<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 19, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10/A
AMENDMENT NO. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF THE
SECURITIES EXCHANGE ACT OF 1934
---------------------
LANDAIR CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
TENNESSEE 62-1743549
(State or other jurisdiction (IRS employer identification number)
of incorporation or organization)
430 AIRPORT ROAD 37745
GREENEVILLE, TENNESSEE (ZIP Code)
(Address of principal executive offices)
</TABLE>
423-636-7000
(Registrant's telephone number, including area code)
---------------------
Copies of Communications to:
<TABLE>
<S> <C>
RICHARD H. ROBERTS LEIGH WALTON
LANDAIR CORPORATION BASS, BERRY & SIMS PLC
430 AIRPORT ROAD 2700 FIRST AMERICAN CENTER
GREENEVILLE, TENNESSEE 37745 NASHVILLE, TENNESSEE 37238
(423) 636-7000 (615) 742-6200
</TABLE>
---------------------
Securities to be registered pursuant to Section 12(b) of the Act:
None
(Title of Class)
---------------------
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 Par Value Per Share
(Title of each class to be registered)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
LANDAIR CORPORATION
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
<TABLE>
<CAPTION>
ITEM FORM 10 ITEM CAPTION LOCATION IN INFORMATION STATEMENT
- ---- -------------------- ---------------------------------
<S> <C> <C>
1. Business........................................ Business; Selected Financial Data
2. Financial Information........................... Selected Financial Data; Management's
Discussion and Analysis of Financial Condition
and Results of Operations
3. Properties...................................... Business -- Properties
4. Security Ownership of Certain Beneficial Owners
and Management................................ Security Ownership of Certain Beneficial Owners
and Management
5. Directors and Executive Officers................ Management
6. Executive Compensation.......................... Compensation of Executive Officers in 1997
7. Certain Relationships and Related
Transactions.................................. Relationship between Services and the Company
after the Distribution; Executive Compensation
and Other Matters
8. Legal Proceedings............................... Business -- Legal Proceedings
9. Market Price of Dividends on the Registrant's
Common Equity and Related Shareholder
Matters....................................... The Distribution -- Listing and Trading of the
Landair Corporation Common Stock; Risk
Factors -- No Current Price Market for the
Landair Corporation Common Stock; Possibility
of Significant Price Fluctuations; Dividend
Policy; Description of Company Capital Stock
10. Recent Sales of Unregistered Securities......... None
11. Description of Registrant's Securities to be
Registered.................................... Description of Company Capital Stock; Purposes
and Anti-takeover Effects of Legislation and
Certain Provisions of the Company's Charter
and Bylaws
12. Indemnification of Directors and Officers....... Liability and Indemnification of Directors and
Officers
13. Financial Statements and Supplementary Data..... Selected Financial Data; Pro Forma Condensed
Combined Financial Statements; Index to
Financial Statements
14. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........... None
15. Financial Statements and Exhibits............... Index to Financial Statements; Index to
Exhibits
</TABLE>
<PAGE> 3
LANDAIR SERVICES, INC. LOGO
August , 1998
Dear Shareholder:
I am pleased to inform you that the Board of Directors of Landair Services,
Inc. ("Services") has approved a distribution to our shareholders of all the
outstanding shares of common stock of Landair Corporation, its truckload
subsidiary (the "Company"). The stock distribution is expected to be made on or
about September 23, 1998 to holders of record of shares of the $.01 par value
common stock of Services (the "Services Common Stock") on September 16, 1998.
You will receive one share of the $.01 par value per share common stock of the
Company (the "Landair Corporation Common Stock") for each share of Services
Common Stock you hold on the record date.
As a result of the distribution of Landair Corporation Common Stock, you
will own shares in two separate public companies. Prior to the distribution of
Landair Corporation Common Stock, Services intends to change its name to Forward
Air Corporation, and will continue to operate its Forward Air network, which
serves the growing deferred air freight market. The Company, on the other hand,
will own and operate the Truckload operations now owned and operated by Landair
Transport, Inc., a subsidiary of Services.
In addition to changing its name to Forward Air Corporation to reflect its
focus on the Forward Air operations, Services will change the symbol under which
it is listed on the Nasdaq National Market to "FWRD." The Company, in turn, will
assume the "LAND" ticker symbol and has applied for listing its stock under that
symbol on the Nasdaq National Market.
Your Board of Directors believes that the distribution, among other things,
will allow investors, analysts and creditors to evaluate better the different
merits of the two distinct businesses and their characteristics and prospects
and thereby enhance the likelihood that each will achieve appropriate market
recognition of its performance. Accordingly, Services believes that the
distribution will position each company to enhance shareholder value and
competitiveness.
The enclosed Information Statement explains the proposed distribution in
detail and provides financial and other important information regarding the
Company. We urge you to read it carefully. Holders of Services Common Stock are
not required to take any action to participate in the distribution. A
shareholder vote is not required in connection with this matter and,
accordingly, your proxy is not being sought.
Sincerely,
/s/Scott M. Niswonger
Scott M. Niswonger
Chairman, President and Chief
Executive Officer
<PAGE> 4
EXPLANATORY NOTE
This Form 10/A-1 was originally filed on August 19, 1998 via the SEC's
EDGAR filing system under the CIK code number of Landair Services, Inc., rather
than the registrant, Landair Corporation. This Form 10/A-1 is being filed today
under the CIK code number of the registrant, Landair Corporation. No other
changes have been made to the Form 10/A-1 since its original filing on August
19, 1998.
INFORMATION STATEMENT
LANDAIR CORPORATION
COMMON STOCK
($0.01 par value per share)
This Information Statement is being furnished to shareholders of Landair
Services, Inc., a Tennessee corporation ("Services"), in connection with the pro
rata distribution (the "Distribution") by Services to its shareholders of all of
the outstanding shares of the $0.01 par value per share common stock (the
"Landair Corporation Common Stock") of its wholly-owned subsidiary, Landair
Corporation (the "Company"). Prior to the Distribution, the name of Services
will, subject to the approval of the shareholders of Services, be changed to
"Forward Air Corporation." References herein to "Services" include the newly
named Forward Air Corporation.
The Distribution is expected to be made on or about September 23, 1998 (the
"Distribution Date") to holders of record of the $0.01 par value per share
common stock of Services (the "Services Common Stock") as of the close of
business on September 16, 1998 (the "Record Date"), subject to the satisfaction
or waiver of certain conditions. The Distribution will be made on the basis of
one share of Landair Corporation Common Stock for each share of Services Common
Stock held on the Record Date. No consideration will be paid by holders of
Services Common Stock for the shares of Landair Corporation Common Stock to be
received in the Distribution, nor will they be required to surrender or exchange
shares of Services Common Stock in order to receive Landair Corporation Common
Stock. See "THE DISTRIBUTION."
There is no current trading market for the Landair Corporation Common
Stock, although a "when issued" market is expected to develop on or about the
Record Date. The Company has applied for listing of the Landair Corporation
Common Stock on The Nasdaq Stock Market's National Market (the "Nasdaq National
Market") under the symbol "LAND." See "THE DISTRIBUTION -- LISTING AND TRADING
OF THE LANDAIR CORPORATION COMMON STOCK."
---------------------
IN REVIEWING THIS INFORMATION STATEMENT, YOU SHOULD CAREFULLY CONSIDER THE
MATTERS DESCRIBED UNDER "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS INFORMATION
STATEMENT.
---------------------
NO VOTE OF SHAREHOLDERS IS REQUIRED IN CONNECTION WITH THIS DISTRIBUTION. WE ARE
NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
---------------------
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 INFORMATION STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
The date of this Information Statement is August , 1998
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION....................................... ii
SUMMARY OF INFORMATION STATEMENT............................ 1
SUMMARY FINANCIAL DATA...................................... 6
RISK FACTORS................................................ 7
THE DISTRIBUTION............................................ 12
RELATIONSHIP BETWEEN SERVICES AND THE COMPANY AFTER THE
DISTRIBUTION.............................................. 16
FINANCING................................................... 19
SELECTED FINANCIAL DATA..................................... 20
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS........... 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 27
BUSINESS.................................................... 32
MANAGEMENT.................................................. 36
COMPENSATION OF EXECUTIVE OFFICERS IN 1997.................. 41
1997 OPTION GRANTS, AGGREGATED OPTION EXERCISES AND OPTION
VALUES.................................................... 41
AGGREGATED OPTION EXERCISES IN LAST YEAR AND YEAR-END OPTION
VALUES.................................................... 42
LANDAIR CORPORATION EMPLOYEE BENEFIT PLANS.................. 44
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 47
DESCRIPTION OF COMPANY CAPITAL STOCK........................ 49
PURPOSES AND ANTI-TAKEOVER EFFECTS OF LEGISLATION AND
CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS.... 50
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS..... 52
INDEPENDENT AUDITORS........................................ 53
INDEX TO FINANCIAL STATEMENTS............................... F-1
ANNEX A -- DISTRIBUTION AGREEMENT........................... A-1
</TABLE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"SEC") a registration statement on Form 10 (such registration statement, as it
may be amended or supplemented, the "Registration Statement") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), with respect
to the Landair Corporation Common Stock. This Information Statement does not
contain all of the information that is set forth in the Registration Statement
and the exhibits and schedules thereto. The Registration Statement and the
annexes, exhibits and schedules thereto are available for inspection and copying
at the public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street N.W., Washington, D.C. 20549, as well as the Regional Offices of the SEC
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; Seven World Trade Center, Suite 1300, New York, New York 10048; and at
5670 Wilshire Boulevard, Suite 1100, Los Angeles, California 90036. Copies of
such information are obtainable by mail from the Public Reference Section of the
SEC at 450 Fifth Street N.W., Washington, D.C. 20549 at prescribed rates. Copies
of such material may also be obtained from the SEC's web site
(http://www.sec.gov).
Following the Distribution, the Company will be subject to the
informational requirements of the Exchange Act and, in accordance therewith,
will file reports, proxy statements and other information with the SEC. The
reports, proxy statements and other information that will be filed by the
Company with the SEC will be available for inspection and copying at the SEC's
public reference facilities referred to above. Copies of such material will be
obtainable by mail from the Public Reference Section of the SEC at the address
referred to above at prescribed rates and from the SEC's web site referred to
above.
ii
<PAGE> 6
NO PERSON IS AUTHORIZED BY SERVICES OR THE COMPANY TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS
INFORMATION STATEMENT OTHER THAN THOSE CONTAINED IN THIS INFORMATION STATEMENT
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY EITHER SERVICES OR THE COMPANY. NEITHER THE
DELIVERY OF THIS INFORMATION STATEMENT NOR CONSUMMATION OF THE DISTRIBUTION
CONTEMPLATED HEREBY SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF, OR
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
iii
<PAGE> 7
SUMMARY OF INFORMATION STATEMENT
This Summary is included for convenience only and should not be considered
complete. This Summary is qualified in its entirety by reference to the more
detailed information, including the Combined Financial Statements and Notes
thereto, set forth elsewhere in this Information Statement and in the
Distribution Agreement set forth as Annex A to this Information Statement (the
"Distribution Agreement"). Shareholders are urged to read this Information
Statement in its entirety. The Company is currently a wholly-owned subsidiary of
Services. Pursuant to the terms of the Distribution Agreement and prior to the
Distribution, Services will be reorganized (the "Reorganization") so that (i)
substantially all of the operations, assets and liabilities related to the
Truckload operations currently being conducted by Services or its subsidiaries
(the "Truckload Business") will be transferred to the Company and its
subsidiaries and (ii) substantially all of the operations, assets and
liabilities related to the less-than-truckload deferred air freight business
currently being conducted by Services or its subsidiaries (the "Forward Air
Business") will continue to be owned by Services and its subsidiaries. Upon
completion of the Reorganization and the Distribution, the Company will be an
independent, separately-traded public company that owns and operates the
Truckload Business. Unless the context otherwise requires, references in this
Information Statement to Services and the Company shall include subsidiaries of
Services and the Company after the Reorganization and the Distribution, and
references in this Information Statement to the Company prior to the
Distribution shall refer to the Truckload Business as operated by Services.
