Exhibit 10.9

 

Execution Copy

 

FIFTH AMENDMENT TO

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

THIS FIFTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (“Fifth
Amendment”) is made as of December 21, 2004, by and among the borrower
signatories hereto (individually a “Borrower” and collectively, “Borrowers”);
the lenders who are signatories hereto (“Lenders”); and FLEET CAPITAL
CORPORATION (“FCC”), a Rhode Island corporation with an office at One South
Wacker Drive, Suite 3400, Chicago, Illinois 60606, as agent for Lenders
hereunder (FCC, in such capacity, being “Agent”).

 

W I T N E S S E T H:

 

WHEREAS, Borrowers, Agent and Lenders entered into a certain Amended and
Restated Loan and Security Agreement dated as of November 26, 2003, as amended
by a certain First Amendment to Amended and Restated Loan and Security Agreement
(“First Amendment”) dated as of January 26, 2004 by and among Borrowers, Agent
and Lenders, by a certain Second Amendment to Amended and Restated Loan and
Security Agreement (“Second Amendment”) dated as of January 31, 2004 by and
among Borrowers, Agent and Lenders and by a certain Third Amendment to Amended
and Restated Loan and Security Agreement (“Third Amendment”) dated as of March
31, 2004 by and among Borrowers, Agent and Lenders and by a certain Fourth
Amendment to Amended and Restated Loan and Security Agreement dated as of July
1, 2004 by and among Borrowers, Agent and Lenders (said Amended and Restated
Loan and Security Agreement, as so amended, is hereinafter referred to as the
“Loan Agreement”); and

 

WHEREAS, Borrowers desire to amend and modify certain provisions of the Loan
Agreement and, subject to the terms hereof, Agent and Lenders are willing to
agree to such amendments and modifications;

 

NOW THEREFORE, in consideration of the premises, the mutual covenants and
agreements herein contained, and any extension of credit heretofore, now or
hereafter made by Agent and Lenders to Borrowers, the parties hereto hereby
agree as follows:

 

1. Definitions. All capitalized terms used herein without definition shall have
the meanings given to them in the Loan Agreement. The definitions of “Investors”
and “Investor Note Documents” as defined in Section 9 of this Fifth Amendment
are hereby added to Appendix A to the Loan Agreement:

 

2. Reserves. If at any time after the Fifth Amendment Effective Date (x)
Borrower achieves as of the last day of any fiscal month, EBITDA for each of the
three consecutive months then ended equal to or greater than $0 and achieves
EBITDA for the six months then ended of $6,000,000 or more and (y) as of the
last day of the fiscal month referred to in clause (x) above, average
Availability for the 30 days then ended and actual Availability as of the last
day of such fiscal month equals or exceeds $5,000,000, then Agent and Lenders
agree to release the Availability Reserve and reduce it to $0. This Section 2 of
the Fifth Amendment amends and supersedes Section 3 of the Fourth Amendment.

 

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3. Additional Reserves; Changes in Advance Rates. During the period beginning on
the Fifth Amendment Effective Date and ending on a date (the “Reserve Standstill
Date”) which is the earliest of (i) the Notification Event, (ii) December 31,
2006, (iii) the failure by Borrowers to fulfill their obligations under Section
6 of the Fourth Amendment or Section 8 of the Fifth Amendment; and (iv) the
occurrence of any other Event of Default, Agent and Lenders agree not to
implement any new Reserves, decrease the advance rates contained in the
definition of Borrowing Base, change the criteria for determining Eligible
Accounts or determine Eligible Accounts in a manner inconsistent with past
practice or amend the definition of Availability; provided that at all times
Agent shall be entitled to create additional Reserves based on increases in the
dilution ratio for Borrowers’ Accounts above 6% based on a new formula attached
hereto as Exhibit A; provided, further, that Agent may implement Reserves (“Tax
Reserves”) for any accrual for penalty and interest relating to delinquent tax
payments prior to the date hereof, if Availability is less than $4,000,000 at
any time (the “Trigger Date”) and such Tax Reserves shall be in the amount of
the accrual for penalty and interest relating to such delinquent tax payments on
the Trigger Date and shall be reduced, upon delivery by Borrowers of evidence of
the payment or successful elimination of such penalty or interest obligations by
the amount of the payment made or the eliminated obligation. This Section 3 of
the Fifth Amendment amends and supersedes Section 4 of the Fourth Amendment.

