UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549
                                    FORM 10-Q


(Mark One)

                  Quarterlyreport  pursuant  to  Section  13 or 15  (d)  of  the
                           Securities  Exchange  Act of 1934  For the  quarterly
                           period ended June 30, 1997 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 8, 1997, was 6,658,551.


<PAGE>



                     CONSOLIDATED DELIVERY & LOGISTICS, INC.
                  FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997

                                      INDEX


<TABLE>
<S>                                                                                             <C>

                                                                                                Page


Part I - Financial Information (unaudited)

         Item 1 - Financial Statements

              Consolidated Delivery & Logistics, Inc. and Subsidiaries
                  Condensed Consolidated Balance Sheets as of December 31, 1996 and
                           June 30, 1997                                                          3
                  Condensed Consolidated Statements of Income for the Three and Six Months
                           Ended June 30, 1996 and 1997                                           4
                  Condensed Consolidated Statements of Cash Flows for the Six Months
                           Ended June 30, 1996 and 1997                                           5
                  Notes to Condensed Consolidated Financial Statements                            6

         Item 2 - Management's Discussion and Analysis of Financial Condition and
                           Results of Operations                                                  9

Part II - Other Information

         Item 1 - Legal Proceedings                                                              13

         Item 4 - Submission of Matters to a Vote of Security Holders                            13

         Item 6 - Exhibits and Reports on Form 8-K                                               14

         Signature                                                                               15
</TABLE>



<PAGE>




            CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                     (In thousands except share information)
<TABLE>
<S>                                                              <C>                   <C>

                                                                     December
                                                                     31, 1996           June 30, 1997
                                                                 ------------------    -----------------
                                                                     (Note 1)            (Unaudited)

                            ASSETS

CURRENT ASSETS
  Cash and cash equivalents                                               $1,725               $2,680
  Accounts receivable, net                                                22,858               20,842
  Prepaid expenses and other current assets                                2,476                3,143
                                                                 ------------------    -----------------
    Total current assets                                                  27,059               26,665

EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net                                  4,316                6,387
OTHER ASSETS                                                               4,315                4,258
                                                                 ==================    =================
    Total assets                                                         $35,690              $37,310
                                                                 ==================    =================

             LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Short-term borrowings                                                   $7,200               $8,250
  Current maturities of long-term debt                                     1,152                1,008
  Accounts payable and accrued liabilities                                13,235               12,744
                                                                 ------------------    -----------------
    Total current liabilities                                             21,587               22,002

LONG-TERM DEBT                                                             3,415                4,811
OTHER LONG-TERM LIABILITIES                                                1,958                2,038
                                                                 ------------------    -----------------

    Total liabilities                                                     26,960               28,851
                                                                 ------------------    -----------------

STOCKHOLDERS' EQUITY
 Preferred stock, $.001 par value; 2,000,000 shares
   authorized; no shares issued and outstanding                                0                    0
 Common stock, $.001 par value; 30,000,000 shares
   authorized; 6,795,790 and 6,658,551 shares issued   and
outstanding at December 31, 1996 and June 30,         1997,
respectively                                                                   7                    7
 Additional paid-in capital                                                9,601                9,001
 Retained earnings (accumulated deficit)                                    (878)                (549)
                                                                 ------------------    -----------------
    Total Stockholders' Equity                                             8,730                8,459
                                                                 ==================    =================
    Total Liabilities and Stockholders' Equity                           $35,690              $37,310
                                                                 ==================    =================
</TABLE>







           See accompanying notes to condensed consolidated financial
                                  statements.

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

                                                 For The Three Months Ended                For The Six Months Ended
                                                          June 30,                                 June 30,
                                             ------------------------------------     ------------------------------------
                                                  1996                1997                 1996                1997
                                             ----------------    ----------------     ----------------    ----------------


REVENUES                                        $41,529             $43,708              $81,694             $85,443

Cost of Revenues                                 30,759              33,230               60,242              65,171
                                             ----------------    ----------------     ----------------    ----------------

          GROSS PROFIT                           10,770              10,478               21,452              20,272

Selling, General, &
   Administrative Expenses                       10,115               9,961               20,325              20,236
                                             ----------------    ----------------     ----------------    ----------------

          OPERATING INCOME                          655                 517                1,127                  36

OTHER (INCOME) EXPENSE:
  Gain on Sale of Subsidiary, net                     0                   0                    0                (816)
  Other income, net                                (143)               (119)                (237)               (214)
  Interest expense                                  226                 274                  407                 518
                                             ----------------    ----------------     ----------------    ----------------

INCOME BEFORE PROVISION FOR
     FOR INCOME TAXES                               572                 362                  957                 548

Provision for Income Taxes                          240                 144                  402                 219
                                             ----------------    ----------------     ----------------    ----------------

          NET INCOME                               $332                $218                 $555                $329
                                             ================    ================     ================    ================

NET INCOME PER SHARE                               $.05                $.03                 $.08                $.05
                                             ================    ================     ================    ================

WEIGHTED AVERAGE SHARES
     OUTSTANDING                                  6,637               6,659                6,633               6,682
                                             ================    ================     ================    ================
</TABLE>













           See accompanying notes to condensed consolidated financial
                                  statements.

            CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<S>                                                                          <C>                 <C>
                                                                             Six Months Ended      Six Months
                                                                               June 30, 1996     Ended June 30,
                                                                                                      1997
CASH FLOWS FROM OPERATING ACTIVITIES:
----------------------------------------------------------------------------
Net income                                                                          $555               $329
----------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by
       (used in) operating activities -
----------------------------------------------------------------------------
    Gain on disposal of equipment and leasehold improvements                          (1)               (10)
----------------------------------------------------------------------------
    Gain on sale of subsidiary                                                         0               (816)
----------------------------------------------------------------------------
    Depreciation and amortization                                                    792                918
----------------------------------------------------------------------------
    Changes in operating assets and liabilities
----------------------------------------------------------------------------
      (Increase) decrease in -
----------------------------------------------------------------------------
        Accounts receivable, net                                                  (2,794)             1,385
----------------------------------------------------------------------------
        Prepaid expenses and other current assets                                   (798)              (765)
----------------------------------------------------------------------------
        Other assets                                                                 266               (295)
----------------------------------------------------------------------------
      Increase (decrease) in -
----------------------------------------------------------------------------
        Accounts payable and accrued liabilities                                  (1,460)               510
----------------------------------------------------------------------------
        Other long-term liabilities                                                 (276)                80
----------------------------------------------------------------------------
          Net cash provided by (used in) operating activities                     (3,716)             1,336
----------------------------------------------------------------------------

----------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
----------------------------------------------------------------------------
  Additions to equipment and leasehold improvements                                 (927)              (730)
----------------------------------------------------------------------------
  Proceeds from sale of equipment and leasehold improvements                          46                 26
----------------------------------------------------------------------------
  Purchases of businesses                                                         (1,416)                 0
----------------------------------------------------------------------------
          Net cash used in investing activities                                   (2,297)              (704)
----------------------------------------------------------------------------

----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
----------------------------------------------------------------------------
  Short-term borrowings, net                                                       2,852              1,050
----------------------------------------------------------------------------
  Proceeds from long-term debt                                                     1,092                  0
----------------------------------------------------------------------------
  Repayments of long-term debt                                                    (3,023)              (643)
----------------------------------------------------------------------------
  Issuance of common stock in connection with
---------------------------------------------------------------------------          402                  0
          purchases of businesses
----------------------------------------------------------------------------
  Deferred financing costs                                                          (121)               (84)
----------------------------------------------------------------------------
          Net cash provided by financing activities                                1,202                323
----------------------------------------------------------------------------
          Net increase (decrease) in cash and cash equivalents                    (4,811)               955
----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, beginning of period                                     6,589              1,725
----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period                                          $1,778             $2,680
----------------------------------------------------------------------------

============================================================================
</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,  1996,  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, 1997, are not  necessarily  indicative of
         the results  that may be expected for any other  interim  period or for
         the year ending  December 31, 1997. 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, 1996.

                  Certain  reclassifications  have been made to the prior year's
         condensed  consolidated financial statements in order to conform to the
         1997 presentation.

(2)      NON-COMPLIANCE UNDER BANK COVENANTS:

                  The Company and certain of its subsidiaries  were parties to a
         Credit  Agreement,  dated as of May 31, 1996 (the "Credit  Agreement"),
         with Summit Bank and Mellon Bank, N.A. as co-agents for the banks party
         thereto  (collectively,  the  "Banks")  pursuant  to  which  the  Banks
         provided the Company with a working capital facility (the  "Facility").
         At June 30, 1997, as a result of losses during 1996, the Company was in
         violation of certain of the financial covenants contained in the Credit
         Agreement,  including  leverage,  interest  and fixed  charge  coverage
         ratios.  In April 1997,  the Company  entered  into a  Forbearance  and
         Amendment  Agreement  with  the  Banks  (the  "Forbearance  Agreement")
         pursuant  to which the Banks  waived  any  default  arising  out of the
         Company's  failure to comply with the  covenants  referenced  above and
         agreed not to  exercise  any  remedies  under the Credit  Agreement  in
         respect  thereof  until  April 1,  1998.  Pursuant  to the terms of the
         Forbearance  Agreement,  amounts  available  for  borrowing  under  the
         Facility were reduced to approximately $8.8 million until June 15, 1997
         and, thereafter,  to the lesser of $8.8 million or an amount determined
         on a formula basis taking into account the Company's  eligible accounts
         receivable  and any pre-tax  losses  incurred after March 31, 1997. The
         interest rates borne by borrowings under the Facility were increased on
         variable  rate  loans to  prime  plus  2.5%,  the  types of  borrowings
         available to the Company were reduced and the  commitment  fees payable
         to the  Banks  were  increased.  In  addition,  under  the  Forbearance
         Agreement,  the Company was  required  to maintain a  consolidated  net
         worth of at least $6.8 million, could not make any acquisitions and was
         required to establish certain separate cash collection accounts.  Under
         the Forbearance  Agreement,  all amounts outstanding under the Facility
         would have become due and payable on April 1, 1998. (See Note 3).

(3)      REVOLVING CREDIT FACILITY:

                  On July 14, 1997, the Company entered into a Loan and Security
         Agreement  (the "First Union  Agreement")  with First Union  Commercial
         Corporation  ("First Union") to replace the Credit  Agreement (see Note
         2) and establish a new revolving credit facility.  Credit  availability
         is based on certain  criteria,  up to a maximum amount of $15.0 million
         and is secured by substantially all of the assets,  including  accounts
         receivable,  of the Company  and its  subsidiaries.  Interest  rates on
         borrowings are based on margins over First Union's lending rates or the
         London interbank borrowing rate (Libor). The First Union Agreement also
         contains  certain  restrictive  covenants  for which the Company was or
         would  have  been  in  compliance  as of June  30,  1997.  The  initial
         borrowing  under the First Union  Agreement was used to repay, in full,
         the amount outstanding under the Facility (see Note 2). The First Union
         Agreement expires on July 30, 1999.

(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  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.

                  Since the  original  complaint  in the  Gapszewicz  action was
         filed,   several   additional   purported   class  actions   containing
         allegations  substantially  similar  to  those  made in the  Gapszewicz
         action have been filed  against the Company,  certain of the  Company's
         directors,  and the co-managing  underwriters of the Company's  initial
         public offering.

                  The Company  believes  that the  allegations  contained in the
         complaints  referred to above are without  merit and has filed a motion
         to dismiss each of the actions referred to above.

                  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  actions,  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  computation of net income per share for the three and six
         months  ended  June  30,  1997  and  1996,  is  based  upon  6,659,000,
         6,637,000,  6,682,000,  and 6,633,000 shares,  respectively,  of Common
         Stock  outstanding.  The  conversion  of stock  options and  debentures
         outstanding are not included in the computations as the effect would be
         antidilutive

                  The  Financial  Accounting  Standards  Board has  issued a new
         standard,   Statement  of  Financial   Accounting  Standards  No.  128,
         "Earnings Per Share" ("SFAS 128").  SFAS 128 establishes  standards for
         computing and  presenting  earnings per share.  SFAS 128 simplifies the
         standards  for  computing  earnings per share  previously  found in APB
         Opinion No. 15,  "Earnings  Per Share,"  and makes them  comparable  to
         international   earnings   per  share   standards.   It  replaces   the
         presentation of primary earnings per share with a presentation of basic
         earnings per share.  It also  requires dual  presentation  of basic and
         diluted  earnings per share on the face of the income statement for all
         entities with complex capital  structures and requires a reconciliation
         of the  numerator  and  denominator  of the  basic  earnings  per share
         computation to the numerator and  denominator  of the diluted  earnings
         per share  computation.  The Company is required to adopt this standard
         as of December 15, 1997 and early adoption is not  permitted.  SFAS 128
         requires   restatement   of  all  prior   period   earnings  per  share
         calculations presented. The Company intends to adopt this standard when
         required  and has  determined  that  adoption  of SFAS 128 will have no
         effect on earnings per share.

(6)      NEW ACCOUNTING PRONOUNCEMENTS:

                  The Financial  Accounting  Standards  Board has issued two new
         statements,  Statements of Accounting  Financial Standards Numbers 130,
         "Reporting  Comprehensive  Income" (SFAS 130"),  and 131,  "Disclosures
         About Segments of an Enterprise and Related Information" (SFAS 131").

                  SFAS 130  establishes  standards for reporting and  displaying
         comprehensive  income  and  its  components  in a full  set of  general
         purpose financial statements.  The objective of SFAS 130 is to report a
         measure of all  changes in equity of an  enterprise  that  result  from
         transactions  and  other  economic  events  of the  period  other  than
         transactions with owners ("comprehensive income"). Comprehensive income
         is the total of net  income and all other  nonowner  changes in equity.
         SFAS 130 is effective  for fiscal years  beginning  after  December 15,
         1997, with earlier application allowed but not required. Upon adoption,
         reclassification of comparative financial statements provided for prior
         periods is required.  The Company  intends to adopt this  standard when
         required and is in the process of determining the effect of SFAS 130 on
         the Company's financial statement presentation.

                  SFAS 131 introduces a new model for segment reporting,  called
         the "management  approach." The management approach is based on the way
         that the chief  operating  decision maker  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 FASB standards. The Company
         is  required to adopt this  standard as of 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
         financial statements.




<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 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.   These  risks  and
uncertainties include, but are not limited to, the effect of economic and market
conditions,  the Company's limited operating history, the ability of the Company
to  successfully  execute its  strategic  plan,  and the impact of  competition.
Subsequent  written and oral  forward  looking  statements  attributable  to the
Company  or  persons  acting on its  behalf  are  expressly  qualified  in their
entirety by the  cautionary  statements  contained  herein and elsewhere in this
Form 10-Q and the Company's 1996 Annual Report on Form 10-K.

Results of Operations

Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996

Revenues

         Revenues for the first half of 1997 increased by $3.7 million (4.5%) to
$85.4 million from $81.7 million for the first half of 1996.  1997 revenues were
affected by the  disposition  of the Company's  contract  logistics  subsidiary,
which accounted for $2.0 million in revenues for the six month period ended June
30, 1996,  but only $400,000 for the six months ended June 30, 1997. Air courier
revenues increased $2.5 million (10.2%),  ground delivery revenue increased $4.5
million  (9.3%)  and  logistics   revenue,   including  the  contract  logistics
subsidiary,  declined  $3.3  million  (38.8%),  for the first  half of 1997 when
compared to the first half of 1996.

         Air courier  revenues  increased  primarily  as a result of  previously
disclosed acquisitions  bolstering the New York - Los Angeles air routes. Ground
delivery revenues  increased  primarily due to the addition of time services and
facilities management service revenue through previously disclosed  acquisitions
which added $3.4  million to revenues  for the six months ended June 30, 1997 in
addition to an increase in contract  distribution revenue in the pharmaceutical,
electronic repair and office product distribution industries.  Logistics revenue
was  negatively  impacted due to the sale of the  Company's  contract  logistics
subsidiary previously discussed.

Cost of Revenues

         For the six months ended June 30, 1997, cost of revenues increased $5.0
million  (8.3%) from $60.2  million for the first half 1996 to $65.2 million for
the comparable period in 1997. The air courier business experienced higher costs
in the second  quarter of 1997 due to a shift in business mix to heavier  weight
shipments.  This shift, combined with higher costs for agents as well as pick-up
and delivery  charges in the first  quarter,  are primarily  responsible  for an
increase in air courier  costs of $3.3  million for the  six-month  period ended
June 30,  1997  over the same  period  for 1996.  Cost of  revenues  for  ground
delivery  increased  due to  contract  start-up  expenses  incurred  during  the
six-month  period  as well as cost  increases  necessary  to  support  increased
revenue  levels.  Cost of revenues  were  favorably  impacted by the sale of the
Company's  contract  logistics  subsidiary,  which accounted for $1.5 million of
such expenses in 1996, compared to $300,000 in the 1997 period.

         As a result of the matters  discussed  above,  gross profit declined by
$1.2 million  (5.6%),  from $21.5 million in the 1996 period to $20.3 million in
the comparable period in 1997. Stated as a percentage of revenues,  gross profit
declined by 2.6%,  from 26.3% for the six months ended June 30,  1996,  to 23.7%
for the six months ended June 30, 1997.

Selling, General and Administrative Expense

         Selling,  general and administrative expenses decreased by $89,000 from
$20.3 million for the six months ended June 30,1996 to $20.2 million for the six
months ended June 30,1997. As a percentage of revenues, these expenses decreased
by 1.2% from 24.9% for the six months ended June 30, 1996,  to 23.7% for the six
months ended June 30, 1997, as a result of the Company's  ongoing  consolidation
and expense reduction efforts.

Operating Income

         For  the  reasons  described  above,  the  Company's  operating  income
decreased  96.8%,  from $1.1 million for the six months ended June 30, 1996,  to
$36,000 for the six months ended June 30, 1997.

Gain on Sale of Subsidiary

         On  January  31,  1997,   the  Company  sold  its  contract   logistics
subsidiary,  for  which  it  recognized  a gain of  $816,000  before  applicable
Federal, state, and local income taxes.

Interest Expense

         Interest  expense  increased by $111,000 to $518,000 for the six months
ended June 30, 1997  compared to $407,000 for the same period in 1996  primarily
due to increased  borrowing  levels and  interest  rate  increases  imposed as a
result of the Forbearance Agreement described in Note 2.

Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996

Revenues

         Revenues  for the second  quarter  of 1997  increased  by $2.2  million
(5.3%) to $43.7  million  from $41.5  million  for the  second  quarter of 1996.
Revenues for the second quarter of 1997 were affected by the  disposition of the
Company's contract logistics subsidiary, which had approximately $1.0 million of
revenues  in the  second  quarter of 1996 but none in the  comparable  period in
1997.  Ground  delivery  revenues  in the  second  quarter  of 1997 grew by $2.7
million (10.8%), air courier revenues grew by $0.9 million (7.0%), and logistics
revenue declined by $1.4 million (33.1%) compared to the second quarter of 1996.
Revenues  contributed  by  previously  disclosed  acquisitions  amounted to $2.8
million  for the  second  quarter  of  1997.  The  remaining  increase  resulted
primarily from the expansion in ground delivery routes and previously  disclosed
new  contract  revenues  for  pharmaceutical  and  office  product  distribution
contracts.  Logistics revenue was negatively  impacted due to the sale in of the
Company's contract logistics subsidiary previously discussed.

Cost of Revenues

         Cost of revenues  increased  $2.5  million  (8.1%) for the three months
ended June 30, 1997 to $33.2  million  from $30.7  million for the three  months
ended June 30, 1996. The increase was due primarily to increased business volume
and the matters described under "Cost of Revenues" in the Six months comparison.
Cost of revenues were favorably  impacted by the sale of the Company's  contract
logistics  subsidiary,  which  accounted  for  approximately  $700,000  of  such
expenses  in the  second  quarter of 1996 and none in the  comparable  period in
1997.

Gross Profit

         Gross profit  decreased by $300,000  from $10.8 million for the quarter
ended June 30, 1996 to $10.5  million for the  quarter  ended June  30,1997 as a
result  of the  aforementioned  revenues  and  cost of  revenues  changes.  As a
percentage  of revenues,  gross profit  declined by 1.9%, to 24.0% in the second
quarter of 1997, compared to 25.9% for the comparable period of 1996.

Selling, General and Administrative Expense

         Selling, general and administrative expenses decreased by $154,000 from
$10.1  million  for the  quarter  ended June 30,  1996 to $10.0  million for the
quarter  ended June 30,  1997.  As a  percentage  of  revenues,  these  expenses
decreased  1.6%,  from 24.4% for the three months ended June 30, 1996,  to 22.8%
for the  three  months  ended  June  30,  1997,  as a  result  of the  Company's
consolidation and expense reduction policies.

Liquidity and Capital Resources

         Working capital  decreased by approximately  $800,000 from $5.5 million
at December 31, 1996 to $4.7 million at June 30, 1997. Cash and cash equivalents
increased by $1.0 million from $1.7 million at December 31, 1996 to $2.7 million
at June 30, 1997. The increase in cash and cash  equivalents is primarily due to
the net cash  provided by  operating  activities  of $1.3  million,  principally
related to  increased  receivable  collections  efforts,  combined  with the net
increase  in  borrowings  of  approximately  $400,000.  This cash was reduced by
approximately $700,000 of additions to equipment and leasehold improvements.

         The Company  incurred a capital lease obligation of $2.2 million during
the second  quarter of 1997 in connection  with lease  agreements to acquire 175
delivery vehicles.

         On  July  14,  1997,  the  Company  entered  into a Loan  and  Security
Agreement (the "First Union Agreement") with First Union Commercial  Corporation
("First Union") to replace the Credit Agreement (see Note 2) and establish a new
revolving credit facility.  Credit availability is based on certain criteria, up
to a maximum amount of $15.0 million and is secured by substantially  all of the
assets,  including  accounts  receivable,  of the Company and its  subsidiaries.
Interest  rates on borrowings  are based on margins over First  Union's  lending
rates or the London interbank borrowing rate (Libor).  The First Union Agreement
also contains certain  restrictive  covenants for which the Company was or would
have been in compliance  as of June 30, 1997.  The initial  borrowing  under the
First Union Agreement was used to repay, in full, the amount  outstanding  under
the Facility (see Note 2). The First Union Agreement expires on July 30, 1999.

         Management believes that cash flows from operations,  together with its
new sources of liquidity and borrowing  capacity (see Note 3), are sufficient to
support the  Company's  operations  and general  business and capital  liquidity
requirements.

Recently Issued Accounting Pronouncements

         The Financial  Accounting Standards Board (The "FASB") has issued three
new standards,  Statement of Financial  Accounting  Standards No. 128, "Earnings
Per Share" ("SFAS 128"),  Statement of Financial  Accounting  Standards No. 130,
"Reporting  Comprehensive  Income"  ("SFAS  130"),  and  Statement  of Financial
Accounting  Standards No. 131,  "Disclosures About Segments of an Enterprise and
Related Information ("SFAS 131").