THE COMPANY
The Company is an irregular route, high-service level truckload carrier
that transports a wide range of commodities in both intrastate and interstate
commerce. The Company provides dry van common carrier and dedicated contract
carriage for shippers of a variety of products in the medium- and short-haul
markets. These products include, among others, air freight, automotive parts and
supplies, electronics, metal products, paper products, retail and other consumer
goods. The preponderance of the Company's business involves providing
high-quality, specialized services to service-sensitive shippers. To assure the
most efficient response to the differing requirements of customers at numerous
shipping locations, the Company has a network of terminals where over-the-road
tractors are based and drivers are domiciled.
The Company utilizes a satellite-linked, computerized operations system to
monitor and facilitate the movement of freight. The Company's operating
philosophy is founded on maintaining the highest level of service at market
competitive prices in the most efficient manner possible.
OPERATIONS
The Company currently conducts operations from ten terminals. Each terminal
is the base for certain over-the-road tractors and is the domicile of the
drivers who operate those tractors. These terminals have facilities and staff to
provide driver supervision, fueling and routine maintenance. The Company also
operates facilities for its dedicated operations. The Company believes this
network of facilities enhances its ability to provide responsive service to its
customers in an efficient manner.
Each customer's shipment is accorded exclusive use of a trailer, with most
shipments being transported directly from customer pick-up locations to
destinations without a change of drivers, relays or circuitous routing via
terminals. The Company operates a centralized customer service and operations
center in Greeneville, Tennessee. All facilities and drivers are linked to a
satellite communication and dispatch system which provides interactive updates
to its operations.
Since January 1998, the Company has recruited commission agents in addition
to its continuing efforts to recruit independent contractors who own and operate
their own tractors ("owner-operators"). The Company believes that the increased
use of owner-operators and commission agents will tend to protect the Company
during business downturns and should provide increased revenue without adding
proportionate fixed costs.
1
<PAGE> 8
The Company's operations are divided into two primary divisions:
Common Carrier Operations. The Company's common carrier operations serve
customers with a variety of shipping needs. The common carrier operations'
primary traffic consists of medium- and short-haul routes and is concentrated
primarily in the eastern two-thirds of the United States. Customers of the
common carrier operations include Fortune 500 companies who subscribe to a
"core-carrier" strategy as well as smaller companies with regional shipping
needs. Services include just-in-time delivery, satellite communications and
electronic data interchange, as well as tailored services required to meet
specific customer needs such as dedicated capacity, team operations and roller
bed equipment used to serve its air cargo industry customers.
Dedicated Contract Carriage. The Company's dedicated fleet operations
provide dedicated equipment and personnel on a contractual basis to each of its
customers for that customer's exclusive use, frequently as a lower cost
alternative to private carriage. While providing shippers with a higher level of
service, the implementation of a dedicated fleet program frees for other uses
that portion of a shipper's capital that would have been invested in a private
fleet. This ability to redeploy capital allows shippers to better utilize
resources in furtherance of their primary businesses. The dedicated fleet's
service typically includes certain of the staffing requirements associated with
operating a private fleet.
The primary focus of the Company's marketing strategy is to increase
freight density within defined market areas that are consistent with the
Company's growth and profit objectives by capitalizing on the trend of shippers
to use a fewer number of truckload carriers in pursuit of a "core carrier"
partnership strategy and the trend to outsource private fleet transportation
requirements. The financial and operating goal of the Company is to maximize
profitability by achieving optimal equipment utilization and yield, while
meeting or exceeding customer service requirements.
The Company's principal executive offices are located at 430 Airport Road,
Greeneville, Tennessee 37745 and its telephone number is (423) 636-7000.
2
<PAGE> 9
THE DISTRIBUTION
Set forth below is a brief summary of certain terms of the Distribution and
related transactions. The Distribution Agreement is more fully described herein
under "THE DISTRIBUTION," and is attached as Annex A to this Information
Statement.
Distributing Company....... Landair Services, Inc., a Tennessee corporation
("Services"), which, prior to the Distribution and
subject to the approval of the shareholders of
Services, will change its name to "Forward Air
Corporation."
Distributed Company........ Landair Corporation, a Tennessee corporation (the
"Company"), which upon completion of the
Reorganization and Distribution will be an
independent, separately-traded public company that
owns and operates the Truckload Business.
Distribution Ratio......... One share of Landair Corporation Common Stock for
each share of Services Common Stock held of record
as of the close of business on the Record Date.
Securities to be
Distributed................ Based on approximately 6,195,631 shares of Services
Common Stock outstanding as of July 31, 1998,
approximately 6,195,631 shares of Landair
Corporation Common Stock will be distributed. The
Landair Corporation Common Stock to be distributed
will constitute all of the outstanding Common Stock
of the Company immediately after the Distribution.
Record Date................ Close of business on September 16, 1998.
Distribution Date.......... On or about September 23, 1998.
Mailing Date............... Certificates representing the shares of Landair
Corporation Common Stock to be distributed pursuant
to the Distribution will be delivered to the
Distribution Agent on the Distribution Date. The
Distribution Agent will mail certificates
representing the shares of Landair Corporation
Common Stock to holders of Services Common Stock as
soon as practicable after the Distribution Date.
Holders of Services Common Stock should not send
stock certificates to Services, the Company or the
Distribution Agent. See "THE DISTRIBUTION -- MANNER
OF EFFECTING THE DISTRIBUTION."
Distribution Agent......... SunTrust Bank, Atlanta will be the distribution
agent (the "Distribution Agent") for the
Distribution.
Reasons for the
Distribution............... Services believes that the Distribution will allow
investors, analysts and creditors to evaluate
better the different merits of the two businesses
and their characteristics and prospects, and may
enhance the likelihood that each will achieve
appropriate market recognition of its performance.
Accordingly, Services believes that the
Distribution will position each company to enhance
shareholder value and competitiveness. See "THE
DISTRIBUTION -- BACKGROUND AND REASONS FOR THE
DISTRIBUTION."
Tax Consequences........... Services has received a private letter ruling (the
"Ruling") from the IRS to the effect, among other
things, that receipt of shares of the Landair
Corporation Common Stock by shareholders of
Services will be tax-free and that Services will
not recognize income, gain or loss as a result of
the Distribution. Accordingly, neither Services or
its shareholders will recognize gain or loss as a
result of the Distribution of Landair Corporation
3
<PAGE> 10
Common Stock. See "THE DISTRIBUTION -- CERTAIN
FEDERAL INCOME TAX ASPECTS OF THE DISTRIBUTION."
Reorganization............. Pursuant to the Distribution Agreement and prior to
the Distribution, Services and its subsidiaries
will effect the Reorganization pursuant to which
(i) substantially all of the operations, assets and
liabilities related to the Truckload Business will
be transferred to the Company and its subsidiaries
and (ii) substantially all of the operations,
assets and liabilities related to the Forward Air
Business will continue to be owned by Services and
its subsidiaries.
Dividend Policy............ The Company currently expects that for the
foreseeable future it will retain earnings to
finance the growth of the Company's business.
Future payment of dividends will depend upon the
financial condition, results of operations,
contractual restrictions and capital requirements
of the Company, as well as other factors deemed
relevant by the Board of Directors of the Company.
See "RISK FACTORS -- DIVIDEND POLICY."
Listing and Trading
Market..................... There is not currently a public market for the
Landair Corporation Common Stock, although the
Company expects that a "when-issued" trading market
may develop on or about the Record Date. The
Company has applied for listing of the Landair
Corporation Common Stock on the Nasdaq National
Market under the symbol "LAND," the ticker symbol
currently used by Services. Upon the change of its
name to Forward Air Corporation prior to the
Distribution, Services will also change the symbol
under which it is listed on the Nasdaq National
Market to "FWRD." See "RISK FACTORS -- NO CURRENT
PUBLIC MARKET FOR THE LANDAIR CORPORATION COMMON
STOCK; POSSIBILITY OF SIGNIFICANT PRICE
FLUCTUATIONS" and "THE DISTRIBUTION -- LISTING AND
TRADING OF THE LANDAIR CORPORATION COMMON STOCK."
Certain Provisions of
Charter and Bylaws......... Certain provisions of the Company's Charter and
Bylaws and Tennessee law may have the effect of
delaying or making more difficult an acquisition of
control of the Company in a transaction not
approved by the Board of Directors of the Company.
See "PURPOSES AND ANTI-TAKEOVER EFFECTS OF
LEGISLATION AND CERTAIN PROVISIONS OF THE COMPANY'S
CHARTER AND BYLAWS." Provisions of the Company's
Charter eliminate certain liabilities of its
directors in connection with the performance of
their duties. See "LIABILITY AND INDEMNIFICATION OF
DIRECTORS AND OFFICERS LIMITATION OF LIABILITY."
Relationship Between
Services and the Company
After the Distribution... Services will have no stock ownership in the
Company upon consummation of the Distribution. For
purposes of governing certain ongoing relationships
between the Company and Services after the
Distribution and to provide for an orderly
transition, the Company and Services have entered
into or will enter into certain agreements. Such
agreements include (i) the Distribution Agreement,
providing for the terms of the Distribution and the
Reorganization; (ii) the Employee Benefit Matters
Agreement, providing for certain allocations of
responsibilities with respect to employee
compensation and benefit matters; (iii) the Tax
4
<PAGE> 11
Sharing Agreement pursuant to which the Company and
Services will allocate tax liabilities that relate
to periods prior to the Distribution Date, and
based on subsequent actions of the Company, will
allocate to the Company any liability that would
arise if the Distribution were not tax-free; and
(iv) the Transition Services Agreement, providing
for the performance of certain services between the
Company and Services. See "RELATIONSHIP BETWEEN
SERVICES AND THE COMPANY AFTER THE DISTRIBUTION."
Risk Factors............... Shareholders should carefully consider all of the
information contained in this Information
Statement, including the matters described under
"RISK FACTORS."
5
<PAGE> 12
SUMMARY FINANCIAL DATA
The following table sets forth (i) summary historical financial data of the
Truckload Business for each of the five years ended December 31, 1997 and for
the six months ended June 30, 1998 and 1997 and (ii) summary pro forma financial
data of the Truckload Business for the year ended December 31, 1997 and as of
and for the six months ended June 30, 1998. The summary pro forma financial data
of the Truckload Business has been derived from the Pro Forma Condensed Combined
Financial Statements.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------------------- -----------------------------------------------------------
PRO FORMA PRO FORMA
1998(4) 1998 1997 1997(4) 1997 1996 1995 1994 1993
--------- ------- ------- --------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (1)(2):
Operating revenue.................. $51,543 $51,543 $42,625 $91,398 $91,398 $82,242 $87,764 $80,934 $66,083
Income from operations............. 3,093 3,093 970 3,739 3,739 825 4,104 3,642 1,287
Interest expense................... (199) (924) (933) (387) (1,826) (2,221) (2,327) (1,116) (899)
Other income (expense), net........ 26 26 (71) (12) (12) 59 227 280 376
------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before income
taxes............................ 2,920 2,195 (34) 3,340 1,901 (1,337) 2,004 2,806 764
Income taxes (benefit)............. 1,133 850 (11) 1,312 751 (432) 1,067 1,402 343
------- ------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)(3)............... $ 1,787 $ 1,345 $ (23) $ 2,028 $ 1,150 $ (905) $ 937 $ 1,404 $ 421
======= ======= ======= ======= ======= ======= ======= ======= =======
Net income per common share:
Basic............................ $ 0.29 $ 0.33
Diluted.......................... $ 0.29 $ 0.33
BALANCE SHEET DATA:
Cash and cash equivalents.......... $ 61 $ 61
Total assets....................... 78,980 98,356
Long-term obligations, net of
current portion.................. 4 14,877
Shareholder's investment........... 44,220 40,903
</TABLE>
- ---------------
(1) Results for 1994 and 1993 lack comparability to other periods because (i)
1994 includes an $805,000 loss on the sale and winding down of refrigerated
trucking operations, and (ii) 1993 includes bonuses of approximately $1.1
million which represented non-recurring bonuses to key management and
payments to Services' S Corporation shareholder to enable him to pay income
taxes by virtue of Services' S Corporation status through October 29, 1993.
