from the financing of plates and permits for the Company's tractor and trailer fleet, and to the increased working capital needs of the business during the first quarter of 1996. The Company has plans to acquire approximately 300 tractors in 1996, of which approximately 200 will replace older tractors and the balance of approximately 100 units will be incremental growth units. The Company has the ability to cancel the tractors anytime prior to 60 days before delivery (and in certain cases has already done so), and the growth units will not be accepted if competitive conditions do not improve. The new tractors will be financed primarily under walk-away operating leases, and are not expected to require any significant deposits or down payments. The Company currently believes that cash generated from operating, financing and investing activities and cash available to it under the bank credit facility will be sufficient to meet the Company's needs during 1996. Other Factors. Inflation can be expected to have an impact on most of the Company's operating costs although the impact of inflation in recent years has been minimal. Management believes the continued intense competition for qualified drivers will lead to higher driver wages and recruiting costs in the future. Changes in market interest rates can be expected to impact the Company to the extent that revenue equipment is added and replaced and because the Company's bank financing is based on the prime rate. The trucking industry is generally affected by customer business cycles and by seasonality. Revenues are also affected by inclement weather and holidays because revenues are directly related to available working days of shippers. Customers typically reduce shipments during and after the winter holiday season. The Company's revenues tend to follow this pattern and are strongest in the summer months. Generally, the second and third calendar quarters have higher load bookings than the fourth and first calendar quarters. Item 8. Financial Statements and Supplementary Data. Index to Consolidated Financial Statements Page Consolidated Balance Sheets 16 Consolidated Statements of Operation 17 Consolidated Statements of Shareholders' Equity 18 Consolidated Statements of Cash Flows 19 Notes to Consolidated Financial Statements 20 Report of Independent Public Accountants 24 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures. Not Applicable. PART III Item 10. Directors and Executive Officers of the Registrant. The information required by this Item is incorporated herein by reference to the Company's definitive Proxy Statement for its annual meeting of shareholders to be filed with the Commission pursuant to Regulation 14A. Item 11. Executive Compensation. The information required by this Item is incorporated herein by reference to the Company's definitive Proxy Statement for its annual meeting of shareholders to be filed with the Commission pursuant to Regulation 14A. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information required by this Item is incorporated herein by reference to the Company's definitive Proxy Statement for its annual meeting of shareholders to be filed with the Commission pursuant to Regulation 14A. Item 13. Certain Relationships and Related Transactions. The information required by this Item is incorporated herein by reference to the Company's definitive Proxy Statement for its annual meeting of shareholders to be filed with the Commission pursuant to Regulation 14A. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a)(1) Financial Statements All financial statements of the Registrant are set forth under Item 8 of this Report. (2) Financial Statement Schedule Schedule Number Description Page II Valuation and Qualifying Accounts 25 The report of the Registrant's independent public accountants with respect to the above-listed financial statements and financial statement schedules appears on page 24 of this Report. All other financial statement schedules not listed above have been omitted because the required information is included in the consolidated financial statements or the notes thereto, or is not applicable or required. (3) Exhibits - See Index to Exhibits on page 15 of this Report. THE COMPANY WILL FURNISH ANY EXHIBIT UPON REQUEST AND UPON PAYMENT OF THE COMPANY'S REASONABLE EXPENSES IN FURNISHING SUCH EXHIBIT. (b) Reports on Form 8-K No reports on Form 8-K were filed during the last quarter of 1995. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. INTRENET, INC. By: /s/ Jackson A. Baker Jackson A. Baker President and Chief Executive Officer Date: March 12, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Jackson A. Baker President, Chief Executive March 12, 1996 Jackson A. Baker Officer and Director (Principal Executive Officer) /s/ Jonathan G. Usher Vice President-Finance, Chief March 12, 1996 Jonathan G. Usher Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) /s/ Edwin H. Morgens Chairman of the Board and March 12, 1996 Edwin H. Morgens Director /s/ Joseph A. Ades Director March 12, 1996 Joseph A. Ades /s/ Eric C. Jackson Director March 12, 1996 Eric C. Jackson /s/ Fernando Montero Director March 12, 1996 Fernando Montero /s/ Thomas J. Noonan, Jr. Director March 12, 1996 Thomas J. Noonan, Jr. /s/ A. Torrey Reade Director March 12, 1996 A. Torrey Reade /s/ Philip Scaturro Director March 12, 1996 Philip Scaturro /s/ Jeffrey B. Stone Director March 12, 1996 Jeffrey B. Stone INDEX TO EXHIBITS Page Number or Incorporation Exhibit by Reference to an Exhibit Number Description Filed as Part of 3.1 Restated Articles of the Registrant Registration Statement on Form 8-A/A filed on August 11, 1995, as Exhibit 2 (a) 3.2 Restated Bylaws of the Registrant Registration Statement on Form 8-A/A filed on August 11, 1995, as Exhibit 2 (b) 10.1 Fourth Amended and Restated Loan ___ Agreement dated as of January 15, 1996 by and among the Registrant, certain subsidiaries and The Huntington National Bank 10.2 1992 Non-Qualified Stock Option Plan Annual Report on Form 10-K for the year ended December 31, 1992 as Exhibit 10.2 10.3 Stock Option Agreement dated as of Annual Report on Form 10-K December 31, 1992 between the Company for the year ended December and Jackson A. Baker 31, 1992 as Exhibit 10.3 10.4 Stock Option Agreement dated as of Annual Report on Form 10-K for the January 15, 1991 between the year ended December 31, 1990 as Company and Compton Management Exhibit 10.4 Corporation 10.5 Employment Agreement dated as of Annual Report on Form 10-K for the December 31, 1992 between the Company year ended December 31, 1992 as and Jackson A. Baker Exhibit 10.5 10.51 Amendment to Employment Agreement ___ between the Company and Jackson A. Baker, dated December 29, 1995 10.6 Employment Agreement dated as of Annual Report on Form 10-K for the March 1, 1994 between the Company year ended December 31, 1993 as and Jonathan G. Usher Exhibit 10.6 10.61 Amendment to Employment Agreement ___ between the Company and Jonathan G. Usher dated December 8, 1995 10.7 Employment Agreement dated as of Annual Report on Form 10-K for the August 1, 1993 between the Company year ended December 31, 1993 as and James V. Davis Exhibit 10.7 10.8 Stock Option Agreement dated as of Annual Report on Form 10-K for the August 1, 1993 between the Company year ended December 31, 1993 as and James V. Davis Exhibit 10.8 10.9 1993 Stock Option and Incentive Plan Registration Statement on Form S-8 (Registration No. 33-69882) filed September 29, 1993, as exhibit 4E. 11 Computation of Per Share Earnings ___ 21 List of Subsidiaries of the Registrant ___ 23 Consent of Independent Public Accountants ___ 27 Financial Data Schedule ___
INTRENET, INC. AND SUBSIDIARIES Consolidated Balance Sheets Years Ended December 31, 1995 and 1994 (In Thousands of Dollars) Assets 1995 1994 Current assets: Cash and cash equivalents $ 171 $ 2,734 Receivables, principally freight revenue less allowance for doubtful accounts of $572 in 1995 and $1,363 in 1994 20,972 20,177 Prepaid expenses and other 5,573 6,409 Total current assets 26,716 29,320 Property and equipment, at cost, less accumulated depreciation of $ 12,923 in 1995 and $ 11,164 in 1994 29,577 27,976 Reorganization value in excess of amounts allocated to identifiable assets, net of accumulated amortization of $4,138 in 1995 and $3,718 in 1994 8,031 8,451 Deferred income taxes, net 2,723 2,723 Other assets 591 588 Total assets $ 67,638 $ 69,058 Liabilities and Shareholders' Equity Current liabilities: Current debt and capital lease obligations $ 6,134 $ 7,425 Accounts payable and cash overdrafts 7,744 8,553 Current accrued claim liabilities 7,031 6,084 Other accrued expenses 6,430 6,267 Total current liabilities 27,339 28,329 Long-term debt and capital lease obligations 14,981 22,291 Long-term accrued claim liabilities 2,300 2,000 Total liabilities 44,620 52,620 Shareholders' equity: Common stock, without par value; 20,000,000 shares authorized; 13,197,728 and 9,087,164 shares issued and outstanding at December 31, respectively 16,245 9,453 Retained earnings since January 1, 1991 6,773 6,985 Total shareholders' equity 23,018 16,438 Total liabilities and shareholders' equity $ 67,638 $ 69,058 The accompanying notes are an integral part of these consolidated financial statements. 16
INTRENET, INC. AND SUBSIDIARIES Consolidated Statements of Operations Years Ended December 31, 1995, 1994 and 1993 (In Thousands of Dollars, Except Per Share Data) 1995 1994 1993 Operating revenues $ 214,973 $ 214,838 $ 191,390 Operating expenses: Purchased transportation and equipment rents 80,997 79,946 73,071 Salaries, wages, and benefits 58,733 53,281 44,245 Fuel and other operating expenses 46,610 44,777 41,196 Operating taxes and licenses 10,093 9,846 7,196 Insurance and claims 6,986 7,680 8,622 Depreciation 4,651 4,826 5,386 Other operating expenses 3,842 4,077 4,941 211,912 204,433 184,657 Operating Income 3,061 10,405 6,733 Interest expense (2,886) (3,557) (3,949) Other expense, net (82) (357) (352) Earnings before income taxes and 93 6,491 2,432 extraordinary items Provision for income taxes (305) (1,326) (922) Earnings (loss) before extraordinary items (212) 5,165 1,510 Extraordinary gain on retirement of debt, net of related income taxes of $612 1,188 Net earnings (loss) $ (212) $ 5,165 $ 2,698 Earnings (loss) per common and common equivalent share Primary: Before extraordinary items $ (0.02) $ 0.52 $ 0.16 Extraordinary gain, net $ $ 0.12 Net earnings (loss) $ (0.02) $ 0.52 $ 0.28 Fully diluted: Before extraordinary items $ (0.02) $ 0.40 $ 0.14 Extraordinary gain, net $ $ 0.09 Net earnings (loss) $ (0.02) $ 0.40 $ 0.23 The accompanying notes are an integral part of these consolidated financial statements. 17
INTRENET, INC. AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity Years Ended December 31, 1995, 1994 and 1993 (In Thousands of Dollars) Retained Earn Common Stock (Deficit) Equity Shares Dollars Balance, December 31, 1992 4,977,164 $3,308 ($878) $2,430 Issuance of common stock, net of costs 4,000,000 5,980 - 5,980 Exercise of stock options 90,000 135 - 135 Net Earnings for 1993 - - 2,698 2,698 Balance, December 31, 1993 9,067,164 9,423 1,820 11,243 Exercise of stock options 20,000 30 - 30 Net earnings for 1994 - - 5,165 5,165 Balance, December 31, 1994 9,087,164 9,453 6,985 16,438 Exercise of stock options, including tax benefit 474,212 802 - 802 Conversion of 7% convertible subordinate debentures 3,636,352 5,990 - 5,990 Net loss for 1995 - - (212) (212) Balance, December 31, 1995 13,197,728 $16,245 $6,773 $23,018 The accompanying notes are an integral part of these consolidated financial statements. 18
INTRENET, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years Ended December 31, 1995, 1994 and 1993 (In Thousands of Dollars) 1995 1994 1993 Cash flows from operating activities: Net earnings (loss) $ (212) $ 5,165 $ 2,698 Adjustments to reconcile net earnings(loss) to net cash provided by operating activities: Deferred income taxes 305 1,128 922 Extraordinary gain on retirement of debt, net (1,188) Depreciation and amortization 5,071 5,246 5,806 Provision for doubtful accounts 85 93 701 Changes in assets and liabilities, net: Receivables (880) (2,105) (3,654) Prepaid expenses 422 215 1,220 Accounts payable and accrued expenses 1,392 1,774 (873) Other (40) 20 (20) Net cash provided by operating activities 6,143 11,536 5,612 Cash flows from financing activities: Net borrowings (repayments) in line of credit, net (2,000) (2,949) (9,950) Issuance of long-term debt 2,299 358 2,513 Principal payments on long-term debt (5,666) (8,719) (9,689) Proceeds from sale of common stock and 7% convertible subordinated debentures 12,000 Proceeds from exercise of stock options 304 30 135 Increase in claim liability collateral funds (1,500) Net cash (used in) financing activities (5,063) (11,280) (6,491) Cash flows from investing activities: Additions to property and equipment (6,713) (3,244) (3,639) Disposals of property and equipment 157 3,366 5,481 Sale of assets of C.I. Whitten 2,913 Net cash provided by (used in) investing activities (3,643) 122 1,842 Net increase (decrease) in cash and cash equivalents (2,563) 378 963 Cash and cash equivalents: Beginning of period 2,734 2,356 1,393 End of period $ 171 $ 2,734 $ 2,356 The accompanying notes are an integral part of these consolidated financial statements. 19
INTRENET, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 (1) Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of Intrenet, Inc., and all of its subsidiaries (the Company). Truckload carrier subsidiaries at December 31, 1995 were Roadrunner Trucking, Inc. (RRT), Eck Miller Transportation Corporation (EMT), Advanced Distribution System, Inc. (ADS), and Roadrunner Distribution Services, Inc. (RDS). All significant intercompany transactions are eliminated in consolidation. Through its subsidiaries, the Company provides general and specialized regional truckload carrier services throughout North America. Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, and disclosure of contingent liabilities, at the date of the financial statements, as well as the reported amounts of revenues and expenses for the reporting period(s). Actual results can, and do, differ from these estimates. The effects of changes in accounting estimates are accounted for in the period in which the estimate changes. Revenue Recognition Operating revenues are recognized when the freight is picked up. Related transportation expenses including driver wages, purchased transportation, fuel and fuel taxes, agent commissions, and insurance premiums are accrued when the revenue is recognized. In 1991, the Emerging Issues Task Force (EITF) released Issue 91-9, "Revenue and Expense Recognition for Freight Services in Process". The EITF reached the conclusion that the preferable method for recognizing revenue and expense was either (1) recognition of both revenue and direct cost when the shipment is completed, or (2) allocation of revenue between reporting periods based on relative transit time in each reporting period and recognize expenses as incurred. The difference between the Company's method of revenue recognition, and the preferable methods described above, is not material to the results of operations or financial condition of the Company. Property and Equipment Property and equipment is carried at cost less an allowance for depreciation. Major additions and betterments are capitalized, while maintenance and repairs that do not improve or extend the life of the respective asset, are expensed as incurred. Improvements to leased premises are amortized on a straight-line basis over the terms of the respective lease. Operating lease tractor rentals are expensed as a part of purchased transportation and equipment rents. Depreciation of property and equipment is provided on a straight-line basis over the following estimated useful lives of the respective assets, or life of the lease for equipment under capital leases: Buildings and Improvements....................... 