<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission file number 33-99716
AMERITRUCK DISTRIBUTION CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2619368
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
City Center Tower II, Suite 1101,
301 Commerce Street, Fort Worth, Texas 76102-5384
(Address of principal executive offices) (Zip Code)
(817) 332-6020
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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TABLE OF CONTENTS
ITEM PAGE
---- ----
PART I. 1. Business 3
2. Properties 8
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security Holders 9
PART II. 5. Market for Registrant's Common Equity and
Related Stockholder Matters 10
6. Selected Financial Data 10
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
8. Financial Statements and Supplementary Data 25
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 47
PART III. 10. Directors and Executive Officers of the Registrant 47
11. Executive Compensation 50
12. Security Ownership of Certain Beneficial Owners and
Management 55
13. Certain Relationships and Related Transactions 56
PART IV. 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 58
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PART I.
ITEM 1. BUSINESS
OVERVIEW
AmeriTruck Distribution Corp. ("AmeriTruck" or the "Company") is the
largest refrigerated trucking company in the United States. In addition to
general refrigerated trucking, AmeriTruck's services include time-sensitive
delivery (for example, mail, inventory for customers with just-in-time
programs), special handling (for example, medical lab supplies, furniture),
specific temperature control (for example, processed foods, laboratory
supplies), dedicated fleets and logistics services. AmeriTruck was formed in
August 1995 to effect the combination of six regional trucking lines in November
1995 (the "Founding Companies"): W&L Services Corp. ("W&L"), Thompson Bros.,
Inc. ("TBI"), J.C. Bangerter & Sons, Inc. ("Bangerter"), CMS Transportation
Services, Inc. and certain related companies, Scales Transport Corporation and a
related company ("Scales") and CBS Express, Inc. ("CBS").
In April 1996, CMS Transportation Services, Inc. changed its corporate name
to "AmeriTruck Refrigerated Transport, Inc." ("ART"), and the distribution
functions previously conducted under the corporate name "CMS Transportation
Services, Inc." were continued as a division of ART. In addition, in June 1996,
the business operations of CBS, a general freight carrier (which then operated
under the name "CBS Express, Inc."), were transferred to Scales. In December
1996, the distribution functions of the CMS Transportation division of ART were
transferred to CBS and its name was changed to "CMS Transportation Services,
Inc." ("CMS"). The CMS Transportation distribution business currently operated
by CMS is sometimes referred to below as the "CMS distribution business" and the
business operations previously operated under the name CBS Express, Inc. and
transferred to Scales are sometimes referred to as the "CBS Express business."
In February 1996, the Company, through CMS (which subsequently changed its
corporate name to AmeriTruck Refrigerated Transport, Inc.), purchased certain
assets of Freymiller Trucking Inc. ("the Freymiller Assets"), from the
bankruptcy estate of Freymiller Trucking Inc., a refrigerated carrier.
Additionally, in July 1996, AmeriTruck completed its purchase of KTL, Inc.
("KTL"), a carrier of refrigerated and non-refrigerated products operating
primarily in Florida, New Jersey and Indiana.
In May 1997, AmeriTruck purchased the capital stock of Monfort
Transportation Company ("Monfort") and Lynn Transportation Co., Inc. ("Lynn"),
both subsidiaries of ConAgra, Inc. ("ConAgra"). In June 1997, AmeriTruck also
purchased all the outstanding stock of Trans-Star, Inc. ("Tran-Star") which was
owned by Allways Services, Inc.
With the addition of Tran-Star, Monfort and Lynn to the AmeriTruck
organization, the Company is currently organized into four operating groups to
better serve its customers. The AmeriTruck Refrigerated Carrier Group was
formed to offer regional and nationwide, truckload refrigerated service. This
new company combined the resources of ART, Bangerter, Tran-Star, Monfort, Lynn
and the refrigerated operations of TBI. The AmeriTruck Specialized Carrier
Group was formed to service customers with unique needs in transportation and
distribution. This group includes W&L, the largest interstate hauler of new
furniture in the U.S., CMS, serving the medical distribution industry, Scales,
offering regional just-in-time dry van service, and AmeriTruck Logistics
Services, Inc. ("ALS," formed in January 1997 to broker freight). The
AmeriTruck Regional LTL Group offers less-than-truckload, refrigerated and non-
refrigerated service. The lead carrier in this group is KTL, offering service
to and from the Florida market. The LTL operations of Lynn in Nevada and
Southern California were recently integrated into this Group. TBI now focuses
on mail transportation and regional specialized services and comprises the
AmeriTruck Mail Services Group. TBI operates under 17 contracts with the U.S.
Postal Service. Most of these contracts were initially awarded in the 1970's
and 1980's.
The Company's principal subsidiaries currently are W&L, TBI, Bangerter,
CMS, Scales, ART, KTL, ALS, Monfort, Lynn and Tran-Star (the "Operating
Companies"). Unless the context requires otherwise, references in this Annual
Report to "AmeriTruck" or the "Company" are to AmeriTruck Distribution Corp. and
its consolidated subsidiaries after giving effect to the acquisitions and
restructuring described above.
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STRATEGY
The Company's strategy is to earn superior returns on invested capital by
being the leader in selected segments of specialized transportation and
logistics. The carriers acquired by AmeriTruck generally provide custom services
at higher than average pricing, which has historically enabled the small
carriers to earn above-average profits even though they had not achieved
economies of scale. Although more than 65 percent of aggregate specialized
freight revenue in the U.S. is still generated by thousands of small carriers,
competitive pressure from deregulation and consolidation is expected to
adversely impact the profits of the industry's small carriers. AmeriTruck
believes that customers will increasingly choose specialized carriers that offer
both the customized service historically associated with smaller, regional
carriers and pricing that reflects the advantages of economies of scale. It is
AmeriTruck's objective to be the leader in providing this type of service in the
refrigerated, new furniture and medical supplies trucking segments.
Critical Mass Through Mergers and Coordination
The Company is managing a phased transformation of the acquired carriers
from eleven independent small companies to interdependence. This combination of
companies into four groups should enable AmeriTruck to continue to offer the
high quality service typical of specialized carriers while benefiting from the
freight networking efficiency and purchasing power of a large national carrier.
The Company believes that the combination of these carriers creates a dense
freight network which, when managed on a combined basis, should further improve
equipment utilization rates over those levels which any of the Operating
Companies could achieve on their own. Additionally, the improved purchasing
power of the combined entities should yield substantial cost savings in
purchasing insurance, equipment, maintenance items, fuel and other operating
cost components.
Significant Industry Consolidation Opportunity
The Company intends to make future acquisitions an integral part of
AmeriTruck's growth strategy. Because the trucking industry is extremely
fragmented, the Company expects to have numerous acquisition opportunities to
broaden and increase the density of its freight network. By becoming the
dominant carrier in the specialized segments in which it operates, AmeriTruck
should improve its revenue per total mile even though the trend for the
industry, as a whole, for revenue per loaded mile (on an inflation adjusted
basis) may continue to decline. Moreover, an acquisition-driven strategy is
expected to enable the Company to gain market share without discounting rates
and is an efficient source of additional drivers. AmeriTruck will fund its
acquisition strategy through internal cash flow, bank borrowings, and by
accessing the equity market. The Company also believes that growth through
acquisitions will present significant opportunities to consolidate
administrative and overhead activities which should reduce these costs steadily
as a percentage of revenues.
MARKET GROUPS
The functions of marketing, customer service and fleet management are
managed on a decentralized basis with overall network design and coordination
provided by the Company.
Customer Service and Marketing
The Company has approximately 156 employees that work in sales and
marketing. At each of the Operating Companies, the President's primary
responsibility is managing operations and maintaining close relationships with
major customers.
The customer service representatives spend most of their time on the phone
with customers discussing equipment requirements in various regions. In
addition, they coordinate with fleet managers to match available units and
customer demand. In many instances, both the customer service representative
and the driver have worked with the specific customer for several years, which
creates a strong relationship between the operating company and the customer.
The Operating Companies also cross-market the services offered by the other
Operating Companies, with the intent of creating substantial freight networking
advantages and improving the Operating Companies operating efficiencies for
AmeriTruck as a whole.
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Fleet Management
The primary purpose of fleet management is to promote a productive
relationship between a carrier and its drivers and to optimize the service
performance and productivity of its tractor and trailer fleet. Each of the
Operating Company's fleet managers work with between 25 and 47 drivers and
tractors and is responsible for overseeing and improving driver retention,
driver productivity, tractor utilization, safety, fuel efficiency, service
reliability and performance and compliance with tractor preventive maintenance
requirements.
The fleet manager's primary role is to communicate with drivers on the
road concerning work assignments, customer needs and driver needs. Fleet
managers also review performance reports for the fleet as a whole and each
driver and tractor within the fleet, reward good drivers, counsel
underperforming drivers and terminate chronically underperforming drivers.
The fleet managers at each of the Operating Companies provide assistance
to drivers from other Operating Companies operating in their geographic region.
For example, an ART driver operating in North Carolina will be able to get help
from W&L. The Company believes that this improves overall operating efficiencies
and driver morale. In addition, through its management information systems the
Company monitors the relative performance of each fleet manager, with respect to
both his or her own drivers and with respect to drivers from other Operating
Companies.
Mobile Communications
In October 1996, AmeriTruck entered into an agreement with HighwayMaster
to purchase 2,000 mobile communication units, 1,225 of which were installed as
of December 31, 1997. HighwayMaster's mobile units have voice technology.
Drivers can make calls directly from their truck, which improves productivity.
Besides voice, the intelligence in the HighwayMaster mobile unit coupled with
the intelligent network complex will allow the Company to provide better service
to its customers and better manage its fleet. When this technology is fully
implemented, the Company will be able to download routes and dispatches into the
mobile unit and the mobile unit will automatically tell the Company when the
truck is late or out of route. This technology will allow the Company to cut
communications expense, stop needless messaging that the computer has to process
and will let the Company deal with important loads so it can prevent service
failures.
In addition to these HighwayMaster mobile units, AmeriTruck has 680
Qualcomm units installed, primarily on tractors acquired with Tran-Star. The
AmeriTruck information system has been modified to support both HighwayMaster
and Qualcomm units. While the Company's overall goal is to move towards
HighwayMaster for mobile communications, the integration of both
technologies allows the Company to make the best use of its current installed
base of equipment and supports future acquisitions of either technology.
CUSTOMERS
For the year ended December 31, 1997 the Company's largest customer was
ConAgra, Inc. (including all subsidiaries) accounting for approximately 8
percent of combined revenues. No other customers accounted for more than 4
percent of the Company's combined revenues for 1997.
Monfort and Lynn operated primarily as in-house carriers for the red
meat division of Monfort, Inc., a ConAgra subsidiary, and the poultry and turkey
divisions of ConAgra Poultry Company, a ConAgra subsidiary. The Company entered
into a Transportation Services Agreement with subsidiaries of ConAgra. The
ConAgra subsidiaries have agreed to tender freight from the Monfort, Inc.'s red
meat division, ConAgra Poultry Company's poultry and turkey divisions and Swift-
Ekrich, Inc.'s processed meats division in lanes and minimum annual volumes. The
term of this agreement is four years, with pricing fixed for the first two years
and adjusted prices in the third and fourth years. The Company is coordinating
Monfort and Lynn activities with the other Operating Companies in the
refrigerated group.
The Company's operations are subject to seasonal trends common to the
trucking industry. Results of operations are generally lower in the winter
months due to reduced shipments and higher operating costs.
RISK MANAGEMENT AND INSURANCE
The primary risk areas in the Company's businesses are bodily injury and
property damage, workers' compensation and cargo loss and damage. The Company
currently maintains insurance against these risks and is subject to liability as
a self-insurer to the extent of the deductible under each policy. The Company
maintains
5
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liability insurance for bodily injury and property damage of at least $25
million per incident, with a deductible for bodily injury and property damage of
$300,000 per incident. The current deductible for workers' compensation in
states where most of the Company's drivers are domiciled ranges from $250,000 to
$350,000 per claim. The Company is self-insured as to damage or loss to the
property and equipment they own or lease. In addition, the Company maintains
cargo loss and damage insurance of between $100,000 and $1 million per incident
with a deductible ranging from $5,000 to $15,000 per incident.
PERSONNEL AND SAFETY
At December 31, 1997 the Company had approximately 3,400 employees, of
whom 2,563 were drivers. In addition, the Company contracted with 662 owner
operators. As with most trucking operations, the Company experiences turnover of
its company-employed drivers and contract operators and, as a result, is
continuously seeking qualified individuals to handle the transportation of
shipments. Safety and dependability of all drivers are of great importance to
the Company's operations. Driver applicants are required to have a combination
of training and experience, and to pass a drug test. The Company's employees are
not represented by unions.
For the year ended December 31, 1997 the Company reported 0.4 accidents
per million miles. An accident, as defined by the U.S. Department of
Transportation ("DOT"), involves death, personal injury with treatment sought
immediately, away from the accident, or a disabled vehicle requiring towing. The
industry average, as reported by the American Trucking Association, for DOT
reportable accidents in 1995 (the most recent year for which such information is
publicly available) was 0.7 accidents per million miles. In addition to
following DOT regulations requiring random drug testing and post-accident drug
testing, the Company rigorously enforces its accident and incident reporting
and follow-up standards.
The Company employs safety specialists and maintains safety programs
designed to meet its specific needs. In addition, the Company employs
specialists to perform compliance checks and conduct safety tests throughout its
operations. The Company conducts a number of safety programs designed to promote
compliance with rules and regulations, and to reduce accidents and cargo claims.
These programs include an incentive pay program for accident and claim-free
driving, driver safety meetings, distribution of safety bulletins to drivers and
participation in national safety associations.
FUEL AVAILABILITY AND COST
Over half of the Company's fuel purchases occur at commercial fuel
stations with the remainder being obtained at Company facilities where fuel is
stored in bulk. The Company believes that the volumes of fuel purchased by the
Operating Companies, in the aggregate, creates substantially more negotiating
leverage with fuel vendors than the Operating Companies had individually prior
to their acquisition by AmeriTruck. Furthermore, the Company expects that fuel
efficiency will improve as older equipment is replaced with tractors with more
sophisticated engines. The Company believes that a significant portion of any
increase in fuel costs or fuel taxes generally may be recoverable from its
customers in the form of higher rates, although a time lag usually occurs in
passing these costs along.
COMPETITION
The Company competes with many other truckload and less-than-truckload
carriers of various sizes, including divisions or subsidiaries of larger
companies, and to a lesser extent railroads, on the basis of price, service and
the ability to supply capacity to customers in a timely manner. The competition
has created downward pressure on the trucking industry's inflation adjusted
pricing structure. Several trucking companies with which AmeriTruck competes
have greater financial resources and more revenue equipment than does the
Company.
REGULATION
Interstate and intrastate motor carriage has been substantially
deregulated as a result of the enactment of the Motor Carrier Act of 1980, the
Trucking Industry Regulatory Reform Act of 1994, and the ICC Termination Act of
1995.
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Carriers can now readily enter the trucking industry and rates and services are
largely free from regulatory controls. However, interstate for-hire carriers do
remain subject to certain regulatory controls imposed by the DOT. The trucking
industry remains subject to regulation by the states with respect to certain
safety and insurance requirements.
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state and local
environmental laws and regulations that impose limitations on the discharge of,
and establish standards for the handling, generation, emission, release,
discharge, treatment, storage and disposal of, certain materials, substances and
wastes. In order to comply with such regulations and to be consistent with the
Company's environmental policy, normal operating procedures include practices to
protect the environment. Amounts expended related to such practices are
contained in the normal day-to-day costs of the Operating Companies' business
operations.
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 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's operations are also subject to laws and regulations governing
air emissions, including the 1990 amendments to the Clean Air Act. The Company
expects that it, together with the rest of the trucking industry, will in the
future become subject to stricter air emission standards, including requirements
that manufacturers produce cleaner-running tractors and that fleet operators
perform more rigorous inspection and maintenance procedures.
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ITEM 2. PROPERTIES
FACILITIES
The Company's facilities consist principally of terminals and shops. Some
of these are full service terminals, which typically include administrative
facilities and customer service personnel and complete facilities to perform
both routine and heavy maintenance and to service all equipment based there.
Certain terminals have facilities in which freight is consolidated. Other
terminals are limited service terminals, which may include some customer service
personnel but do not have complete maintenance facilities. The Company also has
a number of drop yards, which are used primarily for the short-term storage of
trailers. The Company maintains its principal executive and administrative
offices in Fort Worth, Texas.
Set forth below is certain information relating to the terminals and
office facilities of the Operating Companies at December 31, 1997:
<TABLE>
<CAPTION>
Administrative
Operating Company Location Owned/Leased Acreage Terminal Maintenance Offices Trailer Yard
- ----------------- -------- ------------ ------- -------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
W&L Conover, NC Leased 55 X X X X
Thomasville, NC Owned 3.1 X X
TBI Kansas City, KS Owned 4 X X X
Grand Island, NE Owned 4.3 X X X
Fargo, ND Owned 4.5 X X X
Sioux Falls, SD Owned 4 X X X X
Bangerter Phoenix, AZ Owned 9.5 X X X
Fontana, CA Leased 2.8 X
Layton, UT Owned 6.4 X X X X
CMS Yorba Linda, CA * * X
Denver, CO * * X
Orlando, FL * * X
Atlanta, GA Leased 1 X
Suwanee, GA * * X
Ft. Wentworth, GA * * X
Chicago, IL * * X
Evansville, IN * * X X
Florence, KY * * X X
New Orleans, LA * * X
Agawam, MA * * X
Wilmington, MA Leased 1 X
Jessup, MD * * X
Bear Lake, MI * * X X
Tupelo, MS Leased 2 X X
Morris Plains, NJ * * X
Eden, NY Leased 1 X
Delco, NC Leased 1 X
Broadview Hts., OH * * X
Houston, TX * * X
Scales** Tampa, FL Leased 2.5 X X X
Gainesville, GA Leased 5 X X X X
Tifton, GA Leased 5 X X X
Winston-Salem, NC Leased 4 X X
ART Florence, KY Leased 1 X X X
Oklahoma City, OK Leased 6 X X X
KTL Largo, FL Leased 10 X X X X
Highland, IN Leased 2 X X
Cherry Hill, NJ Owned 5 X X
Lynn Oskaloosa, IA Leased 3 X X X X
Las Vegas, NV Leased 5 X X
West Sacramento, CA Leased 1 X X
Monfort Greely, CO Leased 40 X X X X
Denver, CO Leased 10 X
Tran-Star Waupaca, WI Owned 40.1 X X X X
Etters, PA Leased 5.9 X X X
Wyalusing, PA Leased 2 X X X
</TABLE>
* Facility located on customer's property
** ALS occupies part of the Scales Gainesville, GA administrative office
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REVENUE EQUIPMENT AND MAINTENANCE
The Company's equipment fleet, including independent contractor units, at
December 31, 1997 was comprised of the following:
Line-haul tractors:
Tractors.................................................. 2,659
Straight-line trucks...................................... 32
Local tractors............................................. 153
-----
Total tractors............................................ 2,844
=====
Trailers:
Temperature-controlled.................................... 3,278
Dry van and other......................................... 1,553
-----
Total trailers............................................ 4,831
=====
During 1998, the Company intends to replace approximately 350 existing
tractors with new tractors. As the Company replaces older equipment with new
tractors and trailers, the Company believes that downtime as well as operating
and maintenance expenses should be reduced. The Company has begun to purchase
tires and parts on more favorable terms, thereby reducing maintenance costs.
Late model trucks and components in general are more reliable and have better
warranties. In addition, the Company also has begun to negotiate better warranty
terms because of the greater negotiating strength of the combined Operating
Companies. Finally, the Company intends to purchase tractors with standard
specifications for components such as engines, axles and brakes, thereby
reducing the complexity and cost of maintenance parts inventory.
The Company has comprehensive preventive maintenance programs for its
tractors and trailers to minimize equipment downtime and prolong equipment life.
"A" Services, which are performed at 15,000 mile intervals, include safety
checks and chassis lubrication. "B" Services, which are performed at 30,000
mile intervals, include all "A" Services plus oil and filter replacement. "C"
Services, which are performed at 120,000 mile intervals, include all "A" and "B"
Services plus additional, more extensive procedures as may be necessary.
Repairs and maintenance are performed regularly at the Company's 18 full-
service maintenance facilities and at outside shops. The Company has
approximately 207 maintenance personnel. Less than one-third of the Company's
maintenance costs were incurred at outside shops during the year ended December
31, 1997. The Company has begun to share certain maintenance facilities and
personnel among the Operating Companies. Combined with the advantages of a
newer fleet, the Company expects this will result in a decrease in the
percentage of maintenance costs incurred at outside shops, which are more
expensive than Company shops.
ITEM 3. LEGAL PROCEEDINGS
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 might have a material adverse effect on the
Company's consolidated financial position, operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1997, no matters were submitted to a vote of
security holders.
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PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is not publicly traded.
In conjunction with the 1997 acquisitions of Monfort, Lynn and Tran-Star,
the Company issued 3,000 shares of Series A Redeemable Preferred Stock and
727,272 shares of Common Stock with warrants to certain existing stockholders,
directors and executive officers of the Company. The Preferred Stock was issued
at a $1,000 per share for a total purchase price of $3.0 million. The Common
Stock, along with detached warrants for 1,500,000 shares of Common Stock, was
issued for $2.75 per share ($.01 par value) for a total purchase price of $2.0
million.
In connection with the amendment to the FINOVA Credit Facility, the Company
issued $1 million in Subordinated Notes (the "1997 Notes") to certain existing
stockholders. The 1997 Notes bear interest at a rate of 14% per annum and mature
on June 1, 1998. In connection with the 1997 Notes, the Company issued to the
purchasers of the 1997 Notes warrants to a number of shares of the Company's
common stock equal to the aggregate outstanding principal and interest on the
1997 Notes at the time of exercise divided by 2 (the "1997 Warrants"). The
issuance of these shares was exempt under Section 4(2) of the Securities Act of
1933, as amended, as a transaction not involving any public offering.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for W&L and TBI on
a combined basis as the "Predecessor Company" for the entire 1996 and prior
periods. The results for Bangerter are included since August 1995, the results
for the CMS distribution business and Scales (including the CBS Express
business) are included since November 1995, and the results for ART, as it
relates to the Freymiller Assets, and KTL are included since February 1996 and
July 1996, respectively. The results for Monfort and Lynn are included since
June 1997 and for Tran-Star since July 1997.
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The following data should be read in conjunction with Item 7 --
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Item 8 -- "Financial Statements and Supplementary Data."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1997* 1996* 1995* 1994 1993
-------- -------- -------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT CERTAIN OPERATING DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................................................ $291,552 $224,257 $102,846 $80,087 $72,783
Operating expenses
Salaries, wages, and fringe benefits................... 98,837 71,996 32,463 23,639 21,590
Purchased transportation cost.......................... 69,911 57,413 26,564 23,504 21,236
Depreciation and amortization(1)....................... 19,907 15,341 7,882 6,471 5,816
Claims and insurance................................... 11,646 8,806 4,471 3,169 3,000
Restructuring charge(2)................................ 7,184 -- -- -- --
Other operating expenses............................... 79,952 55,882 21,181 14,656 14,168
-------- -------- -------- ------- -------
Total operating expenses.............................. 287,437 209,438 92,561 71,439 65,810
Operating income(1)(2).................................. 4,115 14,819 10,285 8,648 6,973
Interest expense, net of interest income................ (20,778) (16,242) (4,634) (3,233) (3,486)
Other, net.............................................. (611) (469) 26 16 64
-------- -------- -------- ------- -------
Income (loss) before income taxes and
extraordinary items.................................... (17,274) (1,892) 5,677 5,431 3,551
Income tax provision (benefit).......................... (6,618) 340 2,496 2,317 1,249
-------- -------- -------- ------- -------
Income (loss) before extraordinary items................ (10,656) (2,232) 3,181 3,114 2,302
Extraordinary items (3)................................. (243) (230) (23) -- --
-------- -------- -------- ------- -------
Net income $(10,899) $ (2,462) $ 3,158 $ 3,114 $ 2,302
(loss)(2).............................................. ======== ======== ======== ======= =======
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents............................... $ 21 $ 734 $ 15,286 $ 1,617 $ 1,629
Total assets............................................ 263,500 192,648 140,535 54,245 52,974
Long-term debt (including current portion).............. 226,230 169,326 118,335 29,449 33,936
Redeemable preferred stock(4)........................... 3,091 -- -- 2,000 11,322
Total stockholders' equity (deficiency)(4).............. (12,335) (3,824) (1,817) 10,488 (2,409)
</TABLE>
* Comparisons between periods are affected by acquisitions - see Note 2 of
the Financial Statements.
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<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1997 1996 1995 1994 1993
--------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT CERTAIN OPERATING DATA)
CERTAIN OTHER DATA:
EBITDA (5).............................................. $ 24,022 $ 30,160 $18,167 $15,136 $12,853
EBITDAR(6).............................................. 34,308 35,135 19,885 16,063 13,772
Depreciation and amortization (1)....................... 19,907 15,341 7,882 6,471 5,816
Rents................................................... 10,286 4,975 1,718 927 919
Capital expenditures, net of cash proceeds from
dispositions........................................... (5,460) 10,893 11,879 1,619 194
Interest expense, net................................... 20,778 16,242 4,634 3,233 3,486
Ratio of EBITDA to interest expense(5).................. 1.16x 1.86x 3.92x 4.68x 3.69x
Ratio of earnings to fixed charges(7)................... ----- ----- 1.99x 2.04x 1.67x
CERTAIN OPERATING DATA:
Operating ratio(2)...................................... 98.6% 93.4% 90.0% 89.2% 90.4%
Total miles (in thousands).............................. 245,871 188,782 81,683 66,028 60,915
Revenue per total mile(8)............................... $ 1.165 $ 1.180 $1.249 $1.213 $1.195
Daily revenue per tractor(9)............................ 501 $ 542 $ 518 $ 567 $ 547
At period end, number of
Line haul tractors(10)................................. 2,691 1,827 1,126 556 520
Trailers............................................... 4,831 3,343 2,344 1,084 979
Employees and owner operators..........................
Drivers(11)........................................... 2,400 1,366 938 349 337
Non-drivers........................................... 1,000 838 584 287 249
Owner operators....................................... 662 573 374 252 236
</TABLE>
(dollars in thousands)
(1) During 1994, W&L changed its estimate of the useful lives and salvage
values of certain revenue equipment. This change had the effect of
decreasing depreciation and increasing operating income for the year ended
December 31, 1994 by $155. During 1995, TBI changed its estimate of the
useful lives and salvage values of certain revenue equipment. This change
had the effect of decreasing depreciation and increasing operating income
for the year ended December 31, 1995 by $360.
(2) During 1997, the Company recorded costs of $7,184 in connection with the
restructure of its refrigerated carrier group.
(3) The extraordinary items in 1997, 1996 and 1995 consist of an extraordinary
loss on early retirement of debt, net of taxes.
(4) During 1997, the Company issued 3,000 shares of Series A Redeemable
Preferred Stock in conjunction with the 1997 acquisitions. During 1995, all
remaining shares of TBI's outstanding redeemable preferred stock were
redeemed for approximately $2 million. During 1994, all shares of W&L's
outstanding redeemable preferred stock were converted into shares of W&L's
common stock.
(5) EBITDA represents earnings (loss) before interest expense, net, income
taxes, depreciation and amortization. The Company believes EBITDA provides
useful information regarding the Company's ability to service its debt;
however, EBITDA does not represent cash flow from operations, as defined by
generally accepted accounting principles, and should not be considered as a
substitute for net income as an indicator of the Company's operating
performance or for cash flow as a measure of liquidity. For purposes of
calculating the ratio of EBITDA to interest, interest represents total
interest expense, net of interest income.
(6) EBITDAR represents earnings before interest expense, net, income taxes,
depreciation, amortization and rents.
(7) For purposes of the ratio of earnings to fixed charges, (i) earnings
include earnings before income taxes and fixed charges and (ii) fixed
charges consist of interest on all indebtedness, amortization of deferred
financing costs and that portion of rental expense (one-third) that the
Company believes to be representative of interest. The Company's earnings
were insufficient to cover fixed charges by $17,274 and $1,892 for the
years ended December 31, 1997 and 1996 respectively.
(8) Freight revenues, which excludes brokerage and other revenues, divided by
total miles.
(9) Daily revenue per tractor represents freight revenue divided by number of
working days and further divided by number of line haul tractors at period
end. Calculating daily revenue per tractor based on the average number of
line haul tractors during each monthly period would produce more accurate
daily revenue per tractor information. However, this information was not
available for all Operating Companies. In June 1995 W&L purchased 35 line
haul tractors that were not fully placed in service until the middle of the
third quarter; therefore, for comparability purposes these tractors were
included in the daily revenue per tractor calculations on a pro rata basis
by number of days outstanding in 1995. Results for Bangerter, the CMS
distribution business, Scales (including the CBS Express business), ART, as
it relates to the Freymiller Assets, KTL, Monfort, Lynn and Tran-Star were
also included on a pro rata basis by number of days outstanding in 1995,
1996 and 1997, respectively.
(10) The number of line haul tractors includes owned, leased and independent
contractor units.
(11) Represents line haul drivers only. Local drivers of 163, 138, 69, 55, and
53 have been excluded from this count for the years ended December 31,
1997, 1996, 1995, 1994 and 1993, respectively, which is consistent with the
presentation of line haul tractors.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results for the year ended December 31, 1995 for the Company include W&L
and TBI results on a combined basis as the "Predecessor Company" for the entire
1995 period. The results for Bangerter since August 1, 1995 and the results for
the CMS distribution business and Scales (including the CBS Express business)
are included since November 1, 1995. Results for the year ended December 31,
1996 include the results of W&L, TBI, Bangerter, the CMS distribution business
and Scales (including the CBS Express business) for the entire 1996 period and
of ART, as it relates to the Freymiller Assets, since February 5, 1996 and KTL
since July 1, 1996, respectively. The results for Monfort and Lynn have been
included since June 1997 and for Tran-Star since July 1997.
The following analysis should be read in conjunction with the consolidated
financial statements included in Item 8 - "Financial Statements and
Supplementary Data."
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1996
Net Loss
For the year ended December 31,1997, the Company had a net loss of $10.9
million compared with a net loss of $2.5 million for 1996. Results for 1997 were
negatively impacted primarily by a charge of $7.2 million to restructure the
Company's refrigerated carrier group and an increase in interest costs. In
addition, the acquisitions of Monfort, Lynn and Tran-Star, combined with start-
up issues related to the Con Agra Services Agreement, had a negative impact on
profitability. The net loss in both 1997 and 1996 includes extraordinary items,
loss on early retirement of debt, of $243,000 and $230,000, respectively, net of
taxes. These losses related to the write off of deferred financing costs in 1997
with respect to the Company's prior senior credit facility with NationsBank and
to early retirements related to the use of proceeds from the Company's
Subordinated Notes offering in 1995, which were used in part to retire debt in
1996.
