-----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, L6E69ThMYrA9021nfevrWQSgOR7ZYqASQIAKxlZ3Ca92I/9vcjPTH7nYY7eDntdp KrLiYRlvC/Fjjkg0ggGtqA== 0000950137-98-003227.txt : 19980817 0000950137-98-003227.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950137-98-003227 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AASCHE TRANSPORTATION SERVICES INC CENTRAL INDEX KEY: 0000927809 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 363964954 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24576 FILM NUMBER: 98688370 BUSINESS ADDRESS: STREET 1: 10214 N MT VERNON RD CITY: SHANNON STATE: IL ZIP: 61078 BUSINESS PHONE: 8158642421 MAIL ADDRESS: STREET 1: 10214 N MT VERNON ROAD CITY: SHANNON STATE: IL ZIP: 61078 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to ___________________ COMMISSION FILE NUMBER 0-24576 AASCHE TRANSPORTATION SERVICES, INC. - ------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) DELAWARE 36-3964954 - ----------------------------------- ---------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 10214 NORTH MOUNT VERNON ROAD SHANNON, ILLINOIS 61078 (Address of Principal Executive Offices) 815-864-2421 (Registrant's telephone number, including area code) N/A - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date 4,626,130 SHARES OF PAR VALUE $.0001 COMMON STOCK - ------------------------------------------------------------------------------- 2 PART I: FINANCIAL INFORMATION Item 1. Financial Statements AASCHE TRANSPORTATION SERVICES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
June 30, December 31, 1998 1997 ----------- ------------- (Unaudited) ASSETS Current assets: Trade receivables, net $ 13,130 $ 5,449 Prepaid expenses and other current assets 5,437 2,691 -------- -------- Total current assets 18,567 8,140 Property and equipment, at cost 56,789 32,931 Less accumulated depreciation and amortization (13,956) (13,755) -------- -------- Net property and equipment 42,833 19,176 -------- -------- Excess of cost over net assets acquired, net 11,713 7,340 Debt issuance cost, net 1,048 -- Other assets 3,383 851 -------- -------- TOTAL ASSETS $ 77,544 $ 35,507 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Cash overdraft $ 448 $ 312 Accounts payable 2,572 788 Accrued liabilities 2,433 1,234 Guaranteed obligation of Employee Stock Ownership Plan 194 203 Line of credit -- 3,817 Current maturities of long-term debt with unrelated parties 3,805 2,752 Current maturities of long-term debt with related party 995 995 Current maturities of capital lease obligations with unrelated parties 3,322 2,696 Current maturities of capital lease obligations with related parties 437 669 -------- -------- Total current liabilities 14,206 13,466 Line of credit 9,632 -- Long-term debt with unrelated parties, less current maturities 17,415 3,745 Long-term debt with related party, less current maturities 1,053 1,550 Capital lease obligations with unrelated parties, less current maturities 6,374 2,787 Capital lease obligations with related parties, less current maturities 33 144 Minority interest 529 -- Subordinated debt 12,694 -- Deferred income taxes 1,006 1,006 Other 357 -- -------- -------- Total liabilities 63,299 22,698 Stockholders' equity: Common stock, $.0001 par value, 10,000,000 shares authorized, 4,626,130 and 4,539,735 shares issued and outstanding -- -- Additional paid-in capital 17,758 16,565 Guarantee of Employee Stock Ownership Plan obligation (194) (203) Accumulated deficit (3,319) (3,553) -------- -------- Total stockholders' equity 14,245 12,809 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 77,544 $ 35,507 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 2 3 AASCHE TRANSPORTATION SERVICES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share and share data) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, -------------------------- -------------------------- 1998 1997 1998 1997 ---- ---- ---- ---- NET REVENUES $ 29,129 $ 16,799 $ 51,299 $ 34,111 OPERATING EXPENSES: Salaries, wages and benefits 10,774 5,723 18,906 11,868 Fuel 3,516 2,724 6,416 5,823 Purchased transportation 6,338 2,789 10,558 5,614 Supplies and maintenance 3,315 1,710 5,166 3,198 Depreciation and amortization 1,852 1,245 3,509 2,641 Taxes and licenses 397 420 798 882 Insurance 697 482 1,375 993 Communications and utilities 327 202 622 424 Gain on disposition of equipment (22) (27) (48) (64) Other 167 497 580 1,012 ----------- ---------- ----------- ---------- Total operating expenses 27,361 15,765 47,882 32,391 ----------- ---------- ----------- ---------- OPERATING INCOME 1,768 1,034 3,417 1,720 OTHER (EXPENSES) INCOME: Interest expense (1,387) (586) (2,225) (1,173) Warrant accretion expense (214) -- (357) -- Debt issuance cost (76) -- (127) -- Amortization of debt discount (72) -- (120) -- Minority interest expense (17) -- (29) -- Other 127 12 184 16 ----------- ---------- ----------- ---------- INCOME BEFORE INCOME TAX PROVISION 129 460 743 563 INCOME TAX PROVISION (181) (299) (509) (366) ----------- ---------- ----------- ---------- NET (LOSS) INCOME $ (52) $ 161 $ 234 $ 197 =========== =========== =========== =========== NET (LOSS) INCOME PER COMMON SHARE: BASIC $ (0.01) $ 0.04 $ 0.05 $ 0.05 =========== =========== =========== =========== DILUTED $ (0.01) $ 0.04 $ 0.05 $ 0.05 =========== =========== =========== =========== Weighted average common shares outstanding 4,612,930 4,019,420 4,556,575 4,003,689 =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 3 4 AASCHE TRANSPORTATION SERVICES, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (in thousands, except share data) (Unaudited)
Guarantee of Employee Stock Ownership Common Stock Additional Plan Total $.0001 Par Value Paid-In ("ESOP") Accumulated Stockholders' Shares Amount Capital Obligation Deficit Equity ------ ------ ------- ---------- ------- ------ Balance at December 31, 1997 4,539,735 $ -- $ 16,565 $ (203) $ (3,553) $ 12,809 Exercise of stock options and warrants 86,395 -- 392 -- -- 392 Warrants granted in connection with STS acquisition -- -- 801 -- -- 801 Reduction in Guarantee of ESOP obligation -- -- -- 9 -- 9 Net income -- -- -- -- 234 234 --------- -------- --------- ---------- --------- --------- Balance at June 30, 1998 4,626,130 $ -- $ 17,758 $ (194) $ (3,319) $ 14,245 ========= ======== ========= ========== ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 4 5 AASCHE TRANSPORTATION SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
Six Months Ended June 30, ---------------------------- 1998 1997 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 234 $ 197 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 3,509 2,641 Gain on disposition of equipment (48) (64) Other 633 -- Changes in other current operating items: Trade receivables (7,681) 847 Prepaid expenses and other assets (2,413) (548) Accounts payable 1,784 (1,070) Accrued liabilities 1,199 (45) -------- -------- Net cash (used in) provided by operating activities (2,783) 1,958 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Property and equipment additions: Revenue equipment (3,283) (629) Building, office equipment and other (153) (62) Proceeds from the sale of equipment 5,927 4,785 Purchase of Specialty Transportation Services, Inc. (31,564) -- -------- -------- Net cash (used in) provided by investing activities (29,073) 4,094 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings of debt with unrelated parties 18,042 -- Borrowings of subordinated debt 13,375 -- Minority interest 500 -- Debt issuance cost (1,175) -- Net borrowings (repayments) on lines of credit 5,815 (825) Principal payments on long-term debt with unrelated parties (3,318) (2,943) Principal payments on long-term debt with related party (498) (786) Principal payments on capital leases with unrelated parties (1,046) (1,946) Principal payments on capial leases with related parties (367) (352) Issuance of common stock -- 1,306 Proceeds from exercise of options and warrants 392 -- -------- -------- Net cash provided by (used in) financing activities 31,720 (5,546) -------- -------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (136) 506 CASH AND CASH EQUIVALENTS (CASH OVERDRAFT): Beginning of period (312) (349) -------- -------- End of period $ (448) $ 157 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ 2,257 $ 1,163 ======== ======== ======== ======== Income taxes paid $ 313 $ -- ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 5 6 AASCHE TRANSPORTATION SERVICES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 1998 (in thousands, except per share and share data) (Unaudited) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although management believes these disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments necessary for fair presentation for the periods presented have been reflected and are of a normal recurring nature. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto for the three years ended December 31, 1997, 1996, and 1995, as filed with the Securities and Exchange Commission as part of the Company's Annual Report on Form 10-K. Results of operations for the interim periods are not necessarily indicative of the results to be expected for the year. NOTE 2 - ACQUISITION OF THE MUNICIPAL SOLID WASTE HAULING DIVISION OF JACK GRAY TRANSPORT, INC. On January 30, 1998, the Company purchased the net assets of the municipal solid waste transport division of Jack Gray Tranport, Inc. (the "Waste Transport Business") for $30,200 in cash. The Waste Transport Business is operated through Specialty Transportation Services, Inc. ("STS"), a newly formed subsidiary of the Company, headquartered in Portage, Indiana. The Company also issued 825,000 options to purchase the Company's common stock at prices ranging from $3.94 to $4.88 to key employees of STS. In conjunction with the acquisition, the Company recorded $4,575 in cost in excess of net assets acquired. The acquisition was accounted for as a purchase and accordingly, the 1998 consolidated statement of income includes the results of STS from the date of its acquisition. The acquisition by STS was financed with an $18,000 senior bank credit facility, $13,375 of subordinated debt, $2,125 of which was issued to related parties (primarily directors), and $500 of common stock in exchange for a 10% ownership interest in STS. In connection with the issuance of the subordinated debt, 947,500 warrants to acquire the Company's common stock at prices ranging from $3.49 to $4.63 per share were issued to various investors, including related parties (primarily directors), and warrants to acquire an additional 10% of STS common stock were issued. In addition, if the internal rate of return ("IRR") of an $8,000 subordinated debt investment is less than 24%, STS is required to issue warrants to purchase up to an additional 30% of STS common stock for a nominal cost. The Company has the right to call all, but not less than all, of these warrants or the underlying common stock, if previously converted, upon 30 days notice after all, but not less than all, of the $8,000 of subordinated debt issued has been paid in full by the Company for the greater of fair market value or a 24% IRR. The Company has the right to call the warrants, or underlying common stock, if previously converted, any time up to 5 years from the date of the acquisition. Commencing February 1, 2003, the warrants or underlying common stock, if previously converted, can be put to STS for cash, an increase in the subordinated debt, or shares in the Company's common stock at the greater of fair market value or a 24% IRR on its investment. The $500 common stock investment in STS can be put to STS after February 1, 2003 for the fair market value of the common stock. Upon certain events, both the subordinated debt warrants and the common stock in STS can be put to STS for cash, an increase in the subordinated debt, or shares in the Company's common stock at an earlier date. STS transports municipal solid and special waste under contracts ranging from five to twenty years with municipalities and large national waste service companies, including Waste Management, Browning-Ferris and Republic Waste Industries. Under the exclusive waste transfer contracts, STS transports solid and special waste 6 7 from transfer stations to landfill sites owned by either the municipality or a waste services company. Subsequent to the acquisition, STS has expanded its operations to include the transportation of bulk commodities for the scrap recycling, environmental, construction and manufacturing industries. The former executive vice president of Jack Gray Transport, Inc. who organized the waste transport division of Jack Gray Transport, Inc. in 1983, has entered into a five year employment agreement to serve as the President of STS. This former executive vice-president has served as a member of the Company's Board of Directors since July 1996 and a vice president of the Company since January 1998. STS operates as a stand-alone business unit separate from the Company's existing temperature-controlled operations. The following unaudited pro forma statements of operations data are based on certain amounts derived from the unaudited statements of operations of the Waste Transport Business for the six months ended June 30, 1998 and 1997, and assumes in each case, that the acquisition of the net assets of the Waste Transport Business occurred on January 1, 1997. The pro forma statements are not necessarily indicative of the results of operations which would have occurred had the acquisition taken place on January 1, 1997 or of future results of the consolidated operations of STS and the Company.
Six Months Ended June 30, ------------------------- 1998 1997 ---- ---- Net revenues $ 54,733 $ 51,154 Net income (loss) 232 (94) Net income (loss) per common share: Basic 0.05 (0.02) Diluted 0.05 (0.02)
NOTE 3 - COMMON SHARE DATA Basic income per share is computed using the weighted average number of shares outstanding. On a diluted basis, the weighted average number of shares outstanding is adjusted for the incremental shares attributed to outstanding options and warrants, when the effect of such items are dilutive. Effective December 15, 1997, the Company adopted SFAS No. 128, "Earnings per Share". Accordingly, all references in these financial statements to earnings per share, diluted earnings per share and related weighted average shares have been restated to reflect this adoption. Diluted weighted average shares outstanding for the three months ended June 30, 1998 and 1997 in connection with options and warrants amount to 852,175 shares and 78,139 shares, respectively. Diluted weighted average shares outstanding for the six months ended June 30, 1998 and 1997 in connection with options and warrants amount to 564,295 shares and 91,686 shares, respectively. NOTE 4 - RECENT ACCOUNTING STANDARDS In June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information," which changes the way public companies report information about operating segments. The Company will adopt SFAS No. 131 at the end of fiscal 1998. This statement, which is based on the management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report entity-wide disclosures about products and services, major customers and the major countries in which the Company holds assets and reports revenues. Management believes that the adoption of this new standard will not have a material impact on the Company's financial position or results of operation. 7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management's discussion and analysis of financial condition and results of operations contain forward-looking statements which involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors. On January 30, 1998, the Company purchased the net assets of the Waste Transport Business ("STS Acquisition") for $30,200 in cash. The Waste Transport Business is operated through STS, a newly formed subsidiary of the Company. The acquisition was accounted for as a purchase and accordingly, the 1998 consolidated statement of income includes the results of STS from the date of its acquisition. The results of operations discussed below are not necessarily comparable between periods because the results from operations for the six months ended June 30, 1997 do not include STS and the results from operations for the six months ended June 30, 1998 only include STS since the date of its acquisition. RESULTS OF OPERATIONS COMPARISON OF THE SIX MONTH PERIOD ENDED JUNE 30, 1998 WITH THE SIX MONTH PERIOD ENDED JUNE 30, 1997. Net revenues increased $17.2 million, or 50.4%, to $51.3 million in 1998, from $34.1 million in 1997, largely due to the STS Acquisition. During the first half of 1998, the Company increased its revenue producing power units by 353 units. Without giving effect to the additional net revenues contributed by the STS Acquisition, the Company's net revenues decreased by $2.8 million, or 8.2%, due to having less tractors in service. Total miles increased 9.1 million, or 29.9%, to 39.5 million in 1998 from 30.4 million in 1997, largely due to the STS Acquisition. Average miles per tractor decreased 10.1% to 54,839 miles in 1998 from 61,000 miles in 1997. Average revenue per tractor increased 2.7% to $71,179 in 1998 from $69,331 in 1997. The decrease in average miles per tractor and the increase in average revenue per tractor are attributable to the shorter length of haul in the Waste Transport Business. Without giving effect to the STS Acquisition, the Company's total miles decreased by 4.0 million, or 13.2%, due to having less tractors in service. Competition for drivers is intense within the trucking industry and the Company occasionally experiences difficulty in its temperature -controlled operations attracting and retaining qualified drivers and owner-operators which results in the temporary idling of revenue equipment. The Company's operating ratio (operating expenses divided by operating revenues) decreased 1.7%, to 93.3% in 1998 from 95.0% in 1997. The decrease in the operating ratio is largely due to a lower operating ratio in the Waste Transport Business. Without giving effect to the STS Acquisition, the Company's operating ratio decreased 0.2%, to 94.8% in 1998 from 95.0% in 1997. Total operating expenses increased $15.5 million, or 47.8%, to $47.9 million in 1998, compared to $32.4 million in 1997, largely due to the STS Acquisition. Without giving effect to the STS Acquisition, the Company's total operating expenses decreased by $2.7 million, or 8.3%, due primarily to having less tractors in service and decreased fuel prices. Salaries, wages and benefits increased $7.0 million, or 59.3%, to $18.9 million in 1998 compared to $11.9 million in 1997, due to the STS Acquisition and increases in overall compensation of drivers that were needed to enhance recruitment and retention. Without giving effect to the STS Acquisition, the Company's salaries, wages and benefits decreased by $0.1 million, or 0.4%, largely due to having less personnel to service the fewer tractors in service, which more than offset increases in overall compensation of drivers that were needed to enhance driver recruitment and retention. Fuel expenses increased $0.6 million, or 10.2%, to $6.4 million in 1998 compared to $5.8 million in 1997, largely due to the effect of the STS Acquisition, which more than offset decreased fuel prices. Without giving effect to the STS Acquisition, the Company's fuel expense decreased by $1.3 million or 22.8%, largely due to the decrease in the number of tractors in service and decreased fuel prices. Purchased transportation expense increased $4.9 million, or 88.1%, to $10.6 million in 1998 compared to $5.6 million in 1997, largely due to the STS Acquisition. Without giving effect to the STS Acquisition, the Company's purchased transportation expense increased by $0.4 million, or 6.8%, due to an increase in contractor operated units. 8 9 Supplies and maintenance expenses increased $2.0 million, or 61.5%, to $5.2 million in 1998 compared to $3.2 million in 1997, largely due to the STS Acquisition. Without giving effect to the STS Acquisition, the Company's supplies and maintenance expense decreased by $0.6 million, or 18.4%, due to a decrease in company-owned units in service. Depreciation and amortization expense increased $0.9 million, or 32.9%, to $3.5 million in 1998 compared to $2.6 million in 1997, largely due to the STS Acquisition. Without giving effect to the STS Acquisition, the Company's depreciation and amortization expense decreased by $0.4 million or 13.2%, due to a decrease in company-owned units in service. Insurance expense increased $0.4 million, or 38.5%, to $1.4 million in 1998 compared to $1.0 million in 1997, due to the STS Acquisition. Interest expense increased $1.1 million, or 89.7%, to $2.2 million in 1998 compared to $1.2 million in 1997, due to the STS Acquisition. Without giving effect to the STS Acquisition, the Company's interest expense decreased $0.5 million, due to lower levels of debt. Outstanding debt and capital lease obligations aggregated $56.0 million at June 30, 1998 compared with $23.2 million at June 30, 1997. Warrant accretion expense of $357 in 1998 represents the accretion of STS warrants. Debt issuance cost of $127 in 1998 represents the amortization of debt issuance costs in connection with the STS Acquisition. Amortization of debt discount of $120 in 1998 represents the amortization of debt discount in connection with the STS Acquisition. Minority interest expense of $29 in 1998 represents the increase in minority interest in connection with the STS Acquisition. The effective income tax rates of 68.5% and 65.0% in 1998 and 1997, respectively, are higher than the federal statutory rate due primarily to the non-deductibility of certain expenses. COMPARISON OF THE THREE MONTH PERIOD ENDED JUNE 30, 1998 WITH THE THREE MONTH PERIOD ENDED JUNE 30, 1997. Net revenues increased $12.3 million, or 73.4%, to $29.1 million in 1998, from $16.8 million in 1997, largely due to the STS Acquisition. During the first half of 1998, the Company increased its revenue producing power units by 43 units. Without giving effect to the additional net revenues contributed by the STS Acquisition, the Company's net revenues decreased by $0.8 million, or 4.7%, due to having less tractors in service. Total miles increased 7.1 million, or 47.7%, to 22.0 million in 1998 from 14.9 million in 1997, largely due to the STS Acquisition. Average miles per tractor decreased 7.1% to 28,069 miles in 1998 from 30,198 miles in 1997. Average revenue per tractor increased 8.7% to $37,121 in 1998 from $34,144 in 1997. The decrease in average miles per tractor and the increase in average revenue per tractor are attributable to the shorter length of haul in the Waste Transport Business. Without giving effect to the STS Acquisition, the Company's total miles decreased by 1.4 million, or 9.4%, due to having less tractors in service. Competition for drivers is intense within the trucking industry and the Company occasionally experiences difficulty in its temperature-controlled operations attracting and retaining qualified drivers and owner-operators which results in the temporary idling of revenue equipment. The Company's operating ratio (operating expenses divided by operating revenues) increased 0.1%, to 93.9% in 1998 from 93.8% in 1997. Without giving effect to the STS Acquisition, the Company's operating ratio increased 0.7%, to 94.5% in 1998 from 93.8% in 1997. Total operating expenses increased $11.6 million, or 73.6%, to $27.4 million in 1998, compared to $15.8 million in 1997, largely due to the STS Acquisition. Without giving effect to the STS Acquisition, the Company's total operating expenses decreased by $0.6 million, or 4.3%, due primarily to having less tractors in service and decreased fuel prices. Salaries, wages and benefits increased $5.1 million, or 88.3%, to $10.8 million in 1998 compared to $5.7 million in 1997, due to the STS Acquisition and increases in overall compensation of drivers that were needed to enhance recruitment and retention. Without giving effect to the STS Acquisition, the Company's salaries, wages and benefits 9 10 increased by $0.4 million, or 7.2%, largely due to increases in overall compensation of drivers that were needed to enhance driver recruitment and retention, which more than offset having less personnel to service the fewer tractors in service. Fuel expenses increased $0.8 million, or 29.1%, to $3.5 million in 1998 compared to $2.7 million in 1997, largely due to the effect of the STS Acquisition, which more than offset decreased fuel prices. Without giving effect to the STS Acquisition, the Company's fuel expense decreased by $0.4 million or 15.7%, largely due to the decrease in the number of tractors in service and decreased fuel prices. Purchased transportation expense increased $3.5 million, or 127.2%, to $6.3 million in 1998 compared to $2.8 million in 1997, largely due to the STS Acquisition. Without giving effect to the STS Acquisition, the Company's purchased transportation expense increased by $0.3 million, or 10.9%, due to an increase in contractor operated units. Supplies and maintenance expenses increased $1.6 million, or 93.9%, to $3.3 million in 1998 compared to $1.7 million in 1997, largely due to the STS Acquisition. Without giving effect to the STS Acquisition, the Company's supplies and maintenance expense decreased by $0.3 million, or 19.1%, due to a decrease in company-owned units in service. Depreciation and amortization expense increased $0.6 million, or 48.8%, to $1.9 million in 1998 compared to $1.2 million in 1997, largely due to the STS Acquisition. Without giving effect to the STS Acquisition, the Company's depreciation and amortization expense decreased by $0.1 million or 9.4%, due to a decrease in company-owned units in service. Insurance expense increased $0.2 million, or 44.6%, to $0.7 million in 1998 compared to $0.5 million in 1997, due to the STS Acquisition. Interest expense increased $0.8 million, or 136.7%, to $1.4 million in 1998 compared to $0.6 million in 1997, due to the STS Acquisition. Without giving effect to the STS Acquisition, the Company's interest expense decreased $0.2 million, due to lower levels of debt. Outstanding debt and capital lease obligations aggregated $56.0 million at June 30, 1998 compared with $23.2 million at June 30, 1997. Warrant accretion expense of $214 in 1998 represents the accretion of STS warrants. Debt issuance cost of $76 in 1998 represents the amortization of debt issuance costs in connection with the STS Acquisition. Amortization of debt discount of $72 in 1998 represents the amortization of debt discount in connection with the STS Acquisition. Minority interest expense of $17 in 1998 represents the increase in minority interest in connection with the STS Acquisition. The effective income tax rates of 140.3% and 65.0% in 1998 and 1997, respectively, are higher than the federal statutory rate due primarily to the non-deductibility of certain expenses. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1998, the Company had net working capital of $4.4 million. The Company historically has funded its working capital requirements through a combination of operating profits, short turnover in trade receivables, effective cash management practices and borrowing under its revolving bank line of credit. The Company has two revolving bank lines of credit with a total borrowing limit of $12.0 million based on a percentage of eligible trade receivables, $9.6 million of which was borrowed against these lines of credit at June 30, 1998, and approximately $1.1 million was available. In June 1998, the Company entered into a new bank line of credit that extended the due date to April 30, 2000. The Company's growth in prior years and the significant investment in its modern fleet of tractors and trailers have been financed substantially through long-term debt and capital lease obligations collateralized by the equipment. The Company's outstanding debt and capital lease obligations, including current maturities, aggregated 10 11 $56.0 million and $23.2 million at June 30, 1998 and 1997, respectively. The debt to equity ratio (calculated excluding payables and other liabilities) was 3.93:1 at June 30, 1998 and 1.90:1 at June 30, 1997. During 1998, the Company increased its owned fleet size by 353 tractors and 494 trailers. The Company believes that available cash, cash flow from future operations, and borrowings available under its lines of credit will be sufficient to meet its current working capital needs. As the Company continues to facilitate its planned future growth in 1998, the Company's capital needs may require additional borrowings or an equity infusion. FORWARD LOOKING STATEMENTS This Form 10-Q contains forward-looking statements relating to future financial results or business expectations. Business plans may change as circumstances warrant. Actual results may differ materially as a result of factors over which the company has no control. Such factors include, but are not limited to: general economic conditions, availability of drivers, labor costs, interest rates, competition and governmental regulations. These risk factors and additional information are included in the Company's reports on file with the Securities and Exchange Commission. SEASONALITY The Company's results of operations show a seasonal pattern because certain of the frozen food companies serviced by the Company generally reduce shipments during the summer season. During the winter months, the Company has at times experienced delays in meeting its pickup and delivery schedules as a result of severe weather conditions. In addition, the Company's operating expenses have historically been higher in the winter months due to decreased fuel efficiency and increased maintenance costs in colder weather. Accordingly, such factors cause fluctuations in results of operations. The Foliage Division of Asche Transfer experiences seasonal fluctuations in volume during certain periods of the year. YEAR 2000 The Company has determined that it will need to modify or replace significant portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and beyond. The Company also has initiated discussions with its significant suppliers and large customers to ensure that those parties have appropriate plans to remediate Year 2000 issues where their systems interface with the Company's systems or otherwise impact its operations. The Company is addressing the extent to which its operations are vulnerable should those organizations fail to remediate properly their computer systems. The Company's comprehensive Year 2000 initiative is being managed by a team of internal staff. The team's activities are designed to ensure that there is no material adverse effect on the Company's core business operations and that transactions with customers and suppliers are fully supported. The Company is well under way with these efforts, which are scheduled to be completed in early 1999. While the Company believes its planning efforts are adequate to address its Year 2000 concerns, there can be no guarantee that the systems of other companies on which the Company's systems and operations rely will be converted on a timely basis and will not have a material adverse effect on the Company. The cost of the Year 2000 initiative is not expected to be material to the Company's results of operations or financial position. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK SENSITIVE INSTRUMENTS The Company currently does not invest excess funds in derivative financial instruments or other market rate sensitive instruments for the purpose of managing its foreign currency exchange rate risk or for any other purpose. 11 12 PART II AASCHE TRANSPORTATION SERVICES, INC. (A DELAWARE CORPORATION) ITEM 1. LEGAL PROCEEDINGS. Not applicable. ITEM 2. CHANGES IN SECURITIES. (a) Not applicable. (b) Not applicable. (c) Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. (a)(i) Date of Meeting. On May 13, 1998, the Company held its Annual Meeting of Stockholders. (b)(i) Description of each matter voted on and number of votes cast. The following actions were taken at the annual meeting: 1. To elect Larry L. Asche as a Class I director. FOR AGAINST ABSTAIN 3,497,092 -- 44,292 2. To elect Leon M. Monachos as a Class I director. FOR AGAINST ABSTAIN 3,495,892 -- 45,492 3. To elect Gary I. Goldberg as a Class I director. FOR AGAINST ABSTAIN 3,495,892 -- 45,492 4. To elect Dennis D. Wilson as a Class I director. FOR AGAINST ABSTAIN 3,497,092 -- 44,292 5. To adopt an Amendment to the Company's Stock Option Plan. FOR AGAINST ABSTAIN 3,381,946 128,935 30,503 ITEM 5. OTHER INFORMATION. Not applicable. 12 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 10.1 Loan and Security Agreement between Asche Transfer, Inc., AG Carriers, Inc. and American National Bank and Trust Company of Chicago dated June 23, 1998 10.2 Secured Guaranty by Aasche Transportation Services, Inc. in favor of American National Bank and Trust Company of Chicago dated June 23, 1998. 10.3 ESOP Loan and Security Agreement between Aasche Transportation Services, Inc. Employees' Stock Ownership Trust and American National Bank and Trust Company of Chicago dated June 23, 1998. 10.4 Continuing Unconditional Guaranty by Aasche Transportation Services, Inc. in favor of American National Bank and Trust Company of Chicago dated June 23, 1998. 10.5 Continuing Unconditional Guaranty by Asche Transfer, Inc. in favor of American National Bank and Trust Company of Chicago dated June 23, 1998. 10.6 Continuing Unconditional Guaranty by AG Carriers, Inc. in favor of American National Bank and Trust Company of Chicago dated June 23,1998. 10.7 First Amendment to the Stock Option Plan. 27.0 Financial Data Schedule. (b) Reports on Form 8-K No reports on Form 8-K were filed during the calender quarter ended June 30, 1998. 