         SFAS 128  establishes  standards for computing and presenting  earnings
per share,  simplifies the standards for computing earnings per share previously
found in APB Opinion No. 15,  "Earnings Per Share," and makes them comparable to
international  earnings per share  standards.  It replaces the  presentation  of
primary  earnings per share with a presentation  of basic earnings per share. It
also requires dual  presentation of basic and diluted  earnings per share on the
face of the income  statement for all entities with complex  capital  structures
and requires a  reconciliation  of the  numerator and  denominator  of the basic
earnings per share  computation to the numerator and  denominator of the diluted
earnings per share  computation.  The Company is required to adopt this standard
as of December 15, 1997 and early adoption is not  permitted.  SFAS 128 requires
restatement of all prior period earnings per share calculations  presented.  The
Company  intends to adopt this standard when  required and has  determined  that
adoption of SFAS 128 will have no effect on earnings per share.

         SFAS  130   establishes   standards  for   reporting   and   displaying
comprehensive  income  and  its  components  in a full  set of  general  purpose
financial  statements.  The  objective of SFAS 130 is to report a measure of all
changes in equity of an  enterprise  that  result  from  transactions  and other
economic   events  of  the  period   other   than   transactions   with   owners
("comprehensive  income").  Comprehensive  income is the total of net income and
all other  nonowner  changes in equity.  SFAS 130 is effective  for fiscal years
beginning  after  December 15, 1997,  with earlier  application  allowed but not
required.  Upon adoption,  reclassification of comparative  financial statements
provided  for prior  periods  is  required.  The  Company  intends to adopt this
standard when required and is in the process of  determining  the effect of SFAS
130 on the Company's financial statement presentation.

         SFAS 131  introduces  a new model for  segment  reporting,  called  the
"management  approach."  The  management  approach  is based on the way that the
chief operating  decision maker  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  FASB
standards.  The Company is required  to adopt this  standard as of 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 financial statements.

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  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.

                  Since the  original  complaint  in the  Gapszewicz  action was
         filed,   several   additional   purported   class  actions   containing
         allegations  substantially  similar  to  those  made in the  Gapszewicz
         action have been filed  against the Company,  certain of the  Company's
         directors,  and the co-managing  underwriters of the Company's  initial
         public offering.

                  The Company  believes  that the  allegations  contained in the
         complaints  referred to above are without  merit and has filed a motion
         to dismiss each of the actions referred to above.

                  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  actions,  will  have a
         material  adverse  effect  on the  financial  position  or  results  of
         operations of the Company and its subsidiaries.

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

         On June 19, 1997, 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.       Election of Directors
<TABLE>
<S>                                              <C>                     <C>                  <C>

                   Name of Director              Votes For               Votes Against        Authority Withheld

            ------
                   William T. Brannan            5,068,513                     --                         34,919
            ------
                   William T. Beaury             5,068,513                     --                         34,919
            ------
                   Michael Brooks                5,068,513                     --                         34,919
            ------
                   Labe Leibowitz                5,068,513                     --                         34,919
            ------
                   Robert Wyatt                  5,068,513                     --                         34,919
            ------
                   Albert W. Van Ness, Jr.       5,068,213                     --                         35,219
            ------
                   Jon F. Hanson                 5,068,513                     --                         34,919
            ------
                   Marilu Marshall               5,068,513                     --                         34,919
            ------
                   Kenneth W. Tunnell            5,068,513                     --                         34,919
</TABLE>


         2.       Ratification of the selection by the Board of Directors of 
                  Arthur Andersen LLP as the Company's independent auditors
                  for 1997:

                    Votes For:                               4,427,356
                    Votes Against:                             662,006
                    Abstentions:                                14,070


Item 6 - Exhibits and Reports on Form 8-K

         (a)   Exhibits

                  10.1  Loan And Security  Agreement,  Dated July 14, 1997 By
                        And Between First Union Commercial Corporation And 
                        Consolidated Delivery & Logistics, Inc. And Subsidiaries

                  27.1  Financial Data Schedule (for electronic submission only)

         (b)   The Company has not filed any reports on Form 8-K during the
               relevant period.




<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, 1997          CONSOLIDATED DELIVERY & LOGISTICS, INC.




                                  By:___________________________
                                     Joseph G. Wojak
                                     Executive Vice President, Chief
                                        Financial Officer, Treasurer
                                        and Secretary
                                    (PRINCIPAL FINANCIAL AND
                                        ACCOUNTING OFFICER)

<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, 1997          CONSOLIDATED DELIVERY & LOGISTICS, INC.




                                  By: /s/ Joseph G. Wojak
                                      Joseph G. Wojak
                                      Executive Vice President, Chief
                                         Financial Officer, Treasurer
                                         and Secretary
                                     (PRINCIPAL FINANCIAL AND
                                         ACCOUNTING OFFICER)



<PAGE>






                                                   EXHIBIT INDEX




         10.1     Loan  And  Security  Agreement,  Dated  July  14,  1997 By And
                  Between  First  Union  Commercial Corporation And Consolidated
                  Delivery & Logistics, Inc. And Subsidiaries.

         27.1     Financial Data Schedule (for electronic submission only)



<PAGE>




                                                                     EXIBIT 10.1

                                            LOAN AND SECURITY  AGREEMENT,  dated
                                            July ___,  1997 by and between FIRST
                                            UNION COMMERCIAL CORPORATION, with a
                                            place of business at 190 River Road,
                                            Summit,     New    Jersey     07901,
                                            hereinafter  called  "Lender",   and
                                            CONSOLIDATED  DELIVERY &  LOGISTICS,
                                            INC.,    CLAYTON/NATIONAL    COURIER
                                            SYSTEMS,   INC.,   NATIONAL  EXPRESS
                                            COMPANY,   INC.,  AMERICAN  COURIER,
                                            INC., CLICK MESSENGER SERVICE, INC.,
                                            CLICK  MESSENGER  SERVICE  OF  N.Y.,
                                            INC., COURT COURIER  SYSTEMS,  INC.,
                                            OLYMPIC   COURIER   SYSTEMS,   INC.,
                                            SECURITIES   COURIER    CORPORATION,
                                            SILVER STAR EXPRESS,  INC.,  SUREWAY
                                            AIR TRAFFIC CORPORATION, and SUREWAY
                                            LOGISTICS  CORPORATION,  hereinafter
                                            individually and collectively called
                                            "Borrower."

         This Agreement specifies the terms of a revolving credit facility of up
to Fifteen  Million and no/100  ($15,000,000.00)  Dollars by Lender to Borrower,
and further specifies the terms by which all Obligations,  as defined herein, of
Borrower  to Lender  and each  Lender  Affiliate  are to be  secured  by certain
personal property and assets, tangible and intangible, of each Borrower.
         NOW,  THEREFORE,  in consideration of these premises and other good and
valuable consideration, the parties hereto agree as follows:
                                                         I
                                                    DEFINITIONS
         1.1  "ACCOUNT"  or  "ACCOUNTS  RECEIVABLE"  means,  in  addition to the
definition of account as contained in the Uniform  Commercial Code, the right of
the  Borrower  to  receive  payment  for goods  sold or  leased or for  services
rendered which are not evidenced by an instrument or chattel  paper,  whether or
not it has been earned by performance.
         1.2 "ACCOUNT  DEBTOR"  means,  in addition to the definition of account
debtor as  contained  in the  Uniform  Commercial  Code,  the  Person or Persons
obligated to Borrower on an Account, or who is represented by the Borrower to be
so obligated.
         1.3  "ADVANCES"  means  all  loans by  Lender  to  Borrower  under  the
revolving credit facility provided for in paragraph 2.1 of this Agreement.
         1.4  "ADVANCE   DOLLAR   LIMIT"  means   Fifteen   Million  and  no/100
($15,000,000.00)  Dollars or such  lesser  amount as the  maximum  amount of the
revolving credit facility  provided for herein may be reduced in accordance with
paragraph 7.10 hereof.

         1.5 "AFFILIATE" means any Person which, directly or indirectly, owns or
controls,  on  an  aggregate  basis,  including  all  beneficial  ownership  and
ownership or control as a trustee, guardian or other fiduciary, at least fifteen
(15%) percent of the  outstanding  capital stock having ordinary voting power to
elect a majority of the board of  directors  (irrespective  of  whether,  at the
time,  stock of any other  class or  classes of such  corporation  shall have or
might  have  voting  power by reason of the  happening  of any  contingency)  of
Borrower  or any  Obligor or any  Subsidiary,  or is  controlled  by or is under
common control with Borrower or any such Person, or any stockholders of Borrower
or any such  Person,  or any  Subsidiary.  For the  purpose of this  definition,
"control" means the possession,  directly or indirectly,  of the power to direct
or cause the direction of management and policies, whether through the ownership
of voting securities, by contract or otherwise.
         1.6 "AGREEMENT" means this Loan and Security Agreement as may from time
to time be supplemented, amended or modified.
         1.7 "BANK" means First Union National Bank, its successors and assigns.
         1.8 "BORROWER" means the parties identified on the first page hereof as
Borrower,  it being the intent of this  Agreement  that each shall be considered
individually  or  collectively  as Borrower  regardless  of which  receives  the
proceeds  of the loans,  advances  or  financial  accommodations  hereunder  and
regardless  of which is the  source of the  Collateral  hereunder  and that each
Borrower shall be jointly and severally liable for all of the Obligations.
         1.9 "BORROWING BASE" means the lesser of (A) Fifteen Million and no/100
($15,000,000.00)  Dollars,  or (B) the sum of (i) the  Eligible  Loan  Value  of
Eligible  Accounts  minus  (ii) the  Debenture  Reserve  Amount  plus  (iii) the
outstanding  principal balance from time to time in the Collateral  Account,  as
such term is defined in paragraph 2.4 hereof.
         1.10  "BUSINESS  DAY" means a day other  than a  Saturday  or Sunday or
other day on which Bank is authorized or required to close under the laws of the
States of New Jersey, North Carolina, Pennsylvania or applicable Federal Law.
         1.11 "CAPITAL  EXPENDITURES"  means for any period the aggregate of all
expenditures  (including  that  portion of Capital  Leases which is or should be
capitalized,  in  accordance  with GAAP on the  consolidated  balance sheet of a
Person) by such Person during that period for any fixed assets, improvements, or
replacements, substitutions or additions thereto that have a useful life of more
than  one (1)  year  including,  without  limitation,  the  direct  or  indirect
acquisition of such assets by way of increased product charges,  offset items or
otherwise.
         1.12 "CAPITAL  LEASE" as applied to any Person,  means any lease of any
property (whether real, personal or mixed) by that Person as lessee which would,
in  conformity  with GAAP be required to be accounted  for as a capital lease on
the balance sheet of that Person.
         1.13  "CASH  FLOW  LEVERAGE  RATIO"  means at any date the ratio of (A)
Total  Funded Debt at said date  divided by the EBITDA for the period  ending on
said date provided that with respect to the fiscal  quarters of Borrower  ending
through and  including  September  30, 1997  notwithstanding  the  definition of
EBITDA,  for the purpose of calculating  the Cash Flow Leverage Ratio the EBITDA
shall be calculated on an annualized  basis of the fiscal  quarters ending after
March 31,  1997;  for example,  for the quarter  ending June 30, 1997 the EBITDA
shall be  calculated  based upon the income and  expenses of  Borrower  for said
quarter  times 4 rather than for the 12 month period  ending June 30, 1997;  and
for the quarter ending  September 30, 1997 the EBITDA shall be calculated  based
upon the income and  expenses of Borrower  for the  quarters  ending June 30 and
September 30, 1997 times 2.
         1.14 "CASH  MANAGEMENT  SERVICES"  means that certain  Cash  Management
Services  and  Controlled  Disbursement  Service that may be provided by Bank to
Borrower from time to time.
         1.15 "CHATTEL  PAPER" means,  in addition to the  definition of chattel
paper as contained in the Uniform  Commercial  Code, a writing or writings which
evidence  both a money  obligation  and a security  interest  in, or a lease of,
specific  Goods.  When a  transaction  is  evidenced  both  by  such a  security
agreement or a lease and by an Instrument or series of Instruments, the group of
writings taken together constitutes Chattel Paper.
         1.16 "COLLATERAL" means all of those present or future assets,  real or
personal,  of Borrower in which a security  interest in or lien on is granted to
Lender  hereunder or contemplated  hereby,  or under any other present or future
agreement by Borrower in favor of Lender or any Lender Affiliate.
         1.17  "CONTINGENT  OBLIGATIONS"  shall  mean,  as to  any  Person,  any
obligation  of  such  Person   guaranteeing  or  in  effect   guaranteeing   any
Indebtedness,  leases, dividends or other obligations ("primary obligations") of
any other  Person (the  "primary  obligor") in any manner,  whether  directly or
indirectly,  including,  without  limitation,  any  obligation  of such  Person,
whether or not  contingent,  (A) to purchase any such primary  obligation or any
property  constituting  direct or indirect security therefor,  (B) to advance or
supply funds (i) for the purchase or payment of any such primary  obligation  or
(ii) to maintain  working  capital or equity  capital of the primary  obligor or
otherwise to maintain the net worth or solvency of the primary  obligor,  (C) to
purchase property,  securities or services primarily for the purpose of assuring
the  beneficiary  of any such primary  obligation  of the ability of the primary
obligor to make payment of such primary obligation, (D) for the obligations of a
partnership  in which such  Person is a general  partner,  or (E)  otherwise  to
assure or hold harmless the beneficiary of such primary  obligation against loss
in respect  thereof;  provided,  however,  that the term Contingent  Obligations
shall not include the  endorsement of  instruments  for deposit or collection in
the ordinary course of business.  The amount of any Contingent  Obligation shall
be deemed  to be an amount  equal to the  stated or  determinable  amount of the
primary obligation in respect of which such Contingent Obligation is made or, if
not stated or  determinable,  the maximum  reasonably  anticipated  liability in
respect thereof as determined by Lender in good faith.
         1.18  "DEBENTURE  RESERVE  AMOUNT" means the net of (A) Two Million and
no/100  Dollars   ($2,000,000.00)   minus  (B)  the  principal   amount  of  the
Subordinated  Convertible  Debentures as to which (i) the Borrower has hereafter
paid in full said Subordinated  Convertible  Debenture upon a demand for payment
thereunder  having  been made  after  August 21,  1998 by the holder  thereof in
accordance  with the terms hereof or (ii) the holder thereof has,  pursuant to a
writing in from and substance satisfactory to Lender,  extended (a) the maturity
date thereof and (b) the earliest date on which a demand for payment  thereunder
can be made, to a date at least 90 days after the  expiration of the Term of the
revolving credit facility provided for herein.
         1.19 "DEFAULT"  means an event of the nature  specified in Article VIII
hereof and which,  with the giving of notice or passage of time, or both,  would
become an Event of Default.
         1.20     "DOCUMENT(S)"  shall have the meaning set forth in the Uniform
Commercial Code for such term.
         1.21     "EBITDA"  means  at  any  date  the  sum of (A)  Net  Income,
excluding  any  extraordinary  and nonoperating  income,  of a Person for the
preceding twelve (12) months plus (B) any interest, income  taxes, depreciation,
amortization  and other  non-cash charges for such twelve (12) months to the
extent they were  deducted from gross income to calculate Net Income.
         1.22  "ELIGIBLE  ACCOUNT"  means an Account which has been due for less
than the  Eligibility  Period  number of days from the date of  issuance  of the
invoice and is, in all other respects,  acceptable to Lender,  in its good faith
discretion  but  specifically,  without  limitation,  excluding  any  Ineligible
Account.
         1.23 "ELIGIBLE LOAN VALUE OF ELIGIBLE  ACCOUNTS" means (A) prior to the
Loan Value Percentage Change Date, up to eighty (80%) percent of the face amount
of Eligible  Accounts,  less returns and discounts,  offsets,  contra  balances,
credits or  allowances  of any nature,  at any time  issued,  owing,  granted or
outstanding,  and (B) on and after the Loan Value Percentage  Change Date, up to
eighty-five  (85%) percent of the face amount of Eligible  Accounts less returns
and  discounts,  offsets,  contra  balances,  credits or all  allowances  of any
nature, at any time issued, owing, granted or outstanding.
         1.24 "ELIGIBILITY  PERIOD" shall mean ninety (90) days for all Accounts
other than (a) those  owing from  Account  Debtors  identified  on Exhibit  1.24
annexed hereto as to which Accounts the Eligibility  Period shall be one hundred
twenty  (120) days or (b) those owing from any Account  Debtor  identified  in a
writing hereafter  executed and delivered by Lender and making reference to this
paragraph 1.24 as having an Eligibility  Period of more than ninety (90) days as
to which Accounts the  Eligibility  Period shall be the number of days set forth
in said writing.
         1.25  "ENVIRONMENTAL  LAWS" means (A) the  Comprehensive  Environmental
Response,  Compensation and Liability Act of 1980, as amended, 42 U.S.C. 9601 et
seq.  ("CERCLA"),  as amended by the Superfund Amendment and Reauthorization Act
of 1986; (B) the Resource  Conservation and Recovery Act of 1976, as amended (42
U.S.C.  6901 et seq.);  (C) the Spill  Compensation  and Control  Act  (N.J.S.A.
58:10-23.11 et seq.), (D) the Industrial Site Recovery Act (N.J.S.A.  13:1K-6 et
seq.); (E) the Underground  Storage Tanks Act (N.J.S.A.  58:10A-21 et seq.); and
(F) any and all other laws, regulations and executive orders, federal, state and
local,   pertaining  to  environmental  matters,  as  same  may  be  amended  or
supplemented from time to time.
         1.26  "EQUIPMENT"  means,  in addition to the  definition  of equipment
contained in the Uniform Commercial Code, machinery and equipment of every kind,
nature  and  description,  as well as  trucks,  vehicles  of  every  nature  and
description,  including  but not limited to trailers and the like,  handling and
delivery equipment, cranes and hoisting equipment, fixtures, office machines and
furniture, whether affixed to realty or not.
         1.27 "ERISA" means the Employee  Retirement Income Security Act of 1974
         as amended from time to time. 1.28 "EVENT OF DEFAULT" means an event of
         the nature  specified  in Article  VIII hereof 1.29  "EXPIRATION  DATE"
         means the expiration date of the revolving credit facility provided for
         and
as set  forth  in  paragraph  2.1  hereof  or the  date of  termination  of said
revolving credit facility pursuant to the terms hereof.
         1.30  "FINANCIAL  UNDERTAKING"  of a Person  means  (i) any  repurchase
obligation or liability of such Person or any of its  Subsidiaries  with respect
to Accounts or notes receivable sold by such Person or any of its  Subsidiaries,
(ii) any sale and leaseback transaction which does not create a liability on the
consolidated  balance sheet of such Person and its  Subsidiaries,  if any, (iii)
any other transaction  which is the functional  equivalent of or takes the place
of  borrowing  but which does not  constitute  a liability  on the  consolidated
balance sheet of such Person and its Subsidiaries,  or (iv) any obligation under
any "swap agreement" (as defined in 11 U.S.C.ss.101)  including any sums payable
upon termination of any such swap agreement.
         1.31  "FIXED  CHARGE  COVERAGE  RATIO"  means at any date the  ratio of
(A)(i) the EBITDA minus (ii) all unfunded  Capital  Expenditures  and taxes paid
during  the 12  months  ending on said  date  divided  by (B) the sum of (i) the
current portion of long-term debt paid or scheduled to be paid during the twelve
(12) months  ending on such date plus (ii) the  interest  expense for the twelve
(12) months ending on said date.  Notwithstanding the foregoing, with respect to
the fiscal  quarters of Borrower  ending  through and  including  March 31, 1998
notwithstanding  the  definition of EBITDA and the foregoing (A) for the purpose
of  calculating  the Fixed Charge  Coverage  Ratio the EBITDA and taxes paid and
unfunded Capital Expenditures shall be calculated on a cummulative basis for the
fiscal  quarters  ending  after  March 31,  1997,  (B) the  current  portion  of
long-term  debt shall be only that  portion  paid or scheduled to be paid during
the  subject  quarters,  (C) the  interest  expense  shall  be for  the  subject
quarters,  and (D) with respect to the  proposed  Capital  Expenditures  for new
computer hardware and software intended to improve the record keeping of Sureway
Air Traffic  Corporation's  Accounts  Receivable,  up to the  aggregate  cost of
$250,000.00  to the  extent  said  Sureway  Computer  Capital  Expenditures  are
expended  in one fiscal  quarter  rather  than over  three  fiscal  quarters  as
projected by Borrower,  for the purpose of calculating the Fixed Charge Coverage
Ratio said Sureway Computer Capital  Expenditures  shall be divided by three (3)
and deemed expended in three consecutive quarters.
         1.32 "GAAP" means generally  accepted  accounting  principles in effect
from time to time in the United States of America.
         1.33 "GENERAL INTANGIBLES" shall mean all rights of Borrower as defined
in the  Uniform  Commercial  Code  including,  but not limited to, all rights to
property,   choses  in  action  and  other  rights  of  Borrower  not  otherwise
specifically  included  elsewhere in this Agreement,  further  including but not
limited to all  present  and future  trademarks,  trade  names,  service  marks,
copyrights and patents,  tax refunds and all rights under license agreements for
the use of same, and all rights of Borrower under any and all leases of personal
property and all rights of Borrower under all franchise agreements including all
rights of Borrower in all Accounts Receivable generated by services performed by
franchisees.
         1.34 "GOODS" means, in addition to the definition of goods as contained
in the Uniform  Commercial  Code,  all articles of tangible  personal  property,
sold, supplied, leased or otherwise disposed of, represented by an Account.
         1.35 "GOVERNMENTAL  BODY" means any nation or government,  any state or
other  political   subdivision   thereof,   any  entity  exercising   executive,
legislative,  judicial, regulatory or administrative functions of, or pertaining
to government or any court or arbitrator.
         1.36 "INDEBTEDNESS"  means, as to any Person, at a particular time, all
items which,  in accordance  with GAAP,  would be classified as liabilities on a
balance  sheet of such  Person  as at such time and  which  constitute,  without
duplication,  (A) Indebtedness for borrowed money or the deferred purchase price
of Property (other than credit extended to such Person for the purchase of goods
in the  ordinary  course of business to the extent the same would not  otherwise
constitute Indebtedness), (B) indebtedness evidenced by notes, bonds, debentures
or similar  instruments,  (C) obligations under leases which, in accordance with
GAAP, are required to be capitalized on a balance sheet,  (D) obligations  under
conditional sales or other title retention agreements,  (E) indebtedness arising
under letter of credit (both documentary and standby) and acceptance  facilities
and the face  amount of all  letters of credit  issued  for the  account of such
Person and, without duplication,  all drafts drawn thereunder to the extent such
Person shall not have  reimbursed the issuer in respect of the issuer's  payment
of such drafts, (F) all liabilities secured by any Lien on any property owned by
such Person even though such Person has not assumed or otherwise  become  liable
for the payment  thereof  and liens for taxes,  assessments  or similar  charges
incurred  in the  ordinary  course of  business  to the  extent  such  liens are
Permitted  Encumbrances,  (G) mandatory  obligations of such Person to redeem or
purchase Stock or to purchase or repay Indebtedness,  (H) Contingent Obligations
of such  Person  in  respect  of any of the  foregoing,  and  (I) any  Financial
Undertaking of a Person.
         1.37     "INELIGIBLE ACCOUNTS"  means those Accounts as to which any of
the following has occurred:
                  (A) a portion of the Goods or services  giving rise to the 
Account are  returned,  rejected, repossessed, lost or damaged;
                  (B) the Account Debtor disputes said Account;
                  (C) the termination of existence, insolvency, business failure
or suspension of business or appointment of a custodian,  receiver or trustee of
any part of the  property  of, the making of an  assignment  for the  benefit of
creditors of, calling of a meeting of the creditors of, or the  commencement  of
any Bankruptcy, liquidation, reorganization or similar proceeding under state or
federal law against the Account Debtor;
                  (D) more  than  twenty-five  (25%)  percent  of the  aggregate
Accounts  due  from the  Account  Debtor  remains  unpaid  past  the  applicable
eligibility periods set forth in the definition of Eligible Account;
                  (E) the  Account  is  due  from  an  employee,   stockholder,
                  Affiliate  or   Subsidiary   of  Borrower;   (F)  any  of  the
                  representations  set forth in  Paragraph  5.9 are untrue  with
                  respect to said Account;  (G) Borrower has failed with respect
                  to said Account to comply with the requirements of
Paragraph 6.9 hereof;
                  (H) the Account arises out of a contract with any Governmental
Body unless, if required by Lender, all filings have been made under the Federal
Assignment of Claims Act or comparable state or other statute as may be required
by the Lender with regard to said Account;
                  (I) the Goods  giving rise to said  Account are subject to any
"bill  and  hold"  or  similar  arrangements,  have  been  sold on  approval  or
consignment or sale or return basis, or under a repurchase or similar agreement;
                  (J) the  Account  Debtor  does not meet credit  standards
acceptable  to Lender in its good faith discretion;
                  (K) the Account is not payable in United States Dollars or the
Account Debtor is located  outside the United States except those Accounts which
are supported by foreign credit  insurance or Letters of Credit  satisfactory to
and assigned to Lender;
                  (L) the  Account  Debtor  is  located  in  Minnesota  or other
jurisdiction  which requires a Notice of Business  Activities  Report or similar
report to be filed by Borrower,  and Borrower has not filed for the then current
year the required report or is not otherwise  authorized to transact business in
said jurisdiction;
                  (M) because of the nature of Borrower's ownership of assets or
conduct of business,  Borrower is required by applicable law to be authorized to
do business in the jurisdiction where the Account Debtor is located and Borrower
is not so authorized;
                  (N) the  Account is subject to any  offset,  counterclaim  or 
other  claim or defense on the part of the Account Debtor;
                  (O) the  Account  is  subject to a Lien in favor of any Person
                  other  than  Lender;  (P) the  Account is not a good and valid
                  Account, representing an undisputed bona fide
indebtedness  incurred by the Account Debtor  therein named,  for a fixed sum as
set forth in the invoice  relating  thereto with respect to an absolute sale and
delivery,  upon the stated  terms,  of Goods  sold and  delivered,  or  services
actually rendered, by Borrower;
                  (Q) the Account is otherwise unacceptable to Lender in its 
good faith discretion;
                  (R) the Account  arises out of a contract  or  purchase  order
for which a surety  bond was issued on behalf of Borrower;
                  (S) a Letter of Credit has been  issued to  Borrower to secure
payment  of such  Account  unless  (i) the  issuer  of such  Letter of Credit is
acceptable to Lender,  in its good faith  discretion (ii) the original Letter of
Credit has been  delivered  to  Lender,  and (iii) the Letter of Credit has been
transferred  to Lender and Lender is the  beneficiary  or the Person issuing the
Letter of Credit has been  notified in writing of the  assignment by Borrower to
Lender of the  proceeds  of the  Letter of Credit  and to make  payment  of such
proceeds to Lender;
                  (T) a credit  insurance  policy  has been  issued  in favor of
Borrower  covering  the Account  unless (i) the issuer of such credit  insurance
policy is acceptable to Lender in its good faith discretion, and (ii) the Lender
is a beneficiary under such policy; or
                  (U) The Account arises from services performed by a franchisee
of Borrower unless and until Borrower  furnishes to Lender evidence that each of
the following conditions have been met:
                  (i) the  franchisee  has executed and delivered to Borrower an
assignment  of billing and  receivables  in the form  annexed  hereto as Exhibit
1.37, or such other form as Lender may reasonably approve,
                  (ii) Borrower has filed such UCC-1 financing statements as may
be appropriate to perfect Borrower's  interest in the Accounts generated by such
franchisee,
                  (iii)  Borrower  has  executed  and  delivered to Lender UCC-3
statements of assignment, assigning to Lender all of Borrower's rights under the
UCC-1 financing statements filed against the franchisee, and
                  (iv) Borrower has conducted such UCC and other searches as may
be  appropriate to determine no Liens or other  interests  exist in the Accounts
arising  from the  services  of such  franchisee,  other  than the  interest  of
Borrower therein.
         1.38  "INVENTORY"  means, in addition to the definition of inventory as
contained in the Uniform  Commercial Code, all Goods held by Borrower for resale
or lease or furnished or to be furnished under  contracts of service,  and shall
include raw  materials,  goods and work in process and finished  goods,  and all
goods returned by or reclaimed from customers.
         1.39 "INSTRUMENT" means, in addition to the definition of instrument as
contained in the Uniform Commercial Code, a negotiable instrument or a security,
or any other writing which  evidences a right to the payment of money and is not
itself a  security  agreement  or  lease  and is of the type  which  is,  in the
ordinary  course  of  business,  transferred  by  delivery  with  any  necessary
endorsement or assignment.
         1.40  "INTEREST  PERIOD"  means with  respect to each Libor  Loan,  the
period  commencing  on the date such  Advance  commences  to be a Libor  Loan as
elected by the Borrower and ending one, two or three or six months thereafter as
Borrower may elect in the applicable interest rate request and thereafter,  each
period commencing on the last day of the immediately  preceding  Interest Period
and  ending  one,  two or three or six  months  thereafter  as  selected  by the
Borrower,  but in no event after the Expiration Date;  subject,  however, to the
following  provisions:  (i) if any Interest  Period would otherwise end on a day
which is not a New York business day, that Interest  Period shall be extended to
the next  succeeding  New York business day unless the result of such  extension
would be to carry such Interest  Period into another  calendar  month,  in which
event such  Interest  Period  shall end on the  immediately  preceding  New York
business day; (ii) any Interest Period that begins on the last New York business
day  of a  calendar  month  (or  on a day  for  which  there  is no  numerically
corresponding  day in the  calendar  month at the end of such  Interest  Period)
shall end on the last New York  business day of a calendar  month;  and (iii) if
the  Borrower  selects an Interest  Period which would  otherwise  end after the
Expiration  Date, the duration of such Interest Period shall be shortened to one
or two or three  months such that the end of such  Interest  Period  shall occur
prior to or of even date with the Expiration Date.
         1.41 "INTEREST RATE AND FEE CASH FLOW LEVERAGE RATIO" means at any date
the ratio of (A) Total Funded Debt  divided by (B) the EBITDA,  said ratio to be
calculated  quarterly  based upon the  financial  statements  of  Borrower to be
furnished to Lender hereunder;
         1.42  "INVESTMENT   OBLIGATIONS"  means  any  of  the  following:   (A)
Obligations  of or guaranteed by the United States of America;  (B)  Obligations
issued or  guaranteed by any  instrumentality  or agency of the United States of
America,  whether now existing or hereafter organized; (C) Obligations issued or
guaranteed  by any state of the United  States or the District of Columbia;  (D)
Repurchase  agreements  fully secured by obligations of a kind specified in (A),
(B) or (C)  above;  (E)  Interest-bearing  accounts,  certificates  of  deposit,
bankers  acceptances or commercial  paper of Lender or any Lender  Affiliate and
investments in the Evergreen Funds; (F) Certificates of deposit of United States
Lenders  having a ratio of Tier 1 capital of not less than six percent  (6%) and
then in an amount not exceeding 10% of the issuing Lender's  unimpaired  capital
and surplus.  "Tier 1 capital"  shall be defined  from time to time  pursuant to
regulations  published by the Office of the  Comptroller of the Currency and the
Federal Deposit Insurance Corporation.
         1.43  "LENDER" means First Union Commercial Corporation, its successors
and assigns.
         1.44  "LENDER  AFFILIATE" means First Union  Corporation, its successor
and assigns,  and any of its direct and indirect Affiliates and Subsidiaries.
         1.45  "LETTER  OF CREDIT"  means a letter of credit  issued in favor of
Borrower  to  secure  payment  of the sale of goods or of any  Account  or other
obligation due or to become due to Borrower.
         1.46  "LIBOR"  means,  with  respect to each day during  each  Interest
Period,  the rate  (rounded  to the  next  higher  1/100 of 1%) for U.S.  dollar
deposits of a one,  two,  three or six month  maturity  equivalent to the period
selected by the  Borrower as the  Interest  Period as reported on Telerate  page
3750 as of 11:00 a.m., London time, on the second London business day before the
relevant  Interest  Period begins (or if not so reported,  then as determined by
the Lender from another recognized source or interbank quotation),  adjusted for
reserves by dividing that rate by 1.00 minus the Libor Reserve.  Notwithstanding
the foregoing,  if the Borrower has hedged the Libor based rate by entering into
an interest rate swap agreement with Lender, Libor shall be rounded five decimal
places  in  accordance  with  the  1991  ISDA   Definitions   published  by  the
International Swaps and Deriviates Association, Inc.
         1.47 "LIBOR  LOAN" means each Advance on which  interest  thereon is in
accordance with the terms of this Agreement, based on Libor.
         1.48  "LIBOR  MARGIN"  means (A)  initially  two  percent  (2%) and (B)
hereafter a percentage  set forth below  determined by reference to the Interest
Rate and Fee Cash Flow Leverage Ratio of the Borrower on a  consolidated  basis,
with  adjustments  to be made on the dates and as set forth in paragraph  2.2(D)
hereof:

                  Interest Rate & Fee
                  Cash Flow Leverage Ratio                            Margin

                  greater than 4.50 to 1.0                            2.00%
                  4.50 - 3.01 to 1.0                                  1.875%
                  less than 3.01 to 1.0                               1.50%

         1.49 "LIBOR RESERVE" means the maximum percentage  reserve  requirement
(rounded to the next higher  1/100 of 1% and  expressed  as a decimal) in effect
for any day  during  the  Interest  Period  under the  Federal  Reserve  Board's
Regulation D for Eurocurrency liabilities as defined therein.
         1.50  "LIEN"  means  any  mortgage,  deed of  trust,  pledge,  security
interest,  hypothecation,  assignment,  deposit arrangement,  encumbrance,  lien
(statutory or other), or preference,  priority, or other security agreement,  or
preferential  arrangement,   charge,  or  encumbrance  of  any  kind  or  nature
whatsoever (including,  without limitation,  any conditional sale or other title
retention agreement,  any financing lease having substantially the same economic
effect as any of the foregoing) and the filing of any financing  statement under
the Uniform  Commercial Code (or comparable law) of any jurisdiction to evidence
any of the foregoing.
         1.51 "LOAN  DOCUMENTS"  means this Agreement,  all notes,  mortgages or
other documents executed and delivered by Borrower or any Obligor hereunder, and
any amendments, renewals, modifications or supplements thereto, or substitutions
therefor from time to time.
         1.52 "LOAN VALUE PERCENTAGE  CHANGE DATE" means that date that Borrower
has  furnished  to Lender (A) the annual  audited  financial  statements  of the
Borrower for the year ending  December 31, 1997 and which indicate that Borrower
has achieved a Net Income,  exclusive of extraordinary and nonoperating  income,
of at least $884,000.00 for the fiscal year ending December 31, 1997, and (B)(i)
written   evidence   satisfactory  to  Lender  in  its  good  faith   discretion
demonstrating  that  Borrower  has improved  certain  internal  procedures  with
respect to collection of Accounts  Receivable  and other  accounting  matters as
discussed between Lender and Borrower,  or (ii) Borrower furnishes to Lender the
management  letter by  Arthur  Anderson  LLP  accompanying  Borrowers  financial
statement for the years ending December 31, 1997 which is satisfactory to Lender
in the good faith exercise of its discretion.
         1.53  "LONDON  BUSINESS  DAY"  means a day on which  commercial  banks 
are open for  dealings  in U.S. Dollar deposits in the London (England, U.K.) 
interbank market.
         1.54  "MATERIAL  ADVERSE  CHANGE"  means,  as to a Person,  a  material
adverse change in the financial condition,  operations,  business,  prospects or
property of such Person.
         1.55  "MATERIAL  ADVERSE  EFFECT"  means,  as to a Person,  a  material
adverse effect on the financial condition,  operations,  business,  prospects or
property of such Person.
         1.56  "NET INCOME" means the net after tax income of a Person 
determined in accordance with GAAP.
         1.57  "OBLIGATION" or "OBLIGATIONS" means any and all loans,   advances
and other financial  accommodations made by Lender or any Lender Affiliate prior
to, on and after the date of this  Agreement  to, or on the account of Borrower,
and  any  and  all  interest,  fees,  late  fees,  attorney's  fees  and  costs,
commissions,  obligations,  liabilities,  indebtedness,  charges  and  expenses,
direct or indirect, primary, secondary,  contingent,  joint or several which are
due or to become due or that may hereafter be contracted or acquired of Borrower
to Lender or any Lender  Affiliate,  no matter how or when  arising  and whether
under any present or future Loan  Agreement  or other  agreement  or  instrument
between Borrower and Lender or any Lender Affiliate, including "swap agreements"
(as defined in 11 U.S.C.  ss.101) or otherwise,  and the amount due or to become
due upon any notes,  reimbursement  agreement or other  obligations given to, or
received  by,  Lender  or  any  Lender  Affiliate  or on  account  of any of the
foregoing  and the  performance  and  fulfillment  by Borrower of all the terms,
conditions,  promises, covenants and provisions contained in the Loan Documents,
or in any future agreement or instrument between Borrower and Lender or any
Lender Affiliate.
         1.58  "OBLIGOR"  means  the  Borrower   hereunder,   all  sureties  and
guarantors,  if any, and, if any debt due to Lender  hereunder is evidenced by a
note or other instrument, the makers and endorsers thereof.
         1.59  "PAYMENT  DATE"  means (A) with  respect  to Prime Rate Loans the
first day of each month, and (B) with respect to Libor Loans the last day of the
Interest  Period provided that if the Interest Period is six months Payment Date
shall mean the last day of the third month of the  Interest  Period and the last
day of the Interest Period.
         1.60 "PERMITTED ENCUMBRANCES" means (A) Liens for taxes, assessments or
governmental  charges or levies on property of Borrower if the same shall not at
the time be delinquent or thereafter can be paid without  penalty,  or are being
diligently  contested in good faith and by appropriate  proceedings  and against
which Borrower has established adequate reserves, (B) Liens imposed by law, such
as carriers,  warehousemen and mechanics Liens, and Liens incurred in connection
with  construction  or other  similar  Liens  arising in the ordinary  course of
business  provided  same are not at the time due and payable,  (C) Liens arising
out  of  pledge  or  deposits  under  workers  compensation  law,   unemployment
insurance,  old age pension or other social  security or  retirement  benefit or
similar legislation,  (D) Liens arising from judgments or awards with respect to
which Borrower  shall be diligently  and in good faith  prosecuting an appeal or
proceedings  for review and shall have secured a stay of execution  pending such
appeal or review, (E) Liens in favor of Lender or any Lender Affiliate,  (F) the
existing and future purchase money security  interests in items of Equipment and
(G) the existing  liens on specific  assets of Borrower as identified on Exhibit
1.60 annexed hereto.
         1.61 "PERMITTED  INDEBTEDNESS"  means (A) Indebtedness to Lender or any
Lender  Affiliate,  (B)  Subordinated  Debt  consented  to in  writing by Lender
including the Indebtedness under the Subordinated  Convertible  Debentures,  (C)
the Seller Indebtedness,  (D) purchase money Indebtedness  incurred with respect
to the  purchase  of items of  equipment  or under  Capital  Leases  of items of
Equipment  provided said Indebtedness  incurred in each year does not exceed the
maximum per annum Capital Expenditures permitted hereunder and (E) guarantees by
a Borrower of the obligations of another Borrower to third persons.
         1.62 "PERSON" means any individual,  sole proprietorship,  partnership,
joint venture, trust,  unincorporated  organization,  association,  corporation,
institution,  entity,  party or government  (whether national,  federal,  state,
county,  city,  municipal  or  otherwise,  including,  without  limitation,  any
instrumentality, division, agency, body or department thereof).
         1.63 "PLAN" means an employee benefit plan or other plan maintained for
employees of Borrower and covered by Title IV of ERISA.
         1.64 "PRIME RATE" means the rate of interest  established  by Bank from
time to time as its  reference  rate in making  loans but which does not reflect
the rate of  interest  charged to any  particular  Person and is not tied to any
external rate of interest or index. The rate of interest charged hereunder shall
change  automatically and immediately as of the date of each change in the Prime
Rate without prior notice to Borrower.  Lender shall endeavor to notify Borrower
of  changes in the Prime Rate but the  failure to so notify  Borrower  shall not
preclude a change in the  interest  rate on the loans  provided  for herein from
being effective on the date of changes in the Prime Rate.
         1.65 "PRIME RATE LOANS" means each Advance on which interest thereon is
in accordance with the terms of this Agreement based on the Prime Rate.
         1.66 "PRIME RATE MARGIN" means (A) initially one quarter of one percent
(.25%) and (B) hereafter a percentage set forth below determined by reference to
the  Interest  Rate and Fee  Cash  Flow  Leverage  Ratio  of the  Borrower  on a
consolidated basis, with adjustments to be made on the dates and as set forth in
paragraph 2.2(D) hereof:

                  Interest Rate & Fee
                  Cash Flow Leverage Ratio                             Margin

                  greater than 4.50 to 1.0                             .25%
                  4.50 - 3.01 to 1.0                                    00%
                  less than 3.01 to 1.0                       minus    .25%

         1.67 "REPORTABLE  EVENT" has the meaning assigned to such term in Title
IV of ERISA, or regulations  issued thereunder other than a Reportable Event not
subject to the  provision  for a thirty (30) day notice to the  Pension  Benefit
Guaranty Corporation under such regulations.
         1.68  "SELLER   INDEBTEDNESS"   means  the   Indebtedness  of  Borrower
identified on Exhibit 5.20 annexed  hereto arising from the purchase by Borrower
of assets of third Persons.
         1.69  "SUBORDINATED  CONVERTIBLE  DEBENTURES"  means  those  certain 8%
Subordinated   Convertible  Debentures  due  2000  of  Consolidated  Delivery  &
Logistics,  Inc. dated September 14, 1995, the holders thereof and the principal
amount thereof being identified in Exhibit 5.19 annexed hereto.
         1.70  "SUBORDINATED  DEBT" means all Indebtedness of a Person permitted
by this  Agreement  or any other  Loan  Document  and which is  subordinated  to
payment in full of all  Obligations of such Person to Lender  pursuant to a debt
subordination  agreement  or  subordination   provisions  therein  in  form  and
substance satisfactory to Lender.
         1.71 "SUBSIDIARY"  means any corporation of which more than fifty (50%)
percent of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether,
at the time, stock of any other class or classes of such corporation  shall have
or might have voting power by reason of the happening of any  contingency) is at
the time,  directly  or  indirectly,  owned by Borrower or any Obligor or one or
more Subsidiaries.
         1.72 "TANGIBLE  CAPITAL FUNDS" means the Tangible Net Worth of a Person
plus the outstanding principal amount of all Subordinated Debt.
         1.73 "TANGIBLE NET WORTH" means Total Assets,  less (without limitation
and without  duplication  of deductions)  the sum of (A) Total  Liabilities of a
Person,  (B) any  reserves  established  by a Person for  anticipated  losses or
expenses,  (C) the  amount,  if  any,  of all  intangible  items  including  any
leasehold rights,  the amount of any investment in any Affiliate or other entity
including a Subsidiary,  good will (including any amounts, however designated on
the  balance  sheet,  representing  the  cost of  acquisition  of  business  and
investments  in excess of underlying  tangible  assets),  trademarks,  trademark
rights,  trade  name  rights,  copyrights,  patents,  patent  rights,  licenses,
unamortized debt discount,  marketing expenses and customer and/or mailing lists
and  (D)  all  amounts  due  from   employees,   stockholders,   Affiliates  and
Subsidiaries.
         1.74 "TERM" means the period from the date hereof through and including
the later of (A) the Expiration Date and (B) the payment and performance in full
of the Obligations.
         1.75 "TOTAL ASSETS"  means,  at any date, the amount shown on the books
and records of a Person,  determined in  accordance  with GAAP, of all property,
both real and personal, of a Person.
         1.76  "TOTAL  FUNDED  DEBT"  means all  Indebtedness  of the  Borrower,
including  without  limitation  the  Obligations  of  Borrower  to  Lender,  the
Indebtedness  under  the  Subordinated   Convertible   Debentures,   the  Seller
Indebtedness and under Capital Leases.
         1.77  "TOTAL  LIABILITIES"  means,  at  any  date,  the  amount  of all
liabilities  which, in accordance  with GAAP,  should be included in determining
total liabilities as shown on a liability side of a balance sheet of a Person at
such date.
         1.78 "UNIFORM  COMMERCIAL  CODE" means the Uniform  Commercial  Code as
adopted and in effect under the laws of the State of New Jersey.
         1.79 "UNUSED  COMMITMENT  FEE RATE" means (A) initially one half of one
percent  (.50%) and (B)  hereafter a percentage  set forth below  determined  by
reference to the Interest Rate and Fee Cash Flow Leverage  Ratio of the Borrower
on a  consolidated  basis,  with  adjustments to be made on the dates and as set
forth in paragraph 2.2(D) hereof:

         Interest Rate & Fee Cash Flow Leverage Ratio                      Rate
         --------------------------------------------                      ----
         greater 4.50 to 1.0                                               .50%
         4.50 to 3.01 to 1.0                                               .375%
         less than 3.01 to 1.0                                             .25%

         1.80     "INTERPRETATION AND CONSTRUCTION"
                  (a) The  terms  "hereby,"   "hereof,"   "hereto,"   "herein,"
"hereunder"  and any similar  terms,  as used in this  Agreement,  refer to this
Agreement in its entirety and not any particular  Article or paragraph,  and the
term "hereafter" means after, and the term "heretofore"  means before,  the date
of delivery of this Agreement;
                  (b) Words importing a particular gender mean and include every
other  gender,  and words  importing  the  singular  number mean and include the
plural number and vice versa.
                  (c) All financial tests shall be applied only to the Borrower
on a consolidated basis.
                                       II
                                      LOANS