Revenues
Revenues for 1997 were $291.6 million, compared with revenues of $224.3
million for 1996. The $67.3 million increase is due to 1997 revenues of
approximately $69 million from the Tran-Star, Monfort and Lynn acquisitions, and
$15.4 million for the first six months of 1997 from the KTL acquisition. This
increase was partially offset by a decline in volumes at ART.
Expenses
The following table sets forth operating expenses as a percentage of
revenue and the related variance from 1997 to 1996.
VARIANCE
INCREASE
1997 1996 (DECREASE)
---- ---- ----------
Salaries, wages and fringe benefits 33.9% 32.1% 1.8%
Purchased transportation 24.0 25.6 (1.6)
Fuel and fuel taxes 12.4 12.1 0.3
Operating supplies and expenses 6.6 6.2 0.4
Depreciation and amortization of capital leases 6.2 6.3 (0.1)
Claims and insurance 4.0 3.9 0.1
Operating taxes and licenses 2.4 2.2 0.2
General supplies and expenses 5.3 4.3 1.0
Building and office equipment rents 0.7 0.7 -
Amortization of intangibles 0.6 0.5 0.1
Gain on disposal of property and equipment - (0.5) 0.5
Restructuring charge 2.5 - 2.5
---- ---- ----
Operating Ratio 98.6% 93.4% 5.2%
==== ==== ====
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Salaries, wages and fringe benefits for the year ended December 31, 1997
increased 1.8 percentage points as a percent of revenue. This increase is
primarily due to an increase in driver wages, which occurred because company
drivers were used more extensively and owner operators were used less
extensively than in the prior year. Company driver costs are included in
salaries, wages and fringe benefits while owner operator costs are included in
purchased transportation. The increase is also due to an increase in salaries at
the corporate location in preparation for centralization of most administrative
functions. The acquisition of Tran-Star, which has primarily a company-driver
work force, also contributed to the increase.
Purchased transportation costs decreased 1.6 percentage points for 1997 as
a percent of revenue when compared with 1996. The decrease is due primarily to
the acquisitions of KTL in the third quarter of 1996 and Tran-Star at the end of
the second quarter of 1997, which have primarily company-driver work forces.
This decrease in percentage of revenue was partially offset by a higher
percentage of equipment held under operating leases which resulted in increased
equipment rents.
Fuel and fuel taxes for 1997 increased 0.3 percentage points as a percent
of revenue when compared with 1996 due to the acquisitions of KTL in the third
quarter of 1996 and Tran-Star at the end of the second quarter of 1997, which
have primarily company-driver work forces. The increase was also due to lower
miles per gallon as a result of severe weather in the first quarter of 1997. The
impact from these increase were partially offset by lower fuel prices during
1997.
Operating supplies and expenses increased 0.4 percentage points as a
percent of revenue when compared with 1996. This increase is primarily due to
the acquisition of Tran-Star, which had an older fleet of tractors requiring
more routine maintenance. These tractors are currently being retired and
replaced by new tractors. In addition, trailer coordination, in the absence of
a common computer system, was less effective than expected and resulted in
higher trailer costs. As of December 31, 1997, all of the refrigerated group
had been transitioned to a common computer system.
General supplies and expenses increased 1.0 percentage points during 1997
as a percent of revenue due to increased driver recruitment and training costs,
primarily attributable to an unproductive recruiting policy at Trans-Star which
has been changed. The increase was also attributable to increased professional
and consulting fees resulting from increased driver recruitment and advertising
and added costs for system and mobile communications, which the Company
anticipates should be partially offset in the future by improved operating
efficiencies, although no assurances can be made in this regard.
In connection with AmeriTruck's plans to organize into four operating
groups and to eliminate the duplicate facility and employee costs related to the
recently acquired entities, the Company announced a plan in the second quarter
of 1997 to restructure its refrigerated carrier group. The Company recorded $7.2
million in restructuring costs, which included $2.3 million for employee
termination costs, $4.2 million for duplicate facility costs, including the
impairment of certain long-lived assets, and $650,000 of other costs. See Notes
to Consolidated Financial Statements-Note 3. Restructuring Charge.
Interest expense increased $4.3 million for the year ended December 31,
1997 over the same period in 1996. Interest on the revolving lines of credit,
which were used to fund acquisitions, were the primary contributors to this
increase. See "Liquidity and Capital Resources."
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1995
Net Income (Loss)
For the year ended December 31, 1996, the Company had a net loss of $2.5
million compared with net income of $3.2 million for 1995. The additional
operating income from the acquired companies in 1996 was offset by additional
interest costs. 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
offering in 1995 of its 12 1/4% Senior Subordinated Notes due 2005 (the
"Subordinated Notes").
During the year ended December 31, 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
implemented a fuel surcharge to its customers to help
14
<PAGE>
combat this surge in fuel costs. The merger of the operations 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 also intensified its efforts in the driver recruitment
and training areas to correct this problem.
Revenues
In 1996, the Company had revenues of $224.3 million compared with $102.8
million in 1995, an improvement of 118 percent. This increase reflects $116.6
million of additional revenues from the acquired companies when compared with
1995. The Predecessor Company had increased revenues of $4.9 million primarily
attributable to increased volume during 1996.
Expenses
The following table sets forth operating expenses as a percentage of
revenue and the related variance from 1996 to 1995.
VARIANCE
INCREASE
1996 1995 (DECREASE)
---- ---- ----------
Salaries, wages and fringe benefits 32.1% 31.6% 0.5%
Purchased transportation 25.6 25.8 (0.2)
Fuel and fuel taxes 12.1 12.0 0.1
Operating supplies and expenses 6.2 2.4 3.8
Depreciation and amortization of capital leases 6.3 7.2 (0.9)
Claims and insurance 3.9 4.3 (0.4)
Operating taxes and licenses 2.2 3.0 (0.8)
General supplies and expenses 4.3 3.0 1.3
Building and office equipment rents 0.7 0.6 0.1
Amortization of intangibles 0.5 0.5 -
Gain on disposal of property and equipment (0.5) (0.4) (0.1)
---- ---- ----
Operating Ratio 93.4% 90.0% 3.4%
==== ==== ====
Salaries, wages and fringe benefits for the year ended December 31, 1996
increased 0.5 percentage points as a percent of revenue when compared with 1995.
This increase is attributable primarily to the acquired companies, because only
19 percent of their average combined driver base consisted of owner operators as
of December 31, 1996, whose costs are reflected in purchased transportation. In
contrast, 43 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 1996 and pay
increases. The increase is also attributable to corporate salaries.
Purchased transportation costs for 1996 decreased 0.2 percentage points as
a percent of revenue when compared with 1995. The acquired companies driver
base, which consisted of just 19 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 $2.4
million in purchased transportation costs in 1996 due to expanded freight
opportunities and its continued use of owner operator drivers.
Operating supplies and expenses increased 3.8 percentage points as a
percent of revenue for the year ended December 31, 1996. This increase was
mainly attributable to the acquired companies, whose driver base consisted of an
average of 81 percent of Company drivers as of December 31, 1996, contributing
to higher maintenance costs for Company owned equipment.
Depreciation and amortization of capital leases decreased 0.9 percentage
points as a percent of revenue in 1996 when compared with 1995 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 year ended December 31, 1995, by approximately $360,000.
15
<PAGE>
Claims and insurance expenses were up $4.3 million for 1996 compared with
1995, which is due primarily to costs attributable to the acquired companies.
However, these costs decreased on a percentage of revenue basis.
General supplies and expenses for 1996 increased 1.3 percentage points as a
percent of revenue when compared with 1995. This increase is primarily
attributable to commissions paid to company agents and an increase in costs for
professional services.
Interest expense increased $11.7 million for the year ended December 31,
1996 over 1995. Interest on the Subordinated Notes, which were issued in
November 1995 in conjunction with the 1995 acquisitions, and the NationsBank and
the Volvo credit facilities, which were used to fund the acquisition of the
Freymiller Assets and KTL, were the primary factors for this change. See
"Liquidity and Capital Resources".
The change in the effective tax rate for the year ended December 31, 1996
compared with 1995 is primarily due to the driver's expense allowances paid by
ART and KTL, a portion of which are nondeductible expenses.
CONTINGENCIES
Under the requirements of the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 and certain other laws, the Company is
potentially liable for the cost of clean-up of various contaminated sites
identified by the U.S. Environmental Protection Agency ("EPA") and other
agencies. 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 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 the Operating Companies 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 might have a material adverse
effect on the Company's consolidated financial position, operations or
liquidity.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the years ended December 31, 1997
and 1996 was $7.3 million and $519,000, respectively, compared with net cash
provided by operating activities of $12.1 million in 1995. The increase in cash
used from operations in 1997 of $6.8 million was primarily attributable to an
increase in net loss, the resulting impact of deferred income taxes and cash
used for restructuring in 1997. The decrease of $12.6 million in 1996 was
primarily attributable to a $11.3 million increase in accounts and notes
receivable, of which $7.0 million resulted from the purchase of the Freymiller
Assets, and a decrease in net income of $5.6 million. These decreases were
partially offset by an increase in depreciation and amortization of capital
leases of $6.8 million.
During the third and fourth quarters of 1997, the Company and ConAgra have
been coordinating efforts to bring the Transportation Services Agreement to the
contractually committed volumes and prices. However, these volumes have not yet
been attained. Management believes that the most complex issues surrounding a
business relationship of this magnitude, in excess of $50 million per year in
total revenue, will be addressed by the end of the first quarter of 1998. This
process, in addition to the ongoing reorganization of the refrigerated group,
has caused the Company to fall short of its original cash flow plan for the
second half of 1997. During the fourth quarter, the Company and ConAgra agreed
to extend the term of the Transportation Services Agreement for an additional
six months to December 2001 and to identify final traffic lanes and pricing to
be subject to the Transportation Services Agreement. As part of the amendments,
the Company agreed it would not receive any take-or-pay revenues for 1997.
The Company's current business plan indicates that it will need additional
financing to pay down the temporary extension of credit by FINOVA and carryout
its growth strategy. In order to raise additional financing, the Company has
signed a non-binding letter of intent with an investor group to sell TBI, an
AmeriTruck subsidiary primarily involved in mail contract carriage. This letter
of intent is subject to a number of conditions, including due diligence and
approval by the
16
<PAGE>
AmeriTruck Board of Directors. In a separate transaction, the Company has signed
an agreement to negotiate exclusively with two major financial institutions with
respect to the proposed sale of $20 million of newly created preferred stock.
Successful completion of these two transactions would provide AmeriTruck with in
excess of $30 million of new capital before any related transaction costs.
However, no assurances can be made that the parties will reach definitive
agreements or that these transactions will be consummated. In the event that
these transactions do not occur the Company may be required to change its
current strategy by selling equipment and reducing operating levels. Management
believes that borrowings available under the credit facilities, additional
equity and asset sales should be sufficient to cover anticipated future cash
needs. See "Forward Looking Statements and Risk Factors--Financing Plans."
Redeemable Preferred and Common Stock
In May 1997, the Company issued 3,000 shares of Series A Redeemable
Preferred Stock and 727,272 shares of Common Stock with warrants to certain
existing stockholders, directors and executive officers of the Company. The
issuance was made in conjunction with the 1997 acquisitions and gross proceeds
totaled $5 million. See Notes to Consolidated Financial Statements-Note 12.
Redeemable Preferred and Common Stock.
FINOVA Credit Facility
In May 1997, the Company and its subsidiaries entered into a Loan and
Security Agreement and related documents (collectively, the "FINOVA Credit
Facility") with FINOVA Capital Corporation ("FINOVA") pursuant to which FINOVA
has agreed to provide a $60 million credit facility to the Company. The initial
borrowings under the FINOVA Credit Facility were used to refinance the Company's
prior credit facility with NationsBank of Texas, N.A. Additional borrowings
under the FINOVA Credit Facility can be used for acquisitions, capital
expenditures, letters of credit, working capital and general corporate purposes.
Pursuant to the FINOVA Credit Facility, FINOVA has agreed to provide a $60
million revolving credit facility, with a $10 million sublimit for the issuance
of letters of credit, maturing on May 5, 2000 (subject to additional one year
renewal periods at the discretion of FINOVA). The FINOVA Credit Facility is also
subject to a borrowing base consisting of eligible receivables and eligible
revenue equipment.
As of December 31, 1997, the Company's borrowing base supported borrowings
of approximately $63.7 million. Revolving credit loans under the FINOVA Credit
Facility bear interest at a per annum rate equal to either the prime rate plus a
margin equal to 0.75 percent or the rate of interest offered in the London
interbank market plus a margin equal to 2.75 percent. The Company also pays a
monthly unused facility fee and a monthly collateral monitoring fee in
connection with the FINOVA Credit Facility. Revolving credit loans under the
FINOVA Credit Facility were $56.3 million at December 31, 1997 and were
primarily used for refinancing borrowings under the Company's prior facility
with NationsBank of Texas, N.A. and to fund the 1997 acquisitions. There were
also $4.6 million in letters of credit outstanding at December 31, 1997, leaving
$2.8 million available for borrowings.
In November 1997 the Company amended the FINOVA Credit Facility to increase
both the total amount of the FINOVA Credit Facility to $64 million and the
borrowing base availability thereunder (the "Temporary Overadvances"), in each
case for a period not to exceed 120 days. The amendment to the FINOVA Credit
Facility provides for the payment of a $180,000 fee in connection with the
Temporary Overadvances as well as an additional $180,000 fee in the event that
the Temporary Overadvances are not terminated within 60 days. The Temporary
Overadvances bore interest at 11% per annum for the first 60 days, and
thereafter, until the Temporary Overadvances are terminated all outstanding
borrowings under the FINOVA Credit Facility will bear interest at 1% over the
rate otherwise applicable to such advances. In connection with this amendment to
the FINOVA Credit Facility, the Company also issued $1 million in Subordinated
Notes (the "1997 Notes") to certain existing stockholders. The 1997 Notes bear
interest at a rate of 14% per annum and originally matured on April 1, 1998. The
1997 Notes may be converted in connection with a private equity placement
providing gross proceeds to the Company of at least $10 million (the "Qualified
Private Placement") on the same terms as those offered to other investors in the
Qualified Private Placement. In connection with the 1997 Notes, the Company
issued to the purchasers of the 1997 Notes warrants to a number of shares of the
Company's common stock equal to the aggregate outstanding principal and interest
on the 1997 Notes at the time of exercise divided by 2 (the "1997 Warrants").
The 1997 Warrants become exerciseable in the event a Qualified Private Placement
does not occur prior to April 1, 1998, and the exercise price would be paid by
surrender of the applicable investor's 1997 Note. The Company has also agreed
that, in the event a Qualified Private Placement has not occurred by March 31,
1998, the Company will pay an affiliate of BancBoston Ventures Inc., a
stockholder of the Company, a management fee in the annual amount of $100,000.
The Company used the availability from the Temporary Overadvances and the
proceeds from the 1997 Notes to pay interest due in November 1997 on the
Subordinated Notes and for general corporate purposes.
In March 1998, the Company further amended the FINOVA Credit Facility to extend
the period during which the Temporary Overadvances are available to the Company
through May 15, 1998 (or, if earlier, the date of any Qualified Private
17
<PAGE>
Placement or the date of any sale of the stock or substantially all of the
assets of TBI yielding gross cash proceeds of at least $10 million) and to
increase the total amount of the FINOVA Credit Facility to $68.5 million solely
during the period during which the Temporary Overadvances may be drawn. The
March 1998 amendment provides for the payment of an additional $280,000 fee to
FINOVA. The Company does not expect a Qualified Private Placement to occur by
April 1, 1998. However, the maturity of the 1997 Notes has been extended to
June 1, 1998.
The Company's obligations under the FINOVA Credit Facility are
collateralized by substantially all of the unencumbered assets of the Company
and its subsidiaries and are guaranteed in full by each of the Operating
Companies. For purposes of the Indenture, the borrowings under the FINOVA Credit
Facility constitute Senior Indebtedness of the Company and Guarantor Senior
Indebtedness of the Operating Companies.
The FINOVA Credit Facility contains customary representations and
warranties and events of default and requires compliance with a number of
affirmative, negative and financial covenants, including a limitation on the
incurrence of indebtedness and a requirement that the Company maintain a
specified Current Ratio, Net Worth, Debt Service Coverage Ratio and Operating
Ratio. Certain of these covenants were not met at December 31, 1997 and were
unconditionally waived by FINOVA.
Volvo Credit Facilities
In February 1996, the Company and the Operating Companies 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 December 31, 1997, the Operating
Companies have pledged collateral which provides for a $9.4 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.
Certain of these covenants were not met at December 31, 1997 and were
unconditionally waived by Volvo.
The Equipment Financing Facility was provided by Volvo in connection with
the Operating Companies' agreement to purchase 400 new trucks manufactured by
Volvo GM Heavy Truck Corporation. 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. Financing for an additional 150 new
trucks for approximately $11.3 million was committed during 1997, all of which
will be obtained through operating leases.
At December 31, 1997, borrowings outstanding under the Volvo Line of Credit
were $9.4 million. The outstanding debt balance under the Equipment Financing
Facility was $2.8 million at December 31, 1997; however, the remaining financing
under this facility was 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.
Transamerica Lease Facility
In August 1997, the Company entered into a lease agreement with
Transamerica Business Credit Corporation ("TBCC") to provide the Company and its
subsidiaries with an arrangement to lease up to 300 new 1998 model tractors (the
"TBCC
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Lease"). The line under the TBCC Lease will not exceed $22.8 million based upon
a per vehicle cost of $76,000, subject to an unused line fee of one percent if
the Company leases all 300 of the new trucks but does not use the entire line.
The lease term is 48 months and is subject to a terminal rental adjustment
clause at the end of the term. The Company will treat this lease as an
operating lease for accounting purposes. Terms of the arrangement were set
forth in a Master Lease Agreement dated as of August 14, 1997. As of December
31, 1997, the Company had leased 133 trucks under this agreement.
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 Indenture. As of December 31, 1996, the
Company had applied the net proceeds of the Series A Notes primarily to finance
the 1995 acquisitions and prepay debt and capitalized leases.
Capital Expenditures and Resources
For the year ended December 31, 1997, the Company had proceeds from
property and equipment dispositions in excess of capital expenditures of $6.8
million, excluding the 1997 acquisitions of Monfort, Lynn and Tran-Star,
compared with capital expenditures, net of cash proceeds from dispositions, of
$10.9 million in 1996, and $11.9 million in 1995, excluding the 1995 and 1996
acquisitions and the purchase of the Freymiller Assets. These amounts also do
not include capital expenditures financed through capital leases and other debt
which amounted to approximately $300,000 in 1997 and $13.1 million in 1996 and
1995. During 1996 and 1997, the Company purchased new tractors and trailers to
replace older equipment. The Company's intentions are to maintain an average
fleet age of approximately 2 years for line-haul tractors and 5 years for line-
haul trailers. The majority of the 1996 purchases were financed through debt;
where as the 1997 acquisitions were primarily financed through operating leases.
During 1998, the Company plans to purchase approximately 350 new trucks, to
replace existing tractors. 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.
In June 1997, AmeriTruck purchased all the outstanding stock of Tran-Star,
Inc. ("Tran-Star") which was owned by Allways Services, Inc. The purchase price
of $2.6 million included $1.6 million in cash and a $1 million note payable.
Tran-Star is a carrier of refrigerated and non-refrigerated products.
Headquartered in Waupaca, Wisconsin, Tran-Star operates primarily in between the
upper midwestern U.S. and the northeast and southeast, with terminals in Etters
and Wyalusing, Pennsylvania. The Company is currently coordinating Tran-Star's
activities with those of the refrigerated group.
In May 1997, AmeriTruck purchased the capital stock of Monfort
Transportation Company ("Monfort") and Lynn Transportation Co., Inc. ("Lynn"),
both subsidiaries of ConAgra, Inc. ("ConAgra"). The purchase price of $15
million was paid in cash.
Monfort and Lynn operated primarily as in-house carriers for the red meat
division of Monfort, Inc., a ConAgra subsidiary, and the poultry and turkey
divisions of ConAgra Poultry Company, a ConAgra subsidiary. The Company entered
into a Transportation Services Agreement with subsidiaries of ConAgra. The
ConAgra subsidiaries have agreed to tender freight from Monfort, Inc.'s red meat
division, ConAgra Poultry Company's poultry and turkey divisions and Swift-
Ekrich, Inc.'s processed meats division in designated lanes and minimum annual
volumes. The term of this agreement is four years, with pricing fixed for the
first two years and adjusted prices in the third and fourth years. The Company
is coordinating Monfort and Lynn activities with the other Operating Companies
in the refrigerated group.
19
<PAGE>
The Tran-Star, Monfort and Lynn acquisitions were 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, note
payable, miscellaneous acquisition costs and liabilities assumed was $42.4
million for Tran-Star and $35.8 million for Monfort and Lynn. The excess of
the purchase price over fair values of the net assets acquired has been recorded
as goodwill.
During the third quarter of 1996, AmeriTruck purchased all of the
outstanding stock of KTL, Inc. ("KTL") 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. 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.
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.
In February 1996, the Company, through CMS Transportation Services, Inc.,
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, CMS Transportation Services, Inc. changed its corporate name
to "AmeriTruck Refrigerated Transport, Inc." ("ART"), and the distribution
functions previously conducted under the corporate name "CMS Transportation
Services, Inc." were continued as a division of ART. In addition, in June 1996,
the business operations of CBS, a general freight carrier (which then operated
under the name "CBS Express, Inc."), were transferred to Scales. In December
1996, the distribution functions of the CMS Transportation division of ART were
transferred to CBS and its name was changed to "CMS Transportation Services,
Inc." ("CMS").
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 revolving credit facilities, the Volvo Line of Credit and the
FINOVA Credit Facility, which has given AmeriTruck the ability to pursue
acquisitions that the Company could not otherwise fund through cash provided by
operations. In addition to revolving credit facilities, the Company may finance
its acquisitions through equity issuances, seller
20
<PAGE>
financing and other debt financings. However, any acquisitions will be subject
to approval by FINOVA and meeting the tests for debt incurrence under the
Indenture for the Subordinated Notes.
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.
OTHER MATTERS
Evaluation of the Company's primary accounting and operational systems for the
Year 2000 problem has been initiated. During 1997, the Company began
consolidating the accounting and operational processing of several operating
companies onto a centralized set of applications and hardware located at
Electronic Data Systems Corporation ("EDS"). An internal study is currently
under way to determine the full scope and related costs of the Year 2000 problem
with respect to other systems the Company maintains to ensure that the Company's
systems continue to meet its internal needs and those of its customers. As a
part of the internal study, the Company will also address evaluation of key
vendors and customers to determine the impact, if any, on the Company's
business. The internal study and the resulting work requirements of the study
are expected to be completed by the end of 1998, although there can be no
assurance that all steps will be completed in a timely manner until the full
scope of the Year 2000 problem is evaluated. The Company currently does not
believe that the Year 2000 problem will have a material impact on the Company's
financial condition or results of operations, although the ultimate impact could
be material depending on the results of the aforementioned internal study.
FORWARD LOOKING STATEMENTS AND RISK FACTORS
From time to time, the Company issues statements in public filings 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-K include
statements concerning future cost savings, projected levels of capital
expenditures and the timing of deliveries of new trucks and trailers, the
Company's financing and equity plans, the Company's ability to meet its future
cash needs from borrowings under its credit facilities and from cash generated
from operations and asset dispositions, the Company's Transportation Services
Agreement with subsidiaries of ConAgra, 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 1998
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: the
Company's ability to obtain additional equity financing or raise additional cash
through asset sales, the adverse impact of inflation and rising fuel costs; the
Company's substantial leverage and its effect on the Company's ability to pay
principal and interest on the Subordinated Notes and the Company's ability to
incur additional financing or equity to fund its operations, to pursue other
business opportunities and to withstand any adverse economic and industry
conditions; the risk that the Company will not be able to integrate the
Operating Companies' businesses on an economic basis or that any anticipated
economies of scale or other cost savings will be realized; the ability of the
Company to identify suitable acquisition candidates, complete acquisitions or
successfully integrate any acquired businesses; competition; the ability of the
Company to attract and retain qualified drivers; and the Company's dependence on
key management personnel. Each of these risk factors is discussed in more
detail immediately hereafter.
Financing Plans
In order to raise additional financing, the Company has signed a non-binding
letter of intent to sell TBI, an AmeriTruck subsidiary primarily involved in
mail contract carriage. This letter of intent is subject to a number of
conditions, including due diligence and approval by the AmeriTruck Board of
Directors. In a separate transaction, the Company has signed an agreement to
negotiate exclusively with two major financial institutions with respect to the
proposed sale of $20,000,000 of new preferred stock. Successful completion of
these two transactions would provide AmeriTruck with $30,000,000 of new capital
before any related transaction costs. However, no assurances can be made that
the parties will reach definitive agreements or that these transactions will be
consummated. Failure by the Company to raise significant new equity financing
or raise significant funds from asset sales would have a material adverse effect
on the Company and its
21
<PAGE>
ability to service its outstanding indebtedness, including the Subordinated
Notes. Among other effects, the Company would be required to change its current
growth strategy and adopt a strategy involving the sale of operating equipment
and reduction of operating levels.
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. According to a Department of Energy survey, reported by the
American Trucking Association, the average price of diesel fuel for 1997 was
$1.20 compared with $1.24 for 1996. The Company's fuel prices are slightly
below the national average due to the Company's ability to buy fuel at volume
discounts. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Expenses."
Substantial Leverage, Liquidity, Capital Resources and New Credit Facility
As a result of the 1995, 1996 and 1997 acquisitions and the offering of the
Subordinated Notes, the Company has substantial indebtedness in relation to its
total capitalization. This substantial indebtedness poses substantial risks to
holders of the Subordinated Notes, including the possibility that the Company
might not generate sufficient cash flow to pay the principal and interest on the
Subordinated Notes. Such indebtedness may also adversely affect the Company's
ability to finance its future operations and capital needs, may limit its
ability to pursue other business opportunities and may make its results of
operations more susceptible to adverse economic and industry conditions. In
addition, the Company will need to continue to purchase additional revenue
equipment, and, if the Company is unable to enter into operating or capital
leases or obtain borrowed funds in the future, it may have to limit its growth
or operate its revenue equipment for longer periods. If the Company is unable
to generate sufficient cash flow from operations in the future to service its
debt and make necessary capital expenditures, the Company may be required to
refinance all or a portion of its existing debt, including the Subordinated
Notes, to sell assets or to obtain additional financing. There can be no
assurance that any such refinancing would be possible or that any such sale of
assets or additional financing could be achieved.
Limited Combined Operating History
The Company was founded in August 1995 and conducted no operations prior to
consummation of the 1995 acquisitions. Prior to the 1995, 1996 and 1997
acquisitions, the acquired companies operated independently and there can be no
assurance that the Company will be able to successfully integrate these
businesses on an economic basis or that any anticipated economies of scale or
other cost savings will be realized. While the Company's senior management is
highly experienced in the trucking industry and senior management includes the
chief executive officers of the Operating Companies, the Company's management
group has been assembled only recently and there can be no assurance that the
management group will be able to oversee the combined entity and effectively
implement the Company's operating or growth strategies.
During 1997, the assimilation of significant assets of Monfort, Lynn and
Tran-Star negatively impacted the Company. Combined with start-up issues related
to the ConAgra Transportation Services Agreement, the Company did not meet its
original 1997 goals for profitability and cash flow.
During 1996, 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 negatively impacted the Company. 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 is focusing on efforts to correct the negative
impact from the assimilation of the Freymiller Assets, the 1997 acquisitions and
the ConAgra Services Agreement and has intensified its efforts in the driver
recruitment and training areas, which has begun to correct these problems.
However, no assurances can be made that these areas will not continue to have a
negative impact in the future.
22
<PAGE>
Cyclicality and Other Economic Factors
Recessionary business cycles or downturns in customers' business cycles
could have a material adverse effect on the operating results of the Company.
Although management believes that because of the nature of its customer base,
the Company is less sensitive to cyclical pressures than many other large
trucking firms, a significant portion of the Company's customers are in cyclical
industries, such as furniture manufacturing. Fuel prices, fuel taxes, tolls,
insurance costs, interest rates, license and registration fees and fluctuations
in the resale value of revenue equipment are economic factors over which the
Company has little or no control. Significant increases or rapid fluctuations
in fuel prices or fuel taxes, interest rates or increases in license and
registration fees, tolls or insurance costs, to the extent not offset by
increases in freight rates, would reduce the Company's profitability. In
addition, freight shipments, operating cost and earnings are also adversely
affected by inclement weather conditions. Fluctuations in the resale value of
tractors and trailers are also important factors that the Company cannot
control. A decline in the resale value of the Company's tractors and trailers
could cause the Company to retain some of its equipment longer than desired,
resulting in increased operating expenses for fuel, maintenance and repairs, or
to realize losses on sale.
Future Acquisitions
The Company believes that future acquisitions, particularly in the
temperature control segment of the trucking industry, are a key part of its
objective of offering customers both customized service and pricing that
reflects the advantages of economies of scale. No assurances can be made that
the Company will be able to find suitable acquisition candidates, raise any
required financing or complete future acquisitions or, if completed, that any
such acquisitions will help the Company achieve its objectives.
Competition
The trucking industry is highly competitive. The Operating Companies
compete with many other truck carriers of varying sizes and, to a lesser extent,
with railroads. This competition has created downward pressure on the trucking
industry's pricing structure. Some of the Company's larger competitors in the
refrigerated business include Prime, FFE Transportation Service and KLLM Inc.
Merchants Home Delivery Service is one of the largest competitors in the
furniture business. A number of trucking companies with which the Operating
Companies compete have greater financial resources or own more revenue equipment
than does the Company.
Availability of Drivers
The difficulty in attracting qualified drivers (including owner-operators)
is a wide-spread problem in the trucking industry and is an important factor in
the Company's ability to provide a high level of service to its customers and to
effectively utilize the Company's equipment. Problems with driver retention had
a negative impact on the Company's performance in 1996 and 1997. Competition
for drivers is intense and, in part because their driver standards are high, the
Operating Companies have sometimes experienced difficulty attracting and
retaining qualified drivers. Although in the past the Operating Companies have
experienced lower turnover rates than the trucking industry as a whole, there
can be no assurance that the Company's business will not be affected by a
shortage of qualified drivers in the future.