Had these items not been included in the results of operations, income from
operations, income before income taxes and net income would have been
approximately $4.5, $3.6 and $1.8, and $2.4, $1.9, and $1.1 million in 1994
and 1993, respectively.
(2) The historical and pro forma financial information includes certain
allocations of corporate administrative expenses by Services.
(3) Per share data has not been presented because the financial statements of
the Truckload Business include primarily wholly-owned subsidiaries or
divisions of Services.
(4) The summary pro forma balance sheet data of the Truckload Business, as of
June 30, 1998, presents the financial position of the Truckload Business
assuming the Reorganization and the Distribution had occurred on June 30,
1998. The summary pro forma income statement data for the year ended
December 31, 1997 and the six months ended June 30, 1998 present the results
of operations of the Truckload Business assuming the Reorganization and the
Distribution had occurred on January 1, 1997. The summary combined pro forma
financial data incorporates certain assumptions set forth in the footnotes
to the Pro Forma Condensed Combined Financial Statements.
6
<PAGE> 13
RISK FACTORS
Shareholders of Services should be aware that the Reorganization, the
Distribution and the ownership of the Landair Corporation Common Stock involve
certain risks, including those described below and elsewhere in this Information
Statement, which could adversely affect the value of their holdings. Certain
statements contained in this Information Statement constitute forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. When used in this Information Statement, the words
"estimate," "project," "intend," "expect," "anticipate" and similar expressions
are intended to identify forward-looking statements. These forward-looking
statements were based on various factors, many of which are beyond the Company's
control and were derived utilizing numerous assumptions and other important
factors that could cause actual results to differ materially from those in the
forward-looking statements. Actual results in the future could differ materially
from those described in the forward-looking statements as a result of the risk
factors set forth below (which list does not purport to be exhaustive) and the
matters set forth in this Information Statement generally.
NEW STAND-ALONE COMPANY; LACK OF PRIOR INDEPENDENT OPERATING HISTORY
Upon consummation of the Distribution, the Company will be a stand-alone
entity with less capital resources than Services prior to the Distribution.
There can be no assurance that all of the Company's present customers will
continue to do business with it as a stand-alone entity following the
Distribution. Furthermore, the Company's management team has not operated the
Company as a separate public company, and the Company will have a new Board of
Directors, appointed by Services, effective as of the consummation of the
Distribution.
After the Distribution, the Company will have a continuing relationship
with Services under the Transition Services Agreement described in "RELATIONSHIP
BETWEEN SERVICES AND THE COMPANY AFTER THE DISTRIBUTION" for certain services.
The Transition Services Agreement is intended to ensure that the Company's
business will, during the term thereof, receive the same level of services as a
stand-alone operation as it currently receives as a part of Services. There can
be no assurance, however, that Services will be willing to continue providing
such services, or that such services will be provided at a comparable level and
cost, beyond the term of the Transition Services Agreement. The failure of
Services to provide such services to the Company after the expiration of the
Transition Services Agreement or to perform its obligations under the Transition
Services Agreement following the Distribution could have a material adverse
effect on the Company if comparable arrangements cannot be made. The impact of
these and other changes on the Company's operations cannot be predicted. See
"MANAGEMENT" and "RELATIONSHIP BETWEEN SERVICES AND THE COMPANY AFTER THE
DISTRIBUTION."
SUBSTANTIAL CAPITAL REQUIREMENTS; UNAVAILABILITY OF FUTURE FINANCING FROM
SERVICES
In order to compete effectively, the Company must have access to capital.
The Company has relied in part upon Services to provide the cash necessary to
fund capital expenditures and meet other cash requirements. In the future,
Services will not provide the Company with financing or capital contributions.
Accordingly, the Company may need to access lenders or equity markets or obtain
additional funding sources in order to finance its operations and capital
expenditures. No assurance can be given that the Company will have access to
such financial markets or other funding in the future, or that any such
financing or refinancing will be completed on favorable terms and in a timely
manner.
COMPETITION
The truckload industry is highly competitive, and the Company will compete
with other regional and national carriers and, to a lesser extent, with
less-than-truckload carriers, railroads and other means of transportation. Many
of the Company's competitors have greater financial resources, more equipment or
larger
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freight capacity than the Company. Service and price are the principal means of
competition in the transportation industry. Historically, competition in the
trucking industry has resulted in aggressive pricing, and management has no
reason to believe that these conditions will change.
DEPENDENCE ON SIGNIFICANT CUSTOMERS
To succeed in the competitive truckload industry, the Company must continue
to improve its quality of service and maintain competitive pricing. There can be
no assurance that the Company will be successful in its attempts to meet the
competitive demands of the industry, and the failure to do so would have a
material adverse effect on its business, financial condition or results of
operations.
One customer of the Truckload Business, Federal Express Corporation,
accounted for 29.4% of combined operating revenue of the Company for the year
ended December 31, 1997.
POTENTIAL SALE OF LANDAIR CORPORATION COMMON STOCK BY SCOTT NISWONGER
As a condition of the Ruling, Scott Niswonger is required, to the extent he
sells any shares of Services Common Stock within twelve months following the
Distribution, to dispose of an equal percentage of shares of Landair Corporation
Common Stock within the later of twelve months following the Distribution or
three months following such sale of Services Common Stock. Any sales by Mr.
Niswonger of substantial amounts of Landair Corporation Common Stock following
the Distribution, or the perception that such sales could occur, could adversely
affect the prevailing market price of the Landair Corporation Common Stock.
AVAILABILITY OF DRIVERS
The trucking industry continues to experience a shortage of qualified,
experienced drivers. The availability of drivers is an important factor in the
Company's ability to serve its customers. Competition for drivers is intense.
The Company has periodically experienced driver shortages in certain
geographical areas. The Company may not be able to employ a sufficient number of
drivers from time to time to meet customer shipment demands, resulting in loss
of revenue that might otherwise be available to the Company. There can be no
assurance that in the future a shortage of qualified drivers would not have a
material adverse effect on the Company's business, financial condition or
results of operations.
POSSIBLE EFFECT OF ECONOMIC DEVELOPMENTS AND MARKET CONDITIONS
Interest rate fluctuations, increases in fuel prices, economic recession,
changes in customers' business cycles and industry capacity are factors over
which the Company has little or no control, but which may adversely affect its
business, financial condition or results of operations.
RISK OF LOSS OF "TAX-FREE" TREATMENT OF THE DISTRIBUTION
Services has received a private letter ruling from the IRS to the effect
that, among other things, the Distribution will qualify as a tax-free
distribution for federal income tax purposes under Section 355 of the Code. Such
ruling is based on the accuracy of certain factual representations and certain
assumptions of Services. Although Services is not aware of any facts or
circumstances that would cause such representations or assumptions to be false,
no assurance can be given in this regard. Although the Tax Sharing Agreement
restricts the ability of the Company and Services to engage in any transaction
or commit or fail to take any action that would cause the Reorganization or the
Distribution not to qualify as a tax free transaction for federal income tax
purposes, certain actions or the failure to take certain actions by Services or
the Company following the Distribution ("Post-Distribution Acts") potentially
could render the Distribution taxable. Examples of such Post-Distribution Acts
include, without limitation, (i) the transfer by Services or the Company of a
material portion of its assets (other than a transfer of assets in the ordinary
course of business); (ii) the merger of Services or the Company with or into
another corporation; (iii) the discontinuance by Services or the Company of a
material portion of its historical business activities; (iv) transfers of stock
of Services and/or the Company by shareholders of sufficient quantity to cause
the historic shareholders of Services not to be considered to have maintained
sufficient "continuity of proprietary interest" in one or both
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<PAGE> 15
of the companies; and (v) the failure of Services to offer to the public within
twelve months of the Distribution newly issued shares of Services Common Stock
representing approximately fifteen percent of the total issued and outstanding
shares of Services Common Stock.
If the Distribution were rendered taxable as a result of any
Post-Distribution Act or for any other reason, Services would be subject to tax
on the difference between the fair market value of the Landair Corporation
Common Stock and the adjusted tax basis of the Landair Corporation Common Stock
at the time of the Distribution and each holder of Services Common Stock who
received shares of the Landair Corporation Common Stock in the Distribution
would generally be treated as having received a taxable dividend includible in
income in an amount equal to the fair market value of such Landair Corporation
Common Stock received at the time of the Distribution. Under the Tax Sharing
Agreement, the Company will generally indemnify Services with respect to any
taxes incurred by Services in connection with the Distribution if the
Distribution fails to qualify as a tax-free transaction for Federal income tax
purposes as a result of a violation of any of the foregoing restrictions by the
Company or as a result of certain misrepresentations or omissions by the Company
to the IRS or to counsel of Services. See "RELATIONSHIP BETWEEN SERVICES AND THE
COMPANY AFTER THE DISTRIBUTION -- DISTRIBUTION AGREEMENT."
NO CURRENT PUBLIC MARKET FOR THE LANDAIR CORPORATION COMMON STOCK; POSSIBILITY
OF SIGNIFICANT PRICE FLUCTUATIONS
Although the Company expects that a "when-issued" trading market may
develop on or about the Record Date, there is not currently a public market for
the Landair Corporation Common Stock. In addition, the trading price of the
Landair Corporation Common Stock will be influenced by a variety of factors,
including the Company's operating results, the depth and liquidity of the market
for the Landair Corporation Common Stock, investor perception of the Company and
the industries in which it participates and general economic and market
conditions. Such prices may also be affected by certain provisions of the
Company's Charter and Bylaws, as each will be in effect following the
Distribution, which may have anti-takeover effects. Accordingly, there can be no
assurance as to the prices at which trading in the Landair Corporation Common
Stock will occur on a "when-issued" basis or after the Distribution. Although
the Company has applied for listing the Landair Corporation Common Stock on the
Nasdaq National Market, there can be no assurance that an active public market
will develop for the Landair Corporation Common Stock. The prices at which
trading in the Landair Corporation Common Stock occurs may fluctuate
significantly, particularly until the Landair Corporation Common Stock issued in
the Distribution is fully distributed. See "THE DISTRIBUTION -- LISTING AND
TRADING OF THE LANDAIR CORPORATION COMMON STOCK."
DIVIDEND POLICY
The Company currently expects that it will retain earnings to finance the
growth of the Company's business. Future payment of dividends will depend upon
the financial condition, results of operations, contractual restrictions and
capital requirements of the Company, as well as other factors deemed relevant by
the Board of Directors of the Company.
HOLDING COMPANY STRUCTURE
The Company is a holding company and does not have any material assets
other than the stock of its subsidiaries. Accordingly, the Company's ability to
pay dividends, if any, on the Landair Corporation Common Stock, to service its
indebtedness and meet its other cash needs are substantially dependent upon the
results of operations of its subsidiaries and their cash flow, if any, generated
by the operations of such subsidiaries.