 

4. Reaffirmation of Representations and Warranties. Borrowers hereby reaffirm
each of the warranties and representations contained in the Loan Agreement and
the Loan Documents as if each such representation and warranty were made on the
date hereof, subject to such amendments and modifications to the Exhibits to the
Loan Agreement as are attached hereto. Further Borrowers represent and warrant
to Agent and Lenders that as of the date hereof there are no existing and
continuing Defaults or Events of Default after giving effect to this Fifth
Amendment.

 

5. Waiver of Certain Financial Reporting Defaults. As of the Fifth Amendment
Effective Date, Agent and Lenders agree to waive any Default or Event of Default
arising from the failure of Borrowers, (u) to give any notice required by
subsection 8.1.2 for events occurring on or prior to the date hereof; (v) to
deliver the interim financial statements and related items required by
subsection 8.1.3 for periods ending on or prior to the date hereof within the
time frames required by subsections 8.1.3(ii), (iii) and (iv), (w) to deliver to
Agent and Lenders the audited consolidated financial statements required by
subsection 8.1.3(i) and related items required by subsection 8.1.3 for the
fiscal year ending July 3, 2004 on or prior to the date hereof, (x) to file with
the Securities and Exchange Commission its (i) annual 10-K Report for the fiscal
year ending July 3, 2004 and (ii) form 10Q for the first quarter of fiscal year
2005, in each case, within the time periods prescribed by applicable law and
regulations of the Securities and Exchange Commission, (y) to deliver the
Borrowing Base Certificate for periods ending on or prior to October 31, 2004
within the time periods required by subsection 8.1.4 and (z) to deliver to Agent
and Lenders the Projections for the fiscal year ending nearest June 30, 2005
within the time periods prescribed in subsection 8.1.6 of the Agreement. The
waivers contained in this Section 5 do not apply to any section of the Loan
Agreement other than subsection 8.1.2, subsection 8.1.3, subsection 8.1.4,
subsection 8.1.6 and any other covenants that are violated because of Borrowers’
breach of the foregoing specified covenants or any other periods ending after
those specified in this paragraph.

 

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6. Waiver of Events of Default Resulting from Peritas Transaction. Subject to
the fulfillment of the conditions precedent list below, Majority Lenders shall
be deemed to have consented to and waived any Default or Event of Default
resulting from: (x) Borrowers advancing prior to the date hereof up to
$2,200,000 to Borrowers’ Affiliate, Peritas, LLC, a Delaware limited liability
Company (“Peritas”), to permit Peritas to purchase vans or other motor vehicles,
which vans or other motor vehicles will be rented to independent contractors of
Borrowers for use in servicing Borrowers customers; (y) Borrowers making such
advances by permitting Account Debtors to offset against Accounts of Borrowers
owed to Borrowers by Account Debtors the purchase price of said vans or other
motor vehicles; and (z) VEI entering into a certain Agency Agreement (“Agency
Agreement”) with Peritas, dated May 1, 2004 (the transactions referred to in
clauses (x), (y) and (z) are hereinafter referred to as the “Peritas
Transactions”). The consent contained in this Section 6 of this Fifth Amendment
is subject to the fulfillment of each of the following conditions precedent:

 

(a) Borrowers shall have delivered to Agent true and correct executed copies of
the Agency Agreement (Agent acknowledges receipt of an unsigned draft copy of an
Agency Agreement), together with all amendments, exhibits and schedules thereto;

 

(b) Borrowers shall have delivered to Agent true and correct executed copies of
the Master Purchase Agreement between Peritas and the applicable Account Debtor,
together with all amendments, exhibits and schedules thereto (Agent acknowledges
receipt of an unsigned draft copy of a Master Purchase Agreement);

 

(c) All such loans and advances from Borrowers to Peritas have been repaid on or
prior to March 31, 2005.

 

7. Other Events of Default. As of the Fifth Amendment Effective Date, Agent and
Lenders agree to waive any Default or Event of Default resulting from (v)
Borrowers failing to pay accrued payroll taxes when due and incurring interest
and penalties as a result of such non-payment on or prior to the date hereof;
(w) Borrowers incurring on or prior to the date hereof Indebtedness to THLPV so
long as such Indebtedness was converted into equity on or prior to the date
hereof; (x) Borrowers failing to comply with the provisions of subsection 8.2.8
for the fiscal year ending July 3, 2004 so long as the aggregate amount of
Capital Expenditures for such fiscal year (including, without limitation, by way
of Capitalized Leases but excluding Capital Expenditures financed by Permitted
Purchase Money Indebtedness) did not exceed Six Million Dollars ($6,000,000);
(y) Borrowers failing to comply with the provisions of Section 7 of the Fourth
Amendment on or prior to the date hereof; and (z) any change in Control
resulting from THLPV obtaining additional Securities of Parent on or prior to
the date hereof. The waivers contained in this Section 7 do not apply to any
Section of the Loan Agreement other than subsection 8.2.2, subsection 8.2.8 and
subsection 10.1.10 of the Loan Agreement and Section 7 of the Fourth Amendment
and any other covenants that are violated because of Borrowers’ breach of the
foregoing specified covenants or any other periods other than those referenced
herein.