         2.1      REVOLVING CREDIT FACILITY
          (A)  Facility.  So long as no  Default  nor Event of  Default  exists,
Lender shall, from time to time hereafter,  through the Expiration Date, lend to
Borrower such amounts as the Borrower may from time to time request,  based upon
the Eligible Loan Value of Eligible  Accounts  Receivable as may exist from time
to time,  but not to  exceed  the  Borrowing  Base,  and as may be  reported  by
Borrower to Lender on a  borrowing  base report in the form of Exhibit 2.1 which
is to be  submitted  by Borrower to Lender by Tuesday of each week and as of the
close of business of the preceeding  Friday.  Lender shall have the right,  from
time to time, in the good faith exercise of its  discretion,  upon at least five
(5) days prior notice to Borrower, to alter the percentages of the Eligible Loan
Value of  Eligible  Accounts  and/or  to  establish  reserves  against  Eligible
Accounts.  Each month Lender may render to Borrower a statement of the status of
the loans provided for herein,  which Borrower  hereby agrees shall be deemed to
be an account  stated and  correct  and  acceptable  to and  binding on Borrower
unless  Lender shall receive a corrected  statement of exceptions  from Borrower
within  thirty  (30) days after the  monthly  statements  have been  rendered to
Borrower.  The revolving  credit facility  provided for herein shall have a Term
through July 31, 1999. All such loans shall be payable on the Expiration Date or
as otherwise set forth in this  Agreement and shall be evidenced by a promissory
note in the form of Exhibit 2.1 annexed hereto.  Notwithstanding  the expiration
of the Term,  the rights of Lender  hereunder  and the  obligations  of Borrower
hereunder,  including any Obligations  with respect to loans and other financial
accommodations made after the Expiration Date, further including but not limited
to the grant of security  interests in and Liens on the  Collateral as set forth
in Article III hereof,  shall  remain in full force and effect  until all of the
Obligations  of Borrower to Lender and each Lender  Affiliate  are  satisfied in
full.
         (B)      Interest on Advances.
                  (i) The  Borrower  agrees to notify  the  Lender  orally or in
writing,  by 11:00 a.m. local time, at least two (2) Business Days (with respect
to Libor Loans) prior to each date it requests  interest on the  Advances,  or a
portion thereof, to be based on Libor. Each such notice shall be irrevocable and
confirmed  immediately  by delivery to the Lender of a Libor rate request.  Each
Libor rate request shall specify:
                          (a) the date from which  interest  is to accrue  based
on Libor,  which  shall be a London Business Day;
                          (b) the aggregate amount of Advances on which interest
is to be based on Libor; and
                          (c) the duration of the Interest period applicable 
thereto.
                  (ii)    No more than three (3) Interest  Periods with respect 
to Libor Loans shall be outstanding at any time.
                  (iii) All Libor Loans shall be in the principal  amount of Two
Hundred Fifty Thousand and 00/100 ($250,000.00)  Dollars or an integral multiple
thereof.
                  (iv)  On  all  Advances  as to  which  Borrower  has  not,  in
accordance  with the  foregoing,  selected  to have  interest  based  on  Libor,
interest  shall be based on the Prime Rate as set forth in  subparagraph  (C)(i)
below.
          (C).    Interest Rate and Payment Dates
                  (i) Each  Prime Rate Loan  shall  bear  interest  on the daily
outstanding  principal  amount  thereof  for each day such  Prime  Rate  Loan is
outstanding  at a rate per annum  equal to the Prime Rate in effect from time to
time plus the Prime Rate Margin.  Such  interest  shall be payable in arrears on
each Payment Date.
                  (ii) Each Libor Loan shall  bear  interest  for each  Interest
Period applicable thereto, on the daily outstanding principal amount thereof, at
a rate per annum equal to Libor plus the Libor Margin. Interest shall be payable
in arrears for each Interest Period on each Payment Date.
         (D)      Conversion and Continuation Options.
                  (i) The  Borrower  may elect  from  time to time to  convert a
Libor Loan to a Prime  Rate Loan by giving the Lender at least one (1)  Business
Day's prior irrevocable  notice of such election,  provided that conversion of a
Libor  Loan to a Prime  Rate  Loan  shall  only  be made on the  last  day of an
Interest Period with respect  thereto.  The Borrower may elect from time to time
to convert a Prime Rate Loan to a Libor Loan,  in each case by giving the Lender
by 11:00  a.m.  local time at least two (2)  Business  Days'  prior  irrevocable
notice of such  election.  Each notice to be given by the  Borrower  pursuant to
this  paragraph,  shall be  confirmed  by  delivery  to the  Lender of a written
notice, which shall specify:
                            (a) the date on which  such  rate  conversion  shall
                           take effect; (b) the aggregate amount of the Advances
                           to  be  converted  on  such  date;  (c)  whether  the
                           Advances to be converted  are Libor  Loans,  or Prime
                           Rate  Loans;   (d)  whether   the   Advances,   after
                           conversion, will be Libor Loans or PrimRate Loans;
                           and (e) in the case of a Libor Loan, the  duration of
                           the Interest  Period  applicable thereto.
         All or any part of the  outstanding  principal  of a Libor  Loan,  or a
Prime Rate Loan,  may be converted  as provided  herein,  provided  that partial
conversions  shall be in an  aggregate  principal  amount  of a  minimum  of Two
Hundred Fifty Thousand ($250,000.00) Dollars or an integral multiple thereof.
                   (ii)  A  Libor  Loan  may  be  continued  as  such  upon  the
expiration  of an Interest  Period with  respect  thereto by  compliance  by the
Borrower with the notice provisions contained in this paragraph, provided that a
Libor Loan may not be  continued  as such when any Event of Default has occurred
and is continuing,  but shall be automatically converted to a Prime Rate Loan on
the last day of the subject Interest Period.
                  (iii) If the Borrower  shall fail to give notice to convert or
continue a Libor Loan in the manner  required by  paragraphs  (i) or (ii) above,
the  Borrower  shall be deemed to have  elected to  convert  the Libor Loan to a
Prime Rate Loan on the last day of the Interest Period applicable thereto;
           (E) Prepayment.  Prime Rate Loans may be prepaid in whole or in part,
at any time without premium or penalty.  Libor Loans may be prepaid, in whole or
in part, only on the last day of an Interest Period; provided, however, that any
partial prepayments shall be in a principal amount of not less than $250,000.00,
or multiples  thereof.  Any prepayment shall include accrued and unpaid interest
to the date of prepayment on the principal amount prepaid and all other sums due
and payable  hereunder.  All payments received on the Advances may be applied in
such order as the Lender in its sole discretion shall determine.
          (F)  Indemnification.  The Borrower shall indemnify the Lender against
the Lender's loss or expense in employing  deposits as a consequence  of (i) the
Borrower's failure to make any payment when due under the Advances  constituting
a Libor Loan,  or (ii) any  prepayment  of a Libor Loan on a date other than the
last day of the applicable Interest Period ("Indemnified Loss or Expense").
          (G)  Additional  Costs.  If, at any time,  a new, or a revision in any
existing law or interpretation or administration  (including  reversals) thereof
by  any  government  authority,  central  bank  or  comparable  agency  imposes,
increases  or  modifies  any  reserve or  similar  requirement  against  assets,
deposits or credit extended by lenders generally,  or subjects lenders generally
to any tax,  duty or other charge  (except tax on the Lender's net income),  and
any of the  foregoing  increases  the  cost to the  Lender  of  maintaining  its
commitment  to provide  Libor Loans or reduce the amount of any sum  received or
receivable  by the Lender  under the Advances  which are Libor Loans,  within 15
days after  demand by the  Lender,  the  Borrower  agrees to pay the Lender such
additional  amounts as will  compensate the Lender for such  increased  costs or
reductions ("Additional Costs").
         (H) Match Funding.  The amount of such (i) Indemnified Loss or Expense,
or (ii)  Additional  Costs outlined  above shall be determined,  in the Lender's
sole  discretion,  based upon the assumption that the Lender funded 100% of that
portion of the Advances to which the Libor-based  rate applies in the applicable
London interbank market.
          (I)  Unavailability  of Interest Rate. If, at any time, (i) the Lender
shall determine that, by reason of circumstances  affecting foreign exchange and
interbank markets  generally,  Libor deposits in the applicable  amounts are not
being  offered  to the  Lender  or Bank;  or (ii) a new,  or a  revision  in any
existing law or interpretation or administration  (including  reversals) thereof
by any  government  authority,  central bank or comparable  agency shall make it
unlawful  or  impossible  for the  Lender  to honor  its  obligations  under the
Advances, then (A) the Lender's obligation, if any, to make or maintain a Libor.
Loan shall be  suspended,  and (B) at the  Lender's  discretion  the  applicable
Libor-based rate shall,  for the remainder of the term of the Loan,  immediately
be converted  to the Prime Rate plus the Prime Rate Margin,  but if so converted
the indemnification obligation of Borrower under (F) above shall not apply.

         2.2      PAYMENT AND COMPUTATION AND ADJUSTMENTS IN MARGINS
                  (A) Business Day. Whenever any payment to be made hereunder or
under  any note  issued  hereunder  shall be  stated  to be due on other  than a
Business  Day,  such payment may be made on the next  succeeding  Business  Day,
unless such Business Day falls in the next  succeeding  calendar month, in which
case,  such payment shall be made on the next  preceding  Business Day. Any such
alteration  of time  shall,  in such case,  be included  in the  computation  of
payment of interest.  All payments  (including  prepayments) made by Borrower on
account of principal of or interest on the loans hereunder shall be made without
set-off  or  counterclaim  and shall be made  prior to 3:00 p.m.  (New York City
time) on the date such  payment is due, to Lender,  in each case in lawful money
of the United States of America and in immediately  available funds. The failure
of Borrower to make any such  payment by 3:00 p.m.  (New York City time) on such
due date shall not constitute a Default or Event of Default hereunder,  provided
that such  payment is made on such due date,  but any such  payment  received by
Lender on any Business Day after 3:00 p.m.  (New York City time) shall be deemed
to have been received on the immediately succeeding Business Day for the purpose
of calculating any interest payable in respect thereof.
                  (B) Debiting of Account.  The  Borrower  agrees to maintain an
account at the Bank continuously  until the Obligations owing hereunder are paid
in full. That account is account  #____________________ (the "Deposit Account").
The Lender  may,  and the  Borrower  authorizes  the Bank to,  debit the Deposit
Account  for the amount of any  payment  as and when such  payment  becomes  due
hereunder and to remit same to Lender.  Notwithstanding the foregoing,  if there
are insufficient funds in the Deposit Account to make said payment, and Borrower
has otherwise failed to make said payment,  including by the authorization under
(F) below, the Lender and any Lender Affiliate may, and the Borrower  authorizes
the  Lender  and any  Lender  Affiliate  to,  debit  any  other  account  and/or
certificate of deposit  maintained by the Borrower with the Lender or any Lender
Affiliate  for the amount of any payment,  as and when such payment  becomes due
hereunder,  whether such payment is for accrued  interest,  principal or expense
and to remit same to Lender,  even if debiting such account results in a loss or
reduction of interest to the Borrower or the imposition of a penalty  applicable
to the early withdrawal of time deposits.  Such  authorization  shall not affect
the Borrower's obligation to pay when due all amounts payable hereunder, whether
or not there are sufficient funds in any accounts of the Borrower. The foregoing
rights of the Lender and each Lender Affiliate to debit the Borrower's  accounts
shall be in addition to, and not in  limitation  of, any rights to make Advances
or of set-off which the Lender and/or any Lender Affiliate may have hereunder or
under any Loan Document.
         (C) Computation. Interest and any fees or compensation based upon a per
annum  rate  shall be  calculated  on the basis of a 360 day year for the actual
number of days elapsed.
         (D)  Adjustments.  The Prime Rate  Margin and the Libor  Margin and the
Unused  Commitment  Fee  Rate  shall be  calculated  based  upon  the  quarterly
financial  statements  of Borrower on a  consolidated  basis to be  furnished to
Lender in accordance with the terms hereof and shall be adjusted as of the first
day of the month following the month in which such financial  statements and the
required  accompanying  compliance  certificates  are  furnished  by Borrower to
Lender  provided there are at least five (5) Business Days between the date same
are so furnished to Lender and the first day of the following month. If there is
less than five (5)  Business  Days said margins and rate shall be adjusted as of
the sixth (6th)  Business Day following the date said  financial  statements are
furnished  to  Lender.  Subject  to  paragraph  9.7  hereof,  if said  quarterly
financial  statements  and  compliance  certificate  are not furnished to Lender
within the time period set forth in paragraph  6.1 hereof,  the margins and rate
shall be the highest such margin and rate until said  financial  statements  and
certificate are furnished to Lender.
          (E) Notwithstanding any adjustment in the Libor Margin as set forth in
(D) above,  the interest rate on a Libor Loan shall not be adjusted  downward as
to said Libor Loan  during the middle of the  applicable  Interest  Period,  but
shall be  adjusted  upward to the  applicable  margin for the  remainder  of the
Interest  Period  if there is an  upward  adjustment  in the  Libor  Margin as a
consequence  of the  calculation of the Interest Rate and Fee Cash Flow Coverage
Ratio.
         (F) Borrower hereby irrevocably  requests and authorizes Lender to make
Advances  hereunder to the extent of any fees set forth in paragraphs 2.3 hereof
or  interest  due from time to time  under  this  Agreement  or any  other  Loan
Documents  and to apply the proceeds of such  Advances to such fees or interest.
The foregoing  shall not obligate  Lender to make any such Advances and Borrower
shall remain obligated to pay said fees and interest when due.
         2.3      FEES
         (A) Unused  Commitment  Fee.  On the first  Business  Day of each month
hereafter,  Borrower  shall  pay to  Lender a  commitment  fee  equal to  Unused
Commitment  Fee Rate on a per  annum  basis,  of the daily  average  undisbursed
portion of the Advance  Dollar  Limit of the  revolving  credit  facility  under
paragraph 2.1 hereof for the prior month.
         (B) Facility Fee.  Contemporaneous  with the execution hereof Borrower
shall pay to Lender the unpaid portion of a facility  fee of $37,500.00.
         (C) Examination  Fee. If from time to time Lender,  in accordance with
its rights  hereunder,  examines or  inspects  the books and records of Borrower
and/or  Collateral,  Borrower  shall  upon the demand of Lender pay to Lender an
examination  fee of $500.00  per Person for each day a Person who is employed by
Lender  or a Lender  Affiliate  engages  in such  examination,  plus  all  other
out-of-pocket expenses,  including but not limited to travel expenses,  incurred
by Lender in connection therewith.  If Lender engages an outside firm to conduct
such  examination,  Borrower  shall pay to Lender  upon demand the actual out of
pocket  reasonable  costs  and  expenses  incurred  by  Lender  in  having  said
examination  conducted,  such  payment  to be make  within  ten (10) days of the
submission  of  an  invoice  from  Lender  detailing  the  costs  and  expenses.
Notwithstanding  the  foregoing  provided no Default or Event of Default  exists
hereunder  Borrower  shall not be  obligated  to pay for more than four (4) such
examinations or inspections per annum.
         (D) Late Charge.  If any payment hereunder is not paid in full when the
same is due,  the  Lender may  collect  from the  Borrower a fee on such  unpaid
amount equal to five percent (5%) of such amount.

         2.4 PREPAYMENT AND EARLY  TERMINATION  (A) If on any day the sum of the
aggregate  outstanding principal balance of the loans under paragraph 2.1 hereof
shall exceed the Borrowing Base,  Borrower shall, on such day, prepay such loans
by an amount equal to such excess. Any mandatory prepayment under this paragraph
shall be applied first to Prime Rate Loans, and second to Libor Loans, and as to
Libor  Loans,  if more than one (1) Interest  Period is in effect,  then to such
Libor Loans in the order of the Interest  Periods  with the  shortest  remaining
number of days.  Notwithstanding  the foregoing after all then outstanding Prime
Rate Loans are satisfied as a consequnce of such application of prepayments, any
excess prepayments shall be applied as follows:
         (i) the next Two Million Dollars  ($2,000,000.00)  of  prepayments,  or
such greater amount as Lender may agree to, shall be credited to an account (the
"Collateral  Account") to be  established  with Bank or other Lender  Affiliate,
which  Collateral  Account  shall be  subject  to a Lien in favor of  Lender  as
additional security for the Obligations, and
         (ii)  all   prepayments   in  excess  of  said  Two   Million   Dollars
($2,000,000.00) may be applied to Libor Loans as set forth above.
         On the expiration date of any Interest Period, there shall be withdrawn
from the  Collateral  Account  an amount  equal to the Libor  Loan which has the
Interest  Period so expiring and said amount shall be applied to payment of said
Libor Loan.  If after any monies are so credited to the  Collateral  Account the
Borrower  obtains  any Prime  Rate  Loans,  these  shall be  withdrawn  from the
Collateral  Account an amount  equal to said  Prime Rate Loans with said  amount
applied to payment of said Prime Rate Loans.
                  (B) Each loan  hereunder  bearing  interest at a floating rate
based  upon the Prime  Rate,  in effect  from time to time,  may be  voluntarily
prepaid,  in whole or in part,  at any time  without  premium or penalty.  Libor
Loans may be prepaid only on the last day of the applicable Interest Period.
                  (C) Early Termination Fee. If the revolving credit facility is
terminated  by  Lender  upon  the  occurrence  of an  Event  of  Default,  or is
terminated by Borrower prior to the Expiration Date or if Borrower  prepays said
facility  prior to said  Expiration  Date, in view of the  impracticability  and
extreme difficulty of ascertaining actual damages and by mutual agreement of the
parties as to a  reasonable  calculation  of Lender's  lost  profits as a result
thereof,  Borrower shall pay Lender upon the effective date of such  termination
or prepayment a fee in an amount equal to: (a) one percent (1.0%) of the Advance
Dollar  Limit  if  such  termination  occurs  on or  prior  to the  first  (1st)
anniversary of the commencement date of the Term; or (b) one half of one percent
(.5%) of the Advance  Dollar  Limit if such  termination  occurs after the first
(1st)  anniversary  of the  commencement  date of the  Term.  Such fee  shall be
presumed  to be the  amount of damages  sustained  by Lender as the result of an
early  termination  and Borrower  acknowledges  that it is reasonable  under the
circumstances  currently existing. The fee provided for in this Section shall be
deemed included in the Obligations.
         2.5 PROCEDURES FOR ADVANCES On each Business Day Prime Rate Loans shall
be advanced by the Lender to the Borrower  pursuant to the terms and  conditions
of the Cash Management Services. Subject to paragraph 2.1(B) hereof with respect
to Libor Loans,  Borrower  shall  provide  Lender with at least one (1) Business
Day's  oral  notice of the  requested  Advance,  specifying  the date (the "Loan
Date") and amount,  which oral notice shall be promptly  confirmed in writing by
Borrower. Lender shall, on or after 1:00 P.M. (New York time) of the Loan

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Date, make the amount of the requested loan available to Borrower,  provided all
conditions  precedent to such loan have been met or  satisfied.  Each  requested
Advance  hereunder which is to be a Libor Loan shall be in the minimum amount of
$250,000.00 and multiples of $250,000.00 in excess thereof.
         2.6  CONDITIONS TO INITIAL  ADVANCE The obligation of Lender to execute
this Agreement and to make the initial Advance or other financial accommodations
hereunder is subject to the satisfaction of the following conditions precedent:
                  (A)  Documents.  Lender shall have  received the duly executed
note conforming to the requirements hereof, and not less than four (4) copies of
this  Agreement,  each  executed  on  behalf  of  Borrower  and/or  by its  duly
authorized officers.
                  (B)  Deliveries by Borrower.  Borrower shall have delivered or
caused to be  delivered  to the Lender or the Lender  shall have  received,  the
following items, which shall be in form and substance reasonably satisfactory to
the Lender and its counsel:
                  (i)  Legal Opinion of Counsel to Borrower.  Opinion of 
Lowenstein,  Sandler,  Kohl,  Fisher & Boylan P.A. counsel to Borrower dated the
date hereof and  addressed to Lender,  substantially  in the form of Exhibit 2.6
hereto.
                  (ii)  Corporate  Proceedings.  Resolutions  of the  Boards  of
Directors  of  Borrower  certified  on the date  hereof by the  Secretary  or an
Assistant  Secretary of Borrower  authorizing  (a) the  execution,  delivery and
performance of this  Agreement,  and all of the other Loan Documents to which it
is a party;  (b) the consummation of the  transactions  contemplated  hereby and
thereby;  and (c) the  borrowings  and other  matters  contemplated  in the Loan
Documents.  Such certificate  shall state that the resolutions set forth therein
have not been  amended,  modified,  revoked or  rescinded as of the date of such
certificate and are in full force and effect as of the closing date.
                  (iii) Incumbency  Certificate.  A certificate of the Secretary
or an  Assistant  Secretary  of  Borrower,  dated  the  date  hereof,  as to the
incumbency  and signature of the officers  executing  each of the Loan Documents
and any  other  document  to be  delivered  pursuant  to any of such  documents,
together  with  evidence  of the  incumbency  of  such  Secretary  or  Assistant
Secretary.
                  (iv) Officer's  Certificate.  A certificate of Borrower signed
by its  president  or chief  financial  officer  stating that to the best of his
knowledge  after  diligent  investigation:  (a) as of the date hereof and giving
effect to any loan no Default or Event of Default exists hereunder;  and (b) all
of Borrower's representations and warranties contained in this Agreement and the
other Loan Documents are presently true and correct in all material respects.
                  (v)  Consents,   Licenses,   Approvals,  etc.  Copies  of  all
consents,  licenses and  approvals  required in connection  with the  execution,
delivery,  performance,  validity and enforceability of this Agreement, the note
and other Loan Documents, and such consents,  licenses and approvals shall be in
full force and effect and be  reasonably  satisfactory  in form and substance to
Lender and its counsel.
                  (vi)  Searches.  Copies,  in  form  and  substance  reasonably
satisfactory  to Lender,  of written or other advice  relating to such corporate
status, financing statement, tax lien, judgment and other searches as Lender may
reasonably require.
                  (vii)    Other  Documents.  All other  documents  provided for
herein or which Lender may request or require.
                  (viii)   Additional Information.  Such additional  information
and materials which Lender shall have reasonably requested.
                  (ix) Supporting Documents. On or before the date hereof, (a) a
copy  of  the  Certificate  of  Incorporation  of  Borrower,  certified  by  the
Secretaries  of  State  of  their  respective  states  of  incorporation;  (b) a
certificate of such  Secretaries of State,  dated as of a recent date, as to the
good  standing of Borrower and  attaching  the charter  documents of Borrower on
file in the office of such  Secretary  of State;  and (c) a  certificate  of the
Secretary  or an  Assistant  Secretary  of Borrower  dated the Closing  Date and
certifying  with  respect to Borrower  (I) that  attached  thereto is a true and
complete  copy of the  By-laws  of  Borrower,  as in  effect on the date of such
certification,  and (II) that the Certificate of  Incorporation  of Borrower has
not been amended since the date of the last amendment  thereto  indicated on the
certificate of the Secretary of State furnished pursuant to clause (A) above.
                  (x) Fees.  Borrower shall have paid all of the reasonable fees
and expenses of Lender's  counsel which are  occasioned  in connection  with the
preparation of this  Agreement,  and all other Loan Documents and the closing of
the transactions contemplated hereby and thereby.
                  (xi)     Insurance.  Evidence  of the  insurance  required  to
be in  effect as set forth in this Agreement.
                  (xii)  Availability.  Borrower  has  a  sufficient  amount  of
Eligible  Accounts  so that it has  available  additional  borrowings  after the
initial borrowing equal to not less than the difference between (a) Four Million
Dollars  ($4,000,000.00) and (b) the cash and cash equivalents of Borrower as of
the date of the initial borrowing.
                  (xiii)   Borrower  shall  have  delivered  to  Lender  a  duly
completed  borrowing base report as of not earlier than the close of business of
the preceding Friday.
                  (xiv) The agent for the  existing  lenders to  Borrower  shall
have executed and  delivered (a) to Lender a payoff letter in form  satisfactory
to  Lender  and (b) to  Stryker,  Tams & Dill LLP,  counsel  for  Lender,  UCC-3
statements of termination  with respect to all financing  statements in favor of
said  agent  and  the  original  stock   certificates  of  the  Sudsidiaries  of
Consolidated  Delivery & Logistics,  Inc.  and Sureway Air Traffic  Corporation,
said  UCC-3  statements  and stock  certificates  to be held by said  counsel in
escrow pending payment to said agent of the required payoff amount.
         2.7  CONDITIONS TO ALL LOANS The  obligation of Lender to make any loan
or other  financial  accommodation  hereunder is subject to  fulfillment  of the
following additional  conditions  precedent,  to the reasonable  satisfaction of
counsel to Lender:
                  (a)  Representations  and Warranties.  The representations and
warranties  made by Borrower and any Obligor  herein or in any other of the Loan
Documents or which are  contained in any  certificate,  document or financial or
other statement  furnished at any time under or in connection  herewith shall be
correct  in all  material  respects  on and as of the date of each loan or other
financial  accommodation  hereunder,  after giving  effect to such loan or other
financial accommodation hereunder, as if made on and as of such date.
                  (b)      No  Default.  No Event of  Default  has  occurred,  
and no  Default  has  arisen  and is  continuing  on the  date the loan or other
financial accommodation hereunder is to be made, after giving effect to the such
loan or other financial accommodation hereunder.
                  (c) Litigation.  No suit,  action,  investigation,  inquiry or
other  proceeding  by any  governmental  authority  or other Person or any other
legal or  administrative  proceeding  shall be pending or  threatened  which (i)
questions  the  validity or legality of the  transactions  contemplated  by this
Agreement,  or (ii) seeks  damages in  connection  therewith  and which,  in the
reasonable  judgment of Lender, (x) involves a significant risk of a preliminary
or permanent  injunction  or other order by a state or federal court which would
prevent,  or  require  rescission  of,  the  transactions  contemplated  by this
Agreement,  or (y) in the case of any action or proceeding  which seeks monetary
damages  involves a  significant  risk of  resulting  in  substantial  financial
liability to Borrower, any guarantor and/or Lender.
                  (d)  Material  Adverse  Change.  No event shall have  occurred
since the date of the most recent financial  statements of Obligors furnished to
Lender  which  resulted  in a Material  Adverse  Change of any  Obligor or had a
Material Adverse Effect on any Obligor.
                  (e)  Legal  Matters.  All  legal  matters  incident  to the  
making of the loans and other financial  accommodations shall be satisfactory to
counsel to Lender, in the reasonable exercise of its judgment.
         2.8 REGULATORY  CAPITAL  REQUIREMENTS  If any existing or future law or
regulation  or the  interpretation  thereof  by any court or  administrative  or
governmental authority charged with the administration thereof, or compliance by
Lender with any request or directive (whether or not having the force of law) of
any such  authority,  results  in any  increases  after  the date  hereof in any
capital   maintenance,   capital  ratio  or  similar  requirement  against  loan
commitments  made by lenders  generally,  other than those  covered by paragraph
2.1(G)  above,  and the result  thereof is to impose upon Lender or increase any
capital  requirement  applicable  to  Lender  as  a  result  of  the  making  or
maintenance of the revolving credit available  hereunder (which imposition of or
increase  in  capital  requirement  may be  determined  by  Lender's  reasonable
allocation of the aggregate of such capital impositions or increases) then, upon
demand by Lender,  Borrower shall immediately pay to Lender from time to time as
specified by Lender a commitment  fee which shall be  sufficient  to  compensate
Lender for such imposition of or increase in capital requirements  together with
interest  on each such  amount  from the date  demanded  until  payment  in full
thereof at the rate provided in this Agreement  with respect to commitment  fees
not paid when due. A certificate  setting forth in reasonable  detail the amount
necessary to  compensate  Lender as a result of an  imposition of or increase in
capital requirements submitted by Lender to Borrower shall be conclusive, absent
manifest  error or bad faith,  as to the amount  thereof.  For  purposes of this
Paragraph  2.8,  in  calculating  the amount  necessary  to  compensate  for any
imposition of or increase in capital requirements,  Lender shall be deemed to be
entitled to a rate of return on capital (after  federal,  state and local taxes)
of fifteen percent per annum.