FRAUDULENT TRANSFER AND RELATED CONSIDERATIONS
Prior to the Distribution and as part of the Reorganization, Services and
its subsidiaries will transfer certain assets and liabilities between the
Company and Services relating to the Forward Air Business and the
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<PAGE> 16
Truckload Business. Such transfers, as well as the Distribution itself, may be
subject to review under state or federal fraudulent transfer laws in the event
of the bankruptcy or other financial difficulty of either the Company or
Services.
Under those laws, if a court in a lawsuit by an unpaid creditor or
representative of creditors of the Company, such as a trustee in bankruptcy or
the Company as debtor in possession in a case under Chapter 11 of the United
States Bankruptcy Code, were to find that at the time of such transfer of assets
and liabilities, the Company either (i) was insolvent, (ii) was rendered
insolvent, (iii) was engaged in a business or transaction for which its
remaining unencumbered assets constituted unreasonably small capital, or (iv)
intended to incur or believed that it would incur debts beyond its ability to
pay as such debts matured, the court could avoid such transfer.
Similarly, if a court in a lawsuit by an unpaid creditor or representative
of creditors of Services, such as a trustee in bankruptcy or Services as debtor
in possession, were to find that at the time of the Distribution one of the
factors identified in clauses (i) through (iv) above applied to Services, such
court could avoid the Distribution and direct the return of all shares of
Landair Corporation Common Stock distributed thereunder to Services or to an
entity to hold for the benefit of Services' creditors.
Moreover, regardless of the factors identified in clauses (i) through (iv)
above, the court could avoid such transfer of assets and liabilities or the
Distribution if, in either case, it found that such transfer or the Distribution
resulted from actual intent to hinder, delay or defraud creditors of the Company
or Services, respectively.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction being applied. Generally, however, an entity
would be considered insolvent if the sum of its debts (including contingent or
unliquidated debts) is greater than all of its property at a fair valuation or
if the present fair salable value of its assets is less than the amount that
will be required to pay its probable liability on its existing debts as they
become absolute and matured.
CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL; CERTAIN ANTI-TAKEOVER EFFECTS
Certain provisions of the Company's Charter and Bylaws and Tennessee law
could have the effect of delaying, deferring or preventing a change of control
of the Company in a transaction not approved by the Company's Board of
Directors. See "PURPOSES AND ANTI-TAKEOVER EFFECTS OF LEGISLATION AND CERTAIN
PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS."
TRANSPORTATION REGULATIONS
The business of the Company is subject to regulation by various federal and
state agencies, including the United States Department of Transportation
("DOT"). The trucking industry is subject to regulatory and legislative changes
(including limits on vehicle weights and size) that can affect the economics of
the industry by requiring changes in operating practices or influencing the
costs of providing services to shippers. See "BUSINESS -- TRANSPORTATION
REGULATIONS."
ENVIRONMENTAL REGULATIONS
The trucking industry is subject to stringent environmental laws and
regulations, including laws and regulations dealing with underground fuel
storage tanks and the transportation of hazardous materials. Laws protecting the
environment have become more stringent. Management of the Company believes that
the Company is in material compliance with all laws applicable to its
operations, and is not aware of any situation or condition that it believes is
likely to have a material adverse effect on its financial position or results of
operations. There can be no assurance, however, that environmental matters
existing with respect to the Company, or compliance by the Company with laws
relating to environmental matters, will not have a material adverse effect on
the Company's business, financial condition or results of operations. See
"BUSINESS -- ENVIRONMENTAL REGULATIONS."
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SEASONALITY
In the trucking industry, revenue and operating results generally reflect a
seasonal pattern as customers reduce shipments during and after the winter
holiday season and during the month of July due to plant closings. Additionally,
the volume of shipments is often affected by weather variations. The Company's
operating expenses also have historically been higher in the winter months, due
primarily to decreased fuel efficiency and increased maintenance costs of
revenue equipment in colder weather.
INFLATION
Significant increases in fuel prices, to the extent not offset by increases
in rates, would have a material adverse effect on the profitability of the
Company. Historically, the Company has responded to periods of sharply higher
fuel prices by implementing fuel surcharge programs or base rate increases, or
both, to recover additional costs, but there can be no assurance that the
Company will be able to successfully implement such surcharges or increases in
response to increased fuel costs in the future.
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<PAGE> 18
THE DISTRIBUTION
BACKGROUND AND REASONS FOR THE DISTRIBUTION
Services continually reviews its businesses, with a view to increasing
competitiveness and efficiency of its operations and to enhancing the long-term
interests of its shareholders. Following considerable review of available
strategic alternatives for enhancing Services' shareholder value, the Board of
Directors of Services concluded that the Distribution would be in the best
interests of the Company, Services and Services' shareholders. Services believes
that the Distribution will allow investors, analysts and creditors to evaluate
better the different merits of the two businesses and their characteristics and
prospects and may enhance the likelihood that each will achieve appropriate
market recognition of its performance. Accordingly, Services believes that the
Distribution will position each company to enhance long-term shareholder value
and competitiveness.
Financial Reasons. The Board of Directors and management of Services
believe that the separation of the Truckload Business and the Forward Air
Business into two public companies through the Distribution will enable each of
the businesses to raise capital more efficiently, as both lenders and equity
investors will be better able to assess the different risk profiles and
operating characteristics of the Truckload Business and the Forward Air
Business. Currently, the two businesses have different capital requirements,
operating and profit margins, forms of competition, contractual relationships,
regulatory requirements and growth expectations. Services currently intends to
expand the Forward Air Business through the combination of internal growth and
additional acquisitions. The Distribution will give the Forward Air Business
direct access to capital markets and will permit it to raise funds on the basis
of its own operating profile and fundamentals. The Services Board anticipates
that, as an independent entity without the Truckload Business, the Forward Air
Business will be able to raise capital and make acquisitions using common stock
more efficiently because it is expected that the market will value stock in the
Forward Air Business on a price/earnings multiple closer to other low-asset
based transportation service providers, which multiple the Services Board
currently expects will be higher than the multiple historically assigned to
Services and the combined Forward Air and Truckload Businesses.
Similarly, the Company currently intends to expand its business through a
combination of internal growth and additional acquisitions. Separation from the
Forward Air Business will allow investors to assess a potential investment in
the Company based on its capital requirements, operating profile and
fundamentals and growth expectations. Separation of its assets from those of the
Forward Air Business may facilitate asset based lending to the Company to
satisfy some of its future capital needs.
Management and Employee Reasons. Management also expects that the
Distribution will enable both the Company and Services to motivate their
respective key employees, and attract new employees, by offering economic
rewards and incentives, such as stock options whose value will be directly
related to the performance of the Truckload Business and Forward Air Business,
respectively. Prior to the Distribution, employees of Services that were key
employees of either the Truckload Business, exclusively, or the Forward Air
Business, exclusively, received equity-based incentives tied to the combined
results of the Forward Air Business and the Truckload Business.
Potential Customer Concerns. The Forward Air Business currently provides
services to air freight forwarders. These same air freight forwarders and
domestic and international airlines compete with fully integrated air cargo
carriers. The Truckload Business provides transportation services to many of the
same fully integrated air cargo carriers. As a result, the Forward Air Business
may be seen by some as a competitor with several significant customers of the
Truckload Business.
THE REORGANIZATION
Pursuant to the Distribution Agreement and prior to the Distribution,
Services and its subsidiaries will effect the Reorganization pursuant to which
(i) substantially all of the operations, assets and liabilities related
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<PAGE> 19
to the Truckload Business will be transferred to the Company and its
subsidiaries and (ii) substantially all of the operations, assets and
liabilities related to the Forward Air Business will continue to be owned by
Services and its subsidiaries. As part of the Reorganization and pursuant to the
Distribution Agreement, Services has agreed to borrow approximately $12 million
from an unrelated financial institution and to use the proceeds of such
borrowing to pay any intercompany debt owed by Services to Landair Transport,
Inc., currently a wholly-owned subsidiary of Services ("Landair Transport") that
will become a subsidiary of the Company after the Reorganization and the
Distribution. In addition, as part of the Reorganization and pursuant to the
Distribution Agreement, Services will transfer to the Company $5 million in the
form of a capital contribution which the Company intends to use to pay down
long-term debt and increase the Company's future capacity for maintaining and/or
acquiring equipment.
MANNER OF EFFECTING THE DISTRIBUTION
The general terms and conditions relating to the Distribution are set forth
in the Distribution Agreement which is attached hereto as Annex A. The
Distribution Agreement will be executed on or prior to the Distribution Date. In
the event that all conditions to the Distribution are satisfied or waived, and
subject to the right of the Services Board to abandon, defer or modify the
Distribution and related transactions, the Distribution will be made on or about
the Distribution Date to shareholders of record of Services on the Record Date.
On the Distribution Date, all shares of Landair Corporation Common Stock will be
delivered by Services to the Distribution Agent. As soon as practicable after
the Distribution Date, certificates representing Landair Corporation Common
Stock will be mailed by the Distribution Agent to holders of record of Services
Common Stock entitled thereto on the basis of one share of Landair Corporation
Common Stock for each share of Services Common Stock held on the Record Date.
All such shares will be fully paid and nonassessable and the holders thereof
will not be entitled to preemptive rights. See "DESCRIPTION OF COMPANY CAPITAL
STOCK."
Holders of Services Common Stock will not be required to pay any cash or
other consideration for the shares of Landair Corporation Common Stock received
in the Distribution or to surrender or exchange shares of Services Common Stock
or to take any other action in order to receive Landair Corporation Common
Stock. The Distribution will not affect the number of, or the rights attaching
to, the outstanding shares of Services Common Stock.
HOLDERS OF SERVICES COMMON STOCK SHOULD NOT SEND CERTIFICATES TO THE
COMPANY, SERVICES OR THE DISTRIBUTION AGENT. THE DISTRIBUTION AGENT WILL MAIL
THE STOCK CERTIFICATES REPRESENTING SHARES OF LANDAIR CORPORATION COMMON STOCK
AS SOON AS PRACTICABLE AFTER THE DISTRIBUTION DATE. SERVICES STOCK CERTIFICATES
WILL CONTINUE TO REPRESENT SHARES OF SERVICES COMMON STOCK AFTER THE
DISTRIBUTION IN THE SAME AMOUNT SHOWN ON THE CERTIFICATES.
RESULTS OF THE DISTRIBUTION
After the Distribution, the Company will be a separate public company which
will own and operate the Truckload Business formerly conducted by Services and
its subsidiaries. The number and identity of the holders of Landair Corporation
Common Stock immediately after the Distribution will be substantially the same
as the number and identity of the holders of Services Common Stock on the Record
Date. Immediately after the Distribution, the Company will have approximately
6,195,631 shares of Landair Corporation Common Stock outstanding, based on the
number of record shareholders and outstanding shares of Services Common Stock as
of the close of business on July 31, 1998, and the distribution ratio of one
share of Landair Corporation Common Stock for each share of Services Common
Stock. The actual number of shares of Landair Corporation Common Stock to be
distributed will be determined as of the Record Date. The Distribution will not
affect the number of outstanding shares of Services Common Stock or any rights
of Services shareholders.
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DISTRIBUTION AGENT
The Distribution Agent is SunTrust Bank, Atlanta, 58 Edgewood Avenue,
Atlanta, Georgia 30303.