Regulation
Interstate and Intrastate motor carriage has been substantially deregulated
as a result of the enactment of the Motor Carrier Act of 1980, the Trucking
Industry Regulatory Reform Act of 1994, and the ICC Termination Act of 1995.
Carriers can now readily enter the trucking industry and rates and services are
largely free of regulatory controls. However, interstate for-hire carriers do
remain subject to certain regulatory controls imposed by DOT. In addition, the
Operating Companies' operations are subject to various environmental laws and
regulations, including laws and regulations dealing with underground fuel
storage tanks and ownership of property than may contain hazardous substances
and laws which subject the Company to stricter air emission standards
regulation, including requirements that manufacturers produce cleaner-running
tractors and that fleet operators perform more rigorous inspection and
maintenance procedures.
23
<PAGE>
Claims Exposure
The primary risk areas in the Company's businesses are bodily injury and
property damage, workers' compensation and cargo loss and damage. The Operating
Companies currently maintain insurance against these risks and are subject to
liability as a self-insurer to the extent of the deductible under each policy.
The Company maintains liability insurance for bodily injury and property damage
of at least $25 million per incident, with a deductible for bodily injury and
property damage of $300,000 per incident. The current deductible for workers'
compensation in states where most of the Company's drivers are domiciled ranges
from $250,000 to $350,000 per claim. The Company is self-insured as to damage
or loss to the property and equipment they own or lease. In addition, the
Company maintains cargo loss and damage insurance of between $100,000 and $1
million per incident with a deductible ranging from $5,000 to $15,000 per
incident. To the extent that the Company or any of the Operating Companies were
to experience a material increase in the frequency or severity of accidents or
workers' compensation claims, or unfavorable developments on existing claims,
the Company might have to further collateralize its self-insurance amounts and
the Company's operating results, financial position and liquidity could be
materially adversely affected. In addition, significant increases in insurance
costs, to the extent not offset by increases in freight rates, would reduce the
Company's future profitability.
Dependence on Key Personnel
The success of the Company is dependent upon its senior management team, as
well as its ability to attract and retain qualified management personnel. There
is competition for qualified personnel in the trucking industry. There is no
assurance that the Company will be able to retain its existing senior management
or to attract additional qualified management personnel. The Company does not
maintain key man life insurance on any of its senior management team but the
Company has entered into employment agreements with each member of its senior
management team.
24
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997* 1996* 1995*
------------ ------------ ------------
<S> <C> <C> <C>
Operating revenue $291,552 $224,257 $102,846
-------- -------- --------
Operating expenses:
Salaries, wages and fringe benefits 98,837 71,996 32,463
Purchased transportation 69,911 57,413 26,564
Fuel and fuel taxes 36,103 27,071 12,341
Operating supplies and expenses 19,397 13,875 2,445
Depreciation and amortization of capital leases 18,120 14,211 7,407
Claims and insurance 11,646 8,806 4,471
Operating taxes and licenses 6,907 4,988 3,145
General supplies and expenses 15,385 9,598 3,089
Building and office equipment rents 2,117 1,617 586
Amortization of intangibles 1,787 1,130 475
Loss (gain) on disposal of property and equipment 43 (1,267) (425)
Restructuring charge 7,184 - -
-------- -------- --------
Total operating expenses 287,437 209,438 92,561
-------- -------- --------
Operating income 4,115 14,819 10,285
Interest expense 21,015 16,677 4,993
Amortization of financing fees 653 484 37
Other income, net (279) (450) (422)
-------- -------- --------
Income (loss) before income taxes and extraordinary items (17,274) (1,892) 5,677
Income tax provision (benefit) (6,618) 340 2,496
-------- -------- --------
Income (loss) before extraordinary items (10,656) (2,232) 3,181
Extraordinary items, loss on early retirement of debt,
net of taxes of $120, $154 and $16, respectively (243) (230) (23)
-------- -------- --------
Net income (loss) $(10,899) $ (2,462) $ 3,158
======== ======== ========
</TABLE>
* Comparisons between periods are affected by acquisitions -- see Note 2.
See accompanying notes to consolidated financial statements.
25
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997* 1996*
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 21 $ 734
Accounts and notes receivable, net 49,017 29,001
Prepaid expenses 14,782 7,735
Repair parts and supplies 2,123 1,092
Deferred income taxes 3,717 1,467
Other current assets 1,497 1,388
-------- --------
Total current assets 71,157 41,417
Property and equipment, net 117,774 103,801
Goodwill, net 59,971 39,399
Other assets 14,598 8,031
-------- --------
Total assets $263,500 $192,648
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Current portion of long-term debt $ 22,534 $ 11,988
Accounts payable and accrued expenses 31,735 13,557
Claims and insurance accruals 3,496 1,684
Other current liabilities 986 593
-------- --------
Total current liabilities 58,751 27,822
Long-term debt 203,696 157,338
Deferred income taxes 4,410 8,571
Other liabilities 5,887 2,741
-------- --------
Total liabilities 272,744 196,472
-------- --------
Commitments and contingencies (Note 11)
Redeemable preferred stock 3,091 -
Stockholders' equity (deficiency):
Common stock; $.01 par value, 4,230 shares and 3,503 shares
issued and outstanding, respectively 42 35
Additional paid-in capital 2,800 898
Loans to stockholders (1,401) (1,880)
Accumulated deficit (13,776) (2,877)
-------- --------
Total stockholders' deficiency (12,335) (3,824)
-------- --------
Total liabilities and stockholders' deficiency $263,500 $192,648
======== ========
</TABLE>
* Comparisons between periods are affected by acquisitions-see Note 2.
See accompanying notes to consolidated financial statements.
26
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1997* 1996* 1995*
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $(10,899) $ (2,462) $ 3,158
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization of capital leases 18,120 14,211 7,407
Amortization of intangibles 1,787 1,130 475
Loss (gain) on disposal of property and equipment 43 (1,267) (425)
Provision (benefit) for deferred income taxes (6,411) 291 1,074
Provision for doubtful accounts 233 234 224
Extraordinary items, loss on early retirement of debt, net of taxes 243 230 23
Restructuring charge 7,184 - -
Restructuring costs paid (2,859) - -
Other, net (3,126) (125) 897
Changes in current assets and liabilities, net of effects from acquisitions:
Accounts and notes receivable, net (9,469) (11,620) (325)
Prepaid expenses (4,136) (1,438) (1,199)
Repair parts and supplies (517) (9) 22
Other current assets 424 (234) 1,652
Accounts payable and accrued expenses 4,195 (541) (791)
Claims and insurance accruals (2,411) 1,064 406
Other current liabilities 268 17 (527)
-------- -------- --------
Net cash provided by (used in) operating activities (7,331) (519) 12,071
-------- -------- --------
INVESTING ACTIVITIES:
Purchase of Freymiller Assets, net of liabilities assumed - (18,821) -
Payments for acquisitions, net of cash acquired (17,613) (9,342) (18,258)
Purchase of property and equipment (6,737) (19,948) (15,399)
Proceeds from sale of property and equipment 12,197 9,055 3,520
Other, net 705 1,007 (557)
-------- -------- --------
Net cash used in investing activities (11,448) (38,049) (30,694)
-------- -------- --------
FINANCING ACTIVITIES:
Revolving line of credit, net 30,252 32,881 -
Proceeds from issuance of long-term debt 1,000 17,236 103,427
Repayment of long-term debt (21,189) (25,075) (49,011)
Distribution to controlling stockholders - - (17,361)
Proceeds from issuance of redeemable preferred stock 3,000 - -
Proceeds from issuance of common stock 2,000 - -
Redemption of preferred stock - - (2,000)
Checks in excess of cash balances 4,109 - -
Other, net (1,106) (1,026) (2,763)
-------- -------- --------
Net cash provided by financing activities 18,066 24,016 32,292
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (713) (14,552) 13,669
Cash and cash equivalents, beginning of period 734 15,286 1,617
-------- -------- --------
Cash and cash equivalents, end of period $ 21 $ 734 $ 15,286
======== ======== ========
Supplemental cash flow information:
Cash paid during the year for:
Interest $ 20,466 $ 16,592 $ 4,315
Income taxes (net of refunds) (257) 135 2,812
Property and equipment financed through capital lease obligations and other debt
457 13,107 13,063
Noncash consideration for acquisitions 1,000 - -
</TABLE>
*Comparisons between periods are affected by acquisitons-see Note 2.
See accompanying notes to consolidated financial statements.
27
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
COMMON ADDITIONAL TOTAL STOCK-
SHARES COMMON PAID-IN LOAN TO ACCUMULATED HOLDERS' EQUITY
OUTSTANDING STOCK CAPITAL STOCKHOLDERS DEFICIT (DEFICIENCY)
----------- ----- ------- ------------ ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 29 $ - $ 11,963 $ - $ (1,475) $ 10,488
Dividends on preferred stock - - - - (187) (187)
Loans to stockholders - - - (283) - (283)
Issuance of common stock 2 - 1,152 (1,152) - -
Distribution to controlling stockholders - - (15,583) - (1,778) (17,361)
Issuance of common stock to controlling
stockholders 2,173 22 (22) - - -
Issuance of common stock for acquired
companies and minority stockholders 1,074 11 2,490 - (133) 2,368
Net income - - - - 3,158 3,158
----- --- -------- ------- -------- --------
Balance, December 31, 1995 3,278 33 - (1,435) (415) (1,817)
Loans to stockholders - - - (445) - (445)
Issuance of common stock for acquired
company 225 2 898 - - 900
Net loss - - - - (2,462) (2,462)
----- --- -------- ------- -------- --------
Balance, December 31, 1996 3,503 35 898 (1,880) (2,877) (3,824)
Loans to stockholders - - - 479 - 479
Issuance of common stock 727 7 1,993 - - 2,000
Redeemable preferred stock dividend - - (91) - - (91)
Net loss - - - - (10,899) (10,899)
----- --- -------- ------- -------- --------
Balance, December 31, 1997 4,230 $42 $ 2,800 $(1,401) $(13,776) $(12,335)
===== === ======== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
AmeriTruck Distribution Corp. and its wholly-owned subsidiaries generally
operate in specialized areas of the transportation services industry
including time-sensitive delivery, special handling, unconventional pick-up
and delivery times, in-house logistic services, dedicated fleets and
temperature control.
Principles of Consolidation
The combined financial statements include the accounts of AmeriTruck
Distribution Corp. and its wholly-owned subsidiaries ("AmeriTruck" or the
"Company"). AmeriTruck was formed in August 1995 to effect the combination
of six regional trucking lines in November 1995: W&L Services Corp.
("W&L"), Thompson Bros., Inc. ("TBI"), J.C. Bangerter & Sons, Inc.
("Bangerter"), CMS Transportation Services, Inc. and certain related
companies, Scales Transport Corporation and a related company ("Scales")
and CBS Express, Inc. ("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 (the "Controlling
Stockholders"). In addition, the Controlling Stockholders controlled
approximately 67 percent of the outstanding common stock of AmeriTruck
after the consummation of these acquisitions. Therefore, the Controlling
Stockholders on a combined basis have been treated as the acquirer for
purposes of accounting for these acquisitions. With respect to the
acquisitions of W&L and TBI, their acquisitions are accounted for as a
purchase by the Controlling Stockholders of the stock of the remaining
stockholders of W&L and TBI (the "Minority Stockholders"), who owned
approximately 13 percent of W&L and TBI on a combined basis.
In April 1996, CMS Transportation Services, Inc. changed its corporate name
to "AmeriTruck Refrigerated Transport, Inc." ("ART"), and the distribution
functions previously conducted under the corporate name "CMS Transportation
Services, Inc." were continued as a division of ART. In addition, in June
1996, the business operations of CBS, a general freight carrier (which then
operated under the name "CBS Express, Inc."), were transferred to Scales.
In December 1996, the distribution functions of the CMS Transportation
division of ART were transferred to CBS and its name was changed to "CMS
Transportation Services, Inc." ("CMS"). The CMS Transportation distribution
business currently operated by CMS is sometimes referred to below as the
"CMS distribution business" and the business operations previously operated
under the name CBS Express, Inc. and transferred to Scales are sometimes
referred to as the "CBS Express business."
The accompanying AmeriTruck consolidated statements of operations and cash
flows for the years ended December 31, 1997, 1996 and 1995 reflect W&L and
TBI combined historical results and cash flows for such periods, Bangerter
results and cash flows since August 1995, the results of the CMS
distribution business and Scales (including the CBS Express business) since
November 1995, the results of ART as it relates to the purchase of assets
from Freymiller Trucking, Inc. ("the Freymiller Assets"), since February 5,
1996, and the results of KTL, Inc. ("KTL") since July 1996. The results for
Monfort Transportation Company ("Monfort") and Lynn Transportation Co.,
Inc. ("Lynn") have been included since June 1997 and for Tran-Star, Inc.
("Tran-Star") since July 1997. The accompanying AmeriTruck consolidated
balance sheet at December 31, 1996 includes W&L, TBI, Bangerter, the CMS
distribution business, Scales (including the CBS Express business), and KTL
assets and liabilities as adjusted by purchase accounting and the
Freymiller Assets. In addition, the consolidated balance sheet at December
31, 1997 includes Monfort, Lynn and Tran-Star assets and liabilities as
adjusted by purchase accounting.
As of December 31, 1997, the Company's principal subsidiaries currently are
W&L, TBI, Bangerter, CMS, Scales, ART, KTL, AmeriTruck Logistics Services,
Inc. ("ALS", formed in January 1997 to broker freight), Monfort, Lynn and
Tran-Star (the "Operating Companies"). All significant intercompany
accounts and transactions have been eliminated. Effective January 1998 the
Company effected a merger of ART, JCB, Monfort, Lynn and Tran-Star with ART
as the surviving corporation.
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
29
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the periods presented.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in demand deposits and
short-term investments with original maturities of 90 days or less. Cash
equivalents are stated at cost, which approximates market value.
Prepaid Expenses
Prepaid expenses primarily consist of tires in service and prepaid rent
related to operating leases. The cost of new and replacement tires is
capitalized and included in prepaid expenses when placed in service, and
then amortized on a straight-line basis over their estimated useful lives.
Estimated useful lives range from 10 to 24 months. The prepaid rent is
amortized over the life of the lease.
Repair Parts and Supplies
Repair parts and supplies consists of fuel, tires until placed in service,
tubes, replacement parts and supplies and are valued at the lower of
average cost or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated on
the straight-line method over the estimated useful lives of 3 to 10 years
for revenue and service equipment, 10 to 30 years for structures, 4 to 10
years for leasehold improvements, and 2 to 10 years for furniture and
office equipment. Major additions and betterments are capitalized, while
maintenance and repairs that do not improve or extend the life of the asset
are charged to expense as incurred. Gains and losses on dispositions are
included in operating income.
Goodwill and Other Intangibles
Goodwill represents the excess of the acquisition costs over the fair value
of net identifiable assets of businesses acquired and is amortized on a
straight-line basis over 40 years. Accumulated amortization of goodwill at
December 31, 1997 and 1996 was $3,452,000 and $2,129,000, respectively.
Other intangibles, which primarily consist of financing and other costs
associated with business acquisitions, are included in other assets and are
amortized over the life of the agreements.
The realizability of goodwill and other intangibles is evaluated
periodically as events or circumstances indicate a possible inability to
recover their carrying amount. Such evaluation is based on various
analyses, including cash flow and profitability projections that
incorporate, as applicable, the impact on existing company operations.
Management believes that no significant impairment of goodwill and other
intangible assets has occurred.
30
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Claims and Insurance Accruals
Claims accruals represent reserves for estimated costs to repair and
replace damaged goods resulting from cargo claims. Insurance accruals
reflect the estimated cost of claims for bodily injury and property damage,
workers' compensation and employee health care not covered by insurance.
These liabilities for self-insurance are accrued based on claims incurred
and on estimates of both unasserted and unsettled claims which are assessed
based on management's evaluation of the nature and severity of individual
claims and on the Company's past claims experience.
Revenue Recognition
Freight revenues are recognized upon the delivery of freight.
Reclassifications
Certain prior year information has been reclassified to conform to the
current year presentation.
2. ACQUISITIONS
In June 1997, AmeriTruck purchased all the outstanding stock of Tran-Star,
which was owned by Allways Services, Inc. The purchase price of $2.6
million included $1.6 million in cash and a $1 million note payable.
Tran-Star is a carrier of refrigerated and non-refrigerated products.
Headquartered in Waupaca, Wisconsin, Tran-Star operates primarily between
the upper midwestern U.S. and the northeast and southeast, with terminals
in Etters and Wyalusing, Pennsylvania. The Company is currently
coordinating Tran-Star's activities with those of the other carriers within
the refrigerated group. See Notes to Consolidated Financial Statements-Note
3. Restructuring Charge.
In May 1997, AmeriTruck purchased the capital stock of Monfort and Lynn,
both subsidiaries of ConAgra, Inc. ("ConAgra"). The purchase price of $15
million was paid in cash.
Monfort and Lynn operated primarily as in-house carriers for the red-meat
division of Monfort, Inc., a ConAgra subsidiary, and the poultry and turkey
divisions of ConAgra Poultry Company, a ConAgra subsidiary. The Company
entered into a Transportation Services Agreement with subsidiaries of
ConAgra. The ConAgra subsidiaries have agreed to tender freight from
Monfort, Inc.'s red-meat division, ConAgra Poultry Company's poultry and
turkey divisions and Swift-Ekrich, Inc.'s processed meats division in
designated lanes and minimum annual volumes. The term of this agreement is
four years, with pricing fixed for the first two years and adjusted prices
in the third and fourth years. The Company is currently coordinating
Monfort and Lynn activities with those of the refrigerated group. See Notes
to Consolidated Financial Statements-Note 3. Restructuring Charge.
31
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Tran-Star, Monfort and Lynn acquisitions were 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, note payable, miscellaneous acquisition costs and
liabilities assumed was $42.4 million for Tran-Star and $35.8 million for
Monfort and Lynn. The excess of the purchase price over fair values of the
net assets acquired has been recorded as goodwill. The Tran-Star net assets
acquired were as follows (in thousands):
Accounts receivable, net $ 6,653
Property and equipment, net 25,315
Goodwill 7,454
Other assets 2,981
Long-term debt (28,916)
Other liabilities (10,520)
--------
Net assets acquired $ 2,967
========
The Monfort and Lynn net assets acquired were as follows (in thousands):
Accounts receivable, net $ 3,805
Property and equipment, net 15,138
Goodwill 12,736
Other assets 4,087
Long-term debt (14,201)
Other liabilities (5,919)
--------
Net assets acquired $ 15,646
========
The following unaudited pro forma operating results of the Company for the
twelve months ended December 31, 1997 and 1996, reflect the Monfort, Lynn
and Tran-Star acquisitions as if they had occurred on January 1, 1996.
Twelve Months Ended
December 30,
------------------------
1997 1996
-------- --------
(In thousands)
Operating revenue $370,728 $408,003
Operating income (after
restructuring charge of
$7.2 million in 1997) 5,823 25,921
Income (loss) before
extraordinary items (12,127) 1,168
Net income (loss) (12,370) 937
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, 1996 or of
future results of operations of the consolidated entities.
Pro forma operating income during 1997 decreased partially as a result of
the restructuring charge of $7.2 million taken during the second quarter of
1997 in connection with these acquisitions and the reorganization of the
acquired refrigerated carrier group.
32
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Management believes that the freight networks of the refrigerated carriers,
independently operated, did not have the critical mass necessary to compete
efficiently in the changed refrigerated markets. To address this issue, the
Company is integrating these operations into one network. The traffic lanes
awarded by ConAgra subsidiaries in the Transportation Services Agreement,
representing approximately $27 million of additional annual revenue in
excess of the amount provided to Monfort and Lynn by ConAgra historically,
were selected because of their contribution to an efficient nationwide
refrigerated freight network. Furthermore, ConAgra, which represents more
than 50 percent of Monfort's revenue, is contractually committed to restore
business volume and rates paid Monfort to the approximate levels that
existed during the first half of 1996.
During the third and fourth quarters of 1997, the Company and ConAgra have
been coordinating efforts to bring the Transportation Services Agreement to
the contractually committed volumes and prices. However, these volumes have
not yet been attained. Management believes that the most complex issues
surrounding a business relationship of this magnitude, in excess of $50
million per year in total revenue, will be addressed by the end of the
first quarter of 1998. This process, in addition to the ongoing
reorganization of the refrigerated group, has caused the Company to fall
short of its original cash flow plan for the second half of 1997. During
the fourth quarter, the Company and ConAgra agreed to extend the term of
the Transportation Services Agreement for an additional six months to
December 2001 and to identify final traffic lanes and pricing to be subject
to the Transportation Services Agreement. As part of the amendments, the
Company agreed it would not receive any take-or-pay revenues for 1997.
In addition, Tran-Star's operating income declined by $2.5 million as it
experienced deteriorating operating results. Included in operating expenses
for the first half of 1997 were merger related expenses of approximately
$700,000 and increased maintenance expense of approximately $500,000
related to deferral of its normal tractor replacement cycle. The Company
has been taking delivery of tractors to replace half of Tran-Star's fleet.
During the third quarter of 1996, AmeriTruck purchased all of the
outstanding stock of KTL 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.
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. 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.
In February 1996, the Company, through CMS Transportation Services, Inc.,
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.
As discussed in Note 1, AmeriTruck was formed in August 1995 to effect the
combination of six regional trucking lines in November 1995: W&L, TBI,
Bangerter, CMS Transportation Services, Inc., Scales and CBS Express, Inc.
AmeriTruck acquired all of the outstanding common stock of these companies,
except Bangerter, in exchange for
33
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
shares of AmeriTruck's common stock and the payment of $35.0 million in
cash of which $17.4 million is reflected as a dividend to the Controlling
Stockholders for accounting purposes. All of the outstanding common stock
of Bangerter was acquired for a cash purchase price of $1.0 million. The
acquisitions of Bangerter, CMS Transportation Services, Inc., Scales and
CBS Express, Inc. were accounted for by the purchase method. The excess of
the purchase price over the fair values of the net assets acquired has been
recorded as goodwill.
The cash portion of the 1995 acquisitions was funded with a portion of the
proceeds from the private placement of the Subordinated Notes in November
1995. The Subordinated Notes were exchanged for publicly registered
Subordinated Notes in February 1996. The Subordinated Notes were issued
pursuant to the Indenture. The initial offering of the Subordinated Notes
in November 1995 is sometimes referred to as the "Initial Offering." 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 "8. Long-term Debt and Related
Agreements."
In addition, in May 1995, W&L acquired Dietz Motor Lines, Inc., for $2.0
million in cash, which includes payment for non-complete 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. RESTRUCTURING CHARGE
With the addition of Tran-Star, Monfort and Lynn to the AmeriTruck
organization, the Company is currently organized into four operating groups
to better serve its customers. The AmeriTruck Refrigerated Carrier Group
was formed to offer regional and nationwide, truckload refrigerated
service. This new company combined the resources of ART, Bangerter, Tran-
Star, Monfort, Lynn and the refrigerated operations of TBI. The AmeriTruck
Specialized Carrier Group was formed to service customers with unique needs
in transportation and distribution. This group includes W&L, the largest
interstate hauler of new furniture in the U.S., CMS, serving the medical
distribution industry, Scales, offering regional just-in-time dry van
service, and AmeriTruck Logistics Services, Inc. ("ALS," formed in January
1997 to broker freight). The AmeriTruck Regional LTL Group offers less-
than-truckload, refrigerated and non-refrigerated service. The lead carrier
in this group is KTL, offering service to and from the Florida market. The
LTL operations of Lynn Transportation in Nevada and Southern California
were recently integrated into the Group. TBI now focuses on mail
transportation and regional specialized services and comprises the
AmeriTruck Mail Services Group. TBI operates under 17 contracts with the
U.S. Postal Service. Most of these contracts were initially awarded in the
1970's and 1980's.
In connection with the above reorganization and to eliminate the duplicate
facility and employee costs related to the recently acquired entities, the
Company announced a plan in the second quarter of 1997 to restructure its
refrigerated carrier group. The Company recorded $7.2 million in
restructuring costs, which included $2.3 million for employee termination
costs, $4.2 million for duplicate facility costs, including the impairment
of certain long-lived assets, and $650,000 of other costs. In addition, the
Company transferred $6.7 million of property and equipment to assets held
for sale. As of December 31, 1997, the Company has liabilities of $433,000
related to the restructuring charge.
34
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. OTHER INCOME, NET
Other income consists of the following for the years ended December 31 (in
thousands):
1997 1996 1995
---- ---- ----
Interest income $237 $435 $359
Miscellaneous, net 42 15 63
---- ---- ----
$279 $450 $422
==== ==== ====
5. INCOME TAXES
Income tax expense excluding the extraordinary items, was as follows for
the years ended December 31 (in thousands):
1997 1996 1995
---- ---- ----
Current:
Federal $ (207) $ - $1,301
State - 49 121
------- ---- ------
(207) 49 1,422
------- ---- ------
Deferred:
Federal (6,010) 305 706
State (401) (14) 368
------- ---- ------
(6,411) 291 1,074
------- ---- ------
Total $(6,618) $340 $2,496
======= ==== ======
A reconciliation of the federal statutory income tax rate to the effective
income tax rate, excluding the extraordinary items, was as follows for the
years ended December 31:
1997 1996 1995
---- ---- ----
Federal statutory income tax rate (benefit) (34.0)% (34.0)% 34.0%
State income taxes, net of federal tax benefit (2.4) 1.7 5.6
Nondeductible expenses 4.9 61.5 5.0
Nontaxable income - (11.4) -
Other, net (6.8) 0.2 (0.6)
----- ------ ----
Effective tax rate (38.3)% 18.0% 44.0%
===== ====== ====
35
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of deferred tax assets and liabilities at December 31 were
as follows (in thousands):
1997 1996
---- ----
Deferred tax liabilities:
Depreciation and amortization $(17,458) $(13,249)
Prepaid items and other (1,057) (821)
-------- --------
Total deferred tax liabilities (18,515) (14,070)
-------- --------
Deferred tax assets:
Accrued expenses and reserves 4,214 1,786
Net operating losses and tax credits 13,608 5,180
-------- --------
Total deferred tax assets 17,822 6,966
-------- --------
Net deferred tax liability $ (693) $ (7,104)
======== ========
Current deferred income tax asset 3,717 $ 1,467
Noncurrent deferred income tax liability (4,410) (8,571)
-------- --------
Net deferred tax liability $ (693) $ (7,104)
======== ========
The Company has available at December 31, 1997, an alternative minimum tax
(AMT) credit carryforward of $380,000 to offset future regular tax
liabilities. The AMT credit carryforward has no expiration date. The
benefit of the tax credits is recognized in continuing operations for
accounting purposes. The Company also has available federal net operating
losses of approximately $34.9 million. The federal net operating loss
carryover will expire between 2011 and 2013.
The Company has available at December 31, 1997, unused Bangerter
preacquisition operating loss carryforwards of approximately $1.1 million
which expire between 2006 and 2011. These preacquisition carryforwards may
be used only to offset future taxable income, if any, of Bangerter and may
not be used to offset future taxable income of any other member of the
group with which the Company files a consolidated return. The amount of
preacquisition tax loss carryforwards available to offset future taxable
income will be subject to limitation, due to the ownership change, under
Internal Revenue Code Section 382. The Company will be required to pay tax
in any year in which Bangerter's taxable income exceeds the ownership
change limitation, notwithstanding the existence of tax loss carryforwards.
The amount of the preacquisition carryforwards which may be applied in any
one year is limited by the Internal Revenue Code to the lesser of
Bangerter's taxable income or approximately $70,000.
6. ACCOUNTS RECEIVABLE
AmeriTruck maintains an allowance for doubtful accounts based upon the
expected collectibility of all accounts receivable. Allowances for doubtful
accounts of $1,295,000 and $560,000 were recorded at December 31, 1997 and
1996, respectively. Driver advances and employee receivables of $1,785,000
and $1,575,000 were included in accounts receivable at December 31, 1997
and 1996, respectively.
36
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. PROPERTY AND EQUIPMENT
Property and equipment at December 31 was as follows (in thousands):
1997 1996
---- ----
Revenue equipment $140,774 $119,076
Structures 5,745 5,537
Service equipment and other 1,894 1,721
Office furniture and equipment 5,769 3,672
Land 1,102 1,007
Leasehold improvements 832 857
-------- --------
Total property and equipment 156,116 131,870
Accumulated depreciation and amortization (38,342) (28,069)
-------- --------
Net property and equipment $117,774 $103,801
======== ========
Property and equipment includes gross assets acquired under capital leases
of $16,351,000 and $5,560,000 at December 31, 1997 and 1996, respectively.
Related amounts included in accumulated depreciation and amortization were
$2,653,000 and $2,214,000 at December 31, 1997 and 1996.
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 by approximately $360,000 for the year ended
December 31, 1995. These changes in estimates were made to more accurately
reflect future service lives and salvage values of the equipment.
8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following at
December 31 (in thousands):
1997 1996
---- ----
Accounts Payable - trade $16,767 $ 5,840
Payroll and owner operator pay 5,687 2,630
Accrued interest 2,023 1,786
Taxes other than income taxes 1,733 954
Other 5,525 2,347
------- -------
Total $31,735 $13,557
======= =======
37
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. LONG-TERM DEBT AND RELATED AGREEMENTS
Long-term debt consists of the following at December 31 (in thousands):
1997 1996
---- ----
Senior Subordinated Notes due 2005 with
an interest rate of 12.25% (net of
unamortized discount of $1,106 and
$1,247 respectively) $ 98,894 $ 98,753
Obligations collateralized by equipment
maturing through 2002 with interest
rates ranging from 7.25% to 11.51% 43,688 34,539
Capital lease obligations collateralized
by equipment maturing through 2004 with
interest rates ranging from 5.86% to 11.33% 14,286 2,473
Obligation collateralized by real property
maturing 2000 with interest rates ranging
from 8.0% to 10.0% 1,537 -
Obligations maturing through 2005 with
interest rates ranging from 10.0% to 14.0% 2,180 680
Borrowings outstanding on the FINOVA
revolving line of credit, average weighted
interest rate of 8.49% (variable) 56,281 -
Borrowings outstanding on the NationsBank
revolving line of credit, average weighted
interest rate of 7.43% (variable) - 23,517
Borrowings outstanding on the Volvo revolving
line of credit, average weighted interest
rate of 8.44% and 8.25% respectively
(variable) 9,364 9,364
-------- --------
226,230 169,326
Less current portion 22,534 11,988
-------- --------
Total long-term portion of debt $203,696 $157,338
======== ========
Aggregate long-term debt (including current portion), maturing during the
next five years and thereafter is as follows (in thousands):
1998 $ 22,534
1999 25,513
2000 74,942
2001 6,332
2002 46
Thereafter 96,863
--------
$226,230
========
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 Indenture. As of December 31, 1996, the Company had
applied the net proceeds of the Series A Notes primarily to finance the
1995 acquisitions (See footnote "2. Acquisitions") and prepay debt and
capitalized leases. The early retirement of debt resulted in an
extraordinary loss for December 31, 1996 of $230,000, net of taxes of
$154,000.
