<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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 33-99716
AMERITRUCK DISTRIBUTION CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2619368
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
City Center Tower II, Suite 1101,
301 Commerce Street, Fort Worth, Texas 76102
(Address of principal executive offices) (Zip Code)
(817) 332-6020
(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. [X] Yes [ ] No
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AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
Part I FINANCIAL INFORMATION Page
----
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 9
Part II OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 18
i
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ --------------------
1996* 1995* 1996* 1995*
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Operating revenue $62,971 $25,198 $161,145 $66,178
------- ------- -------- -------
Operating expenses:
Salaries, wages and fringe benefits 19,826 7,851 51,951 20,173
Purchased transportation 16,642 6,398 40,713 18,063
Operating supplies and expenses 10,709 4,073 29,137 9,891
Depreciation and amortization of
capital leases 3,930 1,925 10,150 4,885
Claims and insurance 2,431 965 6,067 2,571
Operating taxes and licenses 1,369 685 3,534 1,238
General supplies and expenses 3,299 829 7,637 2,055
Amortization of intangibles 310 78 808 318
Gain on disposal of property and
equipment (182) (302) (437) (365)
------- ------- -------- -------
Total operating expenses 58,334 22,502 149,560 58,829
------- ------- -------- -------
Operating income 4,637 2,696 11,585 7,349
Interest expense 4,523 1,030 12,166 2,539
Amortization of financing fees 124 2 359 5
Other income, net (135) (58) (424) (167)
------- ------- -------- -------
Income (loss) before income taxes and
extraordinary item 125 1,722 (516) 4,972
Income taxes 757 573 470 1,900
------- ------- -------- -------
Income (loss) before extraordinary item (632) 1,149 (986) 3,072
Extraordinary item, loss on early
retirement of debt,
net of taxes of $154 - - (230) -
------- ------- -------- -------
Net income (loss) $ (632) $ 1,149 $ (1,216) $ 3,072
======= ======= ======== =======
</TABLE>
* Comparisons between periods are affected by acquisitions - see Note 2.
See accompanying notes to consolidated financial statements.
1
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AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,842 $ 15,286
Accounts and notes receivable, net 26,295 12,269
Prepaid expenses 7,883 4,057
Repair parts and supplies 1,235 844
Deferred income taxes 1,270 960
Other current assets 1,350 941
-------- --------
Total current assets 39,875 34,357
Property and equipment, net 110,556 67,191
Goodwill, net 38,380 32,705
Notes receivable 600 -
Other assets 7,231 6,282
-------- --------
Total assets $196,642 $140,535
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Current portion of long-term debt $ 13,012 $ 10,566
Accounts payable and accrued expenses 17,239 12,071
Claims and insurance accruals 1,667 1,852
Other current liabilities 598 499
-------- --------
Total current liabilities 32,516 24,988
Long-term debt 155,646 107,769
Deferred income taxes 8,500 7,773
Other liabilities 2,558 1,822
-------- --------
Total liabilities 199,220 142,352
-------- --------
Stockholders' equity (deficiency):
Common stock; $.01 par value; 3,503
shares issued and outstanding 35 33
Additional paid-in capital 898 -
Loans to stockholders (1,880) (1,435)
Accumulated deficit (1,631) (415)
-------- --------
Total stockholders' equity
(deficiency) (2,578) (1,817)
-------- --------
Total liabilities and
stockholders' equity
(deficiency) $196,642 $140,535
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
2
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AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------
1996* 1995*
--------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (1,216) $ 3,072
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization of
capital leases 10,150 4,885
Amortization of intangibles 808 318
Gain on disposal of property and
equipment (437) (365)
Provision for deferred income taxes 317 299
Other, net (855) 344
Changes in current assets and
liabilities, net of effects
from acquisitions:
Accounts and notes receivable, net (10,634) 969
Prepaid expenses (1,577) (561)
Repair parts and supplies (152) (48)
Other current assets (353) 1,949
Accounts payable and accrued
expenses 3,208 (1,324)
Claims and insurance accruals 704 575
Other current liabilities 66 (520)
-------- -------
Net cash provided by operating
activities 29 9,593
-------- -------
INVESTING ACTIVITIES:
Purchase of Freymiller assets, net of
liabilities assumed (18,821) -
Purchase of property and equipment (20,146) (5,519)
Payments for acquisitions, net of cash
acquired (8,383) (1,959)
Proceeds from sale of property and
equipment 5,760 1,953
Other, net 829 (227)
-------- -------
Net cash used in investing
activities (40,761) (5,752)
-------- -------
FINANCING ACTIVITIES:
Revolving line of credit 28,840 -
Proceeds from issuance of long-term
debt 17,236 7,148
Repayment of long-term debt (18,786) (9,960)
Other, net (2) (298)
-------- -------
Net cash provided by (used in)
financing activities 27,288 (3,110)
-------- -------
Net increase (decrease) in cash and
cash equivalents (13,444) 731
Cash and cash equivalents, beginning of
period 15,286 1,617
-------- -------
Cash and cash equivalents, end of period $ 1,842 $ 2,348
======== =======
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 8,963 $ 2,781
Income taxes 174 2,064
Property and equipment financed
through capital lease obligations and
other debt 10,258 6,123
</TABLE>
* Comparisons between periods are affected by acquisitions - see Note 2.
See accompanying notes to consolidated financial statements.
3
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AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ACCOUNTING POLICIES AND INTERIM RESULTS
The 1995 Annual Report on Form 10-K for AmeriTruck Distribution Corp.
("AmeriTruck" or the "Company") and its wholly-owned subsidiaries includes a
summary of significant accounting policies and should be read in conjunction
with this Form 10-Q. The principal subsidiaries are W&L Services Corp. ("W&L"),
Thompson Bros., Inc. ("TBI"), J.C. Bangerter & Sons, Inc. ("Bangerter"),
AmeriTruck Refrigerated Transport, Inc. ("ART"), Scales Transport Corporation
("Scales") and KTL, Inc. ("KTL" and, collectively the "Operating Companies").
The statements for the periods presented are condensed and do not contain all
information required by generally accepted accounting principles to be included
in a full set of financial statements. In the opinion of management, all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial position as of September 30, 1996 and December 31,
1995 and the results of operations for the three-month and nine-month periods
ended September 30, 1996 and 1995 and cash flows for the nine-month periods
ended September 30, 1996 and 1995 have been included. The results of operations
for any interim period are not necessarily indicative of the results of
operations to be expected for the entire year. Certain prior year data has been
reclassified to conform to current year presentation.
Separate financial statements of the Company's subsidiaries are not
included because (a) all of the Company's direct and indirect subsidiaries have
guaranteed the Company's obligations under the Indenture, dated as of November
15, 1995 (the "Indenture"), among the Company, such subsidiaries (in such
capacity, the "Guarantors"), and The Bank of New York, as Trustee, (b) the
Guarantors have fully and unconditionally guaranteed the 12 1/4% Senior
Subordinated Notes due 2005 ("Subordinated Notes") issued under the Indenture on
a joint and several basis, (c) the Company is a holding company with no
independent assets or operations other than its investments in the Guarantors
and (d) the separate financial statements and other disclosures concerning the
Guarantors are not presented because management has determined that they would
not be material.
2. ACQUISITIONS
During the third quarter of 1996, AmeriTruck purchased all of the
outstanding stock of KTL, Inc. ("KTL") of Largo, Florida, from Ronald N. Damico
for a purchase price of $8.1 million in cash and 225,000 shares of Class A
common stock of AmeriTruck valued at $900,000. As part of the transaction, Mr.
Damico and KTL entered into an employment agreement under which Mr. Damico
became employed as KTL's President and Chief Executive Officer. The term of the
employment agreement expires on November 15, 1998. In addition, KTL has agreed
to lease from Mr. Damico and his spouse certain real estate at Clearwater,
Florida on a month-to-month basis. Further, KTL has agreed to lease the real
estate at Largo, Florida used by KTL as its corporate headquarters from a
company owned by Mr. Damico for an 18-month term, at which time KTL has agreed
to purchase the property for $2.4 million less the total amount of
environmental-related costs incurred subsequent to August 16, 1996.
KTL is a trucking company founded in 1983 which specializes in the
truckload transportation of refrigerated commodities and less-than-truckload
shipments requiring expedited, timed-delivery services. KTL operates
approximately 140 tractors and 300 trailers and employs approximately 300
persons, of whom 240 are drivers and many of whom operate as two-driver teams.
The KTL acquisition was accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated to the assets acquired
and liabilities assumed based on their estimated fair values at the date of
acquisition. The total purchase price including cash, common stock,
miscellaneous acquisition costs and liabilities assumed was $21.9 million. The
excess of the
4
<PAGE>
purchase price over the fair values of the net assets acquired has been recorded
as goodwill. The net assets acquired were as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Cash $ 107
Property and equipment, net 12,141
Goodwill 6,167
Other assets 3,445
Long-term debt (10,786)
Other liabilities (1,684)
--------
Net assets acquired $ 9,390
========
</TABLE>
The accompanying consolidated financial statements include assets,
liabilities and financial results of KTL since July 1, 1996. The following
unaudited pro forma operating results of the Company for the nine months ended
September 30, 1996 and 1995, reflect the KTL acquisition as if it had occurred
on January 1, 1995. The following unaudited pro forma operating results for the
nine months ended September 30, 1995 also reflect the Bangerter, CMS, Scales and
CBS acquisitions as if they had occurred on January 1, 1995.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------
1996 1995
--------- --------
(in thousands)
<S> <C> <C>
Operating revenue $174,447 $128,691
Operating income 13,833 13,755
Income (loss) before extraordinary item (259) 1,765
Net income (loss) (489) 1,765
</TABLE>
These pro forma results have been prepared for comparative purposes only and
include pro forma adjustments for conformed depreciation lives and salvage
values and certain other adjustments, including adjustment of the effective tax
rate to the expected rate of AmeriTruck. They are not necessarily indicative of
the results of operations that might have occurred had the acquisitions actually
taken place on January 1, 1995, or of future results of operations of the
consolidated entities. The pro forma results for the nine months ended September
30, 1996 include the purchase of the Freymiller Assets (as defined below) since
February 1996. These assets have not yet generated operating margins comparable
to the other AmeriTruck subsidiaries. The acquisition of the Freymiller Assets
did not require pro forma financial statements and thus the comparative results
for the nine months ended September 30, 1995 do not reflect the pro forma effect
of such assets.
In February 1996, the Company, through CMS Transportation Services, Inc.
("CMS"), purchased certain assets of Freymiller Trucking Inc. ("Freymiller") in
order to supplement its existing temperature-controlled trucking business.
Freymiller had been the subject of a Chapter 11 bankruptcy proceeding in
Oklahoma. CMS purchased certain specific automobiles, computer hardware and
software, furniture and fixtures, rights to the trade name "Freymiller",
existing spare parts, tires and fuel, rights under certain leases, certain
leasehold improvements and shop equipment and installment sales contracts
relating to tractors and trailers sold by Freymiller out of the ordinary course
of business (with all of the foregoing referred to as the "Freymiller Assets").
The Company also negotiated with Freymiller's lenders and lessors to purchase
approximately 185 tractors and 309 trailers, previously operated by Freymiller,
for approximately $14 million. An additional 80 trailers were leased for a
seven-year period. In exchange for the Freymiller Assets, the Company paid
approximately $2.7 million in cash at closing and assumed approximately $2
million in existing equipment financing. In addition, the Company assumed a
lease for Freymiller's maintenance facility in Oklahoma City and certain routine
executory business contracts. Except as provided above, the Company did not
assume any obligations or liabilities of Freymiller.
In connection with these transactions, the Company purchased real property
in Oklahoma City, Oklahoma from Freymiller's Chairman of the Board, President
and Chief Executive Officer for approximately $1.5 million in cash.
5
<PAGE>
In April 1996, the Company changed the corporate name of CMS to AmeriTruck
Refrigerated Transport, Inc. ART currently conducts the operations not only
of CMS but also those formerly conducted with the Freymiller Assets.
The Company funded the cash payments for the purchase of the Freymiller
Assets and the KTL acquisition primarily from borrowings under the NationsBank
and Volvo credit facilities. See footnote "3. Long-Term Debt."
AmeriTruck was formed in August 1995 to effect the combination of six
regional trucking lines in November 1995: W&L, TBI, Bangerter, CMS and certain
related companies, Scales and a certain related company and CBS. Prior to these
acquisitions, W&L and TBI had certain common stockholders who controlled
approximately 87 percent of the common equity of W&L and TBI on a combined
basis. In addition, these stockholders controlled approximately 67 percent of
the outstanding common stock of AmeriTruck after the consummation of these
acquisitions. Therefore, these common stockholders of W&L and TBI have been
treated as the acquirer for purposes of accounting for these acquisitions. The
accompanying AmeriTruck consolidated statements of operations and cash flows
reflect W&L and TBI combined historical results and cash flows for the entire
1995 periods, and Bangerter results and cash flows since August 1, 1995.
Subsequent to these acquisitions, CBS' operations were merged into Scales.
In May 1995, W&L acquired Dietz Motor Lines, Inc. for $2.0 million in cash,
which includes payment for non-compete agreements of $400,000 as well as an
amount for certain eligible accounts receivable. This acquisition has been
accounted for using the purchase method of accounting. Accordingly, the purchase
price was allocated to the assets acquired and the liabilities assumed based on
their estimated fair values at the date of acquisition. The results of
operations of the acquired company are included in the financial statements from
the date of acquisition.
3. LONG-TERM DEBT
NationsBank Credit Facility
In February 1996, the Company and its subsidiaries entered into a Loan
Agreement and related documents (collectively, the "NationsBank Credit
Facility") with NationsBank of Texas, N.A. ("NationsBank") pursuant to which
NationsBank has committed, subject to the terms and conditions of the
NationsBank Credit Facility, to provide a $30 million credit facility to the
Company. Borrowings under the NationsBank Credit Facility can be used for
acquisitions, operating capital, capital expenditures, letters of credit and
general corporate purposes. Pursuant to the NationsBank Credit Facility, as
amended, NationsBank has agreed to provide a $30 million revolving credit
facility, with a $7 million sublimit for letters of credit, maturing on February
1, 1998, at which time the revolving credit facility will convert into a term
loan maturing on February 1, 2003. This facility is also subject to a borrowing
base consisting of eligible receivables and eligible revenue equipment.
Currently, the Company's borrowing base exceeds $30 million. Borrowings under
the NationsBank Credit Facility bear interest at a per annum rate equal to
either NationsBank's base rate or the rate of interest offered by NationsBank in
the interbank eurodollar market plus an additional margin ranging from 1.5
percent to 2.0 percent based on the Senior Funded Debt Ratio of the Company. The
Company also pays a letter of credit issuance fee and a quarterly unused
facility fee. Borrowings under the NationsBank Credit Facility were $23.5
million at September 30, 1996 and were primarily used for the purchase of the
Freymiller Assets and the KTL acquisition. Available borrowings were $2.3
million at September 30, 1996 as there were $4.2 million in letters of credit
outstanding.
The Company's obligations under the NationsBank Credit Facility are
collateralized by substantially all assets of the Company and its subsidiaries
and are guaranteed in full by each of the Operating Companies. For purposes of
the Indenture, such borrowings under the NationsBank Credit Facility constitute
Senior Indebtedness of the Company and Guarantor Senior Indebtedness of the
Operating Companies.
The NationsBank Credit Facility contains customary representations and
warranties and events of default and requires compliance with a number of
affirmative and negative covenants, including a
6
<PAGE>
limitation on the incurrence of indebtedness and a requirement that the Company
maintain a specified Senior Funded Debt Ratio and Fixed Charge Coverage Ratio.
Volvo Credit Facilities
In February 1996, the Company and its subsidiaries entered into a Loan and
Security Agreement, a Financing Integration Agreement and related documents
(collectively, the "Volvo Credit Facilities") with Volvo Truck Finance North
America, Inc. ("Volvo") pursuant to which Volvo has committed, subject to the
terms and conditions of the Volvo Credit Facilities, to provide (i) a $10
million line of credit facility (the "Volvo Line of Credit") to the Company and
the Operating Companies, and (ii) up to $28 million in purchase money or lease
financing (the "Equipment Financing Facility") in connection with the Operating
Companies' acquisition of new tractors and trailers manufactured by Volvo GM
Heavy Truck Corporation. Borrowings under the Volvo Line of Credit are secured
by certain specified tractors and trailers of the Company and the Operating
Companies (which must have a value equal to at least 1.75 times the outstanding
amount of borrowings under the Volvo Line of Credit) and are guaranteed in full
by each of the Operating Companies. As of September 30, 1996, the Operating
Companies have pledged collateral which provides for a $7.5 million line of
credit. Borrowings under the Volvo Line of Credit bear interest at the prime
rate. The Volvo Line of Credit contains customary representations and warranties
and events of default and requires compliance with a number of affirmative and
negative covenants, including a profitability requirement and a coverage ratio.
The Equipment Financing Facility is being provided by Volvo in connection
with the Operating Companies' agreement to purchase 400 new trucks manufactured
by Volvo GM Heavy Truck Corporation between March 1, 1996 and June 30, 1997. The
borrowings under the Equipment Financing Facility are collateralized by the
specific trucks being financed and are guaranteed in full by each of the
Operating Companies. Borrowings under this facility bear interest at the prime
rate.
At September 30, 1996, borrowings outstanding under the Volvo Line of
Credit were $5.4 million with available borrowings of $2.1 million. The
outstanding debt balance under the Equipment Financing Facility was $5.1 million
at September 30, 1996; however, available financing under this facility is less
than $16 million as financing was also obtained through operating leases.
The Equipment Financing Facility contains customary representations and
warranties, covenants and events of default. For purposes of the Indenture, the
borrowings under the Volvo Credit Facilities constitute Senior Indebtedness of
the Company and Guarantor Senior Indebtedness of the Operating Companies.