10 - 40 years Revenue Equipment.................................... 3 - 8 years Other Property....................................... 3 - 7 years Reorganization Value in Excess of Amounts Allocated to Identifiable Assets Reorganization Value in Excess of Amounts Allocated to Identifiable Assets, resulting from the Chapter 11 reorganization of the Company in 1990, is being amortized on a straight-line basis over 35 years. Benefits from recognition of pre-reorganization net operating loss carryforwards (see Note 5) are reported as reductions of the Reorganization Value, and thus reduce its effective life. Debt Issuance Costs and Bank Fees Debt issuance costs and bank fees are amortized over the period of the related debt agreements. Accrued Claim Liabilities The Company maintains insurance coverage for liability, cargo and workers compensation risks, among others, which have deductible obligations ranging to $ 250,000 per occurrence. Provision is made in the Company's financial statements for these deductible obligations at the time the incidents occur, and for claims incurred but not reported. Claim deductible obligations which remain unpaid at the balance sheet date are reflected in the financial statement caption "Accrued Claim Liabilities" in the accompanying consolidated financial statements. Current Accrued Claim Liabilities are claims estimated to be paid in the twelve month period subsequent to the balance sheet date, while Long-Term Accrued Claim Liabilities are claims estimated to be paid thereafter. Income Taxes The Company and its subsidiaries file a consolidated Federal income tax return. The Company recognizes income taxes under the liability method of accounting for income taxes. The liability method recognizes tax assets and liabilities for future taxable income or deductions resulting from differences in the tax and financial reporting basis of assets and liabilities reflected in the balance sheet and the expected tax impact of carryforwards for tax purposes. Earnings (Loss) Per Share Earnings (loss) per common and common equivalent share have been computed using the weighted average common shares outstanding during the periods (13.2 million in 1995, 9.1 million in 1994, and 8.8 million in 1993). No effect has been included for options or warrants outstanding, if the effect would be antidilutive. Fully diluted earnings per share for 1994 and 1993 have been computed under the assumption that the Debentures were converted into common stock on the date of their issuance, using the if-converted method. Credit Risk Financial investments that subject the Company to concentrations of credit risk consist primarily of trade accounts receivable. Concentrations of credit risk with respect to customer receivables are limited due to the Company's diverse customer base, with no one customer, industry, or geographic region comprising a large percentage of customer receivables or revenues. Statements of Cash Flows Cash equivalents consist of highly liquid investments such as certificates of deposit or money market funds with original maturities of three months or less. Cash payments for interest were $ 2.8 million, $ 3.5 million, and $4.1 million 1995, 1994, and 1993, respectively. Cash payments for Federal alternative minimum income taxes were $ 0.1 million in 1995 and $ 0.2 million in 1994. No Federal tax payments were made in 1993. Capital lease obligations of $ 3.6 million, $ 8.0 million, and $3.8 million were incurred in 1995, 1994 and 1993, respectively, primarily for revenue equipment. In 1995, the Company converted $ 5.9 million of Convertible Subordinated Debentures into common stock. Reclassifications Certain 1994 and 1993 amounts have been reclassified for purposes of comparison to the related 1995 amounts. (2) Bank Credit Facility On January 15, 1996, the Company amended its credit facility with a bank. The $ 33 million credit facility now consists of a $28.0 million revolving line of credit which expires January 15, 1999, and a $5.0 million term loan with a final maturity of December 31, 1999. The line of credit includes provisions for the issuance of up to $12.0 million in standby letters of credit which, as issued, reduce available borrowings under the line of credit. Borrowings under the line of credit are limited to amounts determined by a formula tied to the Company's eligible accounts receivable and inventories, as defined in the agreement. Borrowings under the credit facility totaled $ 5.0 million at December 31, 1995, and outstanding letters of credit totaled $ 7.7 million, leaving $ 7.3 million of available credit under the then $22.0 million facility at that date. The interest rate under the credit facility prior to the most recent amendment was 1 1/4 % over the bank's prime rate, or 9.75%, at December 31, 1995 and 1994. Interest on the outstanding principal balance of loans under the amended bank agreement is currently payable at a variable rate of 1/2 % over the bank's prime rate. Principal of the $5.0 million term loan is not required to be paid prior to April 1996, at which time, quarterly payments of $ 312,500 commence. The bank agreement requires the Company to meet certain minimum net worth, debt to net worth and current ratio requirements, prohibits the payment of dividends, and limits capital expenditures to specific amounts which management believes to be currently adequate. Obligations under the bank agreement are secured by liens on or security interests in all of the otherwise unencumbered assets of the Company and its subsidiaries. In connection with the bank agreement, in 1993 the Company issued to the bank warrants to purchase 300,000 shares of common stock at a price of $1.65 per share. The warrants are exercisable at any time prior to December 31, 1998. (3) Leases and Other Long-Term Obligations The Company finances a majority of its revenue equipment under various capital and non-cancelable operating leases, and with collateralized equipment borrowings. Long-term debt at December 31, 1995 and 1994 was: 1995 1994 Bank term loan, interest at 1 1/4 % over bank prime rate $ 5,000 $7,000 Convertible subordinated debentures, interest at 7 % - 5,988 Real estate mortgage obligation, variable interest rate at 2.45 % over commercial paper, currently 8.29 %, option to fix interest rate at 2.50 % over ten year Treasury rate, maturing in 2007 2,310 - Obligations collateralized by equipment, maturing through 2000, interest rates ranging from 7.33 % to 10.80 % 3,216 5,684 Capital lease obligations collateralized by equipment, maturing through 2000, interest rates ranging from 7.33 % to 11.55 % 10,589 11,044 Total 21,115 29,716 Less current maturities (6,134) (7,425) Long-term debt $ 14,981 $ 22,291 Maturities of long-term debt, excluding capital lease obligations, in the coming five years are $ 2,714, 2,587, 1,726, 1,738 and 179 in 1996, 1997, 1998, 1999 and 2000. Future minimum lease payments under capital and non-cancelable operating lease agreements at December 31, 1995 were as follows: Capital Operating Leases Leases 1996 $ 4,283 $ 16,800 1997 3,605 11,370 1998 2,316 6,801 1999 1,702 2,191 Thereafter 484 - Future minimum lease payments 12,390 $ 37,162 Amounts representing interest (1,801) Principal amount $10,589 Total rental expense under non-cancelable operating leases was $ 17,765, $14,728, and $10,924, in 1995, 1994, and 1993, respectively. The Company presently intends to lease approximately 300 tractors ($ 21 million) under operating leases and approximately 650 trailers ($ 14 million) under capital and operating leases in 1996. Purchased transportation and equipment rents expense includes payments to owner-operators of equipment under various short-term lease arrangements. (4) Litigation and Contingencies The Company is a party to routine litigation incidental to its business, primarily involving claims for personal injury and property damage incurred in the transporting of freight. The Company maintains insurance programs in amounts customary for the industry, and in amounts management believes to be adequate, subject to deductibles ranging to $250,000 of exposure for each incident. Except as discussed below, the Company is not aware of any claims or threatened claims that are likely to materially affect the Company's operating results or financial condition. In January, 1996, an action against the Company was filed in the United States District Court for the District of New Jersey by Compton Management Corporation (Compton). Compton provided executive management services to the Company from January 15, 1991 to January 19, 1993. Compton alleged violations of federal securities laws, fraudulent misrepresentation and breach of contract arising out of Compton's option to purchase 264,212 shares of the Company's common stock and subsequent sale of the stock pursuant to a registration statement filed by the Company at Compton's request. Compton alleged that the Company wrongfully delayed filing the registration statement and that the delay prevented Compton from selling its shares at favorable market prices. The complaint seeks compensatory damages of not less than $1,000,000 and punitive damages of at least $5,000,000. The Complaint was only filed recently and the Company has not yet been required to respond. Management believes that the Company has no liability to Compton and intends to vigorously defend the claims. (5) Income Taxes The provision for income taxes for the years ended December 31, 1995, 1994 and 1993 was as follows: 1995 1994 1993 Current $ - $ 200 $ - Deferred : Income from operations 305 1,126 922 Extraordinary gain - - 612 Total Provision $ 305 $1,326 $ 1,534 Income tax expense attributable to income from operations differs from the amounts computed by applying the U. S. Federal statutory tax rate of 34% to pre-tax income from operations as a result of the following: 1995 1994 1993 Taxes at statutory rate $ 31 $ 2,207 $ 827 Increase (decrease) resulting from: Non-deductible amortization 143 143 143 Non-deductible driver subsistence pay 131 1,489 499 Release of valuation allowance held against post-reorganization net deferred tax assets - (2,538) (547) Other, net - 25 - Provision for Income Taxes $ 305 $ 1,326 $ 922 The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, 1995 and 1994 are as follows: 1995 1994 Deferred Tax Assets Insurance claim liabilities $ 3,366 $ 2,816 Reserve for doubtful accounts 194 463 Other 220 192 3,780 3,471 Deferred Tax Liabilities Property differences, primarily depreciation (3,331) (2,927) Other (386) (474) (3,717) (3,401) Net Temporary Differences 63 70 Carryforwards - Pre-reorganization, limited, net operating loss and other tax carryforwards (Expiring 2004-2006) 5,541 5,570 Post-reorganization net operating loss and other tax carryforwards (Expiring 2006-2010) 2,003 1,967 Total Carryforwards 7,544 7,537 Net Deferred Tax Assets 7,607 7,607 Valuation Allowance (4,884) (4,884) Recorded Net Deferred Tax Assets $ 2,723 $ 2,723 Net changes to the valuation allowance in 1994 and 1995, were as follows: Valuation allowance, beginning of year $ (4,884) $ (11,273) Release of allowance held against pre- organization deferred tax assets, and credited against Reorganization Value - 3,851 Release of allowance held against post- reorganization deferred tax assets, and taken to income - 2,538 Valuation allowance, end of year $ (4,884) $ (4,884) Benefits from realization of pre-reorganization net deferred tax assets are reported as a reduction of Reorganization Value in Excess of Amounts Allocated to Identifiable Assets. Conversely, realization of post-reorganization net deferred tax assets are recognized as a reduction of income tax expense. In 1993 and 1994, the Company released valuation allowances held against both pre- and post-reorganization net deferred tax assets to the extent those assets were realized in the Company's tax returns for those years. In addition, in 1994, based upon current and anticipated future operating results, the Company concluded that future realization of a portion of the pre-reorganization net deferred tax assets was more likely than not. As a result, the Company released approximately $ 2.5 million of valuation allowances held against those assets, and reduced the Reorganization Value in Excess of Amounts Allocated to Identifiable Assets by a corresponding amount. While management is optimistic that all net deferred tax assets will be realized, such realization is dependent upon future taxable earnings. The Company's carryforwards expire at specific future dates and utilization of certain carryforwards is limited to specific amounts each year. Accordingly, the Company has recorded a valuation allowance against a portion of those net deferred tax assets. (6) Stock Options and Employee Compensation On August 15, 1992, the Company adopted the 1992 Non-Qualified Stock Option Plan (the 1992 Option Plan). The 1992 Option Plan allows the Company to grant options to purchase up to 590,000 shares of Common Stock to employees and independent contractors of the Company and its operating subsidiaries. On the same date the 1992 Option Plan was approved, the Company granted all of the options available under the 1992 Option Plan. All of the options granted vested immediately and are exercisable at prices ranging from $1.00 to $1.50 per share. In 1993, the Company adopted the 1993 Stock Option and Incentive Plan (the 1993 Option Plan). The 1993 Option Plan allows the Company to grant options to purchase up to 1,000,000 shares of Common Stock to officers and key employees of the Company and its operating subsidiaries. Options issued to date under the 1993 Option Plan have an exercise price equal to market value on the date of grant, and are generally exercisable for a ten year period. The activity in the Company's 1992 and 1993 Option Plans in 1995, 1994, and 1993 was as follows: Balance at December 31, 1992 590,000 $1.00 to $1.50 Granted 100,000 $2.75 Exercised (90,000) $1.50 Canceled (20,000) $1.50 Balance at December 31, 1993 580,000 $1.00 to $2.75 Granted 258,750 $3.625 to 3.875 Exercised (20,000) $1.50 Canceled (9,000) $3.625 to 3.875 Balance at December 31, 1994 809,750 $1.00 to $3.875 Granted 400,000 $2.50 Exercised (210,000) $1.00 to $1.50 Canceled (27,750) $3.625 to 3.875 Balance at December 31, 1995 972,000 $1.00 to $3.875 In addition to those options granted above, on January 19, 1993, the Company granted non-qualified options to purchase 200,000 shares of Common Stock to an executive officer of the Company, at $ 1.50 per share. These options are fully vested at December 31, 1995. (7) Property and Equipment Property and equipment, substantially all of which is pledged as security under the bank credit facility (see Note 2), other indebtedness or capital leases, at December 31 follows (in thousands of dollars): 1995 1994 Land $ 1,532 $ 1,621 Buildings and leasehold improvements 6,295 2,920 Revenue equipment 11,267 13,342 Revenue equipment under capital leases 17,924 15,937 Other property 5,482 5,320 42,500 39,140 Less accumulated depreciation (12,923) (11,164) $ 29,577 $ 27,976 (8) Prepaid and Accrued Expenses An analysis of prepaid and accrued expenses at December 31, 1995, and 1994 follows (in thousands of dollars): 1995 1994 Prepaid expenses: Insurance $ 789 $ 1,406 Shop and truck supplies 2,151 2,018 Other 2,633 2,985 $ 5,573 $ 6,409 Accrued Expenses: Salaries and wages $ 1,921 $ 1,930 Fuel and mileage taxes 504 469 Equipment leases 618 585 Other 3,387 3,283 $ 6,430 $ 6,267 (9) Transactions with Affiliated Parties In 1993, the Company entered into a financial consulting agreement with an affiliate of a member of the Company's Board of Directors. This agreement, which expired on January 31, 1994, provided for payments totaling $275,000 for consulting services rendered. In 1995, 1994 and 1993, the Company leased approximately 290, 150, and 430 tractors, respectively, from unaffiliated leasing companies which had purchased the trucks from a dealership affiliated with a member of the Company's Board of Directors. The lessors paid a selling commission to the dealership. The terms of the leases were the result of negotiations between the Company and the lessors. The Company believes the involvement of the selling dealership did not result in lease terms that are more or less favorable to the Company than would otherwise be available to it. The Company also purchases maintenance parts and services from the dealership from time to time. Total payments to the dealership for these services was $ 1,164,000 in 1995, $ 307,000 in 1994 and $ 123,000 in 1993. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Shareholders and Board of Directors of Intrenet, Inc.: We have audited the accompanying consolidated balance sheets of INTRENET, INC. (an Indiana corporation) and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Intrenet, Inc. and subsidiaries as of December 31, 1995, and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The schedule listed in Item 14 (a) 2 is presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. ARTHUR ANDERSEN LLP Indianapolis, Indiana, February 20, 1996. Schedule II INTRENET, INC. AND SUBSIDIARIES Valuation and Qualifying Accounts (In Thousands of Dollars) Additions Additions Charged To Beginning Costs and Charged To Ending Balance Expenses Other Accounts Deductions Balance Year Ended December 31, 1995 : Allowance for doubtful accounts $ 1,363 $ 85 $ - $ (876) $ 572 Year Ended December 31, 1994: Allowance for doubtful accounts $ 1,481 $ 93 $ - $ (211) $ 1,363 Year Ended December 31, 1993: Allowance for doubtful accounts $ 1,368 $ 701 $ - $ (588) $ 1,481 EX-10 2 FOURTH AMENDED AND RESTATED LOAN AGREEMENT dated as of January 15, 1996 between INTRENET, INC. and its Subsidiaries and THE HUNTINGTON NATIONAL BANK FOURTH AMENDED AND RESTATED LOAN AGREEMENT This Fourth Amended and Restated Loan Agreement (this "Agreement") is entered into at Columbus, Ohio, by, between and among The Huntington National Bank (herein the "Bank") as lender, and Intrenet, Inc. (herein the "Borrower"), and Advanced Distribution System, Inc., Eck Miller Transportation Corporation, Mid-Western Transport, Inc., Roadrunner Enterprises, Inc., Roadrunner Trucking, Inc., Roadrunner Distribution Services, Inc. and Roadrunner International Services, Inc. (herein collectively referred to as the "Subsidiaries"; the Borrower and the Subsidiaries are herein collectively and separately referred to as a "Company" or the "Companies"), as borrowers, as of the 15th day of January, 1996. The Agreement is made pursuant to the following recitals: RECITALS A. On February 24, 1988, the Borrower, certain of its subsidiaries, the Bank, Merchants National Bank & Trust Company of Indianapolis, now known as National City Bank, Indiana (herein "National City"; the Bank and National City are sometimes hereinafter collectively referred to as the "Banks"), and The Huntington National Bank, as Agent for the Bank and National City (the "Agent"), executed a loan agreement (herein the "1988 Loan Agreement"), which sets forth the terms and conditions of certain loans and extensions of credit; and B. Pursuant to the 1988 Loan Agreement, on or about February 24, 1988, and March 4, 1988, the Borrower and certain of its Subsidiaries executed and delivered to the Banks and the Agent certain other loan documents in connection with the extensions of credit provided for in the 1988 Loan Agreement, including without limitation, closing certificates, revolving notes with term options, letter of credit reimbursement agreements, security agreements, continuing guaranties unlimited, an escrow agreement, a Regulation U Statement, and related documents (herein collectively the "1988 Closing Documents"); and C. On or about March 18, 1988, the Borrower, certain of its Subsidiaries, the Banks and the Agent executed a First Amendment to Loan Agreement (herein the "First Amendment") which modified provisions and terms of the 1988 Loan Agreement in connection with a certain Employee Stock Ownership Plan transaction; and D. On or about April 15, 1988, the Borrower, certain of its Subsidiaries, the Banks and the Agent executed a Second Amendment to Loan Agreement (herein the "Second Amendment") which modified provisions and terms of the 1988 Loan Agreement in connection with the sale by the Borrower to Pinnacle Enterprises, Inc. of shares of capital stock of Kintla Enterprises, Inc.; and E. On or about May 11, 1988, the Borrower, certain of its subsidiaries, the Banks and the Agent executed a Third Amendment to Loan Agreement (here in the "Third Amendment") which modified provisions and terms of the 1988 Loan Agreement in connection with certain ownership and management changes; and F. On or about May 16, 1988, the Borrower, certain of its subsidiaries, the Banks and the Agent executed a Fourth Amendment to Loan Agreement (herein the "Fourth Amendment") which modified provisions and terms of the 1988 Loan Agreement in connection with certain duties and lending percentages between Huntington and National City; G. On or about July 22, 1988, the Borrower, certain of its subsidiaries, the Banks and the Agent executed a Fifth Amendment to Loan Agreement (herein the "Fifth Amendment") which modified provisions and terms of the 1988 Loan Agreement in connection with certain duties and lending percentages between Huntington and National City, changes in management and ownership, and the agreement of Roadrunner Enterprises, Inc. to be bound by the terms and conditions of the 1988 Loan Agreement (the First Amendment, Second Amendment, Third Amendment, Fourth Amendment, and Fifth Amendment are herein collectively referred to as the "Amendments"); and H. On or about July 22, 1988, the Borrower and certain of its subsidiaries executed and delivered to the Banks and the Agent in connection with the 1988 Loan Agreement and the Amendments, a collateral assignment and security agreement for a certain promissory note owing to the Borrower from Pinnacle Enterprises, Inc., substitute revolving notes and standby letter of credit reimbursement agreements, closing certificate of Roadrunner Enterprises, Inc., Federal Reserve Form U-l, a continuing guaranty unlimited of Roadrunner Enterprises, Inc., a security agreement of Roadrunner Enterprises, Inc., financing statements of Roadrunner Enterprises, Inc. and related documents (herein collectively the "Supplemental Documents"). The 1988 Loan Agreement, the 1988 Closing Documents, the Amendments and the Supplemental Documents are herein collectively referred to as the "1988 Loan Documents"; and I. On or about February 6, 1989, the Borrower, certain of its Subsidiaries, the Banks and the Agent executed an amended and restated loan agreement (herein the "1989 Loan Agreement"), which sets forth the terms and conditions of certain loans and extension of credit; and J. Pursuant to the 1989 Loan Agreement, on or about February 6, 1989, the Borrower and certain of its subsidiaries executed and delivered to the Banks and the Agent certain other loan and security documents in connection with the extensions of credit provided for in the 1989 Loan Agreement, including without limitation, certain revolving promissory notes, a certain letter of credit reimbursement agreement, mortgages, deeds of trust, security agreements, assignments, powers of attorney, cash management agreements, controlled disbursement agreements, closing certificates, loan expense and disbursement statements, covenants not to sue, a certain intercorporate funding agreement, regulation, statements, a certain record assignment, affidavits, and related documents (herein collectively the "1989 Closing Documents"); and K. On or about May 12, 1989, the Borrower, certain of its subsidiaries, the Banks and the Agent executed a first amendment to amended and restated loan agreement (the "First Amendment to the 1989 Loan Agreement"), which modified provisions and terms of the 1989 Loan Agreement in connection with the amount of the extension of credit and to provide for a certain fee to the Banks for the same; and L. On or about September 7, 1990, the Borrower, certain of its subsidiaries, the Banks and the Agent executed a second amendment to amended and restated loan agreement (herein the "Second Amendment to the 1989 Loan Agreement"), which modified provisions and terms of the 1989 Loan Agreement in connection with the maximum amount of credit extended under the 1989 Loan Agreement and to modify the provisions of the lending formula applicable to such extension of credit. The 1989 Loan Agreement, the 1989 Closing Documents, the First Amendment to the 1989 Loan Agreement, and the Second Amendment to the 1989 Loan Agreement are herein collectively referred to as the "1989 Loan Documents"; and M. On or about January 15, 1991, the Banks, the Agent , and the Companies (with the exception of Roadrunner Distribution Services, Inc. and Roadrunner International Services, Inc.) executed a certain Second Amended and Restated Loan Agreement (herein the "1991 Loan Agreement"), which sets forth the terms and conditions of certain loans and extensions of credit; and N. On or about January 15, 1991, pursuant to the 1991 Loan Agreement, the Companies (with the exception of Roadrunner Distribution Services, Inc. and Roadrunner International Services, Inc.) executed and delivered to the Banks and the Agent certain other loan and security documents in connection with the extension of credit provided for in the 1991 Loan Agreement, including without limitation, certain revolving notes, fixed asset notes, short term notes, a letter of credit reimbursement agreement, an intercorporate funding agreement, security agreements, Regulation U statements, stock certificates, financing statements, mortgages, mortgage modification agreements and related documents (herein collectively the "1991 Closing Documents"); and O. On or about September 27, 1991, the Banks, the Agent and the Companies (with the exception of Roadrunner Distribution Services, Inc. and Roadrunner International Services, Inc.) executed a certain First Amendment to Second Amended and Restated Loan Agreement (the "First Amendment to the 1991 Loan Agreement"), thereby amending and modifying certain terms contained in the 1991 Loan Agreement; and P. On or about November 22, 1991, the Banks, the Agent and the Companies (with the exception of Roadrunner Distribution Services, Inc. and Roadrunner International Services, Inc.) executed a certain Second Amendment to Second Amended and Restated Loan Agreement (the "Second Amendment to the 1991 Loan Agreement"), thereby amending and modifying certain terms contained in the 1991 Loan Agreement; and Q. On or about March 24, 1992, the Banks, the Agent and the Companies (with the exception of Roadrunner International Services, Inc.) executed a certain Third Amendment to Second Amended and Restated Loan Agreement (the "Third Amendment to the 1991 Loan Agreement") thereby amending and modifying certain terms contained in the 1991 Loan Agreement; and R. On or about April 9, 1992, the Banks, the Agent and the Companies executed a certain Fourth Amendment to Second Amended and Restated Loan Agreement (the "Fourth Amendment to the 1991 Loan Agreement") thereby amending and modifying certain terms contained in the 1991 Loan Agreement; and S. On or about September 27, 1991, November 22, 1991, March 24, 1992, April 9, 1992 and on various other dates, the Companies executed and delivered to the Banks certain other loan and security documents, agreements, instruments, certificates, mortgages, mortgage modification agreements and financing statements in connection with the 1991 Loan Agreement and the indebtedness referred to therein (all of the foregoing, together with the 1991 Closing Documents, the First Amendment to the 1991 Loan Agreement, the Second Amendment to the 1991 Loan Agreement, the Third Amendment to the 1991 Loan Agreement and the Fourth Amendment to the 1991 Loan Agreement are herein collectively referred to as the "1991 Loan Documents"); and T. As of January 19, 1993, the Companies satisfied their obligations to National City under a certain Revolving Note dated as of January 15, 1991 in the original principal amount of $5,361,300.00, a certain Fixed Asset Note dated as of January 15, 1991 in the original principal amount of $2,164,500.00, and a certain Short Term Note dated as of January 15, 1991 in the original principal amount of $999,000.00, and National City assigned to the Bank all of its risk participation interest in the Letters of Credit (as defined in Section 1.3 below); and U. On or about January 19, 1993, the Bank and the Companies executed a certain Third Amended and Restated Loan Agreement (hereinafter the "1993 Loan Agreement"), which sets forth the terms and conditions of certain loans and extensions of credit; and V. On or about January 19, 1993, pursuant to the 1993 Loan Agreement, the Companies executed and delivered to the Bank certain other loan and security documents in connection with the extensions of credit provided for in the 1993 Loan Agreement, including without limitation, a Revolving Note, a Term Note, a substitute Standby Letter of Credit Reimbursement Agreement, a Master Fund Management Agreement, a substitute Intercorporate Funding Agreement, a Warrant Certificate with respect to rights to purchase shares of common stock of the Borrower, UCC-1 financing statements, UCC-3 amendments and continuation statements, mortgages, mortgage modification agreements, a Covenant Not to Sue, a Compliance Certificate, a Registration Rights Agreement and related documents (herein collectively the "1993 Closing Documents"); and W. On or about November 10, 1993, the Bank and the Companies executed a certain First Amendment to Third Amended and Restated Loan Agreement (the "First Amendment to the 1993 Loan Agreement"), thereby amending and modifying certain terms contained in the 1993 Loan Agreement; and X. On or about August 3, 1994, the Bank and the Companies executed a certain Second Amendment to Third Amended and Restated Loan Agreement (the "Second Amendment to the Third Amended and Restated Loan Agreement"), thereby amending and modifying certain terms contained in the 1993 Loan Agreement; and Y. On or about November 10 , 1993, August 3, 1994, and on various other dates, the Companies executed and delivered to the Bank certain other loan and security documents, agreements, instruments, certificates, mortgages, mortgage modification agreements and financing statements in connection with the 1993 Loan Agreement and the indebtedness referred to therein (all of the foregoing, together with the 1993 Closing Documents, the First Amendment to the 1993 Loan Agreement and the Second Amendment to the 1993 Loan Agreement are herein collectively referred to as the "1993 Loan Documents"); and Z. The Bank and the Companies desire to amend and restate the 1993 Loan Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises contained herein, the Bank and Companies do hereby amend, restate, modify and agree as follows: SECTION 1. AMOUNT OF LOAN. The Bank agrees to extend credit to the Companies up to the aggregate sum of $33,000,000.00 (herein referred to as the "Loan"), subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties contained herein. The Loan shall be comprised of the credit facilities described in paragraphs 1.1, 1.2, and 1.3 below. 