38
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FINOVA Credit Facility
In May 1997, the Company and its subsidiaries entered into a Loan and
Security Agreement and related documents (collectively, the "FINOVA Credit
Facility") with FINOVA Capital Corporation ("FINOVA") pursuant to which
FINOVA has agreed to provide a $60 million credit facility to the Company.
The initial borrowings under the FINOVA Credit Facility were used to
refinance the Company's prior credit facility with NationsBank of Texas,
N.A. Additional borrowings under the FINOVA Credit Facility can be used for
acquisitions, capital expenditures, letters of credit, working capital and
general corporate purposes. Pursuant to the FINOVA Credit Facility, FINOVA
has agreed to provide a $60 million revolving credit facility, with a $10
million sublimit for the issuance of letters of credit, maturing on May 5,
2000 (subject to additional one year renewal periods at the discretion of
FINOVA). The FINOVA Credit Facility is also subject to a borrowing base
consisting of eligible receivables and eligible revenue equipment.
As of December 31, 1997, the Company's borrowing base supported borrowings
of approximately $63.7 million. Revolving credit loans under the FINOVA
Credit Facility bear interest at a per annum rate equal to either the prime
rate plus a margin equal to 0.75 percent or the rate of interest offered in
the London interbank market plus a margin equal to 2.75 percent. The
Company also pays a monthly unused facility fee and a monthly collateral
monitoring fee in connection with the FINOVA Credit Facility. Revolving
credit loans under the FINOVA Credit Facility were $56.3 million at
December 31, 1997 and were primarily used for refinancing borrowings under
the Company's prior facility with NationsBank of Texas, N.A. and to fund
the 1997 acquisitions. There were also $4.6 million in letters of credit
outstanding at December 31, 1997, leaving $2.8 million available for
borrowings.
In November 1997 the Company amended the FINOVA Credit Facility to increase
both the total amount of the FINOVA Credit Facility to $64 million and the
borrowing base availability thereunder (the "Temporary Overadvances"), in
each case for a period not to exceed 120 days. The amendment to the FINOVA
Credit Facility provides for the payment of a $180,000 fee in connection
with the Temporary Overadvances as well as an additional $180,000 fee in
the event that the Temporary Overadvances are not terminated within 60
days. The Temporary Overadvances bore interest at 11% per annum for the
first 60 days, and thereafter, until the Temporary Overadvances are
terminated all outstanding borrowings under the FINOVA Credit Facility will
bear interest at 1% over the rate otherwise applicable to such advances. In
connection with this amendment to the FINOVA Credit Facility, the Company
also issued $1 million in Subordinated Notes (the "1997 Notes") to certain
existing stockholders. The 1997 Notes bear interest at a rate of 14% per
annum and originally matured on April 1, 1998. The 1997 Notes may be
converted in connection with a private equity placement providing gross
proceeds to the Company of at least $10 million (the "Qualified Private
Placement") on the same terms as those offered to other investors in the
Qualified Private Placement. In connection with the 1997 Notes, the Company
issued to the purchasers of the 1997 Notes warrants to a number of shares
of the Company's common stock equal to the aggregate outstanding principal
and interest on the 1997 Notes at the time of exercise divided by 2 (the
"1997 Warrants"). The 1997 Warrants become exerciseable in the event a
Qualified Private Placement does not occur prior to April 1, 1998, and the
exercise price would be paid by surrender of the applicable investor's 1997
Note. The Company has also agreed that, in the event a Qualified Private
Placement has not occurred by March 31, 1998, the Company will pay an
affiliate of BancBoston Ventures Inc., a stockholder of the Company, a
management fee in the annual amount of $100,000. The Company used the
availability from the Temporary Overadvances and the proceeds from the 1997
Notes to pay interest due in November 1997 on the Subordinated Notes and
for general corporate purposes.
In March 1998, the Company further amended the FINOVA Credit Facility to
extend the period during which the Temporary Overadvances are available to
the Company through May 15, 1998 (or, if earlier, the date of any Qualified
Private Placement or the date of any sale of the stock or substantially all
of the assets of TBI, yielding gross cash proceeds of at least $10 million)
and to increase the total amount of the FINOVA Credit Facility to $68.5
million solely during the period during which the Temporary Overadvances
may be drawn. The March 1998 amendment provides for the payment of an
additional $280,000 fee to FINOVA. The Company does not expect a Qualified
Private Placement to occur by April 1, 1998. However, the maturity of the
1997 Notes has been extended to June 1, 1998.
The Company's obligations under the FINOVA Credit Facility are
collateralized by substantially all of the unencumbered assets of the
Company and its subsidiaries and are guaranteed in full by each of the
Operating Companies. For purposes of the Indenture, the borrowings under
the FINOVA Credit Facility constitute Senior Indebtedness of the Company
and Guarantor Senior Indebtedness of the Operating Companies.
The FINOVA Credit Facility contains customary representations and
warranties and events of default and requires compliance with a number of
affirmative, negative and financial covenants, including a limitation on
the incurrence of indebtedness and a requirement that the Company maintain
a specified Current Ratio, Net Worth, Debt Service
39
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Coverage Ratio and Operating Ratio. Certain of these covenants were not met
at December 31, 1997 and were unconditionally waived by FINOVA. The FINOVA
Credit Facility also contains a subjective acceleration clause for material
adverse change. Management believes there has been no such material adverse
changes.
Volvo Credit Facilities
In February 1996, the Company and the Operating Companies 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 December 31,
1997, the Operating Companies have pledged collateral which provides for a
$9.4 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. Certain of these covenants
were not met at December 31, 1997 and were unconditionally waived by Volvo.
The Equipment Financing Facility was provided by Volvo in connection with
the Operating Companies' agreement to purchase 400 new trucks manufactured
by Volvo GM Heavy Truck Corporation. 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. Financing for an
additional 150 new trucks for approximately $11.3 million was committed
during 1997, all of which will be obtained through operating leases.
At December 31, 1997, borrowings outstanding under the Volvo Line of Credit
were $9.4. The outstanding debt balance under the Equipment Financing
Facility was $2.8 million at December 31, 1997; however, the remaining
financing under this facility was 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.
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 provided a $30 million credit facility to the Company.
Borrowings under the NationsBank Credit Facility were used for
acquisitions, operating capital, capital expenditures, letters of credit
and general corporate purposes. The Company's obligations under the
NationsBank Credit Facility were collateralized by substantially all
personal property 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. In May 1997, this facility was replaced by borrowings
from the FINOVA Credit Facility.
40
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities reflected in the consolidated
financial statements approximates fair value due to the short-term maturity
of these instruments.
The fair value of the Company's long-term debt of $227,305,000 and
$170,609,000 at December 31, 1997, and 1996, respectively was calculated by
discounting future cash flows using an estimated fair market value interest
rate. The interest rate used for the Subordinated Notes was the quoted
market price at the respective year-end. The rate for all other debt was
estimated based on the Company's current borrowing rates for similar types
of borrowing arrangements at the end of 1997.
11. COMMITMENTS AND CONTINGENCIES
Self-Insurance
The Company is primarily self-insured for all collision damages to revenue
equipment. In addition, the Company is self-insured for liability coverage
up to its deductible amounts, which vary among the Operating Companies.
Furthermore, the Operating Companies act as self-insurers for workers'
compensation in several states in which the deductible is as high as
$350,000.
Leases
The Company leases various equipment and buildings under capital and
noncancelable operating leases with an initial term in excess of one year.
As of December 31, 1997, future minimum rental payments required under
these capital and operating leases are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
1998 $ 8,489 $ 9,544
1999 2,770 8,587
2000 2,435 8,262
2001 2,130 5,068
2002 174 1,239
Thereafter 114 609
------- -------
Total 16,112 $33,309
=======
Less amount representing interest (1,826)
-------
Present value of minimum lease
payments $14,286
=======
</TABLE>
Rental expense for operating leases was $10,286,000, $4,975,000 and
$1,718,000 for the years ended December 31, 1997, 1996 and 1995. The
Company received sublease income during 1997 of approximately $700,000.
Future minimum sublease rentals under noncancelable subleases will
approximate $1,500,000 for 1998 and $500,000 for 1999.
The Company also leases revenue equipment from owner operators and leasing
companies under various short-term cancelable operating leases. Rental
payments are based on per mile charges or on a percent of revenue generated
through the use of the equipment.
Letters of Credit
As of December 31, 1997 and 1996, respectively, the Company had various
outstanding letters of credit totaling $4,592,000 and $4,066,000. These
letters of credit were mainly issued to insurance companies in conjunction
with coverage obtained.
41
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Environmental Matters
Under the requirements of the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 and certain other laws, the Company
is potentially liable for the cost of clean-up of various contaminated
sites identified by the U.S. Environmental Protection Agency ("EPA") and
other agencies. 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 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.
Other
The Company is a defendant in legal proceedings considered to be in the
normal course of business, none of which, singularly or collectively, are
considered to be material by management of the Company.
12. REDEEMABLE PREFERRED AND COMMON STOCK
AmeriTruck is authorized to issue 20,000 shares of Preferred Stock, par
value $1.00 per share (the "Preferred Stock"), 12,000,000 shares of Class A
Common Stock, $.01 par value, 12,000,000 shares of Class B Common Stock,
$.01 par value and 1,775,000 shares of Class C Common Stock, $.01 par
value. Preferred Stock may be issued at the discretion of the Board of
Directors of the Company with such designations, rights and preferences as
the Board of Directors may in its discretion determine. Upon issuance, the
Preferred Stock may include, among other things, extraordinary dividend,
redemption, conversion, voting or other rights which may adversely effect
the holders of the Common Stock. At December 31, 1997 the Company had 3,000
shares of Series A Redeemable Preferred Stock (described below), 2,835,461
shares of Class A Common Stock and 1,394,814 shares of Class C Common Stock
outstanding. The holders of Class A Common Stock have one vote per share.
The holders of Class B Common Stock do not have any right to vote except as
may be provided pursuant to the Delaware General Corporation Law. The
holders of Class C Common Stock have one vote per share and normally vote
together with the holders of the Class A Common Stock as a single class. In
addition, the holders of Class C Common Stock have additional voting rights
under certain circumstances.
In conjunction with the 1997 acquisitions of Monfort, Lynn and Tran-Star,
the Company issued 3,000 shares of Series A Redeemable Preferred Stock and
727,272 shares of Common Stock with warrants to certain existing
stockholders, directors and executive officers of the Company. The
Preferred Stock was issued at a $1,000 per share for a total purchase price
of $3.0 million. Dividends on each share of the Preferred Stock accrue
cumulatively on a daily basis at a rate of 5 percent per annum on the
liquidation value thereof, provided that the rate will increase to 10% per
annum upon the earlier of the date of a Disposition Event (as defined) and
November 15, 1998. The dividends are payable in kind on the last day of
each fiscal quarter. The Company will redeem all of the Series A Preferred
Stock outstanding on December 31, 2005 at a liquidation value of $1,000 per
share. The Common Stock, along with detached warrants for 1,500,000 shares
of Common Stock, was issued for $2.75 per share ($.01 par value) for a
total purchase price of $2.0 million. The detached warrants can be
exercised any time prior to May 23, 2007 at $2.00 per share.
In consideration for its advisory services in connection with the 1995
acquisitions, upon consummation of the 1995 acquisitions the Company issued
a warrant to BancBoston Ventures, Inc. exercisable after February 15, 1996
but prior to February 15, 2003 for 375,000 shares of Common Stock at an
exercise price of $4.00 per share (approximate fair value at date of
issuance).
One director of the Company and a former company President have issued
separate promissory notes to TBI and W&L, in the original principal amount
of $1.2 million in connection with the purchase of capital stock of TBI and
W&L.
42
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
This stock was subsequently converted into shares of the Company's common
stock in connection with the 1995 acquisitions. Each of the promissory
notes is secured by these shares and is payable in one installment which is
due on October 10, 2005. Each of the promissory notes bear interest at the
rate of 6.77 percent per annum, such interest being payable at maturity.
13. STOCK OPTION PLAN
In November 1995, the Company's Board of Directors and stockholders
approved the Company's 1995 Stock Option Plan (the "1995 Plan"), which
provides for the grant of incentive stock options and nonstatutory stock
options to employees, and for the grant of nonstatutory stock options to
consultants, of the Company and its subsidiary corporations. In May 1997
the 1995 Plan was amended to increase the maximum number of shares. These
stock options vest either ratably over a two year period or a four year
period from date of grant. In addition, these options expire 10 years from
date of grant or three months from an employee's termination date. A
maximum of 3,271,881 shares of Class A Common Stock, $.01 par value,
("Common Stock") are currently reserved for issuance under the 1995 Plan,
as amended. Approximately 858,879 shares were available for future grant at
December 31, 1997. The exercise price per share may not be less than the
fair market value of a share on the date the option is granted, and the
maximum term of an option may not exceed 10 years.
The Company applies Accounting Principles Board ("APB") Opinion 25 and
related Interpretations in accounting for the 1995 Plan. In accordance with
APB 25, the Company has not recognized any compensation cost for the stock
options granted in 1997, 1996 and 1995. In 1995, the FASB issued FASB
Statement No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123")
which, if fully adopted by the Company, would change the methods the
Company applies in recognizing the cost of the 1995 Plan. Adoption of the
cost recognition provisions of SFAS 123 is optional and the Company has
decided not to elect these provisions of SFAS 123. Had the Company adopted
the cost recognition provision of SFAS 123, the Company's pro forma net
loss for 1997 and 1996 would have been $9,992 and $2,758, respectively and
the net income for 1995 would have been $3,146.
The fair value of each stock option granted is estimated on the date of
grant using the "minimum value" option-pricing model with the following
weighted-average assumptions:
1997 1996 1995
---- ---- ----
Expected term 5 5 5
Expected volatility 0.00% 0.00% 0.00%
Expected dividend yield 0.00% 0.00% 0.00%
Risk-free interest rate 6.49% 6.10% 5.70%
43
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the status of the Company's stock options as of December 31,
1997 and the changes during the three-year period ended on that date is
presented below:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- ---------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Prices Options Prices Options Prices
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 811,808 $4.00 203,650 $4.00 - $ -
Granted 1,829,000 4.10 745,000 4.00 203,650 4.00
Forfeited 300,750 4.00 136,842 4.00 - -
Expired 29,750 4.00 - - - -
--------- ----- ------- ----- ------- -----
Outstanding at end
of year 2,310,308 $4.08 811,808 $4.00 203,650 $4.00
========= ===== ======= ===== ======= =====
Exercisable at end
of year 742,858 $4.05 100,903 $4.00 -
Weighted-average
FV of options
granted during the
year $1.08 $1.02 $0.97
</TABLE>
The options outstanding and exercisable as of December 31, 1997 are
summarized below:
<TABLE>
<CAPTION>
Options Weighted Average Options
Range of Outstanding Remaining Weighted Average Exercisable Weighted Average
Exercise Prices At 12/31/97 Contr. Life Exercise Price At 12/31/97 Exercise Price
<S> <C> <C> <C> <C> <C>
$3.10 to $8.00 2,296,308 9.02 $ 4.00 740,058 $ 4.00
$10.00 to $14.00 6,000 9.39 12.00 1,200 12.00
$16.00 to $22.00 8,000 9.39 19.00 1,600 19.00
---------------- --------- ---- ------ ----- ------
$3.10 to $22.00 2,310,308 9.02 $ 4.08 742,858 $ 4.05
</TABLE>
14. EMPLOYEE BENEFITS
Certain of AmeriTruck's Operating Companies sponsored defined contribution
401(k) retirement savings, pension or profit sharing plans. TBI's profit
sharing plan covers nondriver employees. TBI also has defined contribution
pension plans covering mail and nonmail drivers, which provide for hourly
contributions for the first 40 hours of driving per week for nonmail
drivers and hourly contributions for the first 40 hours of driving per mail
route per week for mail drivers. CMS' retirement plan, Bangerter's profit
sharing plan and W&L's retirement savings plan covered substantially all
eligible employees meeting certain age and service requirements. The CBS
profit sharing plan was terminated on June 30, 1996. Contributions to W&L's
retirement savings plan, CMS' retirement plan and TBI's and Bangerter's
profit sharing plans were at the discretion of the Board of Directors. For
the employee benefit plans mentioned above, the Company's expense was
$586,000, $926,000, and $903,000 for the years ended December 31, 1997,
1996 and 1995, respectively.
During the second quarter of 1997, the employee benefit plans were merged
into the AmeriTruck Distribution Corp. retirement plan. This new plan
covers all employees of AmeriTruck Distribution Corp. and its wholly-owned
subsidiaries who meet certain eligibility requirements, with the exception
of TBI's mail contract drivers. This profit sharing plan has a 401(k)
feature with a discretionary company match.
44
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Liquidity and Capital Resources
The Company has signed a non-binding letter of intent with an investor
group to sell TBI, an AmeriTruck subsidiary primarily involved in mail
contract carriage. This letter of intent is subject to a number of
conditions, including due diligence and approval by the AmeriTruck Board of
Directors. In a separate transaction, the Company has signed an agreement
to negotiate exclusively with two major financial institutions with respect
to the proposed sale of $20 million of newly created preferred stock.
Successful completion of these two transactions would provide AmeriTruck
with in excess of $30 million of new capital before any related transaction
costs. However, no assurances can be made that the parties will reach
definitive agreements or that these transactions will be consummated.
In connection with the Subordinated Notes described in Note 9, the
Company has a mandatory $6.1 million interest payment due on May 15, 1998.
In light of the Company's current projected earnings and cash flow,
management believes the Company has the financial resources to maintain its
current level of operations and make the May 15 payment. As such the
accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. However cash generated from
operations alone will not be sufficient to pay the $6.1 million on May 15,
1998, without proceeds from the sale of assets or sale of capital as
described above, or an extension of the Temporary Overadvance as
described in Note 9.
Management believes that through a combination of the alternatives
discussed above, the Company will have adequate financial resources to
maintain operations and fund the May 15, 1998 payment.
45
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
AmeriTruck Distribution Corp.
We have audited the consolidated balance sheets of AmeriTruck Distribution Corp.
as of December 31, 1997 and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for the three years in the
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AmeriTruck
Distribution Corp. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Fort Worth, Texas
March 31, 1998
46
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
---------------------------
<TABLE>
<CAPTION>
NAME AGE TERM OF OFFICE
---- --- --------------
<S> <C> <C>
Michael L. Lawrence (2) 53 Until Resigns or is Removed
Richard A. Beauchamp 57 Until Resigns or is Removed
Kenneth H. Evans, Jr. (1) 45 Until Resigns or is Removed
William E. Greenwood(1)(2) 59 Until Resigns or is Removed
Michael J. Langevin (1) 51 Until Resigns or is Removed
J. Michael May 53 Until Resigns or is Removed
William P. Scales 56 Until Resigns or is Removed
</TABLE>
(1) Member of Audit Committee
(2) Member of Compensation Committee
Messrs. Lawrence and Greenwood have been directors since the
Company's inception on August 9, 1995. Messrs. Beauchamp,
Evans and Scales have been directors since November 15,
1995. Messrs. Langevin and May have been directors since
January 31, 1996, and hold office as the designees of
BancBoston Ventures, Inc. ("BBV").
Pursuant to a Stockholder Agreement (the "Stockholder
Agreement") entered into at the time the 1995 acquisitions
were consummated, the stockholders of the Company agreed that
it will have a Board of Directors comprised of nine members.
The stockholders have agreed to vote for the following persons
as Directors: (i) two individuals designated by BBV, so long
as BBV shall hold at least 10 percent of the outstanding
shares, and thereafter one individual designated by BBV, so
long as it holds any shares; (ii) initially Michael Lawrence,
so long as he is the Chairman, President and Chief Executive
Officer of the Company, and thereafter an individual
designated by the nominating committee referred to below;
(iii) initially, Messrs. Beauchamp and Scales and two former
executives of the Operating Companies, so long as each is an
executive officer of the Company or the Chairman, President
and Chief Executive Officer of any of the Operating Companies,
and thereafter individuals designated by the nominating
committee referred to below; (iv) initially William E.
Greenwood, and thereafter a person designated by the
nominating committee referred to below; and (v) initially
Kenneth H. Evans, Jr., and thereafter a person designated by
the nominating committee referred to below. One of the
directors designated by BBV and the Chairman and Chief
Executive Officer of the Company shall constitute a nominating
committee with the power to designate any replacement for the
Directors referred to in (ii) through (v) above.
Notwithstanding the foregoing, if a Control Event (as defined
in the Charter) has occurred and is continuing, the Board of
Directors shall be elected as provided below under "Charter
Provisions" and each Stockholder will agree to vote all shares
held by it in favor of any matters recommended for approval by
the stockholders of the Company by the Board of Directors
until such time as the Control Period (as defined in the
Charter) has terminated.
Charter Provisions
The Company's Certificate of Incorporation, as amended,
contains provisions described below.
47
<PAGE>
. Classes of Stock. The Charter provides for three classes of Common
Stock: 4,875,000 shares of Class A Common Stock, par value $.01 per
share (the "Class A Common Stock"); 4,875,000 shares of Class B Common
Stock, par value $.01 per share (the "Class B Common Stock"), and
1,775,000 shares of Class C Common Stock par value $.01 per share (the
"Class C Common Stock").
The holders of Class A Common Stock have one vote per share. The holders of
Class B Common Stock do not have any right to vote except as may be
provided pursuant to the Delaware General Corporation Law. The holders of
Class C Common Stock have one vote per share and normally vote together
with the holders of the Class A Common Stock as a single class. In
addition, the holders of Class C Common Stock have the additional voting
rights described below.
. Board Designation Rights. At any time while a Control Event (as
defined below) has occurred and is continuing, the holders of not less
than 51 percent of the Company's then outstanding Class C Common Stock
are entitled to deliver a notice to the Company. Upon delivery of such
a notice, the holders of Class C Common Stock will be entitled to
1,000 votes per share and will continue to vote together with the
holders of the Company's Class A Common Stock as a single class on all
matters other than the election or removal of directors. In addition,
the holders of Class C Common Stock, voting together as a separate
class, shall be entitled to elect the smallest number of directors to
the Board of Directors of the Company that shall constitute a majority
of the authorized number of directors on such Board of Directors. In
such event, the holders of the Class A Common Stock shall be entitled
to elect the remaining directors. BBV owns all of the outstanding
Class C Common Stock.
A "Control Event", as defined in the Charter, means (a) the Company shall
have failed to make any required payment of principal or interest when due
pursuant to the terms of any agreement evidencing Senior Indebtedness (as
defined in the Indenture) or pursuant to the terms of the Indenture, and
such failure to pay shall have continued without being cured, waived or
consented to, beyond the period of grace, if any, specified in such
agreement or the Indenture, as applicable, (b) there shall have occurred
any of certain events of default under any agreement evidencing Senior
Indebtedness which event of default shall have continued uncured for three
out of four consecutive fiscal quarters, (c) the Company shall have failed
to complete a Qualified Public Offering (as described in the Stockholder
Agreement, dated as of November 15, 1995, a copy of which has been filed as
an exhibit to this Annual Report on Form 10-K) on or prior to the third
anniversary of the completion of the 1995 acquisitions, or (d) there shall
exist a default or breach of any covenant, agreement or provision contained
in Section 6 of the Stockholder Agreement dated as of November 15, 1995, a
copy of which has been filed as an exhibit to this Annual Report on Form
10-K.
In May 1997 the Company further amended the Charter to authorize the
issuance of 20,000 shares of Preferred Stock ($1 par value per share),
12,000,000 shares of Class A Common Stock, 12,000,000 shares of Class B
Common Stock, and 1,175,000 shares of Class C Common Stock.
(b) Identification of Executive Officers
------------------------------------
Executive officers of the Company are appointed by the Board of Directors
on an annual basis and serve until their successors have been duly elected
and qualified. There are no family relationships among any of the executive
officers and directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael L. Lawrence 53 Chairman, President and Chief Executive Officer
Richard A. Beauchamp 57 President, Specialized Group
Ronald N. Damico 56 President, Regional LTL Group
Kenneth H. Evans, Jr. 45 Chief Financial and Accounting Officer
Michael L. Langevin 50 Vice Chairman
J. Michael May 53 General Counsel and Secretary
Michael Noel 59 Corporate Vice President - Sales
Joseph M. Samford 50 Executive Vice President - Equipment and Maintenance
Daniel L. Van Alstine 39 Executive Vice President - Sales and Marketing
Terry A. Wallace 34 President, Refrigerated Group
</TABLE>
48
<PAGE>
Richard A. Beauchamp has been the President of the Specialized Group since
1997. He was Chief Executive Officer of CMS Transportation Services, Inc.
from 1988 to 1996. He has been the President of Transportation Management
Services, Inc. since 1990, the President of I.L.C. Leasing, Inc. from 1988
until 1994, and the President of Carolina Transportation Company from 1992
until June of 1995. He has also been a director of Crown Anderson, Inc., a
pollution control company, since 1974. Mr. Beauchamp was previously
President and Chief Executive Officer of Refrigerated Transportation
Company, Inc., and has 31 years experience in the trucking industry.
Ronald N. Damico served as President of the Regional LTL Group since June
1997 and has been President of KTL, Inc. since 1980. He has more than 20
years of experience in the transportation industry.
Kenneth H. Evans, Jr. has been a Director and Chief Financial and
Accounting Officer of the Company since November 1995. He was National
Co-Chairperson, Transportation Industry Services of Coopers & Lybrand
L.L.P. from 1993 until 1995. He was a Business Assurance Partner of Coopers
& Lybrand L.L.P. from 1985 until 1995 and has served transportation clients
for 12 years.
William E. Greenwood has been President of Zephyr Group since 1994. From
1990 until 1994, Mr. Greenwood was the Chief Operating Officer of
Burlington Northern Railroad Company. He was the Executive Vice President
of marketing from 1986 to 1990. Mr. Greenwood is a director of Mark VII, an
intermodal, third party, truck brokerage and logistics company, and has
served in such position since 1994. He is also a director of Transport
Dynamics, Inc., a privately held logistics software development and service
company, and a director of Box Energy Corporation, a publicly held,
independent exploration and production company primarily engaged in the
exploration for, and the development and production of oil and natural gas.
Michael L. Lawrence has been a Director and the Chairman of the Board of
Directors of TBI since July 1990 and of W&L since August 1994. Mr. Lawrence
was a Director and Chief Executive Officer of TRISM, Inc., a trucking
company specializing in carrying heavy machinery and equipment, explosives
and radioactive materials, from January 1990 to March 1995. Mr. Lawrence
was the President, Chief Executive Officer and principal owner of Lucas
Trucking and Leasing from August 1989 to March 1991. He has a total of 25
years experience in the trucking industry.
Michael J. Langevin served as Vice Chairman of the Company since June 1997
and has been a Director of the Company since January 1996. Since 1989, Mr.
Langevin has been an independent financial consultant associated with
Dunbar Associates, Inc., a financial management consulting firm.
J. Michael May has been a Director, General Counsel and Secretary of the
Company since January 1996. From August 1991 to January 1996, Mr. May was
General Counsel and Secretary of TRISM Inc., and from December 1979 to
August 1991 was General Counsel and Secretary of McGil Specialized
Carriers, Inc. He has 25 years experience in the trucking industry.
Michael Noel has been Corporate Vice President of Sales of the Company
since April 1996. He was employed as Executive Vice President of Tranax,
Ltd., the largest Canadian carrier of commodities requiring temperature
control, from April 1994 to April 1996. Prior to that, Mr. Noel was
employed as Executive Vice President of Wintz Companies for 10 years.
Joseph M. Samford has been Executive Vice President - Equipment and
Maintenance of the Company since March 1996. He was employed by TRISM, Inc.
from June 1992 until March 1996, last holding the position of President,
Trism Maintenance Services, Inc., a subsidiary of TRISM, Inc. For more than
five years prior to March 1992, Mr. Samford was Vice President of
Maintenance at Burlington Motor Carriers.
William P. Scales has been a Director of AmeriTruck since November 1995 and
was the Chief Executive Officer of Scales from 1984 until March 1997. Mr.
Scales previously held managerial positions with Ranger Transportation and
with Refrigerated Transportation Company, Inc. and has 29 years experience
in the trucking industry.
Daniel L. Van Alstine has served as Executive Vice President of Marketing
since June 1997. He was Executive Vice President of Tran-Star, Inc. from
March 1993 until June 1997. From January 1992 until March 1993 he was Chief
Operating Officer for Prodrive, a driving training and recruiting firm. For
more than 5 years prior to January 1992, Mr. Van Alstine held various
management positions with North American Van Lines. He has more than 16
years in the trucking industry.
Terry A. Wallace has served as President of the Refrigerated Group since
December of 1997, and Executive Vice President of Operations for the
Refrigerated Carrier Group from June to Decemeber 1997. He was previously
Vice President of Operations of Transtar, Inc. and has held various
management positions with Transtar and its affiliates since 1987. He has
more than 12 years experience in the trucking industry.
49
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
(a) Compensation to Named Executive Officers.
-----------------------------------------
The following table summarizes the total compensation paid by the
Company or one of the Operating Companies for services rendered during
the years ended December 31, 1997, 1996 and 1995 to the Chief
Executive Officer and to each of the four other most highly
compensated executive officers of the Company at the end of 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
---------------------------------
Annual Compensation Awards Payouts
-------------------------------------- ---------------------- -------
Other Securities
Annual Restricted Underlying All Other
Name and Compen- Stock Options/ LTIP Compen-
Principal Position Year Salary Bonus(1) sation(2) Award(s) SARs (#) Payouts sation(3)
------------------ ---- ------ -------- --------- -------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael L. Lawrence 1997 $300,000 $ $ 8,400 $ -- -- -- $ --
President and Chief 1996 121,875 -- 6,300 -- -- -- --
Executive Officer 1995 75,085 -- -- -- -- -- 7,819
Richard A Beauchamp 1997 210,010 -- 23,940 -- -- -- --
President 1996 200,099 -- 22,812 -- -- -- 1,795
Specialized Group 1995 25,000 -- -- -- -- -- --
Kenneth H. Evans, Jr. 1997 207,333 -- 8,400 -- -- -- --
Chief Financial and 1996 192,000 -- 6,300 -- -- -- --
Accounting Officer 1995 16,000 75,000 -- -- -- -- --
Joseph M. Samford 1997 156,667 -- 8,400 -- -- --
Executive Vice Presi- 1996 120,833 16,066 6,300 -- -- -- --
dent - Equipment 1995 -- -- 7,700 -- -- -- --
and Maintenance
Ronald N. Damico 1997 150,000 -- 8,400 -- -- -- --
President, Regional 1996 51,923 -- 2,800 -- -- -- --
LTL Group
</TABLE>
(1) The bonus awards for the executive officers named in the table were paid
pursuant to the annual incentive compensation plans described in the
"Report On Executive Compensation."