13 14 SIGNATURES Pursuant to the requirements 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. Aasche Transportation Services, Inc. Date August 13, 1998 BY: s/Leon M. Monachos ----------------------------------------- Leon M. Monachos, Chief Financial Officer Date August 13, 1998 BY: s/Larry L. Asche ------------------------------------------ Larry L. Asche, Chairman and Chief Executive Officer 14 EX-10.1 2 LOAN & SECURITY AGREEMENT 1 EXHIBIT 10.1 ================================================================================ LOAN AND SECURITY AGREEMENT BY AND AMONG ASCHE TRANSFER, INC., AN ILLINOIS CORPORATION AND AG CARRIERS, INC., A FLORIDA CORPORATION AS BORROWERS AND AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, AS BANK DATED AS OF JUNE 23, 1998 ================================================================================ 2 LOAN AND SECURITY AGREEMENT THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is made as of the 23rd day of June, 1998 by and among ASCHE TRANSFER, INC., an Illinois corporation having its principal place of business located at 10124 North Mt. Vernon Road, Shannon, Illinois 61078 and AG CARRIERS, INC., a Florida corporation having its principal place of business located at 13349 Southridge Industrial Drive, Tavares, Florida 32778 (individually and collectively "Borrower"), and AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a national banking association ("Bank"), having its principal place of business located at 120 South LaSalle Street, Chicago, Illinois 60603. W I T N E S S E T H: WHEREAS, Borrower desires to borrow funds to provide the working capital necessary for their operations. WHEREAS, on the terms and subject to the conditions contained in this Agreement, Bank is willing to provide such financing and financial accommodations to Borrower on a secured basis; and WHEREAS, Bank and Borrower are desirous of fully setting forth their rights and obligations with respect to the loan to, and borrowing by, Borrower. NOW, THEREFORE, in consideration of the premises, the mutual covenants and agreements set forth herein, Borrower agrees to borrow from Bank, and Bank agrees to lend to Borrower, subject to and upon the following terms and conditions: 1. DEFINITIONS AND TERMS 1.1 Certain Definitions. The following words, terms and/or phrases shall have the meanings set forth thereafter and such meanings shall be applicable to the singular and plural form thereof, giving effect to the numerical difference. "Account Debtor" means any Person who is or who may become obligated to the Borrower under, with respect to, or on account of any Account. "Accounts" means all accounts, contract rights, chattel paper, instruments and documents, whether now owned or to be acquired by the Borrower, whether or not constituting Eligible Accounts Receivable. "Accounts Borrowing Base" means 85% of the Eligible Accounts Receivable from time to time (which percentage may be revised upon Bank's field exam of Borrower's books and records). 3 "Accounting Changes" shall have the meaning assigned to such term in Paragraph 1.2 hereof. "Affiliate" means a corporation, partnership, limited liability company, joint venture, association, business trust or similar entity (a) which controls, is controlled by or is under common control with, directly or indirectly, Borrower; or (b) a majority of the members of the Directing Body of which are members of the Directing Body of Borrower. For the purposes of this definition, control means with respect to: (a) a corporation having stock, the ownership, directly or indirectly, of more than 50% of the securities (as defined in Section 2(1) of the Securities Act of 1933, as amended) of any class or classes the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the directors of such corporation; (b) a not-for-profit corporation not having stock, having the power to elect or appoint, directly or indirectly, a majority of the members of the Directing Body of such corporation; or (c) any other entity, the power to direct the management of such entity through the ownership of at least a majority of its voting securities or the right to designate or elect at least a majority of the members of its Directing Body, by contract or otherwise. For the purposes of this definition, "Directing Body" means with respect to: (a) a corporation having stock, such corporation's board of directors and the owners, directly or indirectly, of more than 50% of the securities (as defined in Section 2(1) of the Securities Act of 1933, as amended) of any class or classes the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporation's directors (both of which groups shall be considered a Directing Body); (b) a not-for-profit corporation not having stock, such corporation's members if the members have complete discretion to elect the corporation's directors, or the corporation's directors if the corporation's members do not have such discretion; and (c) any other entity, its governing board or body. For the purposes of this definition, all references to directors and members shall be deemed to include all entities performing the function of directors or members however denominated. "A/R Accrual" means an Account which is otherwise an Eligible Accounts Receivable where the invoice has not yet been forwarded to the Account Debtor (but in any event is forwarded to the Account Debtor within ten (10) business days of the date the service is rendered). "Authorized Officer" means Larry Asche, Leon Monachos, Diane Asche, Kevin Clark or Gary Goldberg (any one of them) or his/her successor. "Bankruptcy Code" means Title 11 of the United States Code, as amended. "Borrower's Liabilities" means the aggregate of all obligations and liabilities of Borrower in the aggregate to Bank (including, without limitation, all Debts, claims and indebtedness) whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from time to time hereafter owing, due or payable, however evidenced, created, incurred, acquired or 4 owing and however arising, whether under this Agreement, the other Loan Documents, or by other document or instrument, or oral agreement or operation of law or otherwise. "Business Day" means any day on which Bank is open for the transaction of commercial banking business in Chicago, Illinois other than a Saturday or Sunday. "Capital Expenditures" means the cost of acquiring any fixed assets, or any improvements, replacements, substitutions, accessions or additions thereto or therefor which have a useful life of more than one year, including without limitation, the cost of direct or indirect acquisitions of such assets by way of purchase, capital lease or otherwise. "Charges" means, if applicable at any time, all national, federal, state, county, city, municipal and/or other governmental (or any instrumentality, division, agency, body or department thereof, including, without limitation, the PBGC) taxes, levies, assessments, charges, liens, claims or encumbrances upon and/or relating to Borrower's Liabilities, Borrower's business, Borrower's ownership and/or use of the Collateral, income and/or gross receipts. "Closing Date" means June 25, 1998. "Code" means the Internal Revenue Code of 1986, as amended. "Collateral" shall have the meaning assigned to such term in Paragraph 6.1 hereof. "Consolidated Entities" means Aasche Transportation Services, Inc. and all of its wholly owned and partially owned subsidiaries, Asche Transfer, Inc., AG Carriers, Inc. and Specialty Transportation Services, Inc. "Credit Termination Date" means the earliest to occur of (i) the Maturity Date or (ii) the Early Termination Date applicable hereto. "Debt" means all of a Person's liabilities, obligations and indebtedness to any Person of any and every kind and nature, whether primary, secondary, direct, indirect, absolute, contingent, fixed or otherwise, heretofore, now and/or from time to time hereafter owing, due or payable, however evidenced, created, incurred, acquired or owing and however arising, whether under written or oral agreement, by operation of law or otherwise. Without in any way limiting the generality of the foregoing, Debt specifically includes (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations to pay the deferred purchase price of property or services, (iv) obligations as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, (v) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above, and (vi) liabilities in respect of unfunded vested benefits under Plans and Multi-employer Plans covered by Title IV of ERISA. 3 5 "Default Rate" shall have the meaning assigned to such term in Paragraph 3.l(c) hereof. "Early Termination Date" means the date, pursuant to Paragraph 8.3, upon which, whether by notice or by right hereunder, Bank's obligation to extend credit hereunder is terminated. "Eligible Accounts" shall mean those Accounts of Borrower that meet the following requirements: (a) The individual Account is not evidenced by chattel paper or an instrument of any kind; (b) The Account Debtor obligated on such individual Account is not insolvent or the subject of any bankruptcy or insolvency proceeding of any kind and the Lender has not advised Borrower prior to the date of creation of the Account, that the creditworthiness of the Account Debtor is not acceptable to Bank; (c) The individual Account is not owing from an Account Debtor located outside the United States; (d) The individual Account is a valid, legally enforceable obligation of the relevant Account Debtor and such Account Debtor has not asserted any offset, counterclaim or defense denying liability thereunder; provided, however, that if such offset, counterclaim or defense has been asserted, such Account shall be ineligible only to the extent of such asserted offset, counterclaim or defense; (e) The individual Account is subject to and covered by the Lender's perfected security interest and is not subject to any other lien, claim, encumbrance or security interest; (f) The individual Account is evidenced by an invoice or other documentation in form acceptable to the Lender to constitute an A/R Accrual, is dated not later than ten (10) business days after performance of the service and has a due date not later than thirty (30) days from the date of the invoice and the invoice has been sent to the Account Debtor or the Account is separately identified to Bank as an A/R Accrual; (g) The individual Account has not remained unpaid for a period exceeding ninety (90) days after the related invoice date; (h) If more than twenty-five percent (25%) of all Accounts owing by a particular Account Debtor have remain unpaid for a period exceeding ninety (90) days after the related invoice date, no Accounts owing by such Account Debtor are Eligible Accounts; 4 6 (i) The individual Account is not owing from an employee, officer, agent, director or stockholder of the Borrower or from any Affiliate; (j) The Account is not owing from the United States of America or any department, agency or instrumentality thereof, unless the Borrower assigned its right to payment of such Account to the Lender in accordance with the Assignment of Claims Act of 1940, as amended (41 U.S.C. Section 15 and 31 U.S.C. Section 3727), or any similar law or regulation; and (k) Accounts owed by a single Account Debtor do not exceed twenty percent (20%) of the total Eligible Accounts Receivable and Accounts owed by any three Account Debtors do not exceed thirty five percent (35%) of the total Eligible Accounts Receivable, unless expressly approved by Bank. "Equipment" shall have the meaning ascribed to it in the Uniform Commercial Code, as adopted in the State of Illinois. "ERISA" means the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time and, unless the context otherwise requires, the regulations promulgated thereunder and any successor statute. "ERISA Affiliate" means each trade or business (whether or not incorporated) which together with Borrower or an Affiliate would be deemed to be a "single employer"within the meaning of Section 4001(b) of ERISA or, where applicable, would be treated as a "single employer"under Section 412(c)(11) of the Code. "ERISA Termination Event" means (i) a "Reportable Event"described in Section 4043 of ERISA (other than a "Reportable Event"not subject to the provision for 30-day notice to the PBGC under such regulations), (ii) the withdrawal of a Borrower or any Affiliate from a Plan during a plan year in which it was a "substantial employer,"as defined in Section 4001(a) of ERISA, including a cessation of operations that is treated as a withdrawal by a "substantial employer"under Section 4062(e) of ERISA, (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, (iv) the institution of proceedings to terminate a Plan by the PBGC, (v) any other event or condition which in the reasonable judgment of Borrower is likely to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to or any ERISA administrator for, any Plan, or (vi) the partial or complete withdrawal of Borrower or any ERISA Affiliate from a Multi-employer Plan. "Event of Default" shall have the meaning assigned to such term in Paragraph 8.1 hereof. "Excess Interest" shall have the meaning assigned to such term in Paragraph 3.3 hereof. 5 7 "Facilities" means any and all real property (including, without limitation, all buildings or other improvements located thereon) now, hereafter or heretofore, owned, leased, operated or used by Borrower or any of its successors and assigns. "Financials" means those financial statements of Borrower heretofore or concurrently herewith delivered by or on behalf of Borrower to Bank. "Fiscal Year" means the fiscal year of each of the entities comprising the Guarantor Group and Borrower, which in each case shall end on December 31 of each year. "GAAP" shall mean generally accepted accounting principles as in effect from time to time. "Governmental Authorization" means any permit, license, authorization, plan, directive, consent order or consent decree of or from any federal, state or local governmental authority, agency or court having jurisdiction over Borrower or any Facility. "Guaranty" means the Guaranty from Aasche Transportation Services, Inc., a Delaware corporation, in favor of Bank and dated of even date herewith. "Guarantor's Collateral" shall have the meaning set forth in the Guaranty. "Guarantor Group" means Aasche Transportation Services, Inc., Asche Transfer, Inc. and AG Carriers, Inc. "Liabilities" means, as of any date, the aggregate amount of all liabilities of Borrower, in accordance with GAAP. "Lien" means, with respect to the Collateral or any asset of Borrower or Guarantor as the case may be, any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code in effect in any jurisdiction). "Loan" means the Revolving Loan made under the Revolving Credit Commitment, unless the context in which such term is used shall otherwise require. "Loan Documents" means this Loan Agreement and all other agreements, instruments and documents, including, without limitation, guaranties, mortgages, deeds of trust, pledges, powers of attorney, consents, assignments, contracts, notices, security agreements, leases, financing statements and all other written matter heretofore, now and/or from time to time 6 8 hereafter executed by, on behalf of or for the benefit of Borrower and delivered to Bank including, without limitation, the Revolving Note, and the Guaranty. "Maturity Date" means April 30, 2000. "Maximum Rate" shall have the meaning assigned to such term in Paragraph 3.3 hereof. "Multi-employer Plan" means a plan defined as such in Section 4001(a)(3) of ERISA to which contributions have been made by Borrower or an ERISA Affiliate. "Obligor" means any Person who is and/or may become obligated to Borrower under or on account of Accounts. "Organizational Documents" means (a) for a limited liability company, its Articles of Organization and Operating Agreement, (b) for a corporation, its Articles of Incorporation and By-Laws, (c)for a limited partnership, its Limited Partnership Agreement and Certificate of Limited Partnership, (d) for a general partnership, its Partnership Agreement, and (e) for any other type of entity, those documents which are customarily used or required under applicable state or federal law for the due organization of such entity. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "Permitted Debt" shall have the meaning assigned to such term in Paragraph 7.3(d) hereof. "Permitted Liens" shall have the meaning assigned to such term in Paragraph 7.3(a) hereof. "Person" means and includes an individual, a partnership, a joint venture, a corporation (whether or not for profit), a limited liability company, a trust, an unincorporated organization, a government or any department or agency thereof or any other entity or organization. "Plan" means, at any time, any single-employer plan, as defined in Section 4001(a) and subject to Title IV of ERISA, which is maintained, or at any time during the five calendar years preceding the time in question was maintained, for employees of Borrower or an Affiliate. "Prime Rate" means the rate of interest as defined in the Revolving Note. "Revolving Credit Commitment" shall have the meaning ascribed to such term in Paragraph 2.1. 7 9 "Revolving Loan" means the revolving loan made pursuant to Paragraph 2.l, the proceeds of which shall be utilized as working capital for the Borrower. "Revolving Note" means that certain Secured Revolving Note of even date herewith made payable by Borrower in favor of Bank in the original principal amount of $6,000,000.00 or so much thereof as may have been advanced from time to time as described in Paragraph 2.2 and any amendment, modification replacement or substitution thereof. 1.2 Certain UCC and Accounting Terms. Except as otherwise defined in this Agreement or the other Loan Documents, all words, terms and/or phrases used herein and therein shall be defined by the applicable definition therefor (if any) in the Uniform Commercial Code as adopted by the State of Illinois. Notwithstanding the foregoing, any accounting terms used in this Agreement which are not specifically defined herein shall have the meaning customarily given to them in accordance with GAAP. All financial computations hereunder shall be computed, unless otherwise specifically provided herein, in accordance with GAAP, consistently applied. No Accounting Changes (as defined below) shall affect financial covenants, standards or terms in this Agreement; provided, that Borrower shall prepare footnotes to the financial statements required to be delivered hereunder that show the differences between the financial statements delivered (which reflect such Accounting Changes) and the basis for calculating financial covenant compliance (without reflecting such Accounting Changes). "Accounting Changes" means changes in accounting principles required by GAAP and implemented by Borrower. 2. LOAN: BANK'S COMMITMENT; AND NOTE EVIDENCING LOAN 2.1 Revolving Credit Commitment/Limited Permitted Over-Advance. On the terms and subject to the conditions set forth in this Agreement, Bank agrees to make revolving credit available to the Borrower on the Closing Date, in the form of extensions of credit and/or direct loans, in the aggregate original principal amount of the lesser of: (i) SIX MILLION AND 00/100 DOLLARS ($6,000,000.00) or (ii) the Borrower's Accounts Borrowing Base (the "Revolving Credit Commitment"). Extensions of credit shall require payment of fees, execution of appropriate applications and other documentation as is customarily required by Bank. Such extensions shall count dollar for dollar against the foregoing Revolving Credit Commitment in the same manner as though a direct loan had been made. Notwithstanding the foregoing, provided there is no default under the terms of this Agreement (whether matured or unmatured), Bank shall allow Borrower to have an aggregate credit extension/loan balance up to $250,000.00 in excess of the Borrower's Accounts Borrowing Base (but in no event in excess of $6,000,000.00) from January 1 through April 30 (the "Permitted Over-Advance"). 2.2 Revolving Note. The Revolving Loan made by Bank under the Revolving Credit Commitment shall be evidenced by a secured promissory note (as the same may be amended, modified or supplemented from time to time, and together with any renewal thereof or exchanges or substitutions thereof, the "Revolving Note"), dated the date hereof (or such other 8 10 date prior thereto as shall be satisfactory to Bank), payable to the order of Bank in a principal amount equal to the Revolving Credit Commitment, substantially in the form set forth in Exhibit 2.2 hereto, with appropriate insertions. The unpaid principal amount of the Revolving Loan shall bear interest and be due and payable as provided in this Agreement and the Revolving Note. Payments to be made by Borrower under the Revolving Note shall be made at the times, in the amounts and upon the terms set forth herein and therein. 2.3 Recordation. The date, interest rate and amount of the Revolving Loan made by Bank and the interest rate, date and amount of each repayment of principal received by Bank shall be recorded by Bank in its records or, at its option, on the schedule attached to the Revolving Note. The aggregate unpaid principal amount so recorded shall be prima facie evidence of the principal amount owing and unpaid on the Revolving Note. The failure to so record any such amount or any error in so recording any such amount shall not limit or otherwise affect the obligations of Borrower hereunder or under the Revolving Note to repay the principal amount thereof together with all interest accrued thereon. 3. LOAN: INTEREST 3.1 Interest Rates; Applicable Borrowing Amounts. (a) Except as otherwise noted in Paragraph 3.1(c) below, Borrower's Liabilities arising under Article 2 hereof in respect of the Revolving Loan shall bear interest at the rate equal to Lender's Prime Rate as the same changes from time to time and if Borrower is entitled to and so selects for a portion of Borrower's Liabilities, the LIBOR Based Rate (as defined in the Revolving Note). (b) During the period commencing on the Closing Date, accrued interest only on the outstanding principal amount of the Revolving Loan shall be payable monthly in arrears on the first Business Day of each calendar month commencing with July 1, 1998, with a single final payment of the outstanding balance of principal and interest due on the Credit Termination Date. After the Credit Termination Date, accrued interest on the Revolving Loan shall be payable on demand. Prior to the Maturity Date (and prior to successive anniversary dates if renewed), Bank shall review and consider extending the Maturity Date. (c) If any payment of principal on the Revolving Loan is not made when due, the Revolving Loan shall bear interest from the date such payment was due until paid in full, payable on demand, at a rate per annum equal to the Prime Rate plus 3 % (the "Default Rate"). 3.2 Computation of Interest. Interest on the Revolving Loan shall be computed for the actual number of days elapsed on the basis of a 360-day year. In computing interest on the Revolving Loan, (i) the date of funding shall be included and (ii) the date of payment shall be excluded. 9 11 3.3 Interest Laws. Notwithstanding any provision to the contrary contained in this Agreement or the other Loan Documents, Borrower shall not be required to pay, and Bank shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("Excess Interest"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Agreement or in any of the other Loan Documents, then in such event: (a) the provisions of this Paragraph shall govern and control; (b) Borrower shall not be obligated to pay any Excess Interest; (c) any Excess Interest that Bank may have received hereunder shall be, at Bank's option, (i) applied as a credit against the outstanding principal balance of Borrower's Liabilities or accrued and unpaid interest (not to exceed the maximum amount permitted by law), (ii) refunded to the payor thereof, or (iii) any combination of the foregoing; (d) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "Maximum Rate"), and this Agreement and the other Loan Documents shall be deemed to have been and shall be reformed and modified to reflect such reduction; and (e) Borrower shall not have any action against Bank for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on Borrower' s Liabilities is calculated at the Maximum Rate rather than the applicable rate under this Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on Borrower's Liabilities shall remain at the Maximum Rate until Bank shall have received the amount of interest which Bank would have received during such period on Borrower's Liabilities had the rate of interest not been limited to the Maximum Rate during such period. 4. LOAN: GENERAL TERMS 4.1 Payments to Bank. That portion of Borrower's Liabilities consisting of: (a) principal payable on account of the Revolving Loan made by Bank to Borrower pursuant to this Agreement shall be payable by Borrower to Bank as provided herein and in the Revolving Note; (b) costs, fees and expenses payable pursuant to this Agreement shall be payable by Borrower to Bank, on demand; (c) interest payable pursuant to this Agreement shall be payable by Borrower to Bank as provided in Paragraph 3.1; and (d) the balance of Borrower's Liabilities, if any, shall be payable by Borrower to Bank as and when provided in this Agreement or the other Loan Documents. Except as provided in Paragraph 4.2 below, all of such payments to Bank shall be payable at the principal place of business of the Bank specified at the beginning of this Agreement or at such other place or places as Bank may designate in writing to an Authorized Officer. 4.2 Automatic Debit. In order to cause timely payment to be made to Bank of all Borrower's Liabilities as and when due, Borrower hereby authorizes and directs Bank, at Bank's option on or after 12:00 noon on the date due, to debit the amount of Borrower's Liabilities to any ordinary deposit account of Borrower. Bank shall attempt to notify Borrower 10 12 before any such debit is made; provided, however, that any failure to provide such notification shall in no way restrict or invalidate Bank's right to debit Borrower's accounts. 4.3 Application of Payment. An Authorized Officer shall, at the time of making each payment under this Agreement or the Revolving Note (whether by account debit or otherwise), specify to Bank the Revolving Loan or other amounts payable by Borrower hereunder to which such payment is to be applied (and in the event that it fails to so specify, or if an Event of Default has occurred and is continuing, Bank may apply such payment in such manner as it may determine in its sole discretion to be appropriate). 4.4 Offset. Borrower agrees that, in addition to (and without limitation of) any right of set-off, bankers' lien or counterclaim Bank may otherwise have, Bank shall be entitled, at its option, to offset balances held by it for account of Borrower at any of its offices, in United States Dollars or in any other currency, against any principal of or interest on Bank's Revolving Loan, or any other amount payable to Bank hereunder, which is not paid when due (regardless of whether such balances are then due to Borrower). 4.5 Discretionary Disbursements. Bank, in its sole and absolute discretion, may immediately upon notice to an Authorized Officer, disburse any or all proceeds of the Revolving Loan made available to Borrower pursuant to the Loan Documents to pay any fees, costs, expenses or other amounts required to be paid by Borrower hereunder and not so paid. All monies so disbursed by Bank shall be a part of Borrower's Liabilities, payable by Borrower on demand. 4.6 Credit Termination Date; Continuance of Obligations, Etc. This Agreement, Bank's obligations to loan monies to Borrower, and Borrower's ability to borrow monies from Bank shall be in effect until the Credit Termination Date. Notwithstanding the foregoing and until such date when Borrower's Liabilities shall be paid in full, Borrower's obligations under the Loan Documents shall continue, interest shall continue to be paid in accordance with the foregoing, Bank shall be entitled to retain its security interest in the Collateral and Bank shall retain all of its rights and remedies under this Agreement. 4.7 Loan Evidence. The Revolving Loan made by Bank to Borrower pursuant to this Agreement may or may not (at Bank's sole and absolute discretion) be evidenced by notes or other instruments issued or made by Borrower to Bank. Where such loan is not so evidenced, such loan shall be evidenced solely by entries upon the ledgers, books, records and/or computer records of Bank maintained for that purpose, which entries shall be rebuttable presumptive evidence of such loan in the absence of manifest error. 4.8 Over-Advances. Except to the limited extent of the Permitted Over-Advance expressly allowed pursuant to Section 2.1, if, at any time and for any reason, the aggregate amount of Borrower's Liabilities outstanding hereunder exceeds the limitations set forth herein (an "Over-Advance"), then Borrower, upon Bank's election and demand, shall 11 13 immediately pay to Bank, in cash, the amount of such Over-Advance. If such Over-Advance remains outstanding for more than thirty (30) days after notice to Borrower, until such Over-Advance is so repaid to Bank, the amount of such Over-Advance shall bear interest at the applicable Default Rate. 4.9 Prepayment. The principal, accrued interest and all other amounts of the Revolving Loan may be prepaid at any time by Borrower, in whole or in part, subject to the application of yield maintenance as provided for in Section 1(f) of the Revolving Note and the LIBOR Breakage Fee as defined in Section 3(c)(iii) of the Revolving Note. 4.10 Lock Box Account. Aasche Transportation Services, Inc. and Asche Transfer, Inc. will establish lock box account(s) with Bank pursuant to Bank's customary lock box agreement in effect from time to time and such entities shall direct all their account debtors to send all proceeds directly to the lock box account(s). 5. LOAN: CONDITIONS TO LENDING 5.1 Conditions Precedent. Prior to or contemporaneously with the making of the initial advance of funds, Bank's obligation to make the Revolving Loan is subject to the satisfaction of the following conditions precedent: (a) Fees and Expenses. Borrower shall have paid all fees owed to Bank including, but not limited to, the closing fee of $5,000.00 and reimbursed Bank for all expenses due and payable hereunder on or before the date hereof including, but not limited to, reasonable counsel fees provided for in Paragraph 9.12. (b) Documents. Bank shall have received the following documents, each in form and substance satisfactory to Bank, and all of the transactions contemplated by each such document shall have been consummated or each condition contemplated by each such document shall have been satisfied: (i) Related Documents. Copies of this Agreement and each other Loan Document as required by Bank including, without limitation, one copy of the Revolving Note payable to Bank conforming to the requirements hereof duly executed by Borrower and the Guaranty duly executed and delivered by Guarantor. The applicable Form UCC-1 and UCC-2 financing statements related to the Collateral (as herein defined) shall have been executed and delivered to Bank for filing in all jurisdictions that Bank deems necessary or advisable (and shall have been prefiled by Bank's counsel with evidence of filing available). (ii) Legal Opinion. The legal opinion of counsel to Borrower and Guarantor. 12 14 (iii) CFO's Certificate. A certificate executed by the chief financial officer of Borrower stating that (A) no default or Event of Default has occurred and is continuing, (B) no material adverse change in the financial condition or operations of the business of Borrower or Consolidated Entities has occurred since the date of the Financials and (C) each condition precedent to the consummation of the Revolving Loan contemplated hereby has been met or satisfied. (iv) Evidence of Insurance. Evidence of insurance from Borrower's and Guarantor's insurance carriers evidencing that all insurance policies and coverage required by Paragraph 7.2(f) below is in effect. (v) Organizational Documents. A copy of Borrower's and Guarantor's Organizational Documents and all amendments thereto, certified by the Secretary of State of the applicable state of incorporation. (vi) Good Standing Certificates. A Good Standing Certificate (or applicable equivalent certificate) for Borrower and Guarantor from the State of Illinois and each jurisdiction in which Borrower and Guarantor is/are required to be qualified to transact business as a foreign limited corporation. (vii) Internal Approvals. Certified copies of resolutions of Borrower and Guarantor approving the execution and delivery of and the consummation of the transactions contemplated by the Loan Documents and all other documents or instruments to be executed and delivered in conjunction herewith and therewith by Borrower and/or Guarantor. (viii) Incumbency Certificates. Certificates of the secretary of Borrower and Guarantor certifying the name of the officer of Borrower and Guarantor, as the case may be, who will sign the Loan Documents, together with a sample of the true signature of such person. (ix) Licenses and Permits. Copies of all applicable licenses and permits required by Federal, state or local law or regulation for Borrower and Guarantor to own and operate their business. (x) Guaranty. A copy of the secured Guaranty duly executed by Guarantor. (xi) Accounts Receivables. A current, detailed Borrowing Base Certificate in the form attached as Exhibit A and accounts receivable aging, both certified by Borrower's chief financial officer. 13 15 (xii) Other Documents. Such other documents as Bank may reasonably request. (c) Bank's Review. Bank's review of and satisfaction with the organizational, operational and legal structure of Borrower and the Affiliates. 