1.1 Revolving Loan. The Bank agrees to extend credit to the Companies pursuant to a revolving credit facility up to the maximum principal amount of $28,000,000.00 (herein referred to as the "Revolving Loan"), subject to paragraphs 1.3 and 1.4 below and to the terms and conditions of this Agreement; provided, however, that the outstanding principal balance of the Revolving Loan, plus the aggregate outstanding stated amounts of the Letters of Credit (as defined below) shall never exceed $28,000,000.00. The outstanding principal of the Revolving Loan may be increased and decreased an unlimited number of times prior to January 1, 1999 (the Revolving Loan Termination Date"). The Companies' right to obtain advances pursuant to the Revolving Loan shall terminate on, and the unpaid principal balance plus all accrued interest on the Revolving Loan shall be due and payable on, the Revolving Loan Termination Date; provided, however, that the Bank shall have no obligation to advance or re-advance any sums pursuant to the Revolving Loan at any time when there exists any set of facts or circumstances that, by itself, upon the giving of notice, the lapse of time, or any one or more of the foregoing, would constitute an Event of Default under this Agreement. 1.2 Term Loan. The Bank agrees to extend credit to the Companies pursuant to a term facility in the principal amount of $5,000,000.00 (herein referred to as the "Term Loan"), subject to paragraph 1.4 below and to the terms and conditions of this Agreement. The principal balance of the Term Loan shall be due and payable in sixteen consecutive quarterly installments of $312,500.00 each, beginning on April 1, 1996, and continuing on each July 1, October 1, January 1 and April 1 thereafter through and including October 1, 1999, and with the final installment due on December 31, 1999 (the "Term Loan Termination Date"). 1.3 Letters of Credit. The Bank agrees to issue for the account of the Companies, subject to paragraph 1.4 below and to the terms and conditions of this Agreement, one or more standby letters of credit (the "Letters of Credit") (which commitment and commitment amount shall include standby letters of credit issued pursuant to the 1989 Loan Documents, 1991 Loan Documents and 1993 Loan Documents), up to the maximum aggregate stated amount outstanding at any one time of $12,000,000.00 for the purposes stated in Section 5 hereof; provided, however, that the outstanding principal balance of the Revolving Loan, plus the aggregate outstanding stated amounts of the Letters of Credit shall never exceed $28,000,000.00; provided, further, that the Bank shall have no obligation to issue any such Letter of Credit at any time that there exists any set of facts or circumstances that, by itself, upon the giving of notice, or the lapse or time, or any one or more of the foregoing, would constitute an Event of Default under this Agreement. None of the Letters of Credit shall have an expiration date later than the Revolving Loan Termination Date. 1.4 Maximum Amount of the Loan. Notwithstanding the individual limits of the Revolving Loan, the Term Loan, and the Letters of Credit set forth in Sections 1.1, 1.2 and 1.3 above, the outstanding principal balance of the Revolving Loan, plus the outstanding principal balance of the Term Loan, plus the aggregate outstanding stated amounts of the Letters of Credit shall never exceed the sum of $33,000,000.00. 1.5 Amendment and Restatement of Loan Agreement, Assumption and Reaffirmation. The indebtedness and obligations evidenced by this Agreement and all instruments, agreements, and documents executed in connection herewith constitute an amendment, renewal, modification, restatement, and restructure of the indebtedness and obligations of the Companies evidenced by the 1988 Loan Documents, the 1989 Loan Documents, the 1991 Loan Documents and the 1993 Loan Documents. All Uniform Commercial Code financing statements and all security agreements and/or collateral assignments executed and delivered to the Banks in connection with the 1988 Loan Documents, the 1989 Loan Documents, the 1991 Loan Documents and the 1993 Loan Documents shall remain in full force and effect in all respects as if the indebtedness and obligations secured and perfected with respect to such Uniform Commercial Code financing statements, security agreements, and collateral assignments had been payable originally as provided by this Agreement and by the instruments, agreements, and documents executed in connection herewith. Any and all references in the 1988 Loan Documents, 1989 Loan Documents, 1991 Loan Documents or 1993 Loan Documents to the effect that such 1988 Loan Documents, 1989 Loan Documents, 1991 Loan Documents or 1993 Loan Documents have been executed pursuant to, in connection with, or subject to the 1988 Loan Agreement, 1989 Loan Agreement, 1991 Loan Agreement or 1993 Loan Agreement or to the indebtedness or obligations outstanding pursuant to the 1988 Loan Agreement, 1989 Loan Agreement, 1991 Loan Agreement or 1993 Loan Agreement shall, unless the context otherwise requires, hereinafter be deemed to constitute a reference to the effect that such 1988 Loan Documents, 1989 Loan Documents, 1991 Loan Documents and 1993 Loan Documents are executed pursuant to, in connection with, or subject to this Agreement and to the indebtedness and obligations outstanding pursuant to this Agreement. The Companies hereby assume and reaffirm all of the monetary obligations and indebtedness evidenced by the 1988 Loan Documents, 1989 Loan Documents, 1991 Loan Documents and 1993 Loan Documents and agree that all of their monetary obligations and indebtedness set forth therein shall remain in full force and effect, except as modified by this Agreement or by the terms of any notes, instruments or agreements executed in connection herewith. 1.6 Lending Formula. The aggregate stated amount outstanding pursuant to the Letters of Credit plus the aggregate unpaid principal balance of the Revolving Loan shall not exceed (a) 80% of the Companies' "Eligible Accounts," plus (b) 70% of the Companies' "Eligible Unbilled Accounts," plus (c) 50% of "Eligible Maintenance Inventory" (collectively the "Borrowing Base"), as defined below. The term "Eligible Unbilled Accounts" means the portion of the Companies' accounts that the Bank determines in good faith from time to time, based on credit policies, market conditions, the Companies' business or the creditworthiness of the Companies' account debtors is eligible for use in calculating the Borrowing Base. Without limiting the Bank's right to determine which accounts are Eligible Unbilled Accounts, no account will be eligible for use in calculating the Borrowing Base, unless, at a minimum, such account is an account arising in the ordinary course of the Companies' business owing to the Companies (excluding sales or other taxes) from a party (the "Account Debtor") which meets all the following requirements until it is lawfully invoiced to the Account Debtor (a) the account arises from the Companies' completed performance of services that have not yet been invoiced to the Account Debtor; (b) upon being invoiced, the account shall be due and payable not more than 15 days from the date of the invoice therefor; (c) the account is not subject to any prior assignment, claim, lien, security interest, setoff, credit, contra account, allowance, adjustment, levy, return of goods, or discount; (d) the account did not arise from a transaction with a person, corporation or entity affiliated with the Companies; (e) the Companies have not received notice of bankruptcy or insolvency of the Account Debtor; (f) the account is not evidenced by any chattel paper, promissory note, payment instrument or written agreement; (g) except for accounts that arise from an Account Debtor whose mailing address or executive office is located in Canada and that do not arise from a contract with any government or agency thereof or from a consumer, the account does not arise from an Account Debtor whose mailing address or executive office is located outside the United States; (h) the account does not arise from an Account Debtor who has more than 50% of its accounts with the Companies more than 45 days past due; and (i) the Bank has not notified the Companies that the account or the Account Debtor is unsatisfactory or unacceptable (although the Bank reserves the right to do so in good faith and in its sole discretion at any time). The term "Eligible Accounts" means the portion of the Companies' accounts that the Bank determines in good faith from time to time, based on credit policies, market conditions, the Companies' business or the creditworthiness of the Companies' account debtors is eligible for use in calculating the Borrowing Base. Without limiting the Bank's right to determine which accounts are Eligible Accounts, no account will be eligible for use in calculating the Borrowing Base, unless, at a minimum, such account is an account arising in the ordinary course of the Companies' business owing to the Companies (excluding sales or other taxes) from a party (the "Account Debtor" ) which meets all the following requirements until it is collected in full: (a) the account is due and payable not more than 15 days from the date of the invoice therefor and is not more than 45 days past-due; (b) the account arises from the Companies' completed performance of services that have been lawfully invoiced to the Account Debtor; (c) the account is not subject to any prior assignment, claim, lien, security interest, setoff, credit, contra account, allowance, adjustment, levy, return of goods, or discount; (d) the account did not arise from a transaction with a person, corporation or entity affiliated with the Companies; (e) the Companies have not received notice of bankruptcy or insolvency of the Account Debtor; (f) the account is not evidenced by any chattel paper, promissory note, payment instrument or written agreement; (g) except for accounts that arise from an Account Debtor whose mailing address or executive office is located in Canada and that do not arise from a contract with any government or agency thereof or from a consumer, the account does not arise from an Account Debtor whose mailing address or executive office is located outside the United States; (h) the account does not arise from an Account Debtor who has more than 50% of its accounts with the Companies more than 45 days past due; (i) the account does not arise from an Account Debtor to whom the Company has determined to ship goods on a "cash on delivery" or C.O.D. basis, unless the Bank determines in its sole discretion that said account is acceptable and (j) the Bank has not notified the Companies tat the account or the Account Debtor is unsatisfactory or unacceptable (although the Bank reserves the right to do so in good faith and in its sole discretion at any time). The term "Eligible Maintenance Inventory" means the portion of the Companies' inventory consisting of supplies and replacement parts for trucks and trailers that the Bank determines from time to time, based upon credit policies, market conditions, the Companies' business and other matters is eligible for use in calculating the Borrowing Base. For purposes of determining the Borrowing Base, Eligible Maintenance Inventory (unless the Bank agrees otherwise in writing) shall not include slow moving, obsolete or discontinued inventory, packaging, inventory in the control of a third person for storage, consigned inventory or inventory in transit, and all inventory shall be valued at the lesser of cost (on a FIFO basis) or market. SECTION 2. INTEREST RATES. 2.1 Prime Commercial Rate. The Companies, jointly and severally, agree to pay to the Bank monthly interest on the unpaid balance of the Revolving Loan at a variable rate of interest per annum equal to one-half percentage point per annum (1/2%) in excess of the Prime Commercial Rate of the Bank, from time to time in effect, with each change in the Prime Commercial Rate automatically and immediately changing the interest rate on the Revolving Loan without notice to the Companies; Accrued interest on the unpaid principal balance of the Revolving Loan shall be payable monthly on the first day of each month, and at maturity, whether by acceleration or otherwise (the "Revolving Loan Interest Payment Dates"). The Companies, jointly and severally, agree to pay to the Bank quarterly interest on the unpaid balance of the Term Loan at a variable rate of interest per annum equal to one-half percentage point (1/2%) in excess of the Prime Commercial Rate of the Bank, from time to time in effect, with each change in the Prime Commercial Rate automatically and immediately changing the interest rate on the Term Loan without notice to the Companies. Accrued interest on the unpaid principal balance of the Term Loan shall be payable quarterly on each January 1, April 1, July 1 and October 1, and at maturity, whether by acceleration or otherwise (the "Term Loan Interest Payment Dates"). Interest shall be calculated on a 360 day year basis and shall be based on the actual number of days which elapse during the interest calculation period. "Prime Commercial Rate" as used herein shall mean the rate established by the Bank from time to time based on its consideration of economic, money market, business and competitive factors, and it is not necessarily the Bank's most favored rate. 2.2 Interest Rate After Default. If the Companies fail to make any payment of interest or principal or other payment due on any note or letter of credit reimbursement agreement executed in connection with this Agreement on or before five (5) business days after the date such payment is due, or if the Companies shall fail to make any payment required by Section 6.1 or 6.2 of this Agreement on or before thirty (30) business days after the date such payment is due, or if any other Event of Default occurs hereunder and is not cured or waived with 120 days after the date of such Event of Default, or if the Bank shall declare the entire principal and all interest accrued on all notes and any other obligations outstanding pursuant to this Agreement to be due and payable, then interest shall thereafter accrue on the outstanding principal balance of the Revolving Loan and Term Loan and any unreimbursed draws under the Letters of Credit at a rate equal to three and one-half percentage points (3-1/2%) in excess of the Prime Commercial Rate of the Bank. SECTION 3. EVIDENCE OF THE LOAN. The Revolving Loan shall be evidenced by a promissory note, which note shall be in the form of Exhibit A attached hereto, or by one or more notes subsequently executed in substitution therefor. The Term Loan shall be evidenced by a promissory note, which note shall be in the form of Exhibit B attached hereto, or by one or more notes subsequently executed in substitution therefor. The obligations of the Companies pursuant to the issuance of the Letters of Credit shall be evidenced by a Standby Letter of Credit Reimbursement Agreement, which agreement shall be in the form of Exhibit C attached hereto, or by one or more applications and agreements for standby letters of credit executed in substitution therefor. Repayment of the Loan shall be made in accordance with the terms of the notes and agreements then outstanding pursuant to this Agreement. SECTION 4. PREPAYMENT. Subject to the terms and conditions of this Agreement, the Companies shall have the right to prepay at any time and from time to time before maturity any amount or amounts due to the Bank pursuant to this Agreement or to any notes or agreements executed pursuant hereto or to seek cancellation of the Letters of Credit; provided, that if the Companies prepay the Revolving Loan and the Term Loan in full prior to (i) December 31, 1996, the Companies shall jointly and severally pay to the Bank a prepayment fee equal to $300,000.00; (ii) December 31, 1997, but on or after December 31, 1996, the Companies shall jointly and severally pay to the Bank a prepayment fee equal to $250,000.00; (iii) December 31, 1998, but on or after December 31, 1997, the Companies shall jointly and severally pay to the Bank a prepayment fee equal to $200,000.00; provided, however, that no such prepayment fee shall be due if the Revolving Loan and the Term Loan are prepaid in full solely as a result of the refinancing or restructuring of such obligations by the Bank. If the Bank, in its sole and absolute discretion, determines not to renew or extend the maturity of the Revolving Loan, then the Term Loan shall be due and payable at the maturity of the Revolving Loan. SECTION 5. USE OF PROCEEDS. The proceeds of the Revolving Loan and the Term Loan shall be used by the Companies for working capital needs and expenses incurred in the ordinary course of the Companies' businesses. The Letters of Credit shall be used to assure performance by the Companies under insurance plans and bonding plans, for fuel purchase and fuel tax requirements, in connection with fuel credit cards and driver advances in an amount not to exceed $500,000.00, and to secure performance by the Companies under any equipment leasing transactions permitted by this Agreement. SECTION 6. COSTS, EXPENSES AND FEES. 6.1 Revolving and Term Loan Fee. The Companies shall jointly and severally pay to the Bank in respect of the Revolving Loan and the Term Loan a monthly service and collateral management fee (the "Revolving and Term Loan Fee") in the amount of $9,000.00, payable on the first day of each month during which any balance under the Revolving Loan or Term Loan is outstanding. 