UNITED STATES
                SECURITIES AND EXCHANGE COMMISSION
                      WASHINGTON D.C. 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 or
                        

                  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:    0-26954


                     CONSOLIDATED DELIVERY & LOGISTICS, INC.
             (Exact name of Registrant as specified in its charter)


           Delaware                                  22-3350958
(State or other jurisdiction of
incorporation or organization)            (I.R.S. Employer Identification No.)



380 Allwood Road                                       07012  
Clifton, New Jersey                                  (Zip Code)
(Address of principal executive offices)

                           (973) 471-1005
(Registrant's telephone number, including area code)

         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___

The  number of shares of common  stock of the  Registrant,  par value  $.001 per
share, outstanding as of August 4, 1998 was 6,637,517.


<PAGE>



                     CONSOLIDATED DELIVERY & LOGISTICS, INC.
                  FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998

                                      INDEX



                                                                       Page


Part I - Financial Information (unaudited)

    Item 1 - Financial Statements

    Consolidated Delivery & Logistics, Inc. and Subsidiaries
      Condensed Consolidated Balance Sheets as of June 30, 1998 and
      December 31, 1997                                                   3
    Condensed Consolidated Statements of Income for the Three
      and Six Months Ended June 30, 1998 and 1997                         4
    Condensed Consolidated Statements of Cash Flows for the Six
      Months Ended June 30, 1998 and 1997                                 5
    Notes to Condensed Consolidated Financial Statements                  6

    Item 2 - Management's Discussion and Analysis of Financial Condition
                               and Results of Operations                 10

Part II - Other Information

         Item 1 - Legal Proceedings                                      13

         Item 4 - Submission of Matters to a Vote of Security Holders    14

         Item 6 - Exhibits and Reports on Form 8-K                       15

         Signature                                                       16



<PAGE>




            CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                     (In thousands except share information)

<TABLE>
<CAPTION>

                                                                         June 30,                December 31, 
                                                                           1998                     1997
                                                                    -------------------       -------------------
                                                                       (Unaudited)                 (Note 1)
     <S>                                                            <C>                       <C>   

                                ASSETS

     CURRENT ASSETS
       Cash and cash equivalents                                             $1,281                   $1,812
       Accounts receivable, net                                              19,477                   21,275
       Prepaid expenses and other current assets                              2,492                    2,992
                                                                    -------------------       -------------------
         Total current assets                                                23,250                   26,079

     EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net                                5,727                    5,667
     OTHER ASSETS                                                             4,293                    4,403
     NONCURRENT ASSETS OF DISCONTINUED
       OPERATIONS                                                                 -                       10
                                                                    -------------------       -------------------
         Total assets                                                       $33,270                  $36,159
                                                                    ===================       ===================

                 LIABILITIES AND STOCKHOLDERS' EQUITY

     CURRENT LIABILITIES
       Short-term borrowings                                                 $4,500                   $7,360
       Current maturities of long-term debt                                   2,475                    3,280
       Accounts payable and accrued liabilities                              13,095                   12,868
       Net liabilities of discontinued operations                               111                       52
                                                                    -------------------       -------------------
         Total current liabilities                                           20,181                   23,560

     LONG-TERM DEBT                                                           2,398                    2,240
     OTHER LONG-TERM LIABILITIES                                              1,529                    1,745
                                                                    -------------------       -------------------
         Total liabilities                                                   24,108                   27,545
                                                                    -------------------       -------------------

     STOCKHOLDERS' EQUITY
      Preferred stock, $.001 par value; 2,000,000 shares
        authorized; no shares issued and outstanding                              -                        -
      Common stock, $.001 par value; 30,000,000 shares
        authorized; 6,637,517 and 6,666,884 shares issued
        and outstanding at June 30, 1998 and December 31,
        1997, respectively                                                        7                        7
      Additional paid-in capital                                              9,026                    9,026
      Treasury stock, 29,367 shares at cost at June 30, 1998                   (162)                       -
      Retained earnings (accumulated deficit)                                   291                     (419)
                                                                    -------------------       -------------------
         Total stockholders' equity                                           9,162                    8,614
                                                                    -------------------       -------------------
         Total Liabilities and stockholders' equity                         $33,270                  $36,159
                                                                    ===================       ===================

</TABLE>


                      See accompanying notes to condensed consolidated financial
                                           statements.

<PAGE>


            CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                      (In thousands, except per share data)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                      For the Three Months                  For the Six Months
                                                             Ended                                 Ended
                                                             June 30,                             June 30,
                                                  --------------------------------     -------------------------------
                                                       1998              1997             1998              1997
                                                  ---------------    -------------     ------------    ---------------
       <S>                                        <C>                <C>               <C>             <C>   

       Revenue                                       $44,592            $41,700           $87,278         $82,109

       Cost of revenue                                34,347             31,880            67,625          62,948
                                                  ---------------    -------------     ------------    ---------------

         Gross profit                                 10,245              9,820            19,653          19,161

       Selling, general, and
          administrative expenses                      9,358              9,262            18,181          18,974
                                                  ---------------    -------------     ------------    ---------------

         Operating income                                887                558             1,472             187

       Other (income) expense:
         Gain on sale of subsidiary                        -                  -                 -            (816)
         Other income, net                               (91)              (119)             (171)           (214)
         Interest expense                                234                274               498             518
                                                  ---------------    -------------     ------------    ---------------

       Income from continuing operations
          before income taxes                            744                403             1,145             699

       Provision for income taxes                        275                160               435             279
                                                  ---------------    -------------     ------------    ---------------

       Income from continuing operations                 469                243               710             420

       Loss from discontinued  operations,
          net of tax                                       -                 25                 -              91
                                                  ---------------    -------------     ------------    ---------------
     
       Net Income                                       $469               $218              $710            $329
                                                  ===============    =============     ============    ===============

       Basic income (loss) per share:
         Continuing operations                          $.07               $.04              $.11            $.06
         Discontinued operations                          -                (.01)               -             (.01)
                                                  ---------------    -------------     ------------    ---------------
         Net income per share                           $.07               $.03              $.11            $.05
                                                  ===============    =============     ============    ===============
       Diluted income (loss) per share:
         Continuing operations                          $.07               $.04              $.10            $.06
         Discontinued operations                          -                (.01)               -             (.01)
                                                  ---------------    -------------     ------------    ---------------
         Net income per share                           $.07               $.03              $.10            $.05
                                                  ===============    =============     ============    ===============
  
       Basic weighted average common
          shares outstanding                           6,653              6,659             6,660           6,682
                                                  ===============    =============     ============    ===============
       Diluted weighted average common
          shares outstanding                           6,848              6,659             6,824           6,682
                                                  ===============    =============     ============    ===============
</TABLE>

                      See accompanying notes to condensed consolidated financial
                                    statements.