6. COLLATERAL: GENERAL TERMS 6.1 Grant of Security Interest. To secure the prompt payment of Borrower's Liabilities and the prompt, full and faithful performance by Borrower of all of the provisions to be kept, observed or performed by Borrower under this Agreement and/or the other Loan Documents, and to secure the prompt payment and performance of any other obligations owed by Borrower to Bank, including, without limitation, pursuant to any guaranty, Borrower does hereby pledge, assign, transfer and deliver to Bank, and grants to Bank, a security interest in and to and a first lien on all of Borrower's property of any kind or description, tangible or intangible, of whatever description (excluding tractors and trailers) whether now existing and/or owned and hereafter arising and/or acquired, wherever located, including, but not limited to, the following: (a) all Accounts; (b) certificated and uncertificated securities; (c) moneys, reserves, deposits, deposit accounts and interest or dividends thereon, securities, cash, cash equivalents and other property now or at any time or times hereafter in the possession or under the control of Bank or its bailee; (d) liens, guarantees and other rights and privileges pertaining to any of the foregoing; (e) all books, records and computer records in any way relating to the foregoing; (f) all accessions, substitutions, renewals, improvements and replacements of and additions to the foregoing; and (g) products and proceeds of the foregoing including, without limitation, proceeds of insurance policies insuring the same or other guaranty of the same; (all of the foregoing personal property and real property is hereinafter sometimes individually and sometimes collectively referred to as "Collateral"). Borrower shall make appropriate entries upon its financial statements and books and records disclosing Bank's security interest in the Collateral. 6.2 Perfection of Security Interests. The Borrower shall execute and/or deliver to Bank, at any time and from time to time hereafter at the request of Bank, all agreements, instruments, financing statements, continuation statements, authorizations, documents and other written matter (sometimes hereinafter individually and collectively referred to as "Supplemental Documentation") that Bank reasonably may request, in form and substance reasonably acceptable to Bank, to perfect and maintain perfected Bank's security interest in the Collateral and to consummate the transactions contemplated in or by this Agreement and the other Loan Documents. Upon the occurrence of any Event of Default, each Borrower, irrevocably, hereby makes, constitutes and appoints Bank (and all Persons designated by Bank for that purpose) as such Borrower's true and lawful attorney and agent-in-fact to sign the name of such Borrower on the Supplemental Documentation and to deliver the Supplemental Documentation to such Persons as Bank may reasonably elect. Borrower agrees that a copy, electronic image or other reproduction of this Agreement or of any financing statement shall be sufficient as a financing statement. 14 16 6.3 Inspection of Collateral. Bank (by any of its officers, employees and/or agents) shall have the right, at reasonable times and intervals and upon notice to an Authorized Officer prior to the occurrence of an Event of Default, and after the occurrence and during the continuance of an Event of Default, at any time or times, to inspect the Collateral and all related records (and the premises upon which it is located) and to verify the amount and condition of or any other matter relating to the Collateral. All reasonable costs, fees and expenses incurred by Bank, or for which Bank has become obligated, in connection with such inspection and/or verification shall constitute part of Borrower's Liabilities, payable by Borrower to Bank on demand. 6.4 First Lien and Locations of Collateral. Borrower warrants and represents to and covenants with Bank that: (a) as of the Closing Date, Bank's security interest in the Collateral is now and at all times hereafter shall be perfected and have a first priority; (b) the offices and/or locations where Borrower keeps the Collateral consisting of personal property and books and records concerning the Collateral are solely located at: Asche Transfer, Inc. 10214 North Mt. Vernon Road Shannon, Illinois 61078 AG Carriers, Inc. 13349 Southridge Industrial Drive Tavares, Florida 32778 and Borrower shall not remove such books and records and/or the Collateral therefrom and shall not keep any of such books and records and/or the Collateral at any other office or location without the prior written consent of Bank; and (c) as of the Closing Date, Borrower's principal places of business are: Asche Transfer, Inc. 10214 North Mt. Vernon Road Shannon, Illinois 61078 AG Carriers, Inc. 13349 Southridge Industrial Drive Tavares, Florida 32778 An Authorized Officer, by written notice delivered to Bank at least thirty (30) days prior thereto, shall advise Bank of Borrower's opening of any new office or place of business or its closing of any existing office or place of business and any new office or place of business shall be within the continental United States of America. There are no Liens on the Collateral other than the Lien of Bank pursuant hereto. 6.5 Constructive Trust. After the occurrence of an Event of Default, Borrower shall receive, as the sole and exclusive property of Bank, and as trustee for Bank, all monies, 15 17 checks, notes, drafts and all other payment for and/or proceeds of Collateral which come into the possession or under the control of Borrower (or any of its partners, managers, shareholders, directors, officers, employees, agents or those Persons acting for or in concert with Borrower) and immediately upon receipt thereof, Borrower shall remit the same (or cause the same to be remitted), in kind, to Bank at Bank's office listed in Paragraph 9.15 below. 6.6 Application of Proceeds of Collateral. After the occurrence of an Event of Default, Bank, at any time or times in its sole and absolute discretion, may take control of, in any manner, and may endorse any applicable Borrower's name, as appropriate, to any of the items of payment or proceeds described in Paragraph 6.5 above and, pursuant to the provisions of this Agreement, Bank may, in its sole and absolute discretion, apply the same to and on account of Borrower's Liabilities. For the purposes of this Paragraph, each Borrower, irrevocably, hereby makes, constitutes and appoints Bank (and all persons designated by Bank for that purpose) as such Borrower's true and lawful attorney and agent-in-fact with power, without notice to such Borrower, to take any such actions. 6.7 Third Party Collateral Claims. After the occurrence of an Event of Default, Bank, in its sole and absolute discretion, without waiving or releasing any Event of Default or obligation, liability, or duty of Borrower under this Agreement or the other Loan Documents, may at any time or times hereafter, but shall be under no obligation to, pay, acquire and/or accept an assignment of any security interest, lien, encumbrance, or claim asserted by any Person against the Collateral. All sums paid by Bank, in respect thereof and all reasonable costs, fees and expenses, including reasonable attorney's fees, court costs, expenses and other charges relating thereto that are incurred by Bank, on account thereof shall be part of Borrower's Liabilities payable by Borrower to Bank on demand. 6.8 Additional Collateral. After the occurrence of an Event of Default, Bank may, in its sole and absolute discretion, retain as additional Collateral or release to Borrower, from time to time, such portion of the monies, reserves and/or proceeds received by Bank with respect to the Collateral as Bank may determine. All such monies, reserves, proceeds and other property of Borrower in the possession of Bank at any time or times hereafter are hereby pledged by Borrower to Bank as additional Collateral hereunder and may be applied by Bank on account of Borrower's Liabilities. 6.9 No Custom or Waiver. No authorization given by Bank pursuant to this Agreement or the other Loan Documents to sell any specified portion of Collateral or any items thereof and no waiver by Bank in connection therewith shall establish a custom or constitute a waiver of the limitation contained in this Agreement against such sales with respect to any portion of the Collateral or any item thereof not covered by said authorization. 6.10 Verification of Accounts. Any of the Bank's officers, employees or agents shall have the right, at any time or times, in the Bank's or the Borrower's name or in the name of a firm of independent certified public accountants acceptable to Bank, to verify the validity, amount or any other matters relating to any Accounts by mail, telephone, telegraph or otherwise. 16 18 6.11 Assignments, Records and Accounts Reports. The Borrower shall keep accurate and complete records of its Accounts and as frequently as the Bank shall require, but not less frequently than monthly, the Borrower shall deliver to the Bank an accounts payable aging report, an accounts receivable aging report (including line item detail separating A/R Accruals from other accounts receivable) and formal written assignments of all Accounts, together with copies of the invoices related thereto, if requested. The Borrower shall also deliver to the Bank, upon demand, the original copy of all documents, including without limitation, repayment histories, present status reports and shipment reports, relating to the Accounts included in any accounts receivable aging report and such other matters and information relating to the status of then existing Accounts as the Bank shall reasonably request. The Borrower shall furnish a Borrowing Base Certificate in the form attached as Exhibit A with each disbursement request and in any event shall furnish such certificate no less frequently than monthly. 6.12 Notice Regarding Disputed Accounts. The Borrower shall give the Bank prompt notice of any Account in excess of One Hundred Thousand and 00/100 Dollars ($100,000.00) which is in dispute between any Account Debtor and the Borrower. Each accounts receivable aging report shall identify all disputed Accounts and disclose with respect thereto, in reasonable detail, the reason for the dispute, all claims related thereto and the amount in controversy. 6.13 Sale or Encumbrance of Accounts. The Borrower shall not, without the prior written consent of the Bank, sell, transfer, grant a security interest in or otherwise dispose of or encumber any of its Accounts to any Person other than the Bank. 7. REPRESENTATIONS AND WARRANTIES; COVENANTS 7.1 Representations and Warranties of Borrower. Borrower hereby represents and warrants to Bank as of the date hereof and the date of disbursement of each Loan or advance hereunder, as follows: (a) Existence and Authority. Each entity comprising Borrower and Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of its incorporation and is duly qualified to do business and is in good standing under the laws of each jurisdiction in which the ownership of its properties and the nature and extent of the activities transacted by it makes such qualification necessary. Borrower and Guarantor have all requisite company or other power and authority to conduct their activities as presently conducted, to own their properties and to perform their respective obligations under this Agreement and other Loan Documents, as the case may be. (b) Authorization; No Conflict. The execution, delivery and performance of the Loan Documents by each entity comprising Borrower and Guarantor which signed the respective document are within the company powers of each entity comprising Borrower and Guarantor as the case may be, have been duly authorized by all necessary company action and do not contravene (i) the entity's Organizational Documents or (ii) any law or any contractual restriction binding on or affecting Borrower, Guarantor or their properties, and do not result in or require the creation of any Lien (except as may be created under this Agreement or the other Loan Documents) upon or with respect to any of Borrower's or Guarantor's properties. 17 19 (c) No Approval. Except as otherwise provided herein, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by Borrower or Guarantor of this Agreement or any Other Agreement. (d) Validity and Binding Nature. This Agreement is, and the other Loan Documents when delivered hereunder will be, legal, valid and binding obligations of Borrower and Guarantor, enforceable against Borrower and Guarantor, as the case may be, in accordance with its terms. (e) Financial Condition. Neither Borrower nor Guarantor, on the date hereof or on the date of any Loan or advance made by Bank hereunder, has any material contingent obligations, long-term leases (except for commercially reasonable leases of tractors, trailers and other equipment entered into in the ordinary course of business) or material forward or long-term commitments. (f) Litigation. Except as disclosed on Schedule 7.1(f), there is no pending or, to the best knowledge of Borrower, threatened action, suit, inquiry, investigation, or proceeding affecting, directly or indirectly, Borrower or Guarantor before any court, governmental agency or arbitrator, which, in any case, may (i) materially and adversely affect the financial condition or operation of Borrower or Guarantor, (ii) which seeks to restrain or would otherwise have a material adverse effect on the transactions contemplated herein, or (iii) which would affect the validity or enforceability of the Loan Documents. (g) Securities Transaction. No proceeds of any Loan or advance made by Bank to Borrower hereunder will be used to acquire any security in any transaction which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended. (h) Regulation U. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Loan or advance made by Bank to Borrower hereunder will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. (i) ERISA Termination Event and Funding. No ERISA Termination Event has occurred nor is expected to occur with respect to any Plan and all Plans, to the extent governed by ERISA, meet the minimum funding standards of Section 302 of ERISA. (j) Withdrawal Liability and Reportable Events. Neither Borrower nor any ERISA Affiliate has incurred, or expects to incur, any withdrawal liability under Section 4201 of ERISA to any Multiemployer Plan. No Reportable Event (as defined in ERISA) has occurred with respect to any Plan. 18 20 (k) Taxes. Consolidated Entities have filed all tax returns (Federal, state and local) required to be filed and paid all taxes shown thereon to be due, including interest and penalties, other than such taxes that Consolidated Entities are contesting in good faith by appropriate legal proceedings and proper reserves therefor have been established on the books of the applicable entity. (l) Liens. There are no Liens upon or with respect to any of the properties of Borrower, Guarantor or Collateral or any right to receive revenues of Borrower, or Guarantor or Collateral other than Permitted Liens. (m) Conflicts. Neither Borrower nor any Affiliate is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument (including company charters or other organizational documents) which is likely to have a material adverse effect on the ability of Borrower or Guarantor to perform its or their obligations under the Loan Documents or which would restrict or otherwise limit the incurring of the Debt represented by the Loan Documents. (n) Investment Company Act. Neither Borrower nor any Affiliate is an "investment company"or a company "controlled by an "investment company,"within the meaning of the Investment Company Act of 1940, as amended. (o) Compliance with Laws. Borrower and each Affiliate are in material compliance with all laws, orders, regulations and ordinances of all federal, foreign, state and local governmental authorities binding upon or affecting the business, operation or assets of such Borrower and such Affiliate, but only to the extent such failure to comply may have a material adverse effect on Borrower's ability to satisfy its obligations hereunder. (p) Loan Documents. Each Borrower makes each of the representations and warranties contained in the Loan Documents to which such Borrower is a party operative and applicable for the benefit of Bank as if the same were set forth at length herein. (q) True and Correct Nature of Other Representations and Warranties. The representations and warranties of Borrower in the Loan Documents are true and correct. (r) Affiliates. Except as disclosed on Schedule 7.l (r), Borrower has no Affiliates. (s) Labor. Except as disclosed on Schedule 7.1 (s), none of the employees of Borrower or Guarantor is subject to any collective bargaining agreement, and there are no strikes, work stoppages, election or decertification petitions or proceedings, unfair labor charges, equal employment opportunity proceedings, wage payment or material unemployment compensation proceedings, material workmen's compensation proceedings or other material labor or employee-related controversies pending or threatened involving Borrower and any of its employees. 19 21 (t) Solvency. Each entity comprising Borrower and Guarantor has capital sufficient to carry on its business and transactions and all businesses and transactions in which it is about to engage and is solvent and able to pay its debts as they mature and each entity comprising Borrower and Guarantor owns property the fair saleable value of which is greater than the amount required to pay the respective party's debt. No transfer of property is being made and no Debt is being incurred in connection with the transactions contemplated by this Agreement with the intent to hinder, delay or defraud either present or future creditors of either Borrower or any Affiliate. (u) Title; Assets. Borrower and Guarantor have good, indefeasible and merchantable title to and ownership of the Collateral and Guarantor's Collateral in the aggregate, free and clear of all Liens, claims, security interests and other encumbrances except for Permitted Liens. Borrower or Guarantor own, possess or otherwise have rights and assets necessary for the conduct of their businesses. (v) Names. Borrower has no assumed names and is not doing business under any name other than its two company names. (w) Options. No person, corporation, partnership, association or other entity has any option to acquire ownership of the Collateral or Guarantor's Collateral or any portion of either. (x) Debt. As of the date of this Agreement, Guarantor Group has no Debt except for the Permitted Debt set forth in Schedule 7.3(d) hereof. There shall be no intercompany transactions between entities in the Consolidated Entities except for transfers of tractors, trailers and other equipment and ancillary support services to Specialty Transportation Services, Inc. in the ordinary course of business which are promptly paid for. All debts presently owed to lenders of Guarantor are unsecured obligations except for those secured by liens identified in Schedule 7.3(a)(v). (y) Insurance. Schedule 7.1(y) sets forth a complete and accurate description of all policies of insurance that will be in effect as of the Closing Date for Borrower and Guarantor. Borrower and Guarantor are adequately insured under all policies of insurance, no notice of cancellation has been received with respect to such policies and Borrower and Guarantor are in material compliance with all conditions contained in such policies. (z) Compliance with Laws; Licensure. Each member of the Consolidated Entities has materially complied with all applicable requirements of the United States of America, the State of Illinois and all other applicable state and local governments, and of their agencies and instrumentalities, to operate its business as they are being operated and is fully qualified by all necessary permits, licenses, certifications, accreditations and qualifications and is in material compliance with all annual filing requirements of all regulatory authorities. (aa) Accuracy of Information. All factual information heretofore or contemporaneously furnished by or on behalf of Borrower to Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby (excluding factual 20 22 information superseded or replaced prior to the date hereof) is, and all other factual information (taken as a whole) hereafter furnished by or on behalf of Borrower to Bank will be, true and accurate in every material respect on the date as of which such information is dated or certified, and Borrower has not omitted and will not omit any material fact necessary to prevent such information from being false or misleading. Borrower has disclosed to Bank, in writing, all facts which Borrower believes might materially and adversely affect the business, credit, operations, financial condition or prospects of Borrower or any Affiliate or which Borrower believes might materially and adversely affect any material portion of Borrower's or any Affiliate's properties, or Borrower's ability to perform its obligations under the Loan Documents. 7.2 Affirmative Covenants. At all times prior to the Credit Termination Date and thereafter for so long as any amounts are due or owing to Bank hereunder, Borrower hereby covenants that it will, unless Bank otherwise consents in writing: (a) Existence. Do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence of each entity comprising Consolidated Entities in good standing. (b) Compliance with Laws, etc. Comply, and cause each Affiliate to comply, with all applicable present and future laws, rules, ordinances, regulations and orders including, without limitation, laws, rules, ordinances, regulations and orders regarding the operation, licensure and maintenance of the businesses. (c) Payment of Taxes and Other Claims. Pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all Charges levied or imposed upon Borrower or any Affiliate or upon the income, profits or property of Borrower or any Affiliate, if any, and (ii) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a Lien upon the property of Borrower or any Affiliate; provided, however, that Borrower shall not be required to pay or discharge or cause to be paid or discharged any such Charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings to the extent adequate reserves have been established on the books of the Borrower or such Affiliate, as the case may be. (d) Reporting Requirements. Keep true books of record and account in which full, true and correct entries in accordance with GAAP consistently applied will be made of all dealings or transactions in relation to its business and activities, and an Authorized Officer shall furnish to Bank: (i) as soon as possible and in any event within ten (10) days after the occurrence of an Event of Default or any event which, with the giving of notice, lapse of time, or both, would constitute an Event of Default, the statement of an Authorized Officer setting forth details of such Event of Default or event and the action which Borrower has taken or proposes to take to cure the same; (ii) as soon as available and in any event within forty five (45) days after the end of each calendar month beginning with the month ending March 31, 21 23 1998, internally-prepared combined and combining (i.e., consolidated and separate by each entity) financial statements of Borrower and the Affiliates, including a Balance Sheet and the related Income Statement as of the end of such month and for the portion of the Fiscal Year ended at the end of such month, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the previous Fiscal Year, all in reasonable detail and certified (subject to normal year-end adjustments) as to fairness of presentation, in accordance with GAAP, by the chief financial officer of each entity of Borrower and Affiliates, as applicable; (iii) as soon as available and in any event within ninety (90) days after the close of each Fiscal Year, a combined and combining Balance Sheet and the related Income Statement and Statement of Cash Flows as of the end of such Fiscal Year, fairly and accurately presenting the financial condition of Borrower and the Affiliates as at such date and the results of operations of Borrower and the Affiliates for such Fiscal Year and setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding Fiscal Year, all in reasonable detail, prepared in accordance with GAAP consistently applied, and audited, in each case, by an independent certified public accountant acceptable to Bank (Ernst & Young, LLP shall be acceptable) and accompanied by the CPA firm's unqualified opinion; (iv) Together with each delivery of financial statements of Borrower required by subparagraph (iii) above and with the financial statements required to be delivered after the end of each calendar quarter, an Authorized Officer shall deliver to Bank a certificate of the Authorized Officer stating whether any Event of Default, or event which, with the passage of time or giving of notice or both, would constitute, mature into or become such an Event of Default, currently exists and is continuing and what activities, if any, Borrower and Affiliates is taking or proposing to take with respect thereto; (v) as soon as available and in any event within ninety (90) days of the commencement of each Fiscal Year, annual projections including combined and combining income statements, balance sheet and statement of Cash Flows expected for such Fiscal Year; (vi) promptly upon receipt and, in any event, within thirty (30) days after receipt thereof, copies of all interim and supplemental financial reports submitted to Borrower or to any Affiliate by independent certified public accountants in connection with any interim review of the books and records of Borrower or of any Affiliate, as the case may be, made by such accountants; (vii) immediately after notice to Borrower or any Affiliate, as applicable, of the commencement thereof, notice, in writing, of any action, suit, arbitration or other proceeding instituted, commenced or threatened against or affecting Borrower, or any Affiliate with an amount in controversy in excess of $100,000; (viii) if requested by Bank, Borrower's or any Affiliate's federal, state and local tax returns, if and as applicable, as soon as said returns are completed in 22 24 the form said returns will be filed with the Internal Revenue Service and any state or local department of revenue or taxing authority; and (ix) such other information respecting the condition or operations, financial or otherwise, of Borrower or any Affiliate as Bank may from time to time reasonably request, including, without limitation, monthly accounts receivable aging reports, cost reports, annual survey reports and budget and cash flow projections. (e) Visitation Rights. Subject to Paragraph 6.3 above, once a quarter and at any time after a default by Borrower, permit Bank or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of and visit the properties of Borrower, all as Bank shall reasonably request, and to discuss the affairs, finances and accounts of Borrower with Borrower's senior management. (f) Insurance. (i) At its sole cost and expense, keep and maintain public liability and property damage insurance and other appropriate insurance relating to its business and properties and its ownership and use of the Collateral. All such policies of insurance shall be in form and with insurers recognized as adequate by prudent business persons and all such policies shall be in amounts no less than such policies set forth on Schedule 7.1(y) or as otherwise may be reasonably satisfactory to Bank. All policies of insurance shall comply with the Bank's requirements. An Authorized Officer shall deliver to Bank a certificate of insurance and evidence of payment of all premiums for each such policy on or prior to the date of this Agreement. Such policies shall: (A) contain a lender's loss payable clause naming Bank, for the benefit of Bank, as loss payee and additional insured as its interest may appear; and (B) provide that the insurance companies will give Bank at least thirty (30) days written notice before any such policy or policies of insurance shall be altered or canceled. (ii) In the event Borrower at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above or to pay any premium in whole or in part relating thereto, then Bank after giving five (5) days' prior notice to an Authorized Officer, without waiving or releasing any obligation or Event of Default by Borrower hereunder, may at any time or times thereafter (but shall be under no obligation to) obtain and maintain such policies of insurance and pay such premium and take any other action with respect thereto which Bank deems advisable. All sums so disbursed by Bank, including reasonable attorneys fees, court costs, expenses and other charges relating thereto, shall be part of Borrower's Liabilities, payable by Borrower to Bank on demand. (g) Year 2000 Software Compliance. The Borrower will take all actions reasonably necessary to assure that the Year 2000 Issues will not have a material adverse effect on the business, operations or financial condition of the Borrower. Upon the Bank's request, the Borrower will provide the Bank with a description of its plan to address Year 2000 issues, internally and with its suppliers, vendors and customers, including updates and progress 23 25 reports. The Borrower will advise the Bank of any reasonably anticipated material adverse effect on the business, operations or financial condition of the Borrower as a result of Year 2000 Issues. For the purposes hereof, "YEAR 2000 ISSUES" means anticipated costs, problems and uncertainties associated with the inability of certain computer hardware and software to correctly calculate, determine, display, sort and otherwise process all data including dates occurring on and after January 1, 2000, including proper addition of February 29 in leap years, as such inability affects the business, operations, and financial condition of the Borrower and of the Borrower's material customers, suppliers and vendors. 7.3 Negative Covenants. Prior to the Credit Termination Date and thereafter for so long as any amount is due or owing to Bank hereunder, unless Bank shall otherwise consent in writing, Borrower shall not, and shall not permit Guarantor to: (a) Liens, etc. Create or suffer to exist, any Lien, other charge or encumbrance, or any other type of preferential arrangement, upon or with respect to any of the Borrower's or Guarantor's properties, whether now owned or hereafter acquired, or assign any right to receive income, in each case to secure or provide for the payment of any Debt of any Person, except for the following permitted Liens ("Permitted Liens"): (i) Liens arising under this Agreement; (ii) Liens for current taxes, assessments or other governmental charges which are not delinquent or remain payable without any penalty, or the validity of which are contested in good faith by appropriate proceedings upon stay of execution of the enforcement thereof and appropriate reserves are set aside therefor; (iii) deposits or pledges to secure: (A) statutory obligations; (B) surety or appeal bonds; (C) bonds for release of attachment, stay of execution or injunction; (D) performance of bids, tenders, contracts (other than for the repayment of Debt) or leases, or for purposes of like general nature in the ordinary course of its business; (iv) any Lien renewing, extending or refunding any Lien existing on the date hereof or permitted by clauses (i) through (iii) above, provided that the principal amount secured is not increased, and the Lien is not extended to other property; 24 26 (v) liens on tractors, trailers and other equipment purchased or leased by Borrower or Guarantor, provided, that such liens are created substantially simultaneously with the purchase or lease of such tractors, trailers and other equipment in the ordinary course of business and such liens are confined solely to the tractors, trailers and other equipment so purchased or leased; or (vi) such liens as are specifically identified on Schedule 7.3(a)(v). (b) Maintain Existence, Merger, etc. (i) dissolve or liquidate or amend or modify its Organizational Documents or (ii) except as specifically permitted by this Agreement, convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) any Collateral, assets of Borrower or Guarantor or option to acquire assets (whether now owned or hereafter acquired) to any Person; or (iii)together with one or more Affiliates convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of the assets of Borrower and such Affiliates (whether now owned or hereafter acquired) to any Person; or (iv) purchase, lease or otherwise acquire all or substantially all of the assets or properties of, or acquire any capital stock, equity interests, debt or other securities of any Person, or enter into any joint venture or become a partner in any partnership; or (v) engage in any transaction out of the ordinary course of business; or (vi) merge or consolidate with any Person. (c) Sale and Lease-Back. Enter into any arrangement with any Person or to which such Person is a party providing for the leasing by Borrower or any Affiliate of any principal asset which has been or is to be sold or transferred by Borrower or such Affiliate to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of Borrower or such Affiliate, other than customary and commercially reasonable sales or transfers of rolling stock in the ordinary course of business including sales of tractor, trailers and other equipment to a financial company and leasing of such equipment by Specialty Transportation Services, Inc. ("STS"). (d) Debt. Incur, create, assume, become or be liable in any manner with respect to or permit to exist, any Debt, obligations or indebtedness, except for (i) Debt classified as short term (in accordance with GAAP) in an outstanding amount not to exceed $50,000 at any time, (ii) Debt classified other than as short term (in accordance with GAAP) in an outstanding amount not to exceed $100,000 at any time, (iii) the Permitted Debt set forth on Schedule 7.3(d). (e) Guaranty. Guaranty, endorse or otherwise in any way directly, indirectly or contingently become liable for the obligations or liabilities of any other Person, except endorsements of negotiable instruments for collection in the ordinary course of business. (f) Line of Business. Make any change in or engage in any line of business materially different from that previously engaged in by Borrower. 