CONDITIONS TO DISTRIBUTION; RIGHT TO ABANDON, DEFER OR MODIFY DISTRIBUTION
The Distribution is conditioned upon, among other things, (i) the
consummation of the Reorganization in accordance with the terms and conditions
of the Distribution Agreement and certain internal corporate reorganizations;
(ii) the successful renegotiation of certain Services credit facilities and debt
instruments, including the execution of certain consents, waivers and amendments
thereto by lenders; (iii) the establishment of a separate credit facility for
the Company and Services (iv) the receipt of certain third-party consents
relating to certain contracts, licenses and other agreements; (v) the receipt by
Services of the Ruling, or at the option of the Services Board, an opinion of
special tax counsel to Services, in form and substance satisfactory to the
Services Board, to the effect that, among other things, the Distribution will
constitute such a tax-free distribution under Section 355 of the Code; (vi) the
Registration Statement having become effective and no stop-order being in
effect; (vii) there not being in effect any statute, rule, regulation or order
of any court, governmental or regulatory body that prohibits or makes illegal
the transactions contemplated by the Distribution; and (viii) approval for
listing of the Landair Corporation Common Stock on the Nasdaq National Market.
Pursuant to the Distribution Agreement, the Services Board will receive the
right in its discretion other than with respect to those set forth in clauses
(i), (v), (vi) and (vii) above, to waive the satisfaction of any condition to
the Distribution; provided, however, that the Services Board may abandon, defer
or modify the Distribution and the related transactions at any time prior to the
Distribution Date.
CERTAIN FEDERAL INCOME TAX ASPECTS OF THE DISTRIBUTION
Services has received a private letter ruling from the IRS to the effect
that, among other things, the Reorganization will qualify as a "reorganization"
under Section 368(a)(1)(D) of the Code and the Distribution will qualify as a
tax-free distribution for federal income tax purposes under Section 355 of the
Code, and accordingly, for federal income tax purposes:
1. No gain or loss will be recognized by a holder of Services Common
Stock as a result of the receipt of shares of Landair Corporation Common
Stock in the Distribution;
2. The aggregate tax basis of the Services Common Stock and the
Landair Corporation Common Stock in the hands of a shareholder of Services
immediately after the Distribution will be the same as the basis of the
Services Common Stock held by such shareholder immediately before the
Distribution, allocated in proportion to the fair market value of the
Services Common Stock and the Landair Corporation Common Stock at the time
of the Distribution;
3. The holding period of the Landair Corporation Common Stock received
by the shareholders of Services in the Distribution will include the
holding period of the Services Common Stock with respect to which the
Distribution was made (assuming such Services Common Stock was held as a
capital asset); and
4. Generally, no gain or loss will be recognized by Services or the
Company as a result of the Distribution.
The Ruling is based on the accuracy of certain factual representations and
certain assumptions of Services. Although Services is not aware of any facts or
circumstances that would cause such representations or assumptions to be false,
no assurance can be given in this regard. The Distribution, although tax-free as
of the Distribution Date, like other tax-free distributions, could be rendered
taxable as a result of subsequent actions or events. For a description of
subsequent actions or events that could render the Distribution taxable, see
"RISK FACTORS -- RISK OF LOSS OF 'TAX-FREE' TREATMENT OF THE DISTRIBUTION."
If the Distribution were rendered taxable as a result of any
Post-Distribution Act or for any other reason, Services would be subject to tax
on the difference between the fair market value of the Landair Corporation
Common Stock and the adjusted tax basis of the Landair Corporation Common Stock
at the time of the
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<PAGE> 21
Distribution and each holder of Services Common Stock who received shares of the
Landair Corporation Common Stock in the Distribution would generally be treated
as having received a taxable dividend includible in income in an amount equal to
the fair market value of such Landair Corporation Common Stock received at the
time of the Distribution. Under the Tax Sharing Agreement, the Company will
generally indemnify Services with respect to any taxes incurred by Services in
connection with the Distribution if the Distribution fails to qualify as a
tax-free transaction for Federal income tax purposes as a result of a violation
of any of the foregoing restrictions by the Company or as a result of certain
misrepresentations or omissions by the Company to the IRS or to counsel of
Services. See "RELATIONSHIP BETWEEN SERVICES AND THE COMPANY AFTER THE
DISTRIBUTION -- DISTRIBUTION AGREEMENT."
For a description of the Tax Sharing Agreement pursuant to which Services
and the Company will provide for various tax matters, see "RELATIONSHIP BETWEEN
SERVICES AND THE COMPANY AFTER THE DISTRIBUTION -- TAX SHARING AGREEMENT."
THE FOREGOING IS A SUMMARY OF THE ANTICIPATED MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE DISTRIBUTION UNDER CURRENT LAW. IT DOES NOT PURPORT TO
ADDRESS ALL FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION, OR TAX
CONSEQUENCES THAT MAY ARISE UNDER THE TAX LAWS OF OTHER JURISDICTIONS OR THAT
MAY APPLY TO PARTICULAR CATEGORIES OF SHAREHOLDERS, SUCH AS SHAREHOLDERS WHO
RECEIVED THEIR SERVICES COMMON STOCK PURSUANT TO THE EXERCISE OF OPTIONS OR
OTHERWISE AS COMPENSATION. EACH SHAREHOLDER SHOULD CONSULT ITS TAX ADVISOR AS TO
THE PARTICULAR CONSEQUENCES OF THE DISTRIBUTION TO SUCH SHAREHOLDER, INCLUDING
THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND THE EFFECT OF
POSSIBLE CHANGES IN TAX LAWS THAT MAY AFFECT THE TAX CONSEQUENCES DESCRIBED
ABOVE.
LISTING AND TRADING OF THE LANDAIR CORPORATION COMMON STOCK
There is not currently a public market for the Landair Corporation Common
Stock, although the Company expects that a "when-issued" trading market will
develop on or about the Record Date. Prices at which the Landair Corporation
Common Stock may trade prior to the Distribution on a "when-issued" basis or
after the Distribution cannot be predicted and the prices at which such trading
occurs may fluctuate significantly, particularly until the Landair Corporation
Common Stock issued in the Distribution is fully distributed. The prices at
which the Landair Corporation Common Stock trades will be determined by the
market and may be influenced by many factors, including, among others, the
operating results of the Company, the depth and liquidity of the market for
Landair Corporation Common Stock, investor perception of the Company and the
industry in which the Company participates and general economic and market
conditions. Such prices may also be affected by certain provisions of the
Company's Charter and Bylaws and Tennessee law which may have anti-takeover
effects. See "RISK FACTORS -- NO CURRENT PUBLIC MARKET FOR THE LANDAIR
CORPORATION COMMON STOCK; POSSIBILITY OF SIGNIFICANT PRICE FLUCTUATIONS" and
"-- DIVIDEND POLICY" and "PURPOSES AND ANTI-TAKEOVER EFFECTS OF LEGISLATION AND
CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS."
Prior to the Distribution, subject to the approval by the shareholders of
Services, Services will change its name to Forward Air Corporation to reflect
its focus on the Forward Air Business. In connection therewith, Services will
also change the symbol under which it is listed on the Nasdaq National Market to
"FWRD", effective immediately following the name change. The Company, in turn,
will assume the "LAND" ticker symbol currently used by Services and has applied
for listing its stock under that symbol on the Nasdaq National Market.
Services has complied with Staff Legal Bulletin No. 4 (the "Bulletin")
issued by the Division of Corporate Finance of the Securities and Exchange
Commission. The Bulletin states the views of the staff of the Division of
Corporate Finance regarding whether Section 5 of the Securities Act of 1933, as
amended (the
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"Securities Act"), applies to spin-offs. The Bulletin states that the staff will
no longer respond to no-action letter requests about spin-off issues discussed
in the Bulletin. The Bulletin states that a subsidiary does not have to register
the spin-off under the Securities Act if the following five conditions are met:
(i) the parent shareholders do not provide consideration; (ii) the spin-off is
pro rata to the parent shareholders; (iii) the parent provides adequate
information about the spin-off and the subsidiary to its shareholders and to the
trading markets; (iv) the parent has a valid business purpose; and (v) if the
parent spins off "restricted securities," it has held those securities for at
least two years. Services believes that the Distribution meets the conditions of
the Bulletin. Accordingly, the Company believes the shares of Landair
Corporation Common Stock issued in the Distribution will be freely
transferrable, except for shares of Landair Corporation Common Stock received by
persons who may be deemed "affiliates" of the Company under the Securities Act.
Persons who may be deemed to be affiliates of the Company after the Distribution
generally include persons that control, are controlled by or are under common
control with the Company, and include executive officers and directors of the
Company, as well as any of its controlling shareholders. Persons who are
affiliates of the Company will be permitted to sell shares of the Landair
Corporation Common Stock only pursuant to an effective registration statement
under the Securities Act or an exemption from the registration requirements of
the Securities Act.
FUTURE MANAGEMENT OF THE COMPANY
Following the Distribution, it is intended that the Company will continue
to operate the Truckload Business substantially in the manner in which it has
been operated by Services in the recent past, including the further
implementation of certain structural changes intended to enhance the operations
of the Company. See "BUSINESS." The Company and its subsidiaries will have
substantially the same operating management.
REASONS FOR FURNISHING THE INFORMATION STATEMENT
This Information Statement is being furnished by Services solely to provide
information to Services shareholders who will receive Landair Corporation Common
Stock in the Distribution as required by applicable federal securities laws. It
is not, and is not to be construed as, an inducement or encouragement to buy or
sell any securities of Services or the Company. The information contained in
this Information Statement is believed by Services and the Company to be
accurate as of the date set forth on its cover. Changes may occur after that
date, and neither the Company nor Services will update the information except in
the normal course of their respective public disclosure practices.
RELATIONSHIP BETWEEN SERVICES AND THE COMPANY AFTER THE DISTRIBUTION
For the purpose of governing certain aspects of the ongoing relationship
between Services and the Company after the Distribution and to provide
mechanisms for an orderly transition following the Distribution, Services and
the Company will enter into various agreements (collectively, the "Transition
Agreements"). Forms of the Transition Agreements are included as exhibits to the
Registration Statement of which this Information Statement is a part, and the
following summaries are qualified by reference to the Transition Agreements as
filed.
DISTRIBUTION AGREEMENT
The Distribution Agreement provides for, among other things, the principal
corporate transactions required to effect the Distribution and for the
allocation of certain assets and liabilities between Services and the Company.
Pursuant to the Distribution Agreement, Services and its subsidiaries will
effect the Reorganization pursuant to which (i) substantially all of the
operations, assets and liabilities related to the Truckload Business will be
transferred to the Company and its subsidiaries and (ii) substantially all of
the operations, assets and liabilities related to the Forward Air Business will
continue to be owned by Services and its subsidiaries. As part of the
Reorganization and pursuant to the Distribution Agreement, Services has agreed
to borrow approximately $12 million from an unrelated financial institution and
to use the proceeds of such borrowing to
16
<PAGE> 23
pay any intercompany debt owed by Services to Landair Transport, currently a
wholly-owned subsidiary of Services that will become a subsidiary of the Company
after the Reorganization and the Distribution. In addition, as part of the
Reorganization and pursuant to the Distribution Agreement, Services will
transfer to the Company $5 million in the form of a capital contribution which
the Company intends to use to pay down long-term debt and increase the Company's
future capacity for maintaining and/or acquiring equipment. Each of Services and
the Company will bear its own costs and expenses that (i) are necessary to
effect the Distribution and (ii) arise after the Distribution and are related
thereto.
The Distribution Agreement provides that Services will indemnify the
Company against certain liabilities, costs and expenses arising out of Services'
pre-Distribution business (other than as relates to the Company's business) and
the Company will indemnify Services against certain liabilities, costs and
expenses of the Company or arising out of its pre-Distribution business, and
each will have sole responsibility for claims arising out of its respective
activities after the Distribution. The Distribution Agreement also provides that
each of Services and the Company will indemnify each other in the event of
certain liabilities arising under the federal securities laws.