6.2 Letter of Credit Fees. The Companies shall jointly and severally pay to the Bank a fee in respect of the Letters of Credit in the amount of one percent (1%) per annum of the stated amount of each Letter of Credit issued or renewed and outstanding during such year, which fee shall be paid to the Bank upon the issuance or renewal of each Letter of Credit and which fee shall be prorated for each Letter of Credit for which the expiry date is less than one year. The Companies shall also pay any and all other fees, costs and expenses as may be provided for in the Standby Letter of Credit Reimbursement Agreement. 6.3 Restructure Fee. The Companies shall jointly and severally pay to the Bank a restructure fee in respect of the Loan in the amount of $50,000.00, which fee shall be fully earned as of the date of this Agreement, but shall be payable (a) in the following installments: $25,000.00 on February 1, 1996; and $25,000.00 on January 1, 1997; or (b) upon acceleration of the Loan, whichever is earlier. 6.4 Other Costs. The Companies jointly and severally agree to pay all costs and expenses (a) incidental to the extensions of credit provided for in this Agreement and any amendment, extension, modification, restatement, restructure hereof, (b) as provided in any security agreement or document executed in connection herewith, (c) in connection with the enforcement of the Bank's rights related to any of the foregoing, (d) in connection with any sale or attempted sale of any interest herein to a participant or co-lender, and (e) in connection with any litigation, contest, dispute, proceeding or action in any way relating to any collateral security or to this Agreement, whether any of the foregoing are incurred prior to or after maturity, the occurrence of an Event of Default, or the rendering of a judgment. Such costs shall include, but not be limited to, reasonable fees and out-of-pocket expenses of the Bank's counsel, title insurance premiums and costs, recording fees, appraisal fees, Phase I environmental survey fees, other survey fees, inspection fees, revenue stamps and note and mortgage taxes. 6.5 Increased Capital. If, after the date hereof, the Bank determines that (i) the adoption or implementation of or any change in, or in the interpretation or administration of, any law or regulation or any guideline or request from any central bank or other governmental authority or quasi-governmental authority exercising jurisdiction, power or control over the Bank or banks or financial institutions generally (whether or not having the force of law), compliance with which affects or would affect the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank and (ii) the amount of such capital is increased by or based upon (A) the making or maintenance by the Bank of the Loan, any participation in or obligation to participate in the Loan, Letters of Credit or other advances made hereunder or the existence of any obligation to make the Loan, or (B) the issuance or maintenance by the Bank of, or the existence of the Bank's obligation to issue, Letters of Credit, then, in any such case, upon written demand by the Bank, the Companies, jointly and severally, shall immediately pay to the Bank, from time to time as specified by the Bank, additional amounts sufficient to compensate the Bank or such corporation therefor. Such demand shall be accompanied by a statement as to the amount of such compensation and include a summary of the basis for such demand with detailed calculations. SECTION 7. SECURITY FOR LOAN. As security for the Loan, the Companies shall grant to the Bank a first priority lien against all the Companies' accounts receivable, contract rights, general intangibles, documents, inventory, fixtures, equipment, instruments, licenses, franchises, real estate, chattel paper, motor vehicles, automobiles, trucks, vans and trailers, lease rentals, patents, trademarks, trade names, intellectual property, stock, securities, all of the Companies' real and personal property, and the proceeds of all of the foregoing whether now owned or hereafter acquired or created by the Companies subject only to those liens and encumbrances set forth on Exhibit D to this Agreement. At the request of the Bank, the Companies shall authorize and cause to be executed any and all documents which the Bank shall reasonably require in order to effect the foregoing. The Companies shall execute and deliver to the Bank security agreements, mortgages, deeds of trust, assignments of rents and leases and Uniform Commercial Code financing statements in form and content reasonably satisfactory to the Bank. In addition, the Companies shall provide the Bank with any title insurance policies, surveys, environmental surveys, appraisals and other documents or assurances reasonably required by the Bank in form and content satisfactory to the Banks. Nothing contained in this Agreement or in any security agreement, mortgage, deed of trust or other document executed in connection herewith shall affect or modify any security interest, assignment, financing statement or mortgage previously granted to the Bank prior to the date hereof. All such interests and financing statements previously granted or executed and delivered to the Banks shall remain in full force and effect. SECTION 8. WARRANTIES AND REPRESENTATIONS. The Companies warrant and represent to the Bank: 8.1 Subsidiaries. The Companies have no subsidiaries except as set forth on the attached Exhibit E. 8.2 Corporate Organization and Authority. The Companies: (a) are corporations duly organized, validly existing and in good standing under the laws of the State of their respective incorporation as set forth on the attached Exhibit E; (b) have all requisite power and authority and all necessary licenses and permits to own and operate their properties and to carry on their businesses as now conducted and as presently proposed to be conducted, except where the failure to obtain licenses and permits would not have a material adverse effect on the Companies taken as a whole; and (c) are qualified and authorized to do business as corporations or foreign corporations in every jurisdiction in which they do business, except where the failure to be so qualified would not have a material adverse effect on the Companies taken as a whole. 8.3 Financial Statements; Full Disclosure. The financial statements for the fiscal year ending December 31, 1994, and the fiscal quarter ending September 30, 1995, which have been supplied to the Bank have been prepared in accordance with Generally Accepted Accounting Principles and fairly represent the Companies' financial condition as of such date. No material adverse change in the Companies' financial condition has occurred since September 30, 1995. In addition, the financial analyses, reports, business plans, projections, and pro forma financial statements for fiscal years 1995 through 1998 which have been supplied to the Bank have been prepared in accordance with Generally Accepted Accounting Principles and are based on reasonable, good faith assumptions about the Company's financial condition and projected financial condition as of the dates of such financial information or projections. No adverse change has occurred which would materially alter any such analyses, reports, business plans, financial statements, projections, or assumptions. The financial statements and the financial analyses or information referred to in this paragraph do not, nor does this Agreement or any written statement furnished by the Companies to the Banks in connection with obtaining the Loan, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein or herein not misleading. The Companies have disclosed to the Banks in writing or orally all facts which materially affect the properties, business, prospects, profits or condition (financial or otherwise) of the Companies or the ability of the Companies to perform this Agreement. 8.4 Pending Litigation. Except as may be disclosed on Exhibit F attached hereto, there are no proceedings pending, or, to the knowledge of the Companies, threatened against or affecting the Companies in any court or before any governmental authority or arbitration board or tribunal which, individually or in the aggregate, involve the possibility of materially and adversely affecting the properties, businesses, prospects, profits or condition (financial or otherwise) of the Companies, taken as a whole or the ability of the Companies to perform this Agreement. 8.5 Title to Properties. The Companies have good and marketable title to all the property which they purport to own (except as sold or otherwise disposed of in the ordinary course of business), free from any liens and encumbrances, except in favor of the Bank or as set forth on Exhibit D to this Agreement. Moreover, the Companies lease only that real property set forth on Exhibit G attached hereto. 8.6 Borrowing is Legal and Authorized. (a) The Boards of Directors of the Companies have duly authorized the execution and delivery of this Agreement and of each of the notes and documents contemplated herein, and the note or notes executed in connection with this Agreement will constitute valid and binding obligations of the Companies enforceable in accordance with their terms. (b) The execution of this Agreement and related notes and documents and the compliance by the Companies with all the provisions of this Agreement: (i) are within the corporate powers of the Companies; and (ii) are legal and will not conflict with, result in any breach of any of the provisions of, constitute a default under, or result in the creation of any lien or encumbrance upon any property of the Companies under the provisions of, any agreement, charter instrument, bylaw, or other instrument to which the Companies are parties or by which they may be bound. (c) There are no limitations in any indenture, mortgage, deed of trust or other material agreement or instrument to which the Companies are now parties or by which the Companies may be bound with respect to the payment of principal, interest, or other payment on the Loan. 8.7 No Defaults. No event has occurred and no condition exists which, but for notice or lapse of time, would constitute an Event of Default pursuant to this Agreement. None of the Companies are in violation in any material respect of any term of any, charter instrument, bylaw or other material agreement or instrument to which they are parties or by which they may be bound. 8.8 Government Consent. Neither the nature of the Companies or of their businesses or properties, nor any relationship between the Companies and any other entity or person, nor any circumstance in connection with the execution of this Agreement, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of the Companies as a condition to the execution and delivery of this Agreement and the notes and documents contemplated herein. 8.9 Taxes. (a) All tax returns required to be filed by the Companies on or before the date hereof in any jurisdiction have in fact been filed or the time for filing has been extended, and all undisputed taxes, assessments, fees and other governmental charges upon the Companies, or upon any of its respective properties, which are due and payable have been paid except as set forth in Exhibit H to this Agreement. The Companies do not know of any proposed additional tax assessment against them or their properties that would have a material adverse effect on the Companies, except as set forth in Exhibit H to this Agreement. (b) The provisions for taxes on the books of the Companies for their current fiscal period are adequate. 8.10 Compliance with Law. The Companies: (a) are not in violation of any laws, ordinances, governmental rules or regulations to which they are subject, which violation might materially and adversely affect the business, prospects, profits, properties or condition (financial or otherwise) of the Companies taken as a whole; and (b) have not failed to obtain any licenses, permits, franchises or other governmental authorizations necessary to the ownership of their properties or to the conduct of their businesses, which violation or failure to obtain might materially and adversely affect the businesses, prospects, profits, properties or condition (financial or otherwise) of the Companies taken as a whole. 8.11 Restrictions on Companies. The Companies are not parties to any contract or agreement or subject to any charter or other corporate restriction which materially and adversely affects the business of the Companies. The Companies are not parties to any contract or agreement which restricts the right or ability of the Companies to incur indebtedness, other than this Agreement. The Companies have not agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a lien or encumbrance, except to the Bank, except as disclosed on Exhibit D to this Agreement, and except with respect to that certain real property described in a certain Commercial Deed of Trust, Security Agreement, Assignment of Leases and Rents, and Fixture Filing (the "MetLife Deed of Trust") dated August 28, 1995, that was executed and delivered to First American Title Insurance Company, for the benefit of MetLife Capital Financial Corporation, by Roadrunner Trucking, Inc. Except with respect to that certain real property described in the MetLife Deed of Trust, the Companies have not granted a negative pledge related to their assets under any instrument or document to which they are parties. 8.12 No Insolvency. On the date of the Companies' entering into the Loan and after giving effect to all indebtedness of the Companies (including the Loan), (a) the Companies (taken as a whole) will be able to pay their obligations as they become due and payable; (b) the present fair saleable value of the Companies' assets exceeds the amount that will be required to pay their probable liability on their obligations as the same become absolute and matured; (c) the sum of the Companies' property at a fair valuation exceeds Companies' indebtedness; and (d) the Companies will have sufficient capital to engage in their respective businesses. 