4. CHANGE IN ACCOUNTING ESTIMATES
During 1995, the Company changed its estimate of the useful lives and
salvage values of certain revenue equipment. This change had the effect of
increasing operating income for the nine months ended September 30, 1995, by
approximately $340,000.
5. OTHER INCOME, NET
Other (income) expense consists of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
1996 1995 1996 1995
---------- -------- --------- --------
<S> <C> <C> <C> <C>
Interest income $(128) $ (53) $(414) $(161)
Miscellaneous, net (7) (5) (10) (6)
----- ----- ----- -----
$(135) $ (58) $(424) $(167)
===== ===== ===== =====
</TABLE>
7
<PAGE>
6. CONTINGENCIES
Bangerter has been named as a defendant in a lawsuit entitled The Ekotek
----------
Site PRP Committee v. Steven M. Self et al., Civil No. 2:94CV277K (U.S. District
- -------------------------------------------
Court Utah, Central Division), alleging that Bangerter is a potentially
responsible party with respect to the removal and remediation cost of The Ekotek
Site, located in North Salt Lake City, Utah. The suit alleges that hazardous
waste generated by Bangerter, together with substantial volumes of additional
hazardous waste generated by numerous other businesses, were taken to the site
by a waste disposal firm engaged by Bangerter. Bangerter has settled the
litigation for $25,000 and the lawsuit has been dismissed with prejudice. It is
the opinion of management and counsel that there is no reasonable probability of
additional liability. The Company cannot predict with any certainty that it will
not in the future incur liability with respect to environmental compliance or
liability associated with the contamination of additional sites owned or
operated by the Company and its subsidiaries, sites formerly owned or operated
by the Company and its subsidiaries (including contamination caused by prior
owners and operators of such sites), or off-site disposal of hazardous material
or waste that could have a material adverse effect on the Company's consolidated
financial condition, operations or liquidity.
The Company and its subsidiaries are a party to litigation incidental to
its business, primarily involving claims for personal injury or property damages
incurred in the transportation of freight. The Company is not aware of any
claims or threatened litigation that could reasonably be expected to have a
material adverse effect on the Company's consolidated financial position,
operations or liquidity.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following analysis should be read in conjunction with the consolidated
financial statements included in Item 1 - "Financial Statements." Results for
the three and nine months ended September 30, 1995 include W&L and TBI results
on a combined basis as the "Predecessor Company" for the entire 1995 periods,
and Bangerter results since August 1, 1995. Results for the three and nine
months ended September 30, 1996 for the Company include the results of W&L, TBI,
Bangerter, ART (including the Freymiller Assets since February 5, 1996) and
Scales for the entire 1996 periods and of KTL since July 1, 1996. Bangerter, ART
(including the Freymiller Assets), Scales and KTL are collectively referred to
below as the "Acquired Companies. "
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1995
Net Income
For the quarter ended September 30, 1996, the Company had a net loss of
$632,000 compared with net income of $1.1 million for the same period in 1995.
The additional revenue and operating income from the Acquired Companies in the
third quarter of 1996 was substantially offset by additional interest costs.
In addition, operating income was negatively impacted by increased fuel costs
and driver shortages. Excluding the tax provision of $757,000 for the third
quarter of 1996, AmeriTruck pretax income was $125,000.
Revenues
Third quarter revenues for 1996 improved $37.8 million, or 150 percent,
compared with the third quarter of 1995. Approximately $36.4 million, or 96
percent of this increase, reflects revenues of the Acquired Companies. The
Predecessor Company had increased revenues of $1.4 million primarily
attributable to increased volume during the three month period ended September
30, 1996.
Expenses
The following table sets forth operating expenses as a percentage of
revenue and the related variance from 1996 to 1995.
<TABLE>
<CAPTION>
Three Months Ended
September 30, Variance
-------------------- Increase
1996 1995 (Decrease)
--------- --------- ----------
<S> <C> <C> <C>
Salaries, wages and fringe benefits 31.5% 31.2% .3%
Purchased transportation 26.4 25.4 1.0
Operating supplies and expenses 17.0 16.2 .8
Depreciation and amortization of
capital leases 6.2 7.6 (1.4)
Claims and insurance 3.9 3.8 .1
Operating taxes and licenses 2.2 2.7 (.5)
General supplies and expenses 5.2 3.3 1.9
Amortization of intangibles .5 .3 .2
Gain on disposal of property and
equipment (.3) (1.2) .9
---- ---- ----
Operating Ratio 92.6% 89.3% 3.3%
==== ==== ====
</TABLE>
Salaries, wages and fringe benefits for the third quarter of 1996 increased
$12.0 million, or 153 percent, compared with the third quarter of 1995 due to
the addition of $11.2 million in salaries, wages and fringe benefits
attributable to the Acquired Companies. In addition, the increase is
attributable to corporate salaries, some of which should generate future cost
savings for the Company as a whole due to more competitive prices obtained in
such areas as equipment and parts, fuel, insurance and financing.
9
<PAGE>
Purchased transportation costs were up $10.2 million in the third quarter
of 1996. The Acquired Companies added $9.2 million to these costs, while the
Predecessor Company showed an increase of $1.0 million in 1996 due to the
increase in owner operator miles. The 1.0 percentage point increase in
purchased transportation costs, as a percent of revenue, is mainly attributable
to the Acquired Companies, whose percentage of equipment held under operating
leases is higher than the Predecessor Company's, thus increasing equipment rents
for 1996. This increase in percentage of revenue was partially offset due to
the Acquired Companies driver base consisting of an average of just 25 percent
owner operators for the third quarter of 1996, as compared to the Predecessor
Company's driver base, which consisted of 32 percent owner operators as of
September 30, 1995.
Operating supplies and expenses for the Company were $6.6 million higher
for the quarter ended September 30, 1996 over 1995. Of this increase, $6.6
million is attributable to the Acquired Companies. The .8 percentage point
increase in operating supplies as a percent of revenue is mainly attributable to
the Acquired Companies, whose driver base consists of an average of 75 percent
of Company drivers, contributing to higher fuel and maintenance costs for
Company owned equipment. The Company's fuel costs would have been lower by
approximately $600,000 had the average fuel price for the third quarter of 1996
remained consistent with the first quarter of 1996.
Depreciation and amortization of capital leases were up $2.0 million, but
decreased as a percentage of revenue in the third quarter of 1996 due to the
acquisition of used assets from Freymiller as well as a higher percentage of the
Acquired Companies' equipment being held under operating leases. During 1995,
the Company changed its estimate of the useful lives and salvage values of
certain revenue equipment. This change had the effect of increasing operating
income for the third quarter of 1995, by approximately $133,000.
Claims and insurance expenses were up $1.5 million, for the third quarter
of 1996 as compared to the same period in 1995, which is due primarily to costs
attributable to the Acquired Companies. However, on a percentage of revenue
basis, these costs were comparable.
General supplies and expenses increased by $2.5 million for the third
quarter of 1996 when compared with the same period in 1995. The general supplies
and expenses of the Acquired Companies accounted for the majority of this
increase, as the Predecessor Company had only a slight increase in this
category. The largest components of these expenses of the Acquired Companies
were building and office equipment rents, utilities, agent commissions and
office expenses.
Interest expense increased $3.5 million for the quarter ended September 30,
1996 over the same period in 1995. Interest on the Subordinated Notes, which
were issued in November 1995 in conjunction with the 1995 acquisitions, and the
NationsBank and Volvo credit facilities, which were used to fund the acquisition
of the Freymiller Assets and KTL, were the primary factors for this change.
The increase in the effective tax rate for the quarter ended September 30,
1996 compared with the third quarter of 1995 is primarily due to the drivers'
expense allowances paid by Freymiller and KTL, a portion of which are
nondeductible expenses.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1995
Net Income
For the nine months ended September 30,1996, the Company had a net loss of
$1.2 million compared with net income of $3.1 million for the same period in
1995. The additional revenue and operating income from the Acquired Companies
in the first nine months of 1996 was substantially offset by additional interest
costs. In addition, operating income was negatively impacted by increased fuel
costs and driver shortages. The net loss in 1996 includes an extraordinary item,
loss on early retirement of debt of $230,000, net of taxes of $154,000. These
early retirements related to the use of a portion of the proceeds from the
Company's Subordinated Notes offering in 1995.
Revenues
Revenues for the first nine months of 1996 improved $95.0 million, or 144
percent, compared with the first nine months of 1995. Approximately $90.1
million, or 95 percent, of this increase reflects
10
<PAGE>
revenues of the Acquired Companies. The Predecessor Company had increased
revenues of $4.9 million primarily attributable to increased volume during the
nine month period ended September 30, 1996.
Expenses
The following table sets forth operating expenses as a percentage of
revenue and the related variance from 1996 to 1995.
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Variance
------------------- Increase
1996 1995 (Decrease)
--------- -------- ----------
<S> <C> <C> <C>
Salaries, wages and fringe benefits 32.2% 30.5% 1.7%
Purchased transportation 25.3 27.3 (2.0)
Operating supplies and expenses 18.1 14.9 3.2
Depreciation and amortization of
capital leases 6.3 7.4 (1.1)
Claims and insurance 3.8 3.9 (.1)
Operating taxes and licenses 2.2 1.9 .3
General supplies and expenses 4.7 3.1 1.6
Amortization of intangibles .5 .5 -
Gain on disposal of property and
equipment (.3) (.6) .3
---- ---- ----
Operating Ratio 92.8% 88.9% 3.9%
==== ==== ====
</TABLE>
Salaries, wages and fringe benefits for the first nine months of 1996
increased $31.8 million, or 158 percent, compared with the first nine months of
1995 due to the addition of $29.9 million in salaries, wages and fringe benefits
attributable to the Acquired Companies. In addition, the increase is
attributable to corporate salaries, some of which should generate future cost
savings for the Company as a whole due to more competitive prices obtained in
such areas as equipment and parts, fuel, insurance and financing. The 1.7
percentage point increase in salaries, wages and fringe benefits as a percentage
of revenue is attributable primarily to the Acquired Companies, because only 17
percent of their nine month average combined driver base consisted of owner
operators, whose costs are reflected in purchased transportation. In contrast,
as of September 30, 1995, 32 percent of the Predecessor Company's driver base
consisted of owner operators. The Predecessor Company also had increases in
wages and salaries for drivers and terminal personnel due to the increased
mileage during the first nine months of 1996 and pay increases.
Purchased transportation costs were up $22.7 million in the first nine
months of 1996, but decreased on a percentage of revenue basis by 2.0 percentage
points. The Acquired Companies added $20.1 million to these costs, but their
driver base, which consists of an average of just 17 percent owner operators,
helped to lower purchased transportation costs as a percentage of revenue. This
decrease in percentage of revenue was partially offset by a higher percentage of
equipment held under operating leases by the Acquired Companies which resulted
in increased equipment rents. The Predecessor Company showed an increase of
$2.6 million in purchased transportation costs in the 1996 period due to
expanded freight opportunities and its continued use of owner operator drivers.
Operating supplies and expenses for the Company were $19.3 million higher
for the nine months ended September 30, 1996 over 1995. Of this increase, $18.5
million is attributable to the Acquired Companies. The Predecessor Company also
added $756,000 to this increase due to increased fuel costs and maintenance
expenses. The 3.2 percentage point increase in operating supplies as a
percentage of revenue is mainly attributable to the Acquired Companies, whose
driver base consists of an average of 83 percent of Company drivers,
contributing to higher fuel and maintenance costs for Company owned equipment.
The Company's fuel costs would have been lower by approximately $1.4 million had
the average fuel price for the second and third quarters of 1996 remained
consistent with the first quarter of 1996.
Depreciation and amortization of capital leases were up $5.3 million, but
decreased as a percentage of revenue in the first nine months of 1996 due to the
acquisition of used assets from Freymiller as well as a higher percentage of the
Acquired Companies' equipment being held under operating leases. During 1995,
the Company changed its estimate of the useful lives and salvage values of
certain
11
<PAGE>
revenue equipment. This change had the effect of increasing operating income
for the nine months ended September 30, 1995, by approximately $340,000.
Claims and insurance expenses were up $3.5 million for the first nine
months of 1996 as compared to the first nine months of 1995, which is due
primarily to costs attributable to the Acquired Companies. However, on a
percentage of revenue basis, these costs were comparable.
General supplies and expenses increased by $5.6 million for the first nine
months of 1996 when compared with the same period in 1995. The general supplies
and expenses of the Acquired Companies accounted for the majority of this
increase, as the Predecessor Company had only a slight increase in this
category. The largest components of these expenses of the Acquired Companies
were building and office equipment rents, utilities, agent commissions and
office expenses.
Interest expense increased $9.6 million for the nine months ended September
30, 1996 over the same period in 1995. Interest on the Subordinated Notes, which
were issued in November 1995 in conjunction with the 1995 acqusitions, and the
NationsBank and Volvo credit facilities, which were used to fund the acquisition
of the Freymiller Assets and KTL, were the primary factors for this change.
The increase in the effective tax rate for the nine months ended September
30, 1996 compared with the first nine months of 1995 is primarily due to the
driver's expense allowances paid by Freymiller and KTL, a portion of which are
nondeductible expenses.
CONTINGENCIES
Bangerter has been named as a defendant in a lawsuit entitled The Ekotek
----------
Site PRP Committee v. Steven M. Self et al., Civil No. 2:94CV277K (U.S. District
- -------------------------------------------
Court Utah, Central Division), alleging that Bangerter is a potentially
responsible party with respect to the removal and remediation cost of The Ekotek
Site, located in North Salt Lake City, Utah. The suit alleges that hazardous
waste generated by Bangerter, together with substantial volumes of additional
hazardous waste generated by numerous other businesses, were taken to the site
by a waste disposal firm engaged by Bangerter. Bangerter has settled the
litigation for $25,000 and the lawsuit has been dismissed with prejudice. It is
the opinion of management and counsel that there is no reasonable probability of
additional liability. The Company cannot predict with any certainty that it will
not in the future incur liability with respect to environmental compliance or
liability associated with the contamination of additional sites owned or
operated by the Company and its subsidiaries, sites formerly owned or operated
by the Company and its subsidiaries (including contamination caused by prior
owners and operators of such sites), or off-site disposal of hazardous material
or waste that could have a material adverse effect on the Company's consolidated
financial condition, operations or liquidity.
The Company and its subsidiaries are a party to litigation incidental to
its business, primarily involving claims for personal injury or property damages
incurred in the transportation of freight. The Company is not aware of any
claims or threatened litigation that could reasonably be expected to have a
material adverse effect on the Company's consolidated financial position,
operations or liquidity.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the nine months ended
September 30, 1996 was $29,000 compared with $9.6 million for the nine months
ended September 30, 1995. The decrease of $9.6 million was primarily
attributable to a $11.6 million increase in accounts receivable during the first
nine months of 1996, of which $7.0 million resulted from the purchase of the
Freymiller Assets, and a decrease in net income of $4.3 million. These decreases
were partially offset by an increase in depreciation and amortization of capital
leases of $5.3 million.
Subordinated Notes
In November 1995, AmeriTruck completed a private placement of $100 million
of 12 1/4% Senior Subordinated Notes due 2005 (the "Series A Notes"). The Series
A Notes were exchanged for publicly registered 12 1/4% Senior Subordinated Notes
due 2005, Series B (the "Subordinated Notes") in February 1996. The Subordinated
Notes mature on November 15, 2005, and are unsecured subordinated obligations of
the Company. These notes bear interest at the rate of 12.25 percent per annum
from November 15, 1995, payable semiannually on May 15 and November 15 of each
year, commencing on May 15, 1996. The Subordinated Notes are subject to optional
redemption on the terms set forth in the
12
<PAGE>
Indenture. As of September 30, 1996,
the Company has applied the net proceeds of the Series A Notes primarily to
finance the Acquisitions and prepay debt and capitalized leases.
NationsBank Credit Facility
In February 1996, the Company and its subsidiaries entered into a Loan
Agreement and related documents (collectively, the "NationsBank Credit
Facility") with NationsBank of Texas, N.A. ("NationsBank") pursuant to which
NationsBank has committed, subject to the terms and conditions of the
NationsBank Credit Facility, to provide a $30 million credit facility to the
Company. Borrowings under the NationsBank Credit Facility can be used for
acquisitions, operating capital, capital expenditures, letters of credit and
general corporate purposes. Pursuant to the NationsBank Credit Facility, as
amended, NationsBank has agreed to provide a $30 million revolving credit
facility, with a $7 million sublimit for letters of credit, maturing on February
1, 1998, at which time the revolving credit facility will convert into a term
loan maturing on February 1, 2003. This facility is also subject to a borrowing
base consisting of eligible receivables and eligible revenue equipment.
Currently, the Company's borrowing base exceeds $30 million. Borrowings under
the NationsBank Credit Facility bear interest at a per annum rate equal to
either NationsBank's base rate or the rate of interest offered by NationsBank in
the interbank eurodollar market plus an additional margin ranging from 1.5
percent to 2.0 percent based on the Senior Funded Debt Ratio of the Company. The
Company also pays a letter of credit issuance fee and a quarterly unused
facility fee. Borrowings under the NationsBank Credit Facility were $23.5
million at September 30, 1996 and were primarily used for the purchase of the
Freymiller Assets and the KTL acquisition. Available borrowings were $2.3
million at September 30, 1996 as there were $4.2 million in letters of credit
outstanding.
The Company's obligations under the NationsBank Credit Facility are
collateralized by substantially all assets of the Company and its subsidiaries
and are guaranteed in full by each of the Operating Companies. For purposes of
the Indenture, such borrowings under the NationsBank Credit Facility constitute
Senior Indebtedness of the Company and Guarantor Senior Indebtedness of the
Operating Companies.