<PAGE>


            CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>



                                                                                     For the Six Months
                                                                                       Ended June 30,
                                                                                -----------------------------
                                                                                   1998               1997
                                                                                -------------    ------------
<S>                                                                             <C>              <C>   
CASH FLOWS FROM OPERATING ACTIVITIES:                                    
Net income                                                                          $710               $329
Adjustments to reconcile net income to net cash provided by
       operating activities -
    Gain on disposal of equipment and leasehold improvements                         (11)               (10)
    Gain on sale of subsidiary                                                         -               (816)
    Depreciation and amortization                                                  1,231                820
    Changes in operating assets and liabilities
      (Increase) decrease in -
        Accounts receivable, net                                                   1,798              1,711
        Prepaid expenses and other current assets                                    339               (694)
        Other assets                                                                (139)              (238)
      Increase (decrease) in -
        Accounts payable and accrued liabilities                                     227                329
        Other long-term liabilities                                                 (216)                80
                                                                                -------------    ------------
          Net cash provided by operating activities                                3,939              1,511
                                                                                -------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of equipment and leasehold improvements                          11                 26
  Additions to equipment and leasehold improvements                               (1,182)              (540)
                                                                                -------------    ------------
          Net cash used in investing activities                                   (1,171)              (514)
                                                                                -------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Short-term borrowings (repayments), net                                         (2,860)             1,050
  Proceeds from long-term debt                                                       150                  -
  Repayments of long-term debt                                                      (658)              (643)
  Deferred financing costs                                                             -                (84)
                                                                                -------------    ------------
          Net cash (used in) provided by financing activities                     (3,368)               323
                                                                                -------------    ------------
CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS                                    69               (488)
                                                                                -------------    ------------
          Net (decrease) increase in cash and cash equivalents                      (531)               832
CASH AND CASH EQUIVALENTS, beginning of period                                     1,812              1,757
                                                                                -------------    ------------
CASH AND CASH EQUIVALENTS, end of period                                          $1,281             $2,589
                                                                                =============    ============
</TABLE>




                      See accompanying notes to condensed consolidated financial
                                      statements.


<PAGE>


            CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1)      BASIS OF PRESENTATION:

         The accompanying  unaudited condensed consolidated financial statements
         have been prepared in accordance  with  generally  accepted  accounting
         principles for interim financial  information and with the instructions
         to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
         include all of the  information  and  footnotes  required by  generally
         accepted accounting principles for complete financial  statements.  The
         condensed  consolidated  balance  sheet at December 31, 1997,  has been
         derived  from the audited  financial  statements  at that date.  In the
         opinion of management,  all adjustments (consisting of normal recurring
         adjustments)  considered  necessary for a fair  presentation  have been
         included. Operating results for the three and six months ended June 30,
         1998,  are  not  necessarily  indicative  of the  results  that  may be
         expected for any other interim  period or for the year ending  December
         31,  1998.  Certain  reclassifications  have  been  made to prior  year
         amounts  to  conform  with  the  current  presentation,  including  the
         reclassification of the Company's  fulfillment and direct mail business
         as a  discontinued  operation  (see Note 3). For  further  information,
         refer to the consolidated  financial  statements and footnotes  thereto
         included in the  Company's  Form 10-K for the year ended  December  31,
         1997.


(2)      SUBORDINATED DEBENTURES:

         On April 1, 1998 the Company converted $740,000 of the $2 million of 8%
         Subordinated  Convertible  Debentures  (the  " 8%  Debentures")  to 10%
         Subordinated  Convertible  Debentures (the "10% Debentures") and issued
         $150,000  of  additional  10%   Debentures.   The  10%  Debentures  are
         convertible  into common stock of the Company at a conversion  price of
         $5.50 per  share,  accrue  interest  at 10% per annum  which is payable
         quarterly,  mature on August 21, 2000 and extend the initial  repayment
         date by one year from August 1998 to August  1999.  The 10%  Debentures
         are redeemable by the Company,  in whole or in part, without premium or
         penalty at any time on or after August 18,  1999,  at their face amount
         plus accrued and unpaid  interest,  if any, to the date of  redemption.
         The 10% Debentures are redeemable at the option of the holder, in whole
         but not in part,  without premium or penalty,  at any time after August
         21, 1999.  As a result of the above  transaction,  the 10%  Debentures,
         totaling  $890,000,   have  been  classified  as  long-term  debt.  The
         remaining 8%  Debentures,  totaling $1.26 million are payable in August
         1998 and have been classified as  current-maturities  of long-term debt
         in the accompanying condensed consolidated balance sheet as of June 30,
         1998.

(3)      DISCONTINUED OPERATIONS:

         In October 1997,  the Company  announced its intention to pursue a plan
         to dispose of its fulfillment and direct mail business. On December 31,
         1997,  the Company sold certain  assets of its  fulfillment  and direct
         mail  business.  Accordingly,  the  financial  position  and  operating
         results of the Company's fulfillment and direct mail business have been
         segregated   from   continuing   operations  and   reclassified   as  a
         discontinued  operation  in  the  accompanying  condensed  consolidated
         financial statements.


         The net assets  (liabilities) of discontinued  operations are comprised
         of the following (in thousands):
<TABLE>
<CAPTION>

                                                                  June 30,              December 31,
                                                                    1998                    1997
                                                            ---------------------    --------------------
           <S>                                              <C>                      <C>   
           Current assets                                                $48                  $3,829
           Current liabilities                                          (159)                 (3,881)
                                                            ---------------------    --------------------
              Net current liabilities                                   (111)                    (52)
           Equipment and leasehold improvements                            -                      10
                                                            ---------------------    --------------------
           Net liabilities of discontinued operations                  ($111)                   ($42)
                                                            =====================    ====================
</TABLE>
<PAGE>


(4)      LITIGATION:

         On March 19,  1997,  a  purported  class  action  complaint,  captioned
         Gapszewicz v. Consolidated Delivery & Logistics,  Inc., et al. (97 Civ.
         1939),  was filed in the United States  District Court for the Southern
         District of New York (the "Court") against the Company,  certain of the
         Company's  present and former executive  officers,  and the co-managing
         underwriters of the Company's initial public offering (the "Offering").
         The  gravamen  of the  complaint  is that  the  Company's  registration
         statement  for the Offering  contained  misstatements  and omissions of
         material fact in violation of the federal  securities laws and that the
         Company's financial  statements included in the registration  statement
         were false and misleading and did not fairly reflect the Company's true
         financial  condition.  The complaint seeks the certification of a class
         consisting of  purchasers  of the Company's  Common Stock from November
         21,  1995  through  February  27,  1997,  rescission  of the  Offering,
         attorneys' fees and other damages. In April 1997, five other complaints
         containing allegations identical to the Gapszewicz complaint were filed
         in the same federal court against the Company.  On May 27, 1997,  these
         six complaints were  consolidated  into a single action entitled "In re
         Consolidated Delivery & Logistics, Inc. Securities Litigation". On July
         16, 1997, the Company and the underwriter  defendants filed a motion to
         dismiss the complaint.  In response,  the  plaintiffs  filed an amended
         complaint  on  October  20,  1997.  A motion  to  dismiss  the  amended
         complaint  was filed by the Company and the  underwriter  defendants on
         December 15,  1997.  The motion was denied on May 11, 1998. A tentative
         settlement  has  been  agreed  between  the  parties   subject  to  the
         completion of confirmatory  discovery and court  approval.  The Company
         believes  the full  amount of the  settlement  will be  covered  by the
         Company's applicable insurance.

         The  Company  and its  subsidiaries  are from time to time,  parties to
         litigation  arising in the  normal  course of their  business,  most of
         which involves  claims for personal injury and property damage incurred
         in connection with their operations.  Management  believes that none of
         these actions, including the above action, will have a material adverse
         effect on the  financial  position  or  results  of  operations  of the
         Company and its subsidiaries.

(5)      EARNINGS PER SHARE:

         The Company adopted the provisions of Statement of Financial Accounting
         Standards No. 128,  "Earnings  Per Share" ("SFAS 128"),  in the quarter
         ended December 31, 1997. SFAS 128 establishes  standards for the method
         of  computation,  presentation  and  disclosure  for earnings per share
         ("EPS")  and  requires  the  presentation  of basic  and  diluted  EPS.
         Previously  reported  EPS amounts  were not affected by the adoption of
         this new standard.  The conversion of the debentures  into common stock
         (see Note 2) were  antidilutive  for 1998 and 1997.  The  effect of the
         stock options were antidilutive for 1997.

