MOTOR CARGO INDUSTRIES INC, S-1/A, 1997-11-20

MOTOR CARGO INDUSTRIES INC
S-1/A, 1997-11-20
TRUCKING (NO LOCAL)

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 20, 1997

REGISTRATION NO. 333-37211
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

MOTOR CARGO INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------

<TABLE>
<S> <C> <C>
UTAH 4213 87-0406479
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD I.R.S. EMPLOYER
OF INCORPORATION OR INDUSTRIAL CLASSIFICATION CODE IDENTIFICATION NO.
ORGANIZATION) NUMBER)
</TABLE>

845 WEST CENTER STREET, NORTH SALT LAKE, UTAH 84054
(801) 292-1111
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

MARVIN L. FRIEDLAND, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
845 WEST CENTER STREET
NORTH SALT LAKE, UTAH 84054
(801) 292-1111
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------

COPIES TO:

<TABLE>
<S> <C>
ARTHUR B. RALPH, ESQ. ROBERT WALKER, ESQ.
VAN COTT, BAGLEY, CORNWALL & MCCARTHY BAKER, DONELSON, BEARMAN & CALDWELL
50 SOUTH MAIN STREET, SUITE 1600 2000 FIRST TENNESSEE BUILDING
SALT LAKE CITY, UTAH 84144-0540 MEMPHIS, TENNESSEE 38103
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [ ]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED NOVEMBER 20, 1997

2,230,000 SHARES
[MOTOR CARGO INDUSTRIES LOGO]
COMMON STOCK

Of the 2,230,000 shares of Common Stock offered hereby (the "Offering"),
1,150,000 are being sold by Motor Cargo Industries, Inc. (the "Company") and
1,080,000 are being sold by certain selling shareholders of the Company (the
"Selling Shareholders"). See "Principal and Selling Shareholders." The Company
will not receive any proceeds from the sale of the Common Stock by the Selling
Shareholders. Prior to the Offering there has been no public market for the
Common Stock of the Company. It is currently estimated that the initial public
offering price will be between $12.00 and $14.00 per share. See "Underwriting"
for information relating to the factors considered in determining the initial
public offering price. Application has been made for quotation of the Common
Stock on the Nasdaq National Market under the symbol "CRGO." Upon completion of
the Offering, Harold R. Tate, the Chairman of the Board of Directors of the
Company, will beneficially own approximately 56% of the voting power of the
capital stock of the Company and will be able to control the outcome of all
matters requiring a shareholder vote, including the election of directors.
------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS FOR CERTAIN
INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<S> <C> <C> <C> <C>
==================================================================================================
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
- --------------------------------------------------------------------------------------------------
Per Share................. $ $ $ $
Total(3).................. $ $ $ $
==================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities arising under the Securities Act of 1933,
as amended (the "Securities Act"). See "Underwriting."

(2) Before deducting expenses estimated at approximately $600,000 payable by the
Company.

(3) The Company and certain Selling Shareholders have granted the Underwriters
options, exercisable within 30 days after the date hereof, to purchase up to
an additional 17,250 and 317,250 shares of Common Stock, respectively, at
the Price to Public less Underwriting Discounts and Commissions, solely to
cover over-allotments, if any. If all such shares are purchased, the total
Price to Public, Underwriting Discounts and Commissions, Proceeds to
Company, and Proceeds to Selling Shareholders will be $ ,
$ , $ and $ , respectively. See "Underwriting."

------------------------

The Common Stock is offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by the Underwriters, subject to
their right to withdraw, cancel, modify, or reject orders in whole or in part,
and subject to certain other conditions. It is expected that delivery of the
shares of Common Stock offered hereby will be made on or about ,
1997.

MORGAN KEEGAN & COMPANY, INC. FURMAN SELZ

THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 3

[THE INSIDE FRONT COVER OF THE PROSPECTUS CONTAINS SUPERIMPOSED IMAGES OF
THE COMPANY'S HEADQUARTERS IN NORTH SALT LAKE, UTAH, A COMPANY TRACTOR PULLING A
TRIPLE TRAILER AND A MAP OF THE WESTERN UNITED STATES SHOWING LOCATIONS SERVICED
BY MOTOR CARGO. IMAGES ALSO INCLUDE THE MOTOR CARGO LOGO, THE MC DISTRIBUTION
SERVICES LOGO AND A GRAPHICAL DESIGN WHICH INCLUDES THE FOLLOWING TEXT: "A
TRADITION OF EXCELLENCE FOR OVER 75 YEARS -- MOTOR CARGO -- 1922-1997]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THIS OFFERING
AND MAY BID FOR AND PURCHASE SHARES OF COMMON STOCK IN THE OPEN MARKET TO COVER
SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

THE COMPANY INTENDS TO FURNISH ITS SHAREHOLDERS WITH ANNUAL REPORTS
CONTAINING AUDITED FINANCIAL STATEMENTS AND QUARTERLY REPORTS CONTAINING
UNAUDITED FINANCIAL STATEMENTS FOR EACH OF THE FIRST THREE QUARTERS OF EACH
FISCAL YEAR.
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements, including the Notes
thereto, appearing elsewhere in this Prospectus. See "Risk Factors" for a
discussion of certain factors to be considered by prospective investors. Unless
otherwise indicated in this Prospectus, (i) all information assumes that the
Underwriters' over-allotment option is not exercised, (ii) all references to the
"Company" in this Prospectus refer to Motor Cargo Industries, Inc., a Utah
corporation, and its subsidiaries and (iii) all financial information includes
the historical operations of Ute Trucking and Leasing, LLC, a Utah limited
liability company formerly owned by certain shareholders of the Company. See
"History of the Company."

THE COMPANY

Motor Cargo Industries, Inc. (the "Company") is a less-than-truckload
("LTL") carrier which provides transportation and logistics services to shippers
primarily within the western region of the United States. The Company transports
general commodities, including consumer goods, packaged foodstuffs, electronics,
computer equipment, apparel, hardware, industrial goods and auto parts for major
shippers such as Starbucks Coffee Company, 3M Corporation, Steelcase, Pepperidge
Farm, Sony Music, Eli Lilly, General Motors and Square D Corp. No one customer
accounts for over 5% of the Company's total revenues. The Company offers a broad
range of services, including expedited scheduling and full
temperature-controlled service. The Company's management believes that by
focusing on the high service segment of the LTL industry the Company can
continue its profitable growth within the western region of the United States,
which is one of the fastest growing regions of the United States. The Company's
management believes that the Company's rigorous focus on cost controls, its
largely nonunion work force (over 95% of its employees are nonunion) and its
focus on the western region give the Company a competitive advantage with
respect to the larger, national LTL carriers that compete with the Company
within the western region.

The Company has 22 service centers strategically located in each major
population center in the western region. The Company uses a single service
center, rather than multiple satellite terminals, in each of the major cities it
serves in order to reduce intermediate handling. The Company also utilizes 20
independent agents in smaller markets, enabling the Company to offer shippers
extensive coverage throughout the region. Approximately 58% of the Company's
shipments are currently delivered overnight and over 90% of all shipments are
delivered within two days.

Instead of utilizing a "hub and spoke" system, which is typically used by
large, national LTL carriers, the Company emphasizes "direct loading" of freight
between service centers with no intermediate handling on most shipments. Hub and
spoke systems generally require shipments to be loaded and unloaded several
times at a number of service centers and breakbulk facilities prior to delivery.
Direct loading allows shipments to be transported directly from the originating
service center to the destination service center without intermediate handling.
Direct loading reduces the Company's costs because it requires less loading and
unloading of freight and requires fewer terminals and breakbulk operations.

The Company's growth strategy includes the following key elements:

- Increase Market Share Within Core Service Region. The Company believes
that its core western regional market has the potential for significant
profitable revenue growth. In addition, the Company believes it is in a
position to increase its market share within its core service region. In
the second half of 1995 the Company initiated a significant expansion of
its terminal network in order to increase coverage within its core
service region. The Company is now focused on improving route, lane and
service center densities within its core service region through
aggressive sales and marketing efforts and expanded service offerings.
The Company expanded its sales force significantly during 1996 and
intends to further expand its sales force in 1998 and 1999. The Company
anticipates that it will continue to increase the capacity of its
terminal network by adding capacity to existing service centers and
establishing new service centers incrementally as needed, with
particular emphasis in the Pacific northwest.

3
<PAGE> 5

- Expand into Additional Major Markets. The Company's strategic growth
plan calls for establishing market and operational presence in several
major business economic areas ("BEAs") within the midwest and southeast
regions of the United States during the next three years. Unlike more
traditional inter-regional expansion models, the Company intends only to
solicit tonnage from these markets moving west into its core service
region. The Company intends to utilize third-party truckload carriers to
transport freight from these markets to its core service region. The
Company anticipates that this strategy of selling into the region will
improve lane, route and service center densities in its core service
region without requiring the Company to incur the costs associated with
building an inter-regional terminal network. The Company intends to
enter into interline partnerships to provide immediate revenue and
offset start-up costs associated with certain BEA expansions. The
Company commenced operations at its first BEA expansion facility in
Dallas in October 1997. Additional BEAs under consideration for 1998 and
1999 include major distribution centers such as Atlanta, Chicago,
Cleveland, Houston, Indianapolis, Memphis, Minneapolis and St. Louis.

- Expand the Market Presence of MCDS. The Company believes that many
companies are increasingly focused on outsourcing certain non-core
functions and are engaging third-party logistics companies to provide
distribution management services. Through its subsidiary, MC
Distribution Services, Inc. ("MCDS"), the Company provides customized
logistics, warehousing and distribution management services. MCDS
targets customers with distribution requirements that are time-sensitive
and require a significant amount of transportation. MCDS currently
provides "just-in-time" delivery services for two major specialty
retailers. Although MCDS has the ability to provide services for large
projects, MCDS targets smaller and mid-sized projects which do not meet
the minimum revenue requirements of many of its larger competitors. By
focusing on capabilities which are complementary to the Company's
services, and leveraging the Company's existing customer base, the
Company believes that MCDS provides a significant opportunity for future
revenue and earnings growth.

- Emphasize Low-cost Operations. By focusing on the western region, the
Company believes it will be able to improve lane, route and service
center densities, allowing the Company to better leverage the fixed
costs of its terminal network. In addition, the Company believes that
its largely nonunion work force gives it a competitive advantage over
larger unionized carriers that operate within the Company's core service
region. The Company also believes it is among the leading carriers in
the country in adopting technology-based solutions for analyzing the
profitability of shipments and reducing costs. As a result, the Company
recently eliminated certain business and tonnage that did not meet the
Company's margin requirements. Management believes that this account
rationalization process was responsible for improved profit margins
during the first nine months of 1997. The Company intends to continually
analyze the profitability of each customer, lane and service center.

The Company was incorporated in Utah in 1996. The Company's wholly-owned
operating subsidiary, Motor Cargo, a Utah corporation ("Motor Cargo"), is the
surviving corporation resulting from the merger of certain trucking companies in
1973. The Company's principal executive offices are located at 845 West Center
Street, North Salt Lake, Utah 84054, and its telephone number is (801) 292-1111.

4
<PAGE> 6

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the
Company............................ 1,150,000 Shares
Common Stock offered by the Selling
Shareholders....................... 1,080,000 Shares
Common Stock to be outstanding after
this Offering...................... 6,990,000 Shares(1)
Use of proceeds...................... To reduce indebtedness and purchase revenue equipment
and for working capital. See "Use of Proceeds."
Proposed Nasdaq National Market
Symbol............................. "CRGO"
</TABLE>

- ---------------

(1) Includes 20,000 shares to be issued upon completion of the Offering pursuant
to a restricted stock agreement between the Company and Louis V. Holdener.
Excludes 500,000 shares of Common Stock reserved for issuance upon exercise
of options which may be granted under the Company's 1997 Stock Option Plan.
It is anticipated that options for up to 229,500 shares will be granted
under the Company's 1997 Stock Option Plan simultaneously with the
completion of this Offering with an exercise price equal to the initial
public offering price for the Common Stock. See "Management -- 1997 Stock
Option Plan."

RISK FACTORS

A number of factors should be considered by potential investors before
purchasing shares of the Company's Common Stock. See "Risk Factors."

5
<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Operating revenues............... $ 63,660 $ 68,726 $ 82,984 $ 80,808 $ 92,310 $ 68,272 $ 77,446
Operating income................. 5,439 5,883 9,412 7,367 7,315 5,328 7,792
Interest expense................. 1,400 1,408 1,392 1,500 1,430 1,129 772
Net earnings..................... 2,823 2,969 5,181 3,880 3,735 2,659 4,308
Pro forma(1)
Earnings before income taxes... $ 4,130 $ 4,444 $ 8,124 $ 5,974 $ 5,853 4,215 7,132
Income taxes................... 1,549 1,569 3,125 2,303 2,256 1,627 2,878
Net earnings................... 2,581 2,875 4,999 3,671 3,597 2,588 4,254
Earnings per common share...... $ 0.44 $ 0.49 $ 0.86 $ 0.63 $ 0.62 $ 0.44 $ 0.73
Weighted average shares
outstanding.................. 5,820 5,820 5,820 5,820 5,820 5,820 5,820
Supplemental pro forma earnings
per share(2)................... $ 0.61 $ 0.44 $ 0.70
OPERATING DATA:
Operating Ratio (3).............. 91.4% 91.4% 88.7% 90.9% 92.1% 92.2% 89.9%
Average revenue per mile......... $ 2.71 $ 2.84 $ 3.00 $ 2.90 $ 2.80 $ 2.76 $ 3.05
Revenue per hundredweight........ $ 10.61 $ 10.97 $ 10.82 $ 10.78 $ 10.74 $ 10.61 $ 11.08
Average revenue per bill......... $ 119.20 $ 119.85 $ 126.29 $ 122.51 $ 122.54 $ 119.64 $ 125.57
Average tractors for period(4)... 368 402 435 476 520 520 541
Tractors at end of period(4)..... 382 422 448 504 535 535 576
Trailers at end of period........ 1,376 1,571 1,802 2,080 2,251 2,251 2,297
Average miles per tractor(4)..... 64,142 60,451 63,800 58,991 62,868 47,190 46,162
Tons shipped..................... 301,588 314,865 384,416 377,042 426,109 316,715 343,686
Shipments........................ 536,955 576,288 658,982 663,648 747,024 561,652 606,415
Average weight per bill.......... 1,123 1,093 1,167 1,136 1,141 1,128 1,134
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------
ACTUAL AS ADJUSTED(5)(6)
------- -----------------
<S> <C> <C>
BALANCE SHEET DATA:
Net property and equipment............................................... $39,836 $42,236
Total assets............................................................. 62,888 68,692
Long-term obligations, less current maturities........................... 12,500 8,257
Total liabilities........................................................ 32,998 25,498
Stockholders' equity..................................................... 29,890 43,194
</TABLE>

- ---------------

(1) Effective August 28, 1997, the Company acquired the membership interests of
Ute Trucking and Leasing, LLC, a Utah limited liability company ("Ute"). A
limited liability company passes through to its members essentially all
taxable earnings and losses and pays no tax at the company level.
Accordingly, for comparative purposes, a pro forma provision for income
taxes using an effective tax rate of 38% has been determined assuming Ute
has been taxed as a C corporation for all periods presented.

(2) Supplemental pro forma earnings per share is calculated by dividing pro
forma net earnings (adjusted for the pro forma reduction in interest expense
that specifically corresponds to the application of proceeds from the
Offering to repay indebtedness of $7,500,000 of notes payable) by weighted
average shares outstanding used in the calculation of net earnings per
common share (adjusted for the estimated shares at each date that would be
issued by the Company at $13 per share to retire the $7,500,000). See "Use
of Proceeds" and "Certain Transactions."

(3) Operating expenses as a percentage of operating revenues. The operating
ratio for 1995 and subsequent periods includes the revenues and expenses of
MCDS. All other operating data presented includes only operating data for
trucking operations and excludes operating data for MCDS.

(4) Includes pick-up and delivery tractors and trucks. See "Business -- Revenue
Equipment."

(5) Adjusted for the sale of 1,150,000 shares of Common Stock offered by the
Company and the application of the estimated net proceeds therefrom as
described under "Use of Proceeds."

(6) Effective August 28, 1997, Ute was acquired by the Company and became a
taxable entity. Previously, its earnings and losses were included in the
personal tax returns of members, and Ute did not record an income tax
provision. Effective with the change, in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes,"
income taxes will be provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the basis of property and
equipment for financial and income tax reporting. The deferred tax liability
represents the future tax return consequences of these differences, which
will be taxable when the liabilities are settled. Accordingly, a deferred
tax liability at the date of the change (of approximately $238,000) has been
recorded through a one-time charge to the deferred tax provision. See
"Certain Transactions."

6
<PAGE> 8

RISK FACTORS

An investment in the Common Stock offered hereby involves a high degree of
risk. The following factors should be considered carefully, together with the
information provided elsewhere in this Prospectus, in evaluating an investment
in the shares of Common Stock offered hereby.

ECONOMIC FACTORS

The availability and price of fuel, insurance costs, interest rates,
fluctuations in customers' business cycles and national and regional economic
conditions are economic factors over which the Company has little or no control.
Significant increases in fuel prices, interest rates or increases in insurance
costs, to the extent not offset by increases in freight rates, or disruptions in
fuel supply, would adversely affect the Company's results of operations. A
significant downturn in customers' businesses or temporary inventory imbalances
(resulting from a recession or otherwise) also could have a material adverse
effect on the profitability of the Company. Finally, the Company may be forced
to curtail its plans for growth due to changes in economic conditions,
particularly decreased demand for LTL carrier services. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Fuel Availability and Cost."

AVAILABILITY OF EMPLOYEE DRIVERS AND INDEPENDENT CONTRACTORS

The Company utilizes the services of both employee drivers and independent
contractors. Competition for employee drivers and independent contractors is
intense in the trucking industry, and the Company occasionally experiences
difficulty attracting and retaining enough qualified employee drivers and
independent contractors. There can be no assurance that the Company will not be
affected by a shortage of qualified employee drivers or independent contractors
in the future, which could result in temporary underutilization of revenue
equipment, difficulty in meeting shipper demands and increased compensation
levels. Prolonged difficulty in attracting or retaining qualified employee
drivers or independent contractors could have a materially adverse effect on the
Company's operations and limit its growth. See "Business -- Drivers, Independent
Contractors and other Personnel."

RISKS ASSOCIATED WITH GEOGRAPHIC EXPANSION

As part of the Company's growth strategy, the Company intends to establish
market and operational presence in several metropolitan areas outside its core
service region. Unlike more traditional inter-regional expansion models, the
Company intends only to solicit tonnage from these markets moving west into its
core service region. These anticipated expansions involve establishing terminal
facilities that will be operated differently from the service centers currently
operated by the Company in its core service region. The Company has no previous
experience with operations in these markets and limited experience with this new
operating concept, and no assurance can be given that such operations will be
successful. There may be unanticipated costs or problems associated with
implementing this new operating strategy. While the Company intends to enter
into interline partnerships to provide immediate revenue and offset start-up
costs associated with such expansions in certain markets, such expansions may
have a negative effect on the Company's short-term operating results. In
addition, such expansions may require the Company to attract and retain
experienced management personnel and require the integration of management
information systems and other operating systems. The success of the Company's
expansion strategy will depend on the Company's ability to manage effectively an
increasing number of new facilities while continuing to manage its existing
business. See "Business -- Growth Strategy."

CAPITAL REQUIREMENTS

The trucking industry is very capital intensive. The Company historically
has relied upon cash flow from operations and debt to finance new revenue
equipment, and it has granted its lenders a lien on a substantial portion of its
assets. If in the future the Company were unable to borrow sufficient funds,
enter into acceptable operating lease arrangements, or raise additional equity,
the resulting capital shortage would impair the Company's ability to acquire
additional revenue equipment and adversely affect the Company's growth and

7
<PAGE> 9

profitability. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."

CLAIMS EXPOSURE AND INSURANCE COSTS

Trucking companies, including the Company, face multiple claims for
personal injury and property damage relating to accidents, cargo damage and
workers' compensation. The Company currently maintains liability insurance for
bodily injury and property damage in the amount of $30 million, with a self
retention amount of $500,000 per incident and cargo insurance in the amount of
$1 million, with a self retention amount of $100,000, per load. The Company also
maintains workers' compensation insurance, with a deductible of $250,000 in
Nevada, and without a deductible in Washington. The Company is responsible for
workers' compensation claims in other states in which the Company operates, up
to an aggregate of approximately $1.9 million per year, and the Company
maintains insurance for workers' compensation payments in excess of such amount.
During 1996 and the first nine months of 1997 the Company experienced higher
than expected claims for accidents, and the payments and reserves for these
claims adversely affected the Company's operating results for such periods. To
the extent that the Company experiences a material increase in the frequency or
severity of accidents or workers' compensation claims, or unfavorable
developments on existing claims, the Company's operating results and financial
condition could be materially adversely affected. Significant increases in the
Company's claims and insurance costs, to the extent not offset by rate
increases, would reduce the Company's profitability. See "Management's
Discussion and Analysis -- Results of Operations" and "Business -- Safety and
Insurance."

COMPETITION

The trucking industry is highly competitive and fragmented. Competition for
freight transported by the Company is based primarily on service and efficiency
and on freight rates. The Company competes with regional, inter-regional and
national LTL carriers of varying sizes and, to a lesser extent with truckload
carriers, railroads and overnight delivery companies. Some of the Company's
competitors are divisions or subsidiaries of larger trucking companies. Many of
the Company's competitors have greater financial resources, more equipment and
greater freight capacity than the Company. Certain carriers occasionally
experience periods of over capacity during which these carriers reduce prices in
order to increase utilization of revenue equipment. See
"Business -- Competition."

DEPENDENCE UPON KEY PERSONNEL

The Company's success is highly dependent upon the continued services of
the Company's Chairman, Harold R. Tate, and the Company's senior management
team, particularly Marshall L. Tate, the Company's President and Chief Executive
Officer, and Louis V. Holdener, the President of the Company's operating
subsidiary, Motor Cargo. The Company does not have employment agreements with
Harold R. Tate or Marshall L. Tate. The loss of one or more of these individuals
could have a materially adverse effect upon the Company. The Company's success
also depends upon its ability to attract and retain skilled employees. There is
significant competition for qualified personnel in the trucking industry. There
can be no assurance that the Company will attract and retain qualified
management personnel in the future. See "Management."

LABOR RELATIONS

Approximately 5% of the Company's employees are covered by two separate
collective bargaining agreements which expire in 1999 and 2000. The Company
believes that it has satisfactory relations with its employees. There can be no
assurance, however, that new labor agreements will be reached without a work
stoppage or strike or will be reached on terms satisfactory to the Company. A
prolonged work stoppage or strike at any of the Company's facilities could have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Drivers, Independent Contractors and
other Personnel."

8
<PAGE> 10

SEASONALITY

The Company experiences some seasonal fluctuations in freight volume.
Historically, the Company's shipments decrease during the winter months. In
addition, the Company's operating expenses historically have been higher in the
winter months due to decreased fuel efficiency and increased maintenance costs
for revenue equipment in colder weather. Historically, on average, the Company's
revenues have been 3% to 4% lower in the first and fourth quarters of each year
compared to the second and third quarters of each year. The Company's operating
expenses, as a percentage of revenues, have historically been one or two
percentage points higher in the first and fourth quarters of each year compared
to the second and third quarters of each year. The Company's operating revenue
and net earnings may vary as a result of seasonal factors, and accordingly,
results of operations are subject to fluctuation, and results in any period
should not be considered indicative of the results to be expected for any future
period. Fluctuations in operating results may also result in fluctuations in the
price of the Common Stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Seasonality."

FUEL PRICE FLUCTUATIONS

Fuel prices tend to fluctuate. Any increase in fuel taxes or in fuel
prices, to the extent not offset by freight rate increases or fuel surcharges to
customers, or any interruption in the supply of fuel, could have a materially
adverse effect on the Company's operating results. Because of the highly
competitive nature of the market for LTL services, the Company generally must
wait for larger carriers to implement fuel surcharges before the Company can
effectively implement fuel surcharges. See "Business -- Fuel Availability and
Cost."