The Distribution Agreement will also provide that each of the Company and
Services will be granted mutual access to certain historical records and
information in the possession of the other, and requires the retention by each
of the Company and Services for a period consistent with the document retention
policies in effect at Services and the Company prior to the Distribution Date of
all such information in its possession, and thereafter requires that each party
give the other prior notice of its intention to dispose of such information.
The Distribution Agreement provides that, for a period of three years after
the Distribution Date, neither Services nor the Company will directly solicit
the employment of any employee of the other company or its affiliates without
the prior written consent of such other company.
TRANSITION SERVICES AGREEMENT
Services and the Company currently share certain administrative and other
services. After the Distribution, Services and the Company will provide services
to each other substantially on the basis set forth in the Transition Services
Agreement.
Services will provide the following services to the Company: accounts
payable, payroll, human resources and benefit plan administration,
owner-operator settlement, central purchasing, accounting, administrative and
information technology. The Company will provide the following services to
Services: safety, licensing/permitting/fuel tax, insurance/claims,
recruiting/retention and training. Services performed by Services under the
Transition Services Agreement shall be paid for by Services and the Company at
prices comparable to those which could be achieved through arms-length
negotiations.
The Transition Services Agreement will have an eighteen month term;
provided, however, that Services shall be obligated to provide the information
technology services described above until the third anniversary of the
Distribution Date. The information technology services will be reviewed by
Services and the Company every six months. Notwithstanding the stated term of
the Transition Services Agreement, Services or the Company (as recipients of the
services) will be able to terminate any or all such services at any time on
three months written notice, and Services or the Company (as providers of the
services) may at any time after the first anniversary of the Distribution Date,
terminate any or all of the services on six months notice.
EMPLOYEE BENEFIT MATTERS AGREEMENT
The Employee Benefit Matters Agreement will provide for the treatment of
employee benefit matters and other compensation arrangements for Services and
Company employees after the Distribution. Pursuant to this agreement, Services
will continue sponsorship of the various employee benefit plans and welfare
plans of Services with respect to Services employees after the Distribution, and
the Company will be required to establish a number of similar such plans which
will allow the Company to provide to its employees after the Distribution
substantially the same benefits currently provided to them as employees of
Services.
17
<PAGE> 24
According to the terms of the Amended and Restated Stock Option and
Incentive Plan of Services, options to purchase shares of Services Common Stock
that are exercisable at the time of the Distribution and that are held by those
employees who will terminate employment with Services and become employees of
the Company upon the Distribution, will be cancelled if not exercised prior to
such employees' termination of employment with Services. Accordingly, employees
leaving Services and continuing as employees of the Company are expected to
exercise their vested options prior to the Distribution. Under the Employee
Benefit Matters Agreement, unexercisable options held by employees of Services
who remain or become employees of the Company upon consummation of the
Distribution will be converted into options to purchase Landair Corporation
Common Stock under the Company's 1998 Stock Option and Incentive Plan (the
"Stock Plan"). Such conversion shall be on the basis of a formula contained in
the Employee Benefit Matters Agreement designed to preserve the fair market
value of such converted options on the date of the Distribution.
TAX SHARING AGREEMENT
Services and the Company will, on or prior to the Distribution Date, enter
into a Tax Sharing Agreement to determine their responsibilities for taxes
attributable to periods ending before and after the Distribution. Under the
terms of the Tax Sharing Agreement, Services is generally responsible for filing
all tax returns of the Services consolidated group (including the Company and
its subsidiaries) for periods ending on or before the Distribution Date. The
Company will continue to be responsible for its allocable share of such tax
liability for periods ending on or prior to the Distribution Date and the
Company will make payments to Services in respect of such liability, including
any liability that may arise as a result of an audit of the tax returns for such
periods. See "RISK FACTORS -- RISK OF LOSS OF 'TAX-FREE' TREATMENT OF THE
DISTRIBUTION." The Company will generally be entitled to its allocable share of
any refunds attributable to the reduction of its tax liabilities for such
periods. The Company's allocable share of tax liability (and refunds) for these
purposes will generally be determined based on the proportion that its tax
liability, computed as if the Company filed a separate tax return, bears to the
total tax liability of all members of the Services' consolidated group computed
in a similar fashion.
The Company will generally indemnify Services with respect to any taxes
incurred by Services in connection with the Distribution if the Distribution
fails to qualify as a tax-free transaction for federal income tax purposes as a
result of certain transactions by the Company or as a result of certain
misrepresentations or omissions by the Company to the IRS or to counsel for
Services. See "RISK FACTORS -- RISK OF LOSS OF 'TAX-FREE' TREATMENT OF THE
DISTRIBUTION."
After the Distribution Date, Services and the Company will each be
separately responsible for filing all tax returns for their respective
affiliated groups of companies and paying the appropriate amounts of all related
taxes. Services will, however, retain full responsibility for and discretion in
amending all tax returns of the consolidated group and handling any tax
controversy, audit or other dispute resolution process with respect to periods
ending on or prior to the Distribution Date, unless Services approves of a
specific request by the Company to handle such a situation that would directly
affect the Company.
LEASES
Services, through a wholly-owned subsidiary, currently leases to a
wholly-owned subsidiary of the Company a portion of its terminal facility in
Atlanta, Georgia. Rental payments under the lease agreement are based upon the
cost of such facility and an agreed upon percentage of usage. In addition, on or
prior to the date of the Distribution, Services will enter into subleases with
the Company pursuant to which Services will sublease to the Company (i) a
portion of its terminal facility in Columbus, Ohio that is leased by Services
from the Director of Development of the State of Ohio; (ii) a portion of the
facility leased by Services in Indianapolis, Indiana; (iii) a portion of its
terminal facility in Chicago, Illinois that is leased by a Services subsidiary;
(iv) a portion of its terminal facility in Detroit, Michigan that is leased by a
Services subsidiary; and (v) a portion of the headquarters of Services in
Greeneville, Tennessee that is leased by Services from the Greeneville-Greene
County Airport Authority. Services expects to sublease the Columbus terminal
facility for consideration based upon the cost of such facility to Services and
an agreed upon percentage of usage. Services expects to sublease the
Indianapolis, Chicago, Detroit and Greeneville facilities for consideration
based upon an agreed upon percentage of usage.
18
<PAGE> 25
FINANCING
In preparation for the Distribution, Services is negotiating with its
present lenders to obtain separate credit facilities for each of the Company and
Services. In addition, Services expects to eliminate guarantees of indebtedness
and cross-collateralization between the Company and Services. The Company's
proposed new credit facilities are to include a working capital line of credit
and an equipment financing facility. These credit facilities are expected to
permit the Company to borrow up to $15 million under the working capital line of
credit and $20 million under the equipment financing facility. Interest rates
for advances under the facilities will vary based on total indebtedness, cash
flows, results of operations and other ratios. The facilities will bear interest
at LIBOR plus 1.0% to 1.6%, expire in August 2000, and will be secured by
accounts receivable and certain revenue equipment. Availability under the
proposed line of credit is expected to be reduced by the amount of outstanding
letters of credit. Among other restrictions, the terms of the proposed line of
credit are expected to require the Company to maintain a total debt to total net
worth ratio of less than 2.25 to 1.0, a ratio of earnings before interest,
taxes, depreciation and amortization to interest and current maturities of long-
term debt and capital lease obligations greater than 1.25 to 1.0, and a minimum
net worth greater than 90% of net worth upon consummation of the credit facility
plus 50% of net income.
Set forth in the table below are the sources of funds being received by the
Company in connection with the Reorganization and the Distribution and the
anticipated uses of such funds in such Reorganization and Distribution (in
thousands) (See Pro Forma Condensed Combined Financial Statements).
<TABLE>
<S> <C>
Sources:
Receipt of payment from Services of intercompany
indebtedness........................................... $ 12,393
Receipt of capital contribution from Services............. 5,000
--------
$ 17,393
========
Uses:
Payment of long-term debt................................. $(17,393)
========
</TABLE>
19
<PAGE> 26
SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the Truckload
Business as of and for each of the five years ended December 31, 1997 and as of
and for the six months ended June 30, 1998 and 1997. This historical financial
information includes certain allocations of corporate administrative expenses by
Services. The selected financial data are qualified by and should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations", "Pro Forma Condensed Combined Financial Statements"
and "Combined Financial Statements and Notes" thereto appearing elsewhere in the
Information Statement. Per share data has not been presented because the
financial statements of the Truckload Business include primarily wholly-owned
subsidiaries or divisions of Services.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
----------------- -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(1):
Operating revenue......................... $51,543 $42,625 $91,398 $82,242 $87,764 $80,934 $66,083
Income from operations.................... 3,093 970 3,739 825 4,104 3,642 1,287
Interest expense.......................... (924) (933) (1,826) (2,221) (2,327) (1,116) (899)
Other income (expense), net............... 26 (71) (12) 59 227 280 376
------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes......... 2,195 (34) 1,901 (1,337) 2,004 2,806 764
Income taxes (benefit).................... 850 (11) 751 (432) 1,067 1,402 343
------- ------- ------- ------- ------- ------- -------
Net income (loss)................ $ 1,345 $ (23) $ 1,150 $ (905) $ 937 $ 1,404 $ 421
======= ======= ======= ======= ======= ======= =======
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 61 $ 28 $ 614 $ 28 $ 3,687 $ 615 $ 2,678
Total assets.............................. 98,356 87,312 97,208 89,292 95,200 77,719 56,384
Long-term obligations, net of current
portion................................. 14,877 13,878 14,151 19,771 29,990 21,713 9,222
Shareholder's investment.................. 40,903 38,385 39,558 38,408 39,313 38,376 37,955
</TABLE>
- ---------------
(1) Results for 1994 and 1993 lack comparability to other periods because (i)
1994 includes an $805,000 loss on the sale and winding down of refrigerated
trucking operations, and (ii) 1993 includes bonuses of approximately $1.1
million which represented non-recurring bonuses to key management and
payments to Services' S Corporation shareholder to enable him to pay income
taxes by virtue of Services' S Corporation status through October 29, 1993.
Had these items not been included in the results of operations, income from
operations, income before income taxes and net income would have been
approximately $4.5, $3.6 and $1.8, and $2.4, $1.9, and $1.1 million in 1994
and 1993, respectively.
20
<PAGE> 27
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The unaudited pro forma condensed combined balance sheet of the Company, as
of June 30, 1998, presents the financial position of the Truckload Business
assuming the Reorganization and the Distribution had occurred on June 30, 1998.
The unaudited pro forma condensed combined statements of income of the Company
for the year ended December 31, 1997 and the six months ended June 30, 1998
present the results of operations of the Truckload Business assuming the
Reorganization and the Distribution had occurred on January 1, 1997.
The unaudited pro forma condensed combined financial statements of the
Company should be read in conjunction with the historical combined financial
statements of the Truckload Business contained in this Information Statement.
The pro forma condensed combined statements are for informational purposes only
and do not purport to represent what the results of operations or financial
position of the Truckload Business would have been had the Reorganization and
the Distribution in fact occurred on June 30, 1998 as to the balance sheet or on
January 1, 1997 as to the statements of income, or to project the results of
operations of the Truckload Business in any future period. The pro forma
condensed combined financial statements do not purport to represent what the
results of operations or financial position would have been had the Truckload
Business been operated as a separate entity during the periods presented.