         A  reconciliation  of weighted  average  common shares  outstanding  to
         weighted average common shares  outstanding  assuming  dilution follows
         (in thousands) -

<TABLE>
<CAPTION>
                                                         Three Months Ended                  Six Months Ended
                                                               June 30,                          June 30,
                                                 --------------------------------      ------------------------------
                                                      1998              1997               1998             1997
                                                 ---------------    -------------      -------------     ------------
           <S>                                   <C>                <C>                <C>               <C>   
           Basic weighted average
            common shares oustanding                    6,653             6,659               6,660            6,682
           Effect of dilutive securities:
             Stock options                                195                 -                 164                -
                                                 ---------------    -------------      -------------     ------------
           Diluted weighted average
            common shares outstanding                   6,848             6,659               6,824            6,682
                                                 ===============    =============      =============     ============
</TABLE>
<PAGE>

(6)      SUBSEQUENT EVENTS:

         On July 2, 1998,  the  Company  acquired  all of the assets and certain
         liabilities of Metro Courier  Network,  Inc.  ("Metro"),  a provider of
         same-day,  on-call and  scheduled  courier  services in  Massachusetts,
         Maine and New  Hampshire.  The purchase  price for the assets was $4.25
         million plus  contingent  payments,  consisting of $2.5 million in cash
         and a $1.75 million  convertible note (the "Note").  The Note will bear
         interest at the rate of 7% per annum, with interest payable  quarterly,
         and is due July 2001. The Note is subordinate to all  indebtedness  due
         or to become due to the Company's senior lender, First Union Commercial
         Corporation or its affiliates.  The Note is convertible in its entirety
         at the option of the holder at any time through July 1, 2001 into fully
         paid shares of the Company's  common stock at a conversion  price of $7
         per share. The Note is convertible in its entirety at the option of the
         Company when the average  closing sales price of the  Company's  common
         stock  equals or  exceeds $7 per share  over a ninety  day  period.  In
         addition,  a contingent earn out in the aggregate  amount of up to $1.5
         million  is  payable  to Metro  based  on the  achievement  of  certain
         financial goals by the newly formed division during the two year period
         following the closing.

         On August 5, 1998, the Company  acquired all of the outstanding  shares
         of the capital  stock of KBD Services,  Inc.  ("KBD"),  a  ground-based
         provider of time critical  delivery and scheduled  courier  services in
         North and South  Carolina.  The  purchase  price was  approximately  $4
         million  consisting  of  $2.0  million  in  cash,  a $1.46  million  7%
         subordinated  convertible  note  (the "KBD  Note")  and a  $500,000  7%
         contingent  subordinated  convertible note (the "Contingent Note"). The
         KBD  Note  is due  August  5,  2003  with  interest  payable  quarterly
         commencing  October 1, 1998 and is  convertible  in its entirety at the
         option of the holder at any time  through  July 1, 2003 into fully paid
         shares of the  Company's  common stock at a conversion  price of $6 per
         share.  The  Company  may  convert all or any part of the KBD Note into
         fully paid shares of the Company's  common stock at a conversion  price
         of $6 per share when the average  closing  sales price of the Company's
         stock  equals or exceeds $6 over a thirty day  period.  The  Contingent
         Note is subject to a dollar for dollar  reduction or discharge if KBD's
         earnings  before  interest and taxes is less than $700,000 for the year
         ending July 31, 1999 and is due with interest on the finally determined
         principal  on November  1, 1999.  The holder or the Company may convert
         the  Contingent  Note in its  entirety  into fully  paid  shares of the
         Company's  common stock at a conversion price of $6 after September 16,
         1999 through October 20, 1999. The KBD Note and the Contingent Note are
         subordinate to all  indebtedness  due or to become due to the Company's
         senior lender, First Union Commercial Corporation or its affiliates.

         The above transactions will be accounted for under the purchase method.


(7)      NEW ACCOUNTING PRONOUNCEMENTS:

         The  Financial  Accounting  Standards  Board has  issued  Statement  of
         Financial Accounting Standards No. 131,  "Disclosures About Segments of
         an  Enterprise  and  Related   Information"   ("SFAS  131").  SFAS  131
         introduces a new model for segment  reporting,  called the  "management
         approach." The management  approach is based on the way that management
         organizes segments within a company for making operating  decisions and
         assessing  performance.  Reportable  segments are based on products and
         services, geography, legal structure, management structure - any manner
         in which management  disaggregates a company.  The management  approach
         replaces  the notion of  industry  and  geographic  segments in current
         accounting standards.  SFAS 131 is effective for fiscal years beginning
         after December 15, 1997 and early adoption is encouraged. However, SFAS
         131 need not be applied to interim  statements  in the initial  year of
         application.   SFAS  131  requires  restatement  of  all  prior  period
         information  reported.  The Company intends to adopt this standard when
         required and is in the process of determining the effect of SFAS 131 on
         the Company's consolidated financial statements.

         In March 1998,  the  Accounting  Standards  Executive  Committee of the
         American  Institute of Certified Public Accountants issued Statement of
         Position 98-1, "Accounting for the Costs of Computer Software Developed
         or Obtained for Internal  Use." The  statement is intended to eliminate
         the diversity in practice in accounting for internal-use software costs
         and improve financial reporting.  The statement is effective for fiscal
         years  beginning after December 15, 1998. The Company is in the process
         of   determining   the  effect  of  this  statement  on  the  Company's
         consolidated financial position and results of operations.





<PAGE>




Item 2 - Management's Discussion and Analysis of Financial Condition and 
            Results of Operations

Overview

The  following  discussion of the  Company's  results of  operations  and of its
liquidity and capital resources should be read in conjunction with the Condensed
Consolidated  Financial  Statements of the Company and the related Notes thereto
appearing elsewhere herein.

Disclosure Regarding Forward-Looking Statements

The Private  Securities  Litigation  Reform Act of 1995 provides a "safe harbor"
for forward looking statements.  Certain information contained in this Form 10-Q
includes information that is forward looking, such as the Company's expectations
for future performance,  its growth and acquisition strategies,  its anticipated
liquidity and capital needs,  the prospects for  settlement of  litigation,  the
ability to lower costs through increased route density, the effects of Year 2000
compliance  and its future  prospects.  The matters  referred to in such forward
looking  statements could be affected by the risks and uncertainties  related to
the  Company's  business.  Actual  results  may vary from these  forward-looking
statements  due  to  many  factors   including  but  not  limited  to:  lack  of
satisfactory acquisition candidates and/or an inability to conclude acquisitions
on satisfactory terms;  acquisition  limitations under the terms of the existing
credit  facility;  inability to obtain  acquisition  financing  on  satisfactory
terms, the effect of economic and market conditions,  the ability of the Company
to execute its  strategic  plan,  the impact of  competition  and the  Company's
reported  results varying  materially from  management's  current  expectations.
Investors are further  cautioned that the Company's  financial  results can vary
from quarter to quarter,  and the financial  results  reported for the first six
months may not necessarily be indicative of future results. For more information
about the Company,  please review the Company's most recent Form 10-K filed with
the Securities and Exchange Commission.

RESULTS OF OPERATIONS

Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997

Revenue for the first half of 1998  increased by $5.2 million,  or 6.3% to $87.3
million from $82.1 million for the first half of 1997.  Revenue in the Company's
ground  delivery  divisions  accounted  for the increase  primarily due to newly
added customers  combined with an expansion of routes with existing customers in
the contract  distribution  business in the Northeast and Southeast regions. Air
courier revenue remained relatively  consistent for the first six months of 1998
and 1997.

Cost of revenue  increased by $4.7  million,  or 7.5%,  to $67.6 million for the
first six  months of 1998 from $62.9  million  for the first six months of 1997.
The increase in revenue from  contract  distribution  business  described  above
typically produces higher initial costs, which caused a greater increase in cost
of revenue (7.5%) when compared to the increase in revenue  (6.3%).  The Company
believes that these costs tend to decrease on a proportionate rate as additional
volume or new contracts are added thereby increasing route density.