ENVIRONMENTAL HAZARDS

The Company's operations are subject to various environmental laws and
regulations dealing with the transportation, storage, presence, use, disposal,
and handling of hazardous materials and hazardous wastes, discharge of
stormwater, and underground fuel storage tanks. The Company transports certain
commodities that are or may be deemed hazardous substances. The Company also
currently maintains above-ground and underground fuel storage tanks on several
of its properties. The Company is not aware of any fuel spills or hazardous
substance contamination on its properties that would have a material adverse
effect on the Company and the Company believes that its operations are in
material compliance with existing environmental laws and regulations. If,
however, the Company should be involved in a fuel spill, or a spill or other
accident involving hazardous substances, if any such substances were found on
the Company's properties, or if the Company were found to be in violation of
applicable laws and regulations, the Company could be responsible for clean-up
costs, property damage, and fines or other penalties, any one of which could
have a materially adverse effect on the Company. See "Risk Factors -- Government
Regulation" and "Business -- Regulation."

GOVERNMENT REGULATION

Trucking companies are subject to regulation by various federal and state
agencies, including the United States Department of Transportation (the "DOT").
These regulatory authorities govern activities such as operational safety,
accounting systems, and financial reporting. State regulation of intrastate
authority and routes of service was preempted by federal law in 1995. The
abolition of the Interstate Commerce Commission effective January 1, 1996,
terminated regulation by that agency, including regulation of rates and certain
mergers, consolidations, and acquisitions (subject to continued antitrust review
by the Department of Justice and the Federal Trade Commission). The use of
triple trailers is subject to state regulation and is prohibited by several
states within the Company's core service region. Federal legislation prohibiting
the use of triple trailers has also been proposed. The Company also is subject
to regulations promulgated by the Environmental Protection Agency ("EPA") and
similar state agencies. See "Risk Factors -- Environmental Hazards" and
"Business -- Regulation."

9
<PAGE> 11

VOTING CONTROL OF THE COMPANY

On all matters with respect to which the Company's shareholders have a
right to vote, including the election of directors, each share of Common Stock
is entitled to one vote. Upon completion of the Offering, Harold R. Tate will
beneficially own approximately 56% of the outstanding shares of Common Stock
(approximately 55% if the underwriters' over-allotment option is exercised in
full). As long as Mr. Tate controls a majority of the votes entitled to be cast
by the Company's Common Stock, he will have the ability to elect the entire
Board of Directors of the Company, determine the outcome of all matters
involving a shareholder vote, and take certain actions by written consent with
proper notice given to the other shareholders. Control by Mr. Tate of a majority
of the votes entitled to be cast by the holders of outstanding Common Stock
could make it more difficult for a third party to acquire, or discourage a third
party from attempting to acquire, control of the Company. See "Principal and
Selling Shareholders" and "Description of Capital Stock."

LIMITATIONS ON TAKEOVERS

Certain corporate governance and statutory provisions may inhibit changes
in control of the Company. Applicable provisions of Utah law restrict the voting
rights of certain acquirors and the ability of such persons to engage in
unapproved business combinations with the Company. The Company's Articles of
Incorporation allow the Board of Directors to issue and establish all relevant
provisions of preferred stock without further action by the shareholders. Such
preferred stock could be used, for example, in a shareholders' rights plan
designed to restrict or delay a change in control of the Company. The Company's
Bylaws limit the persons who may call a special meeting of the shareholders. In
addition, Harold R. Tate will beneficially own stock entitled to a majority of
the voting power of all of the Company's outstanding Common Stock after the
offering. These provisions and Mr. Tate's stock ownership could make a takeover
more difficult or discourage a person from attempting a takeover, including a
takeover that some shareholders may deem to be in their best interests. See
"Description of Capital Stock."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of shares of the Common Stock or the
availability of such shares for sale in the public market following this
Offering may adversely affect prevailing market prices for the Common Stock.
Upon completion of this Offering, the Company will have 6,990,000 shares of
outstanding Common Stock. All of the 2,230,000 shares of Common Stock offered
hereby will be freely tradeable without restriction or further registration
unless acquired by "affiliates" of the Company as defined in Rule 144 ("Rule
144") under the Securities Act of 1933, as amended (the "Securities Act"). In
connection with this Offering, the Company and all of its existing shareholders,
who will beneficially own approximately 4,760,000 or approximately 68% of the
Company's outstanding Common Stock after the Offering, have agreed not to sell
or otherwise dispose of any shares, directly or indirectly, for 180 days from
the commencement of this Offering without the prior written consent of Morgan
Keegan & Company, Inc. After the 180 day period, 4,040,000 of such shares will
be eligible for sale, subject to compliance with Rule 144. An additional 700,000
shares will be eligible for sale under Rule 144 beginning in August 1998. An
additional 20,000 shares subject to a restricted stock agreement will be
eligible for sale in accordance with the terms of such agreement. See "Principal
and Selling Shareholders" and "Shares Eligible for Future Sale."

LACK OF DIVIDENDS

The Company has never declared or paid cash dividends on its capital stock.
The Company intends to continue to retain earnings to finance the growth and
development of its business and does not anticipate paying cash dividends in the
foreseeable future. Any payment of cash dividends in the future will depend upon
the Company's financial condition, capital requirements, earnings, restrictions
under loan agreements, and other factors the Board of Directors may deem
relevant. See "Dividend Policy."

10
<PAGE> 12

NO PRIOR PUBLIC MARKET FOR COMMON STOCK, DETERMINATION OF OFFERING PRICE

Prior to this Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or, if developed, that such market will be sustained or that the stock will
trade at or above the initial public offering price. The initial public offering
price of the Common Stock offered hereby has been determined by negotiation
among the Company, the Selling Shareholders, and the Underwriters and may bear
no relationship to the price at which the Common Stock will trade after
completion of this Offering. See "Underwriting" for a discussion of the factors
considered in determining the initial public offering price.

IMMEDIATE AND SUBSTANTIAL DILUTION

The current shareholders of the Company acquired their shares of Common
Stock at a cost substantially below the initial public offering price of the
Common Stock offered hereby and, accordingly, at an assumed offering price of
$13 per share, purchasers of Common Stock in this Offering will incur immediate
and substantial dilution in the net tangible book value of their shares of $6.82
per share. In addition, although the consideration to be paid by purchasers of
the Common Stock in the Offering will constitute over 99% of the consideration
paid to the Company for shares of its capital stock, such purchasers will
possess only 32% of the voting power of the Company's capital stock upon
completion of the Offering. See "Dilution."

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus contains forward-looking statements relating to future
events or the future financial performance of the Company. Such statements may
relate, but not be limited, to projections of revenues, income or loss, capital
expenditures, construction or expansion of regional facilities, acquisitions,
plans for growth and future operations, financing needs or plans or intentions
relating to acquisitions by the Company, as well as assumptions relating to the
foregoing. Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Such risks
include, but are not limited to, the matters discussed in the preceding
paragraphs under "Risk Factors." Future events and actual results could differ
materially from those set forth in, contemplated by or underlying the
forward-looking statements.

11
<PAGE> 13

HISTORY OF THE COMPANY

The Company's predecessor, Barton Truck Line ("Barton"), was formed in 1922
in Tooele, Utah to provide freight service in the Tooele community. In 1947,
W.C. Tate and Harold R. Tate purchased Barton, which at the time operated two
trucks and had annual revenues of approximately $35,000. In 1960, Barton
acquired Bonanza Trucking Company ("Bonanza"), a company which operated
primarily in Colorado. Barton and Bonanza were merged in 1973 and renamed Motor
Cargo. During the 1970's, Motor Cargo received further operating authority from
the Interstate Commerce Commission (the "ICC") to expand service throughout
Nevada and into the central and southern California markets. In 1978, Motor
Cargo purchased R & R Transportation Company and acquired statewide intrastate
operating authority in Nevada. Deregulation of the trucking industry after 1980
permitted Motor Cargo to further expand its operations in California, Arizona
and other western states. See "Business -- Regulation."

The Company was incorporated in Utah in January 1996 as a holding company
for Motor Cargo. The Company continues to conduct its operations through Motor
Cargo, its wholly-owned subsidiary. MC Distribution Services, Inc. ("MCDS"), a
wholly-owned subsidiary of Motor Cargo, was formed in 1995 to provide customized
logistics, warehousing and distribution management services.

On August 28, 1997, the Company acquired Ute Trucking and Leasing, LLC, a
Utah limited liability company ("Ute"). Ute's assets consist primarily of
tractors and trailers utilized by the Company pursuant to contracts between the
Company and Ute. The Company issued an aggregate of 700,000 shares of Common
Stock to the four members of Ute, Harold R. Tate, Marshall L. Tate, Darrell Tate
and Marvin L. Friedland, in exchange for their interests in Ute. As of August
31, 1997, the Ute assets had a net book value of approximately $912,000
($3,506,000 less $2,594,000 in related debt). The Company accounted for the
acquisition of Ute as a reorganization of entities under common control in an
accounting method similar to a "pooling of interests" and, accordingly, the
financial statements reflect the assets of Ute at their historical bases. Harold
R. Tate is the Chairman of the Board and Marshall L. Tate and Marvin L.
Friedland are executive officers and directors of the Company. See "Certain
Transactions" and Note M to the Company's Consolidated Financial Statements.

The Company's principal executive offices are located at 845 West Center
Street, North Salt Lake, Utah 84054 and its telephone number is (801) 292-1111.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,150,000 shares of
Common Stock offered by it hereby are estimated to be approximately $13,303,500,
assuming an initial public offering price of $13 per share, after deducting
underwriting discounts and commissions and estimated expenses payable by the
Company. The Company will not receive any proceeds from the sale of shares of
Common Stock by the Selling Shareholders. See "Principal and Selling
Shareholders."

The Company will use approximately $7.5 million of the net proceeds to
repay certain borrowings incurred to purchase revenue equipment, including
approximately $2.3 million in borrowings assumed by the Company in connection
with the acquisition of Ute. At September 30, 1997, these obligations bore
interest at a weighted average annual rate of 7.9% and provided for maturity
dates between 1998 and 2005. See Note F to the Company's Consolidated Financial
Statements. The Company will use approximately $2.4 million of the net proceeds
to purchase revenue equipment pursuant to commitments that provide for delivery
of such revenue equipment by December 31, 1997.

The balance of the net proceeds will be used for working capital and
general corporate purposes, including the purchase of additional revenue
equipment, and possible future business acquisitions. The Company currently does
not have any commitments or agreements for any business acquisition and is not
in active negotiations regarding any such acquisitions. Pending their use by the
Company as described above, the Company intends to invest the net proceeds of
the Offering in short-term, investment-grade instruments.

12
<PAGE> 14

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying any cash dividends in the foreseeable
future. The Company currently intends to retain all future earnings, if any, to
fund the development and growth of its business. Any future determination to pay
cash dividends will be at the discretion of the Board of Directors and will be
dependent upon the Company's financial condition, results of operations, capital
requirements from time to time, restrictions under loan agreements, and such
other factors as the Board of Directors deems relevant. The Company's operating
subsidiary, Motor Cargo, is a party to a credit agreement which restricts the
payment of cash dividends by Motor Cargo during the term of the credit
agreement. Under the terms of the credit agreement, Motor Cargo may not declare
or pay cash dividends following the Offering unless, as of the end of the most
recent fiscal quarter preceding the date of declaration or payment of any
dividend, (i) the ratio of Motor Cargo's current assets (less the amount of the
cash dividend) to current liabilities would be at least 1.10 to 1.0, (ii) the
ratio of Motor Cargo's net, after tax income (plus non-cash expenditures) for
the twelve month period then ended (less the amount of the cash dividend) to the
current portion of long-term debt would not be less than 1.50 to 1 and (iii)
after giving effect to the payment of such dividend, Motor Cargo would otherwise
be in full compliance with the terms of the credit agreement. Accordingly,
because the Company would ordinarily be dependent upon cash dividends from Motor
Cargo in order to pay a cash dividend on its Common Stock, the provisions of the
credit agreement limit the ability of the Company to pay cash dividends. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

CAPITALIZATION

The following table sets forth (i) the current maturities of long-term
obligations and (ii) the capitalization of the Company (a) as of September 30,
1997 and (b) as adjusted to give effect to the sale of the 1,150,000 shares of
Common Stock offered by the Company hereby (at an assumed initial public
offering price of $13 per share) and application of the estimated net proceeds
therefrom as described in "Use of Proceeds." The following table should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------
AS
ACTUAL ADJUSTED(1)
------- -------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term obligations.............................. $ 3,346 $ 89
======= =======
Long-term obligations (less current maturities):......................... $12,500 $ 8,257
Stockholders' equity
Preferred stock, no par value; Authorized -- 25,000,000 shares
Issued -- none
Common Stock, no par value;
Authorized -- 100,000,000 shares Issued and outstanding -- 5,820,000
and 6,990,000 shares issued and outstanding as adjusted................ 1 13,305
Retained earnings...................................................... 29,889 29,889
------- -------
Total stockholders' equity.......................................... 29,890 43,194
------- -------
Total capitalization................................................ $42,390 $51,451
======= =======
</TABLE>

- ---------------

13
<PAGE> 15

DILUTION

The net tangible book value of the Company at September 30, 1997, was
$29,890,398 or $5.14 per share of Common Stock. Net tangible book value per
share of Common Stock is determined by dividing the net tangible book value
(total tangible assets less total liabilities) of the Company by the number of
shares of Common Stock outstanding.

Net tangible book value dilution per share represents the difference
between the amount per share paid by purchasers of shares of Common Stock in the
Offering made hereby and the net tangible book value per share of Common Stock
immediately after completion of the Offering. Without taking into account any
changes in the net tangible book value of the Company, other than to give effect
to the sale of the shares of Common Stock offered hereby at an assumed offering
price of $13 per share and receipt of the net proceeds therefrom, the adjusted
net tangible book value of the Company at September 30, 1997 would have been
$43,193,898, or $6.18 per share. This represents an immediate dilution in net
tangible book value of $6.82 per share to new investors purchasing shares in the
Offering and an immediate increase in net tangible book value of $1.04 per share
to existing shareholders. The following table illustrates this per share
dilution, calculated as of September 30, 1997:

<TABLE>
<S> <C> <C>
Assumed public offering price per share............................. $13.00
Net tangible book value per share at September 30, 1997........... $5.14
=====
Increase per share attributable to new investors.................. 1.04
=====
Net tangible book value per share after the Offering................ 6.18
======
Net tangible book value dilution per share to new investors......... $ 6.82
======
</TABLE>

The following table shows the difference between existing shareholders and
the purchasers of shares in this Offering with respect to the number of shares
purchased from the Company, the total consideration paid, and the average price
per share paid:

<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION(1)
---------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT(3) AMOUNT(3) PERCENT PER SHARE
--------- ---------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders(2)......... 5,840,000 83.55% $ 1,000 .01% $ 0.00
New investors.................... 1,150,000 16.45% $14,950,000 99.99% $ 13.00
Total....................... 6,990,000 100.0% $14,951,000 100.0%
</TABLE>

- ---------------

(1) The total consideration set forth in the table paid by existing shareholders
does not include the value of the Ute assets contributed to the Company by
four existing shareholders as of August 1997. See "Certain Transactions."

(2) Includes 20,000 shares to be issued upon completion of the Offering pursuant
to a restricted stock agreement between the Company and Louis V. Holdener.
Does not include approximately 229,500 shares of Common Stock reserved for
issuance upon the exercise of stock options that will be granted on the date
of this Prospectus to existing shareholders and other employees under the
Company's 1997 Stock Option Plan. See "Management -- 1997 Stock Option
Plan."

(3) The sale of 1,080,000 shares of Common Stock in the Offering by the Selling
Shareholders will cause the number of shares held by existing shareholders
to be reduced to 4,760,000 shares or approximately 68% of the total number
of shares outstanding after the Offering. If the Underwriters'
over-allotment option is exercised in full, sales by the Selling
Shareholders in the Offering will reduce the number of shares held by
current shareholders to 4,442,750 or approximately 63% of the Common Stock
outstanding after the Offering.

14
<PAGE> 16

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated statement of earnings and balance sheet
data as of and for each of the periods in the five year period ended December
31, 1996 and the nine month period ended September 30, 1997 are derived from the
financial statements of the Company, which have been audited by Grant Thornton
LLP, independent public accountants. The selected consolidated statement of
earnings for the nine month period ended September 30, 1996 and pro forma data
are unaudited, but, in the opinion of management, the unaudited financial
statements reflect all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the information included therein. The
financial data for the Company should be read in conjunction with the
Consolidated Financial Statements and Notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this Prospectus. The results for the nine month period ended
September 30, 1997 are not necessarily indicative of results that may be
expected for the full year.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ----------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Operating revenues.............................. $63,660 $68,726 $82,984 $80,808 $92,310 $68,272 $77,446
Operating expenses
Salaries, wages and benefits.................. 29,414 31,432 36,055 35,495 39,666 29,412 33,005
Operating supplies and expenses............... 8,874 9,899 12,145 12,669 14,947 10,969 11,540
Purchased transportation...................... 10,232 11,021 12,238 11,532 14,164 10,578 11,132
Operating taxes and licenses.................. 1,828 1,969 3,068 3,178 3,531 2,534 2,681
Insurance and claims.......................... 1,707 1,963 2,685 1,842 2,785 1,998 3,400
Depreciation and amortization................. 4,145 4,524 4,974 5,930 6,578 4,965 5,156
Communications and utilities.................. 1,164 1,277 1,314 1,521 1,784 1,327 1,474
Building rents................................ 857 758 1,093 1,274 1,540 1,161 1,266
------- ------- ------- ------- ------- ------- -------
Total operating expenses................. 58,221 62,843 73,572 73,441 84,995 62,944 69,654
------- ------- ------- ------- ------- ------- -------
Operating income......................... 5,439 5,883 9,412 7,367 7,315 5,328 7,792
Other income (expense)
Interest expense......................... (1,400) (1,408) (1,392) (1,500) (1,430) (1,129) (772)
Other, net............................... 91 (31) 104 107 (32) 15 112
------- ------- ------- ------- ------- ------- -------
Earnings before income taxes.................... 4,130 4,444 8,124 5,974 5,853 4,215 7,132
Income taxes.................................... 1,307 1,475 2,943 2,094 2,118 1,556 2,824
------- ------- ------- ------- ------- ------- -------
Net earnings.................................... $ 2,823 $ 2,969 $ 5,181 $ 3,880 $ 3,735 $ 2,659 $ 4,308
======= ======= ======= ======= ======= ======= =======
Pro forma(1)
Earnings before income taxes.................. $ 4,130 $ 4,444 $ 8,124 $ 5,974 $ 5,853 $ 4,215 $ 7,132
Income taxes.................................. 1,549 1,569 3,125 2,303 2,256 1,627 2,878
------- ------- ------- ------- ------- ------- -------
Net earnings.................................. $ 2,581 $ 2,875 $ 4,999 $ 3,671 $ 3,597 $ 2,588 $ 4,254
======= ======= ======= ======= ======= ======= =======
Earnings per common share..................... $ 0.44 $ 0.49 $ 0.86 $ 0.63 $ 0.62 $ 0.44 $ 0.73
======= ======= ======= ======= ======= ======= =======
Weighted average shares outstanding........... 5,820 5,820 5,820 5,820 5,820 5,820 5,820
======= ======= ======= ======= ======= ======= =======
Supplemental pro forma earnings per share(2).... $ 0.61 $ 0.44 $ 0.70
======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets.................................. $10,171 $13,481 $18,741 $20,233 $23,197 $22,563
Current liabilities............................. 9,078 10,741 13,414 14,752 15,752 14,711
Total assets.................................... 38,072 42,016 49,391 59,507 63,834 62,888
Long-term obligations, less current
maturities.................................... 12,920 13,745 14,044 17,724 16,820 12,500
Total liabilities............................... 24,470 27,081 30,631 36,784 37,794 32,998
Stockholders' equity............................ 13,602 14,935 18,760 22,723 26,040 29,890
</TABLE>

15
<PAGE> 17

- ---------------

(1) Effective August 28, 1997, the Company acquired the membership interests of
Ute, a Utah limited liability company. A limited liability company passes
through to its members essentially all taxable earnings and losses and pays
no tax at the company level. Accordingly, for comparative purposes, a pro
forma provision for income taxes using an effective income tax rate of 38%
has been determined assuming Ute had been taxed as a C corporation for all
periods presented.

16
<PAGE> 18

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following should be read in conjunction with the financial statements
and notes thereto included elsewhere in this Prospectus.

OVERVIEW

The Company's results of operations for 1994, 1995, 1996 and the nine
months ended September 30, 1997 reflect fluctuations within the motor carrier
industry and significant changes within the Company's operations. Results of
operations for 1994 were positively affected by a Teamster strike which
adversely affected certain unionized carriers. As a result of this strike, the
Company and other carriers with predominantly nonunion employees experienced
unusually large increases in freight volumes. Freight volumes and operating
margins returned to more normal levels in 1995 and 1996.

In the second half of 1995 the Company initiated a significant expansion of
its terminal network in order to increase coverage within its core service
region. As part of this expansion, the Company opened new service centers in
Rialto, California; Oxnard, California; Bakersfield, California; Fresno,
California; and Grand Junction, Colorado. Accordingly, although the Company's
revenues in 1995 were only slightly lower than the unusually high levels
experienced in 1994, earnings were significantly impacted by start-up costs and
expenses associated with the Company's terminal network expansion.

Costs associated with the Company's new service centers continued to affect
earnings in 1996 as several of these service centers were in the early stages of
operation. Earnings in 1996 were also adversely affected by sluggish demand for
LTL carrier services throughout the year, which resulted in severe pricing
pressures, and by escalating fuel prices in the latter half of 1996.

In 1997 the Company began to experience favorable results associated with
its terminal network expansion. Revenues produced by the Company's new service
centers during the nine months ended September 30, 1997 were more consistent
with the revenues of the Company's other service centers than in prior periods.
Higher demand for carrier services also contributed to a more stable pricing
environment during the first nine months of 1997. The Company's results of
operations for the nine months ended September 30, 1997 were also significantly
affected by an aggressive account rationalization program initiated by the
Company in late 1996 to improve revenue quality. By analyzing each account based
upon revenue quality characteristics such as revenue per bill and revenue per
hundredweight, the Company was able to identify accounts providing inadequate
profit margins. While revenue growth was negatively affected by this account
rationalization, the Company's earnings for the nine months ended September 30,
1997 were positively affected by the elimination of certain business and tonnage
which did not meet the Company's margin requirements.

The Company's management believes that its expanded terminal network
provides the Company with the necessary infrastructure for continued growth
within its core service region. With an established terminal network in place to
provide high quality service throughout its core service region, the Company
intends to focus on improving route, lane and service center densities by
increasing the amount of business handled by the Company within its core service
region. The Company intends to achieve this growth by increasing the amount of
business generated by existing customers within its core service region and
acquiring new customers outside its core service region for the purpose of
soliciting new business into its core service region. The Company intends to
continue its rigorous analysis of costs and profitability associated with each
customer, lane and service center.

Effective August 28, 1997, the Company acquired the membership interests of
Ute. A limited liability company passes through to its members essentially all
taxable earnings and losses and pays no tax at the company level. The following
discussion includes financial information of the Company which includes the
results of operations of Ute; however, such financial information does not
reflect any provision for income taxes that would have been paid by the Company
if Ute had been owned by the Company during the relevant periods. For
comparative purposes, the Company's Consolidated Financial Statements contain a
pro forma provision for income taxes. See Note A14 to the Company's Consolidated
Financial Statements.