25 27 (g) Prepayment or Modification of Debt. Make any prepayments of Debt (except as permitted hereunder) or enter into or modify any agreement pursuant to which the terms of payment of any Debt are amended or modified. (h) Financial Covenants. Allow, suffer or permit: (i) Debt Service Coverage Ratio for the Guarantor Group to be less than 1.25:1; or (ii) Shareholder Equity for the Consolidated Entities to be less than $12,000,000.00; or (iii) Any dividend to be declared or paid or any other distribution on the capital stock of the Guarantor Group to be made; (iv) Any transfers of funds from the Guarantor Group to Speciality Transportation Services, Inc. or any other Affiliate not in the Guarantor Group; or (v) The prepayment of any indebtedness owed to third parties as secured by lien identified in Schedule 7.3(a)(v) item 1 or identified in Schedule 7.3(d) items 9 or 10, without the prior written consent of Bank. Compliance with the financial covenants set forth in item (i) above shall be measured on a year-to-date basis as of June 30 and December 31 of each year. Compliance with the other financial covenants must be continuous and may be verified at any time by Bank. In any event, compliance with all of the foregoing items must be evidenced by financial statements and Authorized Officer certificate furnished no later than forty five (45) days, in the case of the certificate as of June 30, and no later than ninety (90) days, in the case of the certificate as of December 31, after the end of the relevant period as further provided for in subparagraph 7.2(d)(iv). The following definitions shall be used: "DEBT SERVICE COVERAGE RATIO" means the ratio of (i) the Guarantor Group's earnings before interest, taxes, non-cash depreciation and amortization expense, minus capital expenditures (net of increases in long term debt) and plus net proceeds received (or minus net proceeds paid) from the sale of tractors, trailers and other equipment, to (ii) all taxes and all principal and interest payable in connection with all indebtedness of the Guarantor Group and all payments due under capitalized leases for the Guarantor Group. 7.4 Maintenance of Accounts. Borrower agrees that Aasche Transportation Services, Inc. and Asche Transfer, Inc. shall maintain their primary operational accounts with Bank and shall maintain an average balance of collected, available funds in one or more demand deposit account(s) with Bank (the "Operating Account(s)") with minimum average daily balances at a level in an amount at least equal to that amount which is required to compensate Bank for its services rendered or Borrower shall be responsible for payment of service charges. Borrower acknowledges that Bank will charge Borrower standard service charges in effect from time to time for various services performed by Bank in connection with any aspect of the relationship between Borrower and Bank, and Borrower hereby agrees that if such service charges exceed the 26 28 credit to Borrower arising from earnings attributable to funds on deposit with Bank in the Operating Account(s), such service charge deficiency shall be deducted by Bank from Borrower's Operating Account, monthly, in arrears, within ten (10) days following the end of each month. Bank may cause interest and other amounts payable on the obligations of Borrower to Bank hereunder to be paid by making a direct charge to the applicable Operating Account in accordance with the terms hereof. Remittances for Aasche Transportation Services, Inc. and Asche Transfer, Inc. shall be made directly to a lockbox as provided in Paragraph 4.10. 8. DEFAULT 8.1 Events of Default. The occurrence of any one of the following events shall constitute a default ("Event of Default") by Borrower under this Agreement: (a) if Borrower or Guarantor fails or neglects to perform, keep or observe any covenant or agreement contained in the Loan Documents which is required to be performed, kept or observed by Borrower or Guarantor, as the case may be, for a period of fifteen (15) days after written notice from Bank; (b) any representation or warranty made by Borrower or Guarantor, as the case may be, herein or in any of the other Loan Documents is breached or is false or misleading in any material respect, or any exhibit, schedule, certificate, financial statement, report, notice or other writing furnished by Borrower or Guarantor, as the case may be, or any of its officers, employees, or agents to Bank is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified; (c) if Borrower fails to pay Borrower's Liabilities when due and payable for a period of five (5) days after written notice from Bank; (d) if any of the Collateral is attached, seized, subjected to a writ or distress warrant or is levied upon, or comes within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors and the same is not terminated or dismissed within sixty (60) days thereafter; (e) if a petition under any section or chapter of Bankruptcy Code or any similar law or regulation shall be filed by Borrower or Guarantor or if Borrower or Guarantor shall make an assignment for the benefit of its creditors or if any case or proceeding is filed by Borrower or Guarantor for its dissolution or liquidation; (f) if Borrower and Guarantor is enjoined, restrained or in any way prevented by court order from conducting all or any material part of its business affairs or if a petition under any section or chapter of Bankruptcy Code or any similar law or regulation is filed against Borrower or Guarantor or if any case or proceeding is filed against Borrower or Guarantor for its dissolution or liquidation and such injunction, restraint or petition is not dismissed or stayed within sixty (60) days after the entry or filing thereof; (g) if an application is made by Borrower or Guarantor for the appointment of a receiver, trustee or custodian for any of Borrower's or Guarantor's assets; (h) if an application is made by any Person other than a Borrower for the appointment of a receiver, trustee or custodian for the Collateral of Borrower and the same is not dismissed within sixty (60) days after the application therefor; (i) if a notice of lien, levy, or assessment is filed of record with respect to all or any of the Collateral by the United States or any department, agency or instrumentality thereof or by any state, county, municipal or other governmental agency, including without limitation the PBGC, or if Borrower receives notice that any taxes or debts owing at any time or times thereafter to any one of them becomes a lien or encumbrance upon any of the Collateral and the same is not released, satisfied or bonded over within sixty (60) days after the same becomes a lien or encumbrance; (j) if Borrower or Guarantor becomes insolvent or 27 29 is unable generally to pay its debts as they become due; (k) if Borrower or Guarantor is in default (after the passage of any applicable cure periods) in the payment of any indebtedness owed to any third party but only to the extent such default materially affects Borrower's ability to satisfy Borrower's Liabilities hereunder; (1) the appointment of a conservator for all or any portion of the Collateral; (m) the occurrence of a breach, default or event of default under the Guaranty (after the passage of any applicable cure periods); (n) the occurrence of a material breach, a default or an event of default by Borrower under any of the other Loan Documents after any cure period applicable to any such default or event of default has expired; (o) the Guaranty shall be terminated, curtailed or restricted in scope without Bank's consent; and (p) a default and a failure to cure within any applicable notice or cure period of an obligation owed to any financial institution (including without limitation Mellon Bank) by Specialty Transportation Services, Inc. 8.2 Cumulative Remedies. All of Bank's rights and remedies under the Loan Documents are cumulative and non-exclusive. 8.3 Acceleration and Termination of Loan. Upon the occurrence of an Event of Default, (a) upon notice by Bank to an Authorized Officer, Borrower's Liabilities shall be immediately due and payable, unless there shall have occurred an Event of Default under subparagraphs 8.l (d), (e), (f), (g), (h), (i), (j) or (1), in which case Borrower's Liabilities shall automatically become due and payable without notice or demand (provided that Bank shall notify Borrower after any such acceleration of Borrower's Liabilities). Upon the occurrence of a default under the Loan Documents which, with the giving of notice or lapse of time or both, will constitute an Event of Default, then without notice by Bank to or demand by Bank of Borrower, Bank shall have no further obligation to and may then forthwith cease advancing monies or extending credit to or for the benefit of Borrower under the Loan Documents. 8.4 Rights of Secured Creditor. Upon an Event of Default, Bank, in its sole and absolute discretion, may: (a) exercise any one or more of the rights and remedies accruing to a secured party under the Uniform Commercial Code of the relevant state or states and any other applicable law upon default by a debtor; (b) enter, with or without process of law and without breach of the peace, any premises where the Collateral or the books and records of Borrower related thereto is or may be located, and without charge or liability to Bank therefor seize and remove the Collateral (and copies of Borrower's books and records in any way relating to the Collateral) from said premises and/or remain upon said premises and use the same (together with said books and records) for the purpose of collecting, preparing and disposing of the Collateral, and Borrower hereby grants Bank a security interest in said books and records for the purpose above stated; (c) sell or otherwise dispose of the Collateral at public or private sale for cash or credit, provided, however, that Borrower shall be credited with the net proceeds of such sale only when such proceeds are actually received by Bank pursuant to Paragraph 9.1 hereof. 8.5 Assembly of Collateral; Injunctive Relief. Upon an Event of Default, Borrower, immediately upon demand by Bank, shall assemble the Collateral and make it available to Bank at a place or places to be designated by Bank which is reasonably convenient to Bank and Borrower. Borrower recognizes that in the event Borrower fails to perform, observe or discharge any of its obligations or liabilities under the Loan Documents, no remedy of law will provide adequate relief to Bank, and agrees that Bank shall be entitled to temporary and 28 30 permanent injunctive relief in any such case without the necessity of proving actual damages or the posting of bond, surety or other security. 8.6 Notice of Collateral Disposition. Any notice required to be given by Bank of a sale, lease or other disposition of the Collateral or any other intended action by Bank, deposited in the United States mail, postage prepaid and duly addressed to an Authorized Officer at its principal place of business specified in Paragraph 9.15 of this Agreement not less than thirty (30) days prior to such proposed action, shall constitute commercially reasonable and fair notice to Borrower thereof. 8.7 Matters Regarding Sale of Collateral. Upon an Event of Default, Borrower agrees that Bank may, if Bank deems it reasonable, postpone or adjourn any such sale of the Collateral from time to time by an announcement at the time and place of sale or by announcement at the time and place of such postponed or adjourned sale, without being required to give a new notice of sale. Borrower agrees that Bank has no obligation to preserve rights against prior parties to the Collateral. Further, Borrower waives and releases any cause of action and claim against Bank as a result of Bank's possession, collection or sale of the Collateral, any liability or penalty for failure of Bank to comply with any requirement imposed on Bank relating to notice of sale, holding of sale, or reporting of sale of the Collateral, and any right of redemption from such sale; provided, however, nothing in this Paragraph shall be deemed a waiver of any cause of action or claim against Bank and as a result of Bank's failure to dispose of the Collateral in a commercially reasonable manner. 8.8 Replevin. In the event Bank seeks possession of the Collateral through replevin or other court process, Borrower hereby irrevocably waives: (a) any bond, surety or security required as an incident to such possession, and (b) any demand for possession of the Collateral prior to commencement of any suit or action to recover possession thereof. 8.9 Application of Proceeds. Except as otherwise herein expressly provided, the proceeds of any collection, sale or other realization of all or any part of the Collateral pursuant hereto, and any other cash of Borrower at the time held by Bank hereunder, shall be applied by Bank: First, to the payment of the costs and expenses of such collection, sale or other realization, including reasonable out-of-pocket costs and expenses of Bank and the reasonable fees and expenses of its agents and counsel, and all expenses incurred and advances made by Bank in connection therewith;. Next, to the payment in full of Borrower's Liabilities; and Finally, to the payment to Borrower, or its successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining. As used in this Paragraph, "proceeds" of Collateral shall mean cash, securities and other property realized in respect of, and distributions in kind of, Collateral, including any amount 29 31 received under any reorganization, liquidation or adjustment of debt of Borrower or any issuer of or obligor on any of the Collateral. 9. GENERAL 9.1 Payment Application Date. Any check, draft, or similar item of payment by or for the account of Borrower delivered to Bank on account of Borrower's Liabilities shall be applied by Bank on account of Borrower's Liabilities on the date such funds are available in accordance with the regular availability schedule of Bank. 9.2 Statement of Account. Each statement of account by Bank delivered to an Authorized Officer relating to Borrower's Liabilities shall be presumed correct and accurate, absent manifest error, and shall constitute an account stated between Borrower and Bank unless, within ninety (90) days after an Authorized Officer's receipt of said statement, an Authorized Officer delivers to Bank, by registered or certified mail (or by any nationally recognized overnight courier) addressed to Bank at its address specified in Paragraph 9.15, written objection thereto specifying the error or errors, if any, contained in any such statement. 9.3 Manner of Application; Set Off /Waiver of Set off Prohibition. Borrower waives the right to direct the application of any and all payments at any time or times hereafter received by Bank on account of Borrower's Liabilities and Borrower agrees that Bank shall have the right, in its absolute and sole discretion, to apply and re-apply any and all such payments in such manner as Bank may deem advisable, notwithstanding any entry by Bank upon any of its books and records. Borrower further waives any right under or benefit of any law that would restrict or limit the right or ability of Bank to obtain payment of Borrower's Liabilities, including any law that would restrict or limit Bank in the exercise of its right to appropriate any indebtedness owing from Bank to Borrower and any deposits or other property of Borrower in the possession or control of Bank and apply the same toward or setoff the same against the payment of Borrower's Liabilities. 9.4 Survival of Representations and Warranties. Borrower covenants, warrants and represents to Bank that all representations and warranties of Borrower contained in the Loan Documents shall be true at the time of Borrower's execution of the Loan Documents and shall survive the execution, delivery and acceptance thereof by the parties thereto and the closing of the transactions described therein or related thereto. 9.5 Integration; Amendment; Assignment; Participation. (a) The Loan Documents constitute the entire agreement and understanding between the parties relating to the subject matter hereof and supersede all prior agreements. The Loan Documents may not be modified, altered or amended except by an agreement in writing signed by an Authorized Officer, on behalf of Borrower, and Bank. (b) Borrower shall not assign any of Borrower's obligations and rights under this Agreement. Bank shall have the right to assign to one or more banks or other financial institutions all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of the Revolving Credit Commitment, the Revolving Loan and the 30 32 other Loan Documents). Upon any such assignment, (i) the assignee shall become a party hereto and, to the extent of such assignment, have all rights and obligations of Bank hereunder and under the Loan Documents and (ii) Bank shall, to the extent of such assignment, relinquish its rights and be released from its obligations under the Loan Documents. Borrower hereby agrees to execute and deliver such documents, and to take such other actions, as Bank may reasonably request to accomplish the foregoing. (c) In addition to the assignments permitted in subparagraph (b) of this Paragraph, Bank and any assignee pursuant to subparagraph (b) above shall have the right to grant participations to one or more banks or other financial institutions in or to any Loan hereunder (and the Loan Documents) without notice to or consent from Borrower. 9.6 No Waiver. Bank's failure at any time or times hereafter to require strict performance by Borrower of any provision of this Agreement shall not waive, affect or diminish any right of Bank thereafter to demand strict compliance and performance therewith. Any suspension or waiver by Bank of an Event of Default by Borrower under the Loan Documents shall not suspend, waive or affect any other Event of Default by Borrower under the Loan Documents, whether the same is prior or subsequent thereto and whether of the same or of a different type. None of the undertakings, agreements, warranties, covenants or representations of Borrower contained in the Loan Documents and no Event of Default by Borrower under the Loan Documents shall be deemed to have been suspended or waived by Bank unless such suspension or waiver is by an instrument in writing by Bank specifying such suspension or waiver and given pursuant to the requirements of Paragraph 9.5 hereof. 9.7 Severability. If any provision of this Agreement or the other Loan Documents or the application thereof to any Person or circumstance is held invalid or unenforceable, the remainder of this Agreement and the other Loan Documents and the application of such provision to other Persons or circumstances will not be affected thereby and the provisions of this Agreement and the other Loan Documents shall be severable in any such instance. 9.8 Successors and Assigns. This Agreement and the other Loan Documents shall be binding upon and inure to the benefit of the respective successors and assigns of Borrower and Bank. This provision, however, shall not be deemed to modify Paragraph 9.5 hereof. 9.9 Conflict with Other Loan Documents. The provisions of the other Loan Documents are incorporated in this Agreement by this reference thereto. Except as otherwise provided in the other Loan Documents by specific reference to the applicable provision of this Agreement, if any provision contained in this Agreement is in conflict with, or inconsistent with, any provision in the other Loan Documents, the provision contained in this Agreement shall govern and control. 9.10 No Impairment by Termination. Except to the extent provided to the contrary in the Loan Documents, no termination or cancellation (regardless of cause or procedure) of the Loan Documents shall in any way affect or impair the powers, obligations, 31 33 duties, rights and liabilities of Borrower in any way or respect relating to (a) any transaction or event occurring prior to such termination or cancellation, (b) the Collateral and/or (c) any of the undertakings, agreements, covenants, warranties and representations of Borrower contained in the Loan Documents. All such undertakings, agreements, covenants, warranties and representations shall survive such termination or cancellation. 9.11 Waivers. Except as otherwise specifically provided in this Agreement, Borrower waives any and all notice or demand which Borrower might be entitled to receive with respect to the Loan Documents by virtue of any applicable statute or law and waives presentment, demand and protest and notice of presentment, protest, default, dishonor, non-payment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Bank on which Borrower may in any way be liable and hereby ratifies and confirms whatever Bank may do in this regard. 9.12 Costs, Fees and Expenses Related to Loan Documents. In accordance with this Agreement on or prior to the date hereof and thereafter upon demand by Bank therefor, Borrower shall pay or reimburse Bank for all reasonable costs, fees and expenses incurred by Bank, or for which Bank becomes obligated, in connection with the negotiation, preparation and consummation of the Loan Documents, including but not limited to, reasonable attorneys' fees, search fees, appraisal fees and other costs and expenses. That portion of Borrower's Liabilities consisting of costs, expenses or advances to be reimbursed by Borrower to Bank pursuant to the Loan Documents which are not paid on or prior to the date hereof shall be payable by Borrower to Bank on demand. 9.13 Release. Borrower releases Bank from any and all causes of action, claims or rights which Borrower may now or hereafter have for, or which may arise from, any loss or damage caused by or resulting from: (a) any failure of Bank to protect, enforce or collect in whole or in part any of the Collateral; (b) Bank's notification to any Obligor of Bank's security interest in the Accounts and the Collateral; (c) Bank's directing any Obligor to pay any sums owing to Borrower directly to Bank in accordance with the terms thereof; and (d) any other act or omission to act on the part of Bank, its officers, agents or employees, except in each instance for willful misconduct and gross negligence. 9.14 Governing Law. This Agreement and the other Loan Documents are submitted by Borrower (for Bank's acceptance or rejection thereof). at Bank's principal place of business as an offer by Borrower to borrow monies from Bank now and from time to time hereafter and shall not be binding upon Bank or become effective until and unless accepted by Bank, in writing, at Bank's place of business. If so accepted by Bank, this Agreement and the other Loan Documents shall be deemed to have been made at Bank's principal place of business. This Agreement and the other Loan Documents shall be governed and controlled by the laws of the State of Illinois without regard to principles of conflict of laws. 9.15 Notices. All notices, consents, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given to any party or parties (a) upon delivery to the address of the party or parties as specified below if delivered in 32 34 person or by courier or if sent by certified or registered mail (return receipt requested), or (b) upon dispatch if transmitted by telecopy or other means of facsimile transmission with confirmation of sending, in each case addressed as follows: If to Borrower: c/o Aasche Transportation Services, Inc. 10214 North Mt. Vernon Road Shannon, Illinois 61078 Attn: Leon Monachos, Chief Financial Officer Telephone: (815) 864-2421 Telecopier: (815) 864-2646 with a copy to: Joel R. Schaider, Esq. Sachnoff & Weaver, Ltd. 30 South Wacker Drive Suite 2900 Chicago, Illinois 60606 Telephone: (312) 207-1000 Telecopier: (312) 207-6400 If to Bank: American National Bank and Trust Company of Chicago Rockford Division 6323 Riverside Boulevard Rockford, Illinois 61114 Attn: Steven B. Towne Telephone: (815) 282-7911 Telecopier: (815) 282-7925 with a copy to: Hinshaw & Culbertson 222 North LaSalle Street, Suite 300 Chicago, Illinois 60601 Attn: Dean E. Parker Telephone: (312) 704-3000 Telecopier: (312) 704-3001 The parties hereto may designate such other address or telecopy number by written notice in the aforesaid manner. 33 35 9.16 FORUM; AGENT; VENUE; JURY TRIAL WAIVER. TO INDUCE BANK TO ACCEPT THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER, OR RESPECT ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED ONLY IN COURTS HAVING SITUS WITHIN CHICAGO, ILLINOIS. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. BORROWER HEREBY IRREVOCABLY APPOINTS AND DESIGNATES ANY AUTHORIZED OFFICER OR ANY OTHER PERSON HAVING AND MAINTAINING A PLACE OF BUSINESS IN SUCH STATE, WHOM AN AUTHORIZED OFFICER MAY FROM TIME TO TIME HEREAFTER DESIGNATE (HAVING GIVEN FIVE (5) DAYS' WRITTEN NOTICE THEREOF TO BANK) AS BORROWER'S TRUE AND LAWFUL ATTORNEY AND DULY AUTHORIZED AGENT FOR ACCEPTANCE OF SERVICE OF LEGAL PROCESS. BORROWER AGREES THAT SERVICE OF SUCH PROCESS UPON SUCH PERSON SHALL CONSTITUTE PERSONAL SERVICE OF SUCH PROCESS UPON BORROWER. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS PARAGRAPH. BORROWER HEREBY IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION IN WHICH BORROWER IS A PARTY. 9.17 Other Costs, Fees and Expenses. If at any time or times hereafter Bank: (a) employs counsel for advice or other representation (i) with respect to the Loan Documents, (ii) to represent Bank in any litigation, contest, dispute, suit or proceeding or to commence, defend, or intervene or to take any other action in or with respect to any litigation, contest, dispute, suit, or proceeding (whether instituted by Bank, Borrower, or any other Person) in any way or respect relating to the Loan Documents or Borrower's affairs, or (iii) to enforce any rights of Bank against Borrower or any other Person which may be obligated to Bank by virtue of the Loan Documents; (b) takes any action to protect, collect, sell, liquidate, or otherwise dispose of any of the Collateral; and/or (c) attempts to or enforces any of Bank's rights or remedies under the Loan Documents, the reasonable costs and expenses incurred by Bank in any manner or way with respect to the foregoing, shall be part of Borrower's Liabilities, payable by Borrower to Bank on demand. Without limiting the generality of the foregoing, such expenses, costs, charges and fees include: (i) attorneys' fees, costs and expenses; (ii) accountants' fees, costs and expenses; (iii) court costs and expenses; (iv) court reporter fees, costs and expenses; (v) long distance telephone charges; (vi) telegram charges; (vii) expenses for travel, lodging and food; and (viii) costs and expenses incurred with respect to exercise or enforcement of Bank's rights in or against Accounts and/or any Obligor, including expenses incurred in fulfilling, in whole or in part, any order of any Obligor from which an Account has arisen or will arise. 9.18 Revival. To the extent that Bank receives any payment on account of Borrower's Liabilities or any proceeds of Collateral are applied on account of Borrower's Liabilities and any such payment(s) and/or proceeds or any part thereof are subsequently invalidated, declared 34 36 to be fraudulent or preferential, set aside, subordinated and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy act, state or federal law, common law or equitable cause, then, to the extent of such payment(s) and/or proceeds received, Borrower's Liabilities or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment(s) and/or proceeds had not been received by Bank and applied on account of Borrower's Liabilities. 9.19 Acknowledgments. Borrower acknowledges that (i) it has been advised by counsel of its choice with respect to this Agreement and the transactions contemplated hereby, (ii) each of the waivers set forth herein was knowingly and voluntarily made; and (iii) the obligations of Bank hereunder, including the obligation to advance and lend funds to Borrower in accordance herewith, shall be strictly construed and shall be expressly subject to Borrower's compliance in all respects with the terms and conditions herein set forth. 9.20 Section Headings. Section and paragraph headings used in this Agreement are for convenience only and shall not effect the construction or interpretation of this Agreement. 9.21 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year specified at the beginning hereof. ASCHE TRANSFER, INC., an Illinois corporation By: /s/ Leon Monachos ------------------------------------------ Name: Leon Monachos ----------------------------------- Its: Vice President-Finance ----------------------------------- AG CARRIERS, INC., a Florida corporation By: /s/ Leon Monachos ------------------------------------------ Name: Leon Monachos ----------------------------------- Its: Vice President-Finance ----------------------------------- Accepted and agreed as of the 23rd day of June, 1998. AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a national banking association By: /s/ Steven B. Towne ------------------------------------ Title: Vice President ---------------------------- 35 37 EXHIBIT A BORROWING BASE CERTIFICATE [See Attached Pages] 36 38 AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
COLLATERAL REPORT ----------------- Date _______________ Report # _________________________________ Period Covered _______________________ _____ to ____________________________ [ ACCOUNTS RECEIVABLE ] Client (Bank Client Code _______________ Use Only) Tech ____________________ 1. Balance brought forward: (Previous Report #_______ Date _________) $_________________ ADDITIONS --------- 2. New sales $_________________ (+) 3. Miscellaneous debits _________________ (+) $_________________ (+) DEDUCTIONS ---------- -------------------------------------------------- 4. Collections (net cash) (See next page, Collection $_________________ (-) Non-A/R Collections O.P. Detail for Breakdown) 4A. __________________ -------------------------------------------------- 5. Discounts allowed _________________ (-) 6. Credit memos _________________ (-) 7. Miscellaneous Credits _________________ (-) $_________________ (-) 8. Gross Balance this report _________________ INELIGIBLES ----------- 9. Over ______ days past invoice date $_________________ (-) 10. Cross-age (______%) _________________ (-) 11. Contras _________________ (-) 12. Others _______________________ _________________ (-) _________________ (-) 13. TOTAL ELIGIBLE RECEIVABLES $_________________ A. Portion of Total Eligible Receivables which is supported by Outstanding $_________________ Invoices B. Portion of Total Eligible Receivables which are A/R Accruals (defined in $_________________ the Loan Agreement) [ INVENTORY ] 14. BORROWING BASE VALUE (____% OF LINE 13) $_________________ Client Code ____________________________ (Bank Use Only) (NOTE: MULTIPLE ADVANCE RATES USE ATTACHMENT I) 15. Balance brought forward: _________________ (Previous Report # ____________ Date_____________) 16. Additions _________________ (+) 17. Deductions _________________ (-) 18. Gross Balance this Report $_________________ INELIGIBLES ----------- 19. Slow-moving / obsolete items _________________ (-)
37 39 20. Consigned inventory _________________ (-) 21. In-transit _________________ (-) 22. Others _________________ (-) $_________________ (-) 23. TOTAL ELIGIBLE INVENTORY $_________________ 24. BORROWING BASE VALUE (_____% OF LINE 23) OR (See Attachment I) $_________________ 25. Inventory Limit _________________ 26. Lesser of Lines 24 & 25 $_________________ - --------------------------------------------------------------------------- OTHERS - --------------------------------------------------------------------------- $_________________ 27. BORROWING BASE VALUE (See Attachment I) 28. TOTAL BORROWING BASE (14 + 26 + 27) Not Exceeding Facility Limit $_____________________ (A) $_________________ ==================================================================================================================================
[ COLLECTION DETAIL ]
Date Funds Deposit Type Date Mail Deposited at (L = Lockbox, Total Deposit American W = Wire, Non-A/R Amount Received National M = Mail) A/R Collections Collections Deposited (Bank Use Only) - -------------- --------- --------------- -------------- -------------- ---------------- ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________ Total Funds Deposited at American National 29. ============== ============== ============== Total Sales For Transfer Total to Transfer Total to the Month Of: From ________________ 19_____ Line 4 Line 4A ___________ To___________________ 19_____ $_____________
Monthend Cut - Off Last Deposits included in Aging:
Total A/R Last Sales Collections Lockbox # Amount Date Mail Deposit Date Report # For the Month of: - --------- ------ ---- ------------ ---- -------- ----------------- ____________ ____________ ____________ ____________ ____________ ___________ _____________ ____________ ____________ ____________ ____________ ____________ ____________ $_____________