Selling,  general and administrative expenses decreased by $800,000, or 4.2%, to
$18.2  million  from  $19.0  million  for the first six months of 1998 and 1997,
respectively.  The Company's ground delivery divisions  contributed  $600,00 and
its air delivery division  contributed  $200,000 of the decrease  reflecting the
Company's continuing policy of consolidation and cost reduction.

As a result of the factors  discussed above,  operating income increased by $1.3
million to $1.5 million from $200,000 for the first six months of 1998 and 1997,
respectively.


Income from continuing  operations before income taxes increased by $400,000, or
57.1%,  to $1.1  million  for the first six months of 1998 from  $700,000 in the
first six months of 1997. Income from continuing  operations before income taxes
for the first six months of 1997  included a gain of $816,000  recognized on the
disposition of the Company's contract logistics subsidiary.


Three  Months  ended June 30, 1998  Compared to the Three  Months Ended June 30,
1997.

Revenue for the second  quarter of 1998  increased by $2.9  million,  or 7.0% to
$44.6 million from $41.7 million for the second quarter of 1997.  Revenue in the
Company's ground delivery divisions contributed to the increase primarily due to
continuing  services to customers  added in the first  quarter of 1998  combined
with an expansion of routes with existing customers in the contract distribution
business in the Northeast and Southeast  regions.  Air courier revenue  remained
relatively  consistent  for the  three  months  ended  June  30,  1998  and 1997
respectively.
<PAGE>

Cost of revenue  increased by $2.4  million,  or 7.5%,  to $34.3 million for the
three months  ended June 30, 1998 from $31.9  million for the three months ended
June 30,  1997.  The  increase in revenue from  contract  distribution  business
described  above  typically  produces  higher initial  costs,  causing a greater
increase  in cost of revenue  (7.5%) when  compared  to the  increase in revenue
(7.0%).   The  Company   believes  that  these  costs  tend  to  decrease  on  a
proportionate  rate as  additional  volume or new  contracts  are added  thereby
increasing route density.

Selling,  general and administrative expenses increased by $100,000, or 1.1%, to
$9.4  million  from $9.3  million for the three  months  ended June 30, 1998 and
1997, respectively.  The primary contributor to the increase in selling, general
and  administrative  expense  was an increase  in sales and  marketing  salaries
reflecting the Company's expanding sales force.

As a result of the  factors  discussed  above,  operating  income  increased  by
$329,000 to $887,000  from  $558,000 for the three months ended June 30,1998 and
1997, respectively.



LIQUIDITY AND CAPITAL RESOURCES

Working capital increased by $600,000 to $3.1 million at June 30, 1998 from $2.5
million at December 31, 1997. Cash and cash equivalents decreased by $500,000 to
$1.3  million at June 30,  1998 from $1.8  million at  December  31,  1997.  The
decrease in cash is  primarily  due to a net  reduction  in Company debt of $3.3
million and the  acquisition  of equipment  and  leasehold  improvements  in the
amount of $1.2 million,  which is offset by cash provided from operations in the
amount of $4.0 million.

As of  April  1,  1998 the  Company  converted  $740,000  of its $2  million  8%
Subordinated  Convertible Debentures to 10% Subordinated  Convertible Debentures
and  issued  an  additional   $150,000  of  the  10%  Subordinated   Convertible
Debentures.  Pursuant to an agreement  with the  Company's  lender,  First Union
National Bank, the conversion  will not affect  availability  under the terms of
the  Company's  credit  facility.  At June 30, 1998 the Company had $7.0 million
available under its credit facility.

As discussed in Note 6 to the  financial  statements  the Company  closed on two
acquisitions,  subsequent to June 30, 1998, requiring the use of $2.5 million on
July 2,  1998 and $2.0  million  on  August  5,  1998,  which  was  financed  by
borrowings under the Company's credit facility.


The Company has engaged First Union Capital  Markets,  a Division of Wheat First
Securities,  Inc., as an exclusive  placement agent for the proposed sale of $20
million senior  subordinated notes to provide  additional  financing to fund the
Company's  anticipated  acquisitions for which  negotiations are being conducted
currently.

Management believes that cash flows from operations,  together with its existing
and  anticipated  borrowing  capacity,  as discussed  above,  are  sufficient to
support the Company's operations and general business and liquidity requirements
for the foreseeable future, including anticipated acquisitions.


Recently Issued Accounting Pronouncements

The  Financial  Accounting  Standards  Board has issued  Statement  of Financial
Accounting  Standards No. 131,  "Disclosures About Segments of an Enterprise and
Related  Information"  ("SFAS 131"). SFAS 131 introduces a new model for segment
reporting, called the "management approach." The management approach is based on
the way that management organizes segments within a company for making operating
decisions and assessing  performance.  Reportable segments are based on products
and services,  geography, legal structure,  management structure - any manner in
which management  disaggregates a company.  The management approach replaces the
notion of industry and geographic segments in current accounting standards. SFAS
131 is effective for fiscal years  beginning  after  December 15, 1997 and early
adoption  is  encouraged.  However,  SFAS  131 need not be  applied  to  interim
statements in the initial year of application.  SFAS 131 requires restatement of
all prior  period  information  reported.  The  Company  intends  to adopt  this
standard when required and is in the process of  determining  the effect of SFAS
131 on the Company's consolidated financial statements.

In March,  1998, the Accounting  Standards  Executive  Committee of the American
Institute of Certified  Public  Accountants  issued  Statement of Position 98-1,
"Accounting  for the  Costs of  Computer  Software  Developed  or  Obtained  for
Internal  Use." The statement is intended to eliminate the diversity in practice
in accounting for internal-use  software costs and improve financial  reporting.
The statement is effective for fiscal years  beginning  after December 15, 1998.
The Company is in the process of determining the effect of this statement on the
Company's consolidated financial position and results of operations.
<PAGE>

Year 2000 Compliance

The Company is currently in the process of evaluating its information technology
infrastructure  for the Year 2000  compliance.  The Company does not expect that
the cost to modify its  information  technology  infrastructure  to be Year 2000
compliant  will be material to its financial  position or results of operations.
The Company does not anticipate  any material  disruption in its operations as a
result of any failure by the Company to be in compliance.  The Company is in the
process of obtaining  information  concerning the Year 2000 compliance status of
its suppliers and customers.  In the event that any of the Company's significant
suppliers  or  customers  does not  successfully  and timely  achieve  Year 2000
compliance, the Company's business or operations could be adversely affected.

Inflation

Inflation has not had a material impact on the Company's results of operations.


<PAGE>



                           Part II - OTHER INFORMATION

Item 1 - Legal Proceedings.

On March 19, 1997, a purported class action complaint,  captioned  Gapszewicz v.
Consolidated Delivery & Logistics, Inc., et al. (97 Civ. 1939), was filed in the
United States District Court for the Southern District of New York (the "Court")
against the  Company,  certain of the  Company's  present  and former  executive
officers,  and the  co-managing  underwriters  of the Company's  initial  public
offering (the  "Offering").  The gravamen of the complaint is that the Company's
registration statement for the Offering contained misstatements and omissions of
material fact in violation of the federal securities laws and that the Company's
financial  statements  included  in the  registration  statement  were false and
misleading and did not fairly  reflect the Company's  true financial  condition.
The complaint seeks the certification of a class consisting of purchasers of the
Company's  Common  Stock from  November  21, 1995  through  February  27,  1997,
rescission of the Offering,  attorneys'  fees and other damages.  In April 1997,
five  other  complaints  containing  allegations  identical  to  the  Gapszewicz
complaint  were filed in the same federal court against the Company.  On May 27,
1997, these six complaints were  consolidated  into a single action entitled "In
re Consolidated Delivery & Logistics,  Inc. Securities Litigation".  On July 16,
1997, the Company and the underwriter  defendants  filed a motion to dismiss the
complaint. In response, the plaintiffs filed an amended complaint on October 20,
1997. A motion to dismiss the amended complaint was filed by the Company and the
underwriter  defendants  on December 15, 1997.  The motion was denied on May 11,
1998. A tentative  settlement has been agreed between the parties subject to the
completion of confirmatory  discovery and court approval.  The Company  believes
the full amount of the  settlement  will be covered by the Company's  applicable
insurance.