 

8. Conference Calls. From the Fifth Amendment Effective Date until the
Termination Date, Borrowers covenant that, upon request by Agent, Borrowers’
Chief Executive Officer, Chief Financial Officer, Senior Vice President of
Finance or other senior officer of

 

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Borrowers acceptable to Agent, a representative of THLPV and a representative of
the consultant referred to in Section 6 of the Fourth Amendment, if so requested
by any Lender, shall participate in conference calls to be held every other week
at times reasonably set by Agent concerning the progress of Borrowers’ GEOCOM
and sales implementation and Borrowers’ business, operations and financial
prospects; provided that in each case, the failure or inability of said
consultant to participate in any such conference calls shall not be deemed a
breach by Borrowers of this Section 8. This Section 8 of the Fifth Amendment
amends and supersedes Section 7 of the Fourth Amendment.

 

9. Consent to Incursion of Additional Indebtedness and Granting of Permitted
Liens. As of the Fifth Amendment Effective Date, Agent and Lenders hereby
consent to and waive any Default or Event of Default resulting from (i)
Borrowers incurring additional Indebtedness pursuant to the terms and conditions
of the “Investor Note Documents” and (ii) Velocity Express Corporation and
Velocity Express, Inc. granting a third subordinate Lien on their assets to
“Investors” (as defined below) pursuant to the Investor Note Documents so long
as such Investor Note Documents include (a) cross acceleration rights to this
Agreement, but not cross default rights (other than with respect to payment
defaults), and (b) an acknowledgment by the Investors that (1) their Lien is
subordinate to the Lien of Agent and BET and (2) if an event of default occurs
under the Investor Note Documents and Investors receive proceeds of Borrowers’
collateral prior to the repayment of the Obligations hereunder and the BET
obligations, Investors will hold such proceeds in trust for Agent and BET and
will deliver such proceeds first to Agent until the Obligations are paid in full
and second to BET until BET’s obligations are paid in full. As used herein,
“Investor Note Documents” shall mean (x) the 6% Convertible Note to be issued to
Velocity Express Corporation to each “Investor” (as defined in the Purchase
Agreement referred to in (y)) below dated as of December 21, 2004), (y) the
Purchase Agreement by and between Velocity Express Corporation and the investor
signatories thereto (“Investors”) dated as of December 21, 2004 (the “Purchase
Agreement”) and (z) that certain Security Agreement by and between Velocity
Express Corporation and Investors dated as of December 21, 2004. Borrowers
represent and warrant that they have delivered to each Lender true and complete
executed copies of the documents and agreements referred to in clauses (x), (y)
and (z) of the previous sentence together with all schedules, exhibits,
amendments and modifications thereto. Borrowers covenant not to prepay the
Indebtedness evidenced by the Investor Note Documents prior to its stated
maturity date.

 

10. Additional Event Default. Borrowers, Agent and Lenders agree that it shall
be an Event of Default if the 6% Convertible Notes referred to in clause (x) of
the definition of Investor Note Documents are not all converted in full into
equity of Velocity Express Corporation on or prior to April 29, 2005.

 

11. Amendments to Loan Agreement.

 

(a) Appendix A of the Loan Agreement shall be amended by amending and restating
the following definition in its entirety to read as follows:

 

“Notification Event – the earlier of (x) the date on which Agent receives
written notice from THLPV that THLPV has elected to terminate its obligations
under Section 2 of the Capital Contribution Agreement; and (z) the date on which
Borrowers’ Availability

 

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is $0 or less, unless as of such date (1) THLPV or third parties have agreed to
make additional cash investments in Borrowers (either directly or indirectly
through Parent) such that Availability is greater than or equal to $0, or (2)
Borrowers shall have caused an Additional Third Party Letter of Credit,
containing the terms and conditions provided for in the definition of such term
and otherwise in form and substance acceptable to Majority Lenders, to be
delivered to Agent, and Borrower shall have drawn down on such Additional Third
Party Letter of Credit and used the proceeds thereof to repay the Revolving
Credit Loans in an amount necessary to cause Availability to be equal or greater
than $0.