8.13 Locations of Companies. The Companies' principal places of business, chief executive offices and all locations in which the Companies maintain real or personal property (not including tractors and trailers) are set forth in Exhibit I attached hereto, the books and records of the Companies are and shall be kept at such addresses described on Exhibit I, and the Companies have no other place of business except as shown in Exhibit I. 8.14 Environmental Protection. Except as disclosed in Exhibit K to this Agreement, the Companies (a) have no actual knowledge of the permanent placement, burial or disposal of any Hazardous Substances (as hereinafter defined) on any real property owned, leased, or used by the Companies (the "Premises"), of any spills, releases, discharges, leaks, or disposal of Hazardous Substances that have occurred or are presently occurring on, under, or onto the Premises, or of any spills, releases, discharges, leaks or disposal of Hazardous Substances that have occurred or are occurring off the Premises as a result of the Companies' improvement, operation, or use of the Premises which would result in non-compliance with any of the Environmental Laws (as hereinafter defined); (b) are and have been in compliance with all applicable Environmental Laws; (c) know of no pending or threatened environmental civil, criminal or administrative proceedings against the Companies relating to Hazardous Substances; (d) know of no facts or circumstances that would give rise to any future civil, criminal or administrative proceeding against the Companies relating to Hazardous Substances; and (e) will not permit any of their employees, agents, contractors, subcontractors, or any other person occupying or present on the Premises to generate, manufacture, store, dispose or release on, about or under the Premises any Hazardous Substances which would result in the Premises not complying with the Environmental Laws. As used herein, "Hazardous Substances" shall mean and include all hazardous and toxic substances, wastes, materials, compounds, pollutants and contaminants (including, without limitation, asbestos, polychlorinated biphenyls, and petroleum products) which are included under or regulated by the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. Section9601, et seq., the Toxic Substances Control Act, 15 U.S.C. Section2601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section6901, et seq., the Water Quality Act of 1987, 33 U.S.C. Section1251, et seq., and the Clean Air Act, 42 U.S.C. Section7401, et seq., and any state or local statute ordinance, law, code, rule, regulation or order regulating or imposing liability (including strict liability) or standards of conduct regarding Hazardous Substances (hereinafter the "Environmental Laws"), but does not include such substances as are permanently incorporated into a structure or any part thereof in such a way as to preclude their subsequent release into the environment, or the permanent or temporary storage or disposal of household hazardous substances by tenants, and which are thereby exempt from or do not give rise to any violation of the aforementioned Environmental Laws. Notwithstanding anything contained herein to the contrary, the Bank acknowledges that Hazardous Substances may be used on the Premises in the ordinary course of the Companies' business, but each of the Companies represents and warrants to the Bank that such Hazardous Substances shall at all times be used in accordance with all Environmental Laws. The acknowledgment by the Bank in the immediately preceding sentence shall not restrict or otherwise limit the indemnification and other obligations of the Companies under this Agreement. SECTION 9. CLOSING CONDITIONS. The obligation of the Bank to make the Loan shall be subject to the following conditions precedent: 9.1 Opinion of Counsel. The Bank shall have received from counsel for the Companies such closing opinions, in form and content satisfactory to the Bank, as are required to be delivered to the Bank as of the date hereof. 9.2 Compliance with this Agreement. The Companies shall have performed and complied with all agreements and conditions contained herein which are required to be performed or complied with by the Companies before or at closing. 9.3 Compliance Certificate. The Bank shall have received a certificate dated the date upon which this Agreement is executed and signed by an authorized officer of the Companies, certifying that the conditions specified in Section 9.2 have been fulfilled. 9.5 Warranties and Representations. On the date of each advance pursuant to the Loan the warranties and representations set forth in Section 8 hereof shall be true and correct on and as of such date with the same effect as though such warranties and representations had been made on and as of such date, except to the extent that such warranties and representations expressly relate to an earlier date. SECTION 10. COMPANIES' BUSINESS COVENANTS. The Companies covenant that on and after the date of this Agreement, so long as any of the indebtedness provided for herein remains unpaid: 10.1 Payment of Taxes and Claims. The Companies will pay before they become delinquent: (a) all taxes, assessments and governmental charges or levies imposed upon it or its property; and (b) all claims or demands of materialmen, mechanics, carriers, warehousemen, landlords, bailee and other like persons which, if unpaid, might result in the creation of a lien or encumbrance upon its property, provided that items of the foregoing description need not be paid while being contested in good faith and by appropriate proceedings and provided further that adequate book reserves have been established with respect thereto; provided further that the Companies' title to, and their right to use, their property is not materially adversely affected thereby, and provided further that no tax liens have attached to the Companies' accounts, contract rights, chattel paper, general intangibles, or inventory. In the case of any item of the foregoing description involving in excess of the amount which the Companies' independent public accountants shall fix as the threshold of materiality for purposes of their audit of the then current year, the appropriateness of the proceedings shall be supported by an opinion of the independent counsel responsible for such proceedings and the adequacy of such reserves shall be supported by the opinion of the independent accountants. 10.2 Maintenance of Properties and Corporate Existence. The Companies shall: (a) Property--maintain their property in good condition and make all renewals, replacements, additions, betterments and improvements thereto which are deemed necessary by the Companies; (b) Insurance--maintain, (i) self insurance and (ii) insurance with financially sound and reputable insurers, with respect to their properties and businesses against such casualties and contingencies, of such types (including but not limited to fire and casualty, public liability, products liability, larceny, embezzlement or other criminal misappropriation insurance), both such self insurance and insurance to be in such amounts as is customary in the case of corporations of established reputations engaged in the same or a similar business and similarly situated; (c) Financial Records--keep true books of records and accounts in which full and correct entries will be made of all its business transactions, and reflect in its financial statements adequate accruals and appropriations to reserves, all in accordance with generally accepted accounting principles; (d) Corporate Existence and Rights--do or cause to be done all things necessary (i) to preserve and keep in full force and effect their existence, rights and franchises, and (ii) to maintain their status as a corporation duly organized and existing and in good standing under the laws of the State of their incorporation; and (e) Compliance with Law--not be in violation of any laws, ordinances, or governmental rules and regulations to which they are subject and will not fail to obtain any licenses, permits, franchises or other governmental authorizations necessary to the ownership of their properties or to the conduct of their businesses, which violation or failure to obtain might materially and adversely affect the businesses, prospects, profits, properties or condition (financial or otherwise) of the Companies taken as a whole. 10.3 Liens and Encumbrances, Negative Pledge. The Companies will not (i) cause or permit or (ii) agree or consent to cause or permit in the future (upon the happening of a contingency or otherwise), any of their or any of the Subsidiaries' property, whether now owned or hereafter acquired, to be subject to a lien or encumbrance to any entity or person other than the Bank, except liens or encumbrances permitted or acknowledged by Sections 8.5 (Exhibit D) or 10.4 hereof. In addition, except as set forth in the MetLife Deed of Trust, the Companies will not contractually agree with any other creditor or third party to provide such party a negative pledge, or other covenants similar to this Section 10.3. 10.4 Other Borrowings. The Companies will not create or incur any indebtedness for borrowed money, credit extensions, or advances except for (i) the Loan, (ii) insurance premium financing transactions, (iii) equipment leases and purchase money financing transactions permitted by Section 10.25 herein with respect to tractors and/or trailers and related equipment and accessories not to exceed the purchase price of such items being purchased or leased; (iv) trade debt payable in the ordinary course of the Companies' businesses, (v) purchase money financing in connection with the capital expenditures permitted by Section 10.24 herein and (vi) indebtedness to MetLife Capital Financial Corporation in a principal amount not to exceed $2,350,000 that is secured only by the property referred to in the MetLife Deed of Trust. 10.5 Contingent Liabilities. The Companies represent and warrant that they have no known contingent liabilities, except as set forth in Exhibit J to this Agreement. The Companies will not guarantee, indorse or otherwise become surety for or upon the obligations of others, except (i) by indorsement of negotiable instruments for deposit or collection in the ordinary course of business, (ii) the Companies's liability for fuel tax bonds, and (iii) in connection with the borrowings permitted pursuant to paragraph 10.4 above. 10.6 Loans and Advances by the Companies. The Companies will not make any loans or advances to any inactive subsidiaries, including without limitation those entities designated on Exhibit E to this Agreement as inactive subsidiaries (the "Inactive Subsidiaries"), or to any other person, corporation or entity; provided, however, the Companies may make advances to owner-operators, trip lessors, and commissioned agents in the ordinary course of business not to exceed the aggregate amount outstanding at any one time of $6,000,000. Notwithstanding the foregoing, the Companies shall be permitted to make loans to any entity comprising the Companies in such amounts, from time to time, as they may deem necessary and appropriate. 10.7 Acquisition of Capital Stock. So long as the Loan is outstanding, the Companies will not purchase, redeem, or otherwise acquire or retire any of its capital stock, bonds or warrants, rights, or options to acquire stock of the Companies, without the prior written consent of the Banks, which consent shall not be withheld unreasonably. 10.8 Investments. None of the Companies shall purchase for investment securities of any kind except securities, or other financial instruments or obligations acquired through the Bank's Prime Interest Program, shares of the capital stock of LTV Steel Company, Inc. owned by any of the Companies as of the date hereof, bonds or other obligations of the United States, certificates of deposit issued by commercial banks or building and loan associations and commercial paper rated at least A-1 or P-1 and having a maturity of no more than one year, securities rated at least Aaa by Moody Investor Services, Inc. or at least AAA by Standard & Poors, or other marketable securities having a market value not to exceed the sum of $500,000.00 in the aggregate outstanding at any one time. None of the Companies shall hereafter make any investment in any of the Inactive Subsidiaries, whether by means of loan or advance, contribution of capital, contribution of assets, acquisition, sale, lease, transfer or other disposition of assets, or otherwise. 10.9 Sale of Accounts; No Consignment. The Companies shall not sell, assign, or encumber, except to the Bank and to Transport Clearings East, Inc. in respect of the accounts of Eck Miller Transportation Corporation, Inc., Advanced Distribution System, Inc., Roadrunner Trucking, Inc. and Roadrunner Distribution Services, Inc. pursuant to certain Intercreditor Agreements between the Bank and Transport Clearings East, Inc. and other agreements satisfactory to the Bank in its sole discretion, any of their Accounts or notes receivable. The Companies shall use their best efforts to discontinue as soon as practicable their practice of selling or assigning accounts to Transport Clearings East, Inc., as permitted by this paragraph. The Companies shall not permit any of their Inventory to be sold or transferred on consignment or acquire or possess any of their Inventory on consignment. 10.10 Minimum Security. The Companies shall maintain, as minimum security for the Revolving Loan and Letters of Credit, Eligible Accounts, Eligible Unbilled Accounts, and Eligible Maintenance Inventory having an aggregate value such that the aggregate stated amount of the Letters of Credit plus the outstanding principal balance of the Revolving Loan shall not exceed the Borrowing Base. 10.11 Management. The Borrower shall not after the date of this Agreement permit any material change in the persons occupying the positions of President, Chief Executive Officer or Chief Operating Officer of the Borrower without the prior written consent of the Bank, which consent will not be withheld unreasonably. 10.12 Book Net Worth. The Companies shall achieve a Book Net Worth of not less than: $22,500,000.00 as of December 31, 1995; $22,000,000.00 as of June 30, 1996; $22,500,000.00 as of December 31, 1996; $23,000,000.00 as of June 30, 1997; $23,500,000.00 as of December 31, 1997; $24,250,000.00 as of June 30, 1998; and $25,000,000.00 as of December 31, 1998, and continuing at all times thereafter. 10.13. Ratio of Total Liabilities to Book Net Worth. The Companies shall achieve a ratio of Total Liabilities to Book Net Worth of not greater than (a) 3.50 to 1.00 as of December 31, 1995; (b) 3.00 to 1.00 as of June 30, 1996; (c) 3.00 to 1.00 as of December 31, 1996; (d) 2.50 to 1.00 as of December 31, 1997, and (e) 2.00 to 1.00 as of December 31, 1998 and continuing at all times thereafter. 10.14 Current Ratio. The Companies, on a combined and consolidated basis, shall achieve a ratio of current assets to current liabilities of not less than (a) 0.90 to 1.00 as of December 31, 1995, (b) 1.00 to 1.00 as of December 31, 1996, (c) 1.00 to 1.00 as of December 31, 1997, (d) 1.10 to 1.00 as of December 31, 1998, and (e) 1.20 to 1.00 as of June 30, 1999, and continuing at all times thereafter. 10.15 Sale of Assets; Merger. The Companies, without the prior written consent of the Bank, which consent will not be withheld unreasonably, except in the ordinary course of business, will not sell, lease, transfer, or otherwise dispose of, any of their assets. In addition, the Companies, without the prior written consent of the Bank, which consent will not be withheld unreasonably, will not consolidate with or merge into any other entity, or permit any other entity to consolidate with or merge into it. The Companies, without the prior written consent of the Bank, which consent will not be withheld unreasonably, will not acquire all or substantially all of the assets or business of any other company, person or entity. The Companies, without the prior written consent of the Bank, which consent will not be withheld unreasonably, will not create or acquire any direct or indirect subsidiaries, or conduct business under any tradenames. In obtaining the consent of the Bank with respect to any proposed transaction referred to in this Section 10.15, the Companies shall provide to the Bank all such information as the Bank reasonably deems necessary to enable it to evaluate such transaction. 