In February 1996,  Liberty Mutual Insurance Company ("Liberty  Mutual") filed an
action against Securities Courier Corporation,  a subsidiary of the Company, Mr.
Vincent Brana and certain other parties in the United States  District Court for
the Southern District of New York alleging,  among other things, that Securities
Courier had fraudulently  obtained  automobile  liability insurance from Liberty
Mutual in the late 1980s and early 1990s at below market rates. This suit, which
claims common law fraud, fraudulent inducement, unjust enrichment and violations
of the civil provisions of the Federal RICO statute,  among other things,  seeks
an unspecified  amount of compensatory and punitive damages from the defendants,
as  well  as  attorneys'  fees  and  other  expenses.  Under  the  terms  of its
acquisition   of  Securities   Courier,   the  Company  has  certain  rights  to
indemnification  from Mr. Brana.  Discovery is currently pending and as a result
the Company is unable to make a determination as to the merits of the claim. The
Company  does not believe  that an adverse  determination  in this matter  would
result in a material  adverse effect on the consolidated  financial  position or
results of operations of the Company.

The Company is, from time to time, a party to  litigation  arising in the normal
course of its business,  most of which involves  claims for personal  injury and
property damage incurred in connection with its same-day ground and air delivery
operations.  Management  believes  that  none of these  actions,  including  the
actions described above, will have a material adverse effect on the consolidated
financial position or results of operations of the Company.



<PAGE>



Item 4 - Submission of Matters to a Vote of Security Holders.

         On June 17, 1998, the Company held its annual meeting of  stockholders.
         The following  sets forth a brief  description of each matter which was
         acted upon, as well as the votes cast for, against or withheld for each
         such matter,  and,  where  applicable,  the number of  abstentions  and
         broker non-votes for each matter:

         1.        Ratification of By-law amendment authorizing staggered terms
                   for the Board of Directors.

                    Votes For:                               3,188,524
                    Votes Against:                             228,778
                    Abstentions:                                18,222


         2.       Election of Directors.
<TABLE>
<CAPTION>

                  Name of Director              Votes For         Authority Withheld
                  ------------------------     -------------    -----------------------
                  <S>                          <C>              <C>    
                  Class I
                  Albert W. Van Ness, Jr.       5,676,746                96,370
                  Labe Leibowitz                5,502,579               270,537
                  Kenneth W. Tunnell            5,676,846                96,260
           
                  Class II
                  William T. Beaury             5,502,579               270,537
                  Michael Brooks                5,527,469               245,647
                  Jon F. Hanson                 5,676,846                96,270
     
                  Class III
                  William T. Brannan            5,676,846                96,270
                  Marilu Marshall               5,676,846                96,270
                  John S. Wehrle                5,676,846                96,270
</TABLE>
       

         3.       Approval of the Employee Stock Purchase Plan.

                    Votes For:                               3,312,365
                    Votes Against:                              58,741
                    Abstentions:                                28,102

         4.        Approval of the Amendment of the Employee Stock Compensation
                   Program.

                    Votes For:                               3,264,863
                    Votes Against:                             106,073
                    Abstentions:                                28,272

         5.       Approval of the Amendments to the Independent Director Stock
                  Option Plan.

                    Votes For:                               5,601,780
                    Votes Against:                              98,748
                    Abstentions:                                36,272



<PAGE>



         6.       Ratification of the selection by the Board of Directors of
                  Arthur Andersen LLP as the Company's independent auditors for
                  1998.

                    Votes For:                               5,724,955
                    Votes Against:                              37,341
                    Abstentions:                                10,820


Item 6 - Exhibits and Reports on Form 8-K

         (a)   Exhibits

                   3.2     Amended and Restated By-laws of Consolidated 
                           Delivery & Logistics, Inc.

                  27.1     Financial Data Schedule (for electronic submission
                           only)

         (b)   Report  on  Form  8-K  filed  on July  16,  1998  concerning  the
               Company's   acquisition   of  all  of  the  assets  and   certain
               liabilities of Metro Courier Network, Inc.




<PAGE>






                                    SIGNATURE

         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.



Dated:   August 14, 1998             CONSOLIDATED DELIVERY & LOGISTICS, INC.




                                     By: /s/ Albert W. Van Ness, Jr.
                                        ----------------------------------
                                         Albert W. Van Ness, Jr.
                                         Chairman of the Board, Chief Executive
                                         Officer and Chief Financial Officer
                                         (PRINCIPAL FINANCIAL AND
                                            ACCOUNTING OFFICER)


<PAGE>



                                  EXHIBIT INDEX


          3.2     Amended and Restated By-laws of Consolidated Delivery &
                  Logistics, Inc.


         27.1     Financial Data Schedule (for electronic submission only)


<PAGE>


Exhibit 3.2

                          AMENDED AND RESTATED BY-LAWS

                                       OF

                     CONSOLIDATED DELIVERY & LOGISTICS, INC.

     (adopted as of September 8, 1995, as amended through November 6, 1997)

                                    ARTICLE I
                                     OFFICES

                  The principal  place of business or office of the  Corporation
as well as all  branch or  subordinate  places of  business  or  offices  may be
established  at any time by the board of directors (the "Board") at any place or
places where the Corporation is qualified to do business or where  qualification
is not required.