Pursuant to and in accordance with the terms and provisions of that certain Loan and Security Agreement ("Agreement") between AMERICAN NATIONAL BANK & TRUST COMPANY OF CHICAGO ("Secured Party") and _________________________________ ("Borrower"), Borrower is executing and delivering to Secured Party this Collateral Report accompanied by supporting data (collectively referred to as "Report"). 38 40 Borrower warrants and represents to Secured Party that this Report is true, correct, and based on information contained in Borrower's own financial accounting records. Borrower, by the execution of this Report hereby ratifies, confirms and affirms all of the terms, conditions and provisions of the Agreement, and further certifies on this _________ day of __________________, 19_____, that the Borrower is in compliance with said Agreement. _____________________________________________ (Borrower) By:__________________________________________ (Title)______________________ 41 SCHEDULE 7.l(f) LITIGATION On May 4, 1998, an accident occurred in Greensville, South Carolina involving a tractor/trailer driven by an employee of Asche Transfer, Inc. and another individual that resulted in the fatality of the other individual. No suit is pending as of the date of this Agreement. 42 SCHEDULE 7.1(r) AFFILIATES - Aasche Transportation Services, Inc., a Delaware corporation ("ATS") - 100% owner of Borrower - Specialty Transportation Services, Inc. - 90% owned by ATS - AGC Transportation Services, Inc. - 100% owed by ATS Borrower represents and warrants this entity is and shall remain a brokerage entity. 43 SCHEDULE 7.1(s) LABOR MATTERS Not Applicable 44 SCHEDULE 7.1(y) INSURANCE See attached pages 45 SCHEDULE 7.3(a)(v) PERMITTED LIENS 1. Pledge of 4,500,000 shares of the issued and outstanding Common Stock, $0.01 par value of Speciality Transportation Services, Inc. pursuant to the Pledge and Security Agreement dated as of January 30, 1998 by Aasche Transportation Services, Inc. ("Aasche"), PNC Bank, National Association ("PNC") and solely in its capacity as Trustee under a certain Voting Trust Agreement of even date herewith between Aasche and PNC in favor of American Capital Strategies, Ltd. 2. Those liens identified on Schedules 7.3(a)(v) - 1 through 7.3(a)(v)-5. 46 SCHEDULE 7.3(d) PERMITTED DEBT 1. Indebtedness secured by Liens identified on Schedule 7.3(a)(v). 2. Indebtedness to Bank. 3. Guarantees by Aasche Transportation Services, Inc. of Double A Development Mortgage. 4. Guarantees by Aasche Transportation Services, Inc. of Asche Transfer debt. 5. Guarantees by Aasche Transportation Services, Inc. of Asche Transfer capital leases. 6. Guarantees by Aasche Transportation Services, Inc. of AG Carriers Inc. debt. 7. Guarantees by Aasche Transportation Services, Inc. of AG Carriers capital leases. 8. Guarantees of ESOP Loan. 9. Guarantees of obligations of AG Carriers Note to Dick Baugh. 10. Indebtedness of Guarantor, representative copies of all notes executed in connection therewith have been delivered to Bank, in an amount equal to $5,375,000. EX-10.2 3 SECURED AGREEMENT 1 EXHIBIT 10.2 AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO SECURED GUARANTY WHEREAS, ASCHE TRANSFER, INC., is an Illinois corporation having its principal office located at 10124 Mount Vernon Road, Shannon, Illinois 61087 ("Asche"), and AG CARRIERS, INC. is a Florida corporation, having its principal office located at 13349 Southridge Industrial Drive, Tavares, Florida 32778 ("AG") (Asche and AG are hereafter referred to, individually and collectively, as the "Borrower"); and WHEREAS, the Borrower desires or may desire at some time and/or from time to time to obtain financial accommodation from AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO (hereafter referred to as the "Bank") with principal offices at 120 South LaSalle Street, Chicago, Illinois 60603; and WHEREAS, the undersigned guarantor is either a corporation or company, desiring to induce the Bank, at its option, at any time, or from time to time, to extend financial accommodation to the Borrower, and represents to the Bank that it is organized under the laws of the state of Delaware, and that the Borrower (a) is engaged in business as a corporate parent, affiliate or subsidiary of the undersigned, and/or (b) expects to derive advantage by assisting the Borrower in procuring financial assistance from the Bank; or the undersigned is a(n) individual(s) or partnership desiring to induce the Bank at its option, at any time, or from time to time, to extend financial accommodation to the Borrower (said undersigned corporation, company, individual(s) or partnership, as the case may be, is severally hereinafter referred to as the "undersigned"). 1. NOW THEREFORE, FOR VALUE RECEIVED, and in consideration of advances, credit or other financial accommodation heretofore, now or hereafter at any time extended to the Borrower by the Bank, the undersigned (jointly and severally if there is more than one guarantor) hereby unconditionally guarantee(s) the full and prompt payment to the Bank at maturity, whether by acceleration or otherwise, and at all times thereafter of any and all "Indebtedness". "Indebtedness" shall mean obligations and liabilities of every kind and nature of the Borrower to the Bank (including all indebtedness, obligations and liabilities of partnerships, created or arising while the Borrower is or was a member thereof), including principal and interest, however evidenced, whether now existing or hereafter created or arising, directly or indirectly, primary or secondary, absolute or contingent, due or to become due, or joint or several, and however owned, held or acquired, whether through discount, overdraft, returned checks, purchase, direct loan or as collateral, or otherwise, including without limitation all obligations and liabilities of the Borrower to the Bank under that certain Loan and Security Agreement among and between the Borrower and the Bank, of even date herewith (the "Loan Agreement"). Capitalized terms used in this guaranty and not otherwise defined herein shall have the meanings given to them in the Loan Agreement. The undersigned further unconditionally guarantees the prompt, full and faithful performance and discharge by the Borrower of all of the terms, conditions, agreements, representations and warranties on the part of the Borrower contained in any agreement, or in any modification or addenda thereto or substitution thereof in connection with any advance, credit or financial accommodation afforded by the Bank to the Borrower. The undersigned further agree(s) to pay all expenses, including, without limitation, reasonable legal fees and court costs paid or incurred by the Bank in endeavoring to collect the Indebtedness, or any part thereof, in enforcing this guaranty, arising out of any post-judgment proceedings, or in defending any suit based on any act or omission of the Bank with respect to the Indebtedness, collateral, or this guaranty or in connection with any Recovery Claim hereinbelow defined (hereafter, collectively referred to as "Expenses"). 2 2. The term "Guaranteed Debt," as used herein, shall be deemed to mean an amount equal to all the Indebtedness plus Expenses, and the amount of the Guaranteed Debt shall be unlimited. 3. In case of the death, incompetence, dissolution, liquidation or insolvency (however evidenced) of the Borrower, a principal of the Borrower, or any guarantor of the Indebtedness or in case any bankruptcy, reorganization, debt arrangement or other proceeding under any bankruptcy or insolvency law, or any dissolution, liquidation or receivership proceeding, is instituted by or against the Borrower, or any of the undersigned or any other guarantor of the Indebtedness or the inability of the Borrower or any of the undersigned to pay debts as they mature, or in case of the assignment by the Borrower or any of the undersigned for the benefit of creditors, then upon the occurrence of any such event, all Guaranteed Debt then existing shall at the option of the Bank, without notice to anyone, immediately become due or accrued and be payable from the undersigned (or any thereof if more than one guarantor). 4. All payments received from whatever source shall be applied toward the payment of the Indebtedness in such order of application as the Bank may in its sole discretion, from time to time elect, and this determination shall be conclusive upon the undersigned. 5. This guaranty shall in all respects be a continuing, absolute and unconditional guaranty, and shall remain in full force and effect with respect to each guarantor until written notice shall have been actually received by the Bank by first class or certified mail, of its discontinuance as to such guarantor, or of the death or dissolution of such guarantor, and also until all Guaranteed Debt created or existing before receipt of such notice shall have been fully paid. In case of any such discontinuance, or death or dissolution of any guarantor or guarantors and notice thereof to the Bank, this guaranty shall nevertheless continue and remain in force against the other guarantor or guarantors until discontinued as to such other guarantor or guarantors as herein provided. No compromise, settlement, release or discharge of, or indulgence with respect to, or failure, negligence or omission to enforce or exercise any right against, any one or more guarantors or the fact that at any time or from time to time, all the Guaranteed Debt may have been paid in full, shall release or discharge the undersigned. In the event of the death of the undersigned, this guaranty shall continue as to all Indebtedness theretofore incurred by the Borrower even though said Indebtedness is renewed or the time of maturity of Indebtedness is extended without the consent of the executors or administrators of the undersigned. This guaranty shall be valid, irrespective of the validity, regularity or enforceability of any instrument, writing or agreement relating to any Indebtedness, whether or not such Indebtedness is due or to become due before or after any bankruptcy or insolvency proceeding involving the Borrower. 6. The liability hereunder shall in no way be affected or impaired by any of the following, any or all of which may be done or omitted by the Bank in its sole discretion without notice to anyone and irrespective of whether the Guaranteed Debt shall be increased or decreased thereby (and the Bank is hereby expressly authorized in its sole discretion to make from time to time, without notice to anyone): any sale, pledge, surrender, compromise, settlement, exchange, release, renewal, extension, modification, election with respect to any collateral under Section 1111 or any other provision or section of bankruptcy Code now existing or hereinafter amended; or other disposition of or with respect to any of said Guaranteed Debt or any security or collateral therefor, whether or not such disposition is commercially reasonable or accomplished in a commercially reasonable manner; and such liability shall in no way be affected or impaired by any acceptance by the Bank of any security for, or other guarantors or obligors of, any of the Guaranteed Debt, or by any forbearance or indulgence by the Bank in the collection of, or any failure, negligence or omission on its part to realize upon any thereof, or to enforce any claims against any person or persons primarily or secondarily liable thereon, or upon any collateral or security therefor or to enforce any lien upon or right of appropriation of any moneys, credits or property of the Borrower in the possession and control of the Bank, or by an application of any payments or credits on the Guaranteed Debt. Any act or omission of any kind or at any time upon the part of the Bank with respect to any matter whatsoever shall not in any manner affect or impair this guaranty nor the liability thereunder. The undersigned hereby consents to all acts and omissions of the Bank set forth herein. 2 3 7. In order to hold the undersigned liable hereunder and to enforce this guaranty, there shall be no obligation on the part of the Bank at any time to resort for payment to the Borrower, or to any other guarantor, or any person, firm or corporation liable for the Guaranteed Debt, or to any collateral, security, property, liens or other rights or remedies of the Bank in respect to the Guaranteed Debt or any part thereof, all of which is hereby expressly waived by the undersigned. 8. All diligence in collection, and any presentment for payment, demand, protest and/or notice, as to any and everyone, of protest, dishonor, default or nonpayment, and notice of the creation and existence of any and all of the Guaranteed Debt, and of any security therefor, and of the acceptance of this guaranty, or extensions of credit or indulgences hereunder or of any other matters or things whatsoever relating hereto are expressly waived. 9. The granting of additional credit from time to time by the Bank to the Borrower in excess of the amount to which the right of recovery under this guaranty is limited or in excess of the amount extended to the Borrower at the time this guaranty is executed by the undersigned, without notice to the undersigned, is hereby expressly authorized and shall in no way affect or impair this guaranty. 10. (a) To secure payment of the Guaranteed Debt, the undersigned does hereby pledge, assign, transfer and deliver to the Bank, and grants to the Bank, a security interest in and to and a first lien on all of property of the undersigned of any kind or description, tangible or intangible, of whatever description (excluding tractors and trailers) whether now existing and/or owned and hereafter arising and/or acquired, wherever located, including, but not limited to, the following: (1) all Accounts; (2) certificated and uncertificated securities; (3) moneys, reserves, deposits, deposit accounts and interest or dividends thereon, securities, cash, cash equivalents and other property now or at any time or times hereafter in the possession or under the control of the Bank or its bailee; (4) liens, guarantees and other rights and privileges pertaining to any of the foregoing; (5) all books, records and computer records in any way relating to the foregoing; (6) all accessions, substitutions, renewals, improvements and replacements of and additions to the foregoing; and (7) products and proceeds of the foregoing including, without limitation, proceeds of insurance policies insuring the same or other guaranty of the same (all of the foregoing personal property and real property is hereinafter sometimes individually and sometimes collectively referred to as "Collateral"). The undersigned shall make appropriate entries upon its financial statements and books and records disclosing the Bank's security interest in the Collateral. (b) The undersigned shall execute and/or deliver to the Bank, at any time and from time to time hereafter at the request of the Bank, all agreements, instruments, financing statements, continuation statements, authorizations, documents and other written matter (sometimes hereinafter individually and collectively referred to as "Supplemental Documentation") that the Bank reasonably may request, in form and substance reasonably acceptable to the Bank, to perfect and maintain perfected the Bank's security interest in the Collateral and to consummate the transactions contemplated in or by this guaranty. Upon the occurrence of any Event of Default, the undersigned irrevocably, hereby makes, constitutes and appoints the Bank (and all Persons designated by the Bank for that purpose) as the undersigned's true and lawful attorney and agent-in-fact to sign the name of the undersigned on the Supplemental Documentation and to deliver the Supplemental Documentation to such Persons as the Bank may reasonably elect. The undersigned agrees that a copy, electronic image or other reproduction of this Agreement or of any financing statement shall be sufficient as a financing statement. (c) The Bank (by any of its officers, employees and/or agents) shall have the right, at reasonable times and intervals and upon notice to the undersigned to inspect the Collateral and all related records (and the premises upon which it is located) and to verify the amount and condition of or any other matter relating to the Collateral. All reasonable costs, fees and expenses incurred by the Bank, or for which the Bank has become obligated, in connection with such inspection and/or verification shall constitute part of the Guaranteed Debt, payable by the undersigned to the Bank on demand. 3 4 (d) The undersigned warrants and represents to and covenants with the Bank that: (1) as of the Closing Date, the Bank's security interest in the Collateral is now and at all times hereafter shall be perfected and have a first priority; (2) the offices and/or locations where the undersigned keeps the Collateral consisting of personal property and books and records concerning the Collateral are solely located at the address indicated on the signature page of this guaranty, and the undersigned shall not remove such books and records and/or the Collateral therefrom and shall not keep any of such books and records and/or the Collateral at any other office or location without the prior written consent of the Bank; and (3) as of the Closing Date, the undersigned's sole office and place of business is located at the address indicated on the signature page of this guaranty. The undersigned, by written notice delivered to the Bank at least thirty (30) days prior thereto, shall advise the Bank of the opening by the undersigned of any new office or place of business or its closing of any existing office or place of business and any new office or place of business shall be within the continental United States of America. There are no Liens on the Collateral other than the Lien of the Bank pursuant hereto. (e) After the occurrence of an Event of Default, the undersigned shall receive, as the sole and exclusive property of the Bank, and as trustee for the Bank, all monies, checks, notes, drafts and all other payment for and/or proceeds of Collateral which come into the possession or under the control of the undersigned (or any of its partners, managers, shareholders, directors, officers, employees, agents or those Persons acting for or in concert with the undersigned) and immediately upon receipt thereof, the undersigned shall remit the same (or cause the same to be remitted), in kind, to the Bank at the Bank's office listed in the preamble of this guaranty. (f) After the occurrence of an Event of Default, the Bank, at any time or times in its sole and absolute discretion, may take control of, in any manner, and may endorse the undersigned's name, as appropriate, to any of the items of payment or proceeds described in Paragraph 10(e) above and, pursuant to the provisions of this guaranty, the Bank may, in its sole and absolute discretion, apply the same to and on account of the Guaranteed Debt. For the purposes of this Paragraph, the undersigned hereby irrevocably makes, constitutes and appoints the Bank (and all persons designated by the Bank for that purpose) as the true and lawful attorney and agent-in-fact of the undersigned, with power, without notice to the undersigned, to take any such actions. (g) After the occurrence of an Event of Default, the Bank, in its sole and absolute discretion, without waiving or releasing any Event of Default or obligation, liability, or duty of the undersigned under this guaranty, may at any time or times hereafter, but shall be under no obligation to, pay, acquire and/or accept an assignment of any security interest, lien, encumbrance, or claim asserted by any Person against the Collateral. All sums paid by the Bank, in respect thereof and all reasonable costs, fees and expenses, including reasonable attorney's fees, court costs, expenses and other charges relating thereto that are incurred by the Bank, on account thereof shall be part of the Guaranteed Debt payable by the undersigned to the Bank on demand. (h) After the occurrence of an Event of Default, the Bank may, in its sole and absolute discretion, retain as additional Collateral or release to the undersigned, from time to time, such portion of the monies, reserves and/or proceeds received by the Bank with respect to the Collateral as the Bank may determine. All such monies, reserves, proceeds and other property of the undersigned in the possession of the Bank at any time or times hereafter are hereby pledged by the undersigned to the Bank as additional Collateral hereunder and may be applied by the Bank on account of the Guaranteed Debt. (i) No authorization given by the Bank pursuant to this guaranty to sell any specified portion of Collateral or any items thereof and no waiver by the Bank in connection therewith shall establish a custom or constitute a waiver of the limitation contained in this Agreement against such sales with respect to any portion of the Collateral or any item thereof not covered by said authorization. (j) Any of the Bank's officers, employees or agents shall have the right, at any time or times, in name of the Bank or the undersigned, as the case may be, or in the name of a firm of independent certified 4 5 public accountants acceptable to the Bank, to verify the validity, amount or any other matters relating to any Accounts by mail, telephone, telegraph or otherwise. (k) The undersigned shall keep accurate and complete records of its Accounts and as frequently as the Bank shall require, but not less frequently than monthly, the undersigned shall deliver to the Bank an accounts payable aging report, an accounts receivable aging report and formal written assignments of all Accounts, together with copies of the invoices related thereto, if requested. The undersigned shall also deliver to the Bank, upon demand, the original copy of all documents, including without limitation, repayment histories, present status reports and shipment reports, relating to the Accounts included in any accounts receivable aging report and such other matters and information relating to the status of then existing Accounts as the Bank shall reasonably request. (l) The undersigned shall give the Bank prompt notice of any Account in excess of Ten Thousand Dollars ($10,000) which is in dispute between any Account Debtor and the undersigned. The undersigned shall provide such additional reports concerning the Accounts (including, without limitation Accounts Receivable Aging Reports) as the Bank shall reasonably request. (m) The undersigned shall not, without the prior written consent of the Bank, sell, transfer, grant a security interest in or otherwise dispose of or encumber any of its Accounts to any Person other than the Bank. (n) The undersigned agrees that the Bank shall have the rights and remedies of a secured party under the Uniform Commercial Code of Illinois with respect to all of the aforesaid property, including, without limitation thereof, the right to sell or otherwise dispose of any or all of such property. THE UNDERSIGNED WAIVES EVERY DEFENSE, COUNTERCLAIM OR SETOFF WHICH THE UNDERSIGNED MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY THE BANK IN ENFORCING THIS GUARANTY, INCLUDING, WITHOUT LIMITATION, EVERY DEFENSE, COUNTERCLAIM OR SETOFF WHICH THE UNDERSIGNED MAY NOW HAVE, OR HEREAFTER MAY HAVE, AGAINST THE BORROWER OR ANY OTHER PARTY LIABLE TO THE BANK IN ANY MANNER. As further security, any and all debts and liabilities now or hereafter arising and owing to any of the undersigned by the Borrower, or any other party liable to the Bank are hereby subordinated to the Bank's claims and are hereby assigned to the Bank. The undersigned ratifies and confirms whatever the Bank may do pursuant to the terms hereof and with respect to any collateral for the Guaranteed Debt, and agrees that the Bank shall not be liable for any error of judgment or mistakes of fact or law. The Bank may, without notice to anyone, apply or set off any balances, credits, deposits, accounts, moneys or other indebtedness at any time credited by or due from the Bank to any of the undersigned against the Guaranteed Debt. Any notification of intended disposition of any property required by law shall be deemed reasonable and properly given if given at least five (5) calendar days before such disposition. 11. Should a claim ("Recovery Claim") be made upon the Bank at any time for recovery of any amount received by the Bank in payment of the Guaranteed Debt (whether received from the Borrower, the undersigned pursuant hereto, or otherwise) and should the Bank repay all or part of said amount by reason of (i) any judgment, decree, or order of any court or administrative body having jurisdiction over the Bank or any of its property; or (ii) any settlement or compromise of any such Recovery Claim effected by the Bank with the claimant (including the Borrower), the undersigned shall remain jointly and severally liable to the Bank for the amount so repaid to the same extent as if such amount had never originally been received by the Bank, notwithstanding any termination hereof or the return of this document to any of the undersigned or the cancellation of any note, this guaranty or other instrument evidencing any of the Indebtedness. 12. In the event the Bank shall sell, assign or transfer the Indebtedness or Guaranteed Debt, or any part thereof, or grant participations therein, each and every immediate or remote successive assignee, transferee, holder of or participant therein, of all or any part of the Indebtedness or Guaranteed Debt shall have the right to enforce this guaranty by suit or otherwise for the benefit of such assignee, transferee, holder or participant, as fully as if such assigned transferee, holder or participant were herein by name specifically given such rights, 5 6 powers and benefits; but the Bank shall have an unimpaired, prior and superior right to enforce this guaranty for its benefit as to so much of the Indebtedness or Guaranteed Debt as it has not been sold, assigned or transferred. 13. No release or discharge of any one or more of the undersigned (if there is more than one guarantor), or of any other person, whether primarily or secondarily liable for and obligated with respect to the Guaranteed Debt, or the institution of bankruptcy, receivership, insolvency, reorganization, dissolution or liquidation proceedings by or against any such guarantor or person, or the entry of any restraining or other order in any such proceeding, shall release or discharge the undersigned or any other guarantor of the Guaranteed Debt, or any other person, firm or corporation liable to the Bank for the Guaranteed Debt, unless and until all of the Guaranteed Debt shall have been fully paid and this guaranty stamped "Canceled" and returned to the undersigned. 14. No delay on the part of the Bank in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Bank of any right or remedy shall preclude any other or further exercise thereof, or the exercise of any other right or remedy. No action of the Bank permitted hereunder shall in any way affect or impair the rights of the Bank and the obligation of the undersigned under this guaranty. 15. To the extent that the Borrower or any of the undersigned is a corporation, limited liability company or partnership, all references herein to the Borrower and to the undersigned, respectively, shall be deemed to include any successor or successors, whether immediate or remote, to such corporation, limited liability company or partnership. 16. This guaranty has been delivered at Chicago, Illinois, and shall be construed according to the laws of the State of Illinois, in which state it shall be performed by the undersigned. All actions arising directly or indirectly as a result or in consequence of this guaranty shall, in the sole and absolute discretion of the Bank, be instituted and litigated only in courts having situs in the City of Chicago, Illinois, and the undersigned hereby consents to the jurisdiction of any State or Federal Court located and having its situs in said city and waives any right to transfer or change the venue of any litigation. 17. Wherever possible, each provision of this guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this guaranty. 18. It is agreed that the undersigned's liability hereunder is several and is independent of any other guaranties at any time in effect with respect to all or any part of the Indebtedness and that the undersigned's liability hereunder may be enforced regardless of the existence of any such other guaranties. 19. This guaranty, and each and every part hereof, shall be binding upon the undersigned (jointly and severally, if there is more than one guarantor) and upon the heirs, legal representatives, successors and assigns of the undersigned, and shall inure to the benefit of the Bank, its successors and assigns. 20. If the undersigned guarantor is a corporation, then and in such event, the undersigned guarantor expressly represents and warrants unto the Bank that the execution and delivery of this guaranty has been duly authorized by resolutions heretofore duly adopted by its Board of Directors in accordance with law and its by-laws, that said resolutions have not been amended nor rescinded, are in full force and effect, that the officers of the undersigned executing and delivering this guaranty, for and on behalf of the undersigned, are duly authorized and empowered so to act. The Bank in accepting this guaranty is expressly relying upon the aforesaid representations and warranties. 21. This guaranty constitutes the entire agreement between the parties relating to the subject matter hereof and is the final and complete expression of their intent. No prior or contemporaneous negotiations, promises, agreements, covenants or representations of any kind or nature, whether made orally or in writing, have been 6 7 made by the parties, or any of them, in negotiations leading to this guaranty or relating to the subject matter hereof, which are not expressly contained herein, or which have not become merged and finally integrated into this guaranty; it being the intention of the parties hereto that in the event of any subsequent litigation, controversy or dispute concerning the terms and provisions of this guaranty, no party shall be permitted to offer to introduce oral or extrinsic evidence concerning the terms and conditions hereof that are not included or referred to herein and not reflected in writing. This guaranty can only be changed, modified, waived or discharged if consented to in a writing duly signed and delivered on behalf of the Bank. No conditions exist to the legal effectiveness of this guaranty. 22. THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING (i) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH THIS GUARANTY OR AN AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED IN CONNECTION HEREWITH, OR (ii) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS GUARANTY, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. IN WITNESS WHEREOF, THIS GUARANTY IS SIGNED AND SEALED by the undersigned at Shannon, Illinois, effective this 23rd day of June, 1998. ADDRESS: CORPORATION, PARTNERSHIP OR LIMITED LIABILITY CO.: 10124 North Mt. Vernon Road AASCHE TRANSPORTATION SERVICES, INC., Shannon, Illinois 61078 a Delaware corporation By: /s/ Leon Monachos --------------------------------- Its: Chief Financial Officer ----------------------------- 7 EX-10.3 4 ESOP LOAN & SECURITY AGREEMENT 1 EXHIBIT 10.3 ESOP LOAN AND SECURITY AGREEMENT American National Bank and Trust Company of Chicago 120 South LaSalle Street Chicago, Illinois 60603 Ladies and Gentlemen: The undersigned, Dennis D. Wilson and James A. Jalovec, not individually but solely as trustees under that certain AASCHE TRANSPORTATION SERVICES, INC. EMPLOYEES' STOCK OWNERSHIP TRUST (the "Borrower"), apply to you (the "Bank") for your commitment, subject to all of the terms and conditions hereof and on the basis of the representations and warranties hereafter set forth, to make a term loan available to the Borrower as hereinafter set forth. SECTION 1 THE TERM LOAN SECTION 1.1 AMOUNT AND TERMS. By its acceptance hereof the Bank agrees, subject to all of the terms and conditions hereof and on the basis of the representations and warranties hereinafter set forth, to make a term loan (the "Loan") of up to ONE HUNDRED NINETY-ONE THOUSAND SIX HUNDRED NINETY AND 47/100 DOLLARS ($191,690.47) to the Borrower, the proceeds of such Loan to be used by the Borrower solely to repay existing indebtedness of the Borrower resulting from loan facilities provided to the Borrower by LaSalle National Bank. There shall be only one borrowing under the Loan and any portion of the Loan amount noted above not requested by the Borrower on the occasion of such borrowing shall thereupon automatically expire. SECTION 1.2 THE NOTE. The Loan made pursuant to Section 1.1 hereof shall be made against and evidenced by a promissory note of the Borrower in the form (with appropriate insertions) attached hereto as Exhibit A (the "Note"), such Note shall be dated the date of issuance thereof, be payable to the order of the Bank in the face principal amount of ONE HUNDRED NINETY-ONE THOUSAND SIX HUNDRED NINETY AND 47/100 DOLLARS ($191,690.47) and be expressed to mature on April 30, 2000, the final maturity thereof. The principal amount of the Loan from time to time remaining unpaid hereon shall bear interest as provided in Section 2 hereof. Without regard to the principal amount of the Note stated on its face, the actual principal amount at any time outstanding and owing by the Borrower on account of the Note shall be the amount of the Loan disbursed under Section 1.1 hereof less all payments of principal actually 2 received by the Bank. The Bank shall record on its books and records or, at its option, on a schedule to the Note the amount of the Loan disbursed by the Bank under Section 1.1 hereof, any repayments of principal thereof and the principal balance from time to time outstanding, provided that prior to any transfer of the Note all such amounts shall be recorded on a schedule to the Note. The Borrower agrees that the record thereof, whether shown on such books and records or on a schedule to the Note, shall be prima facie evidence in any action or proceeding instituted to collect or enforce collection of the Note of the principal amount remaining unpaid thereon; provided, however, that the failure of the Bank to record any of the foregoing shall not limit or otherwise affect the obligation of the Borrower to repay the principal amount of the Loan together with accrued interest thereon. SECTION 2 INTEREST SECTION 2.1 INTEREST RATE. The principal amount of the Loan from time to time remaining unpaid shall bear interest (which the Borrower hereby promises to pay) prior to maturity (whether by lapse of time, acceleration or otherwise) at a rate per annum equal at all times to the Prime Rate as from time to time in effect and any principal amount of the Loan from time to time remaining unpaid after its maturity (whether by lapse of time, acceleration or otherwise) shall bear interest (which the Borrower hereby promises to pay), whether before or after judgment, until paid in full at a rate per annum determined by adding 3% to the interest rate which would otherwise be applicable thereto from time to time. Any change in the interest rate on the Note resulting from a change in the Prime Rate shall be effective on the date of the relevant change in the Prime Rate. SECTION 2.2 BASIS AND PAYMENT DATES. All interest accruing on the principal amount of the Loan prior to maturity shall be due and payable monthly on the fifteenth day of each and every month (commencing July 15, 1998) and at maturity (unless prepaid in whole prior to such date, then on the date of such prepayment in whole). Interest accruing on any principal amount of the Loan from time to time remaining unpaid after its maturity shall be due and payable upon demand. All interest on the Loan shall be computed on the basis of a year of 360 days for the actual number of days elapsed. SECTION 3 COLLATERAL SECTION 3.1 GRANT OF SECURITY INTEREST-PLEDGED SHARES. The Borrower hereby grants to the Bank a continuing security interest in Thirty-four Thousand Six Hundred Forty-seven (34,647) shares of the issued and outstanding common stock of Aasche Transportation Services, Inc., a Delaware corporation (the "Parent Company") which are owned by the Borrower (the "Pledged Shares") together with all rights and remedies incident thereto and all dividends, distributions and income at any time receivable in respect thereof (whether in cash or additional shares or other property) and all other rights and remedies incident thereto and all proceeds thereof (the Pledged Shares and all such other dividends, distributions, income and proceeds 2 3 being hereinafter referred to collectively as the "Collateral"). The security interest herein granted and provided for is made and given to secure and shall secure the prompt payment of principal of and interest on the Note as and when the same becomes due and payable and the payment, observance and performance of any and all obligations and liabilities arising under or provided for in this Agreement or the Note or any of them, in each instance as the same may be amended, modified or restated from time to time, and whether now existing or hereafter arising. SECTION 3.2 FURTHER ASSURANCES. Upon the request of the Bank, the Borrower shall deliver, or cause to be delivered, the Pledged Shares, it being agreed that the Bank is not requiring the delivery of the Pledged Shares as of the date of this Agreement. The Borrower covenants and agrees that it will at any time and from time to time as requested by the Bank execute and deliver such further instruments and do and perform such other acts as the Bank may deem necessary or desirable to provide for or perfect or protect the lien and security interest of the Bank in the Collateral hereunder. SECTION 3.3 VOTING. The Bank shall have the right at any time and from time to time to transfer the Collateral or any part thereof into its name or into the name of its nominee. The Bank shall not be entitled to vote the Pledged Shares unless and until an Event of Default has occurred. SECTION 3.4 DIVIDENDS AND DISTRIBUTIONS. Unless and until a Default or Event of Default shall have occurred hereunder, all cash dividends on the Pledged Shares (other than dividends issued in connection with the complete or partial liquidation of the Parent Company) shall be paid to and may be retained by the Borrower and any and all other dividends, payments or other distributions (including cash liquidating dividends, stock dividends, shares resulting from any split-up or other reclassification, dividends in kind and shares issued pursuant to reorganization or merger involving the Parent Company) which shall be paid or distributed upon or in respect of the Pledged Shares, shall, upon the request of the Bank, be paid and/or delivered to the Bank and held by the Bank as additional collateral security hereunder and, if received by the Borrower, shall forthwith upon their receipt, upon the request of the Bank, be delivered to the Bank. The Borrower agrees that it will from time to time deliver to the Bank appropriate stock powers duly executed in blank with all signatures guaranteed and otherwise in transferable form covering any and all certificates evidencing any additional shares resulting from any stock dividend on or split-up of the Pledged Shares or issued in respect of the Pledged Shares in connection with a reorganization or merger involving the Parent Company. SECTION 3.5 PARTIAL RELEASES. The Bank agrees, provided always that no Default or Event of Default shall have occurred and be continuing, as promptly as is practicable after the last day of each calendar month and upon the written request of the Borrower, to release that number of Pledged Shares then being held by the Bank to secure the Loan and the other obligations secured hereunder which is equal to the number of such Pledged Shares held as of the last day of such month multiplied by a fraction, the numerator of which is the aggregate amount of all principal payments made on the Loan during such month and the denominator of which is the sum of the numerator plus the unpaid principal balance of the Loan as of the last day of such month. 