 

(b) Section 10.1.3 of the Loan Agreement shall be amended and restated to read
as follows until the earlier of (i) May 1, 2005 and (ii) the approval of the
stockholders of the Borrowers of the Proposals (as defined in the Purchase
Agreement), at which time Section 10.1.3 shall read as originally provided in
the Loan Agreement:

 

“10.1.3 Breach of Specific Covenants. Borrowers shall fail or neglect to
perform, keep or observe any covenant contained in Section or subsection 5.2,
5.3, 6.1.2, 6.2.4, 6.2.5, 8.1.8, 8.2 (other than as set forth in (b) below) or
8.3 hereof on the date that Borrowers are required to perform, keep or observe
such covenant or shall fail or neglect to perform, keep or observe any covenant
contained in (a) Section 8.1.4 hereof within 3 Business Days, (b) Section 8.2.1,
Section 8.2.2, Section 8.2.3, Section 8.2.4 or Section 8.2.18 hereof within 10
days, (c) Section 8.1.1 hereof within 30 days, (d) Section 8.1.3 hereof within
60 days, (e) Section 8.1.2, Section 8.1.5 or Section 8.1.6 hereof within 90 days
following the date on which Borrowers are required to perform, keep or observe
such covenant; provided that, the grace periods provided herein shall terminate
upon the earlier of (x) May 1, 2005 and (z) the approval of the stockholders of
the Borrowers of the Proposals (as defined in the Purchase Agreement).”

 

12. BET Documents. Agent and Lenders acknowledge and agree that no Event of
Default shall occur under Section 10.1.6 of the Loan Agreement as a result of
Borrower not making a principal payment due on the BET Subordinated Debt on
either January 31, 2005 or April 30, 2005 to the extent such payment is
prohibited by Section 2.2(b) of the BET Subordination Agreement, even if BET
attempts to claim that such occurrence is an “Event of Default” under the BET
Documents.

 

13. Conditions Precedent. This Fifth Amendment shall become effective upon
satisfaction of each of the following conditions precedent:

 

(i) Borrowers, Agent and Lenders shall have executed and delivered to each other
this Fifth Amendment;

 

(ii) The BET Documents shall have been amended and any defaults thereunder shall
have been waived, each in form and substance acceptable to Majority Lenders;

 

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(iii) Borrowers shall have delivered to Agent and Lenders an unqualified opinion
as it relates to going concern for audited financial statements of Parent and
its Subsidiaries as of July 3, 2004 certified by Ernst & Young LLP;

 

(iv) Parent shall have received a new net cash equity investment or Subordinated
Debt (pursuant to the Investor Note Documents) of at least $20,000,000 on or
after December 1, 2004 from sources other than draws on existing letters of
credit securing the Obligations. Parent, in turn, shall have invested such
amount as an equity contribution in VEI and VEI shall have used the proceeds of
such amount to pay down the outstanding Revolving Credit Loans, which Revolving
Credit Loans may be reborrowed subject to the terms and conditions of the Loan
Agreement; and

 

(v) THLPV shall have acknowledged that the Capital Contribution Agreement
remains in full force and effect except that clause (i) of Section 11 thereof
shall be modified to substitute (a) the word “earlier” for “later” where it
appears therein and (b) “January 1, 2007” for “January 1, 2005.”

 

The date on which each of the above listed conditions precedent are satisfied is
hereinafter referred to as the “Fifth Amendment Effective Date.”

 

14. Execution in Counterparts. This Fifth Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.

 

15. Continuing Effect. Except as otherwise specifically set out herein, the
provisions of the Loan and Security Agreement shall remain in full force and
effect.

 

16. Defaults. Agent and each Lender represents and warrants to Borrowers that it
has no knowledge of any current continuing Events of Default other than those
Events of Default waived pursuant to this Fifth Amendment.