17
<PAGE> 19

RESULTS OF OPERATIONS

The following table sets forth the percentage relationship of certain items
to revenues for the periods indicated:

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Operating revenues................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses
Salaries, wages and benefits..................... 43.5 43.9 43.0 43.1 42.6
Operating supplies and expenses.................. 14.6 15.7 16.2 16.1 14.9
Purchased transportation......................... 14.8 14.3 15.3 15.5 14.4
Depreciation and amortization.................... 6.0 7.3 7.1 7.3 6.7
Insurance and claims............................. 3.2 2.3 3.0 2.9 4.3
Operating taxes and licenses..................... 3.7 3.9 3.9 3.7 3.5
Communications and utilities..................... 1.6 1.9 1.9 1.9 1.9
Building rents................................... 1.3 1.6 1.7 1.7 1.6
----- ----- ----- ----- -----
Total operating expenses................. 88.7 90.9 92.1 92.2 89.9
----- ----- ----- ----- -----
Operating income................................... 11.3 9.1 7.9 7.8 10.1
Other income (expense)
Interest expense................................. (1.7) (1.8) (1.6) (1.7) (1.0)
Other, net....................................... 0.1 0.1 0.0 0.0 0.1
----- ----- ----- ----- -----
Earnings before income taxes....................... 9.7 7.4 6.3 6.1 9.2
Income taxes....................................... 3.5 2.6 2.3 2.3 3.6
----- ----- ----- ----- -----
Net earnings....................................... 6.2% 4.8% 4.0% 3.8% 5.6%
===== ===== ===== ===== =====
</TABLE>

NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996

Operating revenues increased 13.4% for the nine months ended September 30,
1997 to $77.4 million from $68.3 million for the comparable period in 1996. The
increase was attributable to the Company's efforts beginning in the third
quarter of 1996 to improve significantly the yield of its revenue base, the
addition of new customers and, to a lesser extent, expansions within the
Company's operating region. The number of shipments during the first nine months
of 1997 increased by 8.0% to 606,415 compared to 561,652 for the same period in
1996. Revenue per hundred weight increased to $11.08 in the first nine months of
1997 from $10.61 for the same period in 1996.

Of the $9.1 million increase in operating revenues for the nine month
period ended September 30, 1997, $2.3 million was attributable to the Company's
warehousing and distribution management company, MCDS. The increase in revenues
for MCDS resulted primarily from the addition of a single large distribution
management project for a large retail company.

As a result of the Company's focus on revenue quality, tonnage grew by 8.5%
to 343,686 tons for the nine months ended September 30, 1997, compared to
316,715 tons for the same period in 1996, while total shipments increased 8.0%
to 606,415 for the nine months of 1997 compared to 561,652 for the same period
in 1996. During this same period, average revenue per bill increased 5% to
$125.57 compared to $119.64 for the comparable period of 1996. Lower margin
yields resulting from a difficult freight market in early 1996 and sluggish
demand throughout the year contributed to lower revenues in 1996. Revenues for
the first nine months of 1997 were adversely affected by the Company's decision
to discontinue service to certain customers whose business volumes did not meet
minimum margin yield requirements.

As a percentage of operating revenues, salaries, wages and benefits
decreased to 42.6% for the nine months ended September 30, 1997 from 43.1% for
the comparable period of 1996. While salary and wage rates increased
approximately 4% for the nine months ended September 30, 1997, salaries and
wages decreased as a percentage of revenues due to improved quality of revenue
as well as improved utilization of labor. Workers compensation costs increased
0.8% in the first nine months of 1997 due to a workers compensation credit

18
<PAGE> 20

which eliminated workers compensation expense for the same period in 1996.
Pension costs decreased 0.4 percent for the first nine months of 1997 compared
to the first nine months of 1996 due to a better rate of return on invested
pension assets.

Operating supplies and expenses, which includes agent commissions, tires,
parts, repairs and fuel, decreased for the nine months ended September 30, 1997
to 14.9% of operating revenues compared to 16.1% for the comparable period of
1996. This decrease was due to lower fuel prices and agent commissions,
partially offset by increased general, marketing and employee related expense.

Purchased transportation decreased to 14.4% of operating revenues for the
nine months ended September 30, 1997 from 15.5% for the comparable period of
1996. This decrease was primarily due to improved linehaul load factors and
higher revenue per operating mile.

Insurance and claims increased to 4.3% of operating revenues for the nine
months ended September 30, 1997 from 2.9% in the comparable period of 1996. This
increase was a result of the Company and its insurance carrier increasing the
insurance reserves in 1997 for two accidents which occurred in prior years.

As a percentage of operating revenues, depreciation and amortization
decreased to 6.7% for the nine months ended September 30, 1997 compared to 7.3%
for the same period of 1996. This decrease was due largely to increased revenue
levels and continued improvement in asset utilization of equipment acquired in
the second half of 1995 to facilitate the Company's terminal network expansion.

As a percentage of operating revenues, interest expense decreased to 1.0%
for the nine months ended September 30, 1997, compared to 1.7% for the same
period in 1996. This decrease was due primarily to lower debt levels resulting
from strong operating cash flows and continued improvement in cash management
techniques. At September 30, 1997, total obligations were $15.8 million compared
to $17.1 million at September 30, 1996.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

Operating revenues increased 14.2% in 1996 to $92.3 million from $80.8
million in 1995 due primarily to a 13% increase in tonnage to 426,109 in 1996
from 377,042 in 1995. This increase in tonnage was primarily attributable to new
customers and increased shipments from existing customers within the Company's
core operating region. The number of shipments in 1996 increased by 12.6% to
747,024 compared to 663,648 in 1995. During this same period, revenue per bill
remained flat at $122.54 for 1996 compared to $122.51 for the same period in
1995. Revenue per hundredweight decreased slightly to $10.74 in 1996 from $10.78
in 1995. In September 1996, the Company implemented a sliding-scale fuel
surcharge which resulted in a fourth quarter revenue increase of approximately
1.5%.

As a percentage of operating revenues, salaries, wages and benefits
decreased to 43.0% in 1996 from 43.9% in 1995. This was largely attributable to
a workers compensation credit from a previous period which reduced fringe
benefit expense by approximately $800,000 and an increased use of purchased
transportation.

Operating supplies and expenses as a percentage of operating revenues
increased to 16.2% in 1996 compared to 15.7% in 1995. This increase was largely
attributable to increased fuel expense during the year which was only partially
offset by a fuel surcharge implemented in September 1996.

Purchased transportation increased to 15.3% of operating revenues in 1996
compared to 14.3% in 1995. This increase was attributable to increased use of
purchased transportation combined with reduced revenue per operating mile in
1996 as a result of severe price competition and costs associated with the
Company's terminal network expansion initiated during the second half of 1995.

As a percentage of operating revenues, depreciation and amortization
decreased to 7.1% in 1996 compared to 7.3% in 1995. This decrease was largely
attributable to increased revenue levels and better asset utilization of
equipment acquired in 1995 to facilitate the Company's terminal network
expansion.

Insurance and claims increased to 3.0% of operating revenues in 1996
compared to 2.3% for 1995. This increase was caused primarily by two large
liability claims.

19
<PAGE> 21

As a percentage of operating revenues, interest expense decreased slightly
to 1.6% in 1996 compared to 1.8% in 1995. This decrease resulted from lower debt
levels and improved cash management techniques. At December 31, 1996, total
obligations were $23.7 million compared to $23.9 million at December 31, 1995.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Operating revenues declined 2.7% in 1995 to $80.8 million from $83.0
million in 1994. The decline in operating revenues for the period was largely
due to an unusual revenue increase in early 1994, which resulted from a Teamster
strike that adversely affected certain of the Company's unionized competitors
and resulted in unusually high freight volumes for non-unionized carriers,
combined with aggressive price discounting by these competitors during 1995 in
an effort to regain lost market share. Tonnage also declined 1.9% to 377,042
tons for 1995 compared to 384,416 tons for 1994, while total shipments increased
less than 1% to 663,648 in 1995 compared to 658,982 in 1994.

Purchased transportation decreased to 14.3% of operating revenues in 1995
compared to 14.8% in 1994. This was largely attributable to a reduced use of
purchased transportation and an increased use of Company-owned equipment in
1995.

Operating supplies and expenses increased to 15.7% of operating revenues in
1995 compared to 14.6% in 1994. This increase was largely attributable to costs
associated with the Company's terminal network expansion in 1995.

As a percentage of operating revenues, depreciation and amortization
increased to 7.3% in 1995 compared to 6.0% in 1994. This increase is
attributable to reduced revenue and more normal ratios after the 1994 strike
combined with increased equipment purchases associated with the Company's
terminal network expansion during 1995.

Insurance and claims decreased to 2.3% of operating revenues in 1995
compared to 3.2% in 1994. This decrease is attributable to higher freight claim
related expenses in 1994 associated with the Teamster strike and the resulting
sudden demand increase.

Communications and utilities increased marginally to 1.9% of operating
revenues for 1995 compared to 1.6% for 1994. This increase is attributable to
lower operating revenue levels combined with costs associated with expanding the
Company's terminal network.

Building rents increased to 1.6% of operating revenues in 1995, compared to
1.3% in 1994, primarily as a result of the Company's terminal network expansion.

As a percentage of operating revenues, interest expense increased to 1.8%
in 1995 compared to 1.7% in 1994. This increase was due primarily to higher debt
levels associated with the acquisition of equipment. At December 31, 1995, total
obligations were $23.9 million compared to $19.3 million at December 31, 1994.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of liquidity have been funds provided by
operations and bank borrowings. Net cash provided by operating activities was
approximately $11.0 million, $10.7 million, $10.2 million and $10.0 million in
1994, 1995 and 1996 and the nine months ended September 30, 1997, respectively.
Net cash provided by operating activities is primarily attributable to the
Company's income before depreciation and amortization expense.

Capital expenditures totaled approximately $7.1 million, $15.0 million,
$9.7 million and $4.9 million during 1994, 1995 and 1996 and the nine months
ended September 30, 1997, respectively. The majority of the Company's capital
expenditures are financed with long-term debt. The Company's budget for total
capital expenditures is approximately $2.5 million for the fourth quarter of
1997 and approximately $12.0 million for 1998. These capital expenditures will
consist primarily of the acquisition of new revenue equipment and construction
of terminal facilities.

Net cash provided by financing activities was $0.4 million and $4.3
million, respectively, in 1994 and 1995 and net cash used in financing
activities was $0.6 million and $8.3 million in 1996 and the nine months ended
September 30, 1997, respectively. At September 30, 1997, total borrowings under
long-term obligations totaled $15.8 million.

20
<PAGE> 22

The Company is a party to a credit agreement with Sanwa Bank California
("Sanwa Bank"). The credit agreement provides for a $5 million revolving line of
credit. Any outstanding amounts under the revolving line of credit accrue
interest at a variable rate established from time to time by Sanwa Bank;
however, the Company may elect to have an advance accrue interest at a fixed
rate quoted by Sanwa Bank subject to certain prepayment restrictions. The credit
agreement is collateralized by the Company's cash and cash equivalents,
receivables, supplies, inventory, documents, instruments and chattel paper. At
September 30, 1997 there were no outstanding balances under the revolving loan
agreement. The Company has not drawn on the revolving line of credit since 1989.

The Sanwa Bank credit agreement also provides for term loans collateralized
by equipment. As of September 30, 1997, the amount available for term loans
under the credit agreement was $12,067,000. This amount is reduced by 1/20th
each quarter until the year 2002. As of September 30, 1997 the Company had
approximately $6,500,000 in term loans outstanding pursuant to the credit
agreement.

At September 30, 1997, the Company had outstanding long-term obligations
(including current maturities) consisting of approximately $15.8 million, most
of which comprised obligations for the purchase of revenue equipment. See Note F
to the Company's Consolidated Financial Statements. The Company believes that
the net proceeds from this Offering, funds generated from operations and
available borrowings under its current or future credit facilities will be
sufficient to fund the Company's activities at least through 1998. See "Use of
Proceeds."

INFLATION

Inflation has had a minimal effect upon the Company's profitability in
recent years. Most of the Company's operating expenses are inflation-sensitive,
with inflation generally producing increased costs of operation. Although the
Company historically has been able to pass through most increases in fuel prices
and taxes to customers in the form of fuel surcharges or higher rates, the
Company generally must wait for larger carriers to implement fuel surcharges
before the Company can effectively implement fuel surcharges. See "Business-Fuel
Availability and Cost." The Company expects that inflation will affect its costs
no more than it affects those of other regional LTL carriers.

SEASONALITY

THE YEAR 2000 ISSUE

The Company utilizes computer hardware and software in its operations.
Certain computer applications could fail or create erroneous results due to the
upcoming change in the century (the "Year 2000 Issue"). The Company regularly
upgrades its computer hardware and believes that it will not incur any
additional expenses to modify computer hardware due to the Year 2000 Issue. In
addition, the Company has received commitments from software vendors that will
allow the Company to upgrade third-party software programs with minimal expense
to the Company. The Company anticipates, however, that it will incur expenses of
approximately $100,000 over the next two years to upgrade certain proprietary
software developed for the Company. The Company does not expect that its
expenditures related to the Year 2000 Issue will have a material adverse effect
on the results of operations or financial condition of the Company.

21
<PAGE> 23

INDUSTRY OVERVIEW

The Company is a less-than-truckload ("LTL") carrier which provides
transportation and logistics services to shippers primarily within the western
region of the United States. LTL shipments are defined as shipments weighing
less than 10,000 pounds. Generally, LTL carriers transport freight from multiple
shippers to multiple consignees on a scheduled basis. Unlike truckload carriers,
LTL carriers typically do not transport full trailer loads directly from origin
to destination. LTL operations require the handling of shipments in several
coordinated stages.

Typically, LTL carriers transport freight along scheduled routes from
multiple shippers to multiple consignees utilizing a network of terminals,
together with fleets of linehaul and pickup and delivery tractors and trailers.
Freight is picked up from customers by local drivers and consolidated for
shipment. The freight is then loaded into inter-city trailers and transported to
other terminals by linehaul drivers. Large LTL carriers have traditionally
employed a series of hub and spoke terminals. This method improves truck
utilization but requires both multiple cargo rehandlings, which are expensive,
and a fixed network of pickup, breakbulk and destination terminals, which is
capital intensive and requires a large staff of freight handlers. At each
breakbulk terminal, freight is unloaded and reloaded with other freight destined
for locations in the same general direction of another breakbulk terminal, where
the truck is sent for further unloading and loading, until the freight arrives
at a destination terminal located nearest the region of the consignee. At the
destination terminal, freight is then loaded onto a local truck for final
delivery. The Company emphasizes direct loading between the originating and
destination service centers in order to avoid the costly and time-consuming use
of breakbulk terminals.

LTL companies compete in a market estimated at approximately $20 billion
per year and are generally categorized as regional, inter-regional or national
carriers, based upon length of haul and service territory. Carriers with average
lengths of haul less than 500 miles are referred to as regional carriers and
generally provide either overnight or second day service. Regional LTL carriers
usually are able to load freight for direct transport to a destination terminal,
thereby avoiding the costly and time-consuming use of breakbulk terminals (where
freight is rehandled and reloaded to its ultimate destination). Carriers with
average lengths of haul between 500 and 1,000 miles are generally referred to as
inter-regional carriers. National carriers, with average lengths of haul greater
than 1,000 miles, generally operate coast-to-coast relying on networks of
breakbulk and satellite terminals. Due to the geographical size of the western
United States, the Company has a longer average length of haul than most other
regional carriers. For the year ended December 31, 1996, the Company had an
average length of haul of approximately 600 miles.

The national LTL segment is dominated by the so-called "Big Four"
carriers -- Yellow Corporation ($3.07 billion in 1996 revenues), Consolidated
Freightways ($2.15 billion in 1996 revenues), Roadway Express ($2.37 billion in
1996 revenues), and Arkansas Best Corporation ($1.66 billion in 1996 revenues).
Each of these carriers has a largely-unionized work force and an extensive hub
and spoke network of terminals and breakbulk facilities, resulting in a
relatively high cost structure. The regional LTL industry segment includes
carriers that focus on a particular region as well as regional subsidiaries of
large multi-regional holding companies. In the western United States, the
Company's core service region, there are numerous LTL carriers that focus on the
region or a portion of the region. Several of these carriers are subsidiaries of
larger companies, such as Reddaway and Bestway (subsidiaries of US Freightways),
Con-Way Western Express (a subsidiary of CNF Transportation) and Viking Freight
Systems (a subsidiary of Caliber Systems).

In general, the more freight volume an LTL carrier has within a given
geographical area, the lower its incremental operating costs. This is
particularly true with respect to its pickup and delivery operations where
increased freight volumes generally result in less distance between stops and
more shipments per stop ("route density"). As route density increases, an LTL
carrier is able to make more deliveries on shorter routes, thereby increasing
the number of shipments that can be delivered within a defined period and
lowering overall labor costs for each shipment. Similarly, the more business a
carrier experiences in a given traffic lane from one service center to another
("lane density") the lower its incremental costs. As lane density increases, a
carrier experiences improved load factors resulting in increased revenue per
mile, reduced empty miles and reduced costs associated with intermediate
shipment handling and reconsolidation. A carrier's incremental costs are also
improved as the amount of freight handled at a given service center location
("service center density") increases. As service center density improves, a
carrier experiences higher revenues, while maintaining the same fixed cost
structure, thereby improving asset utilization.

22
<PAGE> 24

BUSINESS

GENERAL

The Company is a less-than-truckload ("LTL") carrier which provides
transportation and logistics services to shippers primarily within the western
region of the United States. The Company transports general commodities,
including consumer goods, packaged foodstuffs, electronics, computer equipment,
apparel, hardware, industrial goods and auto parts for major shippers such as
Starbucks Coffee Company, 3M Corporation, Steelcase, Pepperidge Farm, Sony
Music, Eli Lilly, General Motors and Square D Corp. The Company offers a broad
range of services, including expedited scheduling and full
temperature-controlled service. Through MCDS, a wholly-owned subsidiary of the
Company formed in 1995, the Company also provides customized logistics,
warehousing and distribution management services.

The Company utilizes 22 strategically located service centers (also
referred to as "terminals") to serve major markets within the Company's core
service region. In addition, the Company provides service to smaller markets
within its core service region pursuant to agreements with 20 independent
agents, most of which act as exclusive agents for the Company. This combination
of Company-operated service centers and independent agents allows the Company to
provide efficient, high quality service to customers in a large geographical
area. Approximately 58% of the Company's shipments are currently delivered
overnight and over 90% of all shipments are delivered within two days.

CORE SERVICE REGION

The Company's core service region is the western United States, including
Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, western Texas,
Utah and Washington.

The western United States has experienced rapid growth in recent years.
Based upon United States Bureau of Labor statistics, Nevada, Utah and Idaho
experienced the largest percentage increases in nonagricultural job growth in
the United States from 1990 to 1995. More recent data confirm that the western
United States continues to experience above-average nonagricultural job growth.
From June 1996 to June 1997, Nevada again led the nation in nonagricultural job
growth, followed by Arizona, Utah, Washington and Oregon. California, which
experienced an economic downturn in the early 1990s, had the eighth highest
percentage increase in nonagricultural job growth during this same twelve-month
period. The relatively favorable economic conditions have led to a significant
population increase in several western states. From 1990 to 1995, the six
fastest growing states (in terms of percentage increase in population) were
Nevada, Idaho, Arizona, Colorado, Utah and New Mexico. The United States Census
Bureau estimates that the total population of Arizona, California, Colorado,
Idaho, New Mexico, Oregon, Utah and Washington will increase approximately 12%
from 1997 to 2005.

Although the Company's core service region includes the concentrated
population centers along the California coast, the remainder of the region is
characterized by population centers that are separated by longer distances
relative to other regions within the United States. As a result, the Company's
service centers are farther apart and the Company has a longer average length of
haul than most LTL carriers in other regions. Accordingly, linehaul costs
represent a higher percentage of overall operating costs for the Company than
for other regional carriers in other regions of the United States. In general,
the higher costs associated with LTL operations in the western United States are
passed on to customers, resulting in a higher revenue per shipment relative to
other regions.

GROWTH STRATEGY

The Company seeks to achieve sustainable long-term growth by increasing the
amount of business generated by existing customers, acquiring new customers
within its core service region and acquiring new customers outside its service
region for the purpose of soliciting new business into its core service region.
The Company believes that by increasing the amount of business handled by the
Company within its core service

23
<PAGE> 25

region it will be able to achieve longterm growth while improving the efficiency
of its operations. The key elements of the Company's growth strategy are:

- Expand into Additional Major Markets. The Company's strategic growth plan
calls for establishing market and operational presence in several major
business economic areas ("BEAs") within the midwest and southeast regions
of the United States during the next three years. Unlike more traditional
inter-regional expansion models, the Company intends only to solicit
tonnage from these markets moving west into its core service region. The
Company intends to utilize third-party truckload carriers to transport
freight from these markets to its core service region. The Company
anticipates that this strategy of selling into the region will improve
lane, route and service center densities in its core service region
without requiring the Company to incur the costs associated with building
an inter-regional terminal network. The Company intends to enter into
interline partnerships to provide immediate revenue and offset start-up
costs associated with certain BEA expansions. The Company commenced
operations at its first BEA expansion facility in Dallas in October 1997.
Additional BEAs under consideration for 1998 and 1999 include major
distribution centers such as Atlanta, Chicago, Cleveland, Houston,
Indianapolis, Memphis, Minneapolis and St. Louis.

- Expand the Market Presence of MCDS. The Company believes that many
companies are increasingly focused on outsourcing certain non-core
functions and are engaging third-party logistics companies to provide
distribution management services. Through its subsidiary, MCDS, the
Company provides customized logistics, warehousing and distribution
management services. MCDS targets customers with distribution
requirements that are time-sensitive and require a significant amount of
transportation. MCDS currently provides "just-in-time" delivery services
for two major specialty retailers. Although MCDS has the ability to
provide services for large projects, MCDS targets smaller and mid-sized
projects which do not meet the minimum revenue requirements of many of
its larger competitors. By focusing on capabilities which are
complementary to the Company's services, and leveraging the Company's
existing customer base, the Company believes that MCDS provides a
significant opportunity for future revenue and earnings growth.

- Emphasize Low-cost Operations. By focusing on the western region, the
Company believes it will be able to improve lane, route and service
center densities, allowing the Company to better leverage the fixed costs
of its terminal network. In addition, the Company believes that its
largely nonunion work force gives it a competitive advantage over larger
unionized carriers that operate within the Company's core service region.
The Company also believes it is among the leading carriers in the country
in adopting technology-based solutions for analyzing the profitability of
shipments and reducing costs. As a result, the Company recently
eliminated certain business and tonnage that did not meet the Company's
margin requirements. Management believes that this account
rationalization process was responsible for improved profit margins
during the first nine months of 1997. The Company intends to continually
analyze the profitability of each customer, lane and service center.

24
<PAGE> 26

OPERATIONS

The Company picks up freight with pickup and delivery trucks during the day
and transports the freight to Company service centers by early evening. Pick-ups
and deliveries are typically made within a 70 mile radius of each service
center. Upon arrival at a service center, freight is unloaded, logged onto the
Company's computerized tracing system, and reloaded onto trailers destined for
the Company's other service centers. Trucks depart later in the evening for
their destination service centers. In order to ensure prompt service, the
Company enforces established time schedules for linehaul service between service
centers and utilizes an advanced computer system to track and coordinate
deliveries. Through the Company's wide-area computer network, all vital
information relating to shipments is available to each service center on a
real-time basis. Before the cargo arrives at its destination service center, a
manifest showing the contents of each trailer and the sequence in which it is
loaded, along with the delivery bills, is generated by the Company's
computerized tracing system and is available to the destination service center
manager via the Company's computer network. Upon arrival at the destination
service center, the freight is unloaded, sorted and delivered to its final
destination by local delivery trucks.

Instead of utilizing a "hub and spoke" system, which is typically used by
large, national LTL carriers, the Company emphasizes direct loading of freight
between service centers with no intermediate handling on most shipments. Hub and
spoke systems generally require shipments to be loaded and unloaded several
times at a number of service centers and breakbulk facilities prior to delivery.
Direct loading allows shipments to be transported directly from the originating
service center to the destination service center without intermediate handling.
Direct loading reduces the Company's costs because it requires less loading and
unloading of freight and requires fewer terminals and breakbulk facilities.

The Company uses a single service center, rather than multiple satellite
terminals, in each of the major cities it serves. Single service centers reduce
rehandling of freight, shorten delivery times and thereby reduce the risk of
freight damage or loss.

In addition to the Company's 22 service centers, the Company also utilizes
20 independent agents in smaller markets in which the Company does not operate
service centers. These agents are independent businesses which operate within a
specific area as the Company's pick-up and delivery agent. Shipments are
coordinated through these agents in the same manner as the Company's service
centers. Agents are compensated based upon a percentage of freight bill revenue
and are required to maintain standards established by the Company. The Company
believes that its utilization of agents in smaller markets helps the Company
maintain a lower fixed cost structure and emphasize variable costs while
improving the level of local market presence and allowing the Company to provide
its customer base with broader geographical coverage.