The NationsBank Credit Facility contains customary representations and
warranties and events of default and requires compliance with a number of
affirmative and negative covenants, including a limitation on the incurrence of
indebtedness and a requirement that the Company maintain a specified Senior
Funded Debt Ratio and Fixed Charge Coverage Ratio.
Volvo Credit Facilities
In February 1996, the Company and its subsidiaries entered into a Loan and
Security Agreement, a Financing Integration Agreement and related documents
(collectively, the "Volvo Credit Facilities") with Volvo Truck Finance North
America, Inc. ("Volvo") pursuant to which Volvo has committed, subject to the
terms and conditions of the Volvo Credit Facilities, to provide (i) a $10
million line of credit facility (the "Volvo Line of Credit") to the Company and
the Operating Companies, and (ii) up to $28 million in purchase money or lease
financing (the "Equipment Financing Facility") in connection with the Operating
Companies' acquisition of new tractors and trailers manufactured by Volvo GM
Heavy Truck Corporation. Borrowings under the Volvo Line of Credit are secured
by certain specified tractors and trailers of the Company and the Operating
Companies (which must have a value equal to at least 1.75 times the outstanding
amount of borrowings under the Volvo Line of Credit) and are guaranteed in full
by each of the Operating Companies. As of September 30, 1996, the Operating
Companies have pledged collateral which provides for a $7.5 million line of
credit. Borrowings under the Volvo Line of Credit bear interest at the prime
rate. The Volvo Line of Credit contains customary representations and
warranties and events of default and requires compliance with a number of
affirmative and negative covenants, including a profitability requirement and a
coverage ratio.
The Equipment Financing Facility is being provided by Volvo in connection
with the Operating Companies' agreement to purchase 400 new trucks manufactured
by Volvo GM Heavy Truck Corporation between March 1, 1996 and June 30, 1997.
The borrowings under the Equipment Financing Facility are collateralized by the
specific trucks being financed and are guaranteed in full by each of the
Operating Companies. Borrowings under this facility bear interest at the prime
rate.
13
<PAGE>
At September 30, 1996, borrowings outstanding under the Volvo Line of
Credit were $5.4 million with available borrowings of $2.1 million. The
outstanding debt balance under the Equipment Financing Facility was $5.1 million
at September 30, 1996; however, financing under this facility is less than $16
million as financing was also obtained through operating leases.
The Equipment Financing Facility contains customary representations and
warranties, covenants and events of default. For purposes of the Indenture, the
borrowings under the Volvo Credit Facilities constitute Senior Indebtedness of
the Company and Guarantor Senior Indebtedness of the Operating Companies.
The Operating Companies began taking delivery of the Volvo trucks in early
May at an average rate of 10 per week, with total deliveries for the second and
third quarters of 192 trucks. Another 142 trucks are scheduled for delivery
during the fourth quarter of 1996. To partially offset these planned 1996
expenditures of $21.8 million, the Company intends to sell at least 325 used
trucks from the Operating Companies for approximately $7 million. The number of
trucks scheduled for delivery and for sale during 1996 increased by
approximately 75 units as a result of planned modernization of KTL's existing
fleet.
Capital Expenditures and Resources
The Company had capital expenditures, net of cash proceeds from
dispositions, of $14.4 million for the nine months ended September 30, 1996,
excluding the purchase of the Freymiller Assets and the KTL acquisition, and
$3.6 million for the nine months ended September 30, 1995, excluding the Dietz
acquisition. These amounts also do not include capital expenditures financed
through capital leases and other debt which amounted to approximately $10.3
million and $6.1 million for the nine months ended September 30, 1996 and 1995,
respectively. The increase in capital expenditures during the first nine months
of 1996 was primarily due to the purchase of new tractors and trailers in order
to maintain an average fleet age of approximately 2 years for tractors and 4
years for trailers.
AmeriTruck projects 1996 capital expenditures to increase over 1995 levels.
The Company will purchase approximately 350 new trucks, including the 334 Volvo
trucks, and 465 new trailers during 1996. Approximately 90 percent of these new
tractors and trailers are planned to replace older equipment. These equipment
purchases and commitments will likely be financed using a combination of sources
including, but not limited to, cash from operations, leases, debt issuances and
other miscellaneous sources. Each financing decision will be based upon the most
appropriate alternative available. As of September 30, 1996, the Company had
taken delivery of 209 new trucks and 428 new trailers.
During the third quarter of 1996, AmeriTruck purchased all of the
outstanding stock of KTL, Inc. ("KTL") of Largo, Florida from Ronald N. Damico
for a purchase price of $8.1 million in cash and 225,000 shares of Class A
common stock of AmeriTruck valued at $900,000. As part of the transaction, Mr.
Damico and KTL entered into an employment agreement, under which Mr. Damico
became employed as KTL's President and Chief Executive Officer. The term of the
employment agreement expires on November 15, 1998. In addition, KTL has agreed
to lease from Mr. Damico and his spouse certain real estate at Clearwater,
Florida on a month-to-month basis. Further, KTL has agreed to lease the real
estate at Largo, Florida used by KTL as its corporate headquarters from a
company owned by Mr. Damico for an 18-month term, at which time KTL has agreed
to purchase the property for $2.4 million less the total amount of
environmental-related costs incurred subsequent to August 16, 1996.
KTL is a trucking company founded in 1983 which specializes in the
truckload transportation of refrigerated commodities and less-than-truckload
shipments requiring expedited, timed-delivery services. KTL operates
approximately 140 tractors and 300 trailers and employs approximately 300
persons, of whom 240 are drivers and many of whom operate as two-driver teams.
The KTL acquisition was accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated to the assets
acquired and liabilities assumed based on their estimated fair values at the
date of acquisition. The total purchase price including cash, common stock,
miscellaneous acquisition costs and liabilities assumed was $21.9 million. The
excess of the purchase price over the fair values of the net assets acquired has
been recorded as goodwill.
14
<PAGE>
In February 1996, the Company, through CMS Transportation Services, Inc.
("CMS"), purchased certain assets of Freymiller Trucking Inc. ("Freymiller") in
order to supplement its existing temperature-controlled trucking business.
Freymiller had been the subject of a Chapter 11 bankruptcy proceeding in
Oklahoma. CMS purchased certain specific automobiles, computer hardware and
software, furniture and fixtures, rights to the trade name "Freymiller",
existing spare parts, tires and fuel, rights under certain leases, certain
leasehold improvements and shop equipment and installment sales contracts
relating to tractors and trailers sold by Freymiller out of the ordinary course
of business (with all of the foregoing referred to as the "Freymiller Assets").
The Company also negotiated with Freymiller's lenders and lessors to purchase
approximately 185 tractors and 309 trailers previously operated by Freymiller
for approximately $14 million. An additional 80 trailers were leased for a
seven-year period. In exchange for the Freymiller Assets, the Company paid
approximately $2.7 million in cash at closing and assumed approximately $2
million in existing equipment financing. In addition, the Company assumed a
lease for Freymiller's maintenance facility in Oklahoma City and certain routine
executory business contracts. Except as provided above, the Company did not
assume any obligations or liabilities of Freymiller.
In connection with these transactions, the Company purchased real property
in Oklahoma City, Oklahoma from Freymiller's Chairman of the Board, President
and Chief Executive Officer for approximately $1.5 million in cash.
In April 1996, the Company changed the corporate name of CMS to AmeriTruck
Refrigerated Transport, Inc. ART currently conducts the operations not only of
CMS but also those formerly conducted with the Freymiller Assets.
During the nine-months ended September 30, 1996, operating profit margins
were negatively impacted by escalating fuel costs, the assimilation of
significant assets from the Freymiller bankruptcy estate, the merger of the
operations of CBS into Scales, and the cost of developing a corporate staff. The
Company has implemented a fuel surcharge to its customers to help combat this
surge in fuel costs. The merger of CBS into Scales caused the Company to lose
some qualified drivers which in turn resulted in decreased equipment
utilization. In addition, one subsidiary lost drivers as a result of eliminating
driver expense allowances and changing their pay structure. The Company has
intensified its efforts in the driver recruitment and training areas and has
begun to correct this problem in the fourth quarter.
In May 1995, W&L acquired Dietz Motor Lines, Inc. for $2.0 million in cash,
which includes payment for non-compete agreements of $400,000 as well as an
amount for certain eligible accounts receivable. This acquisition has been
accounted for using the purchase method of accounting. Accordingly, the
purchase price was allocated to the assets acquired and the liabilities assumed
based on their estimated fair values at the date of acquisition. The results of
operations of the acquired company are included in the financial statements from
the date of acquisition.
Opportunistic Acquisitions
The Company will pursue opportunistic acquisitions to broaden its
geographic scope, to increase freight network density and to expand into other
specialized trucking segments. Through acquisitions, the Company believes it can
capture additional market share and increase its driver base without adopting a
growth strategy based on widespread rate discounting and driver recruitment,
which the Company believes would be less successful. The Company believes its
large size relative to many other potential acquirers could afford it greater
access to acquisition financing sources such as banks and capital markets.
AmeriTruck has entered into a revolving credit facility with NationsBank of
Texas, N.A. and a revolving credit facility with Volvo Truck Finance North
America, Inc. As described above, these revolving credit facilities, subject to
the conditions on borrowing contained therein, will give AmeriTruck the ability
to pursue acquisitions that the Company could not otherwise fund through cash
provided by operations. In addition, the Company may finance its acquisitions
through equity issuances, seller financing and other debt financings.
The Company is a holding company with no operations of its own. The
Company's ability to make required interest payments on the Subordinated Notes
depends on its ability to receive funds from the Operating Companies. The
Company, at its discretion, controls the receipt of dividends or other payments
from the Operating Companies.
15
<PAGE>
OTHER MATTERS
Inflation and Fuel Costs
Inflation can be expected to have an impact on the Company's earnings.
Extended periods of escalating costs or fuel price increases without
compensating freight rate increases would adversely affect the Company's results
of operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations-Expenses."
The industry as a whole has seen dramatic increases in fuel prices.
According to a Department of Energy survey, reported by the American Trucking
Association, the average price of diesel fuel peaked during the month of April
at 15.7 cents above the December 31, 1995 price. Since April, the average price
had decreased some, but is beginning to gradually increase to near peak levels
again. According to the survey, the average price of diesel fuel for the third
quarter of 1996 was approximately 2.0 cents above the first quarter average
price. The Company has seen its fuel prices increase at a rate consistent with
the national average.
FORWARD LOOKING STATEMENTS AND RISK FACTORS
From time to time, the Company issues statements in public filings
(including this Form 10-Q) or press releases, or officers of the Company make
public oral statements with respect to the Company, that may be considered
forward-looking within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. Such forward-looking
statements in this Form 10-Q include statements concerning future cost savings,
projected levels of capital expenditures and the timing of deliveries of new
trucks and trailers, driver recruitment and training and the Company's pursuit
of opportunistic acquisitions. These forward-looking statements are based on a
number of risks and uncertainties, many of which are beyond the Company's
control. The Company believes that the following important factors, among
others, could cause the Company's actual results for its 1996 fiscal year and
beyond to differ materially from those expressed in any forward-looking
statements made by, on behalf of, or with respect to, the Company: inflation and
fuel costs; substantial leverage; liquidity and capital resources; absence of
combined operating history; dependence on certain customers; cyclicality and
other economic factors; competition; availability of drivers; regulation; claims
exposure; and dependence on key personnel. Each of these risk factors is
discussed in more detail in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995 and other filings the Company has made with the
Securities and Exchange Commission and are incorporated herein by reference.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to litigation incidental to its business, primarily
involving claims for personal injury or property damages incurred in the
transportation of freight. The Company is not aware of any claims or threatened
litigation that could reasonably be expected to have a material adverse affect
on the Company's consolidated financial position, operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The date of the annual meeting was August 7, 1996.
(b) Messrs. Lawrence, Beauchamp, Evans, Greenwood, Langevin, May and
Scales were elected to the Board of Directors.
(c) The following matters were voted on at the meeting:
(1) The following persons were nominated and elected to serve as
directors of AmeriTruck :
<TABLE>
<CAPTION>
Number of Number of Number of Broker
Name Shares in Shares Shares Nonvotes
Favor Against Abstained
---- ----------- --------- --------- --------
<S> <C> <C> <C> <C>
M. L. Lawrence 2,662,481 None None None
R. A. Beauchamp 2,662,481 None None None
K. H. Evans, Jr. 2,662,481 None None None
W. E. Greenwood 2,662,481 None None None
M. J. Langevin 2,662,481 None None None
J. M. May 2,662,481 None None None
W. P. Scales 2,662,481 None None None
</TABLE>
(2) Coopers & Lybrand, L.L.P. was selected as the Company's
independent accountants for the year ending December 31, 1996.
<TABLE>
<CAPTION>
Number of Number of Number of Broker
Shares in Shares Shares Nonvotes
Favor Against Abstained
---------- --------- --------- --------
<S> <C> <C> <C> <C>
2,662,481 None None None
</TABLE>
17
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
The following exhibits are filed as part of this report:
Exhibit Number Description
- -------------- -----------
10.1 First Amendment to Loan Agreement, dated August
13, 1996, to be effective as of June 28, 1996,
between the Company and NationsBank of Texas, N.A.
*10.2 Stock Purchase Agreement, dated as of August 23,
1996, between the Company and Ronald N. Damico
10.3 Continuing and Unconditional Guaranty, dated as of
September 16, 1996, between KTL and NationsBank of
Texas, N.A.
10.4 Security Agreement, dated as of September 16,
1996, between KTL and NationsBank of Texas, N.A.
10.5 Guarantee of 12 1/4% Senior Subordinated Notes
Due 2005, Series B, dated as of September 19,
1996, by KTL
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
* Incorporated by reference to the Company's Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 9, 1996.
B. Reports on Form 8-K
On September 9, 1996, the Company filed a report on Form 8-K in
connection with the acquisition of KTL. On November 5, 1996, the
Company filed an amendment to this Form 8-K.
Items 2, 3, and 5 of Part II were not applicable and have been
omitted.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERITRUCK DISTRIBUTION CORP.
By: /s/ MICHAEL L. LAWRENCE
------------------------------------------
Michael L. Lawrence
Chairman of the Board and
Chief Executive Officer
By: /s/ KENNETH H. EVANS, JR.
------------------------------------------
Kenneth H. Evans, Jr.
Treasurer and Chief Financial and
Accounting Officer
Date: November 14, 1996
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Page
Number Description Number
- ------- ----------- ------
10.1 First Amendment to Loan Agreement, dated
August 13, 1996, to be effective as of
June 28, 1996, between the Company and
NationsBank of Texas, N.A.
10.3 Continuing and Unconditional Guaranty,
dated as of September 16, 1996, between
KTL and NationsBank of Texas, N.A.
10.4 Security Agreement, dated as of September
16, 1996, between KTL and NationsBank of
Texas, N.A.
10.5 Guarantee of 12 1/4% Senior Subordinated
Notes Due 2005, Series B, dated as of
September 19, 1996, by KTL
12 Computation of Ratio of Earnings to Fixed
Charges
27 Financial Data Schedule
<PAGE>
EXHIBIT 10.1
FIRST AMENDMENT TO
LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment") is entered into
on August 13, 1996, to be effective as of June 28, 1996, between AMERITRUCK
DISTRIBUTION CORP., a Delaware corporation ("Borrower"), and NATIONSBANK OF
TEXAS, N.A., a national banking association ("Lender").
R E C I T A L S
- - - - - - - -
1. Borrower and Lender are parties to that certain Loan Agreement (the
"Loan Agreement") dated as of February 1, 1996, providing for a $30,000,000.00
revolving credit loan.
2. The parties hereto desire to amend the Loan Agreement, upon the terms
and subject to conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender agree as
follows:
1. Terms and References. Unless otherwise stated in this Amendment (a)
terms defined in the Loan Agreement have the same meanings when used in this
Amendment, and (b) references to "Sections" are to the Loan Agreement's
sections.
2. Amendments to the Loan Agreement. The Loan Agreement is hereby
amended as follows:
(a) Section 1.01 is hereby amended as follows:
(i) The definition of "Applicable Margin" is hereby deleted in its
entirety and replaced with the following:
"Applicable Margin" shall mean, at the time of determination thereof,
the interest margin over the Base Rate or the Adjusted LIBOR Rate, as the
case may be, based upon the ratio of Senior Funded Debt to EBITDA as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
SENIOR FUNDED APPLICABLE MARGIN APPLICABLE MARGIN LIBOR
DEBT RATIO BASE RATE BORROWINGS BORROWINGS
- ------------------------------------------------------------------------------
<S> <C> <C>
Less than 1.25 to 1.0 0% 1.50%
- ------------------------------------------------------------------------------
Less than 2.0 to 1.0 and 0% 1.75%
greater than or equal to
1.25 to 1.0
- ------------------------------------------------------------------------------
Greater than or equal to 2.0 0% 2.0%
to 1.0
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
(ii) The following definitions are added:
"Allowable Contributions" shall mean capital contributions made in the form
of cash by the stockholders of Borrower or any of them to satisfy the Fixed
Charges Coverage Ratio set forth in Section 8.13 or the Senior Funded Debt Ratio
set forth in Section 8.14.
"Borrowing Base" shall mean, at any particular date, the amount calculated
(without duplication) as follows: (a) eighty percent (80%) of aggregate Eligible
Receivables plus (b) seventy-five percent (75%) of aggregate Eligible Equipment.
"Borrowing Base Report" shall mean, as of any date of preparation, a
certificate prepared, duly executed and certified by a duly elected officer of
Borrower showing the Borrowing Base as determined by Borrower as of the date
thereof, and which shall be in the form of Exhibit K attached hereto.
"Eligible Equipment" shall mean, at any time, revenue equipment held by
Borrower or any Subsidiary and in which Lender has a perfected, first priority
Lien, valued at the lower of original cost or appraised value (based upon the
then-most recent appraisals provided by Borrower and satisfactory to Lender),
provided that such revenue equipment is (a) usable by Borrower or a Subsidiary
in the ordinary course of its business, (b) in Borrower's or a Subsidiary's
possession, and (c) not subject to any Lien (except in favor of Lender).