                                   ARTICLE II
                                  SHAREHOLDERS

                  2.1.  Annual  Meeting.  -- The annual meeting of  Shareholders
shall be held upon not less than ten (10) nor more than sixty (60) days  written
notice of the time, place and purposes of the meeting. The meeting shall be held
at the time and at the  place  determined  by the  Board.  At the  meeting,  the
Shareholders shall elect Directors and transact any other business that properly
comes before the meeting.
                  2.2.   Special  Meetings.  -- A special meeting of
Shareholders  may be called for any purpose by either the  Chairman of the Board
or the Board.  The meeting shall be held at the time and at the place determined
by either the Chairman of the Board, or the Board.
                  2.3.   Record  Date.  -- The  Board  may fix in  advance  a
record date for determination of Shareholders  entitled to notice of and to vote
at any  meeting of  Shareholders.  The record  date shall not be more than sixty
(60) days nor less than ten (10) days before the date of the meeting.
                  2.4. Notice of Meeting. -- Whenever  Shareholders are required
or  permitted to take any action at a meeting,  a written  notice of the meeting
shall be given which shall state the place, date and hour of the meeting, and in
the case of a special meeting,  the purpose or purposes for which the meeting is
called.  Unless  otherwise  provided by law,  the written  notice of any meeting
shall be given personally or by mail, not less than ten (10) nor more than sixty
(60) days before the date of the meeting,  to each Shareholder  entitled to vote
at such meeting.  If mailed,  notice shall be deemed given when deposited in the
United States mail, postage prepaid,  directed to the Shareholder at his address
as it appears on the records of the Corporation.
                  2.5  Adjournments.  -- When a meeting is  adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned  meeting,  the  Corporation  may transact any business which might
have been transacted at the original  meeting.  If, however,  the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the  adjourned  meeting,  a notice of the  adjourned  meeting shall be
given  to each  Shareholder  of  record  entitled  to vote at the  meeting.  Any
previously  scheduled  meeting of the Shareholders may be postponed,  and unless
the Certificate of Incorporation  otherwise provides, any special meeting of the
Shareholders may be canceled by resolution of the Board upon public notice given
prior to the date previously scheduled for such meeting.
                  2.6.  Quorum.  -- The  presence  at a meeting  in person or by
proxy of the  holders of shares  entitled to cast a majority of the votes of all
shares entitled to vote shall constitute a quorum for the purpose of transacting
business.  In the absence of a quorum,  the presiding  officer at the meeting or
the  Shareholders  present,  even  though  less than a quorum,  may  adjourn the
meeting to another time and place and,  except as provided in the Section 2.5 of
these By-Laws, notice of the adjourned meeting need not be given.
                  2.7    Presiding  Officer and  Secretary.  -- The  Chairman
of the Board, or in his absence the President,  shall preside at all Shareholder
meetings.  The  Secretary,  or in his absence  the  appointee  of the  presiding
officer of the meeting, shall act as the Secretary of the meeting.
                  2.8      Vote of Shareholders.
                           a.       Action without a Meeting.  -- Whenever the
vote of the holders of shares of any class or series is required or permitted to
be taken for or in connection with any corporate action, the meeting and vote of
such  holders  may be  dispensed  with if such  action is taken with the written
consent of such  holders  having a majority  of the total  number of votes which
might have been cast for or in connection with the proposed  corporate action if
a meeting were held;  provided  that such written  consent shall not be given by
holders having less than the minimum  percentage of the vote required by statute
for such action,  and further  provided  that prompt notice is given to all such
holders of the taking of  corporate  action  without a meeting  and by less than
unanimous written consent.
                           b. Votes per Share. -- Except as otherwise  provided
these By-Laws or by the Certificate of  Incorporation,  each holder of record of
stock of the  Corporation  entitled  to vote on any  matter  at any  meeting  of
Shareholders  shall  be  entitled  to one vote  for  each  share  of such  stock
registered in his name on the stock ledger of the Corporation on the record date
for the  determination  of the  Shareholders  entitled  to vote at the  meeting.
Except as  otherwise  provided in Section  2.8(d),  the method of voting and the
manner in which  votes are counted  shall be  discretionary  with the  presiding
officer at the meeting.
                  c.     Vote by Proxy.  -- Each  Shareholder  entitled  to vote
at a meeting of Shareholders may authorize  another person or persons to act for
him by proxy,  but no such proxy  shall be voted or acted  upon after  three (3)
years from its date, unless such proxy provides for a longer period.
                  Any  copy,  facsimile   telecommunication  or  other  reliable
reproduction of the writing or transmission  duly authorizing  another to act as
proxy may be substituted or used in lieu of the original writing or transmission
for any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall  be  a  complete   reproduction   for  the  entire  original   writing  or
transmission.
                  A duly executed proxy shall be irrevocable if it so states and
if, and only as long as it is,  coupled  with an interest  sufficient  in law to
support an irrevocable  power.  A Shareholder  may revoke any proxy which is not
irrevocable  by  attending  the meeting in person,  by filing an  instrument  in
writing  revoking the proxy or by filing  another duly executed  proxy bearing a
later date with the Secretary of the Corporation.
                  d.  Election of  Directors.  -- Whenever  Directors  are to be
elected at a meeting,  they shall be elected by a plurality of the votes cast at
the meeting by the Shareholders  entitled to vote thereat. The vote for election
of Directors shall be by written ballot.  Whenever any corporate  action,  other
than the  election of  Directors,  is to be taken by vote of  Shareholders  at a
meeting,   it  shall,  except  as  otherwise  required  by  the  Certificate  of
Incorporation or by these By-Laws, be authorized by a majority of the votes cast
at the meeting by the Shareholders entitled to vote thereat.
                  2.9 Judges of  Election.  -- The Board may at any time appoint
two  or  more  persons  to  serve  as  judges  of  election  at any  meeting  of
Shareholders to act as judges and tellers with respect to all votes by ballot at
such  meeting.  If any judge  appointed  is absent or refuses to act,  or if his
office  becomes  vacant and is not filled by the Board,  the judges then present
may  act,  provided  that  such  judges  constitute  a  majority  of the  judges
appointed.  Otherwise,  if there is a failure  to elect or appoint  judges,  the
presiding  officer  of the  meeting  may  appoint  one or more  judges  for such
meeting.  No  Director  or  Officer of the  Corporation  shall be  eligible  for
election or appointment as judge.  The judges appointed to act at any meeting of
the Shareholders,  before entering upon the discharge of their duties,  shall be
sworn  faithfully  to execute the duties of judges at such  meeting  with strict
impartiality  and according to the best of their ability,  and the oath so taken
shall be subscribed by them.
                  2.10. List of Shareholders  Entitled to Vote. -- The Secretary
shall  prepare  and  make,  at least  ten (10)  days  before  every  meeting  of
Shareholders,  a complete list of Shareholders  entitled to vote at the meeting,
arranged in alphabetical  order, and showing the address of each Shareholder and
the number of shares registered in the name of each Shareholder. Such list shall
be open to the  examination of any  Shareholder,  for any purpose germane to the
meeting,  during ordinary business hours, for a period of at least ten (10) days
prior to the meeting,  either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting,  or if not
so specified,  at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting  during the whole time
thereof and may be inspected by any Shareholder who is present. The share ledger
shall be the only  evidence as to who are the  Shareholders  entitled to examine
the share ledger,  the list of Shareholders or the books of the Corporation,  or
to vote in person or by proxy at any meeting of Shareholders.