3 4 SECTION 3.6 GUARANTY. The Note and the other obligations hereunder shall be guaranteed by the Parent Company, Asche Transfer, Inc., an Illinois corporation, and AG Carriers, Inc., a Florida corporation (collectively, the "Guarantors"), pursuant to a Continuing Unconditional Guaranty dated of even date herewith in form and substance satisfactory to the Bank (the "Guaranty"), and the Guarantors' obligations thereunder shall at all times be secured by that certain Loan and Security Agreement dated as of the date of this Loan and Security Agreement, by and among the Guarantors and the Bank, as amended (the "Guarantor Security Agreement"). SECTION 4 PAYMENTS AND APPLICATION SECTION 4.1 PLACE AND APPLICATION. All payments of principal and interest and all other amounts payable hereunder shall be made to the Bank at the principal office of the Bank at 33 North LaSalle Street, Chicago, Illinois (or at such other place for the account of the Bank as the Bank may from time to time specify in writing to the Borrower) on the date any such payment is due and payable. All such payments shall be made in lawful money of the United States of America, in immediately available funds at the place of payment. Payments received by the Bank after 11:00 a.m. (Chicago time) shall be deemed received as of the opening of business on the next Business Day. All such payments shall be made without set-off or counterclaim and without reduction for, and free from, any and all present and future taxes, levies, imposts, duties, fees, charges, deductions, withholdings, restrictions or conditions of any nature imposed by any government or any political subdivision or taxing authority thereof. SECTION 4.2 PREPAYMENTS. The Borrower shall have the privilege of prepaying, in whole or in part, the Loan at any time upon giving three (3) Business Days' prior notice to the Bank, each such prepayment to be made by the payment of the principal amount to be prepaid and accrued interest thereon to the date fixed for prepayment. All such prepayments shall be made without premium or penalty. No amount prepaid may be reborrowed and partial prepayments shall be applied to the several installments of the note in the inverse order of maturity. SECTION 5 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Bank as follows: SECTION 5.1 The Aasche Transportation Services, Inc. Employees' Stock Ownership Trust (the "Trust") is a duly organized, validly existing employee stock ownership trust exempt from tax under Section 501(a) of the Code. The Borrower has submitted to the Bank a true and correct copy of The Restated Aasche Transportation Services, Inc. Employees' Stock Ownership Trust dated effective as of September 22, 1994 between the Parent Company and the Borrower and all amendments thereto (the "Trust Agreement") and of The Amended and Restated Aasche Transportation Services, Inc. Employees' Stock Ownership Plan and all amendments thereto (the 4 5 "Plan"). The Borrower has submitted to the Bank a true and correct copy of the most recent determination letter from the Internal Revenue Service to the effect that the Plan and the Trust, taken together, qualify as an employee stock ownership plan for purposes of Section 4975(e)(7) of the Code. The Plan is qualified under Section 401(a) of the Code. The Plan and the Trust, taken together, constitute a valid employee stock ownership plan for purposes of Section 4975(e)(7) of the Code and is entitled to all the benefits afforded to employee stock ownership plans thereunder. The Plan and the Trust are in compliance in all material respects with ERISA and the Code, and the Borrower has received no notice to the contrary. The Plan has, at all times during its existence, been administered in compliance with applicable law and with the terms of the Plan. SECTION 5.2 Concurrently herewith the Borrower shall apply the proceeds of the Loan in their entirety to the repayment of loan obligations of the Borrower to LaSalle National Bank (which loan was obtained by the Borrower to refinance a loan which, in turn, funded the Borrower's purchase of the Pledged Shares). The Pledged Shares purchased with the proceeds of the funds borrowed from LaSalle National Bank were acquired for no more than adequate consideration within the meaning of Section 3(18) of ERISA and in accordance with the other requirements of Section 408(e) of ERISA. The acquisition of the Pledged Shares did not, and consummation of the transactions provided for in this Agreement and performance and observance by the Borrower with the provisions hereof and of the Note shall not, constitute a prohibited transaction for purposes of Section 406 of ERISA or Section 4975 of the Code. The Pledged Shares are qualifying employer securities for purposed of ERISA and the Code. SECTION 5.3 The Borrower has full right, power and authority to enter into this Agreement, to make the borrowings hereunder provided for, to issue its Note in evidence thereof, to grant to the Bank the security interest described herein, and to perform each and all of the matters and things herein and therein provided for. This Agreement and the Note do not, nor will the performance or observance by the Borrower of any of the matters or things herein or therein provided for, contravene or constitute a default under any provision of law or any judgment, injunction, order or decree binding upon the Borrower, the Plan or the Trust or any provision of the Plan or the Trust Agreement or any other covenant, indenture or agreement of or affecting the Borrower or any of its assets. The Pledged Shares have been validly issued and, upon acquiring the Pledged Shares with the proceeds of the Loan, the Pledged Shares will be fully paid and non-assessable owned by the Borrower free and clear of all liens, charges, encumbrances and restrictions whatsoever, except for the security interest of the Bank provided for herein. There are no outstanding options or rights of any person, firm, corporation or other entity to purchase, or of the Borrower to sell, any of the Pledged Shares. SECTION 5.4 There is no litigation or governmental proceeding pending, nor to the knowledge of the Borrower threatened, against the Borrower or any of its assets. SECTION 5.5 The Borrower has no material liabilities, whether absolute or contingent, except for those heretofore disclosed to the Bank. SECTION 6 5 6 CONDITIONS PRECEDENT The obligation of the Bank to make the Loan shall be subject to satisfaction of the following conditions precedent: a. the Bank shall have received a certified copy of the Plan and Trust Agreement and all amendments thereto, and the same shall be satisfactory to the Bank; b. the Bank shall have received executed originals of this Agreement and the Note duly signed and properly completed; c. the Bank shall have received the Guaranty and the Guarantor Security Agreement properly executed and delivered by the Guarantors, together with all financing statements required by the Bank in connection therewith; d. the Bank shall have received copies (executed or certified, as may be appropriate) of all legal documents or proceedings taken in connection with the execution and delivery of this Agreement, the Note, the Guaranty and the Guarantor Security Agreement to the extent the Bank or its counsel may reasonably request; e. legal matters incident to this Agreement, the Note, the Guaranty and the Guarantor Security Agreement and to the transactions contemplated hereby shall be acceptable to the Bank and its counsel; and the Bank shall have received the favorable written opinion of counsel for the Borrower and for the Guarantors, in form and substance satisfactory to the Bank and its counsel; f. the Bank shall have received for each Guarantor a good standing certificate (dated as of the date no earlier than 30 days prior to the date hereof) from the office of the Secretary of State of the state of its corporation and each state in which it is qualified to do business as a foreign corporation; g. each and all of the representations and warranties contained in Section 5 hereof and in the Guarantor Security Agreement shall be and remain true and correct as of the date of the making of the Loan; h. the Borrower and the Guarantors shall be in full compliance with all of the terms and conditions hereof, the Note, the Guaranty and the Guarantor Security Agreement, and no Default or Event of Default shall have occurred or be continuing; and i. the Bank shall have received such valuations and certifications as it may require in order to satisfy itself as to the value of the Pledged Shares, the financial condition of the Borrower and the Guarantors, and the lack of material contingent liabilities of the Borrower and the Guarantors. SECTION 7 COVENANTS 6 7 The Borrower covenants and agrees that so long as any amount remains unpaid on the Note or the Commitment is outstanding, except to the extent compliance in any case or cases is waived in writing by the Bank: SECTION 7.1 COMPLIANCE. The Plan's status as a qualified employee stock ownership plan under the Code will continuously be maintained. The Borrower will comply in all material respects with all requirements of the Code, ERISA and any other law, rule or regulation applicable to it. SECTION 7.2 AMENDMENTS OF THE PLAN AND THE TRUST AGREEMENT. Except as may be required under the Code for purposes of maintaining the Plan's status as a qualified employee stock ownership plan, the Plan and the Trust Agreement will not be amended in any respect which under any circumstances adversely affects the rights of the Bank hereunder or under the Note. The Borrower shall give the Bank prior notice of any proposed amendment to the Plan or the Trust Agreement (and will furnish copies of such proposed amendment to the Bank concurrently with such notice), and shall deliver to the Bank certified copies of any such amendment within 10 days of the adoption thereof. SECTION 7.3 FINANCIAL REPORTS. The Borrower will maintain a system of accounting for the Plan and the Trust in accord with sound accounting practice and will furnish to the Bank and its duly authorized representatives such information and data with respect to the financial condition of the Plan and the Trust as the Bank may reasonably request; and without any request, will furnish to the Bank: a. as soon as available, but in any event within 120 days after the close of each annual accounting period of the Plan and the Trust, a statement of assets available for plan benefits and a statement of changes in assets available for plan benefits, all as certified as true and correct by the Borrower; and b. promptly after knowledge thereof shall have come to the attention of the Borrower, written notice of the occurrence of any Default or Event of Default hereunder or of any threatened or pending litigation or governmental proceeding against the Borrower or the Plan or the Trust or against the assets of the Trust. SECTION 7.4 INDEBTEDNESS. The Borrower will not issue, incur, assume, create or have outstanding any indebtedness for borrowed money (including as such any indebtedness representing the deferred purchase price of property, and any indebtedness, whether or not assumed, secured by liens on property acquired by the Borrower at the time of the acquisition thereof); provided, however, that the foregoing provisions shall not restrict nor operate to prevent (i) the indebtedness of the Borrower on the Note, (ii) other indebtedness of the Borrower to the Bank, and (iii) obligations of the Borrower to participants in the Plan created pursuant to the Plan as now in effect, or as hereinafter amended in accordance with Section 7.2 hereof. SECTION 7.5 LIENS. The Borrower will not pledge, mortgage or otherwise encumber, or subject to or permit to exist upon or be subjected to any lien, security interest or charge upon, any 7 8 assets or property of any kind or character at any time owned by the Trust or the Borrower as trustees; provided, however, that nothing contained in this Section 7.5 shall operate to prevent (i) the lien and security interest created for the benefit of the Bank hereby and (ii) any other liens in favor of the Bank. SECTION 7.6 GUARANTIES. The Borrower will not be or become, nor will it permit the Trust assets to be or become, liable as endorser, guarantor, surety or otherwise for any debt, obligation or undertaking of any other person, firm, corporation or entity or otherwise agree to provide funds for payment of the obligations of another, or supply funds thereto or invest therein or otherwise assure a creditor of another against loss, or subordinate any claim or demand it may have to the claim or demand of any other person, firm, corporation or entity. SECTION 7.7 DETERMINATION LETTERS. The Borrower shall obtain and furnish to the Bank, as soon as available and in any event within ninety (90) calendar days after the date of this Agreement a copy of favorable determination letter received from the Internal Revenue Service on account of the Plan and the Trust, confirming that the Plan and the Trust, taken together, qualify as an employee stock ownership plan for purposes of Section 4975(e)(7) of the Code. The Borrower shall also furnish to the Bank, as soon as available and in any event within ten (10) days after receipt thereof, a copy of each determination letter or other communications from the Internal Revenue Service concerning the qualification of the Plan and the Trust, taken together, as an employee stock ownership plan for purposes of the Code. SECTION 8 EVENTS OF DEFAULT AND REMEDIES SECTION 8.1 Any one or more of the following shall constitute an "Event of Default" hereunder: a. default in the payment when due of any part of the principal of or interest on the Note or of any other amounts payable under this Agreement; b. the Borrower shall default in the observance or performance by it of any other provision hereof or in any other instrument or document securing the Note or setting forth terms and conditions applicable to any of the indebtedness evidenced thereby and such default shall continue unremedied for a period of thirty (30) days after notice to the Borrower by the Bank or any other holder of the Note; c. any representation, warranty or statement made by the Borrower herein or in connection with the making of the Loan proves to be incorrect in any material respect as of the date of the issuance or making thereof or (with respect to the representations contained in Sections 5.1 and 5.2 above) as of any subsequent date during the term of this Agreement; d. default shall occur under any evidence of indebtedness issued, assumed or guaranteed by the Borrower or any Guarantor or under any indenture, agreement or other 8 9 instrument under which the same may be issued, and such default shall continue for a period of time sufficient to permit the acceleration of the maturity of any such indebtedness, or any such indebtedness shall not be paid when due (whether by lapse of time, acceleration or otherwise); e. any judgment or judgments, writ or writs, or warrant or warrants of attachment, or any similar process or processes in an aggregate amount in excess of $100,000 shall be entered or filed against the Borrower or any Guarantor or against any of their respective properties or assets and which remains unvacated, unbonded, unstayed or unsatisfied for a period of thirty (30) days; f. any indebtedness, obligation or liability of any Guarantor at any time owing to the Bank shall not be paid when due (whether by demand, lapse of time, acceleration, or otherwise), or any event occurs or condition exists which is specified as an event of default under the Guarantor Security Agreement, or any Guarantor shall purport to terminate, repudiate, revoke or disavow its Guaranty or the Guarantor Security Agreement or any of its obligations thereunder, or the Guaranty or the Guarantor Security Agreement (or any part thereof) shall for any reason not be or shall cease to be in full force and effect or is declared to be null and void; g. dissolution or termination of the existence of any Guarantor or the Borrower; h. the Borrower or any Guarantor shall (i) have entered involuntarily against it an order for relief under the United States Bankruptcy Code, as amended, (ii) not pay, or admit in writing its inability to pay, its debts generally as they become due, (iii) make an assignment for the benefit of creditors, (iv) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its property, (v) institute any proceeding seeking to have entered against it an order for relief under the United States Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, or (vi) fail to contest in good faith any appointment, proceeding described in Section 8.1(i) hereof; or i. a custodian, receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any Guarantor or any substantial part of any of their properties or assets, or a proceeding described in Section 8.1(j)(v) shall be instituted against the Borrower or such Guarantor, and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of thirty (30) days. SECTION 8.2 When any Event of Default described in clauses (a) through (g), both inclusive, of Section 8.1 has occurred and is continuing, the Bank or the holder of the Note may, by notice to the Borrower, declare the principal of and the accrued interest on the Note to be 9 10 forthwith due and payable and thereupon the Note, including both principal and interest and all other sums payable under this Agreement, shall be and become due and payable without further demand, presentment, protest or notice of any kind. SECTION 8.3 When any Event of Default described in clauses (h) or (i) of Section 8.1 hereof has occurred and is continuing, then the entire principal balance of the Note and all interest thereon and all other amounts payable under this Agreement shall immediately become due and payable without presentment, demand, protest or notice of any kind. SECTION 8.4 When any Event of Default has occurred and is continuing, the Bank may, in addition to such other rights or remedies as it may have, then or at any time or times thereafter exercise with respect to the Collateral any and all of the rights, options and remedies of a secured party under the Uniform Commercial Code of Illinois (the "UCC") including, without limitation, the sale of all or any part of the Collateral at any brokers' board or any public or private sale, provided that prior to such exercise the Bank shall release from the Collateral so much thereof as it would have been required to release under Section 3.5 hereof if no Event of Default had occurred. The net proceeds of any such sale, after deducting all costs and expenses incurred in the collection, protection, sale and delivery of the Collateral (which expenses Borrower hereby promises to pay) shall be applied first to the payment of any costs and expenses incurred by the Bank in selling or otherwise disposing of the Collateral, second, to the payment of the principal of and the interest on the Note, and, third, ratably as among any other items of the indebtedness hereby secured. Any surplus remaining after the full payment and satisfaction of the foregoing shall be returned to the Borrower or to whomsoever the Bank reasonably determines to be entitled thereto. Any requirement of said UCC as to reasonable notice shall be met by the Bank personally delivering or mailing notice (by certified or registered mail - return receipt requested) to the Borrower at its address as provided in Section 10.7 hereof at least ten (10) days prior to the event giving rise to the requirement of such notice. In connection with any offer, solicitation or sale of the Collateral, the Bank may restrict bidders and otherwise proceed in whatever manner it reasonably believes appropriate in order to comply or assure compliance with applicable legal requirements pertaining to the offer and sale of securities of the same type as the Collateral (the Borrower agreeing that such restrictions may include restrictions appropriate to assure that the offering and sale of the Collateral does not require registration under applicable state and federal laws and regulations and that Bank shall not be required to conduct a public offering of the Collateral) and to the change of control of corporations such as the Parent Company, and the Borrower acknowledges and agrees that the foregoing shall not affect the commercial reasonableness of any sale of the Collateral. SECTION 9 DEFINITIONS "BUSINESS DAY" means any day on which the Bank is generally open for business in Chicago, Illinois other than a Saturday or Sunday. "CODE" means the Internal Revenue Code of 1986, as amended, and the rules and regulations thereunder. 10 11 "PRIME RATE" means for any day the rate of interest per annum announced from time to time by the Bank as its prime announced or basic rate of interest, which the Borrower expressly acknowledges is not intended to be an expression of a set rate of interest upon which credit is available to commercial borrowers or the public but is merely a reference rate used by the Bank; it being understood and agreed that such rate may not be the Bank's lowest or most favorable rate of interest. A certificate of the Bank as to its Prime Rate in effect on any day shall be conclusive (in the absence of manifest error) for purposes hereof, as to the Prime Rate in effect on such day. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder. "EVENT OF DEFAULT" means any event or condition specified as such in Section 8.1 hereof and the term "Default" means any event or condition the occurrence of which, with the lapse of time or the giving of notice, or both, would constitute an Event of Default. Capitalized terms defined elsewhere in this Agreement shall have the meanings as defined in all provisions hereof. SECTION 10 MISCELLANEOUS SECTION 10.1 HOLIDAYS. If any payment of principal or interest on the Note shall fall due on a day which is not a Business Day, principal together with interest at the rate the Note bears for the period prior to maturity shall continue to accrue from the stated due date thereof to and including the next succeeding Business Day, on which the same is payable. SECTION 10.2 NO WAIVER, CUMULATIVE REMEDIES. No delay or failure on the part of the Bank or on the part of the holder of the Note in the exercise of any power or right shall operate as a waiver thereof or as an acquiescence in any default, nor shall any single or partial exercise of any power or right preclude any other or further exercise thereof or the exercise of any other power or right. The rights and remedies hereunder of the Bank and of the holder of the Note are cumulative to, and not exclusive of, any rights or remedies which any of them would otherwise have. SECTION 10.3 AMENDMENTS, ETC. No amendment, modification, termination or waiver of any provision of this Agreement or of the Note, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Bank, and then such consent, modification or waiver shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances. 11 12 SECTION 10.4 COSTS AND EXPENSES. The Borrower agrees to pay on demand the costs and expenses of the Bank in connection with the negotiation, preparation, execution and delivery of this Agreement, the Note, the Guaranty, the Guarantor Security Agreement and the other instruments and documents to be delivered hereunder or thereunder and in connection with the transactions contemplated hereby or thereby and in connection with any consents hereunder or waivers or amendments hereto or thereto, including the fees and expenses of counsel to the Bank, with respect to all of the foregoing (whether or not the transactions contemplated hereby are consummated), and all costs and expenses (including attorneys' fees), if any, incurred by the Bank or any other holder of the Note in connection with the enforcement of this Agreement, the Note or the Guaranty or any other instrument or document to be delivered hereunder and in connection with any action, suit or proceeding brought against the Bank by any person which in any way arises out of the transactions contemplated or financed hereby or out of any action or inaction by the Bank hereunder or thereunder except for such thereof arising solely from the Bank's gross negligence or willful misconduct. SECTION 10.5 DOCUMENTARY TAXES. The Borrower agrees to pay on demand any documentary, stamp or similar taxes payable in respect of this Agreement or the Note, including interest and penalties, in the event any such taxes are assessed, irrespective of when such assessment is made and whether or not any credit is then in use or available hereunder. SECTION 10.6 SURVIVAL OF REPRESENTATIONS. All representations and warranties made herein or in certificates given in connection with the Loan shall survive the execution and delivery of this Agreement and of the Note, and shall continue in full force and effect with respect to the date as of which they were made as long as any credit is in use or available hereunder. SECTION 10.7 NOTICES. Except as otherwise specified herein, all notices hereunder shall be in writing (including cable, telecopy or telex) and shall be given to the relevant party at its address, telecopier number or telex number set forth below, or such other address, telecopier number or telex number as such party may hereafter specify by notice to the other given by United States certified or registered mail, by telecopy or by other telecommunication device capable of creating a written record of such notice and its receipt. Notices hereunder shall be addressed: to the Borrower: James A. Jalovec, Trustee Dennis D. Wilson, Trustee Aasche Transportation Services, Inc. Employee Stock Ownership Trust c/o Aasche Transportation Services, Inc. 10214 North Mount Vernon Road Shannon, Illinois 61078 800/775-3034 Telephone 815/864-2646 Telecopy to the Bank: American National Bank and Trust Company of Chicago Rockford Division 12 13 6323 Riverside Boulevard Rockford, Illinois 61114 Attention: Steven B. Towne 815/282-7911 Telephone 815/282-7925 Telecopy Each such notice, request or other communication shall be effective (i) if given by telecopier, when such telecopy is transmitted to the telecopier number specified in this Section 10.7 and a confirmation of such telecopy has been received by the sender, (ii) if given by telex, when such telex is transmitted to the telex number specified in this Section 10.7 and the answer back is received by sender, (iii) if given by mail, five (5) days after such communication is deposited in the mail, certified or registered with return receipt requested, addressed as aforesaid or (iv) if given by any other means, when delivered at the address specified in this Section 10.7. SECTION 10.8 HEADINGS. Section headings used in this Agreement are for convenience of reference only and are not a part of this Agreement for any other purpose. SECTION 10.9 SEVERABILITY OF PROVISIONS. Any provision of this Agreement which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 10.10 COUNTERPARTS. This Agreement may be executed in any number of counterparts, and by different parties hereto on separate counterpart signature pages, and all such counterparts taken together shall be deemed to constitute one and the same instrument. SECTION 10.11 BINDING NATURE, GOVERNING LAW, ETC. This Agreement shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Bank and the benefit of its successors and assigns, including any subsequent holder of the Note. This Agreement and the rights and duties of the parties hereto shall be construed and determined in accordance with the laws of the State of Illinois without regard to principles of conflicts of laws. This Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof and any prior agreements, whether written or oral, with respect thereto are superseded hereby. SECTION 10.12 CONCERNING THE BORROWER. The term "Borrower" as used herein shall mean and include the undersigned as trustees of the Trust and their successors in trust not individually but solely as Trustees under that certain Aasche Transportation Services, Inc. Employees' Stock Ownership Trust dated effective as of September 22, 1994, between the undersigned and the Parent Company, and this Agreement shall be binding upon the undersigned and their successors and assigns and upon the trust estate. Subject to Section 10.13 hereof, the undersigned assume no personal liability or responsibility for payment of the indebtedness evidenced by the Note or for observance or performance of the covenants and agreements herein contained or for the truthfulness of the representations and warranties herein contained, the undersigned having executed this Agreement and the Note solely in their capacity as trustees as aforesaid to bind the undersigned, their successors in trust and the trust estate. 