"Eligible Receivables" shall mean only Receivables arising out of bona fide
sales made by Borrower or any Subsidiary in the ordinary course of business. No
Receivable shall be an Eligible Receivable if such Receivable (a) is unpaid more
than ninety (90) days from its invoice date, (b) is subject to dispute, but only
to the extent of the amount in dispute, (c) is from an account debtor that is an
Affiliate of Borrower or any of its Subsidiaries, (d) not subject to a
perfected, first-priority Lien in favor of Lender, (e) is not, in Lender's
reasonable judgment, Eligible Receivables because of the account debtor's
financial inability to pay, (f) has been placed with an attorney or collection
agency, (g) represents the consignment of goods or any advancement of goods for
which the sale is not final, (h) is payable by an account debtor that is also a
supplier or creditor of Borrower and such account debtor has not by written
agreement subordinated its rights of set off to the rights of Lender to the
reasonable satisfaction of Lender, but only to the extent of the amount of
Borrower's or its Subsidiaries' obligations to such suppliers or creditors
(other than cargo claims), (i) is payable by an account debtor that is not
located within the United States or Canada, unless such Receivable is secured by
a letter of credit reasonably acceptable to Lender, (j) arises out of a contract
with, or order from an account debtor that, by its terms, effectively makes void
or unenforceable the assignment by Borrower or any Subsidiary to Lender of the
Receivable arising with respect thereto, and (k) is payable by an account debtor
in which more than ten percent (10%) of the undisputed Receivables of such
account debtor owing to Borrower and/or any Subsidiary are unpaid for more than
ninety (90) days from its invoice date.
"Receivables" shall mean all present and future (a) accounts, receivables,
contract, rights, chattel paper, documents, tax refunds, or payments of, or
owned by, Borrower or any Subsidiary, (b) insurance proceeds, patent rights,
license rights, rights to refunds or indemnification, and other general
intangibles of very kind or nature of, or owned by, Borrower or any Subsidiary,
and
-2-
<PAGE>
(c) forms of obligations whatsoever owing to Borrower or any Subsidiary
together with all instruments and all documents of title representing any
of the foregoing and all right, title, and interest in, and all securities
and guaranties with respect to, each Receivable.
(b) A new Section 1.04 is hereby added as follows:
1.04. Covenant Computations. For purposes of the financial covenants
set forth in Sections 8.13 and 8.14, items of income and expense shall
include such items for any Person newly acquired during the applicable
period(s) of determination on the same basis as that of Borrower and its
other Subsidiaries, without adjustments other than in accordance with SEC
requirements; provided that such items in respect of the assets acquired by
Borrower or its Subsidiaries from the lenders or lessors of Freymiller
Trucking, Inc. on February 5, 1996 shall only be included from and after
the acquisition date thereof.
(c) The first sentence of Section 2.01 is hereby deleted in its entirety
and replaced with the following:
2.01. The Revolving Credit Commitment. Subject to the terms and
conditions of this Agreement, Lender agrees to extend to Borrower, from the
date hereof through the Termination Date, a revolving line of credit which
shall not exceed at any one time outstanding the lesser of (a) the
Borrowing Base or (b) the Revolving Credit Commitment.
(d) Section 2.03(a) is hereby deleted in its entirety and replaced with
the following:
(a) LC Request and Issuance. Subject to the terms and conditions of
this Agreement and applicable law, Lender (itself or through one of its
Affiliates, and references in this Section 2.03 to Lender include those
Affiliates) agrees to issue LCs upon Borrower's making or delivering an LC
Request and delivering an LC Agreement, both of which must be received by
Lender no later than 12:00 noon three (3) Business Days before the
requested LC is to be issued, provided that (i) each LC must expire on or
before the earlier of either the Stated Termination Date or one (1) year
after its issuance, and (ii) the LC Exposure may never exceed, as of any
date, the lesser of (A) $7,000,000.00 (the "LC Commitment") and (B) the
difference between (x) the lesser of the Borrowing Base and the Revolving
Credit Commitment, and (y) the Principal Debt.
(e) Section 3.03(c) is hereby deleted in its entirety and replaced with
the following:
(c) Mandatory Prepayments.
(i) If any of the limitations described in Sections 2.01 and
2.03(a) are ever exceeded, then Borrower shall prepay the Note in at
least the amount of that excess, together with (A) all accrued and
unpaid interest on the principal amount so prepaid, and (B) any
resulting Consequential Loss.
(ii) Notwithstanding anything contained herein or in the Note
to the contrary, if at any time (before or after Scheduled Termination
Date) the outstanding principal balance of the Note exceeds the
Borrowing Base, then Borrower shall immediately prepay
-3-
<PAGE>
in immediately available funds such excess balance, together with any
resulting Consequential Loss.
(f) A new Section 4.04 is hereby added as follows:
4.04. Appraisals. Borrower shall, at Borrower's expense (subject to the
limitations set forth in Section 10.03), provide to Lender (a) semi-annual desk-
top appraisals in a form and format reasonably acceptable to Lender on all of
Borrower's and its Subsidiaries' Eligible Equipment, and (b) upon the request of
Lender, but not more often than one (1) time during any calendar year unless an
Event of Default has occurred and is continuing, physical appraisals at terminal
locations in a form and format reasonably acceptable to Lender on up to twenty-
five percent (25%) of Borrower's and its Subsidiaries' Eligible Equipment,
provided that such physical inspections are conducted so as to not unreasonably
interfere with Borrower's or its Subsidiaries' normal business operations.
(g) Section 7.01 is hereby deleted in its entirety and replaced with the
following:
7.01. Financial Statements, Reports and Documents. Borrower shall deliver
to Lender each of the following:
(a) Periodic Statements. As soon as available, and in any event within
thirty-seven (37) days after the last day of each fiscal quarter of each fiscal
year of Borrower, copies of the consolidated and consolidating balance sheet of
Borrower and its Subsidiaries as of the end of such quarter, and statements of
income, retained earnings and changes in cash flow of Borrower and its
Subsidiaries for that quarter and for the portion of the fiscal year ending with
such quarter, in each case setting forth in comparative form the figures for the
corresponding period of the preceding fiscal year, all in reasonable detail, and
certified by the chief financial officer of Borrower as being true and correct
and as having been prepared in accordance with GAAP, subject to year-end audit
adjustments; provided that Borrower shall also provide to Lender, within thirty-
seven (37) days after the last day of each calendar month, commencing with the
calendar month ending on July 31, 1996 and through and including the calendar
month ending on February 28, 1997, copies of the consolidated and consolidating
balance sheet of Borrower and its Subsidiaries as of the end of such month, and
statements of income, retained earnings and changes in cash flow of Borrower and
its Subsidiaries for that month and for the portion of the fiscal year ending
with such month;
(b) Annual Statements. As soon as available and in any event on or
before each April 15 following the close of each fiscal year of Borrower, copies
of the consolidated and consolidating balance sheet of Borrower and its
Subsidiaries as of the close of such fiscal year and statements of income,
retained earnings and changes in cash flow of Borrower and its Subsidiaries for
such fiscal year, in each case setting forth in comparative form the figures for
the preceding fiscal year, all in reasonable detail and accompanied by an
opinion thereon (which shall not be qualified by reason of any limitation
imposed by Borrower) of independent public accountants of recognized national
standing selected by Borrower and satisfactory to Lender, to the effect that (i)
such consolidated financial statements have been prepared in accordance with
GAAP (except for changes in which such accountants concur), (ii) the examination
of such accounts in connection with such financial statements has been made in
accordance with generally accepted
-4-
<PAGE>
auditing standards and, accordingly, includes such tests of the accounting
records and such other auditing procedures as were considered necessary in the
circumstances, and (iii) in making their audit, such accountants have not become
aware of any condition or event which would constitute a Potential Default or an
Event of Default under any of the terms or provisions of this Agreement (insofar
as any such terms or provisions pertain to accounting matters) and, if any such
condition or event then exists, specifying the nature and period of existence
thereof;
(c) Compliance Certificate. As soon as available, and in any event
within thirty-seven (37) days after the last day of each of the first three (3)
quarterly periods of each fiscal year of Borrower, and contemporaneously with
the delivery of the financial statements set forth in (b) above, a certificate
in the form of Exhibit I attached hereto executed by the chief financial officer
or chief executive officer of Borrower, stating that a review of the activities
of Borrower during the relevant fiscal period has been made under his
supervision and that Borrower has performed each and every obligation and
covenant contained herein and is not in default under any of the same or, if any
such default shall have occurred, specifying the nature and status thereof, and
setting forth a computation in reasonable detail as of the end of the period
covered by such statements, of compliance with Sections 8.13 and 8.14; provided
that if, as of September 30, 1996, a Potential Default or Event of Default
exists (whether or not cured by any Allowable Contributions), then Borrower
shall also provide to Lender a monthly compliance certificate within thirty-
seven (37) days after the last day of each calendar month, commencing with the
calendar month ending on October 31, 1996 and through and including the calendar
month ending on February 28, 1997;
(d) Borrowing Base Report. As soon as available, and in any event
within thirty-seven (37) days after the last day of each quarterly period of
each fiscal year of Borrower, a Borrowing Base Report and an accounts receivable
aging report listing each Receivable, the account debtor, the age of such
Receivable and the amount of such Receivable; provided that if, as of September
30, 1996, a Potential Default or Event of Default exists (whether or not cured
by any Allowable Contributions), then Borrower shall also provide to Lender a
monthly Borrowing Base Report within thirty-seven (37) days after the last day
of each calendar month, commencing with the calendar month ending on October 31,
1996 and through and including the calendar month ending on February 28, 1997;
and
(e) Other Information. Such other information concerning the business,
properties or financial condition of Borrower or any Subsidiary as Lender shall
reasonably request including audit reports, registration statements or other
reports or notices provided to shareholders of Borrower or filed with the
Securities and Exchange Commission or any regulatory agency.
(g) Section 8.01 is hereby deleted in its entirety and replaced with the
following:
8.01. Limitation on Liabilities. Borrower shall not, and shall not permit
any of its Subsidiaries to, incur, guarantee or otherwise be or become, directly
or indirectly, liable in respect of any Liabilities, except:
(a) Liabilities arising out of this Agreement;
(b) without duplication, Liabilities secured by Permitted Liens;
-5-
<PAGE>
(c) current Liabilities for taxes and assessments incurred in the
ordinary course of business;
(d) Liabilities in respect of current accounts payable or accrued (other
than for borrowed funds or purchase money obligations) and incurred in the
ordinary course of business, provided that all such liabilities, accounts and
claims shall be promptly paid and discharged when due or in conformity with
customary trade terms;
(e) the following Liabilities, not to exceed $50,000,000.00 in the
aggregate at any one time outstanding: (i) existing Liabilities of Borrower or
its Subsidiaries described on Schedule 8.01 and secured by the financing
statements listed on Exhibit J, and all renewals, extensions, and refinancings
thereof; (ii) purchase money Liabilities to purchase equipment and capital
lease obligations either (A) incurred in the ordinary course of business, or (B)
assumed in connection with Permitted Acquisitions, and any renewals, extensions
and refinancings of either; (iii) Liabilities incurred with respect to the
financing of Borrower's or any Subsidiary's terminals and secured by real
property of Borrower or any Subsidiary; (iv) purchase money Liabilities payable
to a seller for the purchase price of assets, incurred in connection with a
Permitted Acquisition; (v) Liabilities of Borrower or its Subsidiaries with
respect to any owner-operator equipment purchase program; and (vi) Liabilities
to Volvo Truck Finance North America, Inc. pursuant to the loan agreement dated
February 21, 1996, and all renewals, extensions and refinancings thereof, but
not to exceed $10,000,000.00 at any one time outstanding; and
(f) Permitted Subordinated Debt.
(h) Section 8.13 is hereby deleted in its entirety and replaced with the
following:
8.13. Fixed Charges Coverage. Borrower shall not, as of the last day of
each fiscal quarter of Borrower during the applicable period set forth below,
permit the ratio (such ratio being the "Fixed Charges Coverage Ratio") of (a)
the sum of (i) Consolidated Adjusted Net Income, plus (ii) federal, state, local
and foreign income taxes deducted from Consolidated Adjusted Net Income in
accordance with GAAP, plus (iii) Fixed Charges, to (b) Fixed Charges, in each
case for the four (4) fiscal quarters ending on the date of determination
(except for the quarter ending June 30, 1996, which shall be annualized based
upon the six (6) month period then ended, and
-6-
<PAGE>
for the quarter ending September 30, 1996, which shall be annualized based upon
the nine (9) month period then ended), to be less than the ratio set forth
opposite such period below:
<TABLE>
<CAPTION>
----------------------------------------------------------
Period Minimum Ratio
----------------------------------------------------------
<S> <C>
June 30, 1996 through September 29, 1996 0.90 to 1.0
----------------------------------------------------------
September 30, 1996 through December 30, 1.00 to 1.0
1996
----------------------------------------------------------
December 31, 1996 through March 30, 1.05 to 1.0
1997
----------------------------------------------------------
March 31, 1997 through June 29, 1997 1.10 to 1.0
----------------------------------------------------------
June 30, 1997 through June 29, 1998 1.30 to 1.0
----------------------------------------------------------
June 30, 1998 and thereafter 1.35 to 1.0
----------------------------------------------------------
</TABLE>
In addition, if, as of September 30, 1996, the Fixed Charges Coverage Ratio
is less than 1.00 to 1.0, then Borrower shall also not permit such ratio, as of
the last day of any calendar month during the applicable period set forth above,
commencing on October 31, 1996 through and including February 28, 1997, and
determined for the twelve (12) month period ending on the date of determination
(except for the period ending October 31, 1996, which shall be annualized based
upon the ten (10) month period then ended, and for the period ending November
30, 1996, which shall be annualized based upon the eleven (11) month period then
ended), to be less than the ratio set forth opposite such period above.
Borrower shall provide evidence of such compliance to Lender, as provided in
Section 7.01(c).
Notwithstanding the foregoing, if, as of September 30, 1996, the Fixed
Charges Coverage Ratio set forth above is less than 1.00 to 1.0, but equal to or
greater than 0.95 to 1.0, then Borrower may cure such default by obtaining
Allowable Contributions between July 1, 1996 and November 11, 1996 in an amount
equal to, but not in excess of, the amount that, when added to Consolidated
Adjusted Net Income (as adjusted above), would cause the Fixed Charges Coverage
Ratio to be equal to 1.00 to 1.0 as of September 30, 1996. Such amount shall
(without duplication) be added to Consolidated Adjusted Net Income for purposes
of testing the Fixed Charges Coverage Ratio between September 30, 1996 and March
31, 1997, but only to the extent such amount was necessary to cure the Fixed
Charges Coverage Ratio as of September 30, 1996.
(i) Section 8.14 is hereby deleted in its entirety and replaced with the
following:
8.14. Senior Funded Debt Ratio. Borrower shall not, as of the last day of
any fiscal quarter of Borrower, commencing June 30, 1996, permit the ratio (such
ratio being the "Senior Funded Debt Ratio") of (a) Senior Funded Debt to (b)
EBITDA for the four (4) fiscal quarters ending on the date of determination
(except for the quarter ending June 30, 1996, which shall be annualized based
upon the six (6) month period then ended, and for the quarter ending September
30, 1996, which shall be annualized based upon the nine (9) month period then
ended), to be greater than the ratio set forth opposite such period below:
-7-
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------
Period Maximum Ratio
---------------------------------------------------------
<S> <C>
June 30, 1996 through December 30, 1996 2.25 to 1.0
---------------------------------------------------------
December 31, 1996 and thereafter 2.0 to 1.0
---------------------------------------------------------
</TABLE>
In addition, if, as of September 30, 1996, the Senior Funded Debt
Ratio is greater than 2.25 to 1.0, then Borrower shall also not permit such
ratio, as of the last day of any calendar month during the applicable
period set forth above, commencing on October 31, 1996 through and
including February 28, 1997, and determined for the twelve (12) month
period ending on the date of determination (except for the period ending
October 31, 1996, which shall be annualized based upon the ten (10) month
period then ended, and for the period ending November 30, 1996, which shall
be annualized based upon the eleven (11) month period then ended), to be
greater than the ratio set forth opposite such period above. Borrower shall
provide evidence of such compliance to Lender, as provided in Section
7.01(c).
Notwithstanding the foregoing, if, as of September 30, 1996, the
Senior Funded Debt Ratio is greater than 2.25 to 1.0, then Borrower may
cure such default by obtaining Allowable Contributions between July 1, 1996
and November 11, 1996 in an amount equal to, but not in excess of, the
amount that, when added to EBITDA, would cause the Senior Funded Debt Ratio
to be equal to 2.25 to 1.0. Such amount shall (without duplication) be
added to EBITDA for purposes of testing the Senior Funded Debt Ratio
between September 30, 1996 and March 31, 1997, but only to the extent such
amount was necessary to cure the Senior Funded Debt Ratio as of September
30, 1996.
(j) Section 9.01(c) is hereby deleted in its entirety and replaced with
the following:
(c) default shall occur in the performance of any of the covenants or
agreements of Borrower or any Subsidiary contained herein, or in any of the
other Loan Documents, and (except for failure to perform the covenants and
agreements set forth in Section 7.01) such default shall continue
unremedied for forty-one (41) days after such default occurred; or
(k) Section 10.03 is hereby amended to delete the last sentence therein in
its entirety and replace such sentence with the following:
In addition, Lender may obtain, at Borrower's expense (but not to exceed
$20,000.00 per year), appraisals pursuant to Section 4.04 of Collateral and
other assets or properties of Borrower and its Subsidiaries.
(l) Exhibit K attached hereto is hereby added to the Loan Agreement as
Exhibit K.