(2) The other annual compensation includes amounts paid for monthly allowances.
(3) All other compensation includes matching contributions to the Company's
401(k) Plan or a company contribution under the profit sharing plan.
50
<PAGE>
OPINION/SAR GRANTS IN 1997 FISCAL YEAR
The following table sets forth information with respect to the individuals named
in the Summary Compensation Table concerning the grant of options during 1997.
<TABLE>
<CAPTION>
% of Total
Options/SARs
Number of Granted to
Securities Employees in
Underlying Year ended Exercise or Present
Name and Options/SARs December 31, Base Price Expiration Value of
Principal Position Granted (#) 1997 ($/Sh) (1) Date Options(2)
------------------ ----------- ---- ---------- ---- -------
<S> <C> <C> <C> <C> <C>
Michael L. Lawrence 245,000 13.4% 10 tiers May 22, 2007 $266,732
President and Chief
Executive Officer
Richard A. Beauchamp 30,000 1.6% 10 tiers May 22, 2007 $ 32,661
President Specialized
Group
Kenneth H. Evans, Jr. 145,000 7.9% 10 tiers May 22, 2007 $157,862
Chief Financial and
Accounting Officer
Joseph M. Samford 75,000 4.1% 10 tiers May 22, 2007 $ 81,653
Executive Vice Presi-
dent - Equipment and
Maintenance
Ronald N. Damico 30,000 1.6% 10 tiers May 22, 2007 $ 32,661
President, Regional
LTL Group
</TABLE>
(1) Exercise prices are in 10 equal increments of 10% each, at exercise prices
of $3.10, $6, $8, $10, $12, $14, $16, $18, $20 and $22. The fair market
value on the date of grant was $2.75 as determined by the Board of
Directors.
(2) The dollar amounts under these columns are the result of calculations at 5%
and 10% rates set by the Securities and Exchange Commission and therefore
are not intended to forecast possible future appreciation, if any, of the
Company's Common Stock. These dollar amounts represent gain before income
taxes.
51
<PAGE>
AGGREGATED 1997 STOCK OPTION/SAR EXERCISES
AND YEAR-END OPTION/SAR VALUES
The following table sets forth information with respect to the individuals
named in the Summary Compensation Table concerning their exercise of options
during 1997 and unexercised stock options held as of the end of 1997.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised in-the-Money
Options/SARs at Year End Options/SARs at Year End
Name and Shares Acquired Value ----------------------------- -----------------------------
Principal Position of Exercise(#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------------------ ------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael L. Lawrence - - 29,311 246,689 - -
President and Chief
Executive Officer
Richard A. Beauchamp - - 41,741 35,259 - -
President Specialized
Group
Kenneth H. Evans, Jr. - - 124,180 145,820 - -
Chief Financial and
Accounting Officer
Joseph M. Samford - - 15,301 24,699 - -
Executive Vice Presi-
dent - Equipment and
Maintenance
Ronald N. Damico - - 600 29,400 - -
President, Regional
LTL Group
</TABLE>
(b) Stock Option Plan
-----------------
In November 1995, the Company's Board of Directors and stockholders
approved the Company's 1995 Stock Option Plan ("1995 Plan"), which
provides for the grant of incentive stock options and nonstatutory
stock options to employees, and for the grant of nonstatutory stock
options to consultants, of the Company and its subsidiary
corporations. In May 1997, the 1995 Plan was amended to increase the
maximum number of shares. These stock options vest either ratably over
a two year period or a four year period from date of grant. In
addition, these options expire 10 years from date of grant or three
months from an employee's termination date. A maximum of 3,271,881
shares of Class A Common Stock, $.01 par value, ("Common Stock") are
currently reserved for issuance under the 1995 Plan, as amended. After
giving effect to the 1995 and 1996 acquisitions and in conjunction
with the 1997 acquisitions, there are 4,230,275 shares of Common Stock
outstanding and warrants to purchase 1,875,000 shares of Common Stock.
No individual may be granted options under the 1995 Plan for a number
of shares in excess of two-thirds of the shares that from time to time
may be reserved for issuance under the 1995 Plan.
The 1995 Plan is administered by the Compensation Committee, which has
authority to determine which eligible individuals are to receive
options, the terms of such options, including the status of such
options as incentive or nonstatutory stock options under the federal
income tax laws, the number of shares, exercise prices, and times at
which the options become and remain exercisable, and the time, manner,
and form of payment upon exercise of options, including cashless
exercise or payment of the exercise price with a promissory note. The
exercise price of incentive stock options granted under the 1995 plan
may not be less than 100 percent of the fair market value of the
underlying shares of Common Stock on the date of grant. Options
granted under the 1995 Plan may be immediately exercisable, or may
become exercisable in such cumulative or non-cumulative installments
as the Compensation Committee may determine (subject to acceleration
by the Compensation Committee in whole or in part at any time).
Incentive stock options may not be exercised after a maximum of three
months following termination of the optionee's employment with the
Company or one of its affiliates, except in the event that termination
is due to death or disability, in which case the incentive stock
option is exercisable for a maximum of one year after such
termination. Such three-month and one-year periods may be shortened by
the Compensation Committee in the option agreement evidencing an
option grant. In any event, no incentive stock option may be exercised
after the tenth anniversary of its date of grant.
In the event of any stock dividend, stock split, or reverse stock
split affecting Common Stock, the numbers of shares and exercise
prices of outstanding options under the 1995 Plan will be
proportionately adjusted. In the event of a reclassification or change
of outstanding shares of Common Stock, upon exercise of an option
granted under the 1995 Plan, the optionee will receive such shares of
stock or other securities as are equivalent in kind and value to the
shares of Common Stock that the optionee would have received if he had
exercised the option immediately prior to such reclassification or
change and thereafter had
52
<PAGE>
continued to hold those shares and all other shares, stock, and
securities thereafter issued in respect thereof.
In the event of a consolidation or merger of the Company with or into
another company, or the sale to another company of all or
substantially all of the Company's assets, then, subject to the
following sentence, upon exercise of an option granted under the 1995
Plan, the optionee will receive such shares of stock or other
securities as are equivalent in kind and value to the shares of stock
and/or other securities that the optionee would have received if he
had held the full number of shares of Common Stock subject to the
option immediately prior to such consolidation, merger, or sale, and
thereafter had continued to hold those shares and all other shares,
stock, and securities thereafter issued in respect thereof. Unless any
particular option agreement provides otherwise, however, in the event
of any such consolidation, merger, or sale the Compensation Committee
in its discretion may provide instead that any outstanding option will
terminate, to the extent not previously exercised, either (i) as of
the date of such transaction in consideration of the Company's payment
to the optionee of an amount of cash equal to the difference between
the aggregate fair market value of the shares of the Company's Common
Stock for which the option is then exercisable and the aggregate
exercise price for such shares under the option, or (ii) at the close
of a period of not less than ten days specified by the Compensation
Committee and commencing on the Compensation Committee's delivery of
written notice to the optionee of its decision to terminate such
option without payment of such consideration.
Upon dissolution or liquidation of the Company, all outstanding
options granted under the 1995 Plan will terminate to the extent not
previously exercised.
The Company's Board of Directors may at any time terminate the 1995
Plan or make such modifications of the 1995 Plan as it deems
advisable. No termination or amendment of the 1995 Plan may adversely
affect the rights of any individual to whom an option has previously
been granted without such individual's consent.
As of December 31, 1997, options to purchase approximately 2,413,002
shares of Common Stock have been granted under the 1995 Plan and are
outstanding, and options to purchase approximately 858,879 additional
shares of Common Stock were available for future grants under the 1995
Plan.
(c) Compensation of Directors.
-------------------------
Mr. Greenwood has been awarded options to purchase 20,000 shares of
the Company's Common Stock. Mr. Scales received compensation as a
Director in the amount of $2,000 per month beginning with September,
1997. All directors will be reimbursed for any out-of-pocket expenses
incurred in attending Board of Directors meetings.
(d) Employment Contracts and Termination of Employment.
--------------------------------------------------
Employment Agreements have been entered into by AmeriTruck or one of
the Operating Companies, as specified below, with each of Messrs.
Lawrence, Beauchamp, Damico, Evans and Samford:
Mr. Lawrence, the Chairman and Chief Executive Officer of AmeriTruck,
has entered into an employment agreement having a term expiring in
November 1998 and providing for a base salary of $75,000 annually
through October 31, 1996, and thereafter, an annual base salary of
$300,000. Any additional increases are at the discretion of
AmeriTruck's board of directors.
Mr. Beauchamp, President of the Specialized Group, has entered into an
employment agreement having a term expiring in November 1998 and
providing for a base salary of $150,000 with increases thereafter
being at the discretion of the employer's board of directors.
Mr. Damico, the President of the Regional LTL Group, has entered into
an employment agreement having a term expiring in November 1998 and
providing for a base salary of $150,000 annually, with increases
thereafter being at the discretion of the Company's board of
directors.
53
<PAGE>
Mr. Evans, the Chief Financial Officer and Executive Vice President of
the Company, has entered into an employment agreement having a term
expiring in November 1998 and providing for a base salary of $192,000
for the first twelve months with any increases thereafter being at the
discretion of the Company's board of directors.
Mr. Samford, the Executive Vice President of Equipment and Maintenance
of the Company, has entered into an employment agreement having a term
expiring in November 1998 and providing for a base salary of $150,000
annually, with increases thereafter being at the discretion of the
Company's board of directors.
Each of the above described employment agreements includes a severance
clause under the terms of which the employee is entitled to severance
pay if during the term of the agreement or a renewal term, his
employment is terminated without cause by written notice by the
employer to the employee. Under this severance clause, the employer
must continue to pay to the employee his base salary as in effect
prior to the termination, such salary being payable until the longer
of (i) one year after the date of termination, or (ii) the end of the
stated term of the agreement. In addition, each of the above described
employment agreements provides that upon the employee's termination
(i) without cause by written notice by the employer to the employee or
(ii) due to the death or disability of the employee, the employee is
entitled to receive the management incentive bonus (described below
under "Long-Term Incentive Plan"), if any, that the employee would
have received for the fiscal year of the Company in which the
employment was terminated. The employee is not entitled to such
severance pay or management incentive bonuses in the event of a
termination for cause.
Each of the above described employment agreements also provides that
the employee shall be provided accident, disability and health
insurance under the respective employer's group accident, disability
and health insurance plan maintained for its full-time salaried
employees.
Each of the above described employment agreements also contains a
non-competition provision pursuant to which the employee is
prohibited, during the term of his employment and generally for one
year thereafter, from engaging, within a designated area described
below, in competition with the employer, from diverting to any
competitor of the employer any customer of the employer, and from
soliciting or encouraging any officer, employee or consultant of the
employer to leave the employment of the employer for employment with
any competitor of the employer. Each of the above described employment
agreements provides that the employee may not compete with the
employer for the time periods and under the circumstances described
above anywhere within the continental United States of America.
(e) Long-Term Incentive Plan.
-------------------------
Senior management of the Company and each of the Operating Companies
are eligible to participate in an executive incentive compensation
plan pursuant to which, in general, they will be paid annual bonuses
based upon the financial performance of both their respective
individual Operating Companies and that of the Company. The size of
the incentive compensation pool is determined each year as 35% of the
Company's earnings in excess of the target. Each individual's share of
the pool is determined by reference to the relevant Operating
Company's performance against the Company's operating plan as to such
key factors as, for example, revenue levels, rates per loaded mile,
load ratios, service quality, cost control and coordination with other
Operating Companies, as well as an assessment of the individual's
performance.
(f) Compensation Committee Interlocks and Insider Participation.
------------------------------------------------------------
Messrs. Michael L. Lawrence and William E. Greenwood have been the
members of the Compensation Committee since the Company's inception.
Mr. Lawrence is also Chairman and Chief Executive Officer of the
Company.
54
<PAGE>
(g) Board Compensation Committee Report.
------------------------------------
The following report is presented by the Compensation Committee of the
Board (the "Committee"). The Compensation Committee consists of
Messrs. Lawrence and Greenwood. The committee administers the
executive compensation policies of the Company. All actions of the
committee pertaining to executive compensation are submitted to the
Board of Directors for approval.
The Company's executive compensation program is designed to attract,
retain, and motivate high caliber executives and to focus the
interests of the executives on objectives that enhance stockholder
value. These goals are attained by emphasizing "pay for performance"
by having a significant portion of the executive's compensation
dependent upon business results and by providing equity interests in
the Company. The principal elements of the Company's executive
compensation program are base salary, incentive compensation, and
stock options. In addition, the Company recognizes individual
contributions as well as overall business results, using a
discretionary bonus program.
In 1997 no bonuses were paid to the Company's Executive Officers and
annual salaries were primarily determined based upon the amounts
required under their employment contracts.
Chief Executive Officer
Mr. Lawrence's base salary is determined by the terms of his
employment agreement with the Company. See "Employment Contracts and
Termination of Employment." In light of the Company's financial
performance in 1997, the Company did not pay any bonuses to its
executive officers, including Mr. Lawrence.
Michael L. Lawrence
William E. Greenwood
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners.
-----------------------------------------------
The following table sets forth certain information regarding
beneficial ownership of the Common Stock of the Company by each person
known to the Company to own beneficially more than 5 percent of its
outstanding Common Stock.
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address Beneficial Ownership Percent of Class/(1)/
---------------- -------------------- ---------------------
<S> <C> <C>
BancBoston Ventures, Inc./(2)/ 2,030,449 48.0%
100 Federal Street
Boston, MA 02110
William P. Scales/(3)/ 392,217 9.3%
c/o Scales Transport Corporation
507 A Samples Scales Road
P.O. Box 189
Homer, GA 30547
Michael L. Lawrence 390,330 9.2%
c/o AmeriTruck Distribution Corp.
301 Commerce, Suite 1101
Fort Worth, TX 76102
Randy Thompson 338,782 8.0%
c/o Thompson Bros., Inc.
3605 Teem Drive
Sioux Falls, SD 57107
</TABLE>
55
<PAGE>
<TABLE>
<S> <C> <C>
Richard Beauchamp/(4)/ 283,363 6.7%
c/o AmeriTruck Refrigerated Transport, Inc.
4200 Northside Parkway
Building 8, Suite C
Atlanta, GA 30327
Ronald N. Damico 254,091 6.0%
c/o KTL, Inc.
1501 Lake Ave.
Largo, FL 34641
</TABLE>
/(1)/ Represents percentage ownership of all outstanding classes of
Common Stock. All stockholders except BBV hold shares of Class
A Common Stock.
/(2)/ Excludes a warrant issued to BBV exercisable on or after
February 15, 1996 for 375,000 shares.
/(3)/ Includes 27,860 shares held by Mr. Scales' spouse. Mr. Scales
disclaims beneficial ownership with respect to these shares.
/(4)/ Includes 278,587 shares held by Mr. Beauchamp's spouse. Mr.
Beauchamp disclaims beneficial ownership with respect to these
shares.
(b) Security Ownership of Management.
--------------------------------
The following table shows as of March 15, 1998 the beneficial
ownership of the Company's Common Stock by each director, each current
executive office named in the Summary Compensation Table and officers
and directors as a group.
<TABLE>
<CAPTION>
Name of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
---------------- -------------------- ----------------
<S> <C> <C> <C>
Class A Common William P. Scales 392,217(1) 9.3%
Michael L. Lawrence 390,330 9.2%
Richard Beauchamp 283,363(2) 6.7%
Kenneth H. Evans, Jr./(3)/
Michael J. Langevin/(4)/ 102,934 2.4%
All Directors and
Executive Officers as a
Group (10) persons 1,173,208 27.7%
</TABLE>
/(1)/ Includes 27,860 shares held by Mr. Scales' spouse. Mr. Scales
disclaims beneficial ownership with respect to these shares.
/(2)/ Includes 278,587 shares held by Mr. Beauchamp's spouse. Mr.
Beauchamp disclaims beneficial ownership with respect to these
shares.
/(3)/ Mr. Evans holds options to purchase 270,000 shares.
/(4)/ Dunbar Associates, Inc. owns 102,934 shares. The President of
Dunbar Associates, Inc. is Vickie D. Langevin, Mr. Langevin's
spouse. Mr. Langevin disclaims any beneficial ownership with
respect to these shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AGREEMENTS AND RELATED TRANSACTIONS
The information contained herein relating to Stock Purchase Agreement
and the Employment Agreements (each as defined herein) is qualified in
its entirety by reference to the complete text of such agreements,
copies of which have been filed as exhibits to this Annual Report on
Form 10-K.
56
<PAGE>
Employment Agreements
In connection with the 1996 and 1995 acquisitions, the Company entered
into or amended employment agreements with each of the members of
senior management. In addition, in connection with the Tran-Star,
Monfort and Lynn acquisitions, the Company entered into employment
agreements certain key executives. For a description of the employment
agreements, see Item 11 - "Employment Contracts and Termination of
Employment."
Payments To Management and Significant Stockholders
In connection with the Tran-Star acquisition, the key executives,
Robert Goldberg, Paul Herzog, Daniel Van Alstine and Terry Wallace
received a total of $200,000 in cash and 400,000 stock options as an
incentive for employment. Mr. Goldberg's employment terminated in
December 1997.
PRE-1997 TRANSACTIONS
Since January 1, 1994, the Operating Companies have entered into a
number of transactions with significant stockholders, officers and
directors. Certain of these transactions were still in effect in 1997.
KTL
During the third quarter of 1996, AmeriTruck purchased all of the
outstanding stock of KTL, Inc. ("KTL") of Largo, Florida, from Ronald
N. Damico. 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 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. An
agreement to extend the purchase obligation until April 1999 has been
reached.
CMS
The spouse of Mr. Richard A. Beauchamp (a stockholder and director of
the Company and an executive officer of CMS) owed CMS $639,073 as of
June 30, 1995, representing an unsecured advance. Prior to completion
of the initial offering of the Subordinated Notes in 1995, CMS forgave
$437,823 of such amount. The balance of $201,250 is represented by an
interest-bearing note (with interest at the lowest rate required by
the Internal Revenue Service to avoid imputation of interest income)
due in ten years, with certain mandatory prepayments in the event of
public sales of Common Stock held by Mrs. Beauchamp.
REAL PROPERTY LEASES
Scales entered into lease agreements with respect to its Tampa,
Florida and Homer, Georgia facilities, respectively, with Phil and
Barbara Scales, the owners of both such facilities. Mr. Scales is a
stockholder and director of the Company, and he was an executive
officer of Scales until March 1997. Scales paid a total of $38,844
rent to Mr. and Mrs. Scales during 1994 under the terms of the lease
agreement with respect to the Tampa facility and no rent to Mr. And
Mrs. Scales during 1994 under the terms of the lease agreement with
respect to the Homer facility, but did pay the taxes and insurance
with respect to the Homer facility. In connection with the
acquisitions in 1995, these leases were revised to provide for three-
year terms, terminable by either party upon six-months' prior notice,
and rent of $57,600 per year for the
57
<PAGE>
Tampa facility and $6,000 per year for the Homer facility. The lease
on the Homer facility was terminated in March 1997 by mutual agreement
of the parties.
In connection with the KTL acquisition, the Company entered into a
lease with Ronald N. Damico and his spouse as discussed above under
"KTL."
ARRANGEMENTS WITH DUNBAR ASSOCIATES, INC.
TBI has entered into a Consulting and Non-Competition Agreement with
Dunbar Associates, Inc. ("Dunbar"), pursuant to which Dunbar agreed to
provide, through its representative, consulting services to TBI for a
term extending until November 13, 1998 (renewable for additional one
year terms thereafter upon the consent of the parties thereto). TBI
agreed to pay transaction fees to Dunbar, as approved by TBI's board
of directors, in connection with the completion of any major financing
or acquisition transaction by TBI, the aggregate amount of which
transaction fees shall not be less than $192,000 nor more than
$492,000 during any calendar year. TBI also agreed to pay a retainer
to Dunbar in the amount of $16,000 per month during the term of the
agreement, such retainer being applied against the amount of
transaction fees earned by Dunbar as described above. Michael J.
Langevin, a Director of the Company, is an employee of Dunbar, which
is owned by his spouse.
Dunbar has also issued separate promissory notes in favor of TBI and
W&L, in the original principal amounts of $245,235 and $491,104,
respectively, in connection with Dunbar's purchase of capital stock of
TBI and W&L. This stock was subsequently converted into shares of the
Company's Common Stock in connection with the Acquisitions. Each of
the promissory notes is secured by these shares and is payable in one
installment which is due on October 10, 2005. Each of the promissory
notes bears interest at the rate of 6.77 percent per annum, such
interest being payable at maturity.
FINANCING DURING 1997
In conjunction with the 1997 acquisitions of Monfort, Lynn and Tran-
Star, the Company issued 3,000 shares of Series A Redeemable Preferred
Stock and 727,272 shares of Common Stock with warrants to certain
existing stockholders, directors and executive officers of the
Company. The Preferred Stock was issued at a $1,000 per share for a
total purchase price of $3.0 million. The Common Stock along with
detached warrants for 1,500,000 shares of Common Stock, was issued for
$2.75 per share ($.01 par value) for a total purchase price of $2.0
million.
The Preferred Stock was purchased by (and detached warrants were
issued to) the following: BancBoston Ventures, 2,622 shares (1,311,000
warrants); Bristol Investment Partners, 90 shares (45,000 warrants);
Michael L. Lawrence, 120 shares (60,000 warrants); Ronald N. Damico,
120 shares (60,000 warrants); Ronald E. Adams, 30 shares (15,000
warrants); and William E. Greenwood, 18 shares (9,000 warrants). The
Class A Common Shares were purchased by BancBoston Ventures, Inc.
(633,636 shares), Bristol Investment Partners (21,818 shares), Michael
L. Lawrence (29,091 shares), Ronald N. Damico (29,091 shares), Ronald
E. Adams (7,273 shares) and William E. Greenwood (4,364 shares).
In connection with the amendment to the FINOVA Credit Facility, the
Company issued $1 million in Subordinated Notes (the "1997 Notes") to
certain existing stockholders. The 1997 Notes bear interest at a rate
of 14% per annum and mature on June 1, 1998. In connection with the
1997 Notes, the Company issued to the purchasers of the 1997 Notes
warrants to a number of shares of the Company's common stock equal to
the aggregate outstanding principal and interest of the 1997 Notes at
the time of exercise divided by 2 (the "1997 Warrants"). The issuance
of these shares was exempt under Section 4(2) of the Securities Act of
1933, as amended, as a transaction not involving any public offering.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Financial Statements
Consolidated Balance Sheets at December 31, 1997 and 1996
Consolidated Statements of Operations for the three years ended
December 31, 1997
Consolidated Statements of Stockholders'
Equity for the three years ended December 31, 1997
Consolidated Statements of Cash Flows for the three years
ended December 31, 1997
Notes to Consolidated Financial
Statements Report of Independent Accountants
All schedules for the Company are omitted because they are not
required or not applicable. The required information is included in
the financial statements or notes thereto.
58
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this report.
Exhibit
Number Description
- ------ -----------
* 3.1 Certificate of Incorporation of the Company, as amended.
* 3.2 By-laws of the Company, as amended
* 4.1 Indenture for the Notes, dated as of November 15, 1995, among the
Company, the Guarantors named therein and The Bank of New York, as
Trustee (including form of Exchange Note).
* 4.2 Purchase Agreement, dated as of November 10, 1995, among the Company,
the Guarantors named therein and Smith Barney Inc., as the Initial
Purchaser.
* 4.3 Registration Rights Agreement, dated November 15, 1995, among the
Company, the Guarantors named therein, and the Initial Purchaser.
* 4.4 Form of Exchange Note (included in Exhibit 4.1)
** 10.2 Stock Purchase Agreement, dated as of August 23, 1996, between the
Company and Ronald N. Damico, including his employment agreement
(Form 8-K dated August 23, 1996, filed September 1996). ***
** 10.5 Guarantee of 12 1/4% Senior Subordinated Notes due 2005, Series B,
dated as of September 19, 1996, by KTL (Form 10-Q for the quarter
ended September 30, 1996, filed November 1996).
** 10.6 Loan and Security Agreement, dated February 21, 1996, between Volvo
Truck Finance North America, Inc. ("Volvo") and the Company and
certain of its Subsidiaries (Form 8-K dated May 3, 1996, filed May
1996).
** 10.7 Financing Integration Agreement, dated February 21, 1996,
between Volvo and the Company and certain of its subsidiaries
(Form 8-K dated May 3, 1996, filed May 1996).
** 10.9 Asset Purchase Agreement, dated as of January 5, 1996, between CMS
Transportation Services, Inc. and Freymiller Trucking, Inc., as
debtor and debtor-in-possession (Form 8-K dated May 3, 1996, filed
May 1996).
** 10.10 Consulting and Non-Competition Agreement, dated as of April 1,
1995, between Thompson Bros., Inc. and Dunbar Associates, Inc. (Form
8-K dated May 3, 1996, filed May 1996). ***
* 10.11 Agreement and Plan of Reorganization, dated as of October 20, 1995
(including the amendment thereto dated as of November 14, 1995 and
including all exhibits thereto).
* 10.12 Stock Contribution Agreements, dated as of October 20, 1995, among
the Company and the stockholders of each of the Operating Companies,
respectively (each included in Exhibit 10.11).
* 10.13 Stockholder Agreement, dated as of November 15, 1995, among the
Company and each of its stockholders (included in Exhibit 10.11).
* 10.14 Registration Rights Agreement, dated as of November 15, 1995, among
the Company and each of its stockholders (included in Exhibit 10.11).
59
<PAGE>
* 10.15 Warrant to Purchase 375,000 Shares of Common Stock of the Company,
dated as of November 15, 1995, issued to BancBoston Ventures, Inc.
* 10.16 Employment Agreements among the Company and/or certain of the
Operating Companies and each of Michael L. Lawrence, Paul L.
Bangerter, Richard Beauchamp, Michael J. Crowe, Kenneth H. Evans,
Jr., William P. Scales and Randy Thompson. ***
* 10.17 1995 Stock Option Plan of the Company. ***
** 10.18 Stock Purchase Agreement, dated as of April 28, 1997, between the
Company and Monfort, Inc., and ConAgra Poultry Company (Form 8-K
dated June 6, 1997, filed June 1997).
** 10.19 Stock Purchase Agreement, dated as of June 27, 1997 between the
Company and Allways Services, Inc. and TranStar Services, Inc. (Form
8-K dated July 11, 1997, filed July 1997).
** 10.20 Loan and Security Agreement, dated as of May 5, 1997, between the
Company and FINOVA Capital Corporation (Form 10-Q for the quarter
ended June 30, 1997, filed August 1997).
** 10.21 Master Lease Agreement, dated as of August 14, 1997, between the
Company and Transamerica Business Credit Corporation (Form 10-Q for
the quarter ended September 30, 1997, and filed November 1997).
10.22 Securities Purchase Agreement, dated as of November 13, 1997, between
the Company and certain named investors.
10.23 Third Amendment to Loan and Security Agreement, dated as of November
13, 1997, between the Company and FINOVA Capital Corporation.
12 Computation of ratio of earnings to fixed charges.
* 16.1 Letter from Deloitte & Touche LLP regarding their dismissal as
independent accountants of W&L Services Corp. and Subsidiaries.
* 21 Subsidiaries of the Company and Jurisdictions of Incorporation.
* 24 Powers of Attorney (see signature pages).
27 Financial Data Schedule
* Incorporated by reference to the Company's Registration Statement on Form S-
4, Registration No. 33-99716, initially filed with the Securities and
Exchange Commission on November 24, 1995, as amended.
** Exhibit is incorporated by reference as indicated.
*** Management contract or compensatory plan or arrangement.
REPORTS ON FORM 8-K
During the fourth quarter of 1997, the following Form 8-K reports were
filed: 11-10-97 "AmeriTruck Distribution Corp. Engages Investment Firm
To Raise Equity"
60
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) 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.
/s/ Michael L. Lawrence
-------------------------------
Michael L. Lawrence
Director, Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on March 31, 1998 by the following persons on behalf of
the Registrant and in the capacities indicated.
Signature Title
--------- -----
/s/ Michael L. Lawrence Director, Chairman of the Board and
- ------------------------------- Chief Executive Officer
Michael L. Lawrence
/s/ Richard A. Beauchamp Director
- -------------------------------
Richard A. Beauchamp
/s/ Kenneth H. Evans, Jr. Director, Treasurer and Chief Financial
- ------------------------------- and Accounting Officer
Kenneth H. Evans, Jr.
/s/ William E. Greenwood Director
- -------------------------------
William E. Greenwood
/s/ Michael J. Langevin Director
- -------------------------------
Michael J. Langevin
/s/ J. Michael May Director, General Counsel and Secretary
- -------------------------------
J. Michael May
/s/ William P. Scales Director
- -------------------------------
William P. Scales
61
<PAGE>
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
EXHIBIT INDEX
Page
Exhibit Number Description Number
- -------------- ----------- ------
10.22 Securities Purchase Agreements, dated as of November 13, 1997,
between the Company and certain named investors
10.23 Third Amendment to Loan and Security Agreement, dated as of
November 13, 1997, between the Company and FINOVA Capital
Corporation
12 Computation of ratio of earnings to Fixed Charges
27 Financial Data Schedule
62
<PAGE>
EXHIBIT 12
AMERITRUCK DISTRIBUTION CORP. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except ratio amounts)
(unaudited)
<TABLE>
<CAPTION>
Twelve Months Ended December 31
-----------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings:
Income (loss) before income taxes
and extraordinary items $ 3,551 $ 5,431 $ 5,677 $ (1,892) $(17,274)
-------- -------- -------- -------- --------
Fixed charges:
Interest expense and amortization of debt
discount and premium on all indebtedness 3,783 3,422 4,993 16,677 21,015
Portion of rent under long-term operating
leases representative of an interest
factor 306 309 573 1,658 3,429
Preferred stock dividend requirements of
consolidated subsidiaries 1,224 1,486 188 - -
-------- -------- -------- -------- --------
Total fixed charges 5,313 5,217 5,754 18,335 24,444
-------- -------- -------- -------- --------
Earnings before income taxes, extraordinary
items and fixed charges 8,864 10,648 11,431 16,443 7,170
======== ======== ======== ======== ========
Ratio of earnings to fixed charges 1.67x 2.04x 1.99x * *
======== ======== ======== ======== ========
</TABLE>
* The Company's earnings were insufficient to cover fixed charges by
$17,274 and $1,892 for the years ended December 31, 1997 and 1996,
respectively.