25
<PAGE> 27

The following map shows the location of each of the Company's service centers
and agents within its core service region:

[MAP OMITTED. THE MAP SHOWS THE LOCATION OF THE COMPANY'S SERVICE CENTERS AND
AGENTS SET FORTH IN THE FOLLOWING TABLE:

Service Centers Agents
--------------- ------
<S> <C>
Albuquerque, New Mexico Battle Mountain, Nevada
Bakersfield, California Beatty, Nevada
Colorado Springs, Colorado Bishop, California
Denver, Colorado Boise, Idaho
El Paso, Texas Cedar City, Utah
Fresno, California Elko, Nevada
Grand Junction, Colorado Ely, Nevada
Kent, Washington Eugene, Oregon
Las Vegas, Nevada Flagstaff, Arizona
Medford, Oregon Hawthorne, Nevada
Newark, California Hermiston, Oregon
North Salt Lake, Utah Kingman, Arizona
Oxnard, California Las Vegas, New Mexico
Phoenix, Arizona Lovelock, Nevada
Pico Rivera, California Redding, California
Portland Oregon Ridgecrest, California
Reno, Nevada Tonopah, Nevada
Rialto, California Wells, Nevada
Sacramento, California Wendover, Utah
San Diego, California Winnemucca, Nevada]
Spokane, Washington
Tucson, Arizona
</TABLE>

In October 1997, the Company commenced operations at its BEA expansion
facility in Dallas. This facility functions similarly to the Company's other
service centers with respect to pick-up and shipping operations; however, the
Company does not regularly transport freight from its other service centers to
the Dallas facility for delivery. The Company transports freight from the Dallas
service center to service centers within its core service region using primarily
purchased transportation.

Approximately 58% of the Company's shipments are currently delivered
overnight. The Company uses two-man "sleeper" teams to transport the remaining
second and third day deliveries to outlying service centers and agents. Over 90%
of the Company's shipments are delivered within two days. When necessary, the
Company contracts with third parties for transportation services ("purchased
linehaul transportation") to supplement peak demand periods and address lane
imbalances. The Company obtains purchased linehaul transportation from several
sources, including truckload carriers and independent contractors. By utilizing
purchased linehaul transportation, the Company is able to reduce "empty miles"
and improve load factors.

The Company selectively solicits business from customers to reduce
operational inefficiencies by improving the mix of shipment and lane density,
shipment size and lane flow. The Company currently handles an average of
approximately 3,100 shipments per day with an average weight per shipment of
approximately 1,130 lbs. and an average revenue per bill of approximately $125.
The Company's revenue per hundredweight was $11.08 for the nine months ended
September 30, 1997.

26
<PAGE> 28

The Company's rates for LTL shipments are typically based on weight and
volume characteristics and the distance traveled. The Company periodically
publishes base rates that are generally applicable to customer shipments. The
Company typically offers special rates to customers based on tonnage levels and
other factors. In certain instances, the Company competes with other carriers
for business by participating in competitive bidding. Customers generally
solicit bids for relatively large shipment and tonnage volumes over a one or two
year period. These customers often enter into contractual relationships with a
limited number of carriers based upon price and service.

In early 1997, the Company reorganized its reporting and incentive based
compensation structure, creating direct responsibility for overall service
center profitability. The revised structure has allowed the Company to establish
financial accountability at its most basic operating level.

SPECIALIZED SERVICES

The Company offers a broad range of services, including service
capabilities beyond the scope of most LTL carriers. These services include
Priority+Plus, an expedited time-definite service; Protective+Plus, a full
temperature-controlled service for LTL shipments within the Company's core
service region; and Canadian+Plus, full points coverage into all major Canadian
markets through an exclusive regional marketing partnership with one of Canada's
leading LTL carriers. In November 1997, the Company began providing
less-than-container load service to Hawaii. The Company consolidates shipments,
loads containers and tenders them to a major transoceanic carrier for transport
to Hawaii. The shipments are then delivered by a local carrier in Hawaii
pursuant to an agreement between the carrier and the Company. The Company will
continue to evaluate additional niche service offerings which complement
existing operating systems.

In addition to the service offerings described above, the Company offers
customized services tailored to the ongoing needs of a particular customer.
These customized services often involve a high level of coordination between the
Company and the customer and may include time definite delivery, highly
specialized reporting requirements and electronic data interchange, full time
on-site loading by Company employees, return goods consolidation and management,
and specialized handling and equipment requirements.

Through a program referred to as "Motor Cargo USA," the Company also
provides customers with service to points outside its core service region. The
Company recently entered into a strategic interline partnership with a large
southeastern regional carrier. The companies utilize Dallas, Texas as their
interchange point. This service allows the Company to provide service to
additional points throughout the southeastern United States to its present
customer base. The Company expects to increase the number of interline
partnerships over the next twelve months. Interchange points will be selected
which assist the Company in offsetting startup costs associated with BEA
expansions. See "Business -- Growth Strategy."

In 1995, the Company began providing customized logistics, warehousing and
distribution management services through its subsidiary MCDS. MCDS currently
provides "just-in-time" delivery services for two major specialty retailers.
These two customers currently account for more than 90% of the operating
revenues of MCDS and, for the nine months ended September 30, 1997, these two
customers accounted for approximately 3% of the Company's total revenues;
however, the Company believes that MCDS provides a significant opportunity for
future revenue and earnings growth. See "Business -- Growth Strategy."

CUSTOMERS AND MARKETING

The Company has approximately 3,000 regular customers with an average
monthly revenue billing of $1,000 or more. The Company's customers are not
concentrated in any one area or industry and no one customer accounts for over
5% of total revenues. The Company believes that the diversity of its customers
helps reduce the effects of cyclicality or other conditions in any one industry.
No major industry classification accounts for more than 10% of the Company's
revenues. Some of the companies with which the Company has established core
carrier relationships include Starbucks Coffee Company, 3M Corporation,
Steelcase, Pepperidge Farm, Sony Music, Eli Lilly, General Motors and Square D
Corp.

27
<PAGE> 29

The Company's revenues from its current top ten customers increased 75% to
$11,367,000 for the nine months ended September 30, 1997 compared to $6,504,000
from the same ten customers for the same period in 1995. The Company intends to
continue developing business with existing customers and to capitalize on its
reputation for service.

The Company has positioned itself in the high service end of the regional
LTL market. The Company targets prospective customers that require high levels
of customized service and are not inclined to select a carrier solely on the
basis of price. The Company emphasizes its ability to provide specialized or
customized services to shippers, including (i) highly flexible scheduling, (ii)
consistent and expedited transit commitments, (iii) strong management
information systems and electronic data interchange capabilities, (iv)
commitment to customer service and responsiveness and (v) a willingness to
provide transportation programs outside the scope of the traditional LTL
industry. The Company believes that this strategy of differentiation based upon
high quality service has helped to reduce the effects on the Company of pricing
pressures within the industry. According to survey results published by
Distribution Magazine in August 1997, Motor Cargo ranked highest among western
regional carriers in three out of five core service categories, including
overall value, customer service and administration.

The Company has written contracts with most of its large customers. These
contracts specify rate levels and eliminate the need to negotiate rates for
individual shipments. The Company's contracts typically do not provide for
guaranteed volumes. Although the Company's contracts typically run for a
specified term of one year, they generally may be terminated by either party
upon 30 days' notice. The Company has pricing agreements with substantially all
of its customers which are not covered by contracts. These pricing agreements
specify rate levels but do not require minimum tonnage commitments on the part
of the customer. Pricing agreements may generally be terminated by either party
upon five days' notice.

The Company's senior management is actively involved in the Company's sales
and marketing activities. In order to attract new customers, the Company relies
on its ability to provide quality service and on selective targeting of
potential accounts. At September 30, 1997, the Company had a marketing staff of
56 account executives located throughout its core service region. The account
executives are managed by four regional directors of sales. The account
executives are responsible for developing new business and maintaining relations
with existing customers. The Company also employs three corporate account
managers in its corporate account office in Chicago. These corporate account
managers solicit business from corporate level decision-makers who are
responsible for freight shipments to locations within the Company's service
region. The Company offers bonuses to account executives of up to 15% of their
salary based primarily upon (i) the total revenue generated within an account
executive's territory, (ii) the amount of new business secured by the account
executive and (iii) market penetration (as defined by total customers within the
account executive's territory meeting minimum revenue criteria). The Company
believes these bonuses provide a strong incentive for its account executives and
contribute to the Company's successful marketing efforts. Approximately 50% of
the Company's account executives received a bonus during 1996.

Approximately one-half of the Company's account executives are recruited
from within the transportation industry and have proven track records prior to
joining the Company. The remaining account executives are college graduates
recruited from universities or account executives recruited from positions
outside the transportation industry. Upon joining the Company, all account
executives participate in a 15 month training program, regardless of their
experience. The Company promotes continuous performance improvement by its
account executives through continuing education and mentoring programs.

The Company has designed and implemented a sales force automation system
which provides for improved contact and opportunity management, improved sales
forecasting and simplified reporting. The Company maintains comprehensive
customer base profiles of more than 20,000 existing and prospective customers.
Using this database, key strategic and account development information is
updated daily by the Company's sales force using automated processes. The
Company utilizes this resource to track emerging opportunities and direct highly
targeted and precisely timed marketing messages to existing and prospective
customers.

28
<PAGE> 30

TECHNOLOGY

The Company believes it is among the industry leaders in utilizing
technology to increase productivity and efficiency in its operations. The
Company pursues technology-based solutions within the context of stringent
return on investment criteria. The Company has received significant benefits in
the areas of computer-aided dispatch and routing, document imaging and
retrieval, sales management, productivity analysis and maintenance and parts
management. The Company's technological applications include:

Automated Shipment Costing. The Company has implemented an automated
activity-based costing capability. The Company's system provides actual
profitability analysis on each shipment handled, utilizing real-time data as
opposed to industry or system averages. The data is then formatted to analyze
profitability by customer, lane and service center. This data is then used to
verify the intrinsic profitability of each account and to isolate areas within
the Company's cost structure which require improvement.

Computer-Aided Dispatch and Routing. The Company has developed a computer
based dispatch and routing capability which the Company is using at several
service centers and will soon be available at all Company service centers.
Historically, the dispatching and routing of pick-up and delivery vehicles has
been a manual process. By automating this process and providing
computer-assisted decision support, the Company believes that fleet utilization
can be maximized with a higher degree of labor efficiency. This capability will
also serve as the foundation for future applications in the areas of on-board
computer communications, advanced linehaul planning and optimization, and
platform productivity optimization.

Linehaul Modeling. The Company recently retained The Sabre Group, a large
systems management organization, to develop and implement a linehaul modeling
system. The linehaul modeling system, which is in the early stages of
implementation, will allow the Company to model its present linehaul route
structure and test various hypothetical configuration changes from a cost and
service standpoint. The Company believes that the linehaul modeling system will
significantly increase the Company's ability to improve the efficiency of its
linehaul operations.

Document Imaging. The Company uses an optical imaging system to scan bills
of lading and delivery receipts from remote operating locations. These images
are stored electronically at the Company's central office and may be accessed
through the Company's computer network. Electronic storage of these images
reduces the amount of clerical and management time required for entering and
retrieving information, particularly in the areas of customer service and
accounts receivable management. The Company is in the process of upgrading its
document imaging system to allow broader application in areas such as freight
claims management, safety and compliance, human resources and accounts payable.

Fleet Maintenance and Parts Management. The Company uses a fully integrated
computer-based application to manage all aspects of its fleet maintenance and
parts management. This system tracks full maintenance scheduling and history for
each vehicle. In addition, this system provides for parts inventory management
and fuel tracking and utilization management.

Electronic Data Interchange / Internet. The Company's electronic data
interchange ("EDI") capability allows customers to communicate directly with the
Company's information systems via computer links in order to tender bills of
lading, receive shipment status and receive billing information. In most cases,
standard industry data formats are used for transmission; however, the Company
has also developed proprietary capabilities for several key customers. Many of
the Company's customers require EDI services from their core carriers, and the
Company believes that the number of customers requiring EDI service will
continue to increase.

The Company has also developed Internet based applications primarily for
internal applications. One such application allows the Company's sales and
management personnel to access the Company's main database via the Internet
instead of more costly dial-up connections. The Company is in the early stages
of supplementing the information available to customers on the Company's
Internet web site. The Company intends to provide interactive shipment tracking
capabilities, document retrieval and customer support functions through its
Internet web site.

29
<PAGE> 31

DRIVERS, INDEPENDENT CONTRACTORS AND OTHER PERSONNEL

At September 30, 1997, the Company employed 1,423 persons in the following
categories:

<TABLE>
<CAPTION>
CATEGORY NO. OF EMPLOYEES
--------------------------- ------------------
<S> <C>
Full time drivers.......... 419
Part time drivers and dock
workers.................. 528
Salaried and clerical...... 323
Warehousemen............... 19
Mechanics.................. 76
Sales and sales
management............... 58
</TABLE>

At September 30, 1997, the Company employed 81 linehaul drivers and 447
pick-up and delivery drivers. The Company selects its drivers based upon
experience and driving records. Pursuant to DOT regulations, drivers are
required to pass drug tests prior to employment and periodically thereafter. The
trucking industry experiences driver shortages from time to time; however, the
Company has maintained an adequate and qualified driver force. The Company's
linehaul schedules allow drivers to return home regularly, which contributes to
a low driver turnover rate. The Company's driver turnover rate was 13% in 1996.
The Company compensates linehaul drivers on a per mile basis. Pick-up and
delivery drivers are compensated on an hourly basis.

In addition to its employee drivers, the Company utilized approximately 78
linehaul drivers, as of September 30, 1997, pursuant to an agreement with FHF
Transportation, Inc. ("FHF"). These drivers operate tractors owned by the
Company but are not employees of the Company. The Company makes payments to FHF
based upon mileage.

The Company supplements its linehaul fleet with the use of approximately 50
independent contractors. Because independent contractors provide their own
tractor, independent contractors provide the Company with an alternative method
of obtaining additional revenue equipment with reduced capital investment. This
approach reduces costs and maximizes flexibility by quickly providing additional
linehaul capacity during peak periods of demand. Further, because independent
contractors are compensated at a contracted rate per mile, the use of
independent contractors helps the Company reduce fixed overhead and improve
asset utilization. Independent contractors also allow the Company to better
adjust to seasonal fluctuations in shipping volumes.

Approximately 5% of the Company's employees are covered by two separate
collective bargaining agreements relating to employees at the Company's North
Salt Lake, Utah and Reno, Nevada service centers. Although the employees covered
by these contracts are members of the International Brotherhood of Teamsters,
the contracts are not tied to the Teamsters National Master Contract. The
Company's agreement with Reno employees expires on November 30, 2000, and the
Company's agreement with North Salt Lake employees expires on November 30, 1999.
Both agreements provide for automatic renewal from year to year after
expiration, subject to the right of either party to cancel or terminate the
agreement upon at least 60 days' notice prior to the date of expiration.

Employees at the Company's Phoenix, Arizona service center were covered by
a collective bargaining agreement which expired in 1994. The agreement has not
been renewed.

SAFETY AND INSURANCE

The Company emphasizes safety in all aspects of its operations. The Company
employs a Director of Safety and Compliance who has over 24 years of
safety-related experience with the Company. Each of the Company's terminals
conducts its own safety program and all tractors are inspected daily by Company
personnel. The Company has also established guidelines for hauling hazardous
materials. The Company earned the highest DOT safety and fitness rating of
"satisfactory" during its last audit.

The Company currently maintains liability insurance for bodily injury and
property damage in the amount of $30 million, with a self retention amount of
$500,000 per incident, and cargo insurance in the

30
<PAGE> 32

amount of $1 million, with a self retention amount of $100,000, per load. The
Company is self-insured with respect to physical damage to its properties. The
Company also maintains workers' compensation insurance, with a deductible of
$250,000 in Nevada, and without a deductible in Washington. The Company is
responsible for workers' compensation claims in other states in which the
Company operates up to an aggregate of approximately $1.9 million per year, and
the Company maintains insurance for workers' compensation payments in excess of
such amount.

PROPERTIES

The Company owns its executive offices, located in North Salt Lake, Utah,
consisting of a two-story building of approximately 21,377 square feet. Of the
22 service centers used by the Company as of September 30, 1997, nine were
owned, 12 were leased and one was partially owned and partially leased by the
Company. These facilities range in size according to the markets served. The
Company has not experienced and does not anticipate difficulties in renewing
existing leases on favorable terms or obtaining new facilities as and when
required. The following table sets forth the location of each service center
owned or leased by the Company as of September 30, 1997.

<TABLE>
<CAPTION>
# OF OWNED OR LEASE
LOCATION DOORS LEASED EXPIRATION
--------------------------------------- ----- -------- ---------------
<S> <C> <C> <C>
Pico Rivera, CA........................ 102 Leased December 1998
Rialto, CA............................. 78 Owned
North Salt Lake, UT.................... 77 Owned
Denver, CO
Building 1........................... 43 Leased November 1998
Building 2........................... 36 Owned
Newark, CA............................. 35 Owned
Portland, OR........................... 34 Owned
Reno, NV............................... 32 Leased December 1999
Sacramento, CA......................... 30 Owned
Kent, WA............................... 30 Owned
Phoenix, AZ............................ 24 Owned
El Paso, TX............................ 20 Owned
Las Vegas, NV.......................... 20 Owned
San Diego, CA.......................... 20 Leased May 2001
Fresno, CA............................. 20 Leased October 1998
Albuquerque, NM........................ 12 Leased October 1998
Oxnard, CA............................. 9 Leased Month-to-month
Bakersfield, CA........................ 9 Leased October 2000
Tucson, AZ............................. 8 Leased August 2000
Medford, OR............................ 8 Leased July 2001
Spokane, WA............................ 8 Leased August 1998
Colorado Springs, CO................... 7 Leased August 1998
Grand Junction, CO..................... 3 Leased May 1998
</TABLE>

In October 1997, the Company commenced operations at its BEA expansion
facility in Dallas. The Dallas facility has 16 doors and is leased by the
Company pursuant to a lease which expires in May 1998. Upon expiration of the
current lease, the Company intends to move its Dallas operations to a different
location which has been leased by the Company. The new location has 23 doors and
the Company's lease term is from June 1998 through May 2000.

In addition to the service center facilities leased by the Company as
described above, the Company also leases a sales office in Chicago pursuant to a
lease which expires in April 1998. The Company's subsidiary

31
<PAGE> 33

MCDS leases an aggregate of 161,286 square feet of warehouse space in southern
California pursuant to two leases which expire in January 2001 and February
2001.

REVENUE EQUIPMENT

At September 30,1997, the Company operated a fleet of 576 tractors and
trucks and 2,297 trailers. The Company uses new linehaul tractors in linehaul
operations for approximately five years. After five years of use, the Company
trades-in used linehaul tractors and purchases new linehaul tractors. The table
below reflects, as of September 30, 1997, the average age of the type of
equipment, the number of units and the Company's revenue equipment:

<TABLE>
<CAPTION>
NUMBER AVERAGE
TYPE OF EQUIPMENT (CATEGORIZED BY PRIMARY USE) OF UNITS AGE
--------------------------------------------------------- -------- ---------
<S> <C> <C>
Linehaul tractors........................................ 186 2.8 years
Pick-up and delivery tractors............................ 299 3.2 years
Pick-up and delivery trucks.............................. 91 3.9 years
Trailers................................................. 2,297 6.8 years
</TABLE>

The Company lowers its cost structure and reduces cargo claims expenses by
using twin 28 foot trailers in its linehaul operations whenever possible. To the
extent permitted by state regulations, the Company also utilizes triple trailers
in its linehaul operations. The use of twin and triple trailers permits more
freight to be hauled behind a tractor than could be hauled if the Company used
one larger trailer.

The Company maintains its revenue equipment through the use of its own
maintenance facilities as well as outside vendors. The Company's service centers
in Pico Rivera, Las Vegas, Reno, Denver, Portland and North Salt Lake each have
maintenance facilities. In addition to scheduled maintenance on its equipment,
the Company also performs occasional equipment modifications which are designed
to improve operating performance and reduce operating costs of equipment. All
data regarding equipment costs, depreciation, mileage and maintenance are
recorded on the Company's computer system, allowing management to access
equipment records quickly and plan scheduled maintenance efficiently.

The Company purchases all of its parts through nationally-recognized
vendors. To enable management to better control inventory and costs, all orders
are placed through the Company's central purchasing unit at the Company's
headquarters. The Company is seeking to standardize its line parts by
concentrating its new truck purchases with two tractor manufacturers,
International and Freightliner.

FUEL AVAILABILITY AND COST

Fuel comprises 2% to 3% of the Company's total operating expenses.
Generally, in order to obtain lower fuel costs and greater flexibility in
fueling its fleet, the Company purchases its own fuel in bulk and requires its
drivers to fuel at Company terminals. The Company emphasizes fuel economy
through the use of modern, fuel-efficient equipment, driver and mechanic
training programs and aerodynamic improvements. Although fuel constitutes a much
lower percentage of costs to the Company than it would to a full truckload
carrier, increases in fuel prices or fuel taxes, shortages of fuel or rationing
of petroleum products could have a material adverse effect on the operations and
profitability of the Company.

Generally, in times of sharp fuel price increases, the Company implements
fuel surcharges. The Company presently has a sliding scale fuel surcharge which
is based on a fuel price index for the west coast. Because of the highly
competitive nature of the market for LTL services, the Company generally must
wait for larger carriers to implement fuel surcharges before the Company can
effectively implement fuel surcharges.

COMPETITION

The transportation industry is highly competitive on the basis of both
price and service. The Company competes with regional, inter-regional and
national LTL carriers and, to a lesser extent, with truckload carriers,
railroads and overnight delivery companies. Several large regional LTL carriers
operate within the

32
<PAGE> 34

Company's core service region, including Consolidated Freightways, Yellow
Corporation, Roadway Express and Arkansas Best Corporation. Some of the
Company's competitors are divisions or subsidiaries of larger trucking
companies. Many of the Company's competitors have greater financial resources,
more equipment and greater freight capacity than the Company. Certain carriers
occasionally experience periods of over capacity during which these carriers
reduce prices in order to increase utilization of revenue equipment. The Company
believes that it is able to compete effectively in its markets by providing high
quality customized service at competitive prices.

REGULATION

The Motor Carrier Act of 1980 significantly deregulated the trucking
industry and increased competition among motor carriers. Following enactment of
the Motor Carrier Act, applicants have obtained operating authority more easily,
and interstate motor carriers such as the Company are able to change their rates
and services with less regulatory oversight and delay. The Motor Carrier Act
also removed many route and commodity restrictions on transportation of freight.

Effective January 1, 1995, Section 601 of the Federal Aviation
Administrative Authorization Act and the Trucking Industry Regulatory Reform Act
("TIRRA") substantially deregulated intrastate operating authority. Prior to
TIRRA, the Company maintained intrastate authority in California, Nevada and
Utah. Subsequent to TIRRA, the Company obtained intrastate authority in
Colorado, Oregon, New Mexico and Washington. The passage of TIRRA provides
additional intrastate growth opportunities in the states in which the Company
operates.

The Company was regulated by the ICC until the ICC Termination Act of 1995
abolished the ICC effective January 1, 1996. The Surface Transportation Board,
an independent entity within the DOT, assumed many of the responsibilities of
the ICC. The Company is also regulated by various state agencies. These
regulatory authorities have broad powers, generally governing matters such as
authority to engage in motor carrier operations, rates, certain mergers,
consolidations and acquisitions, and periodic financial reporting. The trucking
industry is subject to regulatory and legislative changes that can affect the
economics of the industry by requiring changes in operating practices or
influencing the demand for, and the costs of providing services to, shippers.