         2.9 EXCESS LOANS In the event Lender shall  advance an amount in excess
of the  aggregate  amount of all loans and other  financial  accommodations  set
forth in this  Agreement or if Borrower  should  directly or  indirectly  become
indebted to Lender in an amount which,  together with all advances made pursuant
to this  Agreement,  is in  excess  of the  aggregate  amount  set forth in this
Agreement,  such advances or such Indebtedness  shall nevertheless be covered by
the terms of this Agreement.
                                                        III
                                                    COLLATERAL
         3.1  CROSS  COLLATERAL  All of the  Collateral  heretofore,  herein  or
hereafter  given or assigned to Lender  hereunder  shall  secure  payment of all
Obligations, as defined herein, of Borrower to Lender and each Lender Affiliate.
         3.2 ACCOUNTS  RECEIVABLE Borrower hereby creates in favor of Lender and
hereby grants to Lender a security interest in all Accounts,  as defined herein,
presently owned by Borrower or hereafter acquired.
         3.3  EQUIPMENT  Borrower  hereby  creates in favor of Lender and hereby
grants to Lender a security  interest in all of  Borrower's  Equipment,  as such
term is  defined  herein,  whether  presently  owned by  Borrower  or  hereafter
acquired,  and wherever  located  excepting only items of motor vehicle  rolling
stock subject to purchase money security interests in favor of third Persons and
unencumbered motor vehicles more than five (5) years old.
         3.4  INVENTORY  Borrower  hereby  creates in favor of Lender and hereby
grants to Lender a security interest in all of Borrower's Inventory,  as defined
herein,  whether presently owned by Borrower or hereafter  acquired and wherever
located.
         3.5 GENERAL INTANGIBLES  Borrower hereby creates in favor of Lender and
hereby  grants  to  Lender a  security  interest  in all of  Borrower's  General
Intangibles, as herein defined, whether presently owned by Borrower or hereafter
acquired.
         3.6 DEPOSIT ACCOUNTS Borrower hereby creates in favor of Lender, hereby
assigns to Lender and hereby grants to Lender a security interest in the balance
of every deposit account,  now or hereafter  existing,  of Borrower with Lender,
and all money,  Instruments,  securities,  documents,  Chattel  Paper,  credits,
claims,  and other  property of Borrower now or hereafter in the  possession  or
custody of Lender or any of its agents.
         3.7 CHATTEL PAPER Borrower hereby creates in favor of Lender and hereby
grants to Lender a security  interest in all of  Borrower's  Chattel  Paper,  as
defined  herein,  whether  presently  owned by Borrower or  hereafter  acquired,
including but not limited to all such Chattel Paper now or hereafter left in the
possession of Lender for any purpose,  further  including but not limited to for
collection.
         3.8  INSTRUMENTS  Borrower hereby creates in favor of Lender and hereby
grants  to Lender a  security  interest  in all of  Borrower's  Instruments,  as
defined  herein,  whether  presently  owned by Borrower or  hereafter  acquired,
including but not limited to all such  Instruments  now or hereafter left in the
possession of Lender for any purpose,  further  including but not limited to for
collection.
         3.9  DOCUMENTS  Borrower  hereby  creates in favor of Lender and hereby
grants to Lender a security interest in all of Borrower's Documents,  as defined
herein, whether presently owned by Borrower or hereafter acquired, including but
not limited to all such  Documents  now or hereafter  left in the  possession of
Lender for any purpose.
         3.10 STOCK  Consolidated  Delivery &  Logistics,  Inc.  and Sureway Air
Traffic Corporation shall,  contemporaneous with the execution of this Agreement
execute and deliver to Lender pledge  agreements,  pursuant to which they pledge
to  Lender  a  security  interest  in all of their  present  and  future  active
Subsidiaries.
         3.11  SECURITY FOR ACCOUNTS  Borrower  hereby  assigns to and grants to
Lender a  security  interest  in all  rights  of  Borrower  in, to and under all
guarantees  and security  Borrower may now or hereafter  acquire of any Accounts
and  other  Collateral,  including  but not  limited  to any  Letters  of Credit
securing any Accounts,  any credit insurance  policies  covering any Account and
the proceeds of any such guarantees and other security.
         3.12  COLLECTION  ACCOUNTS  AND  COLLATERAL  ACCOUNTS  Borrower  hereby
assigns  to and  grants  to  Lender  a  security  interest  and  Lien  on all of
Borrower's  right,  title and  interest in and to all  Collection  Accounts  and
Collateral Accounts and all monies from time to time in said accounts.
         3.13 PROCEEDS AND RECORDS  Borrower  hereby  creates in favor of Lender
and hereby  grants to Lender a security  interest in (A) all books and  records,
including, without limitation,  customer lists, credit files, computer programs,
print-outs  and other computer  materials and records of Borrower  pertaining to
all of the  Collateral;  and (B) all of the  products and proceeds of all of the
foregoing Collateral  (including all proceeds of insurance policies covering the
Collateral); as well as all accessions, additions,  substitutions,  replacements
and increments as to the assets in (A) and (B).
         3.14 CONTINUING  PERFECTION Borrower agrees to immediately turn over to
Lender the  original  of any  Letter of Credit  and if such  Letter of Credit is
transferable, to transfer such Letter of Credit to Lender, and if such Letter of
Credit is not transferable, to notify, in writing, the issuer of any such Letter
of Credit of the  assignment  by  Borrower to Lender of  Borrowers  right to the
proceeds  thereof  and to make  payment  of such  proceeds  directly  to Lender.
Borrower  will  perform  any and all steps  requested  by  Lender to create  and
maintain in Lender's  favor a first and  exclusive and valid lien on or security
interest  in the  Collateral  or  pledges  of  Collateral  (other  than items of
Collateral  which are subject to  Permitted  Encumbrances),  including,  without
limitation,   the  execution,   delivery,  filing  and  recording  of  financing
statements and continuation statements,  supplemental security agreements, notes
and any other  documents  necessary,  in the  opinion of Lender,  to protect its
interest  in the  Collateral.  Lender  and its  designated  officer  are  hereby
appointed Borrower's attorney-in-fact to do all acts and things which Lender may
deem  necessary to perfect and continue  perfected  the security  interests  and
Liens provided for in this Agreement,  including,  but not limited to, executing
financing  statements  on  behalf  of  Borrower.  Neither  the  Lender  nor  its
attorneys,  officers,  employees, or agents shall be liable for acts, omissions,
any  error  in  judgment,   or  mistake  in  fact  in   its/their   capacity  as
attorney-in-fact.  This power,  being coupled with an interest,  is  irrevocable
until the Obligations  have been fully  satisfied.  At the Lender's sole option,
and without the Borrower's consent, the Lender may file a carbon,  photographic,
or other  reproduction  of this  Agreement or any financing  statement  executed
pursuant hereto as a financing statement in any jurisdiction so permitting.
                                                        IV
                                              PROCEEDS OF COLLATERAL
         4.1 LOCKBOX  Borrower  agrees to establish  and maintain  with Lender a
lockbox,  in accordance with Lender's  standard lockbox agreement in effect from
time to time,  and to direct  all  Account  Debtors to make  remittances  on all
Accounts to said lockbox other than with respect to Accounts (a) generated  from
Olympic Courier Systems, Inc.'s facility in Manhattan,  New York, (b) owing from
Account  Debtors whose monthly  average  Accounts are less than  $5,000.00  (the
"Under 5 Accounts") and (c) billed, in accordance with Borrowers present conduct
of business,  from Borrower's St. Louis, Mo. office (the "St. Louis  Accounts").
Any  and  all  remittances  received  in  said  lockbox  may be  applied  to the
Obligations of Borrower to Lender in accordance with paragraph 4.3 hereof.
         4.2 PAYMENTS ON COLLATERAL If,  notwithstanding  the notices to Account
Debtors to remit payments on Accounts to the lockbox  referred to above Borrower
receives  any  payments  on  Accounts or other  Collateral,  Borrower  agrees to
receive any and all payments and remittances on Accounts and Inventory and other
Collateral, including cash, checks, drafts, notes, acceptances or other forms of
payment  in trust for  Lender  and to  deliver  such  payments  to Lender in the
identical  form in  which  they  were  received,  together  with  any  necessary
endorsement in favor of Lender and with collection  reports in form satisfactory
to Lender.  As to all  remittances  on Accounts  invoiced  from Olympic  Courier
Systems, Inc.'s facility in Manhattan, New York, Borrower agrees to receive said
remittances  in trust for Lender and to deposit  them in the same form  received
with any necessary  endorsement into a separate  account,  on which designees of
Lender are the sole signatories, at European American Bank or such other bank as
Lender and Borrower may hereafter  agree to in writing,  with European  American
Bank or such other bank  entering  into an agreement  with Lender in the form of
Exhibit 4.2 annexed hereto or such other form as may be  satisfactory  to Lender
(a "Blocked  Account  Agreement").  As to all remittances on St. Louis Accounts,
Borrower  agrees to receive said  remittances in trust for Lender and to deposit
them in the same form received with any  necessary  endorsement  into a separate
account, on which designees of Lender are the sole signatories,  at such bank as
Lender and Borrower may hereafter  agree to in writing,  with said bank entering
into a Blocked Account  Agreement with Lender.  As to all remittances on Under 5
Accounts  Borrower agrees to receive said remittances in trust for Lender and to
deposit them in the same form  received with any  necessary  endorsement  into a
designated  account,  on which  designee 's of Lender are the sole  signatories,
with Bank, to the extent Bank has a deposit office within  reasonable  proximity
to the office where said remittances are received, or if Bank does not so have a
deposit  office  within  reasonable  proximity  at such other bank as Lender and
Borrower  may  hereafter  agree to in writing,  with said bank  entering  into a
Blocked Account Agreement with Lender. Each deposit account at European American
Bank, the Bank or such other banks at which such deposit  accounts may from time
to time be established is herein referred to as a "Collection Account").  Lender
shall be authorized to cause all funds in each Collection Account to be credited
to Lender via an Automated  Clearing  House charge or by wire  transfer or other
method  satisfactory to Lender,  with such sums received by Lender to be applied
to the  Obligations  of  Borrower to Lender in  accordance  with  paragraph  4.3
hereof.  Borrower  shall pay all fees,  charges  and  expenses  relating  to the
establishment  and  maintenance  of said  accounts and to the  remittance of all
monies in said account to Lender and Borrower shall otherwise indemnify and hold
Lender harmless from all claims,  demands,  actions or causes of action relating
to said account  including  without  limitation  any  obligations,  if any, with
respect to checks or other  instruments  deposited in said Account and which are
dishonored or returned unpaid.
         4.3  APPLICATION  OF  PAYMENTS  All  proceeds  of  any  Account(s)  and
Inventory and other Collateral  which are delivered to or otherwise  received by
Lender for application to the loans provided for herein shall be deemed received
as of the date of actual  receipt by  Lender,  and shall be applied by Lender on
account of the Obligations  upon Lender's  receipt of same;  provided,  however,
that no checks, drafts, or other Instruments received by Lender shall constitute
payment  to Lender  unless  and until such item of  payment  has  actually  been
collected  by Lender.  For the sole  purpose of  calculation  of interest due to
Lender from  Borrower,  all such  proceeds and other  payments on account of the
loans  provided  for in  this  Agreement,  irrespective  of the  type or form of
payment  thereof shall not be considered  applied on account of the  Obligations
until  two  (2)  Business  Days  after  Lender's  application  of  same  to  the
Obligations.  All sums so applied to the  Obligations  shall be applied first to
Prime Rate Loans and second to Libor Loans,  and as to Libor Loans, if more than
one (1) Interest  Period is in effect,  then to such Libor Loans in the order of
the Interest Periods with the shortest remaining number of days. Notwithstanding
the  foregoing  after all then  outstanding  Prime Rate Loans are satisfied as a
consequnce of such application of proceeds, any excess proceeds shall be applied
as follows:
         (i) the next One Million Dollars  ($1,000,000.00) of proceeds,  or such
greater  amount as Lender may agree to,  shall be  credited  to an account  (the
"Collateral  Account") to be  established  with Bank or other Lender  Affiliate,
which  Collateral  Account  shall be  subject  to a Lien in favor of  Lender  as
additional security for the Obligations, and
         (ii)  all   prepayments   in  excess  of  said  One   Million   Dollars
($1,000,000.00) may be applied to Libor Loans as set forth above.
         On the expiration date of any Interest Period, there shall be withdrawn
from the  Collateral  Account  an amount  equal to the Libor  Loan which has the
Interest  Period so expiring and said amount shall be applied to payment of said
Libor Loan.  If after any monies are so credited to the  Collateral  Account the
Borrower  obtains  any Prime  Rate  Loans,  there  shall be  withdrawn  from the
Collateral  Account an amount  equal to said  Prime Rate Loans with said  amount
applied to payment of said Prime Rate Loans.
                                                         V
                                          REPRESENTATIONS AND WARRANTIES
         To induce  Lender to enter  into this  Agreement  and to make loans and
other financial  accommodations  hereunder,  Borrower represents and warrants to
Lender that:
         5.1      GOOD STANDING  Exhibit "A" sets forth:
                  (A)      the jurisdiction of incorporation of Borrower and in 
which it is in good standing;
                  (B)      all other jurisdictions in which Borrower is 
authorized to transact  business in all of which it is in good standing;