<PAGE>
EXHIBIT 10.22
Securities Purchase Agreements in substantially identical form to the
Securities Purchase Agreement filed herewith below were also entered into on
November 13, 1997 between AmeriTruck Distribution Corp. (the "Company") and each
of the below named individuals. Pursuant to such agreements, the Company issued
Subordinated Notes and Common Stock Purchase Warrants in substantially identical
form to those filed herewith below to each of such below named individuals. The
respective Purchase Prices set forth on the signature page to each such
Securities Purchase Agreement and the respective principal amounts of such
Subordinated Notes issued to such individuals are as set forth below opposite
each such individual's name:
Purchase Price/
Name Note Amount
---- ---------------
Ronald Adams $10,000
Michael L. Lawrence $40,000
Ronald N. Damico $40,000
William E. Greenwood $ 6,000
<PAGE>
SECURITIES PURCHASE AGREEMENT
---------- -------- ---------
This SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of
---------
November 13, 1997, by and between (i) AmeriTruck Distribution Corp., a Delaware
corporation (the "Company"), and (ii) the Person named on the signature hereto
-------
as the Investor (the "Investor").
--------
WHEREAS, the Company wishes to sell and the Investor wishes to buy certain
securities of the Company on the terms and subject to the restrictions contained
in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the Company and the Investor agree as follows:
1. DEFINITIONS.
-----------
For all purposes of this Agreement, the following terms shall have the
meanings set forth herein or elsewhere in the provisions hereof:
"Applicable Number" shall have the meaning specified in the Warrant issued
-----------------
to the Investor on the Closing Date.
"BBV" shall mean BancBoston Ventures Inc.
---
"Charter" shall include the articles or certificate of incorporation,
-------
statute, constitution, operating agreement, joint venture or partnership
agreement or articles or other charter of any Person other than an individual,
each as from time to time amended and in effect.
"Class A Common Stock" shall have the meaning specified in Section 4.5(a)
--------------------
hereof.
"Class B Common Stock" shall have the meaning specified in Section 4.5(a)
--------------------
hereof.
"Class C Common Stock" shall have the meaning specified in Section 4.5(a)
--------------------
hereof.
"Closing" shall have the meaning specified in Section 2.2 hereof.
-------
"Closing Date" shall have the meaning specified in Section 2.2 hereof.
------- ----
"Commission" shall mean the Securities and Exchange Commission.
----------
<PAGE>
-2-
"Common Stock" shall mean, collectively, the Class A Common Stock, the
------ -----
Class B Common Stock and the Class C Common Stock, each having the rights and
privileges set forth in the Company's Charter, and any capital stock or other
securities into which or for which such Class A Common Stock, Class B Common
Stock or Class C Common Stock shall have been converted or exchanged pursuant to
any recapitalization, reorganization or merger of the Company.
"Company" shall have the meaning specified in the introductory paragraph
-------
hereof.
"Conversion Price" shall mean, in relation to a share of Conversion Stock
---------- -----
at the time of the exercise of any Note holder's conversion rights set forth in
Section 3.4 hereof, the price for such share of such Conversion Stock payable
generally by the investors purchasing such shares in the Qualified Private
Placement in connection with which such conversion rights are being exercised.
"Conversion Stock" shall mean, in the event of a conversion of any Note
---------- -----
pursuant to (S)3.4 hereof, the shares of any class of capital stock of the
Company which shall be issued by the Company in the applicable Qualified Private
Placement.
"Default" shall mean an event or condition which with the passage of time
-------
or giving of notice, or both, would become an Event of Default.
"Event of Default" shall have the meaning specified in Section 7.1 hereof.
----------------
"Indebtedness" shall mean (a) all Indebtedness of the Company and its
------------
Subsidiaries for borrowed money, whether current or funded, or secured or
unsecured, (b) all Indebtedness of the Company and its Subsidiaries for the
deferred purchase price of property or services represented by a note or other
security, (c) all Indebtedness of the Company and its Subsidiaries created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by any of the Company or its Subsidiaries (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (d)
all Indebtedness of the Company and its Subsidiaries secured by a purchase money
mortgage or other lien to secure all or part of the purchase price of property
subject to such mortgage or lien, (e) all obligations under leases which shall
have been or should be, in accordance with generally accepted accounting
principles, recorded as capital leases in respect of which any of the Company or
its Subsidiaries is liable as lessee, (f) any liability of any of the Company
and its Subsidiaries in respect of banker's acceptances or letters of credit,
and (g) all Indebtedness referred to in clause (a), (b), (c), (d), (e) or (f)
above which is directly or indirectly guaranteed by any of the Company and its
Subsidiaries or which any of the Company and its
<PAGE>
-3-
Subsidiaries has agreed (contingently or otherwise) to purchase or otherwise
acquire or in respect of which it has otherwise assured a creditor against loss.
"Indenture" shall mean the Indenture dated November 15, 1995 among the
---------
Company, certain of the Company's Subsidiaries and The Bank of New York, as
trustee thereunder.
"Investor" shall have the meaning specified in the introductory paragraph
--------
hereof.
"Investor Percentage" shall mean a percentage equal to (i) the quotient of
-------- ----------
the Purchase Price divided by $1,000,000 multiplied by (ii) 100.
---------- --
"Loan Agreement" shall mean the Loan and Security Agreement dated as of May
--------------
5, 1997, among the Company and the Senior Lender, as such Loan Agreement may be
amended, restated, modified, supplemented, extended or renewed and in effect
from time to time.
"Majority Holders of the Notes" shall mean the holder or holders at the
-------- --------------------
relevant time (excluding the Company) of at least 51% of the then outstanding
principal amount of the Notes.
"Management Fee Agreement" shall mean the Management Fee Agreement dated as
------------------------
of the date hereof between the Company and First Capital Corporation of Boston,
as the same may be amended, restated, modified or supplemented and in effect
from time to time.
"Maximum Rate" shall have the meaning specified in Section 3.6(c).
------- ----
"Notes" shall mean the Note of the Company in the form of Exhibit A hereto
----- ---------
issued to the Investor pursuant to Section 2.1 hereof and any other Notes
transferred to any other holders pursuant to Section 8 hereof.
"Person" shall mean an individual, partnership, corporation, limited
------
liability company, association, trust, joint venture, unincorporated
organization, or any government, governmental department or agency or political
subdivision thereof.
"Preferred Stock" shall have the meaning specified in Section 4.5(a)
---------------
hereof.
"Public Sale" shall mean any sale of Common Stock or Preferred Stock to the
------ ----
public pursuant to a public offering registered under the Securities Act, or to
the public through a broker or market-maker pursuant to the provisions of Rule
144 (or any successor rule) adopted under the Act.
"Purchase Price" shall have the meaning set forth in Section 2.1 hereof.
-------- -----
<PAGE>
-4-
"Purchased Securities" shall have the meaning set forth in Section 2.1
--------- ----------
hereof.
"Qualified Private Placement" shall mean any non-public sale of shares of
--------- -----------------
any class of the Company's capital stock yielding gross proceeds to the Company
of at least $10,000,000.
"Registration Rights Agreement" shall mean the Registration Rights
------------ ------ ---------
Agreement, dated as of November 15, 1995, among the Company and the stockholders
of the Company named therein, as the same may be amended, restated, modified or
supplemented and in effect from time to time.
"Related Agreements" shall mean, collectively, the Securities, the
------- ----------
Management Fee Agreement and the Charter of the Company.
"Securities" shall mean the Notes and the Warrants.
----------
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
---------- ---
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Senior Indebtedness" shall have the meaning given to such term in the
-------------------
Indenture.
"Senior Lender" shall mean FINOVA Capital Corporation and any other lender
-------------
from time to time party to the Loan Agreement.
"Senior Subordinated Notes" shall mean the Company's 12-1/4% Senior
-------------------------
Subordinated Notes due 2005 issued pursuant to the Indenture.
"Small Business Act" shall mean the Small Business Investment Act of 1958,
----- -------- ---
as amended, or any successor federal statute, and the rules and regulations of
the Small Business Administration thereunder, all as the same shall be in effect
from time to time.
"Stockholder Agreement" shall mean the Stockholder Agreement, dated as of
---------------------
November 15, 1995, among the Company and the stockholders of the Company named
therein, as the same may be amended, restated, modified or supplemented and in
effect from time to time.
"Subsidiary" shall mean, with respect to the Company, any corporation a
----------
majority (by number of votes) of the outstanding shares of any class or classes
of which shall at the time be owned by the Company or by a Subsidiary of the
Company, if the holders of the shares of such class or classes (a) are
ordinarily, in the absence of contingencies, entitled to vote for the election
of a majority of the
<PAGE>
-5-
directors (or persons performing similar functions) of the issuer thereof, even
though the right so to vote has been suspended by the happening of such a
contingency, or (b) are at the time entitled, as such holders, to vote for the
election of a majority of the directors (or persons performing similar
functions) of the issuer thereof, whether or not the right so to vote exists by
reason of the happening of a contingency.
"Transfer Notice" shall have the meaning specified in Section 8.2 hereof.
-------- ------
"Warrants" shall mean the Common Stock Purchase Warrant of the Company
--------
issued to the Investor hereunder and any other Common Stock Purchase Warrants
transferred to any other holders in accordance with the terms hereof.
2. SALE AND PURCHASE OF PURCHASED SECURITIES.
---- --- -------- -- --------- ----------
2.1. Sale and Purchase of Purchased Securities. The Company agrees to
---- --- -------- -- --------- ----------
issue and sell to the Investor, and, subject to all of the terms and conditions
hereof and in reliance on the representations and warranties set forth or
referred to herein, the Investor agrees to purchase the following Securities
(collectively, the "Purchased Securities") for the dollar amount specified by
--------- ----------
the Investor on the signature page hereto (the "Purchase Price"):
-------- -----
(a) a Note of the Company in the form of Exhibit A hereto in the principal
---------
amount equal to the Investor Percentage multiplied by $1,000,000;
---------- --
(b) a Warrant in the form of Exhibit B hereto for the purchase of a number
------- -
of shares of Common Stock equal to the Applicable Number.
2.2. Closing. The closing of the purchase and sale of the Purchased
-------
Securities (the "Closing") will take place at the offices of the Company on
-------
November __, 1997 or such other date as the parties hereto may agree upon (the
"Closing Date"). At the Closing, the Company will deliver to the Investor the
- -------- ----
Purchased Securities against payment by the Investor of the Purchase Price by
wire transfer or by check. The Purchased Securities purchased by the Investor
will be issued to the Investor on or before the Closing Date and registered in
the Investor's name in the Company's records. At the Closing, the Company will
also deliver to you the application fee and the closing fee referred to in
Section 6.12 hereof in immediately available funds.
2.3. Use of Proceeds. The Company agrees that it will use the proceeds
--- -- --------
from the sale of the Purchased Securities hereunder solely to provide a bridge
financing for working capital and general corporate purposes of the Company in
anticipation of the consummation of a Qualified Private Placement.
<PAGE>
-6-
3. PRINCIPAL AND INTEREST PAYMENTS ON NOTES.
--------- --- -------- -------- -- -----
3.1. Mandatory Principal Repayments.
--------- --------- ----------
(a) The Company agrees to repay the principal amount of the Notes, together
with all accrued and unpaid interest thereon, in one installment on April 1,
1998.
(b) Notwithstanding the provisions of Section 3.1(a) hereof, concurrently
with the consummation of a Qualified Private Placement, the Company agrees to
repay the principal amount of the Notes then outstanding, together with all
accrued and unpaid interest thereon.
3.2. No Prepayments. The Company shall not be permitted to prepay the
--------------
Notes without the written consent of the Majority Holders of the Notes and of
the Senior Lender.
3.3. Application of Payments. Any repayment of less than the entire
----------- -- --------
aggregate unpaid principal amount of all outstanding Notes and all other notes
of the Company issued pursuant to each of the other securities purchase
agreements of even date herewith between the Company and certain other
stockholders, directors and executive officers of the Company, shall be applied
pro rata to all outstanding Notes and all such other notes of the Company,
- --- ----
according to the respective unpaid principal amounts thereof.
3.4. Conversion Rights. Notwithstanding the provisions of Section 3.1(b)
-----------------
hereof, in connection with the consummation by the Company of a Qualified
Private Placement, the holder of any Note may, but shall not be obligated to,
convert any portion of the unpaid principal amount of, and accrued and unpaid
interest on, such Note, into such number of whole shares of Conversion Stock as
such portion of the unpaid principal amount of, and accrued and unpaid interest
on, such Note, will purchase at the Conversion Price, upon the terms and subject
to the conditions hereinafter specified. The Company agrees to give each holder
of Notes not less than ten (10) days prior written notice of the closing of a
Qualified Private Placement, accompanied by copies of the agreements containing
all of the material terms and provisions thereof, and such holder may then, by
notice to the Company not later than three (3) days prior to the date specified
in the Company's notice, exercise its conversion rights hereunder as to all or
any portion of the outstanding principal amount of, and accrued and unpaid
interest on, such Note. The holder's notice to the Company in connection with a
contemplated Qualified Private Placement may expressly provide that the exercise
of conversion rights as set forth therein is contingent upon the completion of
such Qualified Private Placement on the terms and provisions described in the
Company's notice thereof.
<PAGE>
-7-
3.5. No Reborrowing. No amount repaid pursuant to Section 3.1 may be
-- -----------
reborrowed under the Notes.
3.6. Interest Payments.
-------- --------
(a) Subject to Section 3.6(b) hereof, the unpaid principal amount of the
Notes outstanding from time to time shall bear interest at a rate equal to
fourteen percent (14%) per annum. Interest on the Notes shall be calculated on
the basis of the actual number of days elapsed and a 360 day year, shall accrue
and be compounded quarterly in arrears on the first day of each calendar
quarter, commencing on the first such date to occur after the Closing Date,
until paid pursuant to Section 3.1 hereof or converted pursuant to Section 3.4
hereof.
(b) During the continuance of a Default or Event of Default of the type
described in Section 7.1(a) hereof, the principal and (to the extent permitted
by applicable law) interest on the Notes shall bear interest at a rate equal to
twenty-one percent (21%) per annum, payable on demand and compounded quarterly,
until such amount shall be paid in full.
(c) It is not intended by the holders of the Notes, and nothing contained
in this Agreement or any Note shall be deemed, to establish or require the
payment of a rate of interest in excess of the maximum rate permitted by
applicable federal, state or other law (the "Maximum Rate") and, to prevent such
------- ----
an occurrence, any agreement which may now or hereafter be in effect between the
Company and the holders of the Notes regarding the payment of fees or interest
to such holders is hereby limited by the provisions of this Section 3.6(c). If,
in any month, the effective interest rate applicable to the principal
outstanding under the Notes, absent the Maximum Rate limitation contained
herein, would have exceeded the Maximum Rate, then the effective interest rate
applicable to the Notes for that month shall be the Maximum Rate, and, if in any
subsequent month, the effective interest rate would otherwise be less than the
Maximum Rate, then the effective interest rate applicable to the Notes for such
month shall be increased to the Maximum Rate until such time as the amount of
interest paid hereunder equals the amount of interest which would have been paid
in respect of the Notes if the same had not been limited by the Maximum Rate. In
the event that, upon payment in full of the principal outstanding under the
Notes, the total amount of interest paid or accrued in respect of the Notes
under the terms of this Agreement is less than the total amount of interest
which would have been paid or accrued in respect of the Notes had the interest
not been limited hereby to the Maximum Rate, then the Company shall, to the
extent permitted by such applicable federal, state or other law, pay to each of
the holders of the Notes an amount equal to the excess, if any, of (i) the
lesser of (A) the amount of interest which would have been charged in respect of
the Notes if the Maximum Rate had, at all times, been in effect with respect to
the Notes and (B) the amount of interest which would have accrued in
<PAGE>
-8-
respect of the Notes had the effective interest rate applicable with respect to
the Notes at all times not been limited hereunder by the Maximum Rate over (ii)
the amount of interest actually paid or accrued in respect of the Notes held by
such holder under this Agreement. In the event that the holders of the Notes
receive, collect or apply as interest any sum in excess of the Maximum Rate,
such excess amount shall be applied in accordance with Section 3.3 hereof to the
reduction of principal outstanding under the Notes and such other notes of the
Company described in Section 3.3 and if no such principal is then outstanding,
such excess or part thereof remaining, shall be paid to the Company.
3.7. Subordination. Notwithstanding any other provision of this
-------------
Agreement, the payment of principal and interest on the Notes and other
Indebtedness of the Company hereunder is and shall be subordinated in right of
payment to the Senior Indebtedness to the same extent, and according to the same
terms as, the Company's Senior Subordinated Notes. The provisions of Article
Ten of the Indenture (other than Section 10.07 thereof), together with the
associated definitions used therein, as each of the same is in effect on the
date hereof, are hereby incorporated herein such that the subordination terms
set forth therein with respect to the Senior Subordinated Notes shall apply
mutatis mutandis to the Notes issued hereunder. For purposes of such
- ----------------
incorporation, the terms "Trustee" and "Holder" used in the Indenture shall
refer to the holders of the Notes issued hereunder, and the terms "Note" and
"Notes" used in the Indenture shall refer to the Notes issued hereunder. In
addition to the foregoing and without in any way limiting the foregoing, upon
the occurrence and during the continuance of any Event of Default under and as
defined in the Loan Agreement, then no payment or distribution of any assets of
the Company of any kind or character shall be made by the Company on account of
principal of or interest on the Notes unless and until such Event of Default
shall have been cured or waived or shall have ceased to exist or such Senior
Indebtedness shall have been discharged or paid in full or payment thereof
provided for, after which the Company shall resume making any and all required
payments in respect of the Notes.
3.8. Senior Subordinated Notes. All Indebtedness of the Company evidenced
-------------------------
by the Notes shall be pari passu in right of payment to the Indebtedness of the
----------
Company evidenced by the Senior Subordinated Notes.
4. REPRESENTATIONS AND WARRANTIES.
--------------- --- ----------
In order to induce the Investor to enter into this Agreement and to
purchase the Purchased Securities, the Company hereby represents and warrants
that, both before and immediately after giving effect to the Closing:
4.1. Organization and Good Standing. The Company and each of its
------------ --- ---- --------
Subsidiaries is duly organized and existing in good standing in its jurisdiction
of
<PAGE>
-9-
incorporation, is duly qualified as a foreign corporation and authorized to
do business in all other jurisdictions in which the nature of its business or
property makes such qualification necessary, except where the failure to so
qualify would not have a material adverse effect on the business of the Company
or such Subsidiary, and has the corporate power to own its properties and to
carry on its business as now conducted and as proposed to be conducted.
4.2. Authorization. The execution, delivery and performance by the Company
-------------
of this Agreement and the execution and delivery by the Company of each Related
Agreement to which it is a party, and the issuance and sale by the Company of
the Securities hereunder, (a) are within the Company's corporate power and
authority, (b) have been duly authorized by all necessary corporate proceedings,
and (c) do not conflict with or result in any breach of any provision of or the
creation of any lien upon any of the property of the Company or require any
consent or approval pursuant to the Charter or bylaws of the Company, or any
law, regulation, order, judgment, writ, injunction, license, permit, agreement
or instrument.
4.3. Enforceability. The execution and delivery by the Company of this
--------------
Agreement and each Related Agreement to which it is a party, and the issuance
and sale by the Company of the Securities hereunder, will result in legally
binding obligations of the Company, enforceable against the Company in
accordance with the respective terms and provisions hereof and thereof, except
to the extent that (a) such enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors' rights and (b) the availability of the remedy of
specific performance or injunctive or other equitable relief will be subject to
the discretion of the court before which any proceeding therefor may be brought.
4.4. Governmental Approvals. Except as set forth in Schedule 4.4 hereto,
------------ --------- -------- ---
the execution, delivery and performance by the Company of this Agreement and
each Related Agreement to which it is a party, and the issuance and sale by the
Company of the Securities hereunder, do not require the approval or consent of,
or any filing with, any governmental authority or agency prior to the Closing
other than those already obtained or filed.
4.5. Capitalization.
--------------
(a) Capital Stock. The authorized capital stock of the Company consists
------- -----
solely of (i) 20,000 shares of Preferred Stock, $1.00 par value per share (the
"Preferred Stock"), (ii) 12,000,000 shares of Class A Voting Common Stock, $.01
- ---------- -----
par value per share (the "Class A Common Stock"), (iii) 12,000,000 shares of
------- ------ -----
Class B Non-Voting Common Stock, $.01 par value per share ("Class B Common
--------------
Stock"), and (iv) 1,775,000 shares of Class C Voting Common Stock, $.01 par
value per share (the "Class C Common Stock"). On the Closing Date, after giving
----- - ------ -----
<PAGE>
-10-
effect to the transactions contemplated hereby, by the Related Agreements and by
the other securities purchase agreements of even date herewith between the
Company and certain other stockholders, directors and executive officers of the
Company, the Company will have no outstanding capital stock other than 3,000
shares of Series A Preferred Stock, 2,835,462 shares of Class A Common Stock and
1,394,814 shares of Class C Common Stock, all of which will be owned of record
as set forth in Schedule 4.5(a) hereto, and all of which will be duly
-------- ------
authorized, validly issued, fully paid and nonassessable.
(b) Options, Etc. Except as set forth on Schedule 4.5(b) hereto, the
------- --- -------- ------
Company has no outstanding rights (either preemptive or other) or options to
subscribe for or purchase from the Company and no warrants or other agreements
providing for or requiring the issuance by the Company, of any of its capital
stock or any securities convertible into or exchangeable for its capital stock.
4.6. Small Business Concern. The Company meets the criteria established
----- -------- -------
under the Small Business Act for classification as a "small business concern"
within the meaning of the Small Business Act.
4.7. Disclosure. The Company's Annual Report on Form 10-K for the year
----------
ended December 31, 1996, as of its date of filing with the Commission, and the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, as
of its date of filing with the Commission, did not contain any untrue statement
of material fact or omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading.
5. INVESTMENT REPRESENTATIONS.
---------- ---------------
(a) The Investor represents and warrants to the Company that (i) the
Investor is an "accredited investor" as such term is defined in Rule 501
promulgated under the Securities Act and (ii) the Investor is acquiring the
Purchased Securities for investment, and not with a view to selling or otherwise
distributing the Purchased Securities; provided, however, that the disposition
-----------------
of the Investor's property shall at all times be and remain in the Investor's
control, subject to the provisions of Section 8 hereof.
(b) The Investor understands that the Purchased Securities have not been
registered under the Securities Act on the grounds that the offer and sale of
the Purchased Securities to the Investor are exempt from the registration
requirements of the Securities Act under Section 4(2) thereof as a transaction
not involving any public offering of the Purchased Securities. The Investor
understands that the Company's reliance on such exemption is predicated in part
on the representations of the Investor which are contained herein.
<PAGE>
-11-
(c) The Investor understands that he/she/it must bear the economic risk of
the investment in the Purchased Securities contemplated hereby for an indefinite
period of time because the Purchased Securities have not been registered under
the Securities Act and, therefore, cannot be sold unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available.
6. CONDITIONS TO PURCHASE.
---------- -- --------
The obligation of the Investor to purchase the Purchased Securities
pursuant to this Agreement is subject to compliance by the Company with its
agreements contained herein, and to the satisfaction, on or prior to the Closing
Date, of the following conditions:
6.1. This Agreement; Related Agreements. This Agreement and each of the
-------------- ------- ----------
Related Agreements shall have been executed and delivered in a form reasonably
satisfactory to the Investor, shall be in full force and effect and no term or
condition hereof or thereof shall have been amended, modified or waived except
with the prior written consent of the Investor. All covenants, agreements and
conditions contained herein or in the Related Agreements which are to be
performed or complied with on or prior to the Closing Date shall have been
performed or complied with (or waived with the prior written consent of the
Investor) in all material respects.
6.2. Charter Documents; Good Standing Certificates. The Investor shall
------- --------- ---- -------- ------------
have received from the Company a copy, certified by a duly authorized officer of
the Company to be true and complete as of the Closing Date, of the Charter and
the bylaws of the Company and a certificate, dated not more than ten (10) days
prior to the Closing Date, of the Delaware Secretary of State as to the
Company's good standing in such state.
6.3. Proof of Corporate Action; Approvals. The Investor shall have
----- -- --------- ------ ---------
received from the Company copies, certified by a duly authorized officer thereof
to be true and complete as of the Closing Date, of the records of all corporate
action taken to authorize the execution, delivery and performance of this
Agreement or any of the Related Agreements to which the Company is or is to
become a party.
6.4. Incumbency Certificate. The Investor shall have received from the
---------- -----------
Company an incumbency certificate, dated the Closing Date, signed by a duly
authorized officer of the Company, and giving the name and bearing a specimen
signature of each individual who shall be authorized to sign, in the name and on
behalf of the Company, this Agreement and each of the Related Agreements to
which the Company is or is to become a party, and to give notices and to take
other action on the Company's behalf under each of such documents.
<PAGE>
-12-
6.5. Representations and Warranties; Officers' Certificates. The
--------------- --- ---------- -------- ------------
representations and warranties of the Company contained herein shall be true and
correct in all material respects on and as of the Closing Date; and the Company
and shall have performed and complied with all conditions and agreements
required to be performed or complied with by it hereunder and under the Related
Agreements prior to the Closing; and the Investor shall have received on the
Closing Date a certificate to these effects signed by the President of the
Company.
6.6. Legality; Governmental Authorization. The purchase of the Purchased
-------- ------------ -------------
Securities shall not be prohibited by any law, governmental order or regulation,
and shall not subject the Investor to any penalty, special tax, or other onerous
condition. All necessary consents, approvals, licenses, permits, orders and
authorizations of, or registrations, declarations and filings with, any
governmental or administrative agency or other Person, with respect to any of
the transactions contemplated by this Agreement or any of the Related
Agreements, shall have been duly obtained or made and shall be in full force and
effect.
6.7. Amendment of Loan Agreement. On or prior to the Closing Date,
---------------------------
simultaneously with the purchase and sale of the Purchased Securities hereunder,
the Company shall have completed an amendment to the Loan Agreement, in form and
substance satisfactory to the Investor, which shall provide the Company
additional revolving credit availability thereunder in an amount equal to at
least $6,000,000 more than the amount available prior to giving effect to such
amendment and which shall also provide all waivers and consents necessary under
the Loan Agreement to permit the consummation of the transactions contemplated
hereby.
6.8. SBIC Documentation. The Company shall have executed and delivered to
---- -------------
BBV all documents required by BBV in connection with BBV's investment in the
Company on the Closing Date under the rules and regulations applicable to BBV by
virtue of its status as a "small business investment company".
6.9. Legal Opinion. The Investor shall have received from special counsel
----- -------
to the Company an opinion, substantially in the form of Exhibit C hereto.
------- -
6.10. No Litigation. No restraining order or injunction shall prevent the
-- ----------
transactions contemplated by this Agreement and no action, suit or proceeding
shall be pending or threatened before any court or administrative body in which
it will be, or is, sought to restrain or prohibit or to obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby.
6.11. Simultaneous Purchase. It shall be a condition concurrent to the
---------------------
Investor's obligation to purchase the Purchased Securities hereunder that the
Company sell Notes in an aggregate principal amount equal to $1,000,000 and
<PAGE>
-13-
Warrants for the purchase of Common Stock of the Company for an aggregate
purchase price of $1,000,000 to certain existing stockholders, directors and
executive officers of the Company who are "accredited investors" (as defined in
Section 4 hereof) (including the Investor).
6.12. Application Fee; Closing Fee. The Investor shall have received from
------------------------ ---
the Company payment in full of (i) an application fee in an amount equal to one
percent (1%) of the original principal amount of the Note issued to the Investor
on the Closing Date and (ii) a closing fee in an amount equal to four percent
(4%) of the original principal amount of the Note issued to the Investor on the
Closing Date.
6.13. General. All instruments and legal, governmental, administrative
-------
and corporate proceedings in connection with the transactions contemplated by
this Agreement and the Related Agreements shall be satisfactory in form and
substance to the Investor, and the Investor shall have received copies of all
documents, including, without limitation, records of corporate or other
proceedings, opinions of counsel, consents, licenses, approvals, permits and
orders, which the Investor may have requested in connection therewith.
7. DEFAULTS.
--------
7.1. Events of Default. Subject to Section 3.7 hereof, the holders of the
------ -- -------
Securities will be entitled to exercise the remedies provided by Section 7.2
hereof in accordance with the terms thereof if any one or more of the following
events ("Events of Default") shall occur:
------ -- -------
(a) the Company shall fail to make any payment of interest or
principal on any of the Notes as the same shall become due, whether at
maturity or by acceleration or otherwise; or
(b) the Company or any of its Subsidiaries shall fail to perform or
observe any of the covenants or provisions required to be performed or
observed by it pursuant to (i) the Loan Agreement or any of the documents
executed in connection therewith, in each case as amended, restated,
modified or supplemented and in effect from time to time or (ii) the
Indenture, the Senior Subordinated Notes or any of the documents executed
in connection therewith, in each case as amended, restated, modified or
supplemented and in effect from time to time, and such failure (in the case
of either of the foregoing clauses (i) or (ii)) results in the acceleration
of the Indebtedness under the Loan Agreement or, as the case may be, the
Senior Subordinated Notes; or
<PAGE>
-14-
(c) the Company or any of its Subsidiaries shall:
(i) commence a voluntary case under Title 11 of the United States
Code as from time to time in effect, or authorize, by appropriate
proceedings of its board of directors or other governing body, the
commencement of such a voluntary case;
(ii) have filed against it a petition commencing an involuntary
case under said Title 11 and such petition shall not have been
dismissed, bonded, discharged, or stayed within 60 days;
(iii) seek relief as a debtor under any applicable law, other
than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the
rights of creditors, or consent to or acquiesce in such relief;
(iv) have entered against it an order by a court of competent
jurisdiction (x) finding it to be bankrupt or insolvent, (y) ordering
or approving its liquidation, reorganization or any modification or
alteration of the rights of its creditors, or (z) assuming custody of,
or appointing a receiver or other custodian for, all or a substantial
part of its property;
(v) make a general assignment for the benefit of its creditors,
or appoint or consent to the appointment of a receiver or other
custodian for all or a substantial part of its property.