                                   ARTICLE III
                               BOARD OF DIRECTORS

                  3.1      Number and Term of Office - (a) The Board of
Directors shall consist of not less than three (3) nor more than twenty-one (21)
directors,  the  actual  number of which is to be fixed from time to time by the
Board.
                                    (b) The Board  shall be  divided  into three
                  classes,  the members of each class to serve for three  years.
                  The number of  directors  in each class  shall be fixed by the
                  Board at the time the number of  directors  is fixed,  and the
                  number of  directors in each class shall be as nearly equal as
                  possible as the then total  number of  directors  constituting
                  the entire Board  permits.  This paragraph may only be amended
                  by the shareholders of the Corporation.
                                    (c) At the annual meeting of stockholders at
                  which the  stockholders  approve the  provision in the by-laws
                  authorizing a classified  Board,  directors of the first class
                  shall be elected to hold  office  for a term  expiring  at the
                  next succeeding  annual meeting of stockholders,  directors of
                  the second  class  shall be elected to hold  office for a term
                  expiring   at  the  second   succeeding   annual   meeting  of
                  stockholders,  and  directors  of the  third  class  shall  be
                  elected  to  hold  office  for a term  expiring  at the  third
                  succeeding annual meeting.  At each annual meeting thereafter,
                  directors  shall be elected to fill the  directorships  of the
                  class of directors  whose terms have expired.  Those directors
                  shall hold office until the third  successive  annual  meeting
                  after  their  election  and until their  successors  have been
                  elected and qualified, so that the term of office of one class
                  of directors shall expire at each annual meeting.
                  3.2. Regular Meetings.  -- A regular  meeting  of the  Board
shall be held without notice immediately  following and at the same place as the
annual Shareholders' meeting for the purpose of electing Officers and conducting
any other  business  that may come before the  meeting.  The Board may decide to
have additional regular meetings that may be held without notice.
                  3.3. Special  Meetings.  -- A special meeting of the Board may
be called for any  purpose  at any time by the  Chairman  or by the  Board.  The
meeting  shall  be held  upon  not  less  than  one (1) day  notice  if given by
telegram, orally (either by telephone or in person), by same-day courier service
or by facsimile transmission, upon not less than two (2) days notice if given by
overnight courier delivery  service,  or upon not less than five (5) days notice
if given by  depositing  the  notice in the United  States  mails,  first  class
postage  prepaid.  The  notice  shall  be  deemed  given at the time it is given
orally,  the facsimile  transmission  is  originated  (and there is no reason to
believe it was not received),  it is delivered to the overnight courier service,
or it is deposited in the United States mails. The notice shall specify the time
and place and may, but need not, specify the purposes of the meeting.
                  3.4.   Action Without  Meeting.  -- The Board or any committee
thereof may act without a meeting if, prior or  subsequent  to the action,  each
member of the Board or of such committee  consents in writing to the action. The
written  consent or consents shall be filed with the proceedings of the Board or
committee.
                  3.5.   Use of  Communications  Equipment.  -- Any  Director
may  participate  in a meeting of the Board by means of conference  telephone or
any other  means of  communication  by which all  persons  participating  in the
meeting are able to hear each other.
                  3.6. Quorum;  Votes Required.  -- The presence at a meeting of
persons  entitled  to cast a  majority  of the votes of the entire  Board  shall
constitute a quorum for the  transaction of business.  Any action  approved by a
majority  of the votes of  Directors  present  at a meeting at which a quorum is
present shall be the act of the Board. In the absence of a quorum, the Directors
present may adjourn any meeting  from time to time until a quorum is present and
no notice of an adjourned  meeting need be given other than by  announcement  at
the  meeting  which is being  adjourned.  At such  adjourned  meeting at which a
quorum  is  present,  any  business  may be  transacted  which  might  have been
transacted at the meeting originally called.
                  3.7.  Vacancies in Board of  Directors.  -- Any vacancy in the
Board, including a vacancy caused by an increase in the number of Directors, may
be filled by a majority  of the votes of the  remaining  Directors,  even though
less than a quorum of the Board, or by a sole remaining Director,  and Directors
so chosen  shall hold office for a term  expiring at the next annual  meeting of
Shareholders.  No decrease  in the number of  Directors  constituting  the Board
shall shorten the term of any incumbent Director.
                  3.8    Compensation  of  Directors.  -- Directors who are not
Officers of the Corporation  shall receive such  compensation as may be fixed by
the Board for service on the Board or any committee thereof.
                  3.9 Removal.  -- Any Director or Directors may be removed from
office at any time  either  with or without by the  affirmative  vote of (i) the
majority of the holders of voting power of the then outstanding  shares of stock
of the  Corporation  entitled to vote  generally in the  election of  Directors,
voting together as a single class, or (ii) a majority of the Board.

                                   ARTICLE VI
                             COMMITTEES OF THE BOARD
                  4.1  Executive  Committee.  -- The  Corporation  shall have an
Executive Committee  consisting of seven members,  including (i) the Chairman of
the Board, the President and the Executive  Officer appointed as Chief Financial
Officer,  each of whom shall be ex-officio  members and (ii) four (4) additional
Directors  appointed by the Board. The Chairman of the Board, or in his absence,
the President, shall preside at meetings of the Executive Committee.
                  The Executive  Committee  shall exercise such powers as may be
assigned to it by the Board and may  consider  and make  recommendations  to the
Board regarding any matters relating to the affairs of the Corporation.
                  Meetings  of the  Executive  Committee  shall  be held at such
times and places as the Executive  Committee shall determine or upon call of the
Chairman  of the  Board  or the  President.  One-third  of  the  members  of the
Executive  Committee,  including at least one ex-officio member and at least one
other  member,  shall  constitute a quorum of the  Executive  Committee  for the
transaction of business.
                  4.2      Other  Committees.  -- The Board  may from  time to
time, by resolution  adopted by a majority of the whole Board,  designate one or
more other committees, each committee to consist of two or more Directors of the
Corporation.  Any such committee  shall exercise those powers as may be assigned
to it by the Board.
                  4.3  Committee  Rules;  Quorum;  Manner  of  Acting.  --  Each
committee may adopt rules consistent with these By-Laws  governing the method of
calling  meetings and  determining the time and place for holding such meetings.
One-half of any committee for which a quorum is not otherwise set forth in these
By-Laws shall  constitute a quorum for the  transaction of business,  unless the
Board shall otherwise provide,  and the act of a majority of the members of such
committee  present at a meeting at which a quorum is present shall be the act of
such committee.
                                    ARTICLE V
                                WAIVERS OF NOTICE
                  Any notice  required by these By-Laws,  by the  Certificate of
Incorporation,  or by the  Delaware  General  Corporation  Law may be  waived in
writing by any person  entitled  to  notice.  The  waiver,  or  waivers,  may be
executed  either  before or after the event with  respect to which the notice is
waived. Each Director or Shareholder  attending a meeting without protesting the
lack of proper  notice prior to the  conclusion  of such meeting shall be deemed
conclusively to have waived notice of the meeting.

                                   ARTICLE VI
                                    OFFICERS
                  6.1.  Titles.  -- The  Corporation  shall  have the  following
Officers:  a Chairman of the Board,  a President,  one or more Vice  Presidents,
including Executive Vice Presidents and Senior Vice Presidents,  a Secretary and
a Treasurer.  In addition,  such other Officers as may be appointed by the Board
at any time or from time to time.  The Board may by  resolution  delegate to the
Executive Committee,  and to such other Officers as the Board may designate, the
authority (i) to appoint Officers below the level of Executive Vice President or
its equivalent,  (ii) to assign powers and duties to any Officer below the level
of Executive Vice President or its equivalent, (iii) to rescind or terminate the
appointment  of any Officer below the level of Executive  Vice  President or its
equivalent,  and (iv) to accept the resignation of any Officer.  Any one or more
Vice Presidents may be designated  Senior  Executive Vice  President,  Executive
Vice  President  or Senior Vice  President.  One person may hold any two or more
offices and perform the duties thereof.
                  6.2  Appointment,  Term and  Compensation of Officers.  -- The
Chairman of the Board and the President  shall be appointed by the Board to hold
office until the next annual meeting of the Board and until their successors are
appointed and  qualified.  The term of office of all other  Officers shall be at
the pleasure of the Board.  Subject to the terms of any agreement binding on the
Corporation,  the compensation of all Officers of the Corporation shall be fixed
by resolution of the Board,  except that the Board may authorize the Chairman or
the President to fix the compensation of any person in any official position and
to delegate such authority to any other Officers designated by the Board.
                  6.3 Duties and Authority of the Chairman of the Board.  -- The
Chairman of the Board shall be the Chief Executive  Officer of the  Corporation.
Subject  only to the  direction  and  control of the Board,  the  Chairman  have
general charge and supervision  over, and  responsibility  for, the business and
affairs of the Corporation.  Unless  otherwise  directed by the Board, all other
Officers shall be subject to the authority and supervision of the Chairman.  The
Chairman may enter into and execute in the name of the Corporation contracts and
other instruments in the regular course of business which are authorized, either
generally or  specifically,  by the Board.  The Chairman  shall have the general
powers and duties of  management  usually  vested in the  Chairman of a business
corporation  and shall have such other powers and duties as may be prescribed by
the Board.
                  6.4 Duties and Authority of President.  -- In the event of the
Chairman's  absence or inability to act, or if the Board has so designated,  the
President shall be the Chief Executive  Officer of the  Corporation.  Otherwise,
the President shall be the Chief Operating  Officer of the Corporation and shall
be  responsible  only to the  Chairman  and to the  Board  for  those  areas  of
operation of the business and affairs of the  Corporation  as shall be delegated
to the President by the Board or by the Chairman.  Unless otherwise specified by
the Board or by the Chairman,  all other Officers of the Corporation (except the
Chairman)  shall be subject to the authority and  supervision  of the President.
The  President  may  enter  into  and  execute  in the  name of the  corporation
contracts  or other  instruments  in the  regular  course of  business  that are
authorized, either generally or specifically, by the Board.
                  6.5  Duties and  Authority  of Vice  Presidents.  -- Each Vice
President  shall perform the duties and have the authority that may be delegated
to him or her from  time to time by the  Chairman,  by the  President  or by the
Board.  In the  absence  of the  President,  or in the event of the  President's
death, inability, or refusal to act (unless the Board determines otherwise), the
Vice  President  designated as successor for these  purposes by the Board or, if
there is none, the most Senior Vice  President,  shall perform the duties and be
vested with the authority of the President.
                  6.6 Duties and  Authority of  Treasurer.  -- Unless  otherwise
designated by the Board,  the Treasurer shall be the Chief Financial  Officer of
the Company. The Treasurer,  or any Assistant  Treasurer,  shall have custody of
the funds and securities of the  corporation  and shall keep or cause to be kept
regular books of account for the Corporation.  The Treasurer, and each Assistant
Treasurer,  shall perform such other duties and possess such other powers as are
incident  to their  respective  offices or as shall be assigned to him or her by
the Chairman, by the President or by the Board.
                  6.7 Duties and Authority of Secretary.  -- The  Secretary,  or
any  Assistant  Secretary,  shall cause  notices of all meetings to be served as
prescribed  in these  By-Laws  and shall keep or cause to be kept the minutes of
all  meetings  and  written  consents  of the  Shareholders  and the Board.  The
Secretary,  and each  Assistant  Secretary,  shall perform such other duties and
possess  such other  powers as are  incident to their  respective  offices or as
shall be  assigned to him or her by the  Chairman,  by the  President  or by the
Board.