Interstate motor carrier operations are subject to safety requirements
prescribed by the DOT. Such matters as weight and dimensions of equipment are
also subject to federal and state regulation. The use of triple trailers is
subject to state regulation and is prohibited by several states within the
Company's core service region. The Company is subject to federal, state and
local environmental laws and regulations governing the management of hazardous
wastes, other discharge of pollutants into the air and surface and underground
waters, and the disposal of certain substances. These regulations extend to the
Company's above-ground and underground fuel storage tanks. The Company is in the
process of modifying the underground storage tanks at several of its facilities
in order to comply with new federal regulations which become effective at the
end of 1998. In most cases, the Company is replacing its underground storage
tanks with above-ground tanks. The Company expects that its total capital
expenditures through the end of 1998 relating to the modification of its
remaining underground storage tanks will be approximately $575,000. The Company
believes that all of its fuel storage tanks will be in compliance with the new
regulations when they become effective. The Company also believes that it is in
material compliance with all other applicable environmental laws and regulations
and does not believe that the cost of future compliance should have a material
adverse effect on the Company's operations or financial condition.

LEGAL PROCEEDINGS

The Company is routinely a party to litigation incidental to its business,
primarily involving claims for personal injury or property damage incurred in
the transportation of freight. The Company maintains insurance to cover
liabilities in excess of self-insured amounts. The Company's management is not
aware of any claims or threatened claims that it believes are likely to exceed
insurance limits or have a materially adverse effect upon the Company's
operations or financial position.

33
<PAGE> 35

MANAGEMENT

DIRECTORS, DIRECTOR NOMINEES, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth certain information with respect to the
directors, executive officers and certain key employees of the Company as of the
date hereof:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------- --- ----------------------------------------
<S> <C> <C>
Harold R. Tate 71 Chairman of the Board, Director
Marshall L. Tate 35 President and Chief Executive Officer,
Director
Louis V. Holdener 59 Vice President, President of Motor Cargo
Marvin L. Friedland 56 Vice President and General Counsel,
Secretary, Director
Lynn H. Wheeler 56 Vice President and Chief Financial
Officer
R. Scott Price 34 Vice President
Steven E. Wynn(1) 47 Vice President of Operations (Motor
Cargo)
Kevin L. Avery(1) 40 Vice President of Traffic (Motor Cargo)
Jim D. Matt(1) 42 Vice President of Sales (Motor Cargo)
Robert Anderson 76 (2)
James Clayburn La Force, Jr. 68 (2)
</TABLE>

- ---------------
(1) Messers Wynn, Avery and Matt are officers of the Company's principal
operating subsidiary, Motor Cargo, and are not officers of the Company.

(2) Mr. Anderson and Mr. La Force have agreed to serve as directors effective
with the closing of the Offering.

All directors are elected at the annual meeting of shareholders and hold
office until their successors are elected and qualified. The executive officers
are appointed by the Company's Board of Directors and serve at the Board's
discretion.

Harold R. Tate has over 50 years experience in the trucking industry and
has served as Chairman of the Board of the Company and its predecessors since
1947. Mr. Tate served as Chief Executive Officer of the Company and its
predecessors from 1947 to March 1997. Mr. Tate also serves as a member of the
Board of Trustees of the Buffalo Bill Historical Center.

Marshall L. Tate has over 13 years experience in the trucking industry. Mr.
Tate has been employed by the Company since 1984, has served as its President
and Chief Executive Officer since March 1997, and was appointed to the Board of
Directors of the Company in 1996. Prior to becoming the Company's President and
Chief Executive Officer, Mr. Tate served in various divisional positions as well
as Vice President of Sales and Marketing and Executive Vice President of
Corporate Development for Motor Cargo. In 1995, Mr. Tate directed the start-up
of the Company's logistics warehousing and distribution management services
subsidiary, MC Distribution Services. Marshall L. Tate is the son of Harold R.
Tate.

Louis V. Holdener has over 32 years experience in the trucking industry.
Mr. Holdener has been employed by the Company since 1965, has served as
President of Motor Cargo, the Company's primary operating subsidiary, since
1991, and was named Vice President of the Company in 1997. Prior to 1991, Mr.
Holdener served in various positions with the Company, including Vice President
of Operations of Motor Cargo.

Marvin L. Friedland has served as Vice President and General Counsel of the
Company and its predecessors since 1982. Prior to joining the Company, Mr.
Friedland was an attorney in private practice. Mr. Friedland was appointed to
the Board of Directors in 1996. Mr. Friedland is a Certified Public Accountant
and a member of the California Bar and the Utah Bar.

34
<PAGE> 36

Lynn H. Wheeler has been employed by the Company since 1983 and has served
as Vice President Finance of Motor Cargo since 1988. Mr. Wheeler was appointed
Vice President and Chief Financial Officer of the Company in March 1997. Mr.
Wheeler is a Certified Public Accountant, a Certified Internal Auditor and a
member of the American Institute of Certified Public Accountants.

R. Scott Price joined the Company in 1986 and has served as a Vice
President of the Company since October 1997. From 1995 to 1997, Mr. Price served
as Vice President of Sales of Motor Cargo. From 1986 to 1995, Mr. Price held
various positions with Motor Cargo, including Service Center Manager and
Director of Corporate Accounts.

Steven E. Wynn has been employed by Motor Cargo since 1973 and has served
as Vice President of Operations of Motor Cargo since 1991. From 1973 to 1991,
Mr. Wynn served in various positions, including Director of Linehaul Operations
and Director of Operations for Motor Cargo.

Kevin L. Avery joined the Company in 1985 and has served as Vice President
of Traffic of Motor Cargo since 1992. From 1985 to 1992, Mr. Avery served in
various positions, including Director of Pricing, Rate Department Manager and
Director of Quality Assurance for Motor Cargo.

Jim D. Matt joined the Company in October 1997 as Vice President of Sales
for Motor Cargo. Prior to joining the Company, Mr. Matt was Vice President of
Sales for the Midwestern and Eastern divisions of Viking Freight Incorporated
from 1996 to 1997, Vice President of Sales and Marketing for Spartan Express
from 1995 to 1996 and Vice President of Sales and Marketing for Spartan Central
from 1992 to 1995.

Robert Anderson was formerly Chairman and Chief Executive Officer of
Rockwell International Corporation. He has served as Chairman Emeritus of
Rockwell International Corporation since 1990. Mr. Anderson is also a director
of Gulfstream Aerospace Corporation, Optical Data Systems, Inc., After-Market
Technology Corporation and The Timken Company.

James Clayburn La Force, Jr. is Dean Emeritus of the John B. Anderson
School of Management, University of California, Los Angeles. He is also a
director of Eli Lilly and Company, Rockwell International Corporation, Jacobs
Engineering Group, Inc., The Black Rock Funds, Imperial Credit Industries, Inc.,
Provident Investment Council Mutual Funds and The Timken Company.

COMMITTEES OF THE BOARD OF DIRECTORS

Following completion of this Offering, the Board of Directors intends to
establish Audit and Compensation Committees. The Audit Committee will be
comprised initially of Robert Anderson and James Clayburn La Force, Jr., and the
Compensation Committee will be comprised initially of Harold R. Tate, Robert
Anderson and James Clayburn La Force, Jr. The Audit Committee will have
responsibility for reviewing audit plans and discussing audit work, internal
controls and related matters with the Company's independent auditors, reviewing
the audit report and any accompanying recommendations, and nominating
independent auditors to perform the annual audit. The Compensation Committee
will have responsibility for reviewing the compensation of the Company's
executive officers, making recommendations to the Board of Directors, and
administering the Company's 1997 Stock Option Plan. See "Management -- 1997
Stock Option Plan."

DIRECTOR COMPENSATION

Prior to this Offering, directors of the Company were not compensated for
their services as such. Following completion of this Offering, the Company will
pay each non-employee director $2,500 for each meeting of the Board of Directors
and $500 for each telephonic meeting of the Board of Directors attended. The
Company will also reimburse such directors for their expenses incurred in
connection with their activities as directors. On the date of this Prospectus, a
non-qualified option to purchase 10,000 shares of Common Stock at the initial
public offering price set forth on the cover page of this Prospectus will be
granted to each of Mr. Anderson and Mr. La Force. These options will vest over a
four-year period, with 25% of these options vesting on each of the first,
second, third and fourth anniversaries of the date of grant.

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<PAGE> 37

EXECUTIVE COMPENSATION

The following table sets forth summary information concerning compensation
paid or accrued for services rendered to the Company in all capacities during
the fiscal year ended December 31, 1996 by the Company's Chief Executive Officer
and the Company's other executive officers whose salary and bonus for such
fiscal year was in excess of $100,000 (the "Named Executive Officers"). None of
the Company's other executive officers received salary and bonus for such fiscal
year in excess of $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
1996 ANNUAL COMPENSATION(1) LONG TERM COMPENSATION
------------------------------------ -----------------------------
NAME AND OTHER ANNUAL OPTIONS/ ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION(2) SAR(#) COMPENSATION($)(3)
- ----------------------------------- -------- ------- --------------- -------- ------------------
<S> <C> <C> <C> <C> <C>
Harold R. Tate..................... $105,000 $ -- -- -- --
Chief Executive Officer until
March 19, 1997(4)
Marshall L. Tate................... $118,917 $15,344 -- -- --
President
Chief Executive Officer since
March 19, 1997(4)
Marvin L. Friedland................ $126,625 $15,344 $ 4,560 -- $ 17,555
Vice President and
General Counsel
Louis V. Holdener.................. $121,667 $17,844 -- -- $ 16,927
President of Motor Cargo
Lynn H. Wheeler.................... $ 90,125 $15,344 -- -- $ 16,612
Vice President of Finance
and Chief Financial Officer
</TABLE>

- ---------------

(1) Amounts in this table include payments made to certain Named Executive
Officers by Ute during 1996. Amounts in this table do not include payments
made by the Company to PDLM Consulting Limited, a company in which Harold R.
Tate owns a 50% equity interest. See "Certain Transactions."

(2) The amount in this column for Mr. Friedland consists of a cash automobile
allowance.

(3) Amounts in this column include matching contributions made by the Company
under its 401(k) plan on behalf of Mr. Friedland, Mr. Holdener and Mr.
Wheeler of $2,629, $2,063 and $2,299, respectively. Amounts in this column
also include accrued benefits for 1996 under salary continuation agreements
between the Company and Mr. Friedland, Mr. Holdener and Mr. Wheeler of
$14,926, $14,864 and $14,313, respectively.

(4) Harold R. Tate resigned from the office of Chief Executive Officer on March
19, 1997, retaining his position as Chairman of the Board. At that time,
Marshall L. Tate was elected Chief Executive Officer. Effective September 1,
1997, Harold R. Tate's annual salary was increased to $250,000 and Marshall
L. Tate's annual salary was increased to $175,000.

The Board of Directors has awarded Louis V. Holdener 20,000 shares of the
Company's Common Stock, contingent upon completion of the Offering. The award
was made pursuant to a Restricted Stock Agreement, dated October 2, 1997. Under
the Restricted Stock Agreement, upon completion of the Offering, 20,000 shares
of the Company's Common Stock will be issued in Mr. Holdener's name. The Company
will hold the certificates for the shares, which will be released to Mr.
Holdener in four installments, each consisting of 25% of the shares issued under
the agreement on January 1 of 1998, 1999, 2000 and 2001. The shares not released
are subject to forfeiture in the event Mr. Holdener voluntarily ceases his
continuous employment with the Company or the Company terminates his employment
for cause. Termination of employment by the Company without cause, or
termination due to disability or death before January 1, 1999 will result in the
forfeiture of 10,000 shares. Such termination on or after January 1, 1999 will
result in the prompt release of all

36
<PAGE> 38

shares not previously released. Notwithstanding the scheduled release of shares
and the forfeiture provisions, the Board of Directors may, in its discretion,
release any or all shares held by the Company at any time. Pending release or
forfeiture of the restricted shares, Mr. Holdener may exercise all rights of a
shareholder with respect to the restricted shares, except the right to pledge or
convey ownership.

1997 STOCK OPTION PLAN

On October 1, 1997, the Company's Board of Directors adopted the Motor
Cargo Industries, Inc. 1997 Stock Option Plan (the "1997 Stock Option Plan").
The purpose of the 1997 Stock Option Plan is to provide certain of the Company's
key employees who are responsible for the continued growth of the Company an
opportunity to acquire a proprietary interest in the Company and thereby create
in such key employees an increased interest in and a greater concern for the
welfare of the Company.

The Compensation Committee of the Board of Directors will administer the
1997 Stock Option Plan. Under the terms of the 1997 Stock Option Plan, the
committee of the Board of Directors administering the plan is required to be
composed of two or more directors. The Compensation Committee has the authority
to interpret the 1997 Stock Option Plan and to determine and designate the
persons to whom options or awards shall be made and the terms, conditions and
restrictions applicable to each option or award (including, but not limited to,
the price, any restriction or limitation, any vesting schedule or acceleration
thereof, and any forfeiture restrictions). The Board of Directors may amend the
1997 Stock Option Plan but may not, without the prior approval of the
shareholders of the Company, amend the plan to increase the total number of
shares reserved for options and rights under the plan, reduce the exercise price
of any incentive stock option granted under the plan, modify the provisions of
the plan relating to eligibility, or materially increase the benefits accruing
to participants under the plan.

The Company has reserved 500,000 shares of Common Stock for issuance
pursuant to the 1997 Stock Option Plan. Pursuant to the 1997 Stock Option Plan,
on the date of this Prospectus, non-qualified options to purchase 229,500 shares
of Common Stock at the initial public offering price set forth on the cover page
of this Prospectus will be granted to employees of the Company, including an
aggregate of 115,000 options to the Named Executive Officers, other than Harold
R. Tate. These options will vest over a four year period, with 25% of these
options vesting on each of the first, second, third and fourth anniversaries of
the date of grant.

The 1997 Stock Option Plan contains provisions for granting various
stock-based awards, including incentive stock options as defined in Section 422
of the Internal Revenue Code of 1986, nonqualified stock options and stock
appreciation rights. The term of the 1997 Stock Option Plan is ten years,
subject to earlier termination or amendment.

401(k) PROFIT SHARING PLAN

The Company maintains a defined contribution plan (the "401(k) Plan"),
which is intended to satisfy the tax qualification requirements of the Internal
Revenue Code of 1986, as amended (the "Code"). All Company personnel who work
1,000 or more hours per year are eligible to participate in the 401(k) Plan
after one year of service with the Company. The 401(k) Plan permits participants
to contribute between 1% and 15% of their annual compensation from the Company,
subject to the limit imposed by the Code. The Company is obligated to match at
least 25% of employee contributions, up to 6% of a participant's annual
compensation. All amounts contributed by a participant fully vest immediately. A
participant becomes vested over time and is fully vested in any Company matching
contributions after seven years of service. The 401(k) Plan also permits
discretionary contributions by the Company, which contributed $585,000, $344,815
and $310,000 in 1994, 1995 and 1996, respectively, and $347,500 during the nine
months ended September 30, 1997.

PENSION PLAN

The Company has a defined benefit pension plan (the "Pension Plan")
covering substantially all of its employees. Benefits under the Pension Plan are
based upon years of service and hours of service in each year of service. A
participant is fully vested after five years of employment. Once vested,
employees are entitled to

37
<PAGE> 39

receive an annual benefit for each year of service in which such employee worked
at least 1,000 hours. The amount of benefit for each year of service ranges from
$144 for 1,000 hours of service to $240 for 1,800 hours or more of service.
Harold R. Tate receives an annual benefit of $17,256 under the Pension Plan. The
estimated annual benefits payable upon retirement at normal retirement age for
Marshall L. Tate, Marvin L. Friedland, Louis V. Holdener and Lynn H. Wheeler are
$6,025, $5,832, $7,320 and $5,572, respectively. See Note H to the Company's
Consolidated Financial Statements.

SALARY CONTINUATION AGREEMENTS

The Company has salary continuation agreements with certain key management
employees, including Marvin L. Friedland, Louis V. Holdener and Lynn H. Wheeler.
Under the agreements, the Company is obligated to provide for each such employee
or his beneficiaries, during a period of not more than ten years after the
employee's death, disability or retirement, annual benefits ranging from $17,000
to $23,000.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

In 1996, decisions concerning compensation of executive officers were made
by the Company's Board of Directors, consisting at that time of Harold R. Tate,
Marshall L. Tate and Marvin L. Friedland.

CERTAIN TRANSACTIONS

Effective August 28, 1997, the Company acquired Ute. Ute's assets consist
primarily of tractors and trailers utilized by the Company pursuant to contracts
between the Company and Ute. The Company issued an aggregate of 700,000 shares
of Common Stock to the four owners of Ute, Harold R. Tate, Marshall L. Tate,
Darrell Tate and Marvin L. Friedland, in exchange for their interests in Ute.
Harold R. Tate is the principal shareholder and the Chairman of the Board of
Directors of the Company. Marshall L. Tate is the President and Chief Executive
Officer and a director of the Company. Marvin L. Friedland is Vice President and
General Counsel, Secretary and a director of the Company. Harold R. Tate,
Marshall L. Tate and Marvin L. Friedland received 490,000, 70,000 and 70,000
shares of Common Stock, respectively, for their interests in Ute. As of August
31, 1997, the Ute assets had a net book value of approximately $912,000
($3,506,000 less $2,594,000 in related debt). The aggregate lease payments on
the assets paid by the Company to Ute during 1995, 1996 and the nine months
ended September 30, 1997 totaled $3,176,675, $3,458,417 and $2,746,556,
respectively. The number of shares of Common Stock issued to the members of Ute
was determined by the Company and the members of Ute. In making such
determination, the Company and the Ute members considered a number of factors,
including (i) the current and projected earnings of Ute, (ii) the estimated per
share value of the Common Stock at the time Ute was acquired and the price per
share expected to be received by the Company in this Offering, (iii) the
estimated useful life of the Ute assets and (iv) the resale restrictions under
applicable securities laws with respect to the shares of Common Stock issued to
the Ute members. Due to the fact that three directors of the Company had
interests in Ute, the transaction was submitted to the disinterested
shareholders of the Company for their approval in accordance with the Utah
Revised Business Corporation Act. The disinterested shareholders of the Company
unanimously approved the Ute acquisition as of October 3, 1997.

Pursuant to a consulting agreement between the Company and PDLM Consulting
Limited ("PDLM") the Company has made payments to PDLM for consulting services
since 1994. Harold R. Tate owns a 50% equity interest in PDLM. The Company paid
$480,000 to PDLM during 1996 and $160,000 to PDLM during the nine months ended
September 30, 1997 pursuant to the terms of the consulting agreement. The
consulting agreement was terminated in April 1997.

The Company has adopted a policy that any future transactions with
affiliated persons or entities will be on terms no less favorable to the Company
than those that could have been obtained on an arms-length basis from
unaffiliated third parties and that any such transactions must be approved by a
majority of the disinterested directors.

38
<PAGE> 40

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information as of September 30, 1997
and as adjusted to reflect the sale of the shares of Common Stock offered
hereby, with respect to the beneficial ownership of the Common Stock by (i) each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (ii) each Selling Shareholder, (iii) each
director and each person who has consented to become a director of the Company,
(iv) each executive officer named in the Summary Compensation Table, and (v) all
directors and executive officers of the Company as a group. Except as indicated
below, the address for each person is c/o Motor Cargo Industries, Inc., 845
Center Street, North Salt Lake, Utah 84054.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE OFFERING AFTER OFFERING(1)
--------------------- ---------------------
NAME SHARES PERCENT SHARES OFFERED SHARES PERCENT
- ------------------------------------- --------- ------- -------------- --------- -------
<S> <C> <C> <C> <C> <C>
Harold R. Tate(2).................... 4,890,000 84.02% 1,000,000 3,890,000 55.65%
Marshall L. Tate..................... 190,000 3.26% -- 190,000 2.72%
Marvin L. Friedland.................. 190,000 3.26% -- 190,000 2.72%
Louis V. Holdener(3)................. -- -- -- 20,000 0.29%
Lynn H. Wheeler...................... -- -- -- -- --
Lauri Tate Franks(4)................. 120,000 2.06% 20,000 100,000 1.43%
Darrell Tate(5)...................... 190,000 3.26% 20,000 170,000 2.43%
Troy Tate(6)......................... 120,000 2.06% 20,000 100,000 1.43%
Mia Tate(7).......................... 120,000 2.06% 20,000 100,000 1.43%
Robert Anderson...................... -- -- -- -- --
James Clayburn La Force, Jr.......... -- -- -- -- --
All directors and executive officers
as a group (five persons).......... 5,270,000 90.55% 1,000,000 4,290,000 61.37%
</TABLE>

- ---------------

(1) Assumes no exercise of the Underwriters' over-allotment option. The
over-allotment option gives the Underwriters the option to purchase an
additional 17,250 shares from the Company and an additional 317,250 shares
from certain Selling Shareholders, including certain officers and directors
of the Company. Harold R. Tate, Marshall L. Tate and Marvin L. Friedland
have agreed to sell up to 37,250, 20,000, and 20,000 shares, respectively,
in the event the over-allotment option is exercised.

(2) Harold R. Tate is Chairman of the Board of Directors of the Company. Until
March 19, 1997, Mr. Tate was President and Chief Executive Officer of the
Company.

(3) Beneficial ownership after Offering reflects 20,000 shares awarded under a
restricted stock agreement and to be issued upon completion of the Offering.
See "Management -- Executive Compensation."

(4) The address of Lauri Tate Franks is 3905 East Prospector Drive, Salt Lake
City, Utah 84121. Lauri Tate Franks is the daughter of Harold R. Tate.

(5) The address of Darrell Tate is 851 South Westgate Avenue #102, Los Angeles,
California 90049. Darrell Tate is the son of Harold R. Tate.

(6) The address of Troy Tate is 29 Doheny, Laguna Niguel, California 92677. Troy
Tate is the son of Harold R. Tate.

(7) The address of Mia Tate is 4947 Laurel Canyon Blvd #8, North Hollywood,
California 91607. Mia Tate is the daughter of Harold R. Tate.

39
<PAGE> 41

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, no par value, and 25,000,000 shares of Preferred Stock, no par
value ("Preferred Stock"). After the issuance of the shares of Common Stock
offered hereby, a total of 6,990,000 shares of Common Stock will be issued and
outstanding (assuming the Underwriters' over-allotment option is not exercised).
See "Principal and Selling Shareholders."

COMMON STOCK

Subject to the rights of holders of any Preferred Stock then outstanding,
holders of Common Stock are entitled to receive such dividends out of assets
legally available therefor as may from time to time be declared by the Board of
Directors of the Company. Holders of Common Stock are entitled to one vote per
share on all matters on which the holders of Common Stock are entitled to vote.
Holders of Common Stock do not have cumulative voting rights; thus, the holders
of a majority of the shares of Common Stock represented at a meeting can elect
all the directors standing for election at such meeting. In the event of
liquidation, dissolution or winding up of the Company, holders of Common Stock
would be entitled to share ratably, subject to the rights of any Preferred Stock
then outstanding, in assets of the Company available for distribution to holders
of Common Stock.

Fully-paid shares of Common Stock are not liable to further calls or
assessments by the Company and holders of Common Stock are not liable for any
liabilities of the Company. The Common Stock does not have any preemptive or
other subscription rights, any conversion rights or any redemption or sinking
fund provisions.

PREFERRED STOCK

The Company is authorized to issue up to 25,000,000 shares of Preferred
Stock from time to time in one or more series without shareholder approval. No
shares of Preferred Stock are presently issued and outstanding. The Board of
Directors is authorized, without any further action by the shareholders of the
Company, to determine the designation, powers, preferences and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions of any series of Preferred Stock and the number of shares
constituting any such series. Holders of Preferred Stock, if issued, will be
entitled to such voting rights as the Board of Directors, in its sole
discretion, shall determine. Thus, the Board of Directors, without shareholder
approval, could authorize the issuance of Preferred Stock with rights which
could adversely affect the rights of the holders of Common Stock. Any future
issuance of Preferred Stock may have the effect of delaying or preventing a
change in control of the Company without further action by the shareholders and
may adversely affect the voting and other rights of the holders of Common Stock.
The Company has no present plans to issue any Preferred Stock.