21
<PAGE> 28
LANDAIR CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 61 $ -- $ 61
Accounts receivable...................................... 10,663 -- 10,663
Other current assets..................................... 7,144 (292)(2) 6,852
Receivable from Landair Services, Inc.................... 12,393 (12,393)(3) --
------- -------- -------
Total current assets............................. 30,261 (12,685) 17,576
Property and equipment, net................................ 68,062 (1,070)(1) 61,371
(5,621)(2)
Other assets............................................... 33 -- 33
------- -------- -------
Total assets..................................... $98,356 $(19,376) $78,980
======= ======== =======
LIABILITIES AND SHAREHOLDER'S INVESTMENT
Current liabilities:
Accounts payable......................................... $ 5,394 $ -- $ 5,394
Accrued expenses......................................... 12,271 12,271
Current portion of long-term debt........................ 9,662 (991)(2) 3,264
(407)(3)
(5,000)(4)
Current portion of capital lease obligations............. 2,683 (373)(1) 2,310
------- -------- -------
Total current liabilities........................ 30,010 (6,771) 23,239
Long-term debt, less current portion....................... 13,922 (1,936)(2) --
(11,986)(3)
Capital lease obligations, less current portion............ 955 (951)(1) 4
Deferred income taxes...................................... 12,566 (1,049)(2) 11,517
Shareholder's investment................................... 40,903 254 (1) 44,220
(1,937)(2)
5,000 (4)
------- -------- -------
Total liabilities and shareholder's investment... $98,356 $(19,376) $78,980
======= ======== =======
</TABLE>
See accompanying notes to pro forma condensed combined financial statements.
22
<PAGE> 29
LANDAIR CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------ ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Operating revenue:
Forward Air, Inc.......................................... $ 6,137 $ -- $ 6,137
Other..................................................... 85,261 -- 85,261
------- ------ -------
91,398 -- 91,398
Operating expenses.......................................... 87,659 -- 87,659
------- ------ -------
Income from operations...................................... 3,739 -- 3,739
Other income (expense):
Interest expense.......................................... (1,826) 1,439(5) (387)
Other, net................................................ (12) -- (12)
------- ------ -------
(1,838) 1,439 (399)
------- ------ -------
Income before income taxes.................................. 1,901 1,439 3,340
Income taxes................................................ 751 561(6) 1,312
------- ------ -------
Net income.................................................. $ 1,150 $ 878 $ 2,028
======= ====== =======
Net income per common share:
Basic..................................................... $ 0.33
=======
Diluted................................................... $ 0.33
=======
Weighted average number of common shares outstanding:
Basic..................................................... 6,195(7) 6,195
=======
Diluted................................................... 6,195(7)
29(8) 6,224
=======
</TABLE>
See accompanying notes to pro forma condensed combined financial statements.
23
<PAGE> 30
LANDAIR CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------ ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Operating revenue:
Forward Air, Inc. ........................................ $ 2,354 $ -- $ 2,354
Other..................................................... 49,189 -- 49,189
------- ------ -------
51,543 -- 51,543
Operating expenses.......................................... 48,450 -- 48,450
------- ------ -------
Income from operations...................................... 3,093 -- 3,093
Other income (expense):
Interest expense.......................................... (924) 725(5) (199)
Other, net................................................ 26 -- 26
------- ------ -------
(898) 725 (173)
------- ------ -------
Income before income taxes.................................. 2,195 725 2,920
Income taxes................................................ 850 283(6) 1,133
------- ------ -------
Net income.................................................. $ 1,345 $ 442 $ 1,787
======= ====== =======
Net income per common share:
Basic..................................................... $ 0.29
=======
Diluted................................................... $ 0.29
=======
Weighted average number of common shares outstanding:
Basic..................................................... 6,195(7) 6,195
=======
Diluted................................................... 6,195(7)
29(8) 6,224
=======
</TABLE>
See accompanying notes to pro forma condensed combined financial statements.
24
<PAGE> 31
LANDAIR CORPORATION
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS)
(1) Reflects the contribution from the Truckload Business to Services of
property and equipment under capital lease related to the Forward Air Business
as follows:
<TABLE>
<S> <C>
Property and equipment, net................................. $(1,070)
Current portion of capital lease obligations................ 373
Capital lease obligations, less current portion............. 951
Shareholder's investment.................................... (254)
-------
$ --
=======
</TABLE>
(2) Reflects the contribution by the Truckload Business to Services of
property and equipment and certain assets used in the Forward Air Business along
with the related debt, as follows:
<TABLE>
<S> <C>
Property and equipment, net................................. $(5,621)
Other current assets........................................ (292)
Deferred income taxes....................................... 1,049
Current portion of long-term debt........................... 991
Long-term debt, less current portion........................ 1,936
Shareholder's investment.................................... 1,937
-------
$ --
=======
</TABLE>
(3) Reflects the receipt by the Truckload Business of payment from Services
of intercompany indebtedness, as of June 30, 1998, in the amount of $12,393,
with the proceeds used to pay off long-term debt.
(4) Reflects a $5,000 capital contribution to the Truckload Business by
Services with the proceeds used to reduce current portion of long-term debt.
<TABLE>
<S> <C>
Current portion of long-term debt........................... $ 5,000
Shareholder's investment.................................... (5,000)
-------
$ --
=======
</TABLE>
(5) Reflects the elimination of historical interest expense and the
reallocation of interest expense based upon Truckload's pro rata share of the
pro forma adjusted long-term debt and capital lease obligations of Truckload and
Services as of June 30, 1998.
(6) Reflects the inclusion of income tax expense based on the combined
federal and state statutory rate of 39% applied to adjusted pre-tax income.
Income tax expense is greater on a pro forma than an historical basis due to
increased pre-tax income resulting from the pro forma reallocation of interest
expense described in Note 5 above.
(7) Reflects the estimated shares expected to be issued in the Distribution
based on 6,195 shares of Services Common Stock being outstanding at June 30,
1998.
(8) Reflects the increase in 29 diluted weighted average common shares
outstanding for the year ended December 31, 1997 and six months ended June 30,
1998 relating to the options held by Truckload employees that are eligible for
conversion into Truckload options, as if such conversion occurred on January 1,
1997.
25
<PAGE> 32
LANDAIR CORPORATION
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(9) Historically, certain working capital accounts relating to the Forward
Air Business, principally consisting of certain accounts payable, accrued
payroll and related items and accrued liabilities, have been maintained by the
Truckload Business as a result of the Truckload Business' participation in
Services central cash management program. Accordingly, management of the Company
estimates that approximately $5 million of net working capital liabilities will
not be continuing obligations of the Company after such liabilities are paid by
the Company subsequent to the Distribution. The impact of the settlement of the
working capital accounts is not reflected in the unaudited pro forma condensed
combined balance sheet of the Company as of June 30, 1998.
26
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of expense items
to operating revenue for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------- ---------------------
1998 1997 1997 1996 1995
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Operating revenue:
Forward Air, Inc..................................... 4.6% 6.0% 6.7% 7.1% 3.7%
Other................................................ 95.4 94.0 93.3 92.9 96.3
----- ----- ----- ----- -----
100.0 100.0 100.0 100.0 100.0
Operating expenses:
Salaries, wages and employee benefits................ 32.9 32.6 32.7 31.1 27.9
Purchased transportation............................. 24.2 24.1 23.5 26.0 31.2
Fuel and fuel taxes.................................. 11.6 12.5 12.3 12.6 10.0
Depreciation and amortization........................ 9.0 9.6 9.1 10.3 8.2
Insurance and claims................................. 5.7 8.3 7.3 7.6 6.0
Operating leases..................................... 0.8 0.6 0.7 1.3 2.5
Other operating expenses............................. 9.8 10.0 10.3 10.1 9.5
----- ----- ----- ----- -----
Total operating expenses..................... 94.0 97.7 95.9 99.0 95.3
----- ----- ----- ----- -----
Income from operations................................. 6.0 2.3 4.1 1.0 4.7
Interest expense....................................... (1.8) (2.2) (2.0) (2.7) (2.7)
Other income, net...................................... 0.1 (0.2) -- 0.1 0.3
----- ----- ----- ----- -----
Income (loss) before income taxes...................... 4.3 (0.1) 2.1 (1.6) 2.3
Income taxes (benefit)................................. 1.7 -- 0.9 (0.5) 1.2
----- ----- ----- ----- -----
Net income (loss)...................................... 2.6% (0.1)% 1.2% (1.1)% 1.1%
===== ===== ===== ===== =====
</TABLE>
RESULTS OF OPERATIONS
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Operating revenue increased by $8.9 million, or 20.9%, to $51.5 million in
the first half of 1998 from $42.6 million in 1997. The increase in the operating
revenue of the Truckload operations resulted primarily from a 5.3% increase in
equipment utilization and yield, and a 14.8% increase in tractors in service.
During the first six months of 1998 and 1997, the average tractors in service in
the Truckload Business, including owner-operators, were 789 and 687,
respectively.
The operating ratio (operating expenses as a percentage of operating
revenue) was 94.0% for the first half of 1998 compared to 97.7% for 1997. The
improved operating ratio was due primarily to a lower operating cost structure
resulting from an increase in equipment utilization and yield and additional
tractors in service during the period.
Salaries, wages and employee benefits were 32.9% of operating revenue in
the first six months of 1998 compared to 32.6% in 1997. The increase as a
percentage of operating revenue in 1998 was due primarily to an increase in the
ratio of Company-operated to owner-operator equipment. During the first six
months of 1998, average Company-operated tractors in service were 565 compared
to 489 in 1997.
Purchased transportation was 24.2% of operating revenue in the first six
months of 1998 compared to 24.1% in 1997. The decrease in purchased
transportation as a percentage of operating revenue between periods was
primarily attributable to a reduction in the ratio of owner-operator to
Company-operated equipment in 1998. During the first six months of 1998 and
1997, approximately 224 and 198 of the Company's average tractors in service
were contracted through owner-operators.
27
<PAGE> 34
Fuel and fuel taxes were 11.6% of operating revenue in the first half of
1998, compared to 12.5% in 1997. The decrease in fuel and fuel taxes as a
percentage of operating revenue during 1998 resulted primarily from a 11.0%
decrease in average fuel price per gallon. The decrease in fuel and fuel taxes
as a percentage of operating revenue during 1998 was partially offset by an
increase in the ratio of Company-operated to owner-operator equipment.
Depreciation and amortization expense as a percentage of operating revenue
was 9.0% in the first half of 1998, compared to 9.6% in 1997. The improvement in
depreciation and amortization expense as a percentage of operating revenue is
primarily attributed to increased utilization of operating assets partially
offset by additional depreciation and amortization as a result of a higher ratio
of Company-operated to owner-operator equipment during the first six months of
1998 compared to the first half of 1997.
Insurance and claims were 5.7% of operating revenue for the six months
ended June 30, 1998, compared with 8.3% in 1997. The decrease in insurance and
claims as a percentage of operating revenue is due primarily to a decrease in
the frequency and severity of accidents and lower premium costs during the first
half of 1998 compared with 1997.
Operating leases were 0.8% of operating revenue in the first half of 1998
compared to 0.6% in 1997. The increase in operating leases as a percentage of
operating revenue is attributed to an increase in rent expense for revenue
equipment during the period.
Other operating expenses, a large component of which relates to equipment
maintenance, were 9.8% of operating revenue in the first half of 1998 compared
to 10.0% in 1997. The decrease in 1998 as a percentage of operating revenue is
attributed to improvements in utilization levels in the Company's operations
partially offset by increased maintenance expense as a result of a higher ratio
of Company-operated to owner-operator equipment during the first six months of
1998 compared to the same period in the prior year.
Interest expense was $924,000, or 1.8% of operating revenue, in the first
half of 1998 compared to $933,000, or 2.2%, for the same period in 1997.
The combined federal and state effective income tax rate for the first half
of 1998 was 38.7% compared to a tax benefit at the rate of 32.4% for the 1997
period.