                                   ARTICLE VII
                       CAPITAL STOCK AND OTHER SECURITIES
                  7.1. Issuance of Stock and Other  Securities.--Certificates of
any class of capital stock of the Corporation and certificates  representing any
other  securities  of the  Corporation  shall be  signed  by the  Chairman,  the
President,  or any  Vice  President  and  countersigned  by the  Secretary,  any
Assistant Secretary,  the Treasurer or any Assistant Treasurer. The signature of
each Officer may be an engraved or printed facsimile.  If an Officer or transfer
agent or registrar whose facsimile  signature has been placed upon  certificates
ceases to hold the official capacity in which he or she signed, the certificates
may continue to be used. The certificates  may, but need not, be sealed with the
seal of the Corporation,  or a facsimile of the seal. The certificates  shall be
countersigned and registered in whatever manner the Board may prescribe.
                  7.2.  Lost,  Stolen and  Destroyed  Certificates.--In  case of
lost, stolen or destroyed  certificates,  new certificates may be issued to take
their  place  upon  receipt  by  the  Corporation  of an  appropriate  affidavit
accompanied  by  bond  of  indemnity  and  under  whatever  regulations  may  be
prescribed by the Board. The giving of a bond of indemnity may be waived.
                  7.3. Transfer of Securities.--The  shares of the capital stock
or any other registered  securities of the Corporation  shall be transferable on
the books of the Corporation by the holder thereof in person or by that person's
authorized  agent, or by the transferee,  upon surrender for cancellation to the
transfer agent of an outstanding certificate or certificates for the same number
of shares or other  security with an assignment  and  authorization  to transfer
endorsed thereon or attached thereto, duly executed, together with such proof of
the  authenticity  of the signature and of the power of the assignor to transfer
the securities as the Corporation or its agents may require.
                  7.4. Record Date for Dividends or Rights.--The Board may fix a
record  date in advance as of which  shares of stock  shall be held of record to
entitle a  Shareholder  to the  payment of any  dividend,  to the  allotment  of
rights,  or to exercise rights in respect to any change,  conversion or exchange
of capital stock of the  Corporation.  The record date shall not precede by more
than sixty  (60) days the date of the  dividend  payment,  or the  allotment  of
rights,  or the date when the change,  conversion  or exchange of capital  stock
shall take  effect.  Only  Shareholders  of record on the  record  date shall be
entitled to receive or exercise the rights or benefits  when they shall  accrue,
notwithstanding  any  transfer  of any  stock on the  books  of the  Corporation
subsequent to the record date.
                  7.5. Issuance of  Shares.--Shares  of the capital stock of the
Corporation which have been authorized but not issued may be sold or issued from
time to time for such consideration as may be determined by the Board.

                                  ARTICLE VIII
                                 CORPORATE SEAL
                  The Seal of the  Corporation  shall be in such  form as may be
approved from time to time by the Board and said seal,  or a facsimile  thereof,
may be  imprinted  or affixed by any  process or in any manner  reproduced.  The
Secretary and any other Officers  authorized by resolution of the Board shall be
empowered to use and attest the corporate seal on all documents.
                                   ARTICLE IX
                                  MISCELLANEOUS
                  9.1.  Inspection of Corporate Records.  -- The share register,
or duplicate  share  register,  and minutes of proceedings  of the  Shareholders
shall be open to inspection  for any proper  purpose upon the written  demand of
any  person  who has been a  Shareholder  of record or holder of a voting  trust
certificate for at least six months immediately  preceding that person's demand,
or any person  holding,  or so authorized in writing by the holders of, at least
five percent of the outstanding  shares of any class. The inspection may be made
at any  reasonable  time not less  than five days  after  the  person  has given
written notice of the demand to the  Corporation.  The inspection may be made in
person or by an agent or attorney and shall include the right to make  extracts.
Demand for  inspection  shall be made in writing upon the President or Secretary
of the Corporation.
                  9.2. Checks, Drafts,  Etc.--All checks, drafts or other orders
for the payment of money,  notes or other evidences of  indebtedness,  issued in
the name of or payable to the  Corporation,  shall be signed or  endorsed by the
person or persons and in such  manner,  manually or by facsimile  signature,  as
shall be determined from time to time by the Board.
                  9.3.  Execution of  Contracts.--The  Board may  authorize  any
Officer or Officers,  agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the Corporation. The authority may be
general or confined to specific instances.  No Officer,  agent or employee shall
have  any  power  or  authority  to bind  the  Corporation  by any  contract  or
engagement or to pledge its credit or to render it liable for any purpose or for
any amount unless so authorized by the Board or these By-Laws.
                  9.4. Voting Shares of Other  Corporations.--The  Chairman, the
President,  or any Vice  President are each  authorized  to vote,  represent and
exercise on behalf of this Corporation all rights incident to any and all shares
of stock of any other  corporation or corporations  standing in the name of this
Corporation.  The authority  herein  granted may be exercised by those  Officers
either  in  person  or by proxy or by power of  attorney  duly  executed  by the
Officer.
                                    ARTICLE X
                       AMENDMENTS TO AND EFFECT OF BY-LAWS
                  10.1.  Force  and  Effect of  By-Laws.  -- These  By-Laws  are
subject  to the  provisions  of the  Delaware  General  Corporation  Law and the
Corporation's certificate of incorporation,  as each may be amended from time to
time. If any provision in these By-Laws is inconsistent with a provision in that
Act or the  certificate  of  incorporation,  the  provision  of that  Act or the
certificate of incorporation shall govern.
                  10.2.    Amendments  to By-Laws.  -- These  By-Laws may be
altered,  amended,  or repealed  by the  Shareholders  or the Board.  Any by-law
adopted or amended by the  Shareholders may be amended or repealed by the Board,
unless the resolution of the Shareholders adopting the by-law expressly reserves
to the Shareholders the right to amend or repeal it.


<PAGE>