UTAH CONTROL SHARES ACQUISITION ACT

The Utah Control Shares Acquisition Act (the "Control Shares Act")
essentially provides that, when a person or group (the "Acquiror") acquires
shares (or the power to direct the voting of shares) of a corporation that is
subject to the Control Shares Act equal to or in excess of 20%, 33 1/3% or a
majority of the voting power of the corporation, the Acquiror is not permitted
to vote (or to direct the voting of) the shares unless a majority of the
corporation's shares (voting in voting groups, if applicable), excluding shares
held by the Acquiror or by the officers and employee-directors of the
corporation, approve a resolution granting the Acquiror the right to vote the
shares. Shareholder approval may occur at the next meeting of the shareholders
or, if the Acquiror requests a special meeting and agrees to pay the associated
costs of the corporation for the requested special meeting, at the requested
special meeting of the shareholders (to be held within 50 days of the
corporation's receipt of the request by the Acquiror).

If authorized by the corporation's articles of incorporation or bylaws, the
corporation may redeem the Acquiror's shares at their fair market value if the
Acquiror does not file an "acquiring person statement." The Company's Articles
of Incorporation and Bylaws do not provide for redemption of an Acquiror's
shares in the

40
<PAGE> 42

event the Acquiror fails to file an "acquiring person statement." An Acquiror's
shares are not subject to redemption after an "acquiring person statement" has
been filed unless the shares are not accorded full voting rights by the
shareholders.

If the Acquiror obtains the right to vote, and if the Acquiror obtains a
majority of the voting power of the corporation, the shareholders may be
entitled to dissenters' rights.

The Control Shares Act does not apply if (a) a corporation's articles of
incorporation or bylaws provide that the Control Shares Act does not apply, (b)
the acquisition of shares of the corporation is consummated pursuant to a merger
(to which the corporation is a party), or (c) under certain other specified
circumstances. In addition, the Control Shares Act applies only to Utah
corporations that (a) have 100 or more shareholders, (b) have their (i)
principal place of business, (ii) principal office, or (iii) substantial assets
in the State of Utah, and (c) have (i) more than 10% of their shareholders who
are residents of Utah, (ii) more than 10% of their shares owned by Utah
residents, or (iii) 10,000 or more shareholders who are residents of Utah.

The Company's Articles of Incorporation and Bylaws contain no additional
provision restricting transactions with interested shareholders or other
takeover situations, nor do they contain provisions opting out of the Control
Shares Act.

REGISTRAR AND TRANSFER AGENT

The transfer agent and registrar for the Common Stock of the Company is
Zions First National Bank, Salt Lake City, Utah.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company's directors and officers and
all other current shareholders will beneficially own 4,760,000 shares of Common
Stock, representing approximately 68% of the total outstanding shares. The
Company and current shareholders have agreed not to offer, sell, or otherwise
dispose of any shares of Common Stock owned (or in the case of the Company,
owned or issuable) by them for 180 days from the commencement of this Offering
without the prior written consent of Morgan Keegan & Company, Inc. After the 180
day period, 4,040,000 shares held by existing shareholders will be eligible for
sale by the holders thereof under Rule 144 under the Securities Act not later
than , 1998. An additional 700,000 shares will be eligible for sale
under Rule 144 beginning in August 1998. An additional 20,000 shares subject to
a restricted stock agreement will become eligible for sale in accordance with
the terms of such agreement. See "Management -- Executive Compensation."

In general, Rule 144 provides that, subject to its provisions and other
applicable federal and state securities law requirements, any person (or persons
whose shares are aggregated), including any person who may be deemed an
"affiliate" as defined under the Securities Act, who has acquired securities
directly or indirectly from the issuer or an affiliate in a transaction not
involving a public offering ("restricted securities"), and who has beneficially
owned such restricted securities for at least one year is entitled to sell,
within any three-month period, a number of such shares that does not exceed the
greater of (i) the average weekly trading volume of the same class of securities
during the four calendar weeks preceding the filing of notice of the sale with
the Securities and Exchange Commission; or (ii) one percent of the same class of
securities then outstanding, subject to certain manner-of-sale provisions,
notice requirements, and the availability of current information concerning the
Company. A person who is not deemed an "affiliate" of the Company and who has
beneficially owned shares for at least two years is entitled to sell such shares
under Rule 144 without regard to the volume limitations and current public
information, manner of sale, and notice requirements described above.
Affiliates, including officers, directors and principal shareholders of the
Company, are subject to the volume limitations and certain other requirements as
to all shares owned by them, regardless of the length of time such shares have
been beneficially owned and irrespective of whether such shares were acquired
from the issuer or otherwise and whether acquired in a transaction involving a
public offering.

41
<PAGE> 43

Prior to this Offering, there has been no public market for the Common
Stock of the Company and no determination can be made as to the effect, if any,
that the sale or availability for sale of additional shares of the Common Stock
will have on the market price of the Common Stock prevailing from time to time.
Nevertheless, sales of substantial amounts of the shares on the public market
could adversely affect the market price of the Common Stock and could impair the
Company's ability to raise capital through the sale of its equity securities.

UNDERWRITING

The Underwriters named below (the "Underwriters"), for whom Morgan Keegan &
Company, Inc. and Furman Selz LLC are acting as representatives (the
"Representatives"), have severally agreed, subject to the terms and conditions
of the Underwriting Agreement, to purchase from the Company and the Selling
Shareholders, the aggregate number of shares of the Common Stock set forth
opposite their respective names below:

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
-------------------------------------------------------- ----------------
<S> <C>
Morgan Keegan & Company, Inc............................
Furman Selz LLC.........................................

---------
Total......................................... 2,230,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions, including, among other things, the
continuing accuracy of the representations and warranties of the Company and
Selling Shareholders contained in the Underwriting Agreement, the performance by
the Company and Selling Shareholders of their respective obligations under the
Underwriting Agreement, and the receipt of an opinion of counsel for the Company
and counsel for the Selling Shareholders in form and substance reasonably
satisfactory to counsel for the Underwriters. The nature of the Underwriters'
obligations is such that they are committed to purchase and pay for all of the
shares of Common Stock if any are purchased. The Underwriting Agreement contains
covenants of indemnity between the Underwriters and the Company and Selling
Shareholders against certain civil liabilities, including liabilities under the
Securities Act.

In order to facilitate the Offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of the Common Stock. Specifically, the Underwriters may over-allot
in connection with the Offering, creating a short position in the Common Stock
for their own account. In addition, to cover such over-allotments or to
stabilize the price of the Common Stock, the Underwriters may bid for, and
purchase, the Common Stock in the open market. Any of these activities may
stabilize or maintain the market price of the Common Stock above independent
market levels. The Underwriters are not required to engage in these activities,
and, if commenced, may end any of these activities at any time. The
Representatives, on behalf of the syndicate of Underwriters, also may reclaim
selling concessions allowed to an Underwriter or dealer, if the syndicate
repurchases shares distributed by that Underwriter or dealer.

The Company has been advised by the Underwriters that they propose to offer
the shares of Common Stock to the public at the initial public offering price
set forth on the cover page of this Prospectus and to certain dealers at such
price, less a concession not in excess of $0. per share. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $0. per share
to other dealers. The initial public offering price and the concessions and
discount to dealers may be changed by the Underwriters after the Offering.

The Company and certain Selling Shareholders have granted to the
Underwriters options, expiring on the thirtieth day subsequent to the date of
this Prospectus, to purchase up to an additional 17,250 and

42
<PAGE> 44

317,250 shares of Common Stock, respectively, at the price to public, less
underwriting discount, shown on the cover page of this Prospectus. The
Underwriters may exercise such options solely for the purpose of covering
over-allotments, if any, incurred in the sale of the Common Stock offered
hereby. To the extent that the Underwriters exercise such options, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares of Common Stock set forth next to such Underwriter's name in the
preceding table bears to the total offered initially.

The Company and all of the existing shareholders of the Company have agreed
not to offer, sell, contract to sell, grant any option to purchase, or otherwise
dispose (or announce any offer, sale, or grant of any option to purchase or
other disposition) of any shares of Common Stock, or any securities convertible
into, or exercisable or exchangeable for, shares of Common Stock for a period of
180 days after the date of this Prospectus, without the prior written consent of
Morgan Keegan & Company, Inc.

The Underwriters have informed the Company that they do not intend to
confirm sales to any account over which they exercise discretionary authority.

Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price was determined by
negotiations between the Company and the Underwriters. Among the factors
considered in such negotiations were the history of, and the prospects for, the
Company and the industry in which it competes, an assessment of the Company's
management, the Company's past and present operations, its past and present
earnings and the trend of such earnings, the prospects for future earnings of
the Company, the present state of the Company's development, the general
condition of the securities markets at the time of the Offering and the market
price of and demand for publicly-traded common stocks of comparable companies in
recent periods.

Application has been made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "CRGO." The Company has been advised by the
Representatives that each of the Representatives presently intends to make a
market in the Common Stock offered hereby; however, the Representatives are not
obligated to do so, and any market making activity may be discontinued at any
time. There can be no assurance that an active public market for the Common
Stock will develop and continue after the Offering.

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Van Cott, Bagley, Cornwall & McCarthy, a
professional corporation, Salt Lake City, Utah. Certain legal matters will be
passed upon for the Underwriters by Baker, Donelson, Bearman & Caldwell, a
Professional Corporation, Memphis, Tennessee.

EXPERTS

The consolidated financial statements of the Company as of December 31,
1995, 1996 and September 30, 1997 and for each of the years in the three year
period ended December 31, 1996 and for the nine months ended September 30, 1997
included in this Prospectus and elsewhere in the Registration Statement have
been audited by Grant Thornton LLP, independent public accountants, as indicated
in their reports with respect thereto, and are included herein in reliance upon
their authority as experts in accounting and auditing.

43
<PAGE> 45

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all amendments
and exhibits thereto, the "Registration Statement") under the Securities Act of
1933 with respect to the Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock, reference
is made to the Registration Statement and the exhibits and schedules filed as a
part thereof. The Registration Statement may be examined without charge at the
Public Reference Section of the Commission located at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at the regional offices
of the Commission located at Seven World Trade Center, New York, New York 10048
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C., at prescribed rates. This
information is also available from the Commission's Internet web site at
http://www.sec.gov. For further information pertaining to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement,
including the exhibits thereto and the consolidated financial statements and
notes filed as a part thereof.

Statements made in this Prospectus as to the contents of any contract,
agreement, or other document referred to are not necessarily complete. With
respect to each such contract, agreement, or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.

44
<PAGE> 46

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Balance Sheets as of December 31, 1995, December 31, 1996 and September 30, 1997...... F-3
Statements of Earnings for the years ended December 31, 1994, December 31, 1995 and
December 31, 1996 and for the nine months ended September 30, 1996 (unaudited) and
1997................................................................................ F-4
Statement of Stockholders' Equity for the years ended December 31, 1994, December 31,
1995 and December 31, 1996 and for the nine months ended September 30, 1997......... F-5
Statements of Cash Flows for the years ended December 31, 1994, December 31, 1995 and
December 31, 1996 and for the nine months ended September 30, 1996 (unaudited) and
1997................................................................................ F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>

F-1
<PAGE> 47

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

Board of Directors
Motor Cargo Industries, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Motor Cargo
Industries, Inc. and Subsidiaries (the Company) as of December 31, 1995 and 1996
and September 30, 1997, and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996 and for the nine months ended September 30, 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 audits 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Motor Cargo
Industries, Inc. and Subsidiaries as of December 31, 1995 and 1996 and September
30, 1997, and the consolidated results of their operations and their
consolidated cash flows for each of the three years in the period ended December
31, 1996 and for the nine months ended September 30, 1997, in conformity with
generally accepted accounting principles.

Grant Thornton LLP

Salt Lake City, Utah
October 24, 1997

F-2
<PAGE> 48

MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Notes E and L)............. $ 7,102,118 $ 8,771,887 $ 5,765,977
Receivables (Notes B and E)........................... 9,596,151 10,758,456 13,295,981
Prepaid expenses (Notes H and N)...................... 2,048,745 2,086,189 1,588,891
Supplies inventory (Note E)........................... 367,512 338,830 443,564
Deferred income taxes (Note G)........................ 1,052,500 1,074,600 1,469,000
Income taxes receivable............................... 66,458 166,983 --
----------- ----------- -----------
Total current assets.......................... 20,233,484 23,196,945 22,563,413
PROPERTY AND EQUIPMENT, AT COST
(Notes C, E, F and N)................................. 65,699,258 71,559,377 75,477,924
Less accumulated depreciation and amortization........ 26,766,896 31,365,464 35,642,201
----------- ----------- -----------
38,932,362 40,193,913 39,835,723
OTHER ASSETS
Deferred charges...................................... 260,383 367,555 417,951
Unrecognized net pension obligation (Note H).......... 81,231 75,441 71,098
----------- ----------- -----------
341,614 442,996 489,049
----------- ----------- -----------
$59,507,460 $63,833,854 $62,888,185
=========== =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Current maturities of long-term obligations (Note F).. $ 6,133,636 $ 6,844,960 $ 3,346,480
Accounts payable...................................... 2,729,193 2,981,597 3,341,191
Accrued liabilities (Notes H and O)................... 4,213,943 3,896,876 5,309,741
Accrued claims (Note P)............................... 1,675,118 2,028,631 2,713,573
----------- ----------- -----------
Total current liabilities..................... 14,751,890 15,752,064 14,710,985
LONG-TERM OBLIGATIONS, less current maturities (Note F). 17,723,618 16,819,747 12,499,802
DEFERRED INCOME TAXES (Note G).......................... 4,308,529 5,221,629 5,787,000
COMMITMENTS AND CONTINGENCIES (Notes D, E, F, H, J, K
and Q)................................................ -- -- --
STOCKHOLDERS' EQUITY (Notes M, N and Q)
Preferred stock, no-par value
Authorized -- 25,000,000 shares
Issued -- none..................................... -- -- --
Common stock, no-par value
Authorized -- 100,000,000 shares
Issued -- 5,820,000 shares......................... 1,000 1,000 1,000
Retained earnings..................................... 22,722,423 26,039,414 29,889,398
----------- ----------- -----------
22,723,423 26,040,414 29,890,398
----------- ----------- -----------
$59,507,460 $63,833,854 $62,888,185
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE> 49

MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating revenues.............. $82,984,307 $80,807,913 $92,310,142 $68,272,131 $77,445,561
----------- ----------- ----------- ----------- -----------
Operating expenses
Salaries, wages and
benefits................... 36,055,305 35,494,479 39,666,468 29,412,125 33,004,480
Operating supplies and
expenses................... 12,144,802 12,668,945 14,947,069 10,969,121 11,539,799
Purchased transportation...... 12,237,962 11,531,478 14,164,292 10,577,242 11,132,355
Operating taxes and
licenses................... 3,068,598 3,178,345 3,531,244 2,534,474 2,681,422
Insurance and claims.......... 2,685,045 1,842,141 2,784,489 1,997,761 3,400,093
Depreciation and
amortization............... 4,973,975 5,930,353 6,577,569 4,965,108 5,155,815
Communications and
utilities.................. 1,313,892 1,521,389 1,783,797 1,327,027 1,474,323
Building rents................ 1,093,101 1,274,081 1,540,407 1,160,907 1,265,745
----------- ----------- ----------- ----------- -----------
Total operating
expenses............ 73,572,680 73,441,211 84,995,335 62,943,765 69,654,032
----------- ----------- ----------- ----------- -----------
Operating income...... 9,411,627 7,366,702 7,314,807 5,328,366 7,791,529
----------- ----------- ----------- ----------- -----------
Other income (expense)
Interest expense.............. (1,392,044) (1,499,720) (1,429,843) (1,128,857) (772,232)
Other, net.................... 104,259 106,577 (32,073) 15,083 112,688
----------- ----------- ----------- ----------- -----------
(1,287,785) (1,393,143) (1,461,916) (1,113,774) (659,544)
----------- ----------- ----------- ----------- -----------
Earnings before income
taxes............... 8,123,842 5,973,559 5,852,891 4,214,592 7,131,985
Income taxes (Note G)........... 2,943,000 2,094,000 2,118,000 1,556,000 2,824,000
----------- ----------- ----------- ----------- -----------
NET EARNINGS.......... $ 5,180,842 $ 3,879,559 $ 3,734,891 $ 2,658,592 $ 4,307,985
=========== =========== =========== =========== ===========
Pro forma (Notes A11 and A14)
Earnings before income
taxes...................... $ 8,123,842 $ 5,973,559 $ 5,852,891 $ 4,214,592 $ 7,131,985
Income taxes.................. 3,125,000 2,303,000 2,256,000 1,627,000 2,878,000
----------- ----------- ----------- ----------- -----------
Net earnings.................. $ 4,998,842 $ 3,670,559 $ 3,596,891 $ 2,587,592 $ 4,253,985
=========== =========== =========== =========== ===========
Earnings per common share..... $ 0.86 $ 0.63 $ 0.62 $ 0.44 $ 0.73
=========== =========== =========== =========== ===========
Weighted average shares
outstanding................ 5,820,000 5,820,000 5,820,000 5,820,000 5,820,000
=========== =========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE> 50

MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS ENDED
SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------ ------------------ PENSION COST OVER
NUMBER NUMBER RETAINED UNRECOGNIZED
OF SHARES AMOUNT OF SHARES AMOUNT EARNINGS PENSION LIABILITY TOTAL
--------- ------ ---------- ------ ----------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994.... -- $ -- 5,820,000 $1,000 $14,934,333 $ -- $14,935,333
Pension adjustment............ -- -- -- -- -- (310,555) (310,555)
Distributions to LLC
members..................... -- -- -- -- (1,045,394) -- (1,045,394)
Net earnings for the year..... -- -- -- -- 5,180,842 -- 5,180,842
--- --- --------- ------ ----------- --------- -----------
Balance at December 31,
1994........................ -- -- 5,820,000 1,000 19,069,781 (310,555) 18,760,226
Pension adjustment............ -- -- -- -- -- 310,555 310,555
Distributions to LLC
members..................... -- -- -- -- (226,917) -- (226,917)
Net earnings for the year..... -- -- -- -- 3,879,559 -- 3,879,559
--- --- --------- ------ ----------- --------- -----------
Balance at December 31,
1995........................ -- -- 5,820,000 1,000 22,722,423 -- 22,723,423
Net distributions to LLC
members..................... -- -- -- -- (417,900) -- (417,900)
Net earnings for the year..... -- -- -- -- 3,734,891 -- 3,734,891
--- --- --------- ------ ----------- --------- -----------
Balance at December 31,
1996........................ -- -- 5,820,000 1,000 26,039,414 -- 26,040,414
Distributions to LLC
members..................... -- -- -- -- (458,001) -- (458,001)
Net earnings for the period... -- -- -- -- 4,307,985 -- 4,307,985
--- --- --------- ------ ----------- --------- -----------
Balance at September 30,
1997........................ -- $ -- 5,820,000 $1,000 $29,889,398 $ -- $29,890,398
=== === ========= ====== =========== ========= ===========
</TABLE>

The accompanying notes are an integral part of this statement.

F-5
<PAGE> 51

MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net earnings for the period..................... $ 5,180,842 $ 3,879,559 $ 3,734,891 $ 2,658,592 $ 4,307,985
----------- ----------- ----------- ----------- -----------
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation and amortization................. 4,973,975 5,930,353 6,577,569 4,965,108 5,155,815
Provision for losses on trade and other
receivables................................ 594,441 270,000 286,000 212,500 157,500
Loss (gain) on disposition of property and
equipment.................................. 20,745 5,891 72,458 (94,932) (82,288)
Amortization of unrecognized pension
obligation (benefit)....................... 310,555 (782,364) 5,790 4,343 4,343
Deferred income taxes......................... 51,700 785,000 891,000 555,971 170,971
Changes in assets and liabilities
Receivables................................ (737,420) (383,072) (1,448,305) (1,509,287) (2,695,025)
Prepaid expenses........................... (314,203) (65,573) (37,444) 602,600 497,298
Supplies inventory......................... (71,442) 34,164 28,682 57,704 (104,734)
Income taxes receivable.................... (92,953) 26,495 (100,525) 66,458 166,983
Other assets............................... (67,743) 144,841 (107,172) (79,445) (50,396)
Accounts payable........................... 18,206 (380,033) 252,404 20,443 359,594
Accrued liabilities and claims............. 1,152,960 1,267,252 36,446 160,201 2,097,807
----------- ----------- ----------- ----------- -----------
Total adjustments...................... 5,838,821 6,852,954 6,456,903 4,961,664 5,677,868
----------- ----------- ----------- ----------- -----------
Net cash provided by operating
activities........................... 11,019,663 10,732,513 10,191,794 7,620,256 9,985,853
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities
Purchase of property and equipment................ (7,082,154) (14,982,131) (9,712,567) (6,381,312) (4,930,521)
Proceeds from disposition of property and
equipment....................................... 38,476 190,280 1,800,989 239,484 215,184
----------- ----------- ----------- ----------- -----------
Net cash used in investing
activities........................... (7,043,678) (14,791,851) (7,911,578) (6,141,828) (4,715,337)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities
Distributions to LLC members...................... (1,045,394) (226,917) (524,000) (475,000) (458,001)
Contributions from LLC members.................... -- -- 106,100 106,100 --
Proceeds from issuance of long-term obligations... 5,670,263 33,780,585 55,564,002 39,180,160 24,915,000
Principal payments on long-term obligations....... (4,178,138) (29,252,749) (55,756,549) (45,961,135) (32,733,425)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities............................... 446,731 4,300,919 (610,447) (7,149,875) (8,276,426)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents.............................. 4,422,716 241,581 1,669,769 (5,671,447) (3,005,910)
Cash and cash equivalents at beginning of period.... 2,437,821 6,860,537 7,102,118 7,102,118 8,771,887
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period.......... $ 6,860,537 $ 7,102,118 $ 8,771,887 $ 1,430,671 $ 5,765,977
=========== =========== =========== =========== ===========
Supplemental cash flow information
Cash paid during the period for
Interest........................................ $ 1,385,484 $ 1,477,356 $ 1,459,189 $ 1,100,392 $ 734,837
Income taxes.................................... 3,555,730 1,882,300 2,077,215 762,000 1,695,100
</TABLE>

Supplemental schedule of noncash investing and financing activities

Year ended December 31, 1994

The Company increased accrued pension cost by $308,530 and reduced
unrecognized net pension obligation by $2,025. The excess of additional pension
cost over unrecognized net pension obligation of $310,555 was recorded as a
reduction of stockholders' equity.

Year ended December 31, 1995

The Company decreased accrued pension cost by $397,576 and increased
prepaid pension cost by $384,788. Unrecognized net pension obligation decreased
by $5,790, and excess of additional pension cost over unrecognized net pension
obligation decreased by $310,555.

The accompanying notes are an integral part of these statements.

F-6
<PAGE> 52

MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows.
Insofar as the notes refer to the nine months ended September 30, 1996, they are
not audited. In the opinion of management, the unaudited interim financial
statements for the nine months ended September 30, 1996 include all adjustments,
consisting of normal recurring accruals, necessary to present fairly the
Company's results of operations and cash flows. Operating results for the
interim period as of September 30, 1997 and for the nine months then ended are
not necessarily indicative of the results that may be expected for the full 1997
year.

1. Financial statement presentation

The accounting and reporting policies of Motor Cargo Industries, Inc. and
Subsidiaries (the Company) conform with generally accepted accounting principles
and with general practices in the motor carrier industry. In preparing the
Company's financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ significantly from those
estimates. Significant estimates include accrued claims and allowance for
doubtful accounts.

2. Principles of consolidation

The consolidated financial statements include the accounts of Motor Cargo
Industries, Inc. (MCI) and its wholly-owned subsidiaries, Ute Trucking and
Leasing, LLC (Ute) and Motor Cargo and its wholly-owned subsidiaries, MC
Leasing, Inc., MC Distribution Services, Inc., and ICC, Inc. All significant
intercompany accounts and transactions have been eliminated.

3. Business activity

Motor Cargo is a regulated motor carrier which hauls commercial commodities both
intrastate and interstate.

4. Cash equivalents

For the purposes of the financial statements, the Company considers all highly
liquid debt instruments with a maturity of three months or less when purchased
to be cash equivalents.

5. Supplies inventory

Supplies inventory consists primarily of fuel and equipment parts and is stated
at the lower of cost (first-in, first-out method) or market.

6. Depreciation and amortization

Depreciation of property and equipment is provided on the straight-line method
over the estimated useful lives of the assets.