3. Amendments to other Loan Documents.
(a) All references in the Loan Documents to the Loan Agreement shall
henceforth include references to the Loan Agreement, as modified and amended
hereby, and as may, from time to time, be further amended, modified, extended,
renewed, and/or increased.
-8-
<PAGE>
(b) Any and all of the terms and provisions of the Loan Documents are
hereby amended and modified wherever necessary, even though not specifically
addressed herein, so as to conform to the amendments and modifications set forth
herein.
4. Ratifications. Borrower: (a) ratifies and confirms all provisions of
the Loan Documents as amended by this Amendment; (b) ratifies and confirms that
all guaranties, assurances, and Liens granted, conveyed, or assigned to Lender
under the Loan Documents are not released, reduced, or otherwise adversely
affected by this Amendment and continue to guarantee, assure, and secure full
payment and performance of the present and future Obligation; and (c) agrees to
perform such acts and duly authorize, execute, acknowledge, deliver, file, and
record such additional documents, and certificates as Lender may reasonably
request in order to create, perfect, preserve, and protect those guaranties,
assurances, and Liens.
5. Representations. Borrower represents and warrants to Lender that as
of the date of this Amendment: (a) this Amendment and the other Loan Documents
to be delivered under this Amendment have been duly authorized, executed, and
delivered by Borrower; (b) no action of, or filing with, any Governmental
Authority is required to authorize, or is otherwise required in connection with,
the execution, delivery, and performance by Borrower of this Amendment; (c) the
Loan Documents, as amended by this Amendment, are valid and binding upon
Borrower and Guarantors and are enforceable against Borrower and Guarantors in
accordance with their respective terms, except as limited by Debtor Laws; (d)
the execution, delivery, and performance by Borrower and Guarantors of this
Amendment do not require the consent of any other Person and do not and will not
constitute a violation of any laws, agreements, or understandings to which
Borrower or any Guarantor is a party or by which Borrower or any Guarantor is
bound; (e) after giving effect to this Amendment, all representations and
warranties in the Loan Documents are true and correct in all material respects
except to the extent that (i) any of them speak to a different specific date or
(ii) the facts on which any of them were based have been changed by transactions
permitted by the Loan Agreement; and (f) after giving effect to this Amendment,
no Event of Default or Potential Default exists.
6. Conditions Precedent. This Amendment shall not be effective unless
and until: (a) Lender receives counterparts of this Amendment executed by each
party listed below; (b) the representations and warranties in this Amendment are
true and correct in all material respects on and as of the date of this
Amendment; (c) Lender receives an officer's certificate executed by an
authorized officer of Borrower and each Guarantor, certifying to (i) the
resolutions adopted by its board of directors authorizing the transactions
contemplated by this Amendment, (ii) incumbency of officers of Borrower and each
Guarantor, and (iii) changes in Borrower's and each Guarantor's articles of
incorporation and bylaws, if any, since February 1, 1996; (d) Lender receives an
opinion of Borrower's and Guarantors' counsel regarding such matters as Lender
shall require, including opinions regarding (i) the due execution, delivery, and
performance, and the enforceability, of this Amendment, (ii) any required
consents and approvals of third parties and Governmental Authorities, and (iii)
the absence of conflicts with applicable laws, governmental requirements, and
agreements; and (e) Borrower shall have paid to Lender an amendment fee equal to
$15,000.00.
7. Continued Effect. Except to the extent amended hereby, all terms,
provisions and conditions of the Loan Agreement and the other Loan Documents,
and all documents executed in connection therewith, shall continue in full force
and effect and shall remain enforceable and binding in accordance with their
respective terms.
-9-
<PAGE>
8. Miscellaneous. Unless stated otherwise (a) the singular number
includes the plural and vice versa and words of any gender include each other
gender, in each case, as appropriate, (b) headings and captions may not be
construed in interpreting provisions, (c) this Amendment must be construed --and
its performance enforced -- under Texas law, (d) if any part of this Amendment
is for any reason found to be unenforceable, all other portions of it
nevertheless remain enforceable, and (e) this Amendment may be executed in any
number of counterparts with the same effect as if all signatories had signed the
same document, and all of those counterparts must be construed together to
constitute the same document.
9. ENTIRETIES. THE LOAN AGREEMENT AS AMENDED BY THIS AMENDMENT
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES ABOUT THE SUBJECT MATTER OF
THE LOAN AGREEMENT AS AMENDED BY THIS AMENDMENT AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
10. Parties. This Amendment binds and inures to Borrower, Lender and
their respective successors and permitted assigns.
[Remainder of Page Intentionally Left Blank; Signature Pages to Follow.]
-10-
<PAGE>
EXECUTED as of the date first stated above.
AMERITRUCK DISTRIBUTION CORP.,
a Delaware corporation
By: /s/ KENNETH H. EVANS, JR.
-------------------------------------
Kenneth H. Evans, Jr.
Treasurer
NATIONSBANK TEXAS, N.A.,
a national banking association
By: /s/ RACHEL R. JOHNSTON
-------------------------------------
Rachel Johnston
Vice President
-11-
<PAGE>
To induce Lender to enter into this Amendment, the undersigned jointly and
severally (a) consent and agree to this Amendment's execution and delivery, (b)
ratify and confirm that all guaranties, assurances, and Liens granted, conveyed,
or assigned to Lender under the Loan Documents are not released, diminished,
impaired, reduced, or otherwise adversely affected by this Amendment and
continue to guarantee, assure, and secure the full payment and performance of
all present and future Obligation, (c) agree to perform such acts and duly
authorize, execute, acknowledge, deliver, file, and record such additional
guaranties, assignments, security agreements, deeds of trust, mortgages, and
other agreements, documents, instruments, and certificates as Lender may
reasonably deem necessary or appropriate in order to create, perfect, preserve,
and protect those guaranties, assurances, and Liens, and (d) waive notice of
acceptance of this consent and agreement, which consent and agreement binds the
undersigned and their successors and permitted assigns and inures to Lender and
their respective successors and permitted assigns.
W & L SERVICES CORPORATION,
a North Carolina corporation
BEST WAY MOTOR LINES, INC.,
a North Carolina corporation
BILLINGS TRUCKING CORPORATION,
a North Carolina corporation
BLS INVESTMENTS, INC.,
a North Carolina corporation
CAS SERVICES CORPORATION,
a Louisiana corporation
CAS TRANSPORTATION, INC.,
a Delaware corporation
FRONTIER FREIGHT, INC.,
a North Carolina corporation
W & L MOTOR LINES, INC.,
a North Carolina corporation
THOMPSON BROS., INC.,
a North Dakota corporation
J.C. BANGERTER & SONS, INC.,
a Utah corporation
SCALES TRANSPORT CORPORATION,
a Georgia corporation
SCALES LEASING COMPANY, INC.,
a Georgia corporation
AMERITRUCK REFRIGERATED TRANSPORT, INC.,
a Georgia corporation
C.B.S. EXPRESS, INC.,
a Georgia corporation
By: /s/ KENNETH H. EVANS, JR.
--------------------------------------
Kenneth H. Evans, Jr.
Authorized Officer
-12-
<PAGE>
EXHIBIT K
FORM OF BORROWING BASE CERTIFICATE
FOR ENDED , 199 (THE "SUBJECT PERIOD")
---------------- ------------ --
LENDER: NationsBank of Texas, N.A.
BORROWER: AmeriTruck Distribution Corp.
This certificate is delivered under the Loan Agreement (herein so called)
dated as of February 1, 1996, between Borrower and Lender. Capitalized terms
used in this certificate shall, unless otherwise indicated, have the meanings
set forth in the Loan Agreement. On behalf of Borrower, the undersigned
certifies to Lender on the date hereof that (a) no Potential Default or Event of
Default has occurred and is continuing, (b) a review of the activities of
Borrower during the Subject Period has been made under my supervision with a
view to determining the amount of the current Borrowing Base, (c) the
receivables and equipment of Borrower included in the Borrowing Base below meet
all conditions to qualify for inclusion therein as set forth in the Loan
Agreement, and all representations and warranties set forth in the Loan
Agreement with respect thereto are true and correct, and (d) the information set
forth below hereto is true and correct as of the last day of the Subject Period.
AT END OF
LINE SUBJECT PERIOD
- ---- --------------
1. Total Receivables (less discounts) $
--------------
2. Ineligible Receivables
(a) Receivables unpaid more
than 90 days from invoice date $
--------------
(b) Receivables placed with an attorney
for collection $
--------------
(c) Receivables for consignments and
non-final sales $
--------------
(d) Receivables from suppliers and creditors
to the extent of the obligations to such
creditors and suppliers $
--------------
(e) Non-U.S. or non-Canadian
Receivables (unless secured by a
letter of credit) $
--------------
-13-
<PAGE>
(f) Receivables subject to specific
assignment restrictions $
--------------
3. Total Ineligible Receivables
add Lines 2(a) through 2(g) $
--------------
4. Total Eligible Receivables
Line 1 minus Line 3 $
--------------
5. Multiplied by: Borrowing Base factor 80%
6. Receivables Component of the Borrowing Base
Line 4 x Line 5 $
--------------
7. Appraised Value of Eligible Equipment $
--------------
8. Multiplied by: Borrowing Base Factor 75%
9. Equipment Component of Borrowing Base
Line 7 x Line 8 $
--------------
10. Total Borrowing Base
Line 6 plus Line 9 $
--------------
11. Principal Debt plus LC Exposure $
--------------
12. Amount available for advances, if positive, or
amount to be repaid, if negative
Line 10 minus Line 7 $
--------------
AMERITRUCK DISTRIBUTION CORP.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
-14-
<PAGE>
EXHIBIT 10.3
[LOGO OF NATIONSBANK APPEARS HERE]
NationsBank of Texas, N.A. Continuing and Unconditional Guaranty
- --------------------------------------------------------------------------------
1. Guaranty. For Value Received, and to induce NationsBank of Texas, N.A.
Dallas Commercial Banking
--------------------------
Banking Center
901 Main Street, 7th Floor , Dallas, , Texas , 75202
- ----------------------------- --------------------- -------------- ---------
Bank Street Address City State Zip Code
(Attn: Mr. Russell P. Hartsfield ) (herein called "Bank"), to make loans or
--------------------------
advances or to extend credit or other financial accommodations or benefits, with
or without security, to or for the account of
AmeriTruck Distribution Corporation
- --------------------------------------------------
Borrower's Name
301 Commerce Street, Suite 1101, Fort Worth, Texas , 76102
- ------------------------------- ---------- ------------- --------
Street Address City State Zip Code
(herein called "Borrower"), the undersigned (herein called "Guarantor"), if more
than one, then each of them jointly and severally, hereby becomes surety for and
irrevocably and unconditionally guarantees to Bank the full and prompt payment
when due, whether by acceleration or otherwise, of any and all Liabilities (as
hereinafter defined) of Borrower to Bank, together with reasonable attorney's
fees, costs and expenses incurred by Bank in enforcing any and all of such
indebtedness. This Guaranty is continuing and unlimited as to the amount.
Guarantor further unconditionally guarantees the faithful, prompt and complete
compliance by Borrower with all terms, conditions, covenants, agreements and
undertakings of Borrower (herein collectively referred to as the "Obligations")
under all notes and other documents evidencing the Liabilities, as hereinafter
defined, and under all security agreements and other agreements, documents and
instruments executed in connection with the Liabilities or related thereto
including, without limitation, all obligations of Borrower pursuant to that
certain Loan Agreement dated February 1, 1996, executed by Bank and Borrower
(the "Loan Agreement") (all such security agreements and other documents
securing payment of the Liabilities and all notes and other agreements,
documents, and instruments evidencing or relating to the Liabilities and
Obligations being herein collectively called the "Loan Documents"). The
undertakings of Guarantor hereunder are independent of the Liabilities and
Obligations of the Borrower and a separate action or actions for payment,
damages or performance may be brought or prosecuted against Guarantor, whether
or not an action is brought against the Borrower or to realize upon the security
for the Liabilities and/or Obligations and whether or not Borrower is joined in
any such action or actions, and whether or not notice is given or demand is made
upon the Borrower.
Bank shall not be required to proceed first against Borrower, or any other
person, firm or corporation, whether primarily or secondarily liable, or against
any Collateral held by it, before resorting to Guarantor for payment, and
Guarantor shall not be entitled to assert as a defense to the enforceability of
the Guaranty any defense of Borrower with respect to any Liabilities or
Obligations.
2. Paragraph Headings and Governing Law. Guarantor agrees that the paragraph
headings in this Guaranty are for convenience only and that they will not limit
any of the provisions of this Guaranty. Guarantor further agrees that this
Guaranty shall be governed by and construed in accordance with the laws of the
State of Texas and applicable United States federal law. Guarantor further
agrees that this Guaranty shall be deemed to have been made in the State of
Texas at Bank's address indicated herein, and shall be governed by, and
construed in accordance with, the laws of the State of Texas, or the United
States courts located within the State of Texas, and is performable in Dallas,
Dallas County, Texas.
3. Definitions.
A. "Liability" or "Liabilities" as used herein shall include without
limitation, all liabilities, overdrafts, indebtedness, and obligations of
Borrower to Bank, whether direct or indirect, absolute or contingent, joint or
several, secured or unsecured, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, now or
hereafter existing, or held or to be held by the Bank for its own account or as
agent for another or others, whether created directly, indirectly, or acquired
by assignment or otherwise, including but not limited to all extensions or
renewals thereof, and all sums payable under or by virtue thereof, including
without limitation, all amounts of principal and interest, all expenses
(including attorney's fees and cost of collection as specified) incurred in the
collection thereof or the enforcement of rights thereunder or in enforcing this
Guaranty (including without limitation, any liability arising from failure to
comply with state or federal laws, rules and regulations concerning the control
of hazardous wastes or substances), whether arising in the ordinary course of
business or otherwise, and whether held or to be held by Bank for its own
account or as agent for another or others. If Borrower is a partnership,
corporation or other entity the term "Liability" or "Liabilities" as used herein
shall include all Liabilities to Bank of any successor entity or entities.
B. "Guarantor" as used herein shall mean Guarantor or any one or more of
them. Anyone executing this Guaranty shall be bound by the terms hereof without
regard to execution by anyone else. This Guaranty is binding upon Guarantor,
his, their or its executors, administrators, successors or assigns, and shall
inure to the benefit of Bank, its successors, endorsees or assigns.
"Guarantor" as used in this instrument shall be construed as singular or plural
to correspond with the number of persons executing this instrument as Guarantor.
The pronouns used in this Agreement are in the masculine gender but shall be
construed as female or neuter as an occasion may require.
C. "Collateral" means the property subject to a security interest, and
includes accounts and chattel paper which have been sold, including but not
limited to all additions and accessions thereto, all replacements or substitutes
therefor, and all immediate and remote proceeds of the sale or other disposition
thereof.
4. Waivers by Guarantor. Guarantor waives notice of acceptance of this
Guaranty, notice of any Liability or Obligations to which it may apply, and
waives presentment, demand for payment, protest, notice of dishonor or
nonpayment of any Liabilities, waiver of notice of intent to accelerate, waiver
of notice of acceleration and notice of any suit or the taking of other action
by Bank against Borrower, Guarantor or any other person and any other notice to
any party liable thereon (including Guarantor) and any applicable statute of
limitations.
<PAGE>
Until payment in full of the Liabilities and the Obligations, each Guarantor
also hereby waives any claim, right or remedy which such Guarantor may now have
or hereafter acquire against the Borrower that arises hereunder and/or from the
performance by any Guarantor hereunder including, without limitation, any claim,
remedy or right of subrogation, reimbursement, exoneration, contribution,
indemnification, or participation in any claim, right or remedy of the Bank
against the Borrower or any security which the Bank now has or hereafter
acquires, whether or not such claim, right or remedy arises in equity, under
contract, by statute, under common law or otherwise.
Guarantor hereby agrees to waive the benefits of any provision of law requiring
that the Bank exhaust any right or remedy, or take any action, against the
Borrower, any Guarantor, any other person and/or property including but not
limited to the provisions of the Texas Civil Practice and Remedies Code (S)
17.001, Texas Rules of Civil Procedure Rule 31 and the Texas Business and
Commerce Code (S) 34.03, as amended, or otherwise.
Bank may at any time and from time to time (whether before or after revocation
or termination of this Guaranty) without notice to Guarantor (except as required
by law), without incurring responsibility to Guarantor, without impairing,
releasing, or otherwise affecting the obligations of Guarantor, in whole or in
part, and without the endorsement or execution by Guarantor of any additional
consent, waiver or guaranty: (a) change the manner, place or terms of payment;
(b) change or extend the time of or renew or alter, any Liability or Obligation
or installment thereof, or any security therefor; (c) loan additional monies or
extend additional credit to Borrower, with or without security, thereby creating
new Liabilities or Obligations the payment or performance of which shall be
guaranteed hereunder, and the Guaranty herein made shall apply to the
Liabilities and Obligations as so changed, extended, surrendered, realized upon
or otherwise altered; (d) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property at any time
pledged or mortgaged to secure the Liabilities or Obligations and any offset
there against; (e) exercise or refrain from exercising any rights against
Borrower or others (including Guarantor) or act or refrain from acting in any
other manner; (f) settle or compromise any Liability or Obligation or any
security therefor and subordinate the payment of all or any part thereof to the
payment of any Liability or Obligation of any other parties primarily or
secondarily liable on any of the Liabilities or Obligations; (g) release or
compromise any liability of Guarantor hereunder or any Liability or Obligation
of any other parties primarily or secondarily liable on any of the Liabilities
or Obligations; or (h) apply any sums from any sources to any Liability without
regard to any Liabilities remaining unpaid.