13 14 SECTION 10.13 LIMITED LIABILITY. Anything contained herein or in the Note to the contrary notwithstanding, the sole and only recourse of the Bank and any other holder of the Note as against the Borrower for the payment of the obligations hereunder and under the Note shall be to (i) the Collateral, (ii) contributions made to the Plan and the Trust by sponsoring employers to enable the Borrower to meet its obligations hereunder and under the Note, and (iii) earnings attributable to the Collateral and to the investment of sponsoring employer contributions as aforesaid. The foregoing limitations shall not affect the rights of the Bank, which are unconditional and absolute, to declare the indebtedness evidenced by the Note to be immediately due and payable upon the occurrence of any Event of Default or to proceed against any Guarantor or the Collateral. Upon your acceptance hereof in the manner hereinafter set forth, this Agreement shall constitute a contract between us for the uses and purposes hereinabove set forth. Dated as of this 23 day of June, 1998. -------------- Dennis D. Wilson and James A. Jalovec and their successors in trust, not individually but solely as trustees under that certain Aasche Transportation Services, Inc. Employees' Stock Ownership Trust dated effective as of September 22, 1994 between the undersigned and Aasche Transportation Services, Inc. /s/ Dennis D. Wilson ----------------------------------------- Dennis D. Wilson, as Trustee as aforesaid /s/ James A. Jalovec ----------------------------------------- James A. Jalovec, as Trustee as aforesaid Accepted and Agreed to at Chicago, Illinois as of the date last above written. AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO By: /s/ Steven B. Towne --------------------------- Its: Vice President 14 15 EXHIBIT A PROMISSORY NOTE Chicago, Illinois $191,690.47 June [____], 1998 FOR VALUE RECEIVED, the undersigned, Dennis D. Wilson and James A. Jalovec, not individually but solely as trustees under that certain AASCHE TRANSPORTATION SERVICES, INC. EMPLOYEES' STOCK OWNERSHIP TRUST (the "Borrower") promises to pay to the order of AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO (the "Bank") at its office at 33 North LaSalle Street, Chicago, Illinois, the principal sum of ONE HUNDRED NINETY-ONE THOUSAND SIX HUNDRED NINETY AND 47/100 DOLLARS ($191,690.47) or, if less, the aggregate principal amount of the Loan made to the Borrower under Section 1.1 of the Loan and Security Agreement hereinafter referred to on April 30, 2000, the final maturity hereof. The Borrower promises to pay interest (computed on the basis of a year of 360 days for the actual number of days elapsed) at said office on the balance of principal from time to time remaining outstanding and unpaid hereon at the times and rates and in the manner specified in the Loan and Security Agreement referred to below. The Bank shall record on its books and records or, at its option, on a schedule to the Note, the principal amount of the Loan disbursed by the Bank, any payment of principal and the principal balance from time to time outstanding, provided that prior to the transfer of this Note all such amounts shall be recorded on a schedule to this Note. The record thereof, whether shown on such books and records or on a schedule to this Note, shall be prima facie evidence in any action or proceeding instituted to collect or enforce collection of this Note of the principal amount remaining unpaid hereon. This Note is issued under the terms and provisions of that certain Loan and Security Agreement dated as of the date of this Note, between the Borrower and the Bank (the "Loan and Security Agreement"), and this Note and the holder hereof are entitled to all the benefits and security provided for thereby or referred to therein to which Loan and Security Agreement reference is hereby made for a statement thereof. This Note may be declared due prior to its express maturity and voluntary prepayments may be made hereon and the interest rates applicable to this Note may be automatically changed and adjusted, all in the events, on the terms, and in the manner as provided in the Loan and Security Agreement. Recourse for the payment of this Note has been limited by the provisions of the Loan and Security Agreement and this Note is expressly made subject to such provisions. This Note shall be governed by and construed in accordance with the laws of the State of Illinois without regard A-1 16 to principles of conflicts of laws. The Borrower hereby waives presentment for payment and demand. Dennis D. Wilson and James A. Jalovec and their successors in trust, not individually but solely as trustees under that certain Aasche Transportation Services, Inc. Employees' Stock Ownership Trust dated effective as of September 22, 1994 between the undersigned and Aasche Transportation Services, Inc. ----------------------------------------- Dennis D. Wilson, as Trustee as aforesaid ----------------------------------------- James A. Jalovec, as Trustee as aforesaid A-2 EX-10.4 5 CONTINUING UNCONDITIONAL GUARANTY 1 EXHIBIT 10.4 CONTINUING UNCONDITIONAL GUARANTY This CONTINUING UNCONDITIONAL GUARANTY is executed as of June 23, 1998 (the "Guaranty"), by AASCHE TRANSPORTATION SERVICES, INC. (the "Guarantor"), whose address is c/o 10214 Mt. Vernon Road, Shannon, Illinois 61078, to and for the benefit of AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a national banking association (together with any of its affiliate or subsidiary corporations, or their successors or assigns, being collectively referred to herein as the "Bank"), whose address is 120 South LaSalle Street, Chicago, Illinois 60603. WHEREAS, Dennis D. Wilson, James A. Jalovec and their successors in trust, not individually but solely, as trustees under that certain Aasche Transportation Services, Inc. Employees' Stock Ownership Trust, desires or may desire at some time and/or from time to time to obtain financial accommodations from the Bank; and WHEREAS, the Guarantor desires the Bank to extend or continue the extension of credit to the Borrower and the Bank has required that Guarantor execute and deliver this Guaranty to the Bank as a condition to the extension and continuation of credit by the Bank; and WHEREAS, the extension or continued extension of credit, as aforesaid, by the Bank is necessary and desirable to the conduct and operation of the business of the Borrower and will inure to the financial benefit of the Guarantor; NOW, THEREFORE, FOR VALUE RECEIVED, it is agreed that the preceding provisions and preambles are an integral part hereof and that this Guaranty shall be construed in light thereof, and in consideration of advances, credit or other financial accommodation heretofore afforded, concurrently herewith being afforded or hereafter to be afforded to the Borrower by the Bank, the Guarantor hereby unconditionally and absolutely guarantees to the Bank, irrespective of the validity, regularity or enforceability of any instrument, writing, arrangement or credit agreement relating to or the subject of any such financial accommodation, the full and prompt payment in full to the Bank at maturity, whether by acceleration or otherwise, and at all times thereafter, up to the principal amount of One Hundred Ninety-One Thousand Six Hundred Ninety and 47/100 Dollars ($191,690.47) of the Guaranteed Debt as hereafter defined, plus all interest due and to become due thereon from the Borrower to the Bank and all expenses incurred by the Bank in connection with the collection of the Guaranteed Debt or the enforcement of this Guaranty. As used herein, "Guaranteed Debt" shall mean any and all indebtedness, obligations and liabilities of every kind and nature of the Borrower to the Bank (including all indebtedness, obligations and liabilities of partnerships created or arising while the Borrower may have been or may be a member thereof), howsoever evidenced, whether now existing or hereafter created or arising, direct or indirect, primary or secondary, absolute or contingent, due or to become due, or joint or several, and howsoever owned, held or acquired, whether through discount, overdraft, purchase, direct loan or as collateral, or otherwise, and the prompt, full and faithful performance and discharge by the Borrower of each of the terms, 2 conditions, agreements, representations and warranties on the part of the Borrower contained in any agreement, or in any modification or addenda thereto or substitution thereof in connection with any of the Guaranteed Debt. The Guarantor agrees to pay all reasonable costs, legal expenses and attorneys' and paralegals' fees of every kind (including those costs, expenses and fees of attorneys and paralegals who may be employees of the Bank or its indirect parent), paid or incurred by the Bank in endeavoring to collect the Guaranteed Debt (hereinafter defined) or any part thereof, or in enforcing its rights in connection with any collateral, or in enforcing this Guaranty, any collateral, or in connection with any Repayment Claim (as hereinafter defined) hereinbelow described, promptly on demand of the Bank or other person paying or incurring the same. It is hereby agreed that while the liability of the Guarantor under this Guaranty is limited in amount as set forth above the Guaranteed Debt is no way limited as to dollar amount. In the case of any bankruptcy, reorganization, debt arrangement or other proceeding under any bankruptcy or insolvency law, or any dissolution, liquidation or receivership proceeding is instituted by or against either the Borrower or the Guarantor, all of the Guaranteed Debt then existing shall, without notice to anyone, immediately become due or accrued and all amounts due hereunder shall be payable, jointly and severally, from the Guarantor. The Guarantor hereby expressly and irrevocably: (a) waives, to the fullest extent possible, on behalf of itself and its successors and assigns (including any surety) and any other person, any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification, set off or to any other rights that could accrue to a surety against a principal, a guarantor against a maker or obligor, an accommodation party against the party accommodated, a holder or transferee against a maker, or to the holder of a claim against any person, and which the Guarantor may have or hereafter acquire against any person in connection with or as a result of the Guarantor's execution, delivery and/or performance of this Guaranty, or any other documents to which the Guarantor is a party or otherwise; (b) waives any "claim" (as such term is defined in the United States Bankruptcy Code) of any kind against the Borrower until indefeasible payable in full of the Guaranteed Debt, and further agrees that it shall not have or assert any such rights against any person (including any surety), either directly or as an attempted set off to any action commenced against the Guarantor by the Bank or any other person; and (c) acknowledges and agrees (i) that foregoing waivers are intended to benefit the Bank and shall not limit or otherwise affect the Guarantor's liability hereunder or the enforceability of this Guaranty, and (ii) the agreements set forth in this paragraph and the Bank's rights under this paragraph shall survive payment in full of the Guaranteed Debt. All dividends or other payments received by the Bank on account of the Guaranteed Debt, from whatever source derived, shall be taken and applied by the Bank toward the payment of the Guaranteed Debt and in such order of application as the Bank may, in its sole discretion, from time to time elect, and this Guaranty shall apply to and secure any ultimate balance that shall remain owing to the Bank. The Bank shall have the exclusive right to determine how, when and what application of payments and credits, if any, whether derived from the Borrower or any other source, shall be made on the Guaranteed Debt and such determination shall be conclusive upon the Guarantor. 2 3 This Guaranty shall in all respects be continuing, absolute and unconditional, and shall remain in full force and effect with respect to the Guarantor until: (i) written notice from the Bank to the Guarantor by United States certified mail of its discontinuance as to the Guarantor; (ii) written notice of the dissolution of the Guarantor shall have been actually received by the Bank; or (iii) until all Guaranteed Debt created or existing before receipt of either such notice shall have been fully paid. In case of any such discontinuance or dissolution of the Guarantor and notice thereof to the Bank, this Guaranty shall nevertheless continue and remain in force against any other guarantor until discontinued as to such other guarantor as provided herein. In the event of the dissolution of the Guarantor, this Guaranty shall continue as to all of the Guaranteed Debt theretofore incurred by the Borrower even though the Guaranteed Debt is renewed or the time of maturity of the Borrower's obligations is extended without the consent of the successors or assigns of the Guarantor. No compromise, settlement, release or discharge of, or indulgence with respect to, or failure, neglect or omission to enforce or exercise any right against any other guarantor shall release or discharge the Guarantor. The Guarantor's liability under this Guaranty shall in no way be modified, affected, impaired, reduced, released or discharged by any of the following (any or all of which may be done or omitted by the Bank in its sole discretion, without notice to anyone and irrespective of whether the Guaranteed Debt shall be increased or decreased thereby): (a) any acceptance by the Bank of any new or renewal note or notes of the Borrower, or of any security or collateral for, or other guarantors or obligors upon, any of the Guaranteed Debt; (b) any compromise, settlement, surrender, release, discharge, renewals, refinancing, extension, alteration, exchange, sale, pledge or election with respect to the Guaranteed Debt, or any note by the Borrower, or with respect to any collateral under Section 1111 or take any action under Section 364, or any other section of the United States Bankruptcy Code, now existing or hereafter amended, or other disposition of, or substitution for, or indulgence with respect to, or failure, neglect or omission to realize upon, or to enforce or exercise any liens or rights of appropriation or other rights with respect to, any Guaranteed Debt or any security or collateral therefor or any claims against any person or persons primarily or secondarily liable thereon; (c) any failure, neglect or omission to perfect, protect, secure or insure any of the foregoing security interests, liens, or encumbrances of the properties or interests in properties subject thereto; (d) any change in the Borrower's name or the merger of the Borrower into another corporation; (e) any act of commission or omission of any kind or at any time upon the part of the Bank with respect to any matter whatsoever, other than the execution and delivery by the Bank to the Guarantor of an express written release or cancellation of this Guaranty. The Guarantor hereby consents to all acts of commission or omission of the Bank set forth above. In order to hold the Guarantor liable hereunder, there shall be no obligation on the part of the Bank, at any time, to resort for payment to the Borrower or to anyone else, or to any collateral, security, property, liens or other rights and remedies whatsoever, all of which are hereby expressly waived by the Guarantor. 3 4 The Guarantor hereby expressly waives diligence in collection or protection, presentment, demand or protest or in giving notice to anyone of the protest, dishonor, default, or nonpayment or of the creation or existence of any of the Guaranteed Debt or of any security or collateral therefor or of the acceptance of this Guaranty or of extension of credit or indulgences hereunder or of any other matters or things whatsoever relating hereto. The Guarantor waives any and all defenses, claims and discharges of the Borrower, or any other obligor, pertaining to the Guaranteed Debt, except the defense of discharge by payment in full. Without limiting the generality of the foregoing, the Guarantor will not assert, plead or enforce against the Bank any defense of waiver, release, discharge in bankruptcy, statute of limitations, res judicata, statute of frauds, anti-deficiency statute, fraud, incapacity, minority, usury, illegality or unenforceability which may be available to the Borrower or any other person liable in respect of any of the Guaranteed Debt, or any set off available against the Bank to the Borrower or any such other person, whether or not on account of a related transaction. The Guarantor expressly agrees that the Guarantor shall be and remain liable for any deficiency remaining after foreclosure of any mortgage or security interest securing the Guaranteed Debt, whether or not the liability of the Borrower or any other obligor for such deficiency is discharged pursuant to statute or judicial decision. To secure payment of the Guaranteed Debt, the Guarantor grants to the Bank a security interest in all property of the Guarantor delivered concurrently herewith or which is now, or at any time hereafter in transit to, or in the possession, custody, or control of the Bank, and all proceeds of all such property. The Guarantor agrees that the Bank shall have the rights and remedies of a secured party under the Uniform Commercial Code in effect in Illinois from time to time, with respect to all of the aforesaid property, including, without limitation thereof, the right to sell or otherwise dispose of any such property. The Bank may, without demand or notice of any kind to anyone, apply or set off any balances, credits, deposits, accounts, moneys or other indebtedness at any time credited by or due from the Bank to the Guarantor against the amounts due hereunder and in such order of application as the Bank may from time to time elect. Any notification of intended disposition of any property required by law shall be deemed reasonably and properly given if given in the manner provided by the applicable statute. The Guarantor hereby assigns and transfers to the Bank any and all cash, negotiable instruments, documents of titled, chattel paper, securities, certificates of deposit, deposit accounts other cash equivalents and other assets of the Guarantor in the possession or control of the Bank for any purpose. THE GUARANTOR WAIVES EVERY DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SET OFF WHICH THE GUARANTOR MAY NOW HAVE TO ANY ACTION BY THE BANK IN ENFORCING THIS GUARANTY. AS FURTHER SECURITY, ANY AND ALL DEBTS AND LIABILITIES NOW ARISING AND OWING TO THE GUARANTOR BY THE BORROWER, OR TO ANY OTHER PARTY LIABLE TO THE BANK, ARE HEREBY SUBORDINATED TO THE BANK'S CLAIMS AND ARE HEREBY ASSIGNED TO THE BANK. THE GUARANTOR HEREBY AGREES THAT THE GUARANTOR MAY BE JOINED AS A PARTY DEFENDANT IN ANY LEGAL PROCEEDING (INCLUDING, BUT NOT LIMITED TO, A FORECLOSURE PROCEEDING) INSTITUTED BY THE BANK AGAINST THE BORROWER. THE GUARANTOR AND THE BANK IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY WITH RESPECT 4 5 TO ANY SUCH LEGAL PROCEEDING IN WHICH THE GUARANTOR AND THE BANK ARE ADVERSE PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO THE BORROWER AND ACCEPTING THIS GUARANTY. Should a claim (a "Repayment Claim") be made upon the Bank at any time for repayment of any amount received by the Bank in payment of the Guaranteed Debt, or any part thereof, whether received from the Borrower, the Guarantor pursuant hereto, or received by the Bank as the proceeds of collateral, by reason of: (1) any judgment, decree or order of any court or administrative body having jurisdiction over the Bank or any of its property; or (2) any settlement or compromise of any such Repayment Claim effected by the Bank, in its sole discretion, with the claimant (including the Borrower), the Guarantor shall remain jointly and severally liable to the Bank for the amount so repaid to the same extent as if such amount had never originally been received by the Bank, notwithstanding any termination hereof or the cancellation of any note or other instrument evidencing any of the Guaranteed Debt. The Bank may, without notice to anyone, sell or assign the Guaranteed Debt, or any part thereof, or grant participations therein, and in any such event each and every immediate or remote assignee or holder of, or participant in, all or any of the Guaranteed Debt shall have the right to enforce this Guaranty, by suit or otherwise for the benefit of such assignee, holder or participant, as fully as if herein by name specifically given such right herein, but the Bank shall have an unimpaired right, prior and superior to that of any such assignee, holder or participant, to enforce this Guaranty for the benefit of the Bank, as to any part of the Guaranteed Debt retained by the Bank. Unless and until all of the Guaranteed Debt has been paid in full, no release or discharge of the Guarantor, or of any other person, whether primarily or secondarily liable for and obligated with respect to the Guaranteed Debt, or the institution of bankruptcy, receivership, insolvency, reorganization, dissolution or liquidation proceedings by or against the Guarantor or person, or the entry of any restraining or other order in any such proceedings, shall release or discharge the Guarantor, or any other guarantor of the indebtedness, or any other person, firm or corporation liable to the Bank for the Guaranteed Debt. All references herein to the Borrower and to the Guarantor, respectively, shall be deemed to include any successors or assigns, whether immediate or remote to such corporations or any successors in trust to such trust. If this Guaranty contains any blanks when executed by the Guarantor, the Bank is hereby authorized, without notice to the Guarantor, to complete any such blanks according to the terms upon which this Guaranty is executed by the Guarantor and is accepted by the Bank. This Guaranty has been delivered to the Bank at its offices in Chicago, Illinois, and the rights, remedies and liabilities of the parties shall be construed and determined in accordance with the laws of the State of Illinois, in which State it shall be performed by the Guarantor. TO INDUCE THE BANK TO GRANT FINANCIAL ACCOMMODATIONS TO THE BORROWER, THE GUARANTOR IRREVOCABLY AGREES THAT ALL ACTIONS 5 6 ARISING DIRECTLY OR INDIRECTLY AS A RESULT OR IN CONSEQUENCE OF THIS GUARANTY SHALL BE INSTITUTED AND LITIGATED ONLY IN COURTS HAVING SITUS IN THE CITY OF CHICAGO, ILLINOIS. THE GUARANTOR HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT LOCATED AND HAVING ITS SITUS IN CHICAGO, ILLINOIS, AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS. THE GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS, AND TO THE SERVICE OF PROCESS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO THE GUARANTOR AT THE ADDRESS INDICATED IN THE BANK'S RECORDS IN THE MANNER PROVIDED BY APPLICABLE STATUTE, LAW, RULE OF COURT OR OTHERWISE. FURTHERMORE, THE GUARANTOR WAIVES ALL NOTICES AND DEMANDS IN CONNECTION WITH THE ENFORCEMENT OF THE BANK'S RIGHTS HEREUNDER, AND HEREBY CONSENTS TO, AND WAIVES NOTICE OF THE RELEASE, WITH OR WITHOUT CONSIDERATION, OF THE BORROWER OR ANY OTHER PERSON RESPONSIBLE FOR PAYMENT OF THE GUARANTEED DEBT, OR OF ANY COLLATERAL THEREFOR. Wherever possible, each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty. It is agreed that the Guarantor's liability is independent of any other guaranties at any time in effect with respect to all or any part of the Borrower's indebtedness to the Bank, and that the Guarantor's liability hereunder may be enforced regardless of the existence of any such other guaranties. No delay on the part of the Bank in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Bank of any right or remedy shall preclude other or further exercise thereof, or the exercise of any other right or remedy. No modification, termination, discharge or waiver of any of the provisions hereof shall be binding upon the Bank, except as expressly set forth in a writing duly signed and delivered on behalf of the Bank. The Guarantor represents and warrants to the Bank that the execution and delivery of this Guaranty has been duly authorized by resolutions heretofore adopted by the Board of Directors and/or Shareholders of the Guarantor in accordance with law and its bylaws, that said resolutions have not been amended or rescinded, are in full force and effect and that the officer or officers executing and delivering this Guarantor for and on behalf of the Guarantor, is/are duly authorized so to act. The Bank, in extending financial accommodations to the Borrower, is expressly acting and relying upon the aforesaid representations and warranties. This Guaranty: (i) is valid, binding and enforceable in accordance with its provisions, and no conditions exist to the legal effectiveness of this Guaranty as to the Guarantor; (ii) contains the entire agreement between the Guarantor and the Bank; (iii) is the final expression of 6 7 their intentions; and (iv) supersedes all negotiations, representations, warranties, commitments, offers, contracts (of any kind or nature, whether oral or written) prior to or contemporaneous with the execution hereof. No prior or contemporaneous representations, warranties, understandings, offers or agreements of 7 8 any kind or nature, whether oral or written, have been made by the Bank or relied upon by the Guarantor in connection with the execution hereof. The provisions hereof shall be binding upon the Guarantor and upon its executors, administrators, successors and assigns and shall inure to the benefit of the Bank and its successors and assigns. SIGNED AND DELIVERED by the Guarantor as of the date set forth above. AASCHE TRANSPORTATION SERVICES, INC. By: /s/ Leon Monachos ------------------------ Its: CFO ----------------------- EX-10.5 6 CONTINUING UNCONDITIONAL GUARANTY 1 EXHIBIT 10.5 CONTINUING UNCONDITIONAL GUARANTY This CONTINUING UNCONDITIONAL GUARANTY is executed as of June 23, 1998 (the "Guaranty"), by ASCHE TRANSFER, INC. (the "Guarantor"), whose address is c/o 10214 Mt. Vernon Road, Shannon, Illinois 61078, to and for the benefit of AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a national banking association (together with any of its affiliate or subsidiary corporations, or their successors or assigns, being collectively referred to herein as the "Bank"), whose address is 120 South LaSalle Street, Chicago, Illinois 60603. WHEREAS, Dennis D. Wilson, James A. Jalovec and their successors in trust, not individually but solely, as trustees under that certain Aasche Transportation Services, Inc. Employees' Stock Ownership Trust, desires or may desire at some time and/or from time to time to obtain financial accommodations from the Bank; and WHEREAS, the Guarantor desires the Bank to extend or continue the extension of credit to the Borrower and the Bank has required that Guarantor execute and deliver this Guaranty to the Bank as a condition to the extension and continuation of credit by the Bank; and WHEREAS, the extension or continued extension of credit, as aforesaid, by the Bank is necessary and desirable to the conduct and operation of the business of the Borrower and will inure to the financial benefit of the Guarantor; NOW, THEREFORE, FOR VALUE RECEIVED, it is agreed that the preceding provisions and preambles are an integral part hereof and that this Guaranty shall be construed in light thereof, and in consideration of advances, credit or other financial accommodation heretofore afforded, concurrently herewith being afforded or hereafter to be afforded to the Borrower by the Bank, the Guarantor hereby unconditionally and absolutely guarantees to the Bank, irrespective of the validity, regularity or enforceability of any instrument, writing, arrangement or credit agreement relating to or the subject of any such financial accommodation, the full and prompt payment in full to the Bank at maturity, whether by acceleration or otherwise, and at all times thereafter, up to the principal amount of One Hundred Ninety-One Thousand Six Hundred Ninety and 47/100 Dollars ($191,690.47) of the Guaranteed Debt as hereafter defined, plus all interest due and to become due thereon from the Borrower to the Bank and all expenses incurred by the Bank in connection with the collection of the Guaranteed Debt or the enforcement of this Guaranty. As used herein, "Guaranteed Debt" shall mean any and all indebtedness, obligations and liabilities of every kind and nature of the Borrower to the Bank (including all indebtedness, obligations and liabilities of partnerships created or arising while the Borrower may have been or may be a member thereof), howsoever evidenced, whether now existing or hereafter created or arising, direct or indirect, primary or secondary, absolute or contingent, due or to become due, or joint or several, and howsoever owned, held or acquired, whether through discount, overdraft, purchase, direct loan or as collateral, or otherwise, and the prompt, full and faithful performance and discharge by the Borrower of each of the terms, conditions, agreements, representations and warranties on the part of the Borrower contained in any 2 conditions, agreements, representations and warranties on the part of the Borrower contained in any agreement, or in any modification or addenda thereto or substitution thereof in connection with any of the Guaranteed Debt. The Guarantor agrees to pay all reasonable costs, legal expenses and attorneys' and paralegals' fees of every kind (including those costs, expenses and fees of attorneys and paralegals who may be employees of the Bank or its indirect parent), paid or incurred by the Bank in endeavoring to collect the Guaranteed Debt (hereinafter defined) or any part thereof, or in enforcing its rights in connection with any collateral, or in enforcing this Guaranty, any collateral, or in connection with any Repayment Claim (as hereinafter defined) hereinbelow described, promptly on demand of the Bank or other person paying or incurring the same. It is hereby agreed that while the liability of the Guarantor under this Guaranty is limited in amount as set forth above the Guaranteed Debt is no way limited as to dollar amount. In the case of any bankruptcy, reorganization, debt arrangement or other proceeding under any bankruptcy or insolvency law, or any dissolution, liquidation or receivership proceeding is instituted by or against either the Borrower or the Guarantor, all of the Guaranteed Debt then existing shall, without notice to anyone, immediately become due or accrued and all amounts due hereunder shall be payable, jointly and severally, from the Guarantor. The Guarantor hereby expressly and irrevocably: (a) waives, to the fullest extent possible, on behalf of itself and its successors and assigns (including any surety) and any other person, any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification, set off or to any other rights that could accrue to a surety against a principal, a guarantor against a maker or obligor, an accommodation party against the party accommodated, a holder or transferee against a maker, or to the holder of a claim against any person, and which the Guarantor may have or hereafter acquire against any person in connection with or as a result of the Guarantor's execution, delivery and/or performance of this Guaranty, or any other documents to which the Guarantor is a party or otherwise; (b) waives any "claim" (as such term is defined in the United States Bankruptcy Code) of any kind against the Borrower until indefeasible payable in full of the Guaranteed Debt, and further agrees that it shall not have or assert any such rights against any person (including any surety), either directly or as an attempted set off to any action commenced against the Guarantor by the Bank or any other person; and (c) acknowledges and agrees (i) that foregoing waivers are intended to benefit the Bank and shall not limit or otherwise affect the Guarantor's liability hereunder or the enforceability of this Guaranty, and (ii) the agreements set forth in this paragraph and the Bank's rights under this paragraph shall survive payment in full of the Guaranteed Debt. All dividends or other payments received by the Bank on account of the Guaranteed Debt, from whatever source derived, shall be taken and applied by the Bank toward the payment of the Guaranteed Debt and in such order of application as the Bank may, in its sole discretion, from time to time elect, and this Guaranty shall apply to and secure any ultimate balance that shall remain owing to the Bank. The Bank shall have the exclusive right to determine how, when and what application of payments and credits, if any, whether derived from the Borrower or any other source, shall be made on the Guaranteed Debt and such determination shall be conclusive upon the Guarantor. 2 3 This Guaranty shall in all respects be continuing, absolute and unconditional, and shall remain in full force and effect with respect to the Guarantor until: (i) written notice from the Bank to the Guarantor by United States certified mail of its discontinuance as to the Guarantor; (ii) written notice of the dissolution of the Guarantor shall have been actually received by the Bank; or (iii) until all Guaranteed Debt created or existing before receipt of either such notice shall have been fully paid. In case of any such discontinuance or dissolution of the Guarantor and notice thereof to the Bank, this Guaranty shall nevertheless continue and remain in force against any other guarantor until discontinued as to such other guarantor as provided herein. In the event of the dissolution of the Guarantor, this Guaranty shall continue as to all of the Guaranteed Debt theretofore incurred by the Borrower even though the Guaranteed Debt is renewed or the time of maturity of the Borrower's obligations is extended without the consent of the successors or assigns of the Guarantor. No compromise, settlement, release or discharge of, or indulgence with respect to, or failure, neglect or omission to enforce or exercise any right against any other guarantor shall release or discharge the Guarantor. The Guarantor's liability under this Guaranty shall in no way be modified, affected, impaired, reduced, released or discharged by any of the following (any or all of which may be done or omitted by the Bank in its sole discretion, without notice to anyone and irrespective of whether the Guaranteed Debt shall be increased or decreased thereby): (a) any acceptance by the Bank of any new or renewal note or notes of the Borrower, or of any security or collateral for, or other guarantors or obligors upon, any of the Guaranteed Debt; (b) any compromise, settlement, surrender, release, discharge, renewals, refinancing, extension, alteration, exchange, sale, pledge or election with respect to the Guaranteed Debt, or any note by the Borrower, or with respect to any collateral under Section 1111 or take any action under Section 364, or any other section of the United States Bankruptcy Code, now existing or hereafter amended, or other disposition of, or substitution for, or indulgence with respect to, or failure, neglect or omission to realize upon, or to enforce or exercise any liens or rights of appropriation or other rights with respect to, any Guaranteed Debt or any security or collateral therefor or any claims against any person or persons primarily or secondarily liable thereon; (c) any failure, neglect or omission to perfect, protect, secure or insure any of the foregoing security interests, liens, or encumbrances of the properties or interests in properties subject thereto; (d) any change in the Borrower's name or the merger of the Borrower into another corporation; (e) any act of commission or omission of any kind or at any time upon the part of the Bank with respect to any matter whatsoever, other than the execution and delivery by the Bank to the Guarantor of an express written release or cancellation of this Guaranty. The Guarantor hereby consents to all acts of commission or omission of the Bank set forth above. In order to hold the Guarantor liable hereunder, there shall be no obligation on the part of the Bank, at any time, to resort for payment to the Borrower or to anyone else, or to any collateral, security, property, liens or other rights and remedies whatsoever, all of which are hereby expressly waived by the Guarantor. 