                  (C)      any changes in the  structure  of  Borrower,  after  
November  30, 1995 such as mergers, consolidations and the like;
                  (D)      any name changes of Borrower after November 30, 1995;
                  (E)      all trade names or trade styles under which  Borrower
conducts  business  or issue invoices;
                  (F)      all  Subsidiaries  and  Affiliates  of  Borrower  and
the  percentage  of stock or other ownership interest thereof owned by Borrower 
or Affiliates of Borrower;
                  (G)      all stockholders of Borrower other than Consolidated 
Delivery and Logistics, Inc.
         5.2      CORPORATE  AUTHORITY  Borrower,  and all Affiliates  and  
Subsidiaries  have  requisite  power and authority to own their  property and to
carry  on  their  business  as now  conducted,  and  are in  good  standing  and
authorized  to do  business in each  jurisdiction  in which the failure so to do
would  have  a  Material  Adverse  Effect  on  Borrower  or  such  Affiliate  or
Subsidiary.  Each Borrower has the corporate power to execute, deliver and carry
out this  Agreement  and all other Loan  Documents to which they are a party and
their Boards of  Directors  have duly  authorized  and approved the terms of the
loans and other financial  accommodations described herein and the taking of any
and all action contemplated herein and therein, and this Agreement and all other
Loan Documents to which Borrower or any Obligor are a party constitute the valid
and binding obligations of them,  enforceable in accordance with their terms. No
consent or approval of, or exemption by, shareholders,  any Governmental Body or
any  other  Person  is  required  to  authorize,  or is  otherwise  required  in
connection  with the execution,  delivery and performance of, the Loan Documents
to which  it is a party,  or is  required  as a  condition  to the  validity  or
enforceability of the Loan Documents to which it is a party.
         5.3  COMPLIANCE  WITH LAW (A)  Borrower  and all other  Obligors are in
compliance  with all laws,  rules and  regulations to which they are subject and
have all licenses,  certificates,  permits and franchises and other governmental
authorization necessary to own their properties and to conduct their businesses;
                  (B) The  execution  of this  Agreement,  and each  other  Loan
Document and the performance by Borrower and other Obligors of their obligations
hereunder and thereunder,  do not, at the date of execution hereof,  violate any
existing law or  regulation  or any writ or decree of any court or  Governmental
Body or the charter or by-laws of Borrower  or any Obligor or any  agreement  or
undertaking to which either is a party or by which they are bound.
         5.4 NO  LITIGATION  Except  as set forth on  Schedule  5.4 there are no
judgments  against  Borrower or any Obligor as of the date of this Agreement and
no material litigation or administrative proceeding before any Governmental Body
is presently  pending,  or to the  knowledge of  Borrower,  threatened,  against
Borrower or any Obligor or any of their property.
         5.5 NO FINANCIAL  CHANGE (A) There has been no Material  Adverse Change
in the  condition  of Borrower  and other  Obligors  since their last  financial
statements  and  reports  dated  May  31,  1997  furnished  to  Lender  and  the
information  contained  in said  statements  and  reports is true and  correctly
reflects the  financial  condition of Borrower and such Obligors as of the dates
of the  statements  and  reports,  and such  statements  and  reports  have been
prepared in accordance with GAAP and do not contain any material misstatement of
fact or omit to state  any  facts  necessary  to make the  statements  contained
therein not misleading.
                  (B)  Borrower  has  no  Contingent  Obligations  or  Financial
Undertaking  other than as disclosed in its financial  statements dated December
31, 1996 or March 31, 1997 heretofore furnished to Lender.
         5.6 TAX  COMPLIANCE  Except as set forth on Schedule  5.6  Borrower and
each Obligor has filed,  or caused to be filed,  all tax returns  required to be
filed and has paid all taxes  shown to be due and  payable on said  return or on
any assessment made against it.
         5.7 GOOD  TITLE  AND  ABSENCE  OF  LIENS On the date of this  Agreement
Borrower  has good and  marketable  title to all of its  properties  and assets,
real,  personal and mixed,  and none of said  properties or assets is subject to
any Lien, except for Permitted Encumbrances.
         5.8 PLACE OF RECORDS,  CHIEF EXECUTIVE OFFICE,  INVENTORY AND EQUIPMENT
AND OTHER COLLATERAL (A) Borrower's chief executive office, and the office where
Borrower  keeps its records  concerning  its Accounts,  and all locations of its
Inventory,  if any, and Equipment,  and all other business locations of Borrower
are presently at the locations set forth on Exhibit "A". (B) Except as set forth
on Exhibit "A",  within four (4) months of the date of this  Agreement,  none of
Borrower's  assets have been moved from any jurisdiction or other locations than
the present  locations  of assets set forth on Exhibit "A" under item 5.8 (A)(v)
except for  Equipment  purchased by Borrower in the ordinary  course of business
from persons or entities customarily selling such Inventory or Equipment. (C) as
of the date hereof  Borrower has no Inventory  (D) Borrower  does not  presently
purchase or otherwise  hold,  purchase or otherwise  hold Goods on a consignment
basis  except as set forth on  Exhibit  "A".  (E) Except as set forth on Exhibit
"A",  Borrower has not purchased any Equipment  except in the ordinary course of
business for value and from persons  customarily in the business of selling such
Equipment.  (F) Except as set forth on Exhibit "A",  Borrower  does not hold any
Instrument or Chattel Paper connected with any Account.  (G) Except as set forth
on Exhibit "A",  Borrower does not own any trademarks,  trade names,  patents or
copyrights. (H) Except as set forth on schedule 5.8(H) no surety bonds have been
issued on behalf of Borrower  with respect to any  contracts or purchase  orders
out of which Accounts Receivable have arisen or are expected to arise.
         5.9  WARRANTIES  AS TO  ACCOUNTS  Except as  otherwise  provided in the
assignment of Accounts,  if any,  given to Lender,  or invoice or other writing,
Borrower warrants that as to all Accounts  reported to Lender;  (A) each Account
is a valid subsisting  Account as defined herein;  (B) each Account represents a
bona fide performed transaction; (C) the amount shown on Borrower's books and on
any  invoice  or  statement  delivered  to Lender is owing to  Borrower;  (D) no
partial payment has been made; (E) no material set-off or counterclaim exists as
to any such Account and no agreement has been made under which any deductions or
discount  may be  claimed  except  regular  discounts  in the  usual  course  of
business,  but only if  disclosed  on the face of the  invoice;  (F) the Account
Debtor has not disputed the Account or otherwise asserted any defense,  material
set-off or  counterclaim;  (G) that to the extent  required  by law  Borrower is
authorized to do business and is in good standing in any state in which any such
Account  must be  enforced;  (H) each  Eligible  Account  is a valid  subsisting
Eligible  Account as defined  herein;  (I) all agings of Accounts  submitted  to
Lender are true and accurate; (J) no surety bond was required or given on behalf
of Borrower in connection  with any contracts or purchase orders under which the
Account arose.
         5.10 ERISA (A) No Reportable Event or unfunded  deficiencies or failure
of compliance with ERISA or the Internal  Revenue Code of 1986, as amended,  has
occurred and is continuing  with respect to any Plan which would have a Material
Adverse  Effect;  (B) Borrower has complied with the provisions of ERISA and the
Internal Revenue Code of 1986, as amended, with respect to each Plan, which such
failure would have a Material Adverse Effect.
         5.11 LICENSES AND PERMITS AND LAWS Borrower and all of its Subsidiaries
hold all necessary  licenses and permits for the operation of their  businesses,
including  all  permits  required  under  Environmental  Laws and  Borrower  has
complied  with all  laws,  rules and  regulations  applicable  to its  business,
including  but not  limited  to the Fair  Labor  Standards  Act,  29 U.S.C.  ss.
215(a)(1).  All such licenses and permits are in good standing and are not under
any outstanding citation issued by any governmental authority, and no litigation
has been instituted nor (to the best knowledge of Borrower) have any claims been
made by any third  parties  relating to the licenses  and permits  issued by any
Governmental Body for the operation of their  businesses,  and no such citation,
litigation or claim,  to the best knowledge of Borrower,  is contemplated by any
Governmental  Body or any third persons nor, to the best  knowledge of Borrower,
does there exist any basis for any such citation,  litigation or claim by any of
the authorities or any Person.
         5.12  ENVIRONMENTAL  STATUS  As to  all  properties  owned,  leased  or
operated by Borrower and to all operations of Borrower's businesss,  to the best
knowledge of Borrower:
                  (A)  there is no pending or  threatened  proceeding  affecting
Borrower  with respect to any Environmental Law;
                  (B)  Borrower  has not been  identified  as a  responsible  or
potentially  responsible  party under CERCLA and has not  received  notification
that any hazardous substance or contaminant has been found at any site;
                  (C)      none of such  properties  are listed or proposed for
listing on the National  Priorities List under CERCLA;
                  (D) no Hazardous Substance or Hazardous Waste (as such term is
defined in  Environmental  Laws) have been disposed of or otherwise  released or
discharged on such properties;
                  (E) no  underground  storage tanks exist on the properties and
the removal of any such tanks from the  properties  was undertaken in compliance
with the Underground Storage Tank Act, and
                  (F) no friable asbestos,  or any substance containing asbestos
or PCB's have been installed in or exists on such properties.
                  (G) no  lien  has  attached  to any  revenues  or any  real or
personal  property  owned by the Borrower in any  jurisdiction,  arising from an
intentional or unintentional  action or omission of the Borrower or any previous
owner  and/or  operator  of said real  property,  resulting  from the dumping of
hazardous  substances or wastes into the atmosphere or waters or onto lands, any
of which may have damaged any Natural Resources;
                  (H)  the  Borrower  has  not  received  a  summons,  citation,
directive,   letter,  or  other   communication,   written  or  oral,  from  any
jurisdiction,  or  political  sub-division  or  any  agency  or  instrumentality
thereof,  concerning any intentional or unintentional  action or omission on the
Borrower's  part  resulting  in the  dumping of  hazardous  substances  into the
atmosphere or waters,  or onto the lands in any  jurisdiction,  any of which has
resulted in damage to the Natural Resources;
         5.13 REAFFIRMATION Each and every request for a loan or other financial
accommodation  hereunder  shall be deemed as an  affirmation by Borrower that no
Default nor Event of Default exists hereunder and that the  representations  and
warranties  contained  in this Article V are true and accurate as of the date of
each such request (notwithstanding that some of the terms hereof speak as of the
date of this  Agreement) and that Borrower is in compliance  with all applicable
laws, rules and regulations.
         5.14 PROCEEDS OF LOAN Borrower is not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing  or carrying any margin  stock within the meaning of  Regulation U of
the Board of Governors of the Federal Reserve System, as amended. No part of the
proceeds of the loans will be used, directly or indirectly,  for a purpose which
violates any law, rule or regulation of any Governmental Body, including without
limitation  the provisions of Regulations G, T, U or X of the Board of Governors
of the Federal Reserve System, as amended. Borrower represents that the proceeds
of the loan(s)  provided for herein shall be used in the  following  manner:  to
refinance  existing debts, to support  working  capital  requirements  and other
general  corporate  purposes.  No  proceeds  of  any  loan  or  other  financial
accommodations  hereunder  shall be used to purchase  or carry any margin  stock
(within  the meaning of  Regulation  U issued by the Board of  Governors  of the
Federal  Reserve  System)  or to  extend  credit to others  for the  purpose  of
purchasing or carrying any margin stock.
         5.15  BORROWER AND OBLIGOR All of the Borrowers are operated as part of
one consolidated  business entity and are directly dependent upon each other for
and in connection with their respective business activities and their respective
financial resources.  Each Borrower will receive a direct economic and financial
benefit from the Obligations incurred under this Agreement by Borrower,  and the
incurrence of such Obligations is in the best interests of each Borrower.
         5.16  SOLVENCY  The  fair  value  of the  business  and  assets  of the
Borrowers on a consolidated basis (including,  without  limitation,  contingent,
unmatured  and  unliquidated  claims  arising  out of all  rights of  indemnity,
contribution,  reimbursement  or any similar right, or any claim of subrogation,
as such claims may arise or mature,  that each  Borrower  may have  against each
Borrower)  will be in excess of the  amount  that  will be  required  to pay its
liabilities (including, without limitation, contingent,  subordinated, unmatured
and  unliquidated  liabilities on existing debts, as such liabilities may become
absolute  and  matured),  in each case after giving  effect to the  transactions
contemplated by this Agreement and the use of proceeds  therefrom.  After giving
effect  to the  transactions  contemplated  by  this  Agreement  and  the use of
proceeds   therefrom,   Borrowers  will  not  be  engaged  in  any  business  or
transaction,  or about to engage in any business or transaction,  for which such
Person has an  unreasonably  small  capital  (within  the meaning of the Uniform
Fraudulent  Transfer  Act, as adopted in the State of New Jersey and Section 548
of the Federal Bankruptcy Code). Borrower has no intent to
                  (A)      hinder,  delay or defraud  any entity to which it is,
or will  become,  on or after the date hereof, indebted, or
                  (B)      to incur debts that would be beyond its ability to 
pay as they mature.
         5.17     DEFAULTS.  Borrower is not in default  under the  Subordinated
Convertible  Debentures  and the  Seller  Indebtedness,  and is not in  material
default  under any other  agreement to which the Borrower is a party or by which
the  Borrower  or any of its  property  is  bound,  or under  any  indenture  or
instrument  evidencing  any  Indebtedness  of  the  Borrower,  and  neither  the
Borrower's  execution of nor performance  under the Loan Documents will create a
default or any Lien under any such agreement, indenture or instrument other than
a Lien in favor of the Lender;
         5.18 ERISA. No employee  benefit plan  established or maintained by the
Borrower  which is subject to the  Employee  Retirement  Income  Security Act 29
U.S.C. ss. 1001 et seq. ("ERISA") has an accumulated funding deficiency (as such
term is defined in ERISA). No material liability to the Pension Benefit Guaranty
Corporation  (or any  successor  thereto  under ERISA) has been  incurred by the
Borrower with respect to any such plan and no  Reportable  Event under ERISA has
occurred. The Borrower has no actual or anticipated liability under Section 4971
of the Internal  Revenue Code  ("Code")  (relating to tax on failure to meet the
minimum  funding  standard  of  Section  412 of the Code)  with  respect  to any
employee  benefit plan to which it  contributes  but which is not  maintained or
established by it;
         5.19  SUBORDINATED  CONVERTIBLE  DEBENTURES  (A) Exhibit  5.19  annexed
hereto identifies the names and address of the holders of the Senior Convertible
Debentures and the  outstanding  principal  amount thereof held by such Persons.
(B) The  Obligations  of Borrower to Lender under this  Agreement  and the other
Loan  Documents  constitute  Senior  Debt  under  the  Subordinated  Convertible
Debentures.
         5.20  SELLER  INDEBTEDNESS   Exhibit  5.20  annexed  hereto  accurately
describes all Seller Indebtedness of the Borrower,  including without limitation
the  Borrower  which is  obligated  under  such  Indebtedness,  the  outstanding
principal  amount  thereof,   the  scheduled  payment  obligations  of  Borrower
thereunder and the holder of said Indebtedness.
                                                        VI
                                         AFFIRMATIVE COVENANTS OF BORROWER
         6.1 AUDIT AND OTHER REPORTS (A) Borrower agrees that within one hundred
five (105) days of the end of each  fiscal  year,  it will  furnish  Lender with
detailed audited  financial  statements,  including a balance sheet,  profit and
loss statement, cash flow statement and surplus reconciliation,  certified on an
unqualified basis, by an independent certified public accountant satisfactory to
Lender;  (B) Borrower will also furnish monthly similar  statements  uncertified
except for a  certification  by an officer of Borrower  as to their  correctness
within thirty (30) days of the end of each month.  All such statements  shall be
on a  consolidated  and  consolidating  basis and in accordance  with GAAP;  (C)
simultaneous with the submission of the statements required under "A" above, and
with the 10Q reports to be furnished as set forth below  Borrower shall cause to
be  submitted  to Lender (i) a  compliance  certificate  of the chief  financial
officer of Borrower in the form of exhibit 6.1 annexed  hereto setting forth the
calculations  of the financial tests described in paragraph 7.2 and the Interest
Rate and Fee Cash Flow Leverage Ratio hereof and stating  whether or not, to the
best of said officer's  knowledge,  after diligent inquiry a Default or Event of
Default  exists,  and if such exists,  specify the nature  thereof and the steps
Borrower is taking to remedy same and (ii) a comparison of the operating results
for said quarter with the budget for said quarter and with the operating results
for the prior fiscal years equivalent quarter; (D) promptly after the furnishing
thereof  to third  parties,  Borrower  shall  furnish  to  Lender  copies of any
statements,  reports,  proxy  material,  registration  statement and  prospectus
furnished  to any  holder  of any  securities  of  Borrower  or  filed  with any
regulatory  agency or agencies,  including  without  limitation  all 10K and 10Q
reports;  (E)  promptly,  but no later  than five (5) days  after a  responsible
officer  of  Borrower  shall  become  aware of (i) a Default or Event of Default
hereunder,  (ii) a Reportable Event or "prohibited  transaction" as such term is
defined in ERISA,  (iii) litigation against Borrower or any Subsidiary in excess
of  $250,000.00  in the  aggregate  not fully  covered by insurance  (other than
normal  deductibles)  (iv) changes in the executive  management of  Consolidated
Delivery and Logistics, Inc. or (v) the termination or threatened termination of
or claim of breach by  Borrower  or any  Subsidiary  of any  material  contract,
agreement or obligation, or of any claim of patent infringement,  Borrower shall
furnish to Lender a written  notice  specifying  the  existence  thereof and the
action  Borrower or any  Subsidiary  is taking or proposes to take with  respect
thereto;  (F) Borrower will furnish to Lender prompt  written notice if: (i) any
Indebtedness  of Borrower or any  Subsidiary is declared or shall become due and
payable prior to its stated maturity,  or called and not paid when due or (ii) a
default  shall have  occurred  under any note or the holder of any such note, or
other  evidence of  Indebtedness,  certificate  of security  evidencing any such
Indebtedness or any obligee with respect to any  Indebtedness of Borrower or any
Subsidiary has the right to declare any such  Indebtedness due and payable prior
to its stated maturity as a result of such default;  (G) Borrower also agrees to
furnish  to Lender  (i) a copy of any  "management  letter"  or  similar  report
furnished to it by its  accountants  within five (5) days of  Borrowers  receipt
thereof, (ii) such other data and information concerning it and its Subsidiaries
as from time to time may be  requested  by Lender  within two (2) days after the
request by Lender and (iii) a copy of its  federal tax return  promptly,  but no
later  than five (5) days,  after the  filing of same;  and (H)  Borrower  shall
furnish to Lender by no later than  thirty  (30) days of the end of each  fiscal
year a  budget  for the  following  year,  on a month to  month  basis,  in form
satisfactory to Lender,  including without limitation a detailed profit and loss
statement, balance sheet, cash flow statement, anticipated loan usage and excess
availability and a comparison of said budget to the prior fiscal years operating
results and balance sheet as of the end of each month.
         6.2 INSURANCE  Borrower  agrees to keep all of the tangible  Collateral
assigned  hereunder  insured,  at its own cost and  expense,  for the benefit of
Lender, and in such amounts, in such companies, and against such risks as may be
reasonably  acceptable  to Lender,  and,  if  requested  by Lender,  deliver the
policies  evidencing  such  insurance to Lender.  If Borrower  fails to take the
action  called for  herein,  Lender  may,  in its  discretion  obtain  insurance
covering  Lender's  interest in the Collateral and the amount of the premium for
said  insurance  shall be added to the  Obligations  of Borrower to Lender.  All
policies  of  insurance  on the  Collateral  shall be in form and with  insurers
recognized as adequate by prudent  business  persons and all such policies shall
be in such amounts as may be reasonably  satisfactory to Lender.  Borrower shall
deliver to Lender the original (or  certified  copy) of each policy of insurance
and evidence of payment of all  premiums  therefor.  Such  policies of insurance
shall  contain an  endorsement,  in form and substance  satisfactory  to Lender,
showing loss payable to Lender.  Such  endorsement or an independent  instrument
furnished to Lender, shall provide that the insurance companies will give Lender
at least  thirty  (30) days  prior  written  notice  before  any such  policy or
policies of insurance shall be altered or canceled and that no act or default of
Borrower or any other person  shall affect the right of Lender to recover  under
such policy or policies of insurance in case of loss or damage.  Borrower hereby
directs all  insurers  under such  policies  of  insurance  to pay all  proceeds
payable thereunder directly to Lender.  Borrower irrevocably makes,  constitutes
and appoints Lender (and all officers, employees or agents designated by Lender)
as Borrower's  true and lawful attorney (and  agent-in-fact)  for the purpose of
making, settling and adjusting claims under such policies of insurance (provided
that until an Event of  Default  exists,  Lender  shall  obtain  the  consent of
Borrower  prior to finally  making,  settling  or  adjusting  claims  under such
policies of  insurance),  endorsing  the name of  Borrower on any check,  draft,
instrument  or other  item of  payment  for the  proceeds  of such  policies  of
insurance and for making all  determinations  and decisions with respect to such
policies of insurance.  In the event Borrower,  at any time or times  hereafter,
shall fail to obtain or maintain any of the policies of insurance required above
or to pay any premium in whole or in part relating thereto, then Lender, without
waiving or releasing any obligation or default by Borrower  hereunder,  may (but
shall be under no  obligation to do so) at any time or times  thereafter  obtain
and maintain  such policies of insurance and pay such premium and take any other
action with respect thereto which Lender deems advisable.  All sums so disbursed
by Lender, including reasonable attorneys' fees, court costs, expenses and other
charges related thereto,  shall be payable, on demand, by Borrower to Lender and
shall be additional  Obligations  hereunder secured by the Collateral.  Borrower
also  agrees to at all times  maintain  insurance,  both  hazard and  liability,
against  such risks and in such  amounts  as  reasonably  prudent  to  companies
similarly situated as Borrower would maintain and to furnish to Lender from time
to time evidence that such insurance is in full force and effect.
         Notwithstanding  the provisions of this section,  in the event that all
or any part of the Collateral is damaged by fire or other casualty, and Borrower
promptly  notifies Lender of Borrower's  desire to repair and restore or replace
the same, then:
         (A) Provided no Event of Default  exists  Lender shall upon the request
of Borrower remit to Borrower all such  insurance  proceeds up to Fifty Thousand
Dollars  ($50,000.00)  per  casualty  loss,  to be used by Borrower to repair or
restore the damaged Collateral, and
         (B) as to all  such  proceeds  in  excess  of  Fifty  Thousand  Dollars
($50,000.00)  provided that the following  terms and  conditions  are and remain
fully satisfied by Borrower,  Lender shall disburse such insurance  proceeds for
repair and  restoration  of the damaged  Collateral  against  completed  work in
accordance with Lender's standard loan disbursement conditions and requirements;
otherwise, and to the extent of any excess proceeds, Lender shall have the right
to apply the proceeds toward reduction of the Obligations:
         (i) no Event of  Default or event  which,  with the giving of notice or
the passage of time, or both,  would constitute an Event of Default under any of
the Loan Documents shall have occurred and remains uncured within any applicable
grace or cure period;
         (ii) the work is performed under or the purchase of replacement item of
Collateral  is  under  a  fixed  price  or  guaranteed  maximum  price  contract
satisfactory to Lender;
         (iii) Borrower shall have  deposited  with Lender for  disbursement  in
connection with the  restoration  the greater of: (1) the applicable  deductible
under the insurance  policies  covering the loss; or (2) the amount by which the
cost of repair to  substantially  the same value,  condition  and  character  as
existed  prior to such damage or cost of  replacement  is estimated by Lender to
exceed the net insurance proceeds available for repair or replacement; and
         (iv)  Borrower  has  paid as and  when due all of  Lender's  costs  and
expenses  incurred  in  connection  with  the  collection  and  disbursement  of
insurance proceeds.
         6.3  PAYMENT  OF  EXPENSES  Borrower  will  pay any  and all  expenses,
including reasonable counsel fees and disbursements,  filing and recording fees,
and all other  charges  and  expenses  incurred  or to be  incurred by Lender in
connection  with the  preparation  and execution and recording of this Agreement
and all other  Loan  Documents,  and the  loans and  advances  made  under  this
Agreement  and all  amendments  and  modifications  hereto and in  defending  or
prosecuting  any actions or  proceedings  arising out of or relating to Lender's
transactions  with Borrower  including but not limited to any proceedings in any
proceeding under the Bankruptcy Code relating to Borrower or any other Obligor.
         6.4 LANDLORD'S  WAIVER Borrower shall use its best efforts to cause the
landlord  of all  premises  where  Borrower's  chief  executive  office  and the
locations of Borrower's books and records relating to Accounts Receivable may be
located to execute and deliver to Lender a Landlord's  Waiver and  Subordination
in such form as may be acceptable to Lender.
         6.5 GOOD WORKING CONDITION  Borrower and each Subsidiary shall maintain
all of  their  property  in good  working  condition,  ordinary  wear  and  tear
excepted.
         6.6 REPORTS OF COLLATERAL  Borrower shall,  within fifteen (15) days of
the end of each month,  deliver to Lender an aging of its  Accounts and an aging
of its accounts  payable in such form as may be  acceptable to Lender and a duly
completed accounts receivable  reconciliation report in the form satisfactory to
Lender.
         6.7      OBSERVANCE  OF LEGAL  REQUIREMENT,  LICENSES  AND  PERMITS AND
                  PROTECTION  OF  COLLATERAL  (A)  Borrower  shall comply in all
                  material respects with any and all laws, legislation,
rules and  regulations  in effect as of the date hereof and  subsequent  hereto,
including  but not limited to all state,  local and federal  laws,  legislation,
rules and  regulations  relating to employee  pension  and  benefit  funds,  the
payment of taxes,  assessments,  and other governmental charges, zoning, and the
use,   occupancy,   transfer  or   encumbrancing   of  the  Collateral  and  all
Environmental  Laws.  Borrower  agrees to comply with all reasonable  conditions
required by Lender  designed to protect Lender and the Collateral from effect of
all  Environmental  Laws,  ERISA and such  other  laws,  legislation,  rules and
regulations as are in, or may come into,  effect and apply to Borrower,  Lender,
the transactions contemplated hereby or the Collateral or any occupants or users
thereof, whether as lessees, tenants, licensees or otherwise. Borrower agrees to
pay any costs required to comply with any of the above conditions.
                  (B) Borrower shall observe and comply in all material respects
with  all  laws  (including  ERISA),  ordinances,   orders,  judgments,   rules,
regulations,  certifications,  franchises,  permits,  licenses,  directions  and
requirements of all Governmental  Bodies, which now or at any time hereafter may
be  applicable  to Borrower and the  operation of its  business,  a violation of
which might have a Material  Adverse Effect on Borrower,  except such thereof as
shall be  contested  in good  faith and by  appropriate  proceedings  diligently
conducted by Borrower, provided that such reserve or other appropriate provision
as shall be required by the  accountants  for Borrower in accordance  with GAAP,
shall have been made therefor.
                  (C) Borrower and all  Subsidiaries  will  continue to hold all
necessary licenses and permits for the operations of their business.
         6.8  INSPECTION  Lender (by any of its officers,  employees and agents)
shall have the right,  at any time or times  during  Borrower's  usual  business
hours,  to inspect the  Collateral,  all records  related  thereto  (and to make
extracts from such records) and the premises upon which any of the Collateral is
located,  to discuss  Borrower's  affairs and finances with the  accountants for
Borrower and with any other person and to verify the amount, quality,  quantity,
value and condition of, or any other matter relating to, the Collateral.
         6.9 COLLATERAL  REQUIREMENTS Unless Lender notifies Borrower in writing
that it dispenses with any one or more of the following  requirements,  Borrower
will (A) on at least a once a week basis report and give Lender assignments,  in
form acceptable to Lender, of all Accounts, as defined herein, and of the monies
due or to become due on specific contracts related to Accounts; (B) upon request
of Lender furnish to Lender all original and other documents evidencing right to
payment  including but not limited to invoices,  original  orders,  shipping and
delivery receipts; (C) give Lender such financial statements,  reports, lists of
Account  Debtors  and  other  data   concerning  its  Accounts,   contracts  and
collections  and the other  Collateral,  or any other  matters which Lender may,
from time to time  specify;  (D) permit  Lender or its nominee to examine all of
Borrower's records at any time and to make extracts therefrom; (E) inform Lender
immediately  of claims  made,  in regard to  Eligible  Accounts in excess of Ten
Thousand  Dollars  ($10,000.00);  (F) make no  change  in terms of any  Eligible
Account in excess of Ten Thousand Dollars  ($10,000.00) against which Lender has
advanced any money;  (G) furnish to Lender all information  received by Borrower
adversely  affecting the financial standing of any Account Debtor whose Accounts
are  in  excess  of  Ten  Thousand  Dollars  ($10,000.00);   (H)  notify  Lender
immediately  in writing if any of its Accounts  arise out of  contracts  between
Borrower  and the United  States or any  department,  agency or  instrumentality
thereof,  or any other  governmental  body and if  requested  by Lender take all
steps necessary to protect Lender under the Federal  Assignment of Claims Act or
other applicable  state or local statutes or ordinances;  (I) deliver to Lender,
appropriately  endorsed,  any  Instrument  or Chattel Paper  connected  with any
Account;  (J) mark its  records of its  Accounts in any manner  satisfactory  to
Lender to  indicate  the  interest of Lender;  (K)  collect its  Accounts in the
ordinary  course of business;  (L) keep  accurate  and  complete  records of its
Accounts; (M) promptly notify Lender in writing of any trademarks,  trade names,
patents or  copyrights  which it may hereafter own or obtain a license to use or
under  which it may issue  invoices;  and (N)  furnish  to Lender  copies of any
credit insurance policies covering any Accounts  Receivable of Borrower and take
such actions as may be required so as to have Lender a beneficiary thereof.
         6.10 CONTROL OF ACCOUNTS (A) Lender shall have the right at any time on
and  after  the  occurrence  of an  Event  of  Default  and  from  time  to time
thereafter,  unless such Event of Default is cured within any allowable grace or
cure period,  without  notice,  to notify  Account  Debtors to make  payments to
Lender, to endorse all items of payment which may come into its hands payable to
Borrower,  to take  control of any cash or non-cash  proceeds of Accounts and of
any returned or repossessed goods; to compromise, extend or renew any Account or
deal with it as it may deem advisable,  and to make exchanges,  substitutions or
surrenders of Collateral,  to notify the postal  authorities,  after an Event of
Default, to deliver all mail, correspondence or parcels addressed to Borrower to
Lender at such  address as Lender may choose.  (B)  Borrower  herewith  appoints
Lender or its designee as  Attorney-in-Fact  to endorse  Borrower's  name on any
checks, notes, acceptances, drafts or any other Instrument or document requiring
said  endorsement  and to sign Borrower's name on any invoice or bills of lading
relating to any  Account,  or drafts  against its  customers,  or  schedules  or
confirmatory  assignment  on Accounts,  financing  statements  under the Uniform
Commercial  Code, and other public records,  and in verification of Accounts and
after the  occurrence  of an Event of Default in notices to Account  Debtors and
notices of  assignment.  (C) Lender  shall have no  obligation  to preserve  any
rights against any Person obligated on any Account, Chattel Paper, Instrument or
other item of Collateral.
         6.11 CHANGE OF LOCATIONS  Borrower  will  furnish  Lender with at least
thirty (30) days prior  written  notice of any change in location of or addition
to its chief executive office,  the office where it keeps its records concerning
its Accounts, and its location of Inventory, if any, Equipment and other assets,
and other business locations.
         6.12 ENVIRONMENTAL LIENS. In the event that there shall be filed a Lien
against  any   property  of  the   Borrower  by  any   jurisdiction,   political
sub-division,  agency or instrumentality  thereof arising from an intentional or
unintentional  act or  omission  of the  Borrower,  resulting  in the Dumping of
hazardous substances or wastes into the atmosphere or waters or onto lands then,
within thirty (30) days from the date that the Borrower is given notice that the
Lien has been placed  against such  property,  or within such shorter  period of
time in the event that such  jurisdiction,  political  sub-division,  agency, or
instrumentality  thereof has  commenced  steps to cause such property to be sold
pursuant  to the lien,  either  (i) pay the claim and  remove  the Lien from the
applicable property or (ii) furnish to such jurisdiction  political subdivision,
agency  or  instrumentality  thereof  that  imposed  the  lien  with  one of the
following: (a) a bond satisfactory to such jurisdiction, political sub-division,
agency,  or  instrumentality  thereof that imposed the lien in the amount of the
claim out of which the Lien  arises,  (b) a cash  deposit  in the  amount of the
claim out of which the Lien arises or (c) other security reasonably satisfactory
to such jurisdiction, political sub-division, agency, or instrumentality thereof
in an amount sufficient to discharge the claim out of which the Lien arises;