As a result of the foregoing factors, net income increased by $1,368,000 to
$1,345,000 for the first half of 1998 from a loss of $23,000 for the 1997
period.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Operating revenue increased by $9.2 million, or 11%, to $91.4 million for
1997 from $82.2 million in 1996. The increase in the operating revenue of the
Truckload operations resulted primarily from an increase in equipment
utilization and yield. Average tractors in service in the Truckload Business
were 699 during 1997 and 695 in 1996.
The operating ratio for 1997 was 95.9% compared to 99.0% for 1996. The
improved operating ratio in 1997 was due primarily to a lower operating cost
structure resulting from an increase in equipment utilization and yield during
the period.
Salaries, wages and employee benefits were 32.7% of operating revenue in
1997 compared to 31.1% in 1996. The increase in expense as a percentage of
operating revenue in 1997 was due primarily to an increase in the ratio of
Company drivers to owner-operators. The average number of Company-operated
tractors in service was 501 in 1997 and 472 in 1996.
Purchased transportation was 23.5% of operating revenue in 1997 compared to
26.0% in 1996. The decrease in purchased transportation as a percentage of
operating revenue was primarily attributable to a lower ratio of owner-operator
to Company equipment during 1997 as compared to 1996. During 1997 and 1996,
approximately 198 and 223, respectively, of Truckload's average tractors in
service were contracted through owner-operators.
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<PAGE> 35
Fuel and fuel taxes were 12.3% of operating revenue in 1997 compared to
12.6% in 1996. The decrease in fuel and fuel taxes as a percentage of operating
revenue during 1997 resulted from a 0.8% decrease in the average fuel price per
gallon coupled with a 2.3% increase in the average miles per gallon and a 3.5%
increase in average revenue per loaded mile of the Company-operated tractor
fleet. The decrease in fuel and fuel taxes during 1997 was partially offset from
an increase in the ratio of Company drivers to owner operators.
Depreciation and amortization expense as a percentage of operating revenue
was 9.1% in 1997 compared to 10.3% in 1996. The decrease in depreciation and
amortization as a percentage of operating revenue is attributable to substantial
improvements in equipment utilization during 1997, partially offset by increased
ownership of revenue equipment.
Insurance and claims were 7.3% of operating revenue in 1997 compared to
7.6% in 1996. The improvement in insurance and claims expense during 1997 as
compared to 1996 resulted from fluctuations in the frequency and severity of
accidents between years coupled with improvements in claims development trends
and premium costs.
Operating leases were 0.7% of operating revenue in 1997 compared to 1.3% in
1996. The decrease in operating leases as a percentage of operating revenue is
attributed to increased ownership, rather than leasing, of revenue equipment.
Other operating expenses, a large component of which relates to equipment
maintenance, were 10.3% of operating revenue in 1997 compared to 10.1% in 1996.
The increase in other operating expenses as a percentage of operating revenue is
attributed to an increase in the ratio of Company-operated to owner-operator
equipment.
Interest expense was $1.8, or 2.0% of operating revenue, in 1997 compared
to $2.2 million, or 2.7%, in 1996. The decrease in interest expense during 1997
was due to lower average net borrowing during 1997.
The combined federal and state effective tax rate for 1997 was 39.5%
compared to a tax benefit at the rate of 32.3% for 1996. For information
concerning income taxes, as well as information regarding differences between
effective tax rates and statutory rates, see Note 5 of the Notes to Combined
Financial Statements.
As a result of the foregoing factors, net income increased by $2.1 million
to $1.2 million for 1997 from a loss of $905,000 in 1996.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Operating revenue decreased by $5.5 million, or 6.3%, to $82.2 million in
1996 from $87.8 million in 1995. The decrease in the operating revenue of the
Truckload operations resulted primarily from a decrease in equipment utilization
and yield. During 1996 and 1995, average tractors in service in the Truckload
Business were 695 and 685, respectively.
The operating ratio for 1996 was 99.0% compared to 95.3% for 1995. The
decrease in the operating ratio in 1996 was due mainly to a higher cost
structure resulting from a decrease in equipment utilization and yield during
the period.
Salaries, wages and employee benefits were 31.1% of operating revenue in
1996 compared to 27.9% in 1995. The increase as a percentage of operating
revenue in 1996 was due primarily to an increase in the ratio of Company drivers
to owner-operators. During 1996 and 1995, the average Company-operated tractors
in service in the Truckload Business were 472 and 435, respectively.
Purchased transportation was 26.0% of operating revenue in 1996 compared to
31.2% in 1995. The decrease in purchased transportation as a percentage of
operating revenue was primarily attributable to a lower ratio of owner-operators
to Company drivers during 1996 as compared to 1995. During 1996, approximately
223 of Truckload's average tractors in service were contracted through
owner-operators as compared to 250 in 1995.
Fuel and fuel taxes were 12.6% of operating revenue in 1996 compared to
10.0% in 1995. The increase in fuel and fuel taxes as a percentage of operating
revenue during 1996 was primarily attributed to a 14.4%
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<PAGE> 36
increase in the average fuel price per gallon and an increase in the ratio of
Company drivers to owner-operators. Approximately 60% of the increase in fuel
prices during 1996 was passed on to customers in the form of a fuel surcharge.
Depreciation and amortization expense as a percentage of operating revenue
was 10.3% in 1996 compared to 8.2% in 1995. The increase in depreciation and
amortization expense as a percentage of operating revenue for 1996 is
attributable to an increase in the ratio of Company to owner-operator equipment
and to increased ownership of revenue equipment.
Insurance and claims were 7.6% of operating revenue in 1996 compared to
6.0% in 1995. The increase in insurance and claims expense during 1996 as
compared to 1995 resulted from fluctuations in the frequency and severity of
accidents between years coupled with changes in claims development trends and
premium costs.
Operating leases were 1.3% of operating revenue in 1996 compared to 2.5% in
1995. The decrease in operating leases as a percentage of operating revenue is
attributed to increased ownership, rather than leasing, of revenue equipment.
Other operating expenses, a large component of which relates to equipment
maintenance, were 10.1% of operating revenue in 1996 compared to 9.5% in 1995.
The increase in other operating expenses as a percentage of operating revenue is
attributed to an increase in the ratio of Company-operated to owner-operator
equipment.
Interest expense was $2.2, or 2.7% of operating revenue, in 1996 compared
to $2.3 million, or 2.7%, in 1995. The decrease in interest expense during 1996
was due to lower average net borrowing during the year.
The combined federal and state effective tax rate benefit for 1996 was
32.3% compared to an effective tax rate of 53.2% in 1995. For information
concerning income taxes, as well as information regarding differences between
effective tax rates and statutory rates, see Note 5 of the Notes to Combined
Financial Statements.
As a result of the foregoing factors, net income decreased by $1.8 million
resulting in a loss of $905,000 for 1996 compared to net income of $937,000 in
1995.
LIQUIDITY AND CAPITAL RESOURCES
The continued growth of the Truckload Business, and the nature of its
operations, have required significant investment in new equipment. The Truckload
Business has historically financed revenue equipment purchases with cash flows
from operations, and through borrowing under credit agreements with financial
institutions. Working capital needs have generally been met with cash flows from
operations and borrowings under the Services line of credit. Net cash provided
by operating activities of the Truckload Business totaled approximately $16.9,
$9.5 and $14.9 million in 1997, 1996 and 1995, respectively.
Net cash used in investing activities was approximately $14.6 million in
1997, $3.4 million in 1996 and $19.9 million in 1995. Investing activities
consisted primarily of the acquisition of additional revenue equipment and
enhanced management information systems during 1997, 1996 and 1995.
Net cash used in financing activities was $1.7 million in 1997 and $9.8
million in 1996. Net cash provided by financing activities was $8.1 million in
1995. These financing activities included the continued financing of revenue
equipment coupled with repayment of long-term debt and capital leases.
The Truckload Business expects net capital expenditures in 1998 for revenue
equipment and management information systems to be less than $20 million. The
Truckload Business expects to fund these expenditures through cash provided by
operating activities and borrowing under credit facilities which are being
finalized and will be effective as of the Distribution. Additional funds may be
required to fund acquisitions. While the Company expects to be able to borrow
funds to finance acquisitions, no assurance can be given that such financings
can be completed on terms satisfactory to the Company.
In preparation for the Distribution, Services is negotiating with its
present lenders, each an unrelated financial institution, to obtain separate
credit facilities for each of the Company and Services. In addition,
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<PAGE> 37
Services expects to eliminate guarantees of indebtedness and
cross-collateralization between the Company and Services. The Company's proposed
new credit facilities are to include a working capital line of credit and an
equipment financing facility. These credit facilities are expected to permit the
Company to borrow up to $15 million under the working capital line of credit and
$20 million under the equipment financing facility. Interest rates for advances
under the facilities will vary based on covenants related to total indebtedness,
cash flows, results of operations and other ratios. The facilities will bear
interest at LIBOR plus 1.0% to 1.6%, expire in August 2000, and will be secured
by accounts receivable and certain revenue equipment. Availability under the
proposed line of credit is expected to be reduced by the amount of outstanding
letters of credit. Among other restrictions, the terms of the proposed line of
credit are expected to require the Company to maintain a total debt to total net
worth ratio of less than 2.25 to 1.0, a ratio of earnings before interest,
taxes, depreciation and amortization to interest and current maturities of
long-term debt and capital lease obligations greater than 1.25 to 1.0, and a
minimum net worth greater than 90% of net worth upon consummation of the credit
facility plus 50% of net income.
IMPACT OF YEAR 2000
Some of the Company's older computer programs and systems were written
using two digits rather than four to define the applicable year. As a result,
those computer programs have time-sensitive software that recognize a date using
"00" as the year 1900 rather than the year 2000. This could cause a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities.
The Company is in the process of replacing the majority of its key
financial and operational systems as a part of upgrading its systems in the
normal course of business. Management believes that this program will
substantially meet or address its Year 2000 issues. In addition to its
replacement program, the Company will require modifying some of its software and
hardware so that its computer systems will function properly with respect to
dates in the Year 2000 and thereafter. The estimated cost of the Company's
completed and remaining replacement and modification for the Year 2000 issue is
expected to be less than $250,000 and is not expected to be material to the
Company's earnings or financial position.
The Company also plans to initiate a formal communication process with all
its significant suppliers and large customers to determine the extent to which
the Company's interface systems are vulnerable to the failure of any third party
to remediate its own Year 2000 issues, and expects to complete such process
during the first quarter of 1999. Once the Company has completed the process
mentioned above and has determined the extent to which the Company's interface
systems are vulnerable to the failure of any third party to remediate its own
year 2000 issues, the Company expects to develop its plans (including
contingency plans) and budgets to perform any necessary remediation actions.
There is no guarantee that the systems of such other companies will be timely
converted and would not have an adverse effect on the Company.
The system replacements and upgrades are estimated to be completed not
later than June 30, 1999, which is prior to any anticipated impact of Year 2000
issues on the Company's operating systems. The Company believes that with the
completion of such replacements and upgrades, the Year 2000 issue will not pose
significant operational problems for its computer systems. However, if such
replacements and upgrades are not made, or are not completed timely, or if third
parties with which the Company's systems interface are not replaced or upgraded,
the Year 2000 issue could have a material impact on the operations of the
Company.
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<PAGE> 38
BUSINESS
The Company is an irregular route truckload carrier that transports a wide
range of commodities in both intrastate and interstate commerce. The Company
provides dry van common carrier and dedicated contract carriage for shippers of
a variety of products in the medium- and short-haul markets. These products
include, among others, air freight, automotive parts and supplies, electronics,
metal products, paper products, retail and other consumer goods. The
preponderance of the Company's business