10.16 ERISA. The Companies shall with respect to any employee benefit pension plan under Title IV of the Employee Retirement Income Security Act, as amended, established, now or hereafter, by the Companies, any subsidiary of the Companies, or any business under common control with the Companies, or to which the Companies, any subsidiary, or any business under common control with the Companies is, now or hereafter, required to contribute: (a) at all times make prompt payment of contributions required to meet the minimum funding standards set forth in Section 302 through 305 of ERISA with respect to its plan, (b) promptly, after the filing thereof, furnish to the Bank copies of each annual report required to be filed pursuant to Section 103 of ERISA in connection with their plan for the plan year, including any certified financial statements or actuarial statements required pursuant to said Section 103, (c) notify the Bank immediately of any fact, including, but not limited to, any "Reportable Event," as that term is defined in Section 4043 of ERISA, arising in connection with the plan which might constitute grounds for termination thereof by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court of a Trustee to administer the plan, and (d) notify the Bank upon becoming aware of any "Prohibited Transaction" as that term is defined in Section 406 of ERISA. The Companies will not: (e) engage in any "Prohibited Transaction," which violation might materially and adversely affect the business, prospects, profits, properties or condition (financial or otherwise) of the Companies; or (f) terminate any such plan in a manner which could result in the imposition of a lien on the property of the Companies pursuant to Section 4068 of ERISA. 10.17 Lock-box and Collection of Accounts. The Companies shall cause all accounts, accounts receivable, and contract rights to be collected through a lock-box arrangement with the Bank that includes a "blocked" account at Norwest Bank - New Mexico or any successor thereof, and shall execute such agreements with respect to the same in form and substance satisfactory to the Bank. Upon request of the Bank at any time after an occurrence of an Event of Default under this Agreement, the Companies agree to notify all of their account debtors and indicate on all billings that the accounts are payable to the Bank. 10.18 Concentration Account. If the Companies make collections on any of the accounts, accounts receivable, or contract rights, they shall hold the proceeds received from collections in trust for the Bank, and turn over all checks, drafts, cash and other remittances and proceeds to the Bank each business day in the exact form in which they are received. Said proceeds and the monies or other funds collected through the lock-box account described in the immediately preceding paragraph shall be deposited in a concentration account maintained with the Bank (the "Concentration Account"). The Bank shall apply the whole or any part of the collected funds on deposit in the Concentration Account against the principal and/or interest of the Revolving Loan, the Term Loan, or any other indebtedness or obligation of the Companies. The Companies shall execute any and all supporting documentation in form and content satisfactory to the Bank to effectuate the foregoing lock-box and concentration account arrangements. 10.19 Controlled Disbursement Account. The Companies shall maintain with the Bank controlled disbursement accounts and shall execute such documents in form and content satisfactory to the Bank as may be necessary to effectuate the foregoing. 10.20 Deposits with the Bank. The Companies represent and warrant that they maintain all of their operating and deposit accounts with the Bank except for (a) Account No. 7650595 maintained by Roadrunner Trucking, Inc. with Norwest Bank - New Mexico, (b) Account No. 2-100098-0 maintained Eck Miller Transportation Corporation with Farmers State Bank in Rockport, Indiana, (c) Accounts 2010774743, 2010772983, 05296DH010, and 05296DD0118 with the Bank of N.T. Butterfield & Son, Limited maintained by RWI COMPANY Ltd., (d) Account No. 031203054 maintained by Intrenet, Inc. with United Jersey Bank, (e) Account No. L31025-1 maintained by Intrenet, Inc. with AIGRM Liquid Asset, Pool, (f) Account No. 0596001053 maintained by Advanced Distribution System, Inc. with First City, Texas, (g) Account Nos. 7650595, 7655155, and 07675814 maintained by Roadrunner Trucking, Inc. with Norwest Bank - New Mexico, (h) Account No. 7300195018 maintained by Roadrunner Trucking, Inc. with MBank, (i) Account No. 0020078714 maintained by Roadrunner Trucking, Inc. with Western Bank, (j) Account No. 55028115 maintained by Roadrunner Trucking, Inc. with Citibank, (k) Account No. 0596001046 maintained by Roadrunner Trucking, Inc. with First City Bank-Houston, and (1) Account No. 297500767 maintained by Roadrunner Enterprises, Inc. with Norwest Bank New Mexico. The Companies shall maintain all of their operating and deposit accounts with the Bank, except for the accounts specified above, and shall cause RWI COMPANY Ltd. (except as specified above) and all of the Inactive Subsidiaries to maintain all deposit accounts, cash equivalents and monies or securities constituting insurance reserves with the Bank. 10.21 Environmental Compliance and Indemnification. The Companies hereby indemnify the Bank and hold the Bank harmless from and against any loss, damage, cost, expense or liability (including strict liability) directly or indirectly arising from or attributable to the generation, storage, release, threatened release, discharge, disposal or presence (whether prior to or during the term of the Loan) of Hazardous Substances on, under or about the Premises (whether by the Companies or any employees, agents, contractor or subcontractors of the Companies or any predecessor in title or any third persons occupying or present on the Premises), or the breach of any of the representations and warranties regarding the Premises, including, without limitation: (a) those damages or expenses arising under the Environmental Laws; (b) the costs of any repair, cleanup or detoxification of the Premises, including the soil and ground water thereof, and the preparation and implementation of any closure, remedial or other required plans; (c) damage to any natural resources; and (d) all reasonable costs and expenses incurred by the Bank in connection with clauses (a), (b) and (c) including, but not limited to reasonable attorneys' fees. The indemnification provided for herein shall not apply to any losses, liabilities, damages, injuries, expenses or costs which: (i) arise from the gross negligence or willful misconduct of the Bank, or (ii) relate to Hazardous Substances placed or disposed of on the Premises after the Bank acquires title to the Premises through foreclosure or otherwise. 10.22 Cash Dividends and Other Distributions. The Borrower shall not declare or pay any cash dividends. The Borrower shall make no other distributions of any kind to shareholders. 10.23 Capital Expenditures. The Companies will not make any expenditure for fixed or capital assets (excluding truck tractors and trailers), including by way of the incurrence of capitalized leased obligations, expenditures for maintenance and repairs which should be capitalized in accordance with generally accepted accounting principles or otherwise, in excess of $3,300,000.00 during the fiscal year ending December 31, 1996 and during each fiscal year thereafter. 10.24 Expenditures for Tractor and Trailer Fleet The Companies will not make any expenditure for truck tractors or trailers, including by way of the incurrence of capitalized lease obligations, expenditures for maintenance and repairs which should be capitalized in accordance with generally accepted accounting principles, obligations arising under or in connection with conditional sales contracts, operating leases, or conventional financing, or otherwise, in excess of (i) $35,000,000.00 during the fiscal year ending December 31, 1996; (iii) $45,000,000.00 during the fiscal year ending December 31, 1997; (iv) $45,000,000.00 during the fiscal year ending December 31, 1998; and (v) $45,000,000.00 during the fiscal year ending December 31, 1999. 10.25 Corporate Overhead Allocation Accounting Between the Borrower and the Subsidiaries. Each Subsidiary shall pay to the Borrower during each fiscal year during the term of this Agreement, a fee in consideration of the benefits received by such Subsidiary in connection with the Loan, the services provided to such Subsidiary by the Borrower in connection with the Loan and corporate office overhead and charges in the aggregate amount of two percent of such Subsidiary's gross revenues during such fiscal year. SECTION 11. INFORMATION AS TO THE COMPANIES. The Companies shall deliver for themselves and for the Subsidiaries the following to the Bank: (a) within 30 days after the end of each month, financial statements, including a balance sheet and statements of income and surplus and consolidated and consolidating schedules, that fairly represent the Companies' financial condition as of the end of such period; (b) within 45 days after the end of each fiscal quarter, a statement signed by the president or chief financial officer of the Borrower certifying that the Companies are in compliance with terms of this Agreement and that the financial statements contained in the Companies' most recent report filed with the Securities and Exchange Commission on Form 10-Q fairly represent the Companies' financial condition as of the end of such period; (c) within 90 days of the end of each fiscal year, unqualified, audited financial statements prepared on a consolidated basis in accordance with Generally Accepted Accounting Principles and certified by independent public accountants satisfactory to the Bank, containing a balance sheet, statements of income and surplus, statements of cash flows and reconciliation of capital accounts, along with any management letters written by such accountants; (d) within 90 days of the end of each fiscal year, financial statements prepared on a consolidating basis in accordance with Generally Accepted Accounting Principles, containing a balance sheet, statements of income and surplus; (e) within 90 days of the end of each fiscal year, a statement or letter signed by the Companies' independent public accountants certifying that upon the basis of the procedures described in such statement or letter, nothing has come to their attention that would lead them to believe that the Companies are in violation of the terms of this Agreement; (f) within 45 days after the end of each calendar month, a statement or reconciliation signed by the president or chief financial officer of the Borrower certifying the calculation of the Borrowing Base as of the end of such period; (h) immediately upon the filing or release, as the case may be, copies of any Securities and Exchange Commission disclosures, filings, documents or any press releases; (i) within 20 days after the end of each month, a report, setting forth the number and dollar total of accounts receivable of the Companies past due for not more than 30 days, the number and dollar total past due for not more than 60 days, and the number and dollar total past due for more than 60 days; (j) within 20 days after the end of each month, a report, setting forth the number and dollar total of accounts receivable of the Companies that have not yet been invoiced to the account debtor; and (k) at the request of the Bank, such other information as the Bank may from time to time reasonably require. SECTION 12. EVENTS OF DEFAULT. 12.1 Nature of Events. An "Event of Default" shall exist if any of the following occurs and is continuing: (a) the Companies fail to make any payment of interest or principal, or other payment due on any note or letter of credit reimbursement agreement executed in connection with this Agreement on or before five business days after the date such payment is due; (b) any of the Companies fail to perform or observe any covenant contained in Sections 5, 7, 10.1 or 10.25 of the Agreement; (c) any of the Companies fail to perform or observe any covenant contained in Sections 10.2(a)-(d), 10.3 through 10.11, 10.15, or 10.17 through 10.21 of this Agreement and such failure continues for more than five (5) business days after such failure shall first become known to any officer of the Companies; (d) any of the Companies fail to comply with any other provision of this Agreement or of any of the security agreements, mortgages, agreements, notes, instruments or documents executed in connection herewith, and such failure continues for more than ten (10) business days after such failure shall first become known to any officer of the Companies; (e) any warranty, representation or other statement by or on behalf of any of the Companies contained in this Agreement or in any instrument furnished in compliance with or in reference to this Agreement is false or misleading in any material respect; (f) any of the Companies become insolvent, or makes an assignment for the benefit of creditors, or consents to the appointment of a trustee, receiver or liquidator; (g) bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings are instituted by or against any of the Companies; (h) a final judgment or judgments, from which no further right of appeal exists, for the payment of money aggregating in excess of $500,000.00 is or are outstanding against any of the Companies and any one of such judgments has been outstanding for more than 30 days from the date of its entry and has not been discharged in full or stayed; (i) a default occurs and continues beyond the expiration of any grace or cure period under any material instrument of indebtedness to which any of the Companies are parties and results in an acceleration of such indebtedness; or (j) any of the Companies fail to maintain, with financially sound and reputable insurers, liability insurance in such amounts as is customary in the case of corporations of established reputations engaged in the same or a similar business and similarly situated. 12.2 Default Remedies. (a) Acceleration--If an Event of Default exists, the Bank may immediately exercise any right, power or remedy permitted to the Bank by law, and shall have, in particular, without limiting the generality of the foregoing, the right to declare the entire principal and all interest accrued on all notes and any other obligations then outstanding pursuant to this Agreement to be forthwith due and payable, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Companies. (b) Nonwaiver--No course of dealing on the part of the Banks nor any delay or failure on the part of the Bank to exercise any right shall operate as a waiver of such right or otherwise prejudice the Bank's rights, powers and remedies. (d) Set-Off--Upon the occurrence and continuance of any Event of Default hereunder, the Bank is hereby authorized at any time and from time to time without notice to the Companies (any such notice being expressly waived by the Companies) and to the fullest extent permitted by law to set-off and apply any and all deposits, general or special, time or demand, provisional or final at any time held and other indebtedness at any time owing by the Bank to or for the credit or the account of the Companies against any and all obligations of the Companies to the Bank now or hereafter existing under this Agreement, irrespective of whether or not the Bank shall have made any demand hereunder and although such obligations may be unmatured. SECTION 13. DEFINITIONS. For the purpose of this Agreement, the following terms shall have the following meanings: 13.1 "Account Debtor" shall have the meaning set forth in Section 1.6 hereof. 