7.2. Remedies. Subject to Section 3.7 hereof, upon the occurrence and
--------
continuance of any of the Events of Default under Section 7.1 hereof, in each
and every such case, the Majority Holders of the Notes may proceed to protect
and enforce its or their rights by suit in equity, action at law and/or other
appropriate proceedings either for specific performance of any covenant,
provision or condition contained or incorporated by reference in this Agreement
or in the Notes, or in aid of the exercise of any power granted in this
Agreement or in the Notes, and (unless there shall have occurred an Event of
Default under Section 7.1(c) hereof, in which case the unpaid balance of the
Notes shall automatically become due and payable) may by notice to the Company,
declare all or any part of the unpaid principal amount of the Notes then
outstanding to be forthwith due and payable, and thereupon such unpaid principal
amount or part thereof, together with interest accrued thereon and any
applicable prepayment charge and all other sums, if any, payable under this
Agreement or the Notes shall become so due and payable without presentation,
presentment, protest or further demand or notice of any kind, all of which are
hereby expressly waived, and such holder or holders may proceed to enforce
payment of such amount or part thereof in such manner as it or they may elect.
<PAGE>
-15-
7.3. Waivers. The Company hereby waives, to the extent not prohibited by
-------
applicable law, (a) all presentments, demands for performance and notices of
nonperformance (except to the extent specifically required by the provisions
hereof), (b) any requirement of diligence or promptness on the part of any
holder of Securities in the enforcement of its rights under the provisions of
this Agreement or any Related Agreement, and (c) any and all notices of every
kind and description which may be required to be given by any statute or rule of
law.
7.4. Course of Dealing. No course of dealing between the Company or any
------ -- -------
of its Subsidiaries on the one hand, and the Investor or any holder of
Securities, on the other hand, shall operate as a waiver of any of the
Investor's or such holder's rights under this Agreement or any Related
Agreement. No delay or omission in exercising any right under this Agreement or
any Related Agreement shall operate as a waiver of such right or any other
right. A waiver on any one occasion shall not be construed as a bar to or
waiver of any right or remedy on any other occasion.
8. RESTRICTIONS ON TRANSFER.
------------ -- --------
8.1. General Restriction. The shares of Common Stock issuable on exercise
------- -----------
of the Warrants shall constitute "Restricted Shares" for purposes of the
Stockholder Agreement and "Registrable Securities" for purposes of the
Registration Rights Agreement. If the Investor is not already a party to the
Stockholder Agreement and the Registration Rights Agreement, on the Closing Date
the Investor shall execute and deliver to the Company an Instrument of Accession
to each of the Stockholder Agreement and the Registration Rights Agreement. The
Securities shall be transferable only upon satisfaction of the conditions set
forth in this Section 8 and any applicable provisions of the Stockholder
Agreement.
8.2. Notice of Transfer. Prior to any transfer of any Securities, the
------ -- --------
holder thereof shall be required to give written notice to the Company
describing in reasonable detail the manner and terms of the proposed transfer
and the identity of the proposed transferee (the "Transfer Notice"), accompanied
-------- ------
by (a) if reasonably determined by the Company to be necessary with respect to
such transfer, an opinion of Bingham Dana LLP addressed to the Company, or other
counsel reasonably acceptable to the Company, that such transfer may be effected
without registration of such Securities under the Securities Act, and (b) the
written agreement of the proposed transferee to be bound by all of the
provisions hereof and, where required by the terms thereof, the Stockholder
Agreement and the Registration Rights Agreement.
8.3. Restrictive Legends. Except as otherwise permitted by this Section 8,
----------- -------
each Security shall bear the legend specified for such Security in Schedule 8.3
-------- ---
hereto.
<PAGE>
-16-
8.4. Termination of Restrictions. The restrictions imposed by this Section
----------- -- ------------
8 upon the transferability of any Securities shall terminate as to such
Securities upon the sale of such Securities pursuant to a Public Sale. Whenever
any of such restrictions shall terminate as to any Securities, the holder
thereof shall be entitled to receive from the Company, at the Company's expense,
new securities without such legends.
9. NOTICES.
-------
Any notice provided for in this Agreement or the Securities will be in
writing and will be deemed properly delivered if either personally delivered or
sent by telecopier, overnight courier or mailed certified or registered mail,
return receipt requested, postage prepaid, to the recipient at the address
specified below:
If to the Company, to 301 Commerce, Fort Worth, Texas 76102, to the
attention of the Chairman, or at such other address as such person shall
have specified by notice actually received by the addressor.
If to the Investor, then to the Investor at the address set forth on the
signature page hereto, or at such other address as the Investor shall have
specified by notice actually received by the addressor.
Any such notice shall be effective (a) if delivered personally or by telecopier
when received, (b) if sent by overnight courier, when receipted for, and (c) if
mailed, five (5) days after being mailed as described above.
10. AMENDMENTS AND WAIVERS.
---------- --- -------
Any term of this Agreement may be amended and the observance of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) only with the written consent of the
Company and the Investor. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each holder of any Security sold pursuant
to this Agreement and the Company.
11. WAIVER OF CALL RIGHTS.
---------------------
By its signature hereto, the Company hereby agrees to waive in all respects
the provisions of Section 6 of the Securities Purchase Agreement dated as of May
22, 1997 by and between the Company and the Investor, and the parties hereto
hereby agree that such provisions shall hereafter be deemed to be terminated and
of no effect.
<PAGE>
-17-
12. CONSTRUCTION.
------------
The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rule of strict
construction will be applied against any party.
13. MISCELLANEOUS.
-------------
This Agreement (including Exhibits and Schedules) and the Related
Agreements set forth the entire understanding of the parties hereto with respect
to the transactions contemplated hereby and supersede any prior written or oral
understandings with respect thereto. The parties hereto acknowledge and agree
that in entering into this Agreement they have not in any way relied upon any
oral or written agreements, statements, promises, information, arrangements,
understandings, representations or warranties, express or implied, not
specifically set forth in this Agreement or the Related Agreements. The
invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of any other term or provision hereof. The
headings in this Agreement are for convenience of reference only and shall not
alter or otherwise affect the meaning hereof. THIS AGREEMENT MAY BE EXECUTED IN
ANY NUMBER OF COUNTERPARTS WHICH TOGETHER SHALL CONSTITUTE ONE INSTRUMENT, SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC SUBSTANTIVE LAWS OF
THE COMMONWEALTH OF MASSACHUSETTS WITHOUT GIVING EFFECT TO ANY CHOICE OR
CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE
DOMESTIC SUBSTANTIVE LAWS OF ANY OTHER STATE, AND SHALL BIND AND INURE TO THE
BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.
<PAGE>
-18-
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed as of the date and year
first above written.
THE COMPANY:
--- -------
AMERITRUCK DISTRIBUTION CORP.
By:
----------------------------------
Title:
THE INVESTOR:
--- --------
BANCBOSTON VENTURES INC.
By:
----------------------------------
Title:
Address: 175 Federal Street
Boston, MA 02110
Purchase Price: $904,000
(the amount the Investor elects
to invest in the Purchased Securities)
<PAGE>
List of Schedules
-----------------
Schedule 4.4 Governmental Approvals
Schedule 4.5(a) Ownership of Capital Stock
Schedule 4.5(b) Options, Warrants, etc.
Schedule 8.3 Restrictive Legend
List of Exhibits
----------------
Exhibit A Form of Note
Exhibit B Form of Warrant
Exhibit C Form of Legal Opinion
<PAGE>
EXHIBIT A TO
------- -
SECURITIES PURCHASE
AGREEMENT
No. 1
SUBORDINATED NOTE
This Note has not been registered under the Securities Act of 1933, as
amended, and may not be sold or otherwise transferred in the absence of
such registration or an exemption therefrom under such Act or any
applicable state securities laws. Furthermore, this Note may be sold or
otherwise transferred only in compliance with the conditions specified in
the Securities Purchase Agreement referred to hereinafter, a complete and
correct copy of which is available for inspection at the principal office
of the AmeriTruck Distribution Corp. and will be furnished without charge
to the holder of this Note upon written request.
$904,000 November 13, 1997
AMERITRUCK DISTRIBUTION CORP., a Delaware corporation (hereinafter called
the "Company"), for value received, hereby promises to pay to BANCBOSTON
-------
VENTURES INC., a Massachusetts corporation ("Payee"), or its registered assigns,
-----
the entire principal amount of NINE HUNDRED FOUR THOUSAND DOLLARS ($904,000),
payable in the amounts and at the times specified in Section 3 of the Securities
Purchase Agreement (as hereinafter defined) and with a final maturity on April
1, 1998 (the "Maturity Date"), and to pay interest on the unpaid principal
-------- ----
amount hereof from the date hereof until and including the payment in full of
the unpaid principal amount hereof, such interest accruing and compounding at
the rates per annum set forth in Section 3.6(a) or, as applicable, Section
3.6(b), of the Securities Purchase Agreement (as hereinafter defined) (computed
on the basis of actual number of days elapsed and a 360-day year). The Company
hereby promises to pay such interest on the dates specified in the Securities
Purchase Agreement (as hereinafter defined) until the obligation of the Company
with respect to the payment thereof shall be discharged. All payments of
principal and interest hereof shall be made in lawful money of the United States
of America to the account of the holder hereof upon presentation hereof at such
address of the holder hereof as such holder shall have designated to the Company
in writing.
<PAGE>
-2-
This Note is one of the Notes of the Company aggregating $1,000,000 in
original authorized principal amount issued pursuant to the Securities Purchase
Agreement, dated as of November 13, 1997 (the "Securities Purchase Agreement"),
---------- -------- ---------
between the Company and the Payee. The holder of this Note is entitled to
enforce the provisions of the Securities Purchase Agreement and to enjoy the
benefits thereof to the extent provided therein and is subject to the
obligations thereunder as a holder of a Note.
The Company shall not be permitted to prepay any portion of this Note
without the written consent of the Majority Holders of the Notes (as defined in
the Securities Purchase Agreement), and the maturity hereof may be accelerated
by the Majority Holders of the Notes (as defined in the Securities Purchase
Agreement) outstanding following an Event of Default (as defined in the
Securities Purchase Agreement), all as provided in the Securities Purchase
Agreement, to which reference is made for the terms and conditions of such
provisions as to prepayment and acceleration. At its option, the holder of this
Note may also convert the principal amount of this Note and all accrued and
unpaid interest thereon as provided in Section 3.4 of the Securities Purchase
Agreement.
Any permitted transfer of this Note is registrable on the note register of
the Company upon presentation at the principal office of the Company accompanied
by a written instrument of transfer in form satisfactory to the Company duly
executed by, or on behalf of, the holder hereof. This Note may also be
exchanged at such office for one or more Notes in any authorized denominations,
as requested by the holder, of a like aggregate unpaid principal amount.
Prior to due presentment for registration of transfer, the Company and any
agent of the Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment of principal and
interest as herein provided and for all other purposes.
THE HOLDER OF THIS NOTE, BY ACCEPTANCE HEREOF, AGREES WITH THE COMPANY THAT
THIS NOTE SHALL BE SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT TO ALL SENIOR
INDEBTEDNESS (AS DEFINED IN THE SECURITIES PURCHASE AGREEMENT) TO THE EXTENT AND
IN THE MANNER PROVIDED IN THE SECURITIES PURCHASE AGREEMENT.
All indebtedness of the Company evidenced by this Note shall be pari passu
----------
in right of payment to the indebtedness of the Company evidenced by the Senior
Subordinated Notes (as defined in the Securities Purchase Agreement).
<PAGE>
-3-
This Note shall be deemed to take effect as a sealed instrument under the
laws of the Commonwealth of Massachusetts and for all purposes shall be
construed in accordance with such laws.
AMERITRUCK DISTRIBUTION CORP.
By:
----------------------------------
Name:
Title:
<PAGE>
EXHIBIT B TO
------- -
SECURITIES PURCHASE
AGREEMENT
Right to Purchase Shares of Common Stock
of AmeriTruck Distribution Corp.
This Warrant and any shares acquired upon the exercise of this Warrant have
not been registered under the Securities Act of 1933, as amended, and may not be
sold or transferred in the absence of such registration or an exemption
therefrom under such Act or any applicable state securities laws. Furthermore,
this Warrant may be sold or otherwise transferred only in compliance with the
conditions specified in the Securities Purchase Agreement and the Stockholder
Agreement each referred to hereinafter, complete and correct copies of which are
available for inspection at the principal office of AmeriTruck Distribution
Corp. and will be furnished without charge to the holder of this Warrant upon
written request.
No. W-7
AmeriTruck Distribution Corp.
Common Stock Purchase Warrant
AmeriTruck Distribution Corp., a Delaware corporation (the "Company"),
-------
hereby certifies that, for value received, BancBoston Ventures Inc., or its
assigns, is entitled, subject to the terms set forth below, to purchase from the
Company at any time from and after April 1, 1998, subject to the provisions of
Section 2.5 hereof, the Applicable Number (as hereinafter defined) (subject to
adjustment as hereinafter provided) of fully paid and non-assessable shares of
Common Stock (as defined in Section 12 hereof), at an initial purchase price per
share of $2.00 (such price per share as adjusted from time to time as provided
herein is referred to herein as the "Exercise Price"). The number and character
--------------
of such shares of Common Stock and the Exercise Price are subject to adjustment
as provided herein.
1. DEFINITIONS. This Warrant is issued pursuant to the Securities Purchase
-----------
Agreement, dated as of November __, 1997 (the "Securities Purchase Agreement")
-----------------------------
between the Company and the person listed on the signature pages attached
thereto, a copy of which is on file at the principal office of the Company.
Capitalized
<PAGE>
-2-
terms used herein without definition shall have the meanings assigned to such
terms in the Securities Purchase Agreement. Certain terms are used in this
Warrant as specifically defined in Section 12 hereof .
2. EXERCISE OF WARRANT.
-------- -- -------
2.1. Exercise. This Warrant may be exercised in full but not in part
--------
prior to its expiration pursuant to Section 2.5 hereof by the holder hereof at
any time from and after April 1, 1998 by surrender of this Warrant, with the
form of subscription at the end hereof duly executed by such holder, to the
Company at its principal office, together with Notes having an aggregate
outstanding principal amount which, together with any accrued and unpaid
interest owed with respect thereto, are equal to the required aggregate Exercise
Price with respect to the shares of Common Stock for which this Warrant is then
being exercised.
2.2. Class of Stock Receivable upon Exercise. The shares of Common Stock
----- -- ----- ---------- ---- --------
receivable upon exercise of this Warrant shall be shares of Class A Common Stock
or Class B Common Stock, as designated upon such exercise by the holder of this
Warrant on the form of subscription at the end hereof duly executed by such
holder.
2.3. Conflict With Other Laws. Any other provisions hereof to the
-------- ---- ----- ----
contrary notwithstanding, no Bank Affiliate (as defined in Section 12) or small
business investment company, as defined in the Small Business Investment Act of
1958, as amended, shall be entitled to exercise the right under this Warrant to
purchase any share or shares of Common Stock if, under any law or under any
regulation, rule or other requirement of any governmental authority at any time
applicable to such Bank Affiliate or small business investment company, (a) as a
result of such purchase, such Bank Affiliate or small business investment
company would own, control or have power to vote a greater quantity of
securities of any kind than the Bank Affiliate or small business investment
company shall be permitted to own, control or have power to vote, or (b) such
purchase would not be permitted. For purposes of this Section 2.3, a written
statement of the Bank Affiliate or small business investment company exercising
this Warrant, delivered upon surrender of the Warrant, to the effect that the
Bank Affiliate or small business investment company is legally entitled to
exercise its right under this Warrant to purchase securities and that such
purchase will not violate the prohibitions set forth in the preceding sentence,
shall be conclusive and binding upon the Company, shall obligate the Company to
deliver certificates representing the shares of Common Stock so purchased in
accordance with the other provisions hereof and shall relieve the Company of any
liability under this Section 2.3.
2.4. Warrant Agent. In the event that a bank or trust company shall have
------- -----
been appointed as trustee for the holder of the Warrant pursuant to Section 6.2
<PAGE>
-3-
hereof, such bank or trust company shall have all the powers and duties of a
warrant agent appointed pursuant to Section 13 hereof and shall accept, in its
own name for the account of the Company or such successor entity as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 2.
2.5. Termination. This Warrant shall terminate upon the earliest to occur
-----------
of (i) exercise in full, (ii) November __, 2007 or (iii) the consummation by the
Company of a Qualified Private Placement on or prior to March 31, 1998.
3. STOCKHOLDER AGREEMENT; REGISTRATION RIGHTS AGREEMENT. The shares of Common
--------------------- ------------ ------ ---------
Stock issuable pursuant to this Warrant shall constitute "Restricted Shares" for
purposes of the Stockholder Agreement and "Registrable Securities" for purpose
of the Registration Rights Agreement and the holder of this Warrant shall be
entitled to all of the benefits and shall be subject to all of the obligations
contained in such agreements.
4. DELIVERY OF STOCK CERTIFICATES ON EXERCISE.
-------- -- ----- ------------ -- --------
4.1 Delivery. As soon as practicable after the exercise of this Warrant,
--------
and in any event within ten (10) days thereafter, the Company, at its expense
(including the payment by it of any applicable issue taxes), will cause to be
issued in the name of and delivered to the holder hereof, or as such holder
(upon payment by such holder of any applicable transfer taxes) may direct, a
certificate or certificates for the number of fully paid and non-assessable
shares of Common Stock (or Other Securities) to which such holder shall be
entitled on such exercise, together with any other stock or other securities and
property (including cash, where applicable) to which such holder is entitled
upon such exercise.
4.2. Fractional Shares. In the event that the exercise of this Warrant
---------- ------
results in the issuance of any fractional share of Common Stock, then in such
event the holder of this Warrant shall be entitled to cash equal to the fair
market value of such fractional share as determined in good faith by the
Company's Board of Directors.
5. ADJUSTMENT FOR DIVIDENDS, DISTRIBUTIONS AND RECLASSIFICATIONS. In case at
---------- --- --------- ------------- --- -----------------
any time or from time to time, the holders of Common Stock shall have received,
or (on or after the record date fixed for the determination of shareholders
eligible to receive) shall have become entitled to receive, without payment
therefor:
(a) other or additional stock or other securities, cash or property by way
of dividend; or
<PAGE>
-4-
(b) other or additional (or less) stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate restructuring;
other than additional shares of Common Stock issued as a stock dividend or in a
- ----- ----
stock-split (adjustments in respect of which are provided for in Section 7
hereof), then and in each such case the holder of this Warrant, on the exercise
hereof (unless previously paid to the Holder hereof) as provided in Section 2
hereof, shall be entitled to receive the amount of stock and other securities,
cash and property which such holder would have received prior to or would have
held on the date of such exercise if on the date hereof he had been the holder
of record of the number of shares of Common Stock called for on the face of this
Warrant and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and all such other or
additional stock and other securities, cash and property receivable by such
holder as aforesaid during such period, giving effect to all further adjustments
called for during such period by Sections 6 and 7 hereof.
6. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
---------- --- -------------- ------------- ------ ----
6.1. Certain Adjustments. In case at any time or from time to time, the
------- -----------
Company shall (i) effect a capital reorganization, reclassification or
recapitalization, (ii) consolidate with or merge into any other Person, or (iii)
transfer all or substantially all of its properties or assets to any other
Person under any plan or arrangement contemplating the dissolution of the
Company, then in each such case, the holder of this Warrant, on the exercise
hereof as provided in Section 2 hereof at any time after the consummation of
such reorganization, recapitalization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
holder had so exercised this Warrant immediately prior thereto, all subject to
further adjustment thereafter as provided in Sections 5 and 7 hereof.
6.2. Appointment of Trustee for Warrant Holders Upon Dissolution. In the
----------- -- ------- --- ------- ------- ---- -----------
event of any dissolution of the Company following the transfer of all or
substantially all of its properties or assets, the Company, prior to such
dissolution, shall, at its expense, deliver or cause to be delivered the stock
and other securities and property (including cash, where applicable) receivable
by the holders of the Warrant after the effective date of such dissolution
pursuant to this Section 6 to a
<PAGE>
-5-
bank or trust company having its principal office in Boston, Massachusetts, as
trustee for the holder or holders of the Warrant.
6.3. Continuation of Terms. Upon any reorganization, consolidation,
------------ -- -----
merger or transfer (and any dissolution following any transfer) referred to in
this Section 6, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 8 hereof.
7. ADJUSTMENTS FOR ISSUANCE OF COMMON STOCK AND AMOUNT OF OUTSTANDING COMMON
----------- --- -------- -- ------ ----- --- ------ -- ----------- ------
STOCK.
- -----
7.1. General. (a) If at any time there shall occur any stock split, stock
-------
dividend, reverse stock split or other subdivision of the Company's Common Stock
("Stock Event"), then the number of shares of Common Stock to be received by the
-----------
holder of this Warrant shall be appropriately adjusted such that the proportion
of the number of shares issuable hereunder to the total number of shares of the
Company (on a fully diluted basis) prior to such Stock Event is equal to the
proportion of the number of shares issuable hereunder after such Stock Event to
the total number of shares of the Company (on a fully-diluted basis) after such
Stock Event. In each such Stock Event, the Exercise Price in effect immediately
prior to such Stock Event shall, simultaneously with the happening of such Stock
Event, be adjusted by multiplying the Exercise Price in effect immediately prior
to such Stock Event by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such Stock Event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such Stock Event, and the product so obtained shall be the
Exercise Price in effect immediately after such Stock Event; provided that in no
event will the Exercise Price be less than the par value of the Common Stock.
(b) In case the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them (i) to receive a dividend or other
distribution payable in Common Stock or in Convertible Securities (as
hereinafter defined), or (ii) to subscribe for or purchase Common Stock or
Convertible Securities, then such record date chosen by the Company shall be
deemed to be the date of the issue of the shares of Common Stock issued upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
<PAGE>
-6-
7.2. Other Issuances of Common Stock. (a) If the Company shall at any
----- --------- -- ------ -----
time or from time to time issue or sell any additional shares of Common Stock
without consideration or for a consideration per share less than the Exercise
Price in effect immediately prior to such issuance, then the Exercise Price
shall be adjusted to a price determined by dividing (a) an amount equal to the
sum of (i) the product of (A) the number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by (B) the then existing
Exercise Price plus (ii) the consideration, if any, received by the Company upon
such issue or sale by (b) the total number of shares of Common Stock outstanding
immediately after such issue or sale.
(b) In case the Company shall at any time or from time to time in any
manner grant any rights to subscribe for or to purchase any options for the
purchase of Common Stock or any stock or other securities convertible into or
exchangeable for Common Stock (such convertible or exchangeable stock or
securities being herein called "Convertible Securities") and the price per share
----------------------
for which Common Stock is issuable upon the exercise of such rights or options
or upon conversion or exchange of such Convertible Securities (determined by
dividing (a) the sum of (i) the total amount, if any, received or receivable by
the Company as consideration for the granting of such rights or options, plus
(ii) the minimum aggregate amount of additional consideration payable to the
Company upon the exercise of such rights or options, plus, (iii) in the case of
such Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the conversion or exchange thereof, by (b)
the maximum number of shares of Common Stock issuable upon the exercise of such
rights or options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options) shall be less
than the Exercise Price in effect immediately prior to the time of the granting
of such rights or options, then the maximum number of shares of Common Stock
issuable upon the exercise of such rights or options or upon conversion or
exchange of the maximum amount of such Convertible Securities issuable upon the
exercise of such rights or options shall (as of the date of granting of such
rights or options) be deemed to be outstanding and to have been issued for said
price per share as so determined (and accordingly the adjustment provisions of
paragraph (a) above will apply); provided, that no further adjustment of the
--------
Exercise Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities, upon exercise of such rights or options or upon the
actual issue of such Common Stock or upon conversion or exchange of such
Convertible Securities; and provided, further, that upon the expiration of such
-------- -------
rights or options, if any thereof shall not have been exercised, (x) the number
of shares of Common Stock deemed to be issued and outstanding by reason of the
fact that they were issuable upon the exercise of such rights or options or upon
conversion or exchange of Convertible Securities so issuable, which rights or
options were not exercised, shall no longer be deemed to
<PAGE>
-7-
be issued and outstanding, and (y) the Exercise Price shall forthwith be
readjusted and thereafter the Exercise Price shall be the price which it would
have been had adjustment been made on the basis of the issue only of the shares
of Common Stock or of the Convertible Securities actually issued upon the
exercise of such rights or options.
(c) In case the Company shall in any manner issue or sell any Convertible
Securities and the price per share for which Common Stock is issuable upon such
conversion or exchange (determined by dividing (a) the sum of (i) the total
amount received or receivable by the Company as consideration for the issue or
sale of such Convertible Securities, plus (ii) the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (b) the maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities) shall be
less than the Exercise Price in effect immediately prior to the time of such
issue or sale, then the maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall (as of the date
of the issue or sale of such Convertible Securities) be deemed to be outstanding
and to have been issued for said price per share as so determined; provided,
--------
that if any such issue or sale of such Convertible Securities is made upon
exercise of any rights to subscribe for or to purchase or any option to purchase
any such Convertible Securities for which an adjustment of the Exercise Price
has been or is to be made pursuant to other provisions of this Section 7.2 no
further adjustment of the Exercise Price shall be made by reason of such issue
or sale; and provided, further, that upon the termination of the right to
-------- -------
convert or to exchange such Convertible Securities for Common Stock (x) the
number of shares of Common Stock deemed to be issued and outstanding by reason
of the fact that they were issuable upon conversion or exchange of any such
Convertible Securities, which were not so converted or exchanged, shall no
longer be deemed to be issued and outstanding and (y) the Exercise Price shall
be forthwith readjusted and thereafter the Exercise Price shall be the price
which it would have been had adjustment been made on the basis of the issue only
of the number of shares of Common Stock actually issued upon conversion or
exchange of such Convertible Securities.
(d) In case the Company shall declare a dividend or make any other
distribution upon any stock of the Company payable in Common Stock or in
Convertible Securities (other than Stock Events which are provided for in
Section 7.1), the aggregate number of shares of Common Stock issuable in payment
of such dividend or distribution or upon conversion of or in exchange for such
Convertible Securities issuable in payment of such dividend or distribution,
shall, for purposes of determining the Exercise Price, be deemed for the
purposes of this Section 7.2 to have been issued or sold without consideration.
<PAGE>
-8-
(e) In case any shares of Common Stock or Convertible Securities or any
rights or options to purchase any such stock or securities shall be issued for
cash, the consideration received therefor shall be deemed to be the amount
received by the Company therefor, before deduction therefrom of any expenses
incurred and any underwriting commissions or concessions paid or allowed by the
Company in connection therewith. In case any shares of Common Stock or
Convertible Securities or any rights or options to purchase any such stock or
securities shall be issued for a consideration other than cash (or a
consideration which includes cash, if such cash constitutes a part of the assets
of a corporation or business substantially all the assets of which are being
received as such consideration), then, for the purposes of this Section 7.2, the
Board of Directors of the Company shall determine in good faith the fair value
of such consideration, and such Common Stock, rights, options or Convertible
Securities shall be deemed to have been issued for an amount of cash equal to
the value so determined by the Board of Directors. In case any shares of Common
Stock or Convertible Securities or any rights or options to purchase any such
stock or securities are issued in connection with the sale of other assets of
the Company for a consideration which includes both, the Board of Directors
shall determine in good faith what part of the consideration so received is to
be deemed to be consideration for the issue of such shares of such Common Stock
or Convertible Securities or rights or options to purchase such stock or
securities and what part is properly allocable to such other assets.
(f) Upon each adjustment of the Exercise Price pursuant to this Section
7.2, the holder of this Warrant shall thereafter (until another such adjustment)
be entitled to purchase upon exercise of this Warrant the number of shares
obtained by multiplying the number of shares of Common Stock which were issuable
upon exercise hereof, immediately prior to such adjustment by the Exercise Price
in effect immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price. The Exercise Price shall be readjusted
in the foregoing manner upon the happening of any successive event or events
described herein in this Section 7.2, and the adjustments or readjustments
required by this Section 7.2 shall be calculated in the order in which the
events giving rise thereto occur.
(g) The provisions of this Section 7.2 shall not apply to (i) any issuance
of additional Common Stock for which an adjustment is provided under Section 7.1
hereof and (ii) any issuance of options pursuant to the Company's 1995 Stock
Option Plan, to the extent such issuance is approved pursuant to Section 6.3 of
the Stockholder Agreement, and any issuance of shares of Common Stock pursuant
to the exercise of such options.
(h) Notwithstanding anything to the contrary contained in this Section 7.2,
the provisions of this Section 7.2 shall not apply to any issuance of additional
<PAGE>
-9-
Common Stock after a Qualified Public Offering (as defined in the Stockholder
Agreement).
7.3. Other Securities. In case any Other Securities shall have been
----- ----------
issued, or shall then be subject to issue upon the conversion or exchange of any
stock (or Other Securities) of the Company (or any other issuer of Other
Securities or any other entity referred to in Section 6 hereof) or to
subscription, purchase or other acquisition pursuant to any rights or options
granted by the Company (or such other issuer or entity), the holder hereof shall
be entitled to receive upon exercise hereof such amount of Other Securities (in
lieu of or in addition to Common Stock) as is determined in accordance with the
terms hereof, treating all references to Common Stock herein as references to
Other Securities to the extent applicable, and the computations, adjustments and
readjustments provided for in this Section 7 with respect to the number of
shares of Common Stock issuable upon exercise of this Warrant shall be made as
nearly as possible in the manner so provided and applied to determine the amount
of Other Securities from time to time receivable on the exercise of the Warrant,
so as to provide the holder of the Warrant with the benefits intended by this
Section 7 and the other provisions of this Warrant.
8. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
-- -------- -- ----------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of the
Warrant against dilution. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of stock receivable on
the exercise of the Warrant above the amount payable therefor on such exercise,
(ii) will take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and non-assessable shares
of stock on the exercise of the Warrant from time to time outstanding and (iii)
will not transfer all or substantially all of its properties and assets to any
other entity (corporate or otherwise), or consolidate with or merge into any
other entity or permit any such entity to consolidate with or merge into the
Company (if the Company is not the surviving entity), unless such other entity
shall expressly assume in writing and will be bound by all the terms of this
Warrant.
9. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case of any event that
------------ ----------- -- -- -----------
may require any adjustment or readjustment of the Exercise Price and the shares
of Common Stock issuable on the exercise of this Warrant, the Company, at its
expense, will promptly prepare a certificate setting forth such adjustment or
readjustment, or stating the reasons why no adjustment or readjustment is being
made, and showing, in detail, the facts upon which any such
<PAGE>
-10-
adjustment or readjustment is based, including a statement of (i) the new
Exercise Price, (ii) the number of shares of the Company's Common Stock then
outstanding on a fully diluted basis, and (iii) the number of shares of Common
Stock to be received upon exercise of this Warrant, in effect immediately prior
to such adjustment or readjustment and as adjusted and readjusted (if required
by Section 7) on account thereof. The Company will forthwith mail a copy of each
such certificate to each holder of a Warrant, and will, on the written request
at any time of any holder of a Warrant, furnish to such holder a like
certificate setting forth the calculations used to determine such adjustment or
readjustment. At its option, the holder of a Warrant may confirm the adjustment
noted on the certificate by causing such adjustment to be computed by an
independent certified public accountant at the expense of the Company.