Leasehold improvements are amortized over the lesser of the useful life of the
asset or term of the lease.

Maintenance, repairs, and renewals which neither materially add to the value of
the property nor appreciably prolong its life are charged to expense as
incurred. Gains or losses on dispositions of property and equipment are included
in earnings.

F-7
<PAGE> 53

MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
7. Income taxes

The Company utilizes the liability method of accounting for income taxes. Under
the liability method, deferred income tax assets and liabilities are provided
based on the difference between the financial statement and tax bases of assets
and liabilities as measured by the currently enacted tax rates in effect for the
years in which these differences are expected to reverse. Deferred tax expense
or benefit is the result of changes in deferred tax assets and liabilities.

8. Insurance coverage and accrued claims

The Company is self-insured for health costs, cargo damage claims, and
automobile and general liability claims up to $70,000, $100,000, and $500,000
respectively, per single occurrence. The Company also maintains workers'
compensation insurance, with a deductible of $250,000 in Nevada, and without a
deductible in Washington. The Company is responsible for workers' compensation
claims in other states in which the Company operates up to an aggregate of
approximately $1.9 million per year. Liabilities in excess of these amounts are
assumed by insurance companies up to applicable policy limits.

The Company estimates and accrues a liability for its share of final settlements
using all available information including the services of a third-party
insurance risk claims administrator to assist in establishing reserve levels for
each occurrence based on the facts and circumstances of the incident coupled
with the Company's past history of such claims. The Company accrues for workers'
compensation and automobile liabilities when reported, usually the same day as
the occurrence. Additionally, the Company accrues an estimated liability for
incurred but not reported claims. Expense depends upon actual loss experience
and changes in estimates of settlement amounts for open claims which have not
been fully resolved. The Company provides for adverse loss developments in the
period when new information becomes available.

9. Revenue recognition

Freight charges and related expenses are generally recognized as revenue and
operating expense when freight is picked up. The application of this method did
not result in a material difference in reported net earnings in any of the
periods presented when compared to other preferred industry methods.

10. Prepaid tires

The Company capitalizes tires purchased with new equipment and depreciates them
over the estimated useful life of the equipment (5 - 10 years). Replacement
tires are expensed upon placement into service (Note N).

11. Earnings per share

Pro forma earnings per share

Pro forma earnings per common share are based upon the weighted average number
of common shares outstanding during the period presented.

Supplemental pro forma earnings per share

Supplemental pro forma earnings per share for December 31, 1996 and September
30, 1997 were $0.61 and $0.70, respectively, and are calculated by dividing pro
forma net earnings (adjusted for the pro forma reduction in interest expense
that specifically corresponds to the application of proceeds from the offering
to repay indebtedness of $7,500,000 of notes payable) by the weighted average
shares outstanding used in the calculation of earnings per common share
(adjusted for the estimated shares at each date that would be issued by the
Company at $13 per share to retire the $7,500,000).

F-8
<PAGE> 54

MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
12. Fair value of financial instruments

The fair value of the Company's cash and cash equivalents, receivables, accounts
payable, and accrued liabilities approximates carrying value due to the
short-term maturity of the instruments. The fair value of long-term obligations
approximates carrying value based on their effective interest rates compared to
current market prices.

13. Certain reclassifications

Certain nonmaterial reclassifications have been made to the 1994, 1995, and 1996
financial statements to conform to the September 30, 1997 presentation.

14. Pro forma financial information (unaudited)

Effective August 28, 1997, MCI acquired the membership interests of Ute (Note
M). A limited liability company passes through to its members essentially all
taxable earnings and losses and pays no tax at the company level. Accordingly,
for comparative purposes, a pro forma provision for income taxes using an
effective income tax rate of 38% has been determined assuming Ute had been taxed
as a C Corporation for all periods presented.

15. Recently issued accounting pronouncements not yet adopted

Earnings per share

In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per
Share." SFAS 128 eliminates the presentation of primary earnings per share (EPS)
and requires the presentation of basic EPS, which includes no common stock
equivalents and thus no dilution. The statement also eliminates the modified
treasury stock method of computing potential common shares. This statement is
effective for financial statements issued for periods ending after December 15,
1997.

Capital structure

Also in February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129 (SFAS 129), "Disclosure of Information about Capital
Structure." SFAS 129 consolidates in one statement disclosures about the rights
of outstanding securities and changes in the number of equity securities during
the period, disclosures about liquidation preferences and preferred stock, and
disclosures about redemption requirements of certain redeemable stock.
Disclosures were previously included in Accounting Principles Board (APB)
Opinion 10, APB Opinion 15 and SFAS 47. The statement does not change the
required disclosures about capital structure for entities currently subject to
the requirements of APB Opinions 10 and 15 and SFAS 47. SFAS 129 is effective
for financial statements for interim and annual periods ending after December
15, 1997.

Comprehensive income

In September 1997, the FASB issued Statement of Financial Accounting Standards
No. 130 (SFAS 130), "Reporting Comprehensive Income." SFAS 130 requires entities
presenting a complete set of financial statements to include details of
comprehensive income that arise in the reporting period. Comprehensive income
consists of net earnings or loss for the current period and other comprehensive
income, which consists of revenue, expenses, gains, and losses that bypass the
statement of earnings and are reported directly in a separate component of
equity. Other comprehensive income includes, for example, foreign currency
items, minimum pension liability adjustments, and unrealized gains and losses on
certain investment securities.

F-9
<PAGE> 55

MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
15. Recently issued accounting pronouncements not yet adopted -- continued
Comprehensive income -- continued
SFAS 130 requires that components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. This statement is effective for fiscal years beginning
after December 15, 1997 and requires restatement of prior period financial
statements presented for comparative purposes.

Disclosure of segments

Also in September 1997, the FASB issued Statement of Financial Accounting
Standards No. 131 (SFAS 131), "Disclosures about Segments of an Enterprise and
Related Information." This statement requires an entity to report financial and
descriptive information about their reportable operating segments. An operating
segment is a component of an entity for which financial information is developed
and evaluated by the entity's chief operating decision maker to assess
performance and to make decisions about resource allocation. Entities are
required to report segment profit or loss, certain specific revenue and expense
items and segment assets based on financial information used internally for
evaluating performance and allocating resources. This statement is effective for
fiscal years beginning after December 15, 1997 and requires restatement of prior
period financial statements presented for comparative purposes.

Management does not believe that the adoption of SFAS 128, SFAS 129, SFAS 130
and SFAS 131 will have a material effect on the Company's consolidated financial
statements.

NOTE B -- RECEIVABLES

Receivables consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
<S> <C> <C> <C>
Trade receivables................................... $ 9,850,104 $10,829,234 $ 13,387,461
Other receivables................................... 601,047 435,016 438,658
----------- ----------- -----------
10,451,151 11,264,250 13,826,119
Less allowance for doubtful accounts................ (855,000) (505,794) (530,138)
----------- ----------- -----------
$ 9,596,151 $10,758,456 $ 13,295,981
=========== =========== ===========
</TABLE>

The history of the allowance for doubtful accounts is as follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------- -------------------------
1994 1995 1996 1996 1997
--------- --------- --------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance at beginning of
period....................... $ 533,388 $ 950,478 $ 855,000 $ 855,000 $ 505,794
Provisions..................... 594,441 270,000 286,000 212,500 157,500
Write-offs..................... (177,351) (365,478) (635,206) (253,221) (133,156)
--------- --------- --------- --------- ---------
Balance at end of period....... $ 950,478 $ 855,000 $ 505,794 $ 814,279 $ 530,138
========= ========= ========= ========= =========
</TABLE>

F-10
<PAGE> 56

MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C -- PROPERTY AND EQUIPMENT

Cost of property and equipment and estimated useful lives are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1995 1996 1997 YEARS
----------- ----------- ------------- -----
<S> <C> <C> <C> <C>
Land....................................... $ 4,921,588 $ 4,984,268 $ 4,984,268 --
Buildings.................................. 9,659,861 9,696,481 9,702,411 20-45
Revenue equipment.......................... 41,644,581 46,678,422 49,928,749 5-10
Service cars and equipment................. 423,232 356,722 386,742 3-10
Shop and garage equipment.................. 124,945 128,765 136,875 3-10
Office furniture and fixtures.............. 1,379,138 2,004,227 2,043,428 3-10
Other property and equipment............... 5,156,257 5,731,077 6,155,333 3-10
Leasehold improvements..................... 1,069,342 1,952,308 2,137,618 4-5
Construction in progress................... 1,320,314 27,107 2,500 --
----------- ----------- -----------
$65,699,258 $71,559,377 $ 75,477,924
=========== =========== ===========
</TABLE>

NOTE D -- LEASES

The Company leases buildings and revenue equipment under operating lease
agreements. The following is a schedule of future minimum lease payments under
operating leases:

<TABLE>
<CAPTION>
YEAR ENDING TOTAL
SEPTEMBER 30, BUILDINGS EQUIPMENT LEASES
--------------- ---------- --------- ----------
<S> <C> <C> <C>
1998.......................... $1,247,928 $92,223 $1,340,151
1999.......................... 566,484 -- 566,484
2000.......................... 310,810 -- 310,810
2001.......................... 57,506 -- 57,506
Thereafter.................... -- -- --
---------- ------- ----------
Total minimum lease payments.... $2,182,728 $92,223 $2,274,951
========== ======= ==========
</TABLE>

The leases generally provide that property taxes, insurance, and maintenance
expenses are obligations of the Company. It is expected that in the normal
course of business, operating leases that expire will be renewed or replaced by
leases on other properties. The total rent expense for the years ended December
31, 1994, 1995, and 1996, and the nine months ended September 30, 1996
(unaudited) and 1997, was approximately $1,093,101, $1,274,081, $1,540,407,
$1,151,221, and $1,275,044, respectively.

NOTE E -- REVOLVING BANK LOAN

The Company has a revolving bank loan. Under the loan agreement, borrowings are
limited to the lesser of 70% of allowable trade receivables, or $5,000,000. Any
outstanding amounts accrue interest at the lending institution's prime rate,
which is payable monthly. No principal payments are required until maturity (May
1998) as long as the loan does not exceed the required limits. The agreement is
collateralized by cash and cash equivalents, receivables, supplies inventory,
and all documents, instruments, and chattel paper now owned or hereafter
acquired by the Company. At December 31, 1995 and 1996, and at September 30,
1996 and 1997, there were no draws against the loan.

The Company also has a line of credit with a limit of $12,067,000 as of
September 30, 1997. This line is collateralized by revenue equipment. The upper
limit of this line reduces by 1/20th each quarter until reaching $0 in the year
2002. As of September 30, 1997, there was $6,500,000 drawn against the line
(Note F).

F-11
<PAGE> 57

MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE F -- LONG-TERM OBLIGATIONS

Long-term obligations consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
<S> <C> <C> <C>
Prime plus 1% (9.5% at September 30, 1997)
note payable to a bank, due in 2003,
payable in quarterly installments of
$6,562 plus interest, collateralized by
real property............................. $ 216,564 $ 190,314 $ 170,626
6.75-10.53% notes payable to corporations,
due through 2003, payable in monthly
installments totaling $33,842, including
interest, collateralized by real property
and revenue equipment..................... 2,138,392 1,927,386 1,757,257
Prime (8.5% at September 30, 1997) note
payable on a line of credit (up to
$12,067,000) to a bank, due in 2002,
payable in quarterly installments of
$636,230 plus interest, collateralized by
revenue equipment (Note E)................ 8,742,996 10,975,714 6,500,000
6.75-10% notes payable to corporations, due
through 2000, payable in monthly
installments totaling $163,087 plus
interest, collateralized by revenue
equipment................................. 5,016,275 4,529,960 2,804,712
6.5-10.45% notes payable to banks, due
through 2001, payable in monthly
installments totaling $205,063 plus
interest, collateralized by revenue
equipment................................. 4,823,369 4,218,358 3,024,208
8.4-9.25% notes payable to banks, due
through 2005, payable in monthly
installments totaling $28,864 plus
interest, collateralized by real
property.................................. 2,134,103 1,822,975 1,589,479
10% note payable to a corporation, due in
2000, payable in monthly installments of
$9,361, including interest, collateralized
by real property; paid in full during
1996...................................... 785,555 -- --
----------- ----------- ------------
23,857,254 23,664,707 15,846,282
Less current maturities..................... 6,133,636 6,844,960 3,346,480
----------- ----------- ------------
$17,723,618 $16,819,747 $ 12,499,802
=========== =========== ============
</TABLE>

Maturities of long-term obligations are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30,
------------------------------------------------
<S> <C>
1998........................................ $ 3,346,480
1999........................................ 4,961,028
2000........................................ 3,891,412
2001........................................ 2,075,413
2002........................................ 217,182
Thereafter...................................... 1,354,767
-----------
$15,846,282
===========
</TABLE>

The line of credit agreements contain various restrictive covenants including
provisions relating to the maintenance of net worth, debt-to-equity ratio, and
cash-flow coverage. As of September 30, 1997, the Company was in compliance with
all covenants under the line of credit agreements.

F-12
<PAGE> 58

MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE G -- INCOME TAXES

Income tax expense consists of the following:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current
Federal............................ $2,407,300 $1,081,000 $1,009,000 $ 835,024 $2,215,279
State.............................. 484,000 228,000 218,000 165,005 437,750
---------- ---------- ---------- ---------- ----------
2,891,300 1,309,000 1,227,000 1,000,029 2,653,029
---------- ---------- ---------- ---------- ----------
Deferred
Federal............................ 46,013 655,475 743,985 464,236 142,761
State.............................. 5,687 129,525 147,015 91,735 28,210
---------- ---------- ---------- ---------- ----------
51,700 785,000 891,000 555,971 170,971
---------- ---------- ---------- ---------- ----------
$2,943,000 $2,094,000 $2,118,000 $1,556,000 $2,824,000
========== ========== ========== ========== ==========
</TABLE>

The income tax provision reconciled to the tax computed at the federal
statutory rate of 34% is as follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal income taxes at statutory
rate............................... $2,762,100 $2,031,000 $1,990,000 $1,433,000 $2,425,000
State income taxes, net of federal
tax benefit........................ 327,800 252,100 248,800 176,000 298,800
One time charge attributed to
Ute(1)............................. -- -- -- -- 238,000
Income taxes attributed to Ute....... (182,000) (209,000) (136,000) (71,000) (147,000)
All other............................ 35,100 19,900 15,200 18,000 9,200
---------- ---------- ---------- ---------- ----------
$2,943,000 $2,094,000 $2,118,000 $1,556,000 $2,824,000
========== ========== ========== ========== ==========
</TABLE>

Deferred tax assets and liabilities consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
<S> <C> <C> <C>
Deferred tax assets (liabilities)
Allowance for doubtful accounts....... $ 327,000 $ 193,200 $ 203,000
Vacation accrual...................... 310,100 353,500 389,000
Reserve for claims.................... 452,700 575,300 900,000
Unfunded pension...................... -- (58,800) (231,000)
Accrued compensation.................. -- 58,400 63,000
Equipment temporary differences....... (4,308,529) (5,221,229) (5,619,000)
Prepaid tires......................... (37,300) (47,400) (23,000)
----------- ----------- -----------
Net deferred tax liability $(3,256,029) $(4,147,029) $ (4,318,000)
=========== =========== ===========
</TABLE>

- ---------------

(1) Effective August 28, 1997, Ute was acquired by MCI and became a taxable
entity (Note M). Previously, its earnings and losses were included in the
personal tax returns of the members, and Ute did not record an income tax
provision. Effective with the change, in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes," income taxes will be provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due

F-13
<PAGE> 59

MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE G -- INCOME TAXES (CONTINUED)
plus deferred taxes related primarily to differences between the basis of
property and equipment for financial and income tax reporting. The deferred
tax liability represents the future tax return consequences of these
differences, which will be taxable when the liabilities are settled.
Accordingly, a deferred tax liability at the date of the change of
approximately $238,000 was recorded through a one time non-cash charge to
the deferred tax provision.

NOTE H -- PENSION AND PROFIT-SHARING PLANS

1. Pension plan

The Company participates in a defined benefit pension plan covering
substantially all of its employees. The benefits are based on years of service
and hours of service in the current year. A participant is fully vested after
five years. Contributions are intended to provide not only for benefits
attributed to service to date, but also for those expected benefits to be earned
in the future.

The following table sets forth the plan's funded status as of the periods
presented, in accordance with FASB Statement 87: "Employers' Accounting for
Pensions":

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
<S> <C> <C> <C>
Actuarial present value of benefit
obligations:
Accumulated benefit obligations, including
vested benefits of $3,303,221, $3,808,232,
and $4,066,025, for the years ended
December 31, 1995 and 1996 and the nine
months ended September 30, 1997,
respectively.............................. $ 3,423,736 $ 3,972,111 $ 4,257,884
=========== =========== ===========
Projected benefit obligation for service
rendered to date.......................... $(3,606,505) $(4,111,673) $ (4,372,001)
Plan assets at fair value, primarily U.S.
government securities and common stock
funds..................................... 3,423,488 4,125,240 4,859,658
----------- ----------- -----------
Projected benefit obligation (in excess of)
or less than plan assets.................. (183,017) 13,567 487,657
Unrecognized net obligation at January 1,
1987, being recognized over 16 years...... 81,231 75,441 71,098
Unrecognized net gain from past experience
different from that assumed and effects of
changes in assumptions.................... (283,250) (379,979) (707,600)
----------- ----------- -----------
Accrued pension costs included in accrued
liabilities (Note O)...................... $ (385,036) $ (290,971) $ (148,845)
=========== =========== ===========
</TABLE>

Net pension cost included the following components:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- ---------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Service cost -- benefits earned during
the period........................... $ 207,337 $ 247,891 $ 238,559 $ 178,920 $ 186,726
Interest cost on projected benefit
obligation........................... 239,457 268,620 288,520 216,390 251,523
Actual return on plan assets........... 162,362 768,665 (497,698) (307,620) (659,290)
Net (deferral) amortization............ (342,779) (944,968) 199,300 84,073 378,915
--------- --------- --------- --------- ---------
Net pension cost....................... $ 266,377 $ 340,208 $ 228,681 $ 171,763 $ 157,874
========= ========= ========= ========= =========
</TABLE>

F-14
<PAGE> 60

MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE H -- PENSION AND PROFIT-SHARING PLANS (CONTINUED)

1. Pension plan -- continued
The following table sets forth the funded status and amounts recognized in the
Company's balance sheet at September 30, 1997:

<TABLE>
<S> <C>
Actuarial present value of benefit obligations
Vested benefit obligation.............................. $4,066,025
==========
Projected benefit obligation........................... $4,372,001
==========
Accumulated benefit obligation......................... $4,257,884
Plan assets at fair value (primarily U.S. government
securities and common stock funds).................. 4,859,658
----------
Plan assets greater than accumulated benefit
obligation.......................................... 601,774
Pension liability included in accrued liabilities...... 148,845
----------
Prepaid pension costs included in prepaid expenses..... $ 750,619
==========
</TABLE>

The weighted-average discount rate used in determining the actuarial present
value of the projected benefit obligation was 8.0% for the years ended December
31, 1994, 1995 and 1996 and for the nine months ended September 30, 1996 and
1997. The expected long-term rate of return was 8.0% for the years ended
December 31, 1994, 1995 and 1996 and for the nine months ended September 30,
1996 and 1997.

2. 401(k) profit-sharing plan

The Company has a qualified 401(k) profit-sharing plan (the Plan) in which
substantially all of its employees participate. All employees who have completed
one year of service with the Company are eligible to participate in the Plan.
Under the Plan, employees are allowed to make contributions of between 1% and
15% of their annual compensation. The Company matches certain percentages of
employee contributions up to 6%, depending on the Company's operating ratio. All
amounts contributed by a participant are fully vested at all times. A
participant becomes vested over time and is fully vested in any Company matching
contributions after 7 years of service. Expenses for Company contributions
approximated $585,000, $345,000, and $310,000 for the years ended December 31,
1994, 1995 and 1996, respectively, and $214,000 and $348,000 for the nine months
ended September 30, 1996 and 1997, respectively.

NOTE I -- RELATED PARTY TRANSACTIONS

Related parties include the Company's officers, directors, stockholders and
other entities under their common control.

During the years ended December 31, 1994, 1995, and 1996 the Company made
payments for consulting services of $480,000 per year to an entity in which the
Company's chairman is a 50% owner. The Company made payments of $360,000 and
$160,000, respectively, to this entity during the nine months ended September
30, 1996 and 1997. The agreement terminated April 1997 and was not renewed.

Guaranteed payments to members of Ute were $140,000 for the years ended December
31, 1994, 1995, and 1996, and $107,700, and $105,000 for the nine months ended
September 30, 1996 and 1997, respectively.

NOTE J -- DEFERRED COMPENSATION

The Company has salary continuation agreements with certain key management
employees. Under the agreements, the Company is obligated to provide for each
such employee or his beneficiaries, during a period of not more than ten years
after the employee's death, disability, or retirement, annual benefits ranging
from $17,000 to $23,000. The Company has purchased universal life insurance
policies on the lives of these

F-15
<PAGE> 61

MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE J -- DEFERRED COMPENSATION (CONTINUED)
participants. These insurance policies, which remain the sole property of the
Company, are payable to the Company upon the death of the participant or
maturity of the insurance policy. As of September 30, 1997, the value of the
insurance policies exceeded the deferred compensation obligations by
approximately $25,000.

The Company separately contracts with the participants to pay stated benefits
substantially equivalent to those received or available under the insurance
policies upon retirement, death, or permanent disability. The expense incurred
for the years ended December 31, 1994, 1995 and 1996, was approximately $19,000,
$18,000 and $62,660, respectively. The expense incurred for the nine months
ended September 30, 1996 and 1997 was approximately $36,000 for each period.

NOTE K -- COMMITMENTS AND CONTINGENCIES

1. Letters of credit

At September 30, 1997, the Company had outstanding letters of credit totaling
$2,010,000 ($2,035,000, and $2,010,000 at December 31, 1995 and 1996). There
were no draws against these letters of credit during any of the periods
presented.

2. Purchase commitment

As of September 30, 1997, the Company had placed orders for the purchase of
miscellaneous equipment at an estimated total purchase price of $2,430,000. The
equipment is to be delivered by December 31, 1997.

3. Litigation

The Company is involved in litigation arising in the normal course of business.
It is not possible to state the ultimate liability, if any, in these matters. In
the opinion of management, such litigation will have no material effect on the
financial position and results of operations of the Company, in excess of
amounts accrued.

NOTE L -- CONCENTRATION OF CREDIT RISK

The Company maintains cash and cash equivalents at several financial
institutions. At September 30, 1997, uninsured amounts held in these financial
institutions totaled approximately $11,512,000, (approximately $7,388,000, and
$9,121,000 as of December 31, 1995 and 1996, respectively).

NOTE M -- CAPITAL TRANSACTIONS

Effective December 31, 1995, a prior entity known as Motor Cargo Industries,
Inc., a related entity through common ownership, was merged into Motor Cargo as
a result of which its wholly-owned subsidiary MC Leasing, Inc. became a
wholly-owned subsidiary of Motor Cargo. The merger was accounted for in a manner
similar to a pooling of interests with assets acquired approximating liabilities
assumed and no additional shares of Motor Cargo's common stock being issued.

On January 1, 1996 a new entity, MCI was incorporated. Following its
incorporation, the Company issued 5,120,000 shares of common stock in exchange
for all of the outstanding common stock of Motor Cargo (256 shares). This
transaction was accounted for in a manner similar to a pooling of interests.
MCI, which had no significant assets or liabilities at the time of the exchange,
functions as a non-operating holding company for the operating entities. The
consolidated financial statements for all periods presented include the accounts
and operations of all entities for the periods the entities were in existence.