         6.13 REMOVAL OF  HAZARDOUS  SUBSTANCES.  Should the  Borrower  cause or
permit any intentional or unintentional act or omission resulting in the Dumping
of hazardous  substances or wastes into the  atmosphere  or waters,  or onto the
lands  resulting in damage to the Natural  Resources  without having  obtained a
permit issued by the appropriate  governmental  authorities,  the Borrower shall
promptly clean up same in accordance  with all applicable  federal,  state,  and
local orders, statutes, laws, ordinances, rules and regulations;
         6.14 NATURE OF BUSINESS.  Borrower shall continue to engage in business
of the same general  type as now  conducted by Borrower and subject to paragraph
7.13  hereof  preserve,  renew and keep in full force and  effect its  corporate
existence  and  all  licenses,  permits,  rights  and  privileges  necessary  or
desirable for the normal conduct of such business,
         6.15     SUBORDINATED CONVERTIBLE DEBENTURES
                  Borrower  will  promptly  notify Lender in writing if Borrower
receives any notice from any holder of the Subordinated Convertible Debentures:
                           (i)      Notifying Borrower of any default thereunder
                           (ii) Demanding payment thereof in accordance with the
                           terms  thereof;  or (iii)  Exercising  any conversion
                           rights thereunder.
         6.16  SELLER  INDEBTEDNESS  Borrower  will  promptly  notify  Lender in
writing if  Borrower  receives  any notice  from any holder of any of the Seller
Indebtedness notifying Borrower of a default thereunder.
                                                        VII
                                          NEGATIVE COVENANTS OF BORROWER
         7.1 LOANS AND ADVANCES AND INVESTMENTS Borrower will not, without prior
written  consent of Lender,  make any loans or advances to or  investment in any
Person except for Investment Obligations.
         7.2      FINANCIAL COVENANTS
                  (A)      Tangible  Capital  Funds.  Borrower,  on  a  
consolidated basis, will not  allow  its Tangible Capital Funds to be less than:
                           (i)   $5,900,000.00   from  June  30,  1997   through
                           September 29, 1997, (ii) $6,250,000.00 from September
                           30,   1997   through   December   30,   1997,   (iii)
                           $6,750,000.00 from December 31, 1997 through December
                           30, 1998; (iv)  $8,500,000.00  from December 31, 1998
                           through December 30, 1999; and (v)  $10,250,000.00 on
                           December 31, 1999 and thereafter.
                  (B) Cash Flow  Leverage  Ratio.  Borrower,  on a  consolidated
basis,  will not allow its Cash Flow  Leverage  Ratio,  calculated at the end of
each fiscal quarter to be more than 4.6 to 1.0 at all times.
                  (C) Capital  Expenditures.  Borrower, on a consolidated basis,
will  not  (i)  in the  fiscal  year  ending  December  31,  1997  make  Capital
Expenditures   in  excess  of  Three  Million  Six  Hundred   Thousand   Dollars
($3,600,000.00),  and (ii) in each  fiscal  year  ending  December  31, 1998 and
thereafter  make  Capital  Expenditures  in excess of Three  Million Two Hundred
Thousand Dollars ($3,200,000.00) in the aggregate per annum.
                  (D) Fixed Charge Coverage Ratio.  Borrower,  on a consolidated
basis, will not allow its Fixed Charge Coverage Ratio,  calculated at the end of
each fiscal quarter to be less than 1.0 to 1.0 at any time.
                  Compliance  with  the  foregoing  covenants,  other  than  the
Tangible Capital Funds covenant, shall be calculated on the financial statements
of  Borrower  as of the end of each  fiscal  quarter  and of the  Borrower  on a
consolidated basis. Compliance with the Tangible Capital Funds covenant shall be
calculated  based  on  the  monthly  financial   statements  of  Borrower  on  a
consolidated basis.
         7.3  LIENS  Borrower  will not  allow or  suffer  any Lien to exist on 
any of its  assets  except  for Permitted Encumbrances.
         7.4  LIMITATION ON  INDEBTEDNESS  Borrower will not,  without the prior
written  consent  of  Lender,  create,  incur,  assume  or  suffer  to exist any
Indebtedness except Permitted Indebtedness.
         7.5 CERTIFICATE OF INCORPORATION AND BY-LAWS Borrower will not amend or
otherwise  modify its Certificate of Incorporation or By-Laws which restricts or
limits or conditions Borrower from obtaining loans and advances from or granting
liens to Lender,  or the  performance  of the  Obligations of Borrower under the
Loan Documents.
         7.6  TRANSACTIONS  AMONG AFFILIATES  Except for transactions  among the
Borrowers, Borrower will not become a party to any transaction with an Affiliate
of Borrower unless the terms and conditions  relating to such transaction are as
favorable  to  Borrower  as would  be  obtainable  at the  time in a  comparable
arms-length  transaction  with a Person  other than an Affiliate or pay or incur
any obligation to pay any management, service, consulting or similar fees to any
Affiliate.
         7.7  SPECIAL  COVENANTS  AS TO ASSETS  Borrower  covenants  that  until
satisfaction  in full  of all  Obligations  of  Borrower  to  Lender  and  until
termination of this Agreement:  (A) no Inventory, if any, shall be stored with a
bailee,  warehouseman or similar party without Lender's prior written reasonable
consent and, if Lender gives such consent,  Borrower will concurrently therewith
cause any such  bailee,  warehouseman  or similar  party to issue and deliver to
Lender, in form and substance acceptable to Lender,  warehouse receipts therefor
in  Lender's  name.  (B) Except as set forth on Exhibit  "A" none of  Borrower's
Inventory will be of a nature that contains any labels, trademarks, trade names,
or other  identifying  characteristics  which are the property of third parties,
and the use of which by  Borrower  is in  violation  of the rights of such third
parties or a violation of any license,  royalty or similar  agreements  with any
third parties.  (C) Except as set forth on Exhibit "A",  Borrower will not allow
any  Equipment  of Borrower  to be held by any Person in the future  without the
prior written consent of Lender. (D) Except upon prior written notice to Lender,
Borrower will not in the future  purchase any  Equipment  except in the ordinary
course of business  from  Persons  customarily  in the  business of selling such
Inventory or Equipment.  (E) Borrower will not, without prior written consent of
Lender, remove the Collateral from its present location,  except for the removal
of Inventory upon its sale; (F) Borrower will not sell, lease or transfer any of
its Equipment or other assets without the prior written consent of Lender except
for  sales of  Inventory  in the  ordinary  course  of  business  to good  faith
purchasers for value;  (G) Borrower will not cause any surety bonds to be issued
on its behalf in connection  with any  contracts or purchase  orders except upon
not less than ten (10) days prior written notice to Lender.
         7.8  PREPAYMENTS OF  INDEBTEDNESS  Borrower will not prepay or obligate
itself to prepay in whole or in part,  or redeem  the  Subordinated  Convertible
Debentures or any Capital Leases except that provided no Event of Default exists
Borrower may prepay its obligations under Capital Leases in conjunction with and
from the proceeds of a refinancing of said Capital  Leases which  refinancing is
on financial and other terms more  favorable to Borrower than the Capital Leases
being so  refinanced.  Borrower  shall  notify  Lender  in  writing  of any such
refinancing.
         7.9      FISCAL YEAR  Borrower will not change its fiscal year.
         7.10 ISSUANCE OF ADDITIONAL  CAPITAL STOCK  Borrower will not,  without
the prior written consent of Lender,  issue any additional stock or other equity
interest of Borrower or options or warrants  for the  issuance of stock or other
equity  interest of Borrower  unless (A) the proceeds from any such issuance are
remitted  to Lender to be applied to the  Obligations  of Borrower to Lender and
(B) at the Borrowers  option it shall have the right, to reduce or terminate the
revolving  credit  facility  under  paragraph 2.1 hereof in any amount up to the
proceeds  realized from said issuance upon not less than five (5) Business Days'
prior written  notice to Lender,  which notice shall specify the effective  date
thereof  and the amount of such  reduction.  Any partial  reduction  shall be in
whole multiples of Two Hundred Fifty Thousand and 00/100 ($250,000.00)  Dollars,
and shall be  irrevocable  and  effective  only upon  receipt by Lender.  If the
outstanding  amount of the loans under the revolving  credit facility is greater
than the  remaining  amount  of the  maximum  amount  of said  revolving  credit
facility,   Borrower   shall,  on  the  effective  date  of  such  reduction  or
termination,  prepay the outstanding  loans by an amount necessary so as to have
the  outstanding  amount of the loans not  exceed  the  remaining  amount of the
maximum amount of said  revolving  credit  facility.  Borrower shall also pay to
Lender  on the  effective  date of  such  reduction  or  termination,  an  Early
Termination Fee calculated in accordance  with paragraph  2.4(C) hereof based on
the amount of such reduction or termination.
         7.11 CHANGE IN ACCOUNTING PRINCIPLES Borrower will not change or permit
any change in accounting  principles applied to Borrower,  except as required by
GAAP.
         7.12 SALE AND LEASEBACK  Borrower  will not enter into any  arrangement
with any Person providing for the leasing by Borrower of property which has been
or is to be sold or  transferred  by  Borrower  to such  Person  or to any other
Person to whom  funds  have  been or are to be  advanced  by such  Person on the
security of such property or rental obligations of Borrower.
         7.13 MAINTAIN  CORPORATE  EXISTENCE AND NATURE OF BUSINESS (A) Borrower
will not allow its  corporate  existence  to be other than in good  standing and
will not, without the prior written consent of Lender, dissolve or liquidate, or
merge or consolidate with or acquire or affiliate with any other business entity
including  any  acquisition  of the  assets  of any  other  Person  or form  any
Subsidiary  provided that upon not less than ten (10) days prior written  notice
to Lender (i) any Borrower may be merged into any other  Borrower,  and (ii) any
Borrower may be  dissolved  if the business of such  Borrower is to continued by
any other Borrower.


         (B) Borrower  will not change its name without  furnishing to Lender at
least ten (10) days prior written notice thereof.
                  (C) Borrower  will not utilize any trade name not set forth on
Exhibit "A" without  furnishing  to Lender at least ten (10) days prior  written
notice thereof.
                  (D)      Borrower will not change the nature of its business.
         7.14     DIVIDENDS; REDEMPTION'S
         (A) Borrower will not, without the prior written consent of Lender, pay
or declare any cash or property dividends,  nor otherwise make a distribution of
capital or income  provided that any Borrower other than  Consolidated  Delivery
and Logistics, Inc. may declare and pay dividends to its parent corporation.
         (B) Borrower  will not,  without the prior  written  consent of Lender,
redeem,  retire or  repurchase  any stock of  Borrower,  such  consent not to be
unreasonably  withheld  or  delayed  provided  that (i) no  Default  or Event of
Default  exists,  (ii) no  Default or Event of Default  would  exist,  including
without  limitation a violation of any financial  covenants set forth herein, if
such  redemption,   retirement  or  repurchase  would  occur,  (iii)  Borrower's
financial condition and results of operations are reasonably consistent with the
projections  furnished  from time to time by Borrower to Lender,  (iv)  Borrower
furnishes  to Lender  such  information  relative to such  proposed  redemption,
retirement  or  repurchase  as Lender  may  request,  and (v) the  amount of any
treasury stock Borrower may hold as a consequence of such redemption, retirement
or repurchase  will be deducted from Total Assets for the purpose of calculating
the  Tangible Net Worth of Borrower in addition to other items to be so deducted
from Total Assets for the purpose of calculating Tangible Net Worth.
         7.15 DISPOSAL OF ASSETS Except for transactions  between the Borrowers,
Borrowers will not sell, lease,  transfer or otherwise dispose of (A) any of the
Collateral  or (B) any of its  other  assets  except in the  ordinary  course of
business  to  third   parties   unaffiliated   with   Borrower  in  arms  length
transactions.  Borrower will not sell,  discount or otherwise  dispose of any of
its notes or Accounts  Receivable or other  obligations owing to Borrower except
for the purpose of collection in the ordinary course of business.
         7.16 PAYMENT OF SUBORDINATED  DEBT Borrower shall not make any payments
on account of principal  and/or  interest on  Subordinated  Debt if a Default or
Event of Default exists.

                                                       VIII
                                                 EVENTS OF DEFAULT
         The  occurrence  of any of the following  shall  constitute an Event of
Default:
         8.1      NON-PAYMENT  Failure  on the part of any  Obligor to pay any  
Obligation  to Lender or any Lender Affiliate when due.
         8.2 NON-PERFORMANCE  Failure on the part of any Obligor to perform when
such  performance is due any term,  covenant or condition  contained in any Loan
Document or any other  agreement  now  existing or  hereafter  entered into with
Lender or any Lender Affiliate,  including without limitation any swap agreement
(as defined in 11 U.S.C.  ss.101) or in any document executed in connection with
any such  agreements and with respet to a failure to comply with paragraphs 6.3,
6.4,  6.5,  6.7 and 6.13 hereof such failure  remains  uncured for ten (10) days
after notice from Lender to Borrower specifying such failure to perform.
         8.3 MISREPRESENTATION Any representation,  covenant or warranty made by
any Obligor in this Agreement,  or any Loan Document,  or in connection with any
instrument of guaranty or security or other writing  supplementary  or ancillary
hereto or thereto  furnished to Lender or any Lender Affiliate shall have proved
to have been inaccurate in any substantial or material respect as of the date or
dates with respect to which it is deemed to have been made.
         8.4 OTHER LIEN  Borrower  shall  have  caused or  permitted  a security
interest or Lien,  perfected or otherwise,  other than the security interest and
Liens specifically provided for or permitted hereunder,  to be created in any of
its  assets,  or shall  have  failed to take any action  requested  by Lender to
perfect or protect the security interests and Liens provided for herein and with
respect to  involuntary  Liens same remains  undischarged  for thirty (30) days,
provided no such Lien is superior to the Lien in favor of Lender.
         8.5  INSOLVENCY  Any Obligor shall have applied for or consented to the
appointment  of a  custodian,  receiver,  trustee  or  liquidator  of  all  or a
substantial  part of its assets;  a custodian  shall have been appointed with or
without consent of any Obligor; any Obligor is generally not paying its debts as
they become due; has made a general assignment for the benefit of creditors; has
been adjudicated insolvent; or has filed a voluntary petition in Bankruptcy,  or
a petition or an answer seeking  reorganization or an arrangement with creditors
or to take advantage of any insolvency law, or an answer  admitting the material
allegations  of a  petition  in any  Bankruptcy,  reorganization  or  insolvency
proceeding;  or taken  corporate  action for the purpose of effecting any of the
foregoing; or an order, judgment or decree shall have been entered,  without the
application,  approval  or  consent  of any  Obligor  by any court of  competent
jurisdiction  approving a petition  seeking  reorganization  of any Obligor,  or
appointing a receiver,  trustee,  custodian or liquidator  of any Obligor,  or a
substantial  part of its assets and such order,  judgment  or decree  shall have
continued  unstayed and in effect for any period of sixty (60) consecutive days;
or a petition in Bankruptcy  shall have been filed against any Obligor and shall
not have been  dismissed for a period of sixty (60)  consecutive  days, or if an
Order for Relief has been entered under the  Bankruptcy  Code, or if any Obligor
shall have suspended the transaction of its usual business.
         8.6 CHANGE IN  MANAGEMENT  If all of Albert W.  VanNess,  Jr.,  William
Brannan  and Joseph  Wojak  cease to be actively  engaged in the  management  of
Borrower and there is not substitute management acceptable to Lender in its good
faith discretion.
         8.7 JUDGMENT OR LIEN Entry of a judgment,  issuance of any garnishment,
attachment  or  distraint,  the  filing  of  any  lien  or of  any  governmental
attachment against any property of Borrower which entry, issuance, attachment or
filing shall have  continued  unstayed and in effect for a period of thirty (30)
consecutive days.


         8.8  NONCOMPLIANCE  WITH  LEASES OR LAWS  Failure of Borrower to comply
with the terms and  conditions of any lease  covering the premises  where any of
its  assets  are  located,   including  the  Collateral,  or  with  any  orders,
ordinances, laws or statutes of any city, state or other governmental department
having  jurisdiction  with  respect to such  premises or the conduct of business
thereon.
         8.9      INSECURITY.   The  good  faith  determination of  Lender  that
the  prospect  of  payment  and performance of Borrowers obligations to Lender
is materially impaired.
         8.10     ADVERSE CHANGE  A Material Adverse Change has occurred of 
Borrower on a consolidated basis.
         8.11     ERISA If (A) any  Reportable  Event  occurs and shall be  
continuing for thirty (30) days after notice from Lender to Borrower, or (B) any
Plan shall be terminated,  or (C) the Plan  administrator of any Plan shall file
with the Pension Benefit Guaranty  Corporation ("PBGC") a notice of intention to
terminate  such Plan, or (D) the PBGC shall  institute  proceedings to terminate
any Plan or  appoint a trustee to  administer  any Plan,  and,  if in any of the
cases set forth in (A) through (D) above,  Lender reasonably  determines in good
faith  that any Plan will be  terminated  and that the  amount  of the  unfunded
guaranteed  benefits  (within the meaning of Title IV of ERISA)  resulting  upon
termination  of such Plan would have a material  adverse effect on the financial
condition  and  properties or operation of Borrower if a lien against the assets
of Borrower were to result under ERISA.
         8.12 DEFAULT IN OBLIGATIONS TO THIRD PARTIES Borrower or any Obligor is
in default beyond any applicable grace or cure period of any material obligation
to any third party including  without  limitation the  Subordinated  Convertible
Debentures and the Seller Indebtedness.
         8.13  LICENSES If any  license or permit  necessary  for the  continued
operation  of  Borrower's  or  any  Obligor's  customary  business  is  revoked,
suspended, terminated or not renewed.
         8.14     TRANSFER  OF ASSETS.  Any  Obligor  transfers  or sells all or
substantially  all of its assets,  without the prior  written  consent of Lender
except as expressly permitted hereunder.
         8.15     TERMINATION  OF  GUARANTY.  Any  guarantor,  if any,  of the  
Obligations  of Borrower to Lender  revokes or terminates  his (its) guaranty of
the Obligations.
         8.16     LOAN  DOCUMENTS.  Any Loan  Document  ceases to be in full  
force and effect or the validity or  enforceability  thereof is contested by any
Obligor or any representative thereof.
                                                        IX
                                          CONSEQUENCE OF EVENT OF DEFAULT
         In case any Event of Default shall have occurred,  and remains  uncured
beyond any grace or cure period, then and in every such Event of Default, Lender
may take any or all of the following  actions,  at the same time or at different
times and in such  order as the  Lender may  determine,  provided  that upon the
occurrence  of an Event  of  Default  under  paragraph  8.5  hereof  the  credit
facilities   under  this  Agreement  shall   automatically   terminate  and  all
Obligations shall automatically be immediately due and payable.