3 4 The Guarantor hereby expressly waives diligence in collection or protection, presentment, demand or protest or in giving notice to anyone of the protest, dishonor, default, or nonpayment or of the creation or existence of any of the Guaranteed Debt or of any security or collateral therefor or of the acceptance of this Guaranty or of extension of credit or indulgences hereunder or of any other matters or things whatsoever relating hereto. The Guarantor waives any and all defenses, claims and discharges of the Borrower, or any other obligor, pertaining to the Guaranteed Debt, except the defense of discharge by payment in full. Without limiting the generality of the foregoing, the Guarantor will not assert, plead or enforce against the Bank any defense of waiver, release, discharge in bankruptcy, statute of limitations, res judicata, statute of frauds, anti-deficiency statute, fraud, incapacity, minority, usury, illegality or unenforceability which may be available to the Borrower or any other person liable in respect of any of the Guaranteed Debt, or any set off available against the Bank to the Borrower or any such other person, whether or not on account of a related transaction. The Guarantor expressly agrees that the Guarantor shall be and remain liable for any deficiency remaining after foreclosure of any mortgage or security interest securing the Guaranteed Debt, whether or not the liability of the Borrower or any other obligor for such deficiency is discharged pursuant to statute or judicial decision. To secure payment of the Guaranteed Debt, the Guarantor grants to the Bank a security interest in all property of the Guarantor delivered concurrently herewith or which is now, or at any time hereafter in transit to, or in the possession, custody, or control of the Bank, and all proceeds of all such property. The Guarantor agrees that the Bank shall have the rights and remedies of a secured party under the Uniform Commercial Code in effect in Illinois from time to time, with respect to all of the aforesaid property, including, without limitation thereof, the right to sell or otherwise dispose of any such property. The Bank may, without demand or notice of any kind to anyone, apply or set off any balances, credits, deposits, accounts, moneys or other indebtedness at any time credited by or due from the Bank to the Guarantor against the amounts due hereunder and in such order of application as the Bank may from time to time elect. Any notification of intended disposition of any property required by law shall be deemed reasonably and properly given if given in the manner provided by the applicable statute. The Guarantor hereby assigns and transfers to the Bank any and all cash, negotiable instruments, documents of titled, chattel paper, securities, certificates of deposit, deposit accounts other cash equivalents and other assets of the Guarantor in the possession or control of the Bank for any purpose. THE GUARANTOR WAIVES EVERY DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SET OFF WHICH THE GUARANTOR MAY NOW HAVE TO ANY ACTION BY THE BANK IN ENFORCING THIS GUARANTY. AS FURTHER SECURITY, ANY AND ALL DEBTS AND LIABILITIES NOW ARISING AND OWING TO THE GUARANTOR BY THE BORROWER, OR TO ANY OTHER PARTY LIABLE TO THE BANK, ARE HEREBY SUBORDINATED TO THE BANK'S CLAIMS AND ARE HEREBY ASSIGNED TO THE BANK. THE GUARANTOR HEREBY AGREES THAT THE GUARANTOR MAY BE JOINED AS A PARTY DEFENDANT IN ANY LEGAL PROCEEDING (INCLUDING, BUT NOT LIMITED TO, A FORECLOSURE PROCEEDING) INSTITUTED BY THE BANK AGAINST THE BORROWER. THE GUARANTOR AND THE BANK IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY WITH RESPECT 4 5 TO ANY SUCH LEGAL PROCEEDING IN WHICH THE GUARANTOR AND THE BANK ARE ADVERSE PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO THE BORROWER AND ACCEPTING THIS GUARANTY. Should a claim (a "Repayment Claim") be made upon the Bank at any time for repayment of any amount received by the Bank in payment of the Guaranteed Debt, or any part thereof, whether received from the Borrower, the Guarantor pursuant hereto, or received by the Bank as the proceeds of collateral, by reason of: (1) any judgment, decree or order of any court or administrative body having jurisdiction over the Bank or any of its property; or (2) any settlement or compromise of any such Repayment Claim effected by the Bank, in its sole discretion, with the claimant (including the Borrower), the Guarantor shall remain jointly and severally liable to the Bank for the amount so repaid to the same extent as if such amount had never originally been received by the Bank, notwithstanding any termination hereof or the cancellation of any note or other instrument evidencing any of the Guaranteed Debt. The Bank may, without notice to anyone, sell or assign the Guaranteed Debt, or any part thereof, or grant participations therein, and in any such event each and every immediate or remote assignee or holder of, or participant in, all or any of the Guaranteed Debt shall have the right to enforce this Guaranty, by suit or otherwise for the benefit of such assignee, holder or participant, as fully as if herein by name specifically given such right herein, but the Bank shall have an unimpaired right, prior and superior to that of any such assignee, holder or participant, to enforce this Guaranty for the benefit of the Bank, as to any part of the Guaranteed Debt retained by the Bank. Unless and until all of the Guaranteed Debt has been paid in full, no release or discharge of the Guarantor, or of any other person, whether primarily or secondarily liable for and obligated with respect to the Guaranteed Debt, or the institution of bankruptcy, receivership, insolvency, reorganization, dissolution or liquidation proceedings by or against the Guarantor or person, or the entry of any restraining or other order in any such proceedings, shall release or discharge the Guarantor, or any other guarantor of the indebtedness, or any other person, firm or corporation liable to the Bank for the Guaranteed Debt. All references herein to the Borrower and to the Guarantor, respectively, shall be deemed to include any successors or assigns, whether immediate or remote to such corporations or any successors in trust to such trust. If this Guaranty contains any blanks when executed by the Guarantor, the Bank is hereby authorized, without notice to the Guarantor, to complete any such blanks according to the terms upon which this Guaranty is executed by the Guarantor and is accepted by the Bank. This Guaranty has been delivered to the Bank at its offices in Chicago, Illinois, and the rights, remedies and liabilities of the parties shall be construed and determined in accordance with the laws of the State of Illinois, in which State it shall be performed by the Guarantor. TO INDUCE THE BANK TO GRANT FINANCIAL ACCOMMODATIONS TO THE BORROWER, THE GUARANTOR IRREVOCABLY AGREES THAT ALL ACTIONS 5 6 ARISING DIRECTLY OR INDIRECTLY AS A RESULT OR IN CONSEQUENCE OF THIS GUARANTY SHALL BE INSTITUTED AND LITIGATED ONLY IN COURTS HAVING SITUS IN THE CITY OF CHICAGO, ILLINOIS. THE GUARANTOR HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT LOCATED AND HAVING ITS SITUS IN CHICAGO, ILLINOIS, AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS. THE GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS, AND TO THE SERVICE OF PROCESS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO THE GUARANTOR AT THE ADDRESS INDICATED IN THE BANK'S RECORDS IN THE MANNER PROVIDED BY APPLICABLE STATUTE, LAW, RULE OF COURT OR OTHERWISE. FURTHERMORE, THE GUARANTOR WAIVES ALL NOTICES AND DEMANDS IN CONNECTION WITH THE ENFORCEMENT OF THE BANK'S RIGHTS HEREUNDER, AND HEREBY CONSENTS TO, AND WAIVES NOTICE OF THE RELEASE, WITH OR WITHOUT CONSIDERATION, OF THE BORROWER OR ANY OTHER PERSON RESPONSIBLE FOR PAYMENT OF THE GUARANTEED DEBT, OR OF ANY COLLATERAL THEREFOR. Wherever possible, each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty. It is agreed that the Guarantor's liability is independent of any other guaranties at any time in effect with respect to all or any part of the Borrower's indebtedness to the Bank, and that the Guarantor's liability hereunder may be enforced regardless of the existence of any such other guaranties. No delay on the part of the Bank in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Bank of any right or remedy shall preclude other or further exercise thereof, or the exercise of any other right or remedy. No modification, termination, discharge or waiver of any of the provisions hereof shall be binding upon the Bank, except as expressly set forth in a writing duly signed and delivered on behalf of the Bank. The Guarantor represents and warrants to the Bank that the execution and delivery of this Guaranty has been duly authorized by resolutions heretofore adopted by the Board of Directors and/or Shareholders of the Guarantor in accordance with law and its bylaws, that said resolutions have not been amended or rescinded, are in full force and effect and that the officer or officers executing and delivering this Guarantor for and on behalf of the Guarantor, is/are duly authorized so to act. The Bank, in extending financial accommodations to the Borrower, is expressly acting and relying upon the aforesaid representations and warranties. This Guaranty: (i) is valid, binding and enforceable in accordance with its provisions, and no conditions exist to the legal effectiveness of this Guaranty as to the Guarantor; (ii) contains the entire agreement between the Guarantor and the Bank; (iii) is the final expression of 6 7 their intentions; and (iv) supersedes all negotiations, representations, warranties, commitments, offers, contracts (of any kind or nature, whether oral or written) prior to or contemporaneous with the execution hereof. No prior or contemporaneous representations, warranties, understandings, offers or agreements of any kind or nature, whether oral or written, have been made by the Bank or relied upon by the Guarantor in connection with the execution hereof. The provisions hereof shall be binding upon the Guarantor and upon its executors, administrators, successors and assigns and shall inure to the benefit of the Bank and its successors and assigns. SIGNED AND DELIVERED by the Guarantor as of the date set forth above. ASCHE TRANSFER, INC. By: /s/ Leon Monachos ------------------------ Its: Vice President-Finance ----------------------- 7 EX-10.6 7 CONTINUING UNCONDITIONAL GUARANTY 1 EXHIBIT 10.6 CONTINUING UNCONDITIONAL GUARANTY This CONTINUING UNCONDITIONAL GUARANTY is executed as of June 23, 1998 (the "Guaranty"), by AG CARRIERS, INC. (the "Guarantor"), whose address is c/o 10214 Mt. Vernon Road, Shannon, Illinois 61078, to and for the benefit of AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a national banking association (together with any of its affiliate or subsidiary corporations, or their successors or assigns, being collectively referred to herein as the "Bank"), whose address is 120 South LaSalle Street, Chicago, Illinois 60603. WHEREAS, Dennis D. Wilson, James A. Jalovec and their successors in trust, not individually but solely, as trustees under that certain Aasche Transportation Services, Inc. Employees' Stock Ownership Trust, desires or may desire at some time and/or from time to time to obtain financial accommodations from the Bank; and WHEREAS, the Guarantor desires the Bank to extend or continue the extension of credit to the Borrower and the Bank has required that Guarantor execute and deliver this Guaranty to the Bank as a condition to the extension and continuation of credit by the Bank; and WHEREAS, the extension or continued extension of credit, as aforesaid, by the Bank is necessary and desirable to the conduct and operation of the business of the Borrower and will inure to the financial benefit of the Guarantor; NOW, THEREFORE, FOR VALUE RECEIVED, it is agreed that the preceding provisions and preambles are an integral part hereof and that this Guaranty shall be construed in light thereof, and in consideration of advances, credit or other financial accommodation heretofore afforded, concurrently herewith being afforded or hereafter to be afforded to the Borrower by the Bank, the Guarantor hereby unconditionally and absolutely guarantees to the Bank, irrespective of the validity, regularity or enforceability of any instrument, writing, arrangement or credit agreement relating to or the subject of any such financial accommodation, the full and prompt payment in full to the Bank at maturity, whether by acceleration or otherwise, and at all times thereafter, up to the principal amount of One Hundred Ninety-One Thousand Six Hundred Ninety and 47/100 Dollars ($191,690.47) of the Guaranteed Debt as hereafter defined, plus all interest due and to become due thereon from the Borrower to the Bank and all expenses incurred by the Bank in connection with the collection of the Guaranteed Debt or the enforcement of this Guaranty. As used herein, "Guaranteed Debt" shall mean any and all indebtedness, obligations and liabilities of every kind and nature of the Borrower to the Bank (including all indebtedness, obligations and liabilities of partnerships created or arising while the Borrower may have been or may be a member thereof), howsoever evidenced, whether now existing or hereafter created or arising, direct or indirect, primary or secondary, absolute or contingent, due or to become due, or joint or several, and howsoever owned, held or acquired, whether through discount, overdraft, purchase, direct loan or as collateral, or otherwise, and the prompt, full and faithful performance and discharge by the Borrower of each of the terms, conditions, agreements, representations and warranties on the part of the Borrower contained in any 2 conditions, agreements, representations and warranties on the part of the Borrower contained in any agreement, or in any modification or addenda thereto or substitution thereof in connection with any of the Guaranteed Debt. The Guarantor agrees to pay all reasonable costs, legal expenses and attorneys' and paralegals' fees of every kind (including those costs, expenses and fees of attorneys and paralegals who may be employees of the Bank or its indirect parent), paid or incurred by the Bank in endeavoring to collect the Guaranteed Debt (hereinafter defined) or any part thereof, or in enforcing its rights in connection with any collateral, or in enforcing this Guaranty, any collateral, or in connection with any Repayment Claim (as hereinafter defined) hereinbelow described, promptly on demand of the Bank or other person paying or incurring the same. It is hereby agreed that while the liability of the Guarantor under this Guaranty is limited in amount as set forth above the Guaranteed Debt is no way limited as to dollar amount. In the case of any bankruptcy, reorganization, debt arrangement or other proceeding under any bankruptcy or insolvency law, or any dissolution, liquidation or receivership proceeding is instituted by or against either the Borrower or the Guarantor, all of the Guaranteed Debt then existing shall, without notice to anyone, immediately become due or accrued and all amounts due hereunder shall be payable, jointly and severally, from the Guarantor. The Guarantor hereby expressly and irrevocably: (a) waives, to the fullest extent possible, on behalf of itself and its successors and assigns (including any surety) and any other person, any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification, set off or to any other rights that could accrue to a surety against a principal, a guarantor against a maker or obligor, an accommodation party against the party accommodated, a holder or transferee against a maker, or to the holder of a claim against any person, and which the Guarantor may have or hereafter acquire against any person in connection with or as a result of the Guarantor's execution, delivery and/or performance of this Guaranty, or any other documents to which the Guarantor is a party or otherwise; (b) waives any "claim" (as such term is defined in the United States Bankruptcy Code) of any kind against the Borrower until indefeasible payable in full of the Guaranteed Debt, and further agrees that it shall not have or assert any such rights against any person (including any surety), either directly or as an attempted set off to any action commenced against the Guarantor by the Bank or any other person; and (c) acknowledges and agrees (i) that foregoing waivers are intended to benefit the Bank and shall not limit or otherwise affect the Guarantor's liability hereunder or the enforceability of this Guaranty, and (ii) the agreements set forth in this paragraph and the Bank's rights under this paragraph shall survive payment in full of the Guaranteed Debt. All dividends or other payments received by the Bank on account of the Guaranteed Debt, from whatever source derived, shall be taken and applied by the Bank toward the payment of the Guaranteed Debt and in such order of application as the Bank may, in its sole discretion, from time to time elect, and this Guaranty shall apply to and secure any ultimate balance that shall remain owing to the Bank. The Bank shall have the exclusive right to determine how, when and what application of payments and credits, if any, whether derived from the Borrower or any other source, shall be made on the Guaranteed Debt and such determination shall be conclusive upon the Guarantor. 2 3 This Guaranty shall in all respects be continuing, absolute and unconditional, and shall remain in full force and effect with respect to the Guarantor until: (i) written notice from the Bank to the Guarantor by United States certified mail of its discontinuance as to the Guarantor; (ii) written notice of the dissolution of the Guarantor shall have been actually received by the Bank; or (iii) until all Guaranteed Debt created or existing before receipt of either such notice shall have been fully paid. In case of any such discontinuance or dissolution of the Guarantor and notice thereof to the Bank, this Guaranty shall nevertheless continue and remain in force against any other guarantor until discontinued as to such other guarantor as provided herein. In the event of the dissolution of the Guarantor, this Guaranty shall continue as to all of the Guaranteed Debt theretofore incurred by the Borrower even though the Guaranteed Debt is renewed or the time of maturity of the Borrower's obligations is extended without the consent of the successors or assigns of the Guarantor. No compromise, settlement, release or discharge of, or indulgence with respect to, or failure, neglect or omission to enforce or exercise any right against any other guarantor shall release or discharge the Guarantor. The Guarantor's liability under this Guaranty shall in no way be modified, affected, impaired, reduced, released or discharged by any of the following (any or all of which may be done or omitted by the Bank in its sole discretion, without notice to anyone and irrespective of whether the Guaranteed Debt shall be increased or decreased thereby): (a) any acceptance by the Bank of any new or renewal note or notes of the Borrower, or of any security or collateral for, or other guarantors or obligors upon, any of the Guaranteed Debt; (b) any compromise, settlement, surrender, release, discharge, renewals, refinancing, extension, alteration, exchange, sale, pledge or election with respect to the Guaranteed Debt, or any note by the Borrower, or with respect to any collateral under Section 1111 or take any action under Section 364, or any other section of the United States Bankruptcy Code, now existing or hereafter amended, or other disposition of, or substitution for, or indulgence with respect to, or failure, neglect or omission to realize upon, or to enforce or exercise any liens or rights of appropriation or other rights with respect to, any Guaranteed Debt or any security or collateral therefor or any claims against any person or persons primarily or secondarily liable thereon; (c) any failure, neglect or omission to perfect, protect, secure or insure any of the foregoing security interests, liens, or encumbrances of the properties or interests in properties subject thereto; (d) any change in the Borrower's name or the merger of the Borrower into another corporation; (e) any act of commission or omission of any kind or at any time upon the part of the Bank with respect to any matter whatsoever, other than the execution and delivery by the Bank to the Guarantor of an express written release or cancellation of this Guaranty. The Guarantor hereby consents to all acts of commission or omission of the Bank set forth above. In order to hold the Guarantor liable hereunder, there shall be no obligation on the part of the Bank, at any time, to resort for payment to the Borrower or to anyone else, or to any collateral, security, property, liens or other rights and remedies whatsoever, all of which are hereby expressly waived by the Guarantor. 3 4 The Guarantor hereby expressly waives diligence in collection or protection, presentment, demand or protest or in giving notice to anyone of the protest, dishonor, default, or nonpayment or of the creation or existence of any of the Guaranteed Debt or of any security or collateral therefor or of the acceptance of this Guaranty or of extension of credit or indulgences hereunder or of any other matters or things whatsoever relating hereto. The Guarantor waives any and all defenses, claims and discharges of the Borrower, or any other obligor, pertaining to the Guaranteed Debt, except the defense of discharge by payment in full. Without limiting the generality of the foregoing, the Guarantor will not assert, plead or enforce against the Bank any defense of waiver, release, discharge in bankruptcy, statute of limitations, res judicata, statute of frauds, anti-deficiency statute, fraud, incapacity, minority, usury, illegality or unenforceability which may be available to the Borrower or any other person liable in respect of any of the Guaranteed Debt, or any set off available against the Bank to the Borrower or any such other person, whether or not on account of a related transaction. The Guarantor expressly agrees that the Guarantor shall be and remain liable for any deficiency remaining after foreclosure of any mortgage or security interest securing the Guaranteed Debt, whether or not the liability of the Borrower or any other obligor for such deficiency is discharged pursuant to statute or judicial decision. To secure payment of the Guaranteed Debt, the Guarantor grants to the Bank a security interest in all property of the Guarantor delivered concurrently herewith or which is now, or at any time hereafter in transit to, or in the possession, custody, or control of the Bank, and all proceeds of all such property. The Guarantor agrees that the Bank shall have the rights and remedies of a secured party under the Uniform Commercial Code in effect in Illinois from time to time, with respect to all of the aforesaid property, including, without limitation thereof, the right to sell or otherwise dispose of any such property. The Bank may, without demand or notice of any kind to anyone, apply or set off any balances, credits, deposits, accounts, moneys or other indebtedness at any time credited by or due from the Bank to the Guarantor against the amounts due hereunder and in such order of application as the Bank may from time to time elect. Any notification of intended disposition of any property required by law shall be deemed reasonably and properly given if given in the manner provided by the applicable statute. The Guarantor hereby assigns and transfers to the Bank any and all cash, negotiable instruments, documents of titled, chattel paper, securities, certificates of deposit, deposit accounts other cash equivalents and other assets of the Guarantor in the possession or control of the Bank for any purpose. THE GUARANTOR WAIVES EVERY DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SET OFF WHICH THE GUARANTOR MAY NOW HAVE TO ANY ACTION BY THE BANK IN ENFORCING THIS GUARANTY. AS FURTHER SECURITY, ANY AND ALL DEBTS AND LIABILITIES NOW ARISING AND OWING TO THE GUARANTOR BY THE BORROWER, OR TO ANY OTHER PARTY LIABLE TO THE BANK, ARE HEREBY SUBORDINATED TO THE BANK'S CLAIMS AND ARE HEREBY ASSIGNED TO THE BANK. THE GUARANTOR HEREBY AGREES THAT THE GUARANTOR MAY BE JOINED AS A PARTY DEFENDANT IN ANY LEGAL PROCEEDING (INCLUDING, BUT NOT LIMITED TO, A FORECLOSURE PROCEEDING) INSTITUTED BY THE BANK AGAINST THE BORROWER. THE GUARANTOR AND THE BANK IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY WITH RESPECT 4 5 TO ANY SUCH LEGAL PROCEEDING IN WHICH THE GUARANTOR AND THE BANK ARE ADVERSE PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO THE BORROWER AND ACCEPTING THIS GUARANTY. Should a claim (a "Repayment Claim") be made upon the Bank at any time for repayment of any amount received by the Bank in payment of the Guaranteed Debt, or any part thereof, whether received from the Borrower, the Guarantor pursuant hereto, or received by the Bank as the proceeds of collateral, by reason of: (1) any judgment, decree or order of any court or administrative body having jurisdiction over the Bank or any of its property; or (2) any settlement or compromise of any such Repayment Claim effected by the Bank, in its sole discretion, with the claimant (including the Borrower), the Guarantor shall remain jointly and severally liable to the Bank for the amount so repaid to the same extent as if such amount had never originally been received by the Bank, notwithstanding any termination hereof or the cancellation of any note or other instrument evidencing any of the Guaranteed Debt. The Bank may, without notice to anyone, sell or assign the Guaranteed Debt, or any part thereof, or grant participations therein, and in any such event each and every immediate or remote assignee or holder of, or participant in, all or any of the Guaranteed Debt shall have the right to enforce this Guaranty, by suit or otherwise for the benefit of such assignee, holder or participant, as fully as if herein by name specifically given such right herein, but the Bank shall have an unimpaired right, prior and superior to that of any such assignee, holder or participant, to enforce this Guaranty for the benefit of the Bank, as to any part of the Guaranteed Debt retained by the Bank. Unless and until all of the Guaranteed Debt has been paid in full, no release or discharge of the Guarantor, or of any other person, whether primarily or secondarily liable for and obligated with respect to the Guaranteed Debt, or the institution of bankruptcy, receivership, insolvency, reorganization, dissolution or liquidation proceedings by or against the Guarantor or person, or the entry of any restraining or other order in any such proceedings, shall release or discharge the Guarantor, or any other guarantor of the indebtedness, or any other person, firm or corporation liable to the Bank for the Guaranteed Debt. All references herein to the Borrower and to the Guarantor, respectively, shall be deemed to include any successors or assigns, whether immediate or remote to such corporations or any successors in trust to such trust. If this Guaranty contains any blanks when executed by the Guarantor, the Bank is hereby authorized, without notice to the Guarantor, to complete any such blanks according to the terms upon which this Guaranty is executed by the Guarantor and is accepted by the Bank. This Guaranty has been delivered to the Bank at its offices in Chicago, Illinois, and the rights, remedies and liabilities of the parties shall be construed and determined in accordance with the laws of the State of Illinois, in which State it shall be performed by the Guarantor. TO INDUCE THE BANK TO GRANT FINANCIAL ACCOMMODATIONS TO THE BORROWER, THE GUARANTOR IRREVOCABLY AGREES THAT ALL ACTIONS 5 6 ARISING DIRECTLY OR INDIRECTLY AS A RESULT OR IN CONSEQUENCE OF THIS GUARANTY SHALL BE INSTITUTED AND LITIGATED ONLY IN COURTS HAVING SITUS IN THE CITY OF CHICAGO, ILLINOIS. THE GUARANTOR HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT LOCATED AND HAVING ITS SITUS IN CHICAGO, ILLINOIS, AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS. THE GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS, AND TO THE SERVICE OF PROCESS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO THE GUARANTOR AT THE ADDRESS INDICATED IN THE BANK'S RECORDS IN THE MANNER PROVIDED BY APPLICABLE STATUTE, LAW, RULE OF COURT OR OTHERWISE. FURTHERMORE, THE GUARANTOR WAIVES ALL NOTICES AND DEMANDS IN CONNECTION WITH THE ENFORCEMENT OF THE BANK'S RIGHTS HEREUNDER, AND HEREBY CONSENTS TO, AND WAIVES NOTICE OF THE RELEASE, WITH OR WITHOUT CONSIDERATION, OF THE BORROWER OR ANY OTHER PERSON RESPONSIBLE FOR PAYMENT OF THE GUARANTEED DEBT, OR OF ANY COLLATERAL THEREFOR. Wherever possible, each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Guaranty. It is agreed that the Guarantor's liability is independent of any other guaranties at any time in effect with respect to all or any part of the Borrower's indebtedness to the Bank, and that the Guarantor's liability hereunder may be enforced regardless of the existence of any such other guaranties. No delay on the part of the Bank in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Bank of any right or remedy shall preclude other or further exercise thereof, or the exercise of any other right or remedy. No modification, termination, discharge or waiver of any of the provisions hereof shall be binding upon the Bank, except as expressly set forth in a writing duly signed and delivered on behalf of the Bank. The Guarantor represents and warrants to the Bank that the execution and delivery of this Guaranty has been duly authorized by resolutions heretofore adopted by the Board of Directors and/or Shareholders of the Guarantor in accordance with law and its bylaws, that said resolutions have not been amended or rescinded, are in full force and effect and that the officer or officers executing and delivering this Guarantor for and on behalf of the Guarantor, is/are duly authorized so to act. The Bank, in extending financial accommodations to the Borrower, is expressly acting and relying upon the aforesaid representations and warranties. This Guaranty: (i) is valid, binding and enforceable in accordance with its provisions, and no conditions exist to the legal effectiveness of this Guaranty as to the Guarantor; (ii) contains the entire agreement between the Guarantor and the Bank; (iii) is the final expression of 6 7 their intentions; and (iv) supersedes all negotiations, representations, warranties, commitments, offers, contracts (of any kind or nature, whether oral or written) prior to or contemporaneous with the execution hereof. No prior or contemporaneous representations, warranties, understandings, offers or agreements of any kind or nature, whether oral or written, have been made by the Bank or relied upon by the Guarantor in connection with the execution hereof. The provisions hereof shall be binding upon the Guarantor and upon its executors, administrators, successors and assigns and shall inure to the benefit of the Bank and its successors and assigns. SIGNED AND DELIVERED by the Guarantor as of the date set forth above. AG CARRIERS, INC. By: /s/ Leon Monachos ------------------------ Its: Vice President-Finance ----------------------- 7 EX-10.7 8 FIRST AMENDMENT TO STOCK OPTION PLAN 1 EXHIBIT 10.7 APPENDIX A TEXT OF AMENDMENT TO THE STOCK OPTION PLAN FIRST AMENDMENT TO THE AASCHE TRANSPORTATION SERVICES, INC. STOCK OPTION PLAN The Aasche Transportation Services, Inc. Stock Option Plan (the "PLAN") is hereby amended, effective March 24, 1998, as follows: 1. The aggregate number of Shares as to which Options may be granted pursuant to Article II of the Plan shall be increased from 683,500 to 908,500. 2. The definition of Key Employee as set forth under Article I of the Plan shall be amended to read as follows: KEY EMPLOYEE means an employee of the Company or an Affiliate (including, without limitation, an employee who also is serving as an officer or director of the Company or of an Affiliate), designated by the Board or the Committee as being eligible to be granted one or more Options under the Plan. IN WITNESS WHEREOF, Aasche Transportation Services, Inc. has caused this Amendment to be executed by its officer hereto duly authorized this 24th day of March, 1998. AASCHE TRANSPORTATION SERVICES, INC. By: /s/ Larry L. Asche -------------------------------------- Its: Chairman and Chief Executive Officer ------------------------------------- 15 EX-27 9 FINANCIAL DATA SCHEDULE
5 1,000 0 6-MOS DEC-31-1998 JAN-1-1998 JUN-30-1998 1,000 0 0 13,130 0 0 18,567 56,789 13,956 77,544 14,206 0 0 0 0 14,245 77,544 0 51,299 0 47,882 2,674 0 2,345 743 509 234 0 0 0 234 0.05 0.05
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