Effective August 28, 1997, the membership interests of Ute were acquired in
exchange for 700,000 shares of common stock of the Company. Because of the
common ownership of the two entities, this transaction was

F-16
<PAGE> 62

MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE M -- CAPITAL TRANSACTIONS (CONTINUED)
accounted for in a manner similar to a pooling of interests. Ute is included in
the consolidated financial statements for all periods presented as a
wholly-owned subsidiary of MCI. Revenues and earnings for Ute for each of the
three years in the period ended December 31, 1996 and for the nine months ended
September 30, 1996 and 1997 are as follows: $8,283,197 and $486,544; $7,773,901
and $523,606; $9,018,480 and $361,350; $2,737,282 and $507,379; $6,895,730 and
$140,856, respectively. All revenue generated in Ute is from the renting and
contracting, under an independent operating agreement, of revenue equipment to
Motor Cargo. Therefore, Ute's related operations are eliminated in the
consolidated financial statements.

NOTE N -- PRIOR PERIOD ADJUSTMENT

During the nine months ended September 30, 1997, the Company changed its method
of accounting for tires. The previous method involved recording new tires,
(tires purchased with new equipment and replacement stock) as prepaid tires upon
purchase and amortizing them based on normal tread-wear. The new method involves
expensing replacement tires upon placement into service. Under the new method,
tires purchased with new equipment are capitalized as equipment and depreciated
over the estimated useful life of the equipment (5 - 10 years). Management
believes the new method should simplify the comparability of its financial
statements with other regulated motor carriers. The effect of the change, which
was not significant, was retroactively applied to all periods presented.

NOTE O -- ACCRUED LIABILITIES

Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1995 1996 1997
---------- ---------- -------------
<S> <C> <C> <C>
Salaries, wages, and payroll taxes.... $2,261,821 $1,943,386 $ 2,501,335
Accrued employee benefits............. 705,538 684,301 697,212
Income taxes payable.................. -- -- 749,411
Vacation accrual...................... 811,962 925,274 1,022,775
All other............................. 434,622 343,915 339,008
---------- ---------- ----------
$4,213,943 $3,896,876 $ 5,309,741
========== ========== ==========
</TABLE>

NOTE P -- ACCRUED CLAIMS PAYABLE

The history of accrued claims payable is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1995 1996 1997
---------- ---------- -------------
<S> <C> <C> <C>
Balance at beginning of period........ $1,552,200 $1,675,118 $ 2,028,631
Provisions............................ 1,462,594 2,385,923 3,117,442
Expenditures.......................... (1,339,676) (2,032,410) (2,432,500)
---------- ---------- ----------
Balance at end of period.............. $1,675,118 $2,028,631 $ 2,713,573
========== ========== ==========
</TABLE>

F-17
<PAGE> 63

MOTOR CARGO INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE Q -- SUBSEQUENT EVENTS

1. Common stock offering

In October 1997, the Company's Board of Directors approved the filing of a Form
S-1 registration statement under the Securities Act of 1933, to register up to
2,564,500 shares of the Company's common stock of which up to 1,397,250 shares
could be sold by identified selling stockholders.

2. Stock option plan

In October 1997, the Company's Board of Directors adopted the Motor Cargo
Industries, Inc. 1997 Stock Option Plan (the Plan). The purpose of the Plan is
to provide certain of the Company's key employees an opportunity to acquire an
ownership interest in the Company. The Company has reserved 500,000 shares of
common stock for issuance under the Plan. Pursuant to the Plan, non-qualified
options to purchase 229,500 shares of Common Stock at the initial public
offering price will be granted to employees of the Company. Included are
approximately 115,000 options that will be granted to certain officers of the
Company. These shares may be issued as incentive stock options or awards. To
date, no options have been granted under the Plan.

The Company intends to account for stock-based compensation under Accounting
Principles Board Opinion No. 25, under which no significant compensation cost is
expected to be recognized upon grant of the options. The Company intends to
adopt only the disclosure provisions of Financial Accounting Standard No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123). The Company, therefore,
does not expect SFAS 123 to have a material impact on its financial position or
operations.

3. Stock award

In October 1997, the Company's Board of Directors awarded an officer of the
Company 20,000 shares of the Company's common stock, contingent upon completion
of the common stock offering. The award was made pursuant to a Restricted Stock
Agreement which states that upon completion of the offering, 20,000 shares of
the Company's common stock will be issued in the officer's name. The Company
will hold the certificates for the shares, which will be released in four
installments, each consisting of 25% of the shares issued based on the officer's
continued employment. In the event the officer voluntarily ceases his employment
with the Company or the Company terminates his employment for cause, the shares
not previously released will be forfeited. Termination of employment by the
Company without cause, or termination due to disability or death will result in
the prompt release of some or all shares not previously released, depending upon
the date of the relevant event.

F-18
<PAGE> 64

[THE INSIDE BACK COVER OF THE PROSPECTUS CONTAINS SUPERIMPOSED IMAGES OF A
COMPANY SERVICE CENTER, THE COMPANY'S MAIN COMPUTER ROOM, A COMPANY EMPLOYEE,
SEVERAL COMPANY TRACTORS (INCLUDING ONE TRACTOR PULLING A DOUBLE TRAILER, A
COMPANY DELIVERY VAN DISPLAYING "PRIORITY+PLUS" AND A PHONE NUMBER FOR "HOT SHOT
SERVICE" AND A FLAG DISPLAYING THE COMPANY'S LOGO].
<PAGE> 65

======================================================

NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SHARES OF COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF,
ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
History of the Company................ 12
Use of Proceeds....................... 12
Dividend Policy....................... 13
Capitalization........................ 13
Dilution.............................. 14
Selected Consolidated Financial
Data................................ 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Industry Overview..................... 22
Business.............................. 23
Management............................ 34
Certain Transactions.................. 38
Principal and Selling Shareholders.... 39
Description of Capital Stock.......... 40
Shares Eligible for Future Sale....... 41
Underwriting.......................... 42
Legal Matters......................... 43
Experts............................... 43
Additional Information................ 44
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

UNTIL , 1997 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

======================================================
======================================================
2,230,000 SHARES
LOGO
COMMON STOCK
------------------------

PROSPECTUS
------------------------

MORGAN KEEGAN & COMPANY, INC.

FURMAN SELZ
, 1997

======================================================
<PAGE> 66

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates except
the registration fee and the NASD filing fees.

<TABLE>
<CAPTION>
AMOUNT
TO
BE PAID
--------
<S> <C>
Registration fee.................................................. $ 10,880
NASD fee.......................................................... 4,090
Nasdaq listing and entry fee...................................... 35,000
Printing and engraving............................................ 75,000
Legal fees and expenses of the Company............................ 200,000
Accounting fees and expenses...................................... 175,000
Blue sky fees and expenses........................................ 6,000
Directors and officers liability insurance........................ 75,000
Transfer agent fees............................................... 6,000
Miscellaneous..................................................... 13,030
--------
TOTAL................................................... $600,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 16-10a-902 ("Section 902") of the Utah Revised Business Corporation
Act (the "Revised Act") provides that a corporation may indemnify any individual
who was, is, or is threatened to be made a named defendant or respondent (a
"Party") in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative and whether formal or
informal (a "Proceeding"), because he is or was a director of the corporation
or, while a director of the corporation, is or was serving at its request as a
director, officer, partner, trustee, employee, fiduciary or agent of another
corporation or other person or of an employee benefit plan (an "Indemnified
Director"), against any obligation incurred with respect to a Proceeding,
including any judgment, settlement, penalty, fine or reasonable expenses
(including attorneys' fees), incurred in the Proceeding if his conduct was in
good faith, he reasonably believed that his conduct was in, or not opposed to,
the best interests of the corporation, and, in the case of any criminal
Proceeding, he had no reasonable cause to believe his conduct was unlawful;
except that (i) indemnification under Section 902 in connection with a
Proceeding by or in the right of the corporation is limited to payment of
reasonable expenses (including attorneys' fees) incurred in connection with the
Proceeding and (ii) the corporation may not indemnify a director in connection
with a Proceeding by or in the right of the corporation in which the director
was adjudged liable to the corporation, or in connection with any other
Proceeding charging that the director derived an improper personal benefit,
whether or not involving action in his official capacity, in which Proceeding he
was adjudged liable on the basis that he derived an improper personal benefit.

Section 16-10a-903 ("Section 903") of the Revised Act provides that, unless
limited by its articles of incorporation, a corporation shall indemnify a
director who was successful, on the merits or otherwise, in the defense of any
Proceeding, or in the defense of any claim, issue or matter in the proceeding,
to which he was a Party because he is or was a director of the corporation,
against reasonable expenses (including attorneys' fees) incurred by him in
connection with the Proceeding or claim with respect to which he has been
successful.

In addition to the indemnification provided by Sections 902 and 903,
Section 16-10a-905 ("Section 905") of the Revised Act provides that, unless
otherwise limited by a corporation's articles of

II-1
<PAGE> 67

incorporation, a director may apply for indemnification to the court conducting
the Proceeding or to another court of competent jurisdiction. On receipt of an
application and after giving any notice the court considers necessary, (i) the
court may order mandatory indemnification under Section 903, in which case the
court shall also order the corporation to pay the director's reasonable expenses
to obtain court-ordered indemnification, or (ii) upon the court's determination
that the director is fairly and reasonably entitled to indemnification in view
of all the relevant circumstances and regardless of whether the director met the
applicable standard of conduct set forth in Section 902, the court may order
indemnification as the court determines to be proper, except that
indemnification with respect to certain Proceedings resulting in a director
being found liable for certain actions against the corporation may be limited to
reasonable expenses (including attorneys' fees) incurred by the director.

Section 16-10a-904 ("Section 904") of the Revised Act provides that a
corporation may pay for or reimburse the reasonable expenses (including
attorneys' fees) incurred by a director who is a Party to a Proceeding in
advance of the final disposition of the Proceeding if (i) the director furnishes
the corporation a written affirmation of his good faith belief that he has met
the applicable standard of conduct described in Section 902, (ii) the director
furnishes to the corporation a written undertaking, executed personally or on
his behalf, to repay the advance if it is ultimately determined that he did not
meet the required standard of conduct, and (iii) a determination is made that
the facts then known to those making the determination would not preclude
indemnification under Section 904.

Section 16-10a-907 ("Section 907") of the Revised Act provides that, unless
a corporation's articles of incorporation provide otherwise, (i) an officer of
the corporation is entitled to mandatory indemnification under Section 903 and
is entitled to apply for court ordered indemnification under Section 905, in
each case to the same extent as a director, (ii) the corporation may indemnify
and advance expenses to an officer, employee, fiduciary or agent of the
corporation to the same extent as a director, and (iii) a corporation may also
indemnify and advance expenses to an officer, employee, fiduciary or agent who
is not a director to a greater extent than the right of indemnification granted
to directors, if not inconsistent with public policy, and if provided for by its
articles of incorporation, bylaws, general or specific action of its board of
directors or contract.

The Company's Bylaws provide that the Company may indemnify an individual
made a party to a proceeding because he is or was a director of the Company
against liability if the Company has authorized the indemnification pursuant to
(i) the majority vote of the Board of Directors of the Company present at a
meeting at which a quorum is present, with only those directors not party to the
proceeding being counted to satisfy the quorum, (ii) the majority vote of a
committee of the Board of Directors of the Company consisting of two or more
directors not party to the proceeding, (iii) where the procedure set forth in
clauses (i) and (ii) above cannot be satisfied, the majority vote of the full
Board of Directors of the Company, including any directors who are party to the
proceeding, or (iv) the majority vote of the shareholders of the Company. In
addition, a determination must be made in the same manner as described in the
preceding sentence, or by special legal counsel selected by the Board of
Directors of the Company or its committee, to the effect that the standard of
conduct set forth in Section 902 has been met.

The Bylaws also provide that the Company may pay for or reimburse in
advance of final disposition of any proceeding the reasonable expenses incurred
by an individual made a party to a proceeding because he is or was a director of
the Company if authorization of such payment is made in the same manner as
described in the first sentence of the preceding paragraph and a determination
is made in the same manner as described in the last sentence of the preceding
paragraph that (i) the individual has furnished to the Company a written
affirmation of his good faith belief that he has met the standard of conduct set
forth in Section 902, (ii) the individual has furnished to the Company a written
undertaking to repay the advance if it is ultimately determined that the
individual did not meet the standard of conduct set forth in Section 902, and
(iii) the facts then know to those making the determination would not preclude
indemnification under the Bylaws of the Company or Section 904.

The Bylaws of the Company also provide that the Company may indemnify and
advance expenses to any individual made a party to a proceeding because the
individual is or was an officer, employee, fiduciary, or

II-2
<PAGE> 68

agent of the Company to the same extent as to an individual made a party to a
proceeding because he is or was a director of the Company, or to a greater
extent, if not inconsistent with public policy, if provided for by general or
specific action of the Board of Directors of the Company.

The Company's Articles of Incorporation and Bylaws have similar provisions
providing that a director of the Company shall not be liable to the Company or
its shareholders for monetary damages for any action taken or any failure to
take any action as a director, except liability for (i) the amount of a
financial benefit received by a director to which he is not entitled, (ii) an
intentional infliction of harm on the Company or its shareholders, (iii) a
violation of Section 16-10a-842 of the Revised Act which prohibits unlawful
distributions by a corporation or its shareholders, or (iv) an intentional
violation of criminal law. Utah law permits director liability to be eliminated
to the extent liability for the items described in clauses (i) through (iv) of
the preceding sentence is preserved.

Reference is also made to the Underwriting Agreement filed herewith
pursuant to which the Underwriters have agreed to indemnify the Company and its
officers and directors against certain liabilities, including liabilities under
the Securities Act.

Indemnification may be granted pursuant to any other agreement, bylaw, or
vote of shareholders or directors. In addition to the foregoing, the Company
maintains insurance from commercial carriers against certain liabilities which
may be incurred by its directors and officers. The foregoing description is
necessarily general and does not describe all details regarding the
indemnification of officers, directors or controlling persons of the Company.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

In January 1996, the Company issued 4,400,000 shares of Common Stock to
Harold R. Tate and 120,000 shares of Common Stock to each of Marshall L. Tate,
Marvin L. Friedland, Lauri Tate Franks, Darrell Tate, Troy Tate and Mia Tate in
exchange for their respective shares of Motor Cargo common stock. The Company
believes that the issuance of Common Stock to the foregoing persons, which did
not involve a public offering or sale of securities, was exempt from the
registration requirements of the Securities Act pursuant to the exemption from
registration afforded by Section 4(2) of the Securities Act. No underwriters,
brokers or finders were involved in this transaction.

Effective as of August 28, 1997, the Company issued 490,000 shares of
Common Stock to Harold R. Tate and 70,000 shares of Common Stock to each of
Marshall L. Tate, Marvin L. Friedland and Darrell Tate for their respective
interests in Ute Trucking and Leasing, LLC. The Company believes that the
issuance of the Common Stock to the foregoing persons, which did not involve a
public offering or sale of securities, was exempt from the registration
requirements of the Securities Act pursuant to the exemption from registration
afforded by Section 4(2) of the Securities Act. No underwriters, brokers or
finders were involved in this transaction.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.**
3.1 Articles of Incorporation of the Company.**
3.2 Bylaws of the Company.**
4.1 Articles of Incorporation of the Company filed as Exhibit 3.1 to this
Registration Statement.**
4.2 Bylaws of the Company filed as Exhibit 3.2 to this Registration
Statement.**
4.3 Specimen certificate.**
5 Opinion of Van Cott, Bagley, Cornwall & McCarthy.*
</TABLE>

II-3
<PAGE> 69

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------
<C> <S>
10.1 1997 Credit Agreement, dated September 30, 1997, between Motor Cargo and
Sanwa Bank California.**
10.2 1997 Stock Option Plan.**
10.3 Pension Plan of Employees of Motor Cargo and Trust Agreement.**
10.4 Motor Cargo Profit Sharing Plan.**
10.5 Restricted Stock Agreement, dated October 2, 1997, between the Company and
Louis V. Holdener.**
10.6 Agreement to Purchase and Sell Leasehold Interest dated October 2, 1990
between Leonard L. Gumport and Motor Cargo.**
10.7 Lease Agreement dated December 23, 1996 between Channing, Inc. and Motor
Cargo.**
10.8 Lease Agreement dated as of January 1, 1989 between Andrea Tacchino
Company and Motor Cargo.**
10.9 First Amendment to Lease dated March 1, 1990 between Andrea Tacchino
Company and Motor Cargo.**
10.10 Lease Agreement dated October 31, 1995 between Pete Aardema and Motor
Cargo.**
10.11 Lease Agreement dated September 29, 1995 among Colburn R. Thomason,
Michael Tolladay, Kevin Tweed and Motor Cargo.**
10.12 Form of Salary Continuation Agreement.**
10.13 Promissory Note dated July 29, 1994 in favor of General Electric Capital
Corporation.**
10.14 Promissory Note dated September 8, 1994 in favor of General Electric
Capital Corporation.**
10.15 Promissory Note dated May 7, 1996 in favor of Lease Plan U.S.A.**
10.16 Promissory Note dated August 16, 1993 in favor of Sanwa Bank.**
10.17 Contribution Agreement, dated August 28, 1997, between the Company and the
members of Ute Trucking and Leasing, LLC.**
10.18 Management Agreement between the Company and FHF Transportation, Inc.**
21 List of subsidiaries**
23.1 Consent of Grant Thornton LLP.*
23.2 Consent of Van Cott, Bagley, Cornwall & McCarthy (included in Exhibit 5).*
23.3 Consent of Robert Anderson to be named as a director.**
23.4 Consent of James Clayburn La Force, Jr. to be named as a director.**
24.1 Power of Attorney.**
27 Financial Data Schedule.**
</TABLE>

- ---------------
* Filed herewith.
** Previously filed.

(b) FINANCIAL STATEMENT SCHEDULES

Schedules have been omitted because the information required to be set
forth therein is not applicable or is shown in the financial statements or notes
thereto.

II-4
<PAGE> 70

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Registrant pursuant to the provisions set forth in Item 14, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a director, officer, or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and the Registrant
will be governed by the final adjudication of such issue.

The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

The undersigned registrant hereby undertakes that:

(a) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(b) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-5
<PAGE> 71

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of North Salt Lake, State of
Utah, on this 20th day of November, 1997.

MOTOR CARGO INDUSTRIES, INC.

By: /s/ MARSHALL L. TATE
------------------------------------
Marshall L. Tate
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on November 20,
1997 in the capacities indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>

/s/ HAROLD R. TATE Chairman of the Board
- ---------------------------------------------
Harold R. Tate

/s/ MARSHALL L. TATE President and Chief Executive Officer and
- --------------------------------------------- Director
Marshall L. Tate (principal executive officer)

/s/ LYNN H. WHEELER Vice President, Finance and Chief Financial
- --------------------------------------------- Officer
Lynn H. Wheeler (principal financial and accounting officer)

/s/ MARVIN L. FRIEDLAND Director
- ---------------------------------------------
Marvin L. Friedland
</TABLE>

II-6
<PAGE> 72

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER PAGE
- ------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement**........................................
3.1 Articles of Incorporation of the Company**..............................
3.2 Bylaws of the Company**.................................................
4.1 Articles of Incorporation of the Company filed as Exhibit 3.1 to this
Registration Statement**................................................
4.2 Bylaws of the Company filed as Exhibit 3.2 to this Registration
Statement**.............................................................
4.3 Specimen certificate**..................................................
5 Opinion of Van Cott, Bagley, Cornwall & McCarthy*.......................
10.1 1997 Credit Agreement, dated September 30, 1997, between Motor Cargo and
Sanwa Bank California**.................................................
10.2 1997 Stock Option Plan**................................................
10.3 Pension Plan of Employees of Motor Cargo and Trust Agreement**..........
10.4 Motor Cargo Profit Sharing Plan**.......................................
10.5 Restricted Stock Agreement, dated October 2, 1997, between the Company
and Louis V. Holdener**.................................................
10.6 Agreement to Purchase and Sell Leasehold Interest dated October 2, 1990
between Leonard L. Gumport and Motor Cargo**............................
10.7 Lease Agreement dated December 23, 1996 between Channing, Inc. and Motor
Cargo**.................................................................
10.8 Lease Agreement dated as of January 1, 1989 between Andrea Tacchino
Company and Motor Cargo**...............................................
10.9 First Amendment to Lease dated March 1, 1990 between Andrea Tacchino
Company and Motor Cargo**...............................................
10.10 Lease Agreement dated October 31, 1995 between Pete Aardema and Motor
Cargo**.................................................................
10.11 Lease Agreement dated September 29, 1995 among Colburn R. Thomason,
Michael Tolladay, Kevin Tweed and Motor Cargo**.........................
10.12 Form of Salary Continuation Agreement**.................................
10.13 Promissory Note dated July 29, 1994 in favor of General Electric Capital
Corporation**...........................................................
10.14 Promissory Note dated September 8, 1994 in favor of General Electric
Capital Corporation**...................................................
10.15 Promissory Note dated May 7, 1996 in favor of Lease Plan U.S.A**........
10.16 Promissory Note dated August 16, 1993 in favor of Sanwa Bank**..........
10.17 Contribution Agreement, dated August 28, 1997, between the Company and
the members of Ute Trucking and Leasing, LLC**..........................
10.18 Management Agreement between the Company and FHF Transportation,
Inc**...................................................................
21 List of subsidiaries**..................................................
23.1 Consent of Grant Thornton LLP*..........................................
23.2 Consent of Van Cott, Bagley, Cornwall & McCarthy (included in Exhibit
5)*.....................................................................
23.3 Consent of Robert Anderson to be named as a director**..................
23.4 Consent of James Clayburn La Force, Jr. to be named as a director**.....
24.1 Power of Attorney**.....................................................
27 Financial Data Schedule**...............................................
</TABLE>

- ---------------

* Filed herewith.

** Previously filed.

<PAGE> 1

EXHIBIT 5

November 20, 1997

Motor Cargo Industries, Inc.
845 Center Street
North Salt Lake, Utah 84054

Re: Motor Cargo Industries, Inc.
Registration Statement on Form S-1

Gentlemen:

In our capacity as counsel to Motor Cargo Industries, Inc., a
Utah corporation (the "Company"), you have requested our opinion in connection
with the registration statement on Form S-1, file number 333-37211, as amended
(the "Registration Statement"), filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to (i) the issuance of up to
1,150,000 authorized and unissued shares (or 1,167,250 authorized and unissued
shares if the underwriters' over-allotment option is exercised in full) of the
Company's Common Stock, no par value, (the "Common Stock"), to be issued
subject to the effectiveness of the Registration Statement, and (ii) the
proposed sale by certain selling shareholders of the Company so identified in
the Registration Statement (the "Selling Shareholders") of an aggregate of
1,080,000 authorized and issued shares of the Common Stock (or 1,397,250
authorized and issued shares of the Common Stock if the underwriters'
over-allotment option is exercised in full).

In connection with the preparation of this opinion letter, and
as the basis for the opinions set forth below, we have made such investigations
of the Utah Revised Business Corporations Act as we have deemed relevant and
necessary, and we have examined such documents and records as we have deemed
relevant and necessary. As to various questions of fact material to this
opinion letter, we have relied upon representations and/or certificates of
officers of the Company.

Based upon and subject to the foregoing examination, we are of
the opinion that:

1. The Company has the authority to issue 1,167,250
shares of the Common Stock upon the effectiveness of the Registration
Statement.
<PAGE> 2

Motor Cargo Industries, Inc.
November 20, 1997
Page 2

2. The shares of the Common Stock to be sold by the
Company and by the Selling Shareholders upon the effectiveness of the
Registration Statement will, when sold and paid for as described in the
Registration Statement, be validly issued, fully paid and non- assessable.

We hereby consent to the filing of this opinion letter as
Exhibit 5 to the Registration Statement. In giving this consent, we do not
admit that we are within the category of persons whose consent is required
under Section 7 of the Securities Act or the General Rules and Regulations of
the Commission.

Very truly yours,

VAN COTT, BAGLEY, CORNWALL & McCARTHY

By /s/ Arthur B. Ralph
----------------------------------
Arthur B. Ralph

<PAGE> 1

EXHIBIT 23.1

CONSENT

We have issued our report dated October 24, 1997, accompanying the consolidated
financial statements of Motor Cargo Industries, Inc., contained in the
Registration Statement and Prospectus. We consent to the use of the
aforementioned report in the Registration Statement and Prospectus and to the
use of our name as it appears under the captions "Selected Consolidated
Financial Data" and "Experts".

/s/ GRANT THORNTON LLP
Salt Lake City, Utah
November 20, 1997