13.2 "Agent" is defined in the Recitals hereof. 13.3 "Agreement" is defined in the preamble. 13.4 "Bank" is defined in the preamble. 13.5 "Banks" is defined in the Recitals hereof. 13.6 "Book Net Worth" shall mean at a particular date all amounts which would be included under "shareholders' equity" on a consolidated balance sheet of the Companies, including preferred stock, common stock, retained earnings, and paid-in capital, all as determined in accordance with Generally Accepted Accounting Principles consistently applied as of such date. Book Net Worth shall not include any subordinated debt 13.7 "Borrower" is defined in the preamble. 13.8 "Borrowing Base" shall have the meaning set forth in Section 1.6 hereof. 13.9 "Companies" is defined in the preamble. 13.10 "Concentration Account" shall have the meaning set forth in Section 10.9 hereof. 13.11 "Default" shall have the same meaning as "Event of Default" as set forth in Section 12.1 hereof. 13.12 "Eligible Accounts" shall have the meaning set forth in Section 1.6 hereof. 13.13 "Eligible Maintenance Inventory" shall have the meaning set forth in Section 1.6 hereof. 13.14 "Eligible Unbilled Accounts" shall have the meaning set forth in Section 1.6 hereof. 13.15 "Environmental Laws" shall have the meaning set forth in Section 8.14 hereof. 13.16 "Event of Default" shall mean any of the events specified in Section 12.1 hereof. 13.17 "Generally Accepted Accounting Principles" shall mean, unless the context otherwise requires, that all accounting terms shall be determined in accordance with generally accepted accounting principles, consistently applied. 13.18 "Hazardous Substances" shall have the meaning set forth in Section 8.14 hereof. 13.19 "Inactive Subsidiaries" shall have the meaning set forth in Section 10.6 hereof. 13.20 "Letters of Credit" shall have the meaning set forth in Section 1.3 hereof. 13.21 "Loan" shall have the meaning set forth in Section 1 hereof. 13.22 "MetLife Deed of Trust" shall have the meaning set forth in Section 8.11 hereof. 13.23 "National City" is defined in the Recitals hereof. 13.24 "1988 Loan Agreement" shall have the meaning set forth in recitals hereof. 13.25 "1989 Loan Agreement" shall have the meaning set forth in recitals hereof. 13.26 "1991 Loan Agreement" shall have the meaning set forth in recitals hereof. 13.27 "1993 Loan Agreement" shall have the meaning set forth in recitals hereof. 13.28 "1988 Loan Documents" shall have the meaning set forth in recitals hereof. 13.29 "1989 Loan Documents" shall have the meaning set forth in recitals hereof. 13.30 "1991 Loan Documents" shall have the meaning set forth in the recitals hereof. 13.31 "1993 Loan Documents" shall have the meaning set forth in the recitals hereof. 13.32 "Premises" shall have the meaning set forth in Section 8.14 hereof. 13.33 "Prime Commercial Rate" shall have the meaning set forth in Section 2.1 hereof. 13.34 "Prohibited Transaction" shall have the meaning set forth in Section 406 of ERISA. 13.35 "Reportable Event" shall have the meaning set forth in Section 4043 of ERISA. 13.36 "Revolving and Term Loan Fee" shall have the meaning set forth in Section 6.1 hereof. 13.37 "Revolving Loan" shall have the meaning set forth in Section 1.1 hereof. 13.38 "Revolving Loan Interest Payment Dates" shall have the meaning set forth in Section 2.1 hereof. 13.39 "Revolving Loan Termination Date" shall have the meaning set forth in Section 1.1 hereof. 13.40 "Security Agreement" shall mean those agreements among and between the Banks and Companies which further evidence and describe the security interests granted by Companies pursuant to the Agreement. 13.41 "Standby Letter of Credit Reimbursement Agreement" shall mean the Agreement among the Bank and the Companies with respect to the repayment of advances under any of the Letters of Credit. 13.42 "Subsidiaries" is defined in the preamble. 13.43 "Term Loan" shall have the meaning set forth in Section 1.2 hereof. 13.44 "Term Loan Interest Payment Dates" shall have the meaning set forth in Section 2.1 hereof. 13.45 "Term Loan Termination Date" shall have the meaning set forth in Section 1.2 hereof. 13.46 "Total Liabilities" shall mean with respect to the Companies (a) all indebtedness for borrowed money or for the deferred purchase price of property or services, (b) any other indebtedness which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations with respect to any letter of credit issued for the account of any of the Companies, (d) all obligations in respect of acceptances issued or created for the account of any of the Companies, (e) lease obligations which, in accordance with GAAP, should be capitalized, (f) all liabilities (including lease obligations) secured by any lien or encumbrance on any property owned by any of the Companies even though any such Company has not assumed or otherwise become liable for the payment thereof, (g) all obligations with respect to interest rate protection agreements (valued at the termination value thereof computed in accordance with a method approved by the International Swap Dealer's Association), and (i) all other obligations which, in accordance with GAAP, would be classified upon a balance sheet as liabilities (except capital stock and surplus earned). SECTION 14. MISCELLANEOUS. 14.1 Notices. (a) All communications under this Agreement or under the notes or reimbursement agreements executed pursuant hereto shall be in writing and shall be mailed by first class mail, postage prepaid, (1) if to the Bank, at the following address, or at such other address as may have been furnished in writing to the Companies by the Bank: The Huntington National Bank 41 South High Street P.O. Box 1558 HCO 431 Columbus, Ohio 43216 Attn: Raymond J. Feldman, Vice President (2) if to the Companies, at the following address, or at such other address as may have been furnished in writing to the Bank by the Companies: Intrenet, Inc. 400 TechneCenter Drive, Suite 200 Milford, OH 45150 Attn: Jonathan G. Usher, Vice President-Finance (b) any notice so addressed and mailed by registered or certified mail shall be deemed to be given when so mailed. 14.2 Reproduction of Documents. This Agreement and all documents relating hereto, including, without limitation, (a) consents, waivers and modifications which may hereafter be executed, (b) documents received by the Bank at the closing or otherwise, and (c) financial statements, certificates and other information previously or hereafter furnished to the Bank, may be reproduced by the Bank by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process and the Bank may destroy any original document so reproduced. The Companies agree and stipulate that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by the Bank in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. 14.3 Survival, Successors and Assigns. All warranties, representations, and covenants made by the Companies herein or on any certificate or other instrument delivered by them or on their behalf under this Agreement shall be considered to have been relied upon by the Bank and shall survive the closing of the Loan regardless of any investigation made by the Bank on their behalf. All statements in any such certificate or other instrument shall constitute warranties and representations by the Companies. This Agreement shall inure to the benefit of and be binding upon the heirs, successors and assigns of each of the parties. 14.4. Amendment and Waiver, Duplicate Originals, and References to the Agreement. This Agreement may be amended, and the observance of any term of this Agreement may be waived, with (and only with) the written consent of the Companies and the Bank; provided however that nothing herein shall change the Bank's sole discretion (as set forth elsewhere in this Agreement) to make advances, determinations, decisions or to take or refrain from taking other actions. No delay or failure or other course of conduct by the Bank in the exercise of any power or right shall operate as a waiver thereof; nor shall any single or partial exercise of the same preclude any other or further exercise thereof, or the exercise of any other power or right. Two or more duplicate originals of this Agreement may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. Any references to this Agreement that are contained in any documents executed in connection herewith shall be deemed to constitute a reference to this Agreement as the same may hereafter be amended, modified or restated. 14.5 Uniform Commercial Code and Generally Accepted Accounting Principles. Unless the context otherwise requires, all terms used herein which are defined in the Uniform Commercial Code as enacted in Ohio shall have the meaning stated therein, and all accounting terms shall be determined in accordance with generally accepted accounting principles, consistently applied. 14.6 Enforceability and Governing Law. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction, as to such jurisdiction, shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. No delay or omission on the part of the Bank in exercising any right shall operate as a waiver of such right or any other right. All of the Bank's rights and remedies, whether evidenced hereby or by any other agreement or instrument, shall be cumulative and may be exercised singularly or concurrently. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio. The Companies agree that any legal suit, action or proceeding arising out of or relating to this Agreement may be instituted in a state or federal court of appropriate subject matter jurisdiction located in the City of Columbus, Ohio; waives any objection which it may have now or hereafter to the venue of any suit, action or proceeding; and irrevocably submits to the jurisdiction of any such court in any such suit, action or proceeding. 14.7 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE: AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 14.8 Term of Agreement. The term of this Agreement shall commence with the date hereof and end on the date when, after written notice from either party to the other that no further loans are to be made hereunder, the Companies pay in full the Loan and all other fees and obligations of the Companies to the Bank set forth in this Agreement or in any other agreement in favor of the Bank, and the Bank has no further obligations of any type to the Companies. IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be executed and delivered as of the date and year first set forth above. BORROWER: INTRENET, INC. By: Its: SUBSIDIARIES: ADVANCED DISTRIBUTION SYSTEM, INC. By: Its: ECK MILLER TRANSPORTATION CORPORATION By: Its: MID-WESTERN TRANSPORT INC. By: Its: ROADRUNNER ENTERPRISES, INC. By: Its: ROADRUNNER TRUCKING, INC. By: Its: ROADRUNNER DISTRIBUTION SERVICES, INC. By: Its: ROADRUNNER INTERNATIONAL SERVICES, INC. By: Its: THE BANK: THE HUNTINGTON NATIONAL BANK By: Its: EXHIBIT 10.1 COLUMBUS/0131624.05 EX-10 3 AMENDMENT TO EMPLOYMENT AGREEMENT This Amendment to Employment Agreement ("Amendment") is made and dated as of December 29, 1995, by and between Intrenet, Inc., an Indiana corporation ("Employer"), and Jackson A. Baker ("Employee"). W I T N E S S E T H: WHEREAS, Employee is currently employed by Employer under an Employment Agreement dated as of December 31, 1992 (the "Prior Agreement") as Employer's President and Chief Executive Officer; WHEREAS, the parties now desire to amend the Prior Agreement on the terms contained herein. NOW, THEREFORE, in consideration of these premises and the mutual covenants and undertakings herein contained, the parties agree as follows: 1. Amendment. Section 3 of the Prior Agreement is amended to read as follows: "3. Term. The term of this Agreement (the "Term") shall continue after December 31, 1995 on a month-to-month basis until either party provides written notice to the other that the Term shall expire at the end of the month following the month in which the notice is sent. The expiration of the Term of this Agreement shall not constitute termination without cause as provided in Section 7b hereof." 2. Other Provisions. Except as expressly modified in this Amendment, the other provisions of the Prior Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and delivered as of the day and year first above set forth. INTRENET, INC. By /s/ Edwin H. Morgens Edwin H. Morgens, Chairman of the Board "Employer" /s/ Jackson A. Baker Jackson A. Baker "Employee" EXHIBIT 10.51 dcworrel\intrenet\jab-emp.95;12/15/95 EX-10 4 AMENDMENT TO EMPLOYMENT AGREEMENT This Amendment to Employment Agreement ("Amendment") is made and dated as of December 8, 1995, by and between Intrenet, Inc., an Indiana corporation ("Employer"), and Jonathan G. Usher ("Employee"). W I T N E S S E T H: WHEREAS, Employee is currently employed by Employer under an Employment Agreement dated as of March 1, 1994 (the "Prior Agreement") as Employer's Chief Financial Officer; WHEREAS, the parties now desire to amend the Prior Agreement on the terms contained herein. NOW, THEREFORE, in consideration of these premises and the mutual covenants and undertakings herein contained, the parties agree as follows: 1. Amendment. Section 3 of the Prior Agreement is amended to read as follows: "3. Term. This Agreement shall become effective on March 1, 1994 and continue through February 28, 1997." 2. Other Provisions. Except as expressly modified in this Amendment, the other provisions of the Prior Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and delivered as of the day and year first above set forth. INTRENET, INC. By /s/ Jackson A. Baker Jackson A. Baker, President And Chief Executive Officer "Employer" /s/ Jonathan G. Usher Jonathan G. Usher "Employee" EXHIBIT 10.61 dcworrel\intrenet\jgu-emp.95;12/08/95 EX-11 5
INTRENET, INC. STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS 1995 1994 1993 Weighted average shares outstanding during period 13,197,728 9,080,131 8,797,536 Assumed exercise of options and warrants 605,209 884,370 757,721 Shares assumed for primary earnings per share 13,802,937 9,964,501 9,555,257 Effect on number of shares of using yearend share price for fully diluted calculation 0 83,198 - Assumed conversion of 7% Convertible Subordinated Debentures 0 3,636,363 3,457,036 Shares assumed for fully diluted earnings per share 13,802,937 13,684,062 13,012,293 Earnings for the period: ($ in Thousands) Before extraordinary items $ (212) $ 5,165 $ 1,510 Extraordinary items 0 - 1,188 Net earnings $ (212) $ 5,165 $ 2,698 Earnings per common and common equivalent share: Primary: Before extraordinary items $ (0.02) $ 0.52 $ 0.16 Extraordinary gain, net - - 0.12 Net earnings $ (0.02) $ 0.52 $ 0.28 Fully diluted: Before extraordinary items $ (0.02) $ 0.40 $ 0.14 Extraordinary gain, net - - 0.09 Net earnings $ (0.02) $ 0.40 $ 0.23 EXHIBIT 11 26
EX-21 6 SUBSIDIARIES OF THE REGISTRANT Intrenet, Inc. December 31, 1995 Advanced Distribution System, Inc., a Florida Corporation Eck Miller Transportation Corporation, an Indiana corporation Mid-Western Transport, Inc., an Indiana corporation Roadrunner Enterprises, Inc., an Indiana corporation EXHIBIT 21 EX-23 7 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K, into the Company's previously filed Registration Statement File No. 33-69882. Indianapolis, Indiana, Arthur Andersen LLP March 8, 1996. EXHIBIT 23 EX-27 8
5 0000778161 INTRENET, INC. 1,000 U.S. DOLLARS YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1 171 0 21,544 (572) 0 26,716 42,500 (12,923) 67,638 27,339 14,981 0 0 16,245 6,773 67,638 0 214,973 0 211,912 82 0 2,886 93 305 (212) 0 0 0 (212) (.02) (.02)
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