5. Subordination. Upon demand of Bank, Guarantor agrees that it will not
demand, take or receive from the Borrower, by set-off or in any other manner,
payment of any liabilities and/or obligations, now and at any time or times
hereafter owing by the Borrower to Guarantor unless and until all the
Liabilities shall have been fully paid, and any security interest, liens or
encumbrances which Guarantor now has and from time to time hereafter may have
upon any of the assets of the Borrower shall be made subordinate, junior and
inferior and postponed in priority, operation and effect to any security
interest of Bank in such assets.
6. Waivers by Bank. No delay on the part of Bank in exercising any of its
options, powers or rights, or any partial or single exercise thereof, shall
constitute a waiver thereof. No waiver of any of its rights hereunder, and no
modification or amendment of this Guaranty, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; and each
such waiver, if any, shall apply only with respect to the specific instance
involved, and shall in no way impair the rights of Bank or the obligations of
Guarantor to Bank in any other respect at any other time.
7. Termination. This Guaranty shall continue until written notice of
revocation signed by each respective Guarantor or until written notice of the
death of such Guarantor shall actually have been received by Bank,
notwithstanding change in name, location, composition or structure of, or the
dissolution, termination or increase, decrease or change in personnel, owners or
partners of Borrower, or any one or more of Guarantors, provided, however, that
no notice of revocation or termination hereof shall affect in any manner rights
arising under this Guaranty with respect to Liabilities or Obligations that
shall have been created, contracted, assumed or incurred prior to receipt of
such written notice pursuant to any agreement entered into by Bank prior to
receipt of such notice, and the sole effect of such notice of revocation or
termination hereof shall be to exclude from this Guaranty, Liabilities or
Obligations thereafter arising that are unconnected with Liabilities or
Obligations theretofore arising or transactions entered into theretofore.
8. Partial Invalidity and/or Enforceability of Guaranty. The unenforceability
or invalidity of any provision of this Guaranty shall not affect the
enforceability or validity of any other provision herein and the invalidity or
unenforceability of any provision of any Loan Document as it may apply to any
person or circumstance shall not affect the enforceability or validity of such
provision as it may apply to other persons or circumstances.
In the event Bank is required to relinquish or return the payments, the
Collateral or the proceeds thereof, in whole or in part, which had been
previously applied to or retained for application against any Liability, by
reason of a proceeding arising under the Bankruptcy Code, or for any other
reason, this Guaranty shall automatically continue to be effective
notwithstanding any previous cancellation or release effected by the Bank.
9. Obligations of Guarantor. Upon the occurrence of an event of default,
Guarantor shall upon demand by Bank, promptly and with due diligence pay all
Liabilities and perform and satisfy for the benefit of Bank all Obligations.
Guarantor will not become a party to a merger or consolidation with any other
company, except as provided in the Loan Agreement. Guarantor further agrees
that this Guaranty Agreement shall be binding, legal and enforceable against
Guarantor in the event Borrower changes its name, status or type of entity.
10. Financial and Other Information. In entering into this Guaranty, the
Guarantor has not relied upon any representation of the Bank as to the financial
condition, operation or creditworthiness of the Borrower. The Guarantor further
agrees that the Bank shall have no duty or responsibility now or hereafter to
make any investigation or appraisal of the Borrower on behalf of the Guarantor
or to provide the Guarantor with any credit or other information which may come
to its attention now or hereafter.
11. Notices. All notices required or permitted to be given to Bank herein
shall be sent by registered or certified mail, return receipt requested to the
Bank at the address shown in the preamble to this agreement. Guarantor agrees
that all notices required or permitted to be given to Guarantor shall be sent by
first class mail, postage prepaid United States mail. The parties agree that
the notice shall be considered received by Guarantor five (5) days after being
placed in the United States mail.
12. Events of Default. The following are events of default hereunder: (a) an
Event of Default as defined in the Loan Agreement shall occur and be continuing;
or (b) termination of Guaranty by Guarantor.
13. Remedies. Upon the occurrence of any event of default hereunder, Bank
shall have all of the remedies of a creditor and, to the extent applicable, of a
secured party, under all applicable law, and without limiting the generality of
the foregoing, Bank may, at its option and without notice of demand: (a)
declare any Liability accelerated and due and payable at once; and (b) take
possession of any Collateral wherever located, and sell, resell, assign,
transfer and deliver all or any part of said
<PAGE>
Collateral of Borrower or Guarantor at any public or private sale or otherwise
dispose of any or all of the Collateral in its then condition, for cash or on
credit or for future delivery, and in connection therewith Bank may impose
reasonable conditions upon any such sale. Bank, unless prohibited by law the
provisions of which cannot be waived, may purchase all or any part of said
Collateral to be sold, free from and discharged of all trusts, claims, rights or
redemption and equities of the Borrower or Guarantor whatsoever; Guarantor
acknowledges and agrees that the sale of any Collateral through any nationally
recognized broker-dealer, investment banker or any other method common in the
securities industry shall be deemed a commercially reasonable sale under the
Uniform Commercial Code or any other equivalent statute or federal law, and
expressly waives notice thereof except as provided herein; and (c) set-off
against any or all liabilities of Guarantor all money owed by Bank in any
capacity to Guarantor whether or not due, and also set-off against all other
Liabilities of Borrower or Guarantor to Bank all money owed by Bank in any
capacity to any Borrower or Guarantor, and if exercised by Bank, Bank shall be
deemed to have exercised such right of set-off and to have made a charge against
any such money immediately upon the occurrence of such default although made or
entered on the books subsequent thereto.
14. Attorney Fees, Cost and Expenses. Guarantor shall pay all costs of
collection and reasonable attorney's fees, including reasonable attorney's fees
in connection with any suit, mediation or arbitration proceeding, out of court
payment agreement, trial, appeal, bankruptcy proceedings or otherwise, incurred
or paid by Bank in enforcing the payment of any Liability or enforcing or
preserving any right or interest of Bank hereunder, including the collection,
preservation, sale or delivery of any Collateral from time to time pledged to
Bank, and after deducting such fees, costs and expenses from the proceeds of
sale or collection, Bank may apply any residue to pay any of the Liabilities and
Guarantor shall continue to be liable for any deficiency with interest at the
rate specified in any instrument evidencing the Liability or, at the Bank's
option, equal to the highest lawful rate, which shall remain a liability.
15. Preservation of Property. Bank shall not be bound to take any steps
necessary to preserve any rights in any of the property of Guarantor pledged to
Bank to secure Guarantor's obligations against prior parties who may be liable
in connection therewith, and Guarantor hereby agrees to take any such steps.
Bank, nevertheless, at any time, may (a) take any action it deems appropriate
for the care or preservation of such property or of any rights of Guarantor or
Bank therein, (b) demand, sue for, collect or receive any money or property at
any time due, payable or receivable on account of or in exchange for any
property of Guarantor, (c) compromise and settle with any person liable on such
property, or (d) extend the time of payment or otherwise change the terms of the
Loan Documents as to any party liable on the Loan Documents, all without notice
to, without incurring responsibility to, and without affecting any of the
obligations or liabilities of Guarantor.
16. Collateral. Bank shall have a properly perfected security interest in all
of Guarantor's funds on deposit with Bank to secure the balance of any
liabilities and/or obligations that Guarantor may now or in the future owe the
Bank. Bank is granted a contractual right of set-off and will not be liable for
dishonoring checks or withdrawals where the exercise of Bank's contractual right
of set-off or security interest results in insufficient funds in Guarantor's
account. As authorized by law, Guarantor grants to Bank this contractual right
of set-off and security interest in all property of Guarantor now or at anytime
hereafter in the possession of Bank, including but not limited to any joint
account, special account, account by the entireties, tenancy in common, and all
dividends and distributions now or hereafter in the possession or control of
Bank.
17. Limitation. It is the intention of Guarantor and the Bank that the amount
of the Liabilities and Obligations guaranteed by Guarantor by this Guaranty
shall be in, but not in excess of, the maximum amount permitted by fraudulent
conveyance, fraudulent transfer or similar laws applicable as to Guarantor.
Accordingly, notwithstanding anything to the contrary contained in this Guaranty
or any other agreement or instrument executed in connection with the payment of
any of the Limitations and the Obligations, the amount of the Liabilities and
the Obligations guaranteed by Guarantor by this Guaranty shall be limited to
that amount which after giving effect thereto would not (i) render Guarantor
insolvent, (ii) result in the fair saleable value of the assets of Guarantor
being less than the amount required to pay its debts and other liabilities
(including contingent liabilities) as they mature, or (iii) leave Guarantor with
unreasonably small capital to carry out its business as now conducted and as
proposed to be conducted, including its capital needs, as such concepts
described in (i), (ii) and (iii) herein are determined under applicable law, if
the obligations of Guarantor hereunder would otherwise be set aside, terminated,
annulled or avoided for such reason by a court of competent jurisdiction in a
proceeding actually pending before such court. For purposes of this Guaranty,
the term "applicable law" means as to Guarantor each statute, law, ordinance,
regulation, order, judgment, injunction or decree of the United States or any
state or commonwealth, any municipality, any foreign country, or any territory,
possession or tribunal applicable to Guarantor.
18. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM BASED ON OR
ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN
ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE
APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION
OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC.
(J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY
INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION
AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS
AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO
COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES
IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF THE
-------------
BORROWER'S DOMICILE AT THE TIME OF THIS AGREEMENT'S EXECUTION AND ADMINISTERED
BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY
PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION
ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90
DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A
SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP
TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE DEEMED TO (I)
---------------------
LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR
REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II) BE A WAIVER BY THE
BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY
EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE BANK HERETO (A) TO
EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SET-OFF, OR (B) TO
FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN
FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO)
INJUNCTIVE RELIEF,
<PAGE>
WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE BANK MAY EXERCISE SUCH
SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR
ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION
PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT. AT BANK'S OPTION, FORECLOSURE
UNDER A DEED OF TRUST OR MORTGAGE MAY BE ACCOMPLISHED BY ANY OF THE FOLLOWING:
THE EXERCISE OF A POWER OF SALE UNDER THE DEED OF TRUST OR MORTGAGE, OR BY
JUDICIAL SALE UNDER THE DEED OF TRUST OR MORTGAGE, OR BY JUDICIAL FORECLOSURE.
NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE
OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL
CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY
SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING
RESORT TO SUCH REMEDIES.
19. NOTICE OF FINAL AGREEMENT. THIS WRITTEN CONTINUING AND UNCONDITIONAL
GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
Dated: September 16, 1996
NationsBank of Texas, N.A.
By: /s/ RUSSELL P. HARTSFIELD
-------------------------------------------------------
Russell P. Hartsfield, Senior Vice President
Witnessed by:
- -----------------------------------------------------------
- -----------------------------------------------------------
Print Name (And Title, if Applicable)
Corporate Guarantor or Partnership:
Attest (If Applicable)
/s/ J. MICHAEL MAY, Secretary
- -----------------------------------------------------------
[Corporate Seal]
Guarantor:
- -----------------------------------------------------------
- -----------------------------------------------------------
Print Individual's Name
KTL, INC., a Florida corporation.
- -----------------------------------------------------------
Name of Corporation, Partnership, etc.
By: /s/ KENNETH H. EVANS, JR.
-------------------------------------------------------
Kenneth H. Evans, Jr., Treasurer
[Corporate Seal]
<PAGE>
Individual Acknowledgment
State of _____________ )
)
County of ____________ )
This instrument was acknowledged before me on _______________, 19______,
by _______________________________________
Guarantor
____________________________________
(Seal) Notary Public
in and for the State of ____________
____________________________________ ____________________________________
My Commission Expires Print Name of Notary
Corporate Acknowledgement
State of Texas
County of Tarrant
This instrument was acknowledged before me on September 16, 1996, by Kenneth
H. Evans, Jr., KTL, INC., a Florida corporation, on behalf
-----------------------
of said corporation.
/s/ MINDY DAVIS
____________________________________
(Seal) Notary Public
in and for the State of Texas
------------
4-21-99 Mindy Davis
____________________________________ ____________________________________
My Commission Expires Print Name of Notary
<PAGE>
EXHIBIT 10.4
NationsBank
NationsBank of Texas, N.A. Security Agreement
================================================================================
Date: September 16, 1996
Between
and
- --------------------------------------------------------------------------------
Bank: (Secured Party) Debtor/Pledgor:
NationsBank of Texas, N.A. KTL, Inc.
Banking Center: Dallas 301 Commerce Street
Commercial Banking Suite 1101
901 Main Street, 7th Floor Fort Worth, Tarrant County, Texas 76102
P.O. Box 831000
Dallas, Dallas County,
Texas 75283-1000
Attention: Mr. Russell P.
Hartsfield
(Address including county) (Name and address including county)
- --------------------------------------------------------------------------------
Debtor/Pledgor is: [_] Individual [X] Corporation [_] Partnership [_] Other
----
- --------------------------------------------------------------------------------
Address is Debtor's: [_] Residence [_] Place of Business
[X] Chief Executive Office if more than one place of business.
- --------------------------------------------------------------------------------
(This agreement contains some provisions preceded by boxes. Mark only those
boxes beside provisions which will be applicable to this transaction. A box
which is not marked means that the provision beside it is not applicable to this
transaction.)
A. Security Interest. For good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged and subject to the applicable terms of
this agreement Debtor/Pledgor (hereinafter referred to as Debtor) assigns and
grants to Bank (also known as Secured Party), a security interest and lien in
the Collateral to secure the payment and the performance of the Obligation.
B. Collateral. The security interest is granted in the following ("Collateral")
(Check as applicable)
1.
[X] Accounts. Any and all accounts, accounts receivable, receivables, contract
rights, general intangibles, book debts, checks, notes, drafts, instruments,
chattel paper, acceptances, choses in action, any and all amounts due to Debtor
from a factor or other forms of obligations and receivables now existing or
hereafter arising out of the business of the Debtor, as well as any and all
returned, refused and repossessed goods, and the cash or non-cash proceeds
resulting therefrom.
[_] Inventory. Any and all of Debtor's inventory, including without limitation
any and all goods held for sale or lease or being processed for sale or lease in
Debtor's business as now or hereafter conducted, whether now owned or
hereinafter acquired, including all materials, goods and work in process,
finished goods, and other tangible property held for sale or lease or furnished
or to be furnished under contracts of service or used or consumed in Debtor's
business, along with all documents (including documents of title) covering
inventory, all cash and non-cash proceeds from the sale of inventory including
proceeds from insurance and specifically including but not limited to (attach
Schedule if necessary):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[X] Equipment. Any and all of Debtor's furnishings and equipment, wherever
located, whether now owned or hereafter acquired, together with all increases,
parts, fittings, accessories, equipment, and special tools now or hereafter
affixed to any part thereof or used in connection therewith, and all products,
additions, substitutions, accessions, and all cash and non-cash proceeds,
including proceeds from insurance thereof and thereto, including without
limitation the following (attach Schedule if necessary):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[X] Vehicles. All present and future automobiles, trucks, truck tractors,
trailers, semi-trailers, or other motor vehicles or rolling stock, now owned or
hereafter acquired by Debtor, including, without limitation, the motor vehicles
listed on Schedule 1 attached hereto (collectively, "Vehicles").
---------- --------
[_] Fixtures. All of Debtor's fixture now existing or hereafter acquired,
together with all substitutes and replacements therefor, all accessions and
attachments thereto, and all tools, parts and equipment now or hereafter added
to or used in connection therewith. These goods are or will become fixtures on
the following described real estate in County,
------------------------------
(State), owned by:
- ------------------ ------------------------------------------
[name of owner] more particularly described as follows:
- --------------------------------------------------------------------------------
[insert legal
- ----------------------------------------------------------------
description (or attach Exhibit) of property, not street address], including
without limitation the following (attach schedule if necessary):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[_] Instruments and/or Investment Documents. The following described instruments
and documents including, without limitation, negotiable instruments, promissory
notes, and documents of title owned or to be owned by Debtor, certificates of
deposit, and all liens, security agreement, leases and other contracts securing
or otherwise relating to any of said instruments or documents, and all cash and
non-cash proceeds and products thereof and such additional property receivable
or distributed in respect of or in exchange for all or any of such instruments
or documents (attach Schedule if necessary):
-----------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[_] General Intangibles. All patents, trademarks, service marks, trade secrets,
copyrights and exclusive licenses (whether issued or pending) and all documents,
applications, materials and other matters related thereto, all inventions, and
all manufacturing, engineering and production plans, drawings, specifications,
processes and systems, all trade names, computer programs, data bases, systems
and software (including source and object codes), goodwill, choses in action and
all other general intangibles of Debtor whether now owned or hereafter acquired
and all cash and non-cash proceeds thereof, including without limitation the
following described intangible personal property, and all chattel paper,
documents and instruments relating to such intangibles, including without
limitation (attach schedule if necessary):
-------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[_] Timber. All of Debtor's uncut timber growing or to be grown on the following
described property, and all cash and non-cash proceeds including proceeds from
insurance, and all products thereof (complete legal description of real property
required) (attached Exhibit if necessary):
-------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[_] Other:
---------------------------------------------------------------------
- --------------------------------------------------------------------------------
(hereinafter referred to as "Goods" and all proceeds thereof).
- -----------------
2. All substitutes and replacements for, accessions, attachments and other
additions to, tools, parts and equipment used in connection with, and proceeds
and products of, the above Collateral, including all income and benefits
resulting from any of the above, such as dividends payable or distributable in
cash, property or stock; interest, premium and principal payments; redemption
proceeds and subscription rights; all certificates of title, manufacturer's
statements of origin, other documents, accounts and chattel paper arising from
or related to the above Collateral, and returned or repossessed Collateral, any
of which, if received by Debtor, upon request after an event of default shall be
delivered immediately to Bank.
3. The balance of every deposit account of Debtor under control of Bank and any
other claim of Debtor against Bank, now or hereafter existing, liquidated or
unliquidated, and all money, instruments, securities, documents, chattel paper,
credits, claims, demands, income, and any other property, rights and interests
of Debtor which at any time shall come into the possession or custody or under
the control of Bank or any of its agents, affiliates or correspondents, for any
purpose, and the proceeds of any thereof. Bank shall be deemed to have
possession of any of the Collateral in transit to or set apart for it or any of
its agents, affiliates or correspondents.