 

17. Permitted Distributions. Agent, Lenders and BET consent to VEI or Parent
making a Distribution of not more than $400,000 to THLPV (or an Affiliate
thereof) on or prior to December 23, 2004 if, and only if on or after December
1, 2004 and prior to the making of such proposed Distribution, (x) THLPV or an
Affiliate thereof shall have made a new cash equity investment in Parent (which
in turn shall have made a comparable equity investment in VEI) or VEI, either
directly or through a draw down of a new letter of credit issued for the benefit
of Agent on or after the date hereof and in form and substance acceptable to
Agent, in an amount equal to or greater than the proposed Distribution, and (y)
a third party not under common control with THLPV has made a new cash equity
investment in Parent (which, in turn, shall have made a comparable equity
investment in VEI), or VEI, either directly, through a draw down of a new letter
of credit issued for the benefit of Agent, or indirectly through THLPV, on or
after the date hereof, in an amount equal to or greater than the proposed
Distribution.

 

(Signature Page Follows)

 

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(Signature Page to Fifth Amendment to

Amended and Restated Loan and Security Agreement)

 

IN WITNESS WHEREOF, this Fifth Amendment has been duly executed as of the day
and year specified at the beginning hereof.

 

BORROWERS: VELOCITY EXPRESS, INC. VXP LEASING MID-WEST, INC. VXP MID-WEST, INC.
VELOCITY EXPRESS LEASING INTERMOUNTAIN, INC. VELOCITY EXPRESS LEASING
MID-ATLANTIC, INC. VELOCITY EXPRESS LEASING MID-WEST, INC. VELOCITY EXPRESS
LEASING NEW ENGLAND, INC. VELOCITY EXPRESS LEASING NORTHEAST, INC. VELOCITY
EXPRESS LEASING SOUTHEAST, INC. VELOCITY EXPRESS LEASING SOUTHWEST, INC.
VELOCITY EXPRESS LEASING WEST COAST, INC. VELOCITY EXPRESS INTERMOUNTAIN, INC.
VELOCITY EXPRESS MID-ATLANTIC, INC. VELOCITY EXPRESS MID-WEST, INC. VELOCITY
EXPRESS NEW ENGLAND, INC. VELOCITY EXPRESS NORTHEAST, INC. VELOCITY EXPRESS
SOUTHEAST, INC.

 

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VELOCITY EXPRESS SOUTHWEST, INC. VELOCITY EXPRESS WEST COAST, INC. POS II, INC.
VELOCITY EXPRESS ADMINISTRATION, INC. NEW DELAWARE DELIVERY, INC. CORPORATE
EXPRESS DISTRIBUTION SERVICES, INC.

Each By:

           

Name:

       

Title:

   

 

CONSENTED AND AGREED TO THIS              DAY OF DECEMBER, 2004

VELOCITY EXPRESS CORPORATION, as a
Guarantor and as a Party hereto

By:

           

Name:

       

Title:

   

 

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Accepted in Chicago, Illinois:

FLEET CAPITAL CORPORATION, (“Agent” and “Lender”)

By:

       

Name:

       

Title:

   

 

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MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business Financial Services
Inc. (“Lender”)

By:

       

Name:

       

Title:

   

 

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1. The undersigned hereby acknowledge and agree that the cash equity
contribution described in Section 10(iv) of the foregoing Fifth Amendment shall
not have the effect of reducing the amount of the Second TH Lee Letter of Credit
or the Third Party Letter of Credit.

 

2. The undersigned consent to Borrowers, Agent and Lenders entering into the
foregoing Fifth Amendment and consent and acknowledge the terms thereof.

 

3. The undersigned acknowledge and agree that the Capital Contribution Agreement
dated as of July 1, 2004 by and between the undersigned and Fleet Capital
Corporation, as agent, remains in full force and effect, except that in clause
(i) of the first sentence of Section 11 of the Capital Contribution Agreement,
January 1, 2007 shall be substituted for January 1, 2005. Each party hereto
acknowledges and agrees that the Capital Contribution Agreement is hereby
amended by (a) deleting the word “later” where it appears in Section 11 and
inserting therefore the word “earlier” and (b) deleting “January 1, 2005” from
clause (i) of the first sentence of Section 11 and inserting therefor “January
1, 2007”.

 

TH LEE PUTNAM VENTURES, L.P. By:        

Name:

       

Title:

   

 

TH LEE PUTNAM PARALLEL

VENTURES, L.P.

By:        

Name:

       

Title:

   

 

Accepted and Agreed to this ___ day of

December, 2004

FLEET CAPITAL CORPORATION, as

Agent

By:        

Name:

       

Title:

   

 

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EXHIBIT A

 

The sum of dilutive credits divided by gross collections. The average calculated
dilution level for the months of July, August and September, 2004 was 4.25%.