         9.1 ACCELERATION  Declare all loans,  sums and Obligations owing Lender
from Borrower under this Agreement or any other agreement or loan between Lender
and Borrower and Lender Affiliate to be forthwith due and payable, whereupon all
such sums shall forthwith become due and payable,  without presentment,  demand,
protest or other notice of any kind, all of which are hereby expressly waived by
Borrower
         9.2  POSSESSION  Proceed  with  or  without  judicial  process  to take
possession of all or any part of the Collateral  provided for herein not already
in the  possession of Lender and Borrower  agrees that upon receipt of notice of
Lender's  intention to take  possession  of all or any part of said  Collateral,
Borrower will do everything  reasonably necessary to assemble the Collateral and
make same available to Lender at a place to be designated by Lender.
         9.3 METHODS OF SALE So long as Lender acts in a commercially reasonable
manner, assign,  transfer and deliver at any time or from time to time the whole
or any portion of the Collateral or any rights or interest therein in accordance
with the Uniform  Commercial  Code,  and without  limiting the scope of Lender's
rights thereunder,  Lender may sell the Collateral at public or private sale, or
in any other manner, at such price or prices as Lender may deem best, and either
for cash or credit, or for future delivery,  at the option of Lender, in bulk or
in  parcels  and with or  without  having  the  Collateral  at the sale or other
disposition. Lender shall have the right to be the purchaser at any public sale.
Lender  shall have the right to conduct  such sales on  Borrower's  premises  or
elsewhere and shall have the right to use Borrower's premises without charge for
such  sales  for such  time or times as  Lender  may see fit.  Lender  is hereby
granted  license  or other  right to use,  without  charge,  Borrower's  labels,
patents,  copyrights,  rights of use of any name,  trade  secrets,  trade names,
trademarks and advertising  matter,  or any property of a similar nature,  as it
pertains to the  Collateral,  in advertising for sale and selling any Collateral
and Borrower's rights under all licenses and franchise agreements shall inure to
Lender's  benefit.  Borrower  agrees that a reasonable  means of  disposition of
Accounts shall be for Lender to hold and liquidate any and all Accounts.  In the
event of a sale of the  Collateral,  or any other  disposition  thereof,  Lender
shall  apply  all  proceeds  first to all  costs and  expenses  of  disposition,
including attorneys' fees, and then to interest, then to the principal component
of the  Obligations  of  Borrower  to  Lender  in such  order  as  Lender  deems
appropriate.
         9.4 RETENTION OF COLLATERAL  Elect to retain the Collateral or any part
thereof in  satisfaction  of all  Obligations  due from  Borrower to Lender upon
notice of such  proposed  election  to  Borrower  and any other  party as may be
required by the Uniform Commercial Code.
         9.5 SET-OFF Lender shall have the right immediately, and without notice
or other action to set-off  against any of the Obligor's  Obligations  to Lender
any sum owed by Lender in any  capacity to any Obligor  whether due or not,  and
Lender shall be deemed-to  have exercised such right of set-off and to have made
a charge against any such sum  immediately  upon the occurrence of such event of
default, even though the actual book entries may be made at some time subsequent
thereto.
         9.6  ATTORNEYS'  FEES AND EXPENSES Add to the  Obligations of Borrower,
Lender's  reasonable  expenses to obtain or enforce  payment of any  Obligations
hereunder or in connection  with any  insolvency  proceedings of Borrower or any
Obligor and the  enforcement or liquidation of any debt hereunder  shall include
reasonable attorneys' fees plus other legal expenses incurred by Lender.
         9.7  DEFAULT   INTEREST   Increase  the  rate  of  interest  under  any
Obligations to a rate of four (4%) percent in excess of the Prime Rate in effect
from time to time. Unless otherwise agreed by Lender,  this increase in interest
rate shall be  retroactive  to the date of the first  occurrence  of an Event of
Default.
         9.8 LENDER'S PERFORMANCE OF BORROWER'S  OBLIGATION If Borrower fails to
comply with any of the  covenants  or perform any of its  obligations  set forth
herein or in any other Loan  Document,  Lender may, but shall have no obligation
to, perform any such  obligations or undertake any act to cause such covenant to
be complied with,  including,  but not limited to,  discharging  any Lien on any
asset other than  Permitted  Encumbrances.  Any and all sums,  and all costs and
expenses  incurred by Lender in so  performing or causing  compliance,  shall be
payable on demand  together  with  interest at the default rate  provided for in
paragraph  9.7 hereof from the date of any such payment by Lender until the date
paid by Borrower.  Any such  performance by Lender shall not cure any Default or
Event of Default by Borrower.
         9.9 OTHER  REMEDIES  Exercise  any  other  remedies  under the  Uniform
Commercial Code or other  applicable law, or any other Loan Document,  including
but not limited to proceeding to enforce its right by suit in equity,  action at
law or  other  appropriate  proceeding,  whether  for  payment  or the  specific
performance  of the covenants or agreements  contained in this  Agreement or any
other Loan Document.
                                                         X
                                                   MISCELLANEOUS
         10.1 NO WAIVER  Borrower  agrees that no delay on the part of Lender in
exercising any power or right hereunder or any other Loan Document shall operate
as a waiver of any such power or right, nor act as a consent to any departure by
Borrower from any of the terms or conditions  hereof or thereof,  preclude other
or further  exercise  thereof,  or the exercise of any other power or right.  No
waiver  whatsoever  shall be valid  unless in writing  signed by Lender and then
only to the extent set forth therein.
         10.2  MODIFICATION  OR AMENDMENT  This  Agreement  and every other Loan
Document  cannot be  changed  orally  and  cannot  be  changed  by an  executory
agreement  unless such  agreement is in writing and signed by all parties hereto
by their duly authorized officers.
         10.3 CERTAIN  WAIVER(S) (A) Borrower waives  presentment,  dishonor and
notice of dishonor,  protest and notice of protest of all  commercial  papers at
any time held by Lender on which Borrower is in any way liable.
                  (B) Borrower  waives any right, if any, it may have to require
Lender to proceed against any Collateral or any other Obligor before  proceeding
against  Borrower in  enforcing  any of its rights or  remedies,  and waives any
right,  if  any,  to  claim a fair  market  value  credit  with  respect  to any
Collateral  whether  before  or  after  the  sale or  other  disposition  of any
Collateral.
         10.4  ONE  INSTRUMENT  The  provisions  of this  Agreement  shall be in
addition  to those of any notes or other  evidence  of the  Obligations  held by
Lender relating to this particular transaction,  all of which shall be construed
as one instrument.
         10.5 LAW OF NEW JERSEY This  Agreement and all other Loan Documents and
the rights of the parties  hereto and thereto  shall be governed by the internal
laws of the State of New Jersey without regard to conflict of laws.
         10.6  JURISDICTION  Subject to paragraph  10.19 hereof  Borrower hereby
irrevocably  consents  to the  jurisdiction  of the  Courts  of the State of New
Jersey or any  Federal  Court in such  State in  connection  with any  action or
proceeding  arising  out of or  related  to this  Agreement  or any  other  Loan
Document.  In any such  litigation,  Borrower  waives  personal  service  of any
summons,  complaint  or other  process  and agrees  that  service may be made by
certified or registered mail to it, at the address provided herein. The Borrower
agrees that any action  brought by Borrower  shall be commenced  and  maintained
only in a court in the  Federal  judicial  district  in New  Jersey  or in Essex
County, New Jersey.
         10.7 SUCCESSORS OR ASSIGNS;  JOINT AND SEVERAL LIABILITY This Agreement
and all other  Loan  Documents  shall be  binding  upon and  shall  inure to the
benefit  of  the  parties  hereto,  their  respective  successors  and  assigns,
provided,  however,  that Borrower shall not have any right to assign any of its
rights  hereunder or under any other Loan  Documents.  The  obligations  of each
Borrower  hereunder  and  under  each  other  Loan  Document  shall be joint and
several.
         10.8 RIGHTS  CUMULATIVE The rights and remedies herein  expressed or in
any other  Loan  Document  to be vested in or  conferred  upon  Lender  shall be
cumulative  and  shall  be in  addition  to and  not in  substitution  for or in
derogation of the rights and remedies  conferred  upon secured  creditors by the
Uniform Commercial Code or any other applicable law.
         10.9  NOTIFICATION  OF DISPOSITION OF COLLATERAL Any  notification of a
sale or other  disposition of the Collateral  will be sufficient if given in the
manner set forth in Paragraph  10.10 hereof not less than five (5) days prior to
the day on  which  such  sales  or  other  disposition  will be  made,  and such
notification shall be deemed reasonable notice.
         10.10  ADDRESSES OF NOTICES Any written notice required or permitted to
be  given  by this  Agreement  shall  be  given  or made in  writing,  including
telecopy,  and shall be, as  elected by the party  giving  such  notice,  served
personally  by  messenger  or  courier  service,  telecopied  (followed  up by a
mailing),  or mailed in the United  States by prepaid,  registered  or certified
mail, return receipt requested, to the following:

If to Borrower:                Consolidated Delivery & Logistics, Inc.
                               380 Allwood Road
                               Clifton, NJ 07012
                               ATTN:  Joseph Wojak
                               Fax No.:  (973) 471-5519

with a copy (except            Lowenstein, Sandler, Kohl, Fischer & Boylan, P.A.
for routine notices with       65 Livingston Avenue
respect to borrowings          Roseland, NJ 07068
hereunder and the like)        ATTN:  Alan Wovsaniker, Esq.
to:                            Fax No.: (973) 992-5820

If to Lender:                  FIRST UNION COMMERCIAL CORPORATION
                               123 South Broad Street, PA 1221
                               Philadelphia, PA 19101
                               ATTN:  Leveraged Finance Division -
                                       Portfolio Management
                               Fax # (215) 985-6079





with a copy (except            STRYKER, TAMS & DILL LLP
for routine notices with       Two Penn Plaza East
respect to borrowings          Newark, New Jersey  07105
hereunder and the like) to     ATTN:  Alan D. Wiener, Esq.
                               Fax # (973) 491-9692

Any notice given in accordance  with the provisions of this  paragraph  shall be
deemed  effective,  if hand delivered,  on the date of such delivery,  or on the
date  telecommunicated  if telecopied,  or if mailed, on the date upon which the
return receipt is signed or delivery  refused or the notice is designated by the
postal  authorities as not deliverable,  as the case may be. Each party may give
notice to each of the other  parties of a change of its  address for the purpose
of giving notice under this paragraph  which,  thereafter  until changed by like
notice, shall be the address of such party for purposes of this Agreement.
         10.11 TITLES The titles and headings  indicated herein are inserted for
convenience  only and shall not be considered a part of this Agreement or in any
way limit the construction or interpretation of this Agreement.
         10.12 DISCLOSURE  Lender is hereby authorized to disclose any financial
or other information it may have about Borrower to any Lender Affiliate,  to any
present or future participant or prospective participant, any regulatory body or
agency having  jurisdiction  over Lender, or to any Person which succeeds to all
or any part of Lender's interest herein.
         10.13 SALE, ASSIGNMENT OR PARTICIPATION'S.  The Lender may from time to
time sell or assign, in whole or in part, or grant participations in some or all
of the Loan Documents and/or the obligations  evidenced hereby.  Nothing in this
Agreement or other Loan  Documents  shall  prohibit the Lender from  pledging or
assigning this Agreement and other Loan Documents  including  Collateral and all
rights related thereto to any Federal Reserve Bank in accordance with applicable
law. The holder of any such sale,  assignment,  pledge or participation,  if the
applicable  agreement between the Lender and such holder so provides,  (i) shall
be  entitled to all of the rights,  obligations  and  benefits of the Lender and
(ii) shall be deemed to hold and may  exercise  the rights of setoff or Banker's
lien with respect to any and all obligations of such holder to the Borrower,  in
each case as fully as though the Borrower were directly indebted to such holder.
The Lender may in its  discretion,  give  notice to the  Borrower  of such sale,
assignment,  pledge or participation;  however,  the failure to give such notice
shall not affect any of the  Lender's or such  holder's  rights  hereunder.  The
Borrower authorizes the Lender to provide information concerning the Borrower to
any prospective purchaser, assignee, pledgee or participant provided such Person
agrees to keep such  information  confidential.  The  information  provided  may
include,  but is not limited to,  amounts,  terms,  balances,  payment  history,
return item history and any financial or other  information  about the Borrower.
The  Borrower  agrees to  indemnify,  defend,  release the Lender,  and hold the
Lender  harmless,  at the Borrower's cost and expense,  from and against any and
all  lawsuits,  claims,  actions,  proceedings,  or suits  against the Lender or
against the Borrower and the Lender,  arising out of or relating to the Lender's
reporting or disclosure of such information.  Notwithstanding the foregoing,  if
Lender  assigns or otherwise  transfers  an interest in this  Agreement or other
Loan Documents to a Person which Lender is aware is a "Non US Taxpayer",  Lender
shall endeavor to promptly notify Borrower of such assignment or transfer and no
additional sums shall be payable by Borrower under the Loan Documents because of
any  withholding  of  federal  income  tax such  Person is  subject  to. For the
purposes of this paragraph 10.13 "Non US Taxpayer" means a person, as defined in
Section  7701(a)(1)  of the Internal  Revenue Code of 1986, as amended (the "IRS
Code"),  which is not a "United States person" as defined in Section 7701(a)(30)
of the IRS Code and is  subject  to  withholding  of  federal  income  tax under
Subtitle A, Chapter 3, SubChapter A of the IRS Code (Section 1441, et seq.).
         10.14 INTEREST LIMITATION It is the intention of Lender and Borrower to
conform  strictly  to the laws of the  State of New  Jersey  or the laws of such
other  jurisdiction  which  may be found to  apply  to the  subject  transaction
relating to the maximum rate of interest which may be lawfully contracted for or
charged. Nothing contained in this Agreement or any other Loan Document shall be
construed to mean that Borrower has contracted to pay or is obligated to pay any
sum or sums to Lender  in excess of those  which  may  lawfully  be  charged  or
contracted  for  under  applicable  law of the  State  of New  Jersey  or  other
applicable  law. If any  provision  of this  Agreement  or any of the other Loan
Documents  shall require payment of any sum or sums of interest in excess of the
maximum  permitted rate which may be lawfully  contracted  for or charged,  then
Borrower  and  Lender  agree  that  such  result  is as a  consequence  of their
inadvertence  and/or  mistake,  and the  interest  charge for which  Borrower is
liable  under  this  instrument  shall be  recomputed  for the sole and  limited
purpose of determining the extent of the obligations and liabilities of Borrower
to Lender so that the  interest  charges for which  Borrower is liable shall not
exceed  the  maximum  permitted  rate  which  is  determined  to be  applicable.
Additionally,  any sums of interest  which are collected by Lender from Borrower
or other source in connection with the loan evidenced hereby which are in excess
of the  maximum  permitted  rate  shall,  for the sole and  limited  purpose  of
determining the extent of the obligations and liabilities of Borrower to Lender,
be credited  against  the amount of  principal  for which  Borrower is liable to
Lender after giving effect to any recomputation and adjustment required pursuant
to the foregoing  provisions of this section,  or if such outstanding  principal
balance and  interest  are paid in full,  any such  excess  shall be remitted by
Lender to Borrower.
         10.15  INDEMNIFICATION  Borrower  hereby  agrees  to  and  does  hereby
indemnify,  protect,  defend and save harmless  Lender and any member,  officer,
director,  official,  agent, employee and attorney of Lender, and its respective
heirs, successors and assigns (collectively,  the "Indemnified  Parties"),  from
and against any and all losses, damages,  expenses or liabilities of any kind or
nature and from any suits, claims or demands,  including reasonable counsel fees
incurred in investigating  or defending such claim,  suffered by any of them and
caused by, relating to, arising out of,  resulting from, or in any way connected
with  the  Loan  Documents  and the  transactions  contemplated  therein  or the
Collateral  (unless caused by the gross negligence or willful  misconduct of the
Indemnified  Parties)  including,   without  limitation:  (i)  losses,  damages,
expenses or liabilities sustained by Lender in connection with any environmental
cleanup or other remedy required or mandated by any environmental  law; (ii) any
untrue statement of a material fact contained in information submitted to Lender
by Borrower and/or any Obligor or the omission of any material fact necessary to
be stated  therein in order to make such statement not misleading or incomplete;
(iii) the  failure of Borrower  and/or any  Obligor to perform  any  obligations
herein  required to be  performed by Borrower  and/or any Obligor;  and (iv) the
ownership,  construction,  occupancy,  operations, use and maintenance of any of
Borrower's  and/or the Obligor's  properties.  The  provisions of this paragraph
shall survive termination of this Agreement and the other Loan Documents.
         10.16 SEVERABILITY AND CONSISTENCY The illegality,  unenforceability or
inconsistency of any provisions of this Agreement or any instrument or agreement
required  hereunder  shall  not  in any  way  affect  or  impair  the  legality,
enforceability  or consistency of the remaining  provisions of this Agreement or
any instrument or agreement required hereunder.  The Loan Documents are intended
to be consistent.  However, in the event of any inconsistencies among any of the
Loan   Documents,   such   inconsistency   shall  not  affect  the  validity  or
enforceability  of Loan Document.  The Borrower  agrees that in the event of any
inconsistency  or ambiguity  in any of the Loan  Documents,  the Loan  Documents
shall not be construed against any one party but shall be interpreted consistent
with the Lender's policies and procedures.
         10.17  INTEGRATION;  NO THIRD PARTY  BENEFICIARY This Agreement and the
other Loan  Documents  constitute the sole agreement of the parties with respect
to the subject matter hereof and thereof and supersede all oral negotiations and
prior  writings  with  respect to the subject  matter  hereof and  thereof.  The
Borrower and the Lender do not intend any of the  benefits of this  Agreement to
inure to any third party,  and no third party shall have any status,  right,  or
entitlement under this Agreement.
         10.18  JUDICIAL  PROCEEDINGS;  WAIVERS  THE  BORROWER  AND  THE  LENDER
ACKNOWLEDGE  AND AGREE THAT  SUBJECT  TO  PARAGRAPH  10.19  HEREOF (i) ANY SUIT,
ACTION OR PROCEEDING,  WHETHER CLAIM OR  COUNTERCLAIM,  BROUGHT OR INSTITUTED BY
THE  LENDER OR THE  BORROWER  OR ANY  SUCCESSOR  OR ASSIGN OF THE  LENDER OR THE
BORROWER, OR ON WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
DEALINGS OF THE PARTIES WITH RESPECT  HERETO OR THERETO SHALL BE TRIED ONLY BY A
COURT AND NOT BY A JURY AND EACH PARTY  WAIVES THE RIGHT TO TRIAL BY JURY;  (ii)
EACH WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER,  IN ANY SUCH SUIT, ACTION
OR PROCEEDING, ANY SPECIAL, EXEMPLARY,  PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES;  AND (ii) THIS SECTION IS
A SPECIFIC  AND  MATERIAL  ASPECT OF THIS  AGREEMENT  AND THE  LENDER  WOULD NOT
EXECUTE THIS  AGREEMENT IF THE WAIVERS SET FORTH IN THIS SECTION WERE NOT A PART
OF THIS AGREEMENT.

         10.19 ARBITRATION. Upon demand of any party hereto, whether made before
or  after  institution  of  any  judicial  proceeding,  any  dispute,  claim  or
controversy  arising out of,  connected  with or relating to this  Agreement and
other Loan Documents ("Disputes") between or among the parties to this Agreement
and other Loan  Documents  shall be resolved by binding  arbitration as provided
herein. Institution of a judicial proceeding by a party does not waive the right
of that party to demand  arbitration  hereunder.  Disputes may include,  without
limitation,  tort  claims,  counterclaims,  disputes  as to  whether a matter is
subject to  arbitration,  claims brought as class  actions,  claims arising from
Loan  Documents  executed in the future,  or claims  arising out of or connected
with the transaction reflected by this Agreement and other Loan Documents.
         Arbitration  shall be conducted  under and  governed by the  Commercial
Financial Disputes  Arbitration Rules (the "Arbitration  Rules") of the American
Arbitration  Association  (the  "AAA")  and  Title  9  of  the  U.S.  Code.  All
arbitration  hearings shall be conducted in the city of Newark,  New Jersey. The
expedited procedures set forth in Rule 51 et seq. of the Arbitration Rules shall
be applicable to claims of less than  $1,000,000.00.  All applicable statutes of
limitation shall apply to any Dispute.  A judgment upon the award may be entered
in any court  having  jurisdiction.  The panel  from which all  arbitrators  are
selected  shall be  comprised  of  licensed  attorneys.  The  single  arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general  jurisdiction,  state or federal, of the state where the hearing will
be conducted or if such person is not available to serve, the single  arbitrator
may be a licensed  attorney.  Notwithstanding  the foregoing,  this  arbitration
provision does not apply to disputes under or related to swap agreements.
         Preservation and Limitation of Remedies.  Notwithstanding the preceding
binding arbitration provisions,  Lender and Borrower agree to preserve,  without
diminution,  certain  remedies  that any party  hereto  may  employ or  exercise
freely,  independently or in connection with an arbitration  proceeding or after
an  arbitration  action is brought.  Lender and Borrower shall have the right to
proceed in any court of proper  jurisdiction  or by  self-help  to  exercise  or
prosecute the following  remedies,  as  applicable:  (i) all rights to foreclose
against any real or personal property or other security by exercising a power of
sale  granted  under  Loan  Documents  or under  applicable  law or by  judicial
foreclosure  and sale,  including a  proceeding  to confirm  the sale;  (ii) all
rights of self-help under applicable law including  peaceful  occupation of real
property and collection of rents,  set-off,  and peaceful possession of personal
property;  and (iii)  obtaining  provisional  or  ancillary  remedies  including
injunctive  relief,  sequestration,   garnishment,  attachment,  appointment  of
receiver and filing an involuntary Bankruptcy proceeding.  Preservation of these
remedies does not limit the power of an  arbitrator  to grant  similar  remedies
that may be requested by a party in a Dispute.
         Borrower and Lender agree that they shall not have a remedy of punitive
or exemplary  damages  against the her in any Dispute and hereby waive any right
or claim to punitive or  exemplary  damages  they have now or which may arise in
the future in  connection  with any  Dispute  whether the Dispute is resolved by
arbitration or judicially.
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and  delivered by their proper and duly  authorized  officers as of the
day and year first above written.


<PAGE>



                                        FIRST UNION COMMERCIAL CORPORATION


                                                 BY:
                                                 NAME:
                                                 TITLE:


                                        CONSOLIDATED DELIVERY & LOGISTICS, INC.,


                                                 BY:
                                                 NAME:
                                                 TITLE:



                                        CLAYTON/NATIONAL COURIER SYSTEMS, INC.


                                                 BY:
                                                 NAME:
                                                 TITLE:




                                        NATIONAL EXPRESS COMPANY, INC.,


                                                 BY:
                                                 NAME:
                                                 TITLE:


                                        AMERICAN COURIER, INC.,


                                                 BY:
                                                 NAME:
                                                 TITLE:

                                        CLICK MESSENGER SERVICE, INC.,


                                                 BY:
                                                 NAME:
                                                 TITLE:

                                        CLICK MESSENGER SERVICE OF N.Y., INC.,


                                                 BY:
                                                 NAME:
                                                 TITLE:


                                        COURT COURIER SYSTEMS, INC.,


                                                 BY:
                                                 NAME:
                                                 TITLE:


                                        OLYMPIC COURIER SYSTEMS, INC.,


                                                 BY:
                                                 NAME:
                                                 TITLE:


                                        SECURITIES COURIER CORPORATION


                                                 BY:
                                                 NAME:
                                                 TITLE:


                                        SILVER STAR EXPRESS, INC.


                                                 BY:
                                                 NAME:
                                                 TITLE:


                                        SUREWAY AIR TRAFFIC CORPORATION


                                                 BY:
                                                 NAME:
                                                 TITLE:


                                        SUREWAY LOGISTICS CORPORATION


                                                 BY:
                                                 NAME:
                                                 TITLE:







<PAGE>