C. Obligation.
1. Description of Obligations. The following obligations ("Obligation") are
secured by this agreement: (a) All debts, obligations, liabilities and
agreements of Debtor to Bank, now or hereafter existing, arising directly or
indirectly between Debtor and Bank whether absolute or contingent, joint or
several, secured or unsecured, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, and all
renewals, extensions or rearrangement of any of the above including, without
limitation, all obligations of Debtor pursuant to that certain Continuing and
Unconditional Guaranty dated February 1, 1996, between Debtor and Bank; (b)
Bank's participation in any loan or other debt of Debtor to another person; (c)
All costs incurred by Bank to obtain, preserve, perfect and enforce this
agreement and maintain, preserve, collect and enforce the Collateral; (d)
Interest on the above amounts as agreement between Bank and Debtor; (e) All
debt, obligations and liabilities of AmeriTruck Distribution Corp. (such party,
together with the Debtor named above, is hereinafter referred to collectively as
"Debtor") to Bank of the kinds described in this Item C, now existing or
hereafter arising including, without limitation, all obligations of Debtor
pursuant to that certain Loan Agreement dated February 1, 1996, between
AmeriTruck Distribution Corporation and Bank (the "Loan Agreement"); (f) All
--------------
expenses of the Bank, including fees and expenses of the Bank's counsel,
incident to the enforcement of payment of all obligations of the Debtor by any
action or participation in, or in connection with a case or proceeding under the
Bankruptcy Code, or any successor statute thereto; (g) If the Debtor is not the
obligor of any of the Obligations, and in the event any amount paid to the Bank
on any Obligation is subsequently recovered from the Bank in or as a result of
any bankruptcy, insolvency or fraudulent conveyance proceeding, the Debtor shall
be liable to the Bank for the amounts so recovered up to the fair market value
of the Collateral whether or not the Collateral has been released or the
security interest terminated. In the event the Collateral has been released or
the security interest terminated, the fair market value of the Collateral shall
be determined, at the Bank's option, as of the date the Collateral was released,
the security interest terminated, or said amounts were recovered; and (h) All
amounts which may be owed to Bank pursuant to all other loan documents executed
between Bank and any other Debtor.
D. Debtor's Warranties. Debtor hereby represents and warrants to Bank as
follows:
1. Financing Statements. Except as may be noted by schedule attached hereto and
incorporated herein by reference, no financing statement covering the Collateral
is or will be on file in any public office, except the financing statements
relating to this security interest, and no security interest, other than the one
herein created, has attached or been perfected in the Collateral or any part
thereof.
2. Ownership. Debtor owns the Collateral free from any setoff, claim,
restriction, lien, security interest or encumbrance except liens for Permitted
Liens (as defined in the Loan Agreement).
3. Fixtures and Accessions. None of the Collateral is affixed to real estate or
is an accession to any goods, or will become a fixture or accession, except as
expressly set out herein.
4. Claims of Debtors on Collateral. All account debtors and other obligors
whose debts or obligations are part of the Collateral have no right to setoffs,
counterclaims or adjustments, and no defenses in connection therewith, except
for adjustments made in the ordinary course of Debtor's business.
5. Power and Authority. Debtor has full power and authority to make this
agreement.
E. Debtor's Covenants. Until full payment and performance of all Obligations
and termination or expiration of any obligation or commitment of Bank to make
advances or loans to Debtor, unless Bank otherwise consents in writing:
1. Obligation and This Agreement. Debtor shall perform all of its agreements
herein and in any other agreements between it and Bank.
2. Ownership of Collateral. Debtor shall defend the Collateral against all
claims and demands of all persons at any time claiming any interest therein
adverse to Bank. Debtor shall keep the Collateral free from all liens and
security interests except for Permitted Liens.
3. Insurance. Debtor shall insure the Collateral with companies reasonably
acceptable to Bank and in accordance with the terms of the Loan Agreement. All
insurance policies shall be written for the benefit of Debtor and Bank as their
interests may appear, payable to Bank as loss payee, or in other form
satisfactory to Bank, and such policies or
-2-
<PAGE>
certificates evidencing the same shall be furnished to Bank. All policies of
insurance shall provide for written notice to Bank at least 30 days prior to
cancellation. Risk of loss or damage is Debtor's to the extent of any
deficiency in any effective insurance coverage.
4. Maintenance. Debtor shall keep all tangible Collateral in good condition.
5. Bank's Costs. Debtor shall pay all costs necessary to obtain, preserve,
perfect, defend and enforce this security interest, collect the Obligation, and
preserve, defend, enforce and collect the Collateral including but not limited
to taxes, assessments, insurance premiums, repairs, reasonable attorney's fees
and legal expenses, food, rent, storage costs and expenses of sales. Whether
Collateral is or is not in Bank's possession, and without any obligation to do
so and without waiving Debtor's default for failure to make any such payment,
Bank at its option may pay any such costs and expenses, discharge encumbrances
on Collateral, and pay for insurance of Collateral, and such payment shall be a
part of the Obligation and bear interest at the rate set out in the Obligation.
Debtor agrees to reimburse Bank on demand for any costs so incurred.
6. Information and Inspection. Debtor shall (i) promptly furnish Bank any
information with respect to Collateral requested by Bank; (ii) allow Bank or its
representatives to inspect the Collateral, at any time upon reasonable notice
and wherever located, and to inspect and copy, or furnish Bank or its
representatives with copies of, all records relating to the Collateral and the
Obligation; (iii) furnish Bank or its representatives such information as Bank
may reasonably request to identify Collateral, at the time and in the form
requested by Bank; and (iv) deliver upon request to Bank shipping and delivery
receipts evidencing the shipment of goods and invoices evidencing the receipt
of, and the payment for, Collateral.
7. Additional Documents. Debtor shall sign and deliver any papers furnished
by Bank which are necessary or desirable in the judgment of Bank to obtain,
maintain and perfect the security interest hereunder and to enable Bank to
comply with the Federal Assignment of Claims Act or any other federal or state
law in order to obtain or perfect Bank's interest in Collateral or to obtain
proceeds of Collateral.
8. Parties Liable on Collateral. Debtor will preserve the liability of all
obligors on any Collateral, will preserve the priority of all security therefor,
and will deliver to Bank the original certificates of title on all motor
vehicles or other titled vehicles constituting the Collateral when and as
required by the Loan Agreement. Bank shall have no duty to preserve such
liability or security, but may do so at the expense of Debtor, without waiving
Debtor's default.
9. Right of Bank to Notify Debtors. At any time after an event of default,
whether Debtor is or is not in default hereunder, Bank may notify persons
obligated on any Collateral to make payments directly to Bank and Bank may take
control of all proceeds of any Collateral. Until Bank elects to exercise such
rights, Debtor, as agent of Bank, shall collect and enforce all payments owed on
Collateral.
10. Records of Collateral. Debtor at all times will maintain accurate books
and records covering the Collateral. Debtor immediately will mark all books and
records with an entry showing the absolute assignment of all Collateral to Bank
and Bank is hereby given the right to audit the books and records of Debtor
relating to Collateral at any time upon reasonable notice and from time to time.
The amounts shown as owed to Debtor on Debtor's books and on any assignment
schedule will be the undisputed amounts owing and unpaid.
11. Disposition of Collateral. If disposition of any Collateral gives rise to
an account, chattel paper or instrument, Debtor immediately shall notify Bank,
and upon request of Bank after an event of default shall assign or indorse the
same to Bank. No Collateral may be sold, leased, manufactured, processed or
otherwise disposed of by Debtor in any manner without the prior written consent
of Bank, except Collateral sold, leased, manufactured, processed or consumed in
the ordinary course of business.
12. Accounts. Each account held as Collateral will represent the valid and
legally enforceable obligation of third parties (subject to adjustments in the
ordinary course of Debtor's business), and shall not be evidenced by any
instrument or chattel paper.
13. Location of Collateral. Debtor shall give Bank written notice of each
office of Debtor in which records of Debtor pertaining to accounts held as
Collateral are kept, and each location at which Collateral is or will be kept,
and of any change of any such location. If no such notice is given, all records
of Debtor pertaining to Collateral are and shall be kept at Debtor address shown
above.
14. Notice of Changes. Debtor will notify Bank immediately of any material
change in the Collateral, of a change in Debtor's residence or location, of a
change in any matter warranted or represented by Debtor in this agreement or
furnished to Bank, and of any event of default.
15. Use and Removal of Collateral. Debtor will not use the Collateral
illegally nor, unless previously indicated as a fixture, permit the Collateral
to be affixed in real or personal property without the prior written consent of
Bank.
16. Possession of Collateral. Except as provided in the Loan Agreement, Debtor
will deliver all other instruments, documents and chattel paper which are part
of the Collateral and in Debtor's possession to the Bank immediately, or if
hereafter acquired, immediately following acquisition, appropriately indorsed to
Bank's order, or with appropriate, executed powers. Except as provided in the
Loan Agreement, Debtor waives presentment, notice of acceleration, demand,
notice of dishonor, protest, and all other notices with respect hereto.
17. [Reserved].
18. Change of Name/Status. Without the written consent of Bank, Debtor shall
not change its name, change its corporate status, use any trade name or engage
in any business in which it was not engaged on the date of this agreement.
19. Power of Attorney. Debtor appoints Bank as Debtor's attorney-in-fact with
full power in Debtor's name and behalf to do every act which Debtor is obligated
to do or may be required to do hereunder, however, nothing in this paragraph
shall be construed to obligate Bank to take any action hereunder nor shall Bank
be liable to Debtor for failure to take any action hereunder. This appointment
shall be deemed a power coupled with an interest and shall not be terminable as
long as the Obligations are outstanding and shall not terminate on the
disability or incompetence of the Debtor.
20. Waivers by Debtor. Except as provided in the Loan Agreement, Debtor waives
notice of the creation, advance, increase, existence, extension or renewal of,
and of any indulgence with respect to, the Obligation; waives presentment,
demand, notice of dishonor, and protest; waives notice of the amount of the
Obligation outstanding at any time, notice of any change in financial condition
of any person liable for the Obligation or any part thereof, notice of any event
of default, and all other notices respecting the Obligation; and agrees that
maturity of the Obligation and any part thereof may be accelerated, extended or
renewed one or more times by Bank in its discretion, without notice to Debtor.
Debtor waives any right to require that any action be brought against any other
person or to require that resort be had to any other security or to any balance
of any deposit account. The Debtor further waives any right of subrogation or
to enforce any right of action against any other Debtor until the Obligation is
paid in full.
21. Other Parties and Other Collateral. No renewal or extension of or any
other indulgence with respect to the Obligation or any part thereof, no release
of any security, no release of any person (including any maker, indorser,
guarantor or surety) liable on the Obligation, no delay in enforcement of
payment, and no delay or omission or lack of diligence or care in exercising any
right or power with respect to the Obligation or any security therefor or
guaranty thereof or under this agreement shall in any manner impair or affect
the rights of Bank under the law, hereunder, or under any other agreement
pertaining to the Collateral. Bank need not file suit or assert a claim for
personal judgment against any person for any part of the Obligation or seek to
realize upon any other security for the Obligation, before foreclosing or
otherwise realizing upon the Collateral for the purpose of paying the
Obligation. Debtor waives any right to the benefit of or to require or control
application of any other security or proceeds thereof, and agrees that Bank
shall have no duty or obligation to Debtor to apply to the Obligation any such
other security or proceeds thereof.
22. Collection and Segregation of Accounts. Until the occurrence of an event
of default, the Bank hereby authorizes the Debtor to collect the Collateral,
subject to the direction and control of the Bank, but the Bank may, without
cause or notice, curtail or terminate said authority at any time. Upon notice
by the Bank, whether oral or in writing, to the Debtor, the Debtor shall
forthwith upon receipt of all checks, drafts, cash, and other remittances in
payment of or on account of the Collateral, deposit the same in one or more
special accounts maintained with the Bank over which the Bank alone shall have
the power of withdrawal. The remittance of the proceeds of such Collateral
shall not, however,
-3-
<PAGE>
constitute payment or liquidation of such Collateral until the Bank shall
receive good funds for such proceeds. Funds placed in such special accounts
shall be held by the Bank as security for all Obligations secured hereunder.
These proceeds shall be deposited in precisely the form received, except for the
indorsement of the Debtor where necessary to permit collection of items, which
indorsement the Debtor agrees to make, and which indorsement the Bank is also
hereby authorized, as attorney-in-fact, to make on behalf of the Debtor. In the
event the Bank has notified the Debtor to make deposits to a special account,
pending such deposit, the Debtor agrees that it will not commingle any such
checks, drafts, cash or other remittances with any funds or other property of
the Debtor, but will hold them separate and apart therefrom, and upon an express
trust for the Bank until deposit thereof is made in the special account. The
Bank will, from time to time, apply the whole or any part of the Collateral
funds on deposit in this special account against such Obligations as are accrued
hereby as the Bank may in its sole discretion elect. At the sole election of
the Bank, any portion of said funds on deposit in the special account which the
Bank shall elect not to apply to the Obligations, may be paid over by the Bank
to the Debtor.
23. Compliance with State and Federal Laws. Debtor will comply with all State
and Federal laws and regulations applicable to its business, whether now in
effect or hereafter enacted including but not limited to the wage and hours laws
and relating to the use or disposal of hazardous materials and wastes.
24. Vehicles. Debtor shall cause Bank's security interest in all Vehicles to
be properly noted on all certificates of title issued or outstanding with
respect to such Vehicles.
F. Rights and Powers of Bank.
1. General. Bank, after default, without liability to Debtor may: obtain from
any person information regarding Debtor or Debtor's business, which information
any such person also may furnish without liability to Debtor; require Debtor to
give possession or control of any Collateral to Bank; indorse as Debtor's agent
any instruments, documents or chattel paper in Collateral or representing
proceeds of Collateral; contact account debtors directly to verify information
furnished by Debtor; take control of proceeds, including stock received as
dividends or by reason of stock splits; release Collateral in its possession to
any Debtor, temporarily or otherwise; reject as unsatisfactory any property
hereafter offered by Debtor as Collateral; set standards from time to time to
govern what may be used as after acquired Collateral; take control of funds
generated by the Collateral, such as cash dividends, interest and proceeds or
refunds from insurance, and use same to reduce any part of the Obligation and
exercise all other rights which an owner of such Collateral may exercise, except
the right to vote or dispose of Collateral before an event of default; at any
time transfer any of the Collateral or evidence thereof into its own name or
that of its nominee; and demand, collect, convert, redeem, receipt for, settle,
compromise, adjust, sue for, foreclose or realize upon Collateral, in its own
name or in the name of Debtor, as Bank may determine. Bank shall not be liable
for failure to collect any account or instruments, or for any act or omission on
the part of the Bank, its officers, agents or employees, except willful
misconduct and gross negligence. The foregoing rights and powers of Bank will
be in addition to, and not a limitation upon, any rights and powers of Bank
given by law, elsewhere in this agreement, in the Loan Agreement or otherwise.
If Debtor fails to maintain any required insurance, to the extent permitted by
applicable law Bank may (but is not obligated to) purchase single interest
insurance coverage for the Collateral which insurance may at Bank's option (i)
protect only Bank and not provide any remuneration or protection for Debtor
directly and (ii) provide coverage only after the Obligation has been declared
due as herein provided. The premiums for any such insurance purchased by Bank
shall be a part of the Obligation and shall bear interest as provided in B.1.d.
hereof.
2. Convertible Collateral. Bank, may present for conversion any Collateral
which is convertible into any other instrument or investment security or a
combination thereof with cash, but Bank shall not have any duty to present for
conversion any Collateral unless it shall have received from Debtor detailed
written instructions to that effect at a time reasonably far in advance of the
final conversion date to make such conversion possible.
G. Default.
1. Event of Default. An event of default shall occur if: (i) an Event of
Default as defined in the Loan Agreement shall occur and be continuing; or (ii)
there is a loss, theft, damage or destruction of any material portion of the
Collateral for which there is no insurance coverage or for which, in the opinion
of the Bank there is insufficient insurance coverage.
2. Rights and Remedies. If any Event of Default shall occur, then, in each and
every such case, the Bank may, without presentment, demand, or protest; notice
of default, dishonor, demand, non-payment, or protest; notice of intent to
accelerate all or any part of the Obligation; notice of acceleration of all or
any part of the Obligation; or notice of any other kind, all of which Debtor
hereby expressly waives, (except for any notice required under this agreement,
any other loan document or applicable law); at any time thereafter exercise
and/or enforce any of the following rights and remedies:
a) Possession and Collection of Collateral. At its option: (i) take possession
or control of, store, lease, operate, manage, sell or otherwise dispose of, all
or any part of the Collateral; (ii) notify all parties under any account or
contract right forming all or any part of the Collateral to make any payments
otherwise due to the Debtor directly to the Bank; (iii) in the Bank's own name,
or in the name of the Debtor, demand, collect, receive, sue for, and give
receipts and releases for, any and all amounts due under such accounts and
contract rights; (iv) indorse as the agent of the Debtor any check, note,
chattel paper, documents, or instruments forming all or any part of the
Collateral; (v) make formal application for transfer to the Bank (or to any
assignee of the Bank to any purchaser of any of the Collateral) of all of the
Debtor's permits, licenses, approvals, agreements, and the like relating to the
Collateral or to the Debtor's business; (vi) take any other action which the
Bank deems necessary or desirable to protect and realize upon its security
interest in the Collateral; and (vii) in addition to the foregoing, and not in
substitution therefor, exercise any one or more of the rights and remedies
exercisable by the Bank under any other provision of this agreement, under any
of the other loan documents, or as provided by applicable law (including,
without limitation, the Uniform Commercial Code as in effect in Texas
(hereinafter referred to as the "UCC")). In taking possession of the Collateral
the Bank may enter the Debtor's premises and otherwise proceed without legal
process, if this can be done without breach of the peace. The Debtor shall, upon
the Bank's demand, promptly make the Collateral or other security available to
the Bank at a place designated by the Bank, which place shall be reasonably
convenient to both parties.