10. NOTICES OF RECORD DATE. In the event of:
------- -- ------ ----
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right; or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or any consolidation or merger of
the Company with or into any other person; or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Company; or
(d) any proposed issue or grant by the Company of any shares of stock of
any class or any other securities, or any right or option to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities (other than the issue of Common Stock on the exercise of this
Warrant),
then, and in each such event, the Company will mail or cause to be mailed to the
holder of this Warrant a notice specifying (i) the date on which any such record
is to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right, (ii)
the date on which any such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up is
anticipated to take place, and the time, if any is to be fixed, as of which the
holders of record of Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other Securities) for securities or
other property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger,
<PAGE>
-11-
dissolution, liquidation or winding-up and (iii) the amount and character of any
stock or other securities, or rights or options with respect thereto, proposed
to be issued or granted, the date of such proposed issue or grant and the
persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall be mailed at least thirty (30) days prior to
the date specified in such notice on which any such action is to be taken.
11. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. The Company will at
----------- -- ----- -------- -- -------- -- -------
all times reserve and keep available, solely for issuance and delivery on the
exercise of the Warrant, a number of shares of Class A Common Stock equal to the
total number of shares of Common Stock from time to time issuable upon exercise
of the Warrant and a number of shares of Class B Common Stock equal to the total
number of shares of Common Stock from time to time issuable upon exercise of the
Warrant, and, from time to time, will take all steps necessary to amend its
Certificate of Incorporation to provide sufficient reserves of shares of Common
Stock issuable upon exercise of the Warrant.
12. DEFINITIONS. As used herein the following terms, unless the context
-----------
otherwise requires, have the following respective meanings:
Applicable Number means, at any time with respect to the holder of this
-----------------
Warrant, the quotient of (a) the sum of the aggregate outstanding principal
amount of the Notes held by such holder plus the amount of accrued and unpaid
interest in respect of such Notes divided by (b) 2.
----------
Bank Affiliate means, any person who is a bank holding company or a
--------------
subsidiary of a bank holding company as defined in the Bank Holding Company Act
of 1956, as amended, or other applicable banking laws of the United States and
the rules and regulations promulgated thereunder.
Company shall mean AmeriTruck Distribution Corp. and any corporation which
-------
shall succeed to or assume the obligations of the Company hereunder.
Common Stock means (i) the Company's Class A Voting Common Stock, $.01 par
------ -----
value per share (the "Class A Common Stock"), (ii) the Company's Class B Non-
--------------------
Voting Common Stock, $.01 par value per share (the "Class B Common Stock"),
--------------------
(iii) the Company's Class C Common Stock, $.01 par value per share (the "Class C
-------
Common Stock"), (iv) any other capital stock of any class or classes (however
- ------------
designated) of the Company, the holders of which shall have the right, without
limitation as to amount, either to all or to a share of the balance of current
dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and (v) any other securities
into which or for which any of the securities described in clauses (i), (ii),
(iii) or (iv) above have
<PAGE>
-12-
been converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
Other Securities refers to any stock (other than Common Stock) and other
----- ----------
securities of the Company or any other entity (corporate or otherwise) (i) which
the holder of this Warrant at any time shall be entitled to receive, or shall
have received, on the exercise of this Warrant, in lieu of or in addition to
Common Stock, or (ii) which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other Securities, in
each case pursuant to Section 5 or 6 hereof.
13. WARRANT AGENT. The Company may, by written notice to the holder of this
------- -----
Warrant, appoint an agent having an office in Boston, Massachusetts for the
purpose of issuing Common Stock on the exercise of this Warrant pursuant to
Section 2 hereof, and exchanging or replacing this Warrant, or any of the
foregoing, and thereafter any such issuance, exchange or replacement, as the
case may be, shall be made at such office by such agent.
14. REMEDIES. The Company stipulates that the remedies at law of the holder of
--------
this Warrant in the event of any default or threatened default by the Company in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
15. NOTICES. All notices and other communications from the Company to the
-------
holder of this Warrant shall be mailed by first class registered or certified
mail, postage prepaid, or sent by overnight courier (or sent in the form of a
telex or telecopy) at such address as may have been furnished to the Company in
writing by such holder or, until any such holder furnishes to the Company an
address, then to, and at the address of, the last holder of this Warrant who has
so furnished an address to the Company.
16. MISCELLANEOUS. In case any provision of this Warrant shall be invalid,
-------------
illegal or unenforceable, or partially invalid, illegal or unenforceable, the
provision shall be enforced to the extent, if any, that it may legally be
enforced and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. This Warrant
and any term hereof may be changed, waived, discharged or terminated only by a
statement in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought. This Warrant shall be
governed by and construed in accordance with the domestic substantive laws (and
not the conflict of law rules) of the State of Delaware. The headings in this
Warrant are for purposes of reference
<PAGE>
-13-
only, and shall not limit or otherwise affect any of the terms hereof. This
Warrant shall take effect as an instrument under seal.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer and its corporate seal to be impressed hereon and
attested by its Secretary.
Dated as of November __, 1997
AMERITRUCK DISTRIBUTION CORP.
(Corporate Seal) By:
---------------------------
Name:
Title:
Attest:
- ----------------------
Secretary
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise
of Common Stock Purchase Warrant)
TO: AmeriTruck Distribution Corp.
The undersigned, the holder of the within Common Stock Purchase Warrant,
hereby irrevocably elects to exercise this Common Stock Purchase Warrant for,
and to purchase thereunder ___________ shares of Class __ Common Stock of
AmeriTruck Distribution Corp. and herewith surrenders to the Company Notes
having an aggregate outstanding principal amount which, together with all
accrued and unpaid interest owing with respect thereto, are equal to
$__________, and requests that the certificates for such shares be issued in the
name of, and delivered to ________________, whose address is
_____________________________.
Dated: __________________ ____________________________________
(Signature must conform in all
respects to name of Holder as
specified on the face of the
Warrant)
(Address)
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto ______________________ the right represented by the within Warrant to
purchase _______ shares of Class __ Common Stock of AmeriTruck Distribution
Corp., a Delaware corporation, to which the within Warrant relates, and appoints
____________ attorney to transfer such right on the books of AmeriTruck
Distribution Corp., with full power of substitution in the premises.
[INSERT NAME OF HOLDER]
Dated:___________________ By: _________________________________
Title: ______________________________
[insert address of Holder]
Signed in the presence of:
_______________________________
<PAGE>
MANAGEMENT FEE AGREEMENT
---------- --- ---------
This MANAGEMENT FEE AGREEMENT is made as of November __, 1997 (the "Closing
-------
Date"), between AMERITRUCK DISTRIBUTION CORP., a Delaware corporation (the
- ----
"Company") and FIRST CAPITAL CORPORATION OF BOSTON, a Massachusetts corporation
- --------
(the "Manager").
-------
WHEREAS, the Manager is willing to provide certain consulting services to
the Company, and the Company desires to retain the Manager to provide such
management services to the Company.
NOW, THEREFORE, in consideration of the mutual agreements set forth below,
the parties hereto agree as follows:
1. SERVICES. The Manager shall furnish the following consulting services
--------
(the "Services") to the Company:
--------
(a) advice and administrative support in the review and development of the
Company's business policies, including the review and development of
growth and acquisition opportunities;
(b) advice and administrative support in the management of the Company's
credit facilities and other important contractual relationships; and
(c) monitoring and review of the Company's financial performance.
The Services may include the Manager's advice on alternative courses of
action for the Company's consideration. Final decisions on any course of action
shall always remain the responsibility of the Company.
2. CONSULTING FEES. In consideration of the Services, commencing from
---------------
and after March 31, 1998 and solely in the event that the Company shall not have
consummated a Qualified Private Placement (as hereinafter defined) on or prior
to such date, the Company shall pay a fee to the Manager in the amount of
$100,000 per annum (the "Fee"). The Fee shall be payable to the Manager in
---
advance in equal quarterly installments on the first day of each calendar
quarter commencing on April 1, 1998. In addition, the Company shall reimburse
the Manager for all reasonable out-of-pocket expenses incurred in connection
with the provision of the Services. Any such reimbursement of expenses shall be
made promptly after submission of a bill therefor by the Manager. As used
herein, a "Qualified Private Placement" shall mean any non-public
---------------------------
<PAGE>
-2-
sale of shares of any class of the Company's capital stock yielding gross
proceeds to the Company of at least $10,000,000.
3. TERM. This Agreement shall continue so long as the Manager, or any
----
affiliate of the Manager, owns any shares of capital stock of the Company;
provided, however, that (a) the Manager may terminate its obligations to provide
- -------- -------
Services upon 3 months' prior notice to the Company and (b) this Agreement shall
terminate in the event that the Company shall consummate a Qualified Private
Placement on or prior to March 31, 1998 and in any event upon completion by the
Company of a registered public offering of its capital stock.
4. ASSIGNMENT. This Agreement and any rights and obligations hereunder
----------
shall not be assignable or transferable by the Manager, other than to an
affiliate of the Manager, without the prior written consent of the Company, or
by the Company at any time.
5. INDEMNIFICATION. The Company shall indemnify and hold harmless each
---------------
of the Manager and its affiliates, directors, officers, controlling persons
(within the meaning of Section 15 of the Securities Act of 1933 or Section 20(a)
of the Securities Exchange Act of 1934), if any, agents and employees (the
Manager, its affiliates and such other specified persons being collectively
referred to as "Indemnified Persons" and individually as an "Indemnified
----------- ------- -----------
Person") from and against any and all claims, liabilities, losses, damages and
- ------
expenses incurred by any Indemnified Person (including those arising out of an
Indemnified Person's negligence and fees and disbursements of the respective
Indemnified Person's counsel) which (A) are related to or arise out of (i)
actions taken or omitted to be taken (including any untrue statements made or
any statements omitted to be made) by the Company or (ii) actions taken or
omitted to be taken by an Indemnified Person with the Company's consent or in
conformity with the Company's instructions or the Company's actions or omissions
or (B) are otherwise related to or arise out of the Manager's engagement, and
will reimburse each Indemnified Person for all costs and expenses, including
fees of any Indemnified Person's counsel, as they are incurred, in connection
with investigating, preparing for, defending, or appealing any action, formal or
informal claim, investigation, inquiry or other proceeding, whether or not in
connection with pending or threatened litigation, caused by or arising out of or
in connection with the Manager's acting pursuant to the engagement, whether or
not any Indemnified Person is named as a party thereto and whether or not any
liability results therefrom. The Company will not, however, be responsible for
any claims, liabilities, losses, damages or expenses pursuant to clause (B) of
the preceding sentence that have resulted primarily from the bad faith, gross
negligence or willful misconduct of the Manager. The Company also agrees that
neither the Manager nor any other Indemnified Person shall have any liability to
the Company for or in connection with such engagement except for any such
liability for claims, liabilities, losses, damages, or expenses
<PAGE>
-3-
incurred by the Company that have resulted primarily from the bad faith, gross
negligence or willful misconduct of the Manager. The Company further agrees that
it will not, without the prior written consent of the Manager, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such claim, action, suit or proceeding) unless such
settlement, compromise or consent includes an unconditional release of the
Manager and each other Indemnified Person hereunder from all liability arising
out of such claim, action, suit or proceeding. THE COMPANY HEREBY ACKNOWLEDGES
THAT THE FOREGOING INDEMNITY SHALL BE APPLICABLE TO ALL CLAIMS, LIABILITIES,
LOSSES, DAMAGES OR EXPENSES THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE
RESULTED FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY
NEGLIGENCE OF THE MANAGER OR ANY OTHER INDEMNIFIED PERSON.
The foregoing right to indemnity shall be in addition to any rights that
the Manager and/or any other Indemnified Person may have at common law or
otherwise and shall remain in full force and effect following the completion or
any termination of the engagement. The Company hereby consents to personal
jurisdiction and to service and venue in any court in which any claim which is
subject to this Agreement is brought against the Manager or any other
Indemnified Person.
It is understood that the Manager and certain other Indemnified Persons may
also be engaged to act for the Company in one or more additional capacities, and
that the terms of any such additional engagements may be embodied in one or more
separate written agreements. This indemnification shall apply to the engagement
specified in the first paragraph hereof as well as to any such additional
engagement(s) (whether written or oral) and any modification of said engagement
or such additional engagement(s) and shall remain in full force and effect
following the completion or termination of said engagement or such additional
engagements.
6. MISCELLANEOUS. This Agreement shall be construed and administered and
-------------
the validity hereof shall be determined in accordance with the laws of the
Commonwealth of Massachusetts without regard to its conflicts-of-laws rules.
<PAGE>
-4-
IN WITNESS WHEREOF, the parties hereto have executed this Management Fee
Agreement as of the date first written above.
AMERITRUCK DISTRIBUTION CORP.
By:
--------------------------------------
Name:
Title:
FIRST CAPITAL CORPORATION OF BOSTON
By:
--------------------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.23
THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT
This Third Amendment to Loan and Security Agreement (this
"Amendment"), is made and entered into effective as of the 13th day of November,
1997 by and between FINOVA CAPITAL CORPORATION, a Delaware corporation
("Lender") and AMERITRUCK DISTRIBUTION CORP., a Delaware corporation
("Borrower"). This Amendment modifies and amends that certain Loan and Security
Agreement, dated May 5, 1997, between Lender and Borrower (the "Agreement"). All
terms used herein with initial capital letters, unless otherwise specifically
defined herein, shall have the same meanings as set forth in the Agreement. All
references to the Agreement shall include the Schedule.
RECITALS:
WHEREAS, Borrower has informed Lender that Borrower is attempting to
obtain Twenty Million Dollars ($20,000,000) in connection with a private
placement of its capital stock;
WHEREAS, in connection therewith, Borrower and Lender desire to amend
the Agreement in certain respects;
NOW, THEREFORE, in consideration of the foregoing premises and other
valuable consideration, the parties hereto agree as follows:
1. Amendment to Schedule. Subject to the terms and conditions of
Section 2 below, the Agreement is amended as follows:
(a) Section 18.1 of the Agreement shall be amended to add the
following definitions in the appropriate alphabetical order:
"Additional Availability Period" means the 120 day period commencing
on November 13, 1997 and ending on the earliest of (A) March 12, 1998, (B)
the date a Qualified Private Placement is consummated and (C) the date
Borrower notifies Lender in writing of its desire to terminate the
Additional Availability Period.
"Qualified Private Placement" means any non-public sale of shares of
any class of the Company's capital stock yielding gross proceeds to the
Company of at least $10,000,000.
"Special Advances" means the portion of the Revolving Loans that
exceed $60,000,000 and/or are attributable to advances against clauses (iv)
and/or (v) of Section 1.2 of the Schedule to the Agreement. For purposes
hereof, Revolving Loans shall be deemed made first, against clauses (i),
(ii) and (iii) of Section 1.2 of the Schedule and then against clauses (iv)
and (v), and
<PAGE>
payments shall be deemed to be made first against Special Advances and then
against the other Revolving Loans.
"Subordinated Debt" means the Indebtedness of up to $1,000,000
evidenced by the documents substantially in the form attached as Exhibit A
to that certain Third Amendment to Loan and Security Agreement dated as of
November 13, 1997 between Borrower and Lender.
(b) Clause (vi) of the definition of "Eligible Receivables" in
Section 18.1 of the Agreement is amended and restated in its entirety as
follows:
(vi) the account debtor is the United States or any department,
agency or instrumentality thereof or any State, city or municipality of the
United States, unless the applicable Loan Party with respect thereto has
complied with the Federal Assignment of Claims Act or the applicable state
statute, if any; provided, that so long as no Event of Default exists, if
the applicable Loan Party has failed to comply with the Federal Assignment
of Claims Act, (A) at all times on or prior to December 13, 1997,
Receivables owing by the United States that otherwise satisfy the
definition of Eligible Receivables shall be Eligible Receivables, except
for the aggregate portion thereof that exceeds fifteen percent (15%) of all
Eligible Receivables (or with respect to the United States Postal Service,
the portion thereof that exceeds ten percent (10%) of all Eligible
Receivables) and (B) at all times after December 13, 1997, Receivables
owing by the United States that otherwise satisfy the definition of
Eligible Receivables shall be Eligible Receivables, except for the
aggregate portion thereof that exceeds One Million Dollars ($1,000,000);
(c) The definition of "Net Worth" in Section 18.1 of the Agreement is
amended and restated in its entirety as follows:
"Net Worth" at any date means Borrower's net worth as determined on a
consolidated basis in accordance with generally accepted accounting
principles, consistently applied, excluding the effect of Restructuring
Charges, but plus the Subordinated Debt.
(d) The definition of "Senior Contractual Debt Service" in Section
18.1 of the Agreement is amended and restated in its entirety as follows:
"Senior Contractual Debt Service" means, for any period, Total
Contractual Debt Service (excluding the sum of payments under or required
to be made by the Loan Parties during such period for scheduled principal
payments due with respect to the Subordinated Debt and under the Indenture
(and any notes issued pursuant thereto) and accrued interest (whether or
not paid) during such period on all such Indebtedness with respect to the
Subordinated Debt and the Indenture (and any notes issued pursuant
thereto)).
-2-
<PAGE>
(e) Section 1.1 of the Schedule to the Agreement is amended and
restated in its entirety as follows:
TOTAL FACILITY (Section 1.1): $60,000,000; provided, that during the
Additional Availability Period, the Total
Facility shall be $64,000,000
(f) Section 1.2 of the Schedule to the Agreement is amended and
restated in its entirety as follows:
LOANS (SECTION 1.2):
Revolving Loans: A revolving line of credit
(the "Revolving Loans") consisting of loans
against Eligible Receivables and against
Eligible Equipment in an aggregate
outstanding principal amount not to exceed
the lesser of:
(a) Total Facility
(b) the sum of:
(i) an amount equal to eighty-five
percent (85%) of the net amount
of the Eligible Receivables
that are billed; plus
(ii) an amount (not to exceed the
lesser of (A) Four Million
Dollars ($4,000,000) and (B) an
amount equal to three (3)
working days' revenue (based on
the most recent monthly
financials)) equal to seventy
(70%) of Eligible Receivables
that are unbilled less than
five (5) Business Days; plus
(iii) an amount equal to the
Equipment Advance Rate
multiplied by the Orderly
Liquidation Value of the
Eligible Equipment; plus
(iv) during the Additional
Availability Period only, an
amount equal to five percent
(5%) of the net amount of the
Eligible Receivables that are
billed; plus
(v) during the Additional
Availability Period only, an
amount equal to the
-3-
<PAGE>
product of (A) the amount by
which eighty percent (80%)
exceeds the Equipment Advance
Rate multiplied by (B) the
Orderly Liquidation Value of
the Eligible Equipment; less
(vi) the aggregate undrawn face
amount of all Letters of
Credit issued under Section
1.4 of this Agreement; less
(vii) the amount of the Landlord
Reserve and such other
reserves as Lender, in its
reasonable credit judgment,
deems proper from time to
time based on the results of
its examinations, Appraisals
or other credit or collateral
considerations which indicate
a deterioration in Eligible
Receivables or Eligible
Equipment from the date
hereof, such that additional
reserves for Eligible
Receivables and/or Eligible
Equipment are warranted.
Notwithstanding the foregoing, (A) the loans
against Eligible Equipment shall not exceed
$35,000,000 at any time, (B) the loans
against the availability described in
clauses (iv) and (v) shall not exceed Six
Million Dollars ($6,000,000) and (C) the
availability described in clauses (iv) and
(v) above shall not be available at any time
other than during the Additional
Availability Period. The Revolving Loans
shall be segregated into two tranches:
revolving loans under tranche A (the
"Revolving A Loans") and revolving loans
under tranche B (the "Revolving B Loans").
The maximum outstanding principal amount of
Revolving A Loans is Thirty Million Dollars
($30,000,000) and the maximum outstanding
principal amount of Revolving B Loans is
Thirty Million Dollars ($30,000,000);
provided, that during the Additional
Availability Period, the maximum outstanding
principal amount of Revolving B Loans shall
be Thirty-Four Million Dollars
($34,000,000). With respect to each request
for a Revolving Loan or Letter of Credit,
Borrower shall designate whether such
request is for a Revolving A Loan (or under
the tranche for Revolving A Loans in the
case of Letters of Credit) or a Revolving B
Loan (or under the tranche for Revolving B
Loans in the case of Letters
-4-
<PAGE>
of Credit). With each request for a
Revolving B Loan (or a Letter of Credit to
be issued under the tranche for Revolving B
Loans), Borrower shall provide Lender with a
certificate of the chief financial officer
of Borrower, in form and substance
satisfactory to Lender that such Revolving B
Loan or Letter of Credit, as applicable,
will not result in a breach or violation of
the Indenture, and at the request of Lender,
with an opinion of Borrower's counsel that
such Revolving B Loan or Letter of Credit,
as applicable, will not result in a breach
or violation of the Indenture.
(g) The first section of Section 3.1(A) of the Schedule to the
Agreement is amended and restated in its entirety as follows:
INTEREST AND FEES (SECTION 3.1):
A. Interest.
(i) The Revolving Loans shall bear
interest on the unpaid principal
amount thereof from the date such
Revolving Loans are made and until
paid in full at one of the following
rates, as selected by Borrower from
time to time as provided in this
Section 3.1:
(a) Base Rate Option. That
portion of the outstanding
principal balance of the
Revolving Loan subject to
this option shall bear
interest at a fluctuating
rate per annum equal to (A)
if the Additional
Availability Period has not
ended, the Base Rate plus one
and three-quarters percent
(1.75%) during the period
commencing January 12, 1998
and ending on the last day of
the Additional Availability
Period and (B) the Base Rate
plus three-quarters of one
percent (0.75%) at all other
times; and
(b) LIBOR Rate Option. That
portion of the outstanding
principal balance of the
Revolving Loan subject to
this option shall bear
interest at a fixed rate per
annum equal to (A) if the
Additional Availability
Period has
-5-
<PAGE>
not ended, the LIBOR Rate
applicable to such LIBOR Rate
Portion plus three and three-
quarters percent (3.75%)
during the period commencing
January 12, 1998 and ending
on the last day of the
Additional Availability
Period and (B) the LIBOR Rate
applicable to such LIBOR Rate
Portion plus two and three-
quarters percent (2.75%) at
all other times.
; provided, that during the period
November 13, 1997 and ending January
11, 1998, the Special Advances shall
bear interest on the unpaid principal
amount thereof from the date such
Special Advances are made and until
paid in full at a rate per annum equal
to eleven percent (11%).
(h) A new Section 3.1(E) is added to the Schedule to the Agreement as
follows:
E. Fees for Additional Availability
Period. Borrower shall pay to Lender
an Additional Availability Facility
Fee equal to One Hundred Fifty
Thousand Dollars ($150,000) which
shall be payable on the first day of
the Additional Availability Period
and, if the Additional Availability
Period has not yet ended, another
Additional Availability Facility Fee
equal to One Hundred Eighty Thousand
Dollars ($180,000) which shall be
payable on January 12, 1998.
(i) Exhibit E to the Agreement is replaced with the Exhibit E
attached hereto.
(j) Exhibit H to the Agreement is replaced with the Exhibit H
attached hereto.
2. Conditions to Effectiveness. As a condition precedent to the
effectiveness of this Amendment, Lender shall have received evidence that
Borrower has received proceeds of at least Eight Hundred Seventy-Four Thousand
Dollars ($874,000) of Subordinated Debt (as defined below).
3. Other Agreements. Borrower agrees that, in addition to its rights
to obtain Appraisals under Section 5.3 of the Agreement, Lender may obtain, at
the expense of Borrower, an Appraisal of the Equipment and that such Appraisal
shall not be subject to any
-6-
<PAGE>
of the limitations set forth in Section 5.3 of the Agreement. In
addition, Borrower agrees to pay to Lender a fee equal to Thirty Thousand
Dollars ($30,000) on the date hereof, regardless of whether this Amendment
becomes effective. Within ten (10) days of the date hereof, Borrower agrees to
enter into, and to cause of its operating subsidiaries to enter into, blocked
account and lockbox agreements, each in form and substance reasonably
satisfactory to Lender, and consistent with drafts previously reviewed and
approved by Borrower, with Lender and NationsBank of Texas, N.A. Borrower also
agrees to obtain, on or before November 30, 1997, an additional One Hundred
Twenty-Six Thousand Dollars ($126,000) of subordinated debt substantially on the
terms set forth in the agreements attached hereto as Exhibit A (such
subordinated debt, together with the subordinated debt referred to in Section 2
above, the "Subordinated Debt"); provided, that Borrower agrees that such
Subordinated Debt may not be repaid unless the Additional Availability Period
has ended and no Event of Default exists. Failure of Borrower to comply with
any of the terms set forth in this Section 3 shall constitute an Event of
Default. Pursuant to Sections 14(k) and 14(l) of the Agreement, Lender consents
to the incurrence of the Subordinated Debt and the execution, delivery and
performance of the documents attached hereto as Exhibit A. Pursuant to Sections
14(k) and 14(l) of the Agreement, Lender also consents to the execution,
delivery and performance of the Management Fee Agreement attached hereto as
Exhibit B; provided, that Borrower agrees that no payments may be made under
such agreement if an Event of Default shall be continuing.
4. Confirmation of Liens. This Amendment in no way acts as a release
or relinquishment of any of the liens, security interests, rights or remedies
securing payment of the Loans or of the enforcement thereof. Such liens,
security interests, rights and remedies are hereby ratified, confirmed,
preserved, renewed and extended by Borrower in all respects.
5. Events of Default. The Events of Default specified in the Agreement
and the other Loan Documents shall continue to be the Events of Default under
the Loans except as otherwise specifically agreed herein to the contrary.
Lender's remedies with respect to the occurrence of an Event of Default shall
continue to be as set forth in the Loan Documents.
6. Reaffirmation of the Loan Documents. All terms, conditions and
provisions of the Agreement and the other Loan Documents are hereby reaffirmed
and continued in full force and effect and shall remain unaffected and unchanged
except as specifically amended hereby.
7. Representations and Warranties. Borrower represents and warrants to
Lender that the execution and delivery by Borrower of this Amendment has been
duly and properly made and authorized. The Loan Documents and this Amendment
each constitute valid and binding obligations of Borrower, enforceable in
accordance with their respective terms.
-7-
<PAGE>
8. Benefit of the Amendment. The terms and provisions of this
Amendment and the other Loan Documents shall be binding upon and inure to the
benefit of Lender and Borrower and their respective successors and assigns,
except that Borrower shall not have any right to assign its rights under this
Amendment or any of the Loan Documents or any interest therein without the prior
written consent of Lender.
9. Choice of Law. The Loan Documents and this Amendment shall be
performed and construed in accordance with the laws of the State of Arizona.
10. Entire Agreement. Except as modified by this Amendment, the Loan
Documents remain in full force and effect. The Loan Documents, as modified by
this Amendment, embody the entire agreement and understanding between Borrower
and Lender, and supersede all prior agreements and understandings between said
parties relating to the subject matter thereof.
11. Counterparts; Telecopy Execution. This Amendment may be executed
in any number of separate counterparts, each of which, when taken together,
shall constitute one and the same agreement, admissible into evidence,
notwithstanding the fact that all parties have not signed the same counterpart.
Delivery of an executed counterpart of this Amendment by telefacsimile shall be
equally as effective as delivery of a manually executed counterpart of this
Amendment. Any party delivering an executed counterpart of this Amendment by
telefacsimile shall also deliver a manually executed counterpart of this
Amendment, but the failure to deliver a manually executed counterpart shall not
affect the validity, enforceability, and binding effect of this Amendment.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the day, month, and year first above written.
FINOVA CAPITAL CORPORATION, a Delaware
corporation
By
------------------------------------
Name
----------------------------------
Title
---------------------------------
AMERITRUCK DISTRIBUTION CORP., a
Delaware corporation
By
------------------------------------
Name
----------------------------------
Title
---------------------------------
-9-
<PAGE>
REAFFIRMATION OF GUARANTORS
Dated November 13, 1997
Each of the undersigned hereby (i) confirms that it has read the
foregoing Consent and First Amendment Agreement, and (ii) reaffirms its
obligations under the Continuing Guaranty that it executed in favor of FINOVA
Capital Corporation.
AMERITRUCK EQUIPMENT CORP.
AMERITRUCK LOGISTICS SERVICES, INC.
AMERITRUCK REFRIGERATED TRANSPORT, INC.
J.C. BANGERTER & SONS, INC.
CMS TRANSPORTATION SERVICES, INC.
KTL, INC.
SCALES TRANSPORTATION CORPORATION
SCALES LEASING COMPANY, INC.
THOMPSON BROS., INC.
W&L SERVICES CORP.
W&L MOTOR LINES, INC.
AMERITRUCK OPERATIONS SERVICES, INC.
BEST WAY MOTOR LINES, INC.
BILLINGS TRUCKING CORPORATION
BLS INVESTMENTS, INC.
CAS SERVICE COMPANY
CAS TRANSPORTATION, INC.
FRONTIER FREIGHT, INC.
MONFORT TRANSPORTATION COMPANY
LYNN TRANSPORTATION CO.
TRANS-STAR, INC.
PRO-TRANS SERVICES, INC.
By
-------------------------------------
Name
-----------------------------------
Title of each Guarantor
-----------------
<PAGE>
EXHIBIT A
See Attached
<PAGE>
EXHIBIT B
See Attached
<PAGE>
EXHIBIT E
Such Account Debtors as are mutually agreed to by Borrower and Lender
on or before December 15, 1997
<PAGE>
EXHIBIT H
None
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERITRUCK
DISTRIBUTION CORP'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 21
<SECURITIES> 0
<RECEIVABLES> 50,312
<ALLOWANCES> 1,295
<INVENTORY> 2,123
<CURRENT-ASSETS> 71,157
<PP&E> 156,116
<DEPRECIATION> 38,342
<TOTAL-ASSETS> 263,500
<CURRENT-LIABILITIES> 58,751
<BONDS> 226,230
3,091
0
<COMMON> 42
<OTHER-SE> (12,377)
<TOTAL-LIABILITY-AND-EQUITY> 263,500
<SALES> 0
<TOTAL-REVENUES> 291,552
<CGS> 0
<TOTAL-COSTS> 287,437
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 233
<INTEREST-EXPENSE> 21,015
<INCOME-PRETAX> (17,274)
<INCOME-TAX> (6,618)
<INCOME-CONTINUING> (10,656)
<DISCONTINUED> 0
<EXTRAORDINARY> (243)
<CHANGES> 0
<NET-INCOME> (10,899)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