The Bank shall not be liable for, nor be prejudiced by, any loss, depreciation
or other damages to the Collateral, unless caused by the Bank's willful and
malicious act. The Bank shall have no duty to take any action to preserve or
collect the Collateral.
b) Receiver. Obtain the appointment of a receiver for all or any of the
Collateral, the Debtor hereby consenting to the appointment of such a receiver
and agreeing not to oppose any such appointment.
c) Right of Set Off. Without notice or demand to the Debtor, set off and apply
against any and all of the Obligations any and all deposits (general or special,
time or demand, provisional or final) and any other indebtedness, at any time
held or owing by the Bank to or for the credit of the account of the Debtor.
Bank shall be entitled to immediate possession of all books and records
evidencing any Collateral or pertaining to chattel paper covered by this
agreement and it or its representatives shall have the authority to enter upon
any premises upon which any of the same, or any Collateral, may be situated and
remove the same therefrom without liability. Bank may surrender any insurance
policies in Collateral and receive the unearned premium thereon. Debtor shall
be entitled to any surplus and shall be liable to Bank for any deficiency. The
proceeds of any disposition after default available to satisfy the Obligation
shall be applied to the Obligation in such order and in such manner as Bank in
its discretion shall decide.
H. General.
1. Parties Bound. Bank's rights hereunder shall inure to the benefit of its
successors and assigns, and in the event of any assignment or transfer of any of
the Obligation or the Collateral, Bank thereafter shall be fully discharged from
any responsibility with respect to the Collateral so assigned or transferred,
but Bank shall retain all rights and powers hereby given with respect to any of
the Obligation or Collateral not so assigned or transferred. All
representations, warranties and agreements of Debtor if more than one are joint
and several and all shall be binding upon the personal representatives, heirs,
successors and assigns of Debtor.
2. Waiver. No delay of Bank in exercising any power or right shall operate as
a waiver thereof; nor shall any single or partial exercise of any power or right
preclude other or further exercise thereof or the exercise of any other power of
right. No waiver by Bank of any right hereunder or of any default by Debtor
shall be binding upon Bank unless in writing, and no failure by Bank to exercise
any power or right hereunder or waiver of any default by Debtor shall operate as
a waiver of any other or further exercise of such right or power or of any
further default. Each right, power and remedy of the Bank as provided for in any
of the loan documents, or which shall now or hereafter exist at law or in equity
or by statute or otherwise, shall be cumulative and concurrent and shall be in
addition to every other such right, power or remedy. The exercise or beginning
of the exercise by the Bank of any one or more of such rights, powers or
remedies shall not preclude the simultaneous or later exercise by the Bank of
any or all other such rights, powers or remedies.
-4-
<PAGE>
3. Agreement Continuing. This agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this agreement, and if all
transactions between Bank and Debtor shall be closed at any time, shall be
equally applicable to any new transactions thereafter. Provisions of this
agreement, unless by their terms exclusive, shall be in addition to other
agreements between the parties. Time is of the essence of this agreement.
4. Definitions. Unless the context indicates otherwise, definitions in the
UCC apply to words and phrases in this agreement; if UCC definitions conflict,
Article 9 definitions apply.
5. Notice. Notice shall be deemed reasonable if mailed postage prepaid at
least 5 days before the related action (or if the UCC elsewhere specifies a
longer period, such longer period) to the address of Debtor given above.
6. Modifications. No provision hereof shall be modified or limited except by
a written agreement expressly referring hereto and to the provisions so modified
or limited and signed by the Debtor and Bank, nor by course of conduct, usage of
trade.
7. Partial Invalidity. The unenforceability or invalidity of any provision of
this security agreement shall not affect the enforceability or validity of any
other provision herein and the invalidity or unenforceability of any provision
of any loan document to any person or circumstance shall not affect the
enforceability or validity of such provision as it may apply to other persons or
circumstances.
8. Gender and Number. Where appropriate, the use of one gender shall be
construed to include the others or any of them; and the singular number shall be
construed to include the plural, and vice versa.
9. Applicable Law and Venue. This agreement has been delivered in the State
of Texas, and except for the creation, perfection and priority of the liens and
security interests created hereby in the Collateral, which shall be governed by
the laws of the state provided in Section 9-103 of the Uniform Commercial Code,
this agreement shall be construed in accordance with the laws of that State. It
is performable by Debtor in the county or city of Bank's address set out above
and Debtor expressly waives any objection as to venue in any such location.
Wherever possible each provision of this agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition of invalidity,
without invalidating the remainder of such provisions or the remaining
provisions of this agreement.
10. Financing Statement. To the extent permitted by applicable law, a carbon,
photographic or other reproduction of this security agreement or any financing
statement covering the Collateral shall be sufficient as a financing statement.
11. Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be considered to be an original, but all of
which shall constitute one in the same instrument. As used herein "this
agreement" shall include all attachments and addenda.
12. Limitation. It is the intention of Debtor and Bank that the amount of the
Obligation secured by Debtor by this agreement shall be in, but not in excess
of, the maximum amount permitted by fraudulent conveyance, fraudulent transfer
or similar laws applicable as to Debtor. Accordingly, notwithstanding anything
to the contrary contained in this agreement or any other agreement or instrument
executed in connection with the payment of any of the Obligation, the amount of
the Obligation secured by this agreement shall be limited to that amount which
after giving effect thereto would not (i) render Debtor insolvent, (ii) result
in the fair saleable value of the assets of Debtor being less than the amount
required to pay its debts and other liabilities (including contingent
liabilities) as they mature, or (iii) leave Debtor with unreasonably small
capital to carry out its business as now conducted and as proposed to be
conducted, including its capital needs, as such concepts described in (i), (ii)
and (iii) herein are determined under applicable law, if the obligations of
Debtor hereunder would otherwise be set aside, terminated, annulled or avoided
for such reason by a court of competent jurisdiction in a proceeding actually
pending before such court. For purposes of this agreement, the term "applicable
law" means as to Debtor each statute, law, ordinance, regulation, order,
judgment, injunction or decree of the United States or any state or
commonwealth, any municipality, any foreign country, or any territory,
possession or tribunal applicable to Debtor.
13. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM BASED ON OR
ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN
ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE
APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION
OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC.
(J.A.M.S.) AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY
INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION
AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS
AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO
COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES
IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF THE
BORROWER'S DOMICILE AT THE TIME OF THIS AGREEMENT'S EXECUTION AND ADMINISTERED
BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY
PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION
ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90
DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A
SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP
TO AN ADDITIONAL 60 DAYS.
B. RESERVATIONS OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE DEEMED TO (I)
LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR
REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II) BE A WAIVER BY THE
BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY
EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE BANK HERETO (A) TO
EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO
FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN
FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO)
INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE
BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN
SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF
ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT. AT BANK'S
OPTION, FORECLOSURE UNDER A DEED OF TRUST OR MORTGAGE MAY BE ACCOMPLISHED BY ANY
OF THE FOLLOWING: THE EXERCISE OF A POWER OF SALE UNDER THE DEED OF TRUST OR
MORTGAGE, OR BY JUDICIAL SALE UNDER THE DEED OF TRUST OR MORTGAGE, OR BY
JUDICIAL FORECLOSURE. NEITHER THIS EXERCISE OR SELF HELP REMEDIES NOR THE
INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR
ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
14. NOTICE OF FINAL AGREEMENT. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN OR ORAL AGREEMENTS BETWEEN THE PARTIES.
Remainder of Page Intentionally Blank.
Signature Page to Follow.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly
executed under seal by their duly authorized representatives as of the date
first above written.
Bank/Secured Party
NationsBank of Texas, N.A.
By: /s/ RUSSELL P. HARTSFIELD (Seal)
----------------------------------------------
Name: Russell P. Hartsfield
Title: Senior Vice President
DEBTOR/PLEDGOR:
- ----------------------------------------
Print Individual's Name:
(Seal)
- ----------------------------------
- ----------------------------------------
Print Individual's Name:
(Seal)
- ----------------------------------
KTL, INC.
- ----------------------------------------
(Name of Corporation, Partnership, etc.)
By: /s/ KENNETH H. EVANS, JR. (Seal)
-------------------------------
Kenneth H. Evans, Jr.
Title: Treasurer
-------------------------------
-6-
<PAGE>
SCHEDULE 1
VEHICLES
-7-
<PAGE>
EXHIBIT 10.5
KTL, INC.
---------
GUARANTEE OF 12 1/4% SENIOR
SUBORDINATED NOTES DUE 2005, SERIES B
-------------------------------------
Reference is made to the Indenture, dated as of November 15, 1995 (as in
effect from time to time, the "Indenture"), among The Bank of New York, as
---------
trustee, AmeriTruck Distribution Corp., a Delaware corporation (the "Company"),
-------
and the Subsidiaries of the Company named as Guarantors in the Indenture.
Defined terms used in this Guarantee (the "Subsequent Guarantee") without
--------------------
definition have the meanings given them in the Indenture.
Pursuant to the Indenture, the Company has previously issued and sold
$100,000,000 aggregate principal amount of its 12 1/4% Senior Subordinated Notes
Due 2005 (the "Old Notes"). As contemplated by the Indenture, the Company
---------
subsequently issued $100,000,000 aggregate principal amount of its 12 1/4%
Senior Subordinated Notes Due 2005, Series B in exchange for the Old Notes.
The undersigned (the "Subsequent Guarantor"), for consideration received,
--------------------
jointly and severally with the other Guarantors unconditionally and irrevocably
guarantees on a senior subordinated basis to each Holder and to the Trustee, as
applicable, (i) the due and punctual payment of the principal of and interest on
the Notes (including interest, to the extent allowable, accruing after the
filing of a petition under any Bankruptcy Law), when and as the same shall
become due and payable, whether at Stated Maturity, as a result of redemption,
by acceleration or otherwise, (ii) the due and punctual payment of interest on
overdue principal of, premium and interest, if any, on the Notes, to the extent
lawful, (iii) the due and punctual performance of all other obligations under
the Indenture to the Holders or the Trustee including payment obligations under
Section 7.07 of the Indenture, all in accordance with the terms of such Notes
and the Indenture, and (iv) in the case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, at Stated Maturity, at redemption, by acceleration or
otherwise, to be paid by such Subsequent Guarantor or through the other
Guarantors as provided below. The Subsequent Guarantor hereby agrees that its
obligations hereunder shall be absolute and unconditional, irrespective of, and
shall be unaffected by (and waives any defense that may arise out of), any
invalidity, irregularity or unenforceability of any such Note or the Indenture,
any failure to enforce the provisions of any such Note or the Indenture, any
waiver, modification or indulgence granted to the Company with respect thereto
by any Holder or the Trustee, or any other circumstances which may otherwise
constitute a legal or equitable discharge of a surety or guarantor. The
Subsequent Guarantor hereby waives diligence, presentment, filing of claims with
a court in the event of a
<PAGE>
-2-
merger or bankruptcy of the Company, any right to require a proceeding first
against the Company, the benefit of discussion, protest or notice with respect
to any such Note or the Indebtedness evidenced thereby and all demands
whatsoever, and covenants that this Subsequent Guarantee will not be discharged
as to any such Note or the Trustee except as provided in Section 11.04 of the
Indenture or by payment in full of the principal thereof and interest thereon
(as provided in Section 8.01 or 8.02(a) of the Indenture and, in the case of
Section 8.02(a), subject to Section 8.05 of the Indenture) and payment in full
of the obligations set forth in Section 7.07 of the Indenture. The Subsequent
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (i) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article Six of
the Indenture for the purpose of this Subsequent Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (ii) in the event of any declaration of
acceleration of such obligations as provided in Article Six of the Indenture,
such obligations (whether or not due and payable) shall forthwith become due and
payable by each Guarantor for the purpose of this Subsequent Guarantee. In
addition, without limiting the foregoing provisions, upon the effectiveness of
an acceleration under Article Six of the Indenture, the Trustee shall promptly
make a demand for payment on the Notes under the Guarantee provided for in
Article Eleven of the Indenture and not discharged. The obligations of each
Guarantor under Article 11 of the Indenture and this Subsequent Guarantee shall
be joint and several. For purposes of Article Eleven of the Indenture and this
Subsequent Guarantee, each Guarantor's liability (a Guarantor's "Base Guaranty
-------------
Liability") shall be that amount from time to time equal to the aggregate
- ---------
liability of a Guarantor under Article 11 of the Indenture and this Subsequent
Guarantee, but shall be limited to the least of (A) the aggregate amount of the
obligation as stated in the first sentence of Section 11.01 of the Indenture and
this paragraph with respect to the Notes issued pursuant to the Indenture or (B)
the amount, if any, which would not have (i) rendered such Guarantor "insolvent"
(as such term is defined in Section 101(32) of Title 11 of the U.S. Code and in
Section 271 of the Debtor and Creditor Law of the State of New York, as each is
in effect at the date of the Indenture) or (ii) left it with unreasonably small
capital at the time its Guarantee of the Notes was entered into, after giving
effect to the incurrence of existing Indebtedness immediately prior to such
time; provided, however, that it shall be a presumption in any lawsuit or
-------- -------
other proceeding in which a Guarantor is a party that the amount guaranteed is
the amount set forth in clause (A) above unless a creditor or representative of
creditors of such Guarantor, or debtor in possession or trustee in bankruptcy of
such Guarantor, otherwise proves in such a lawsuit that the aggregate liability
of such Guarantor is limited to the amount set forth in clause (B). In making
any determination as to the solvency or sufficiency of capital of a Guarantor in
accordance with the previous sentence, the right of such Guarantor to
contribution from other Guarantors, to subrogation pursuant to the following
paragraph (and the corresponding paragraph in Section 11.01 of the Indenture)
and
<PAGE>
-3-
any other rights such Guarantor may have, contractual or otherwise, shall be
taken into account.
Each Guarantor shall be subrogated to all rights of the Holders and the
Trustee against the Company or any of the other Guarantors in respect of any
amounts paid to the Holders and the Trustee by such Guarantor pursuant to the
provisions of Article 11 of the Indenture and this Subsequent Guarantee;
provided, however, that such Guarantor shall not be entitled to enforce, or to
- -----------------
receive any payments arising out of or based upon, such right of subrogation
until the principal of and interest on all of the Notes, and the obligations set
forth in Section 7.07 of the Indenture, shall have been paid in full.
The Subsequent Guarantee shall not be valid or become obligatory for any
purpose with respect to a Note until the certificate of authentication on such
Note shall have been signed by or on behalf of the Trustee.
This Subsequent Guarantee shall be subject to all other provisions of the
Indenture, including without limitation the provisions of Sections 11.02, 11.03,
11.04 and 11.05 of the Indenture, all of which are hereby incorporated into this
Subsequent Guarantee by this reference. This Subsequent Guarantee shall
constitute a Guarantee for purposes of the Indenture and the undersigned shall
constitute a Guarantor for purposes of the Indenture. This Subsequent Guarantee
shall be automatically and unconditionally released and discharged in the event
that the circumstances set forth in the second paragraph of Section 4.18 of the
Indenture occur with respect to the Subsequent Guarantor.
IN WITNESS WHEREOF, the undersigned has caused this Subsequent Guarantee to
be duly executed on its behalf as of the 19th day of September, 1996.
KTL, INC.
By:/s/ KENNETH H. EVANS, JR.
----------------------------------
Name: Kenneth H. Evans, Jr.
Title: Chief Financial and
Administrative Officer
<PAGE>
EXHIBIT 12
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except ratio amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
1996* 1995* 1996* 1995*
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Earnings:
Income (loss) before income taxes and
extraordinary loss $ 125 $1,722 $ (516) $4,972
------ ------ ------- ------
Fixed charges:
Interest expense and amortization of
debt discount and premium on all
indebtedness 4,523 1,030 12,166 2,539
Portion of rent under long-term
operating leases representative of an
interest factor 374 161 1,133 276
Preferred stock dividend requirements
of consolidated subsidiaries - 97 - 266
------ ------ ------- ------
Total fixed charges 4,897 1,288 13,299 3,081
------ ------ ------- ------
Earnings before income taxes and fixed
charges $5,022 $3,010 $12,783 $8,053
====== ====== ======= ======
Ratio of earnings to fixed charges (1) 1.03x 2.34x - 2.61x
====== ====== ======= ======
</TABLE>
(1) The Company's earnings were insufficient to cover fixed charges by $516
for the nine month period ended September 30, 1996.
* Comparisons between periods are affected by acquisitions - see Note 2
contained in the unaudited Notes to Consolidated Financial Statements.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from AmeriTruck
Distribution Corp.'s Consolidated Financial Statements for the nine months ended
September 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,842
<SECURITIES> 0
<RECEIVABLES> 26,823
<ALLOWANCES> 528
<INVENTORY> 1,235
<CURRENT-ASSETS> 39,875
<PP&E> 140,553
<DEPRECIATION> 29,997
<TOTAL-ASSETS> 196,642
<CURRENT-LIABILITIES> 32,516
<BONDS> 168,658
0
0
<COMMON> 35
<OTHER-SE> (2,613)
<TOTAL-LIABILITY-AND-EQUITY> 196,642
<SALES> 0
<TOTAL-REVENUES> 161,145
<CGS> 0
<TOTAL-COSTS> 149,560
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,166
<INCOME-PRETAX> (516)
<INCOME-TAX> 470
<INCOME-CONTINUING> (986)
<DISCONTINUED> 0
<EXTRAORDINARY> (230)
<CHANGES> 0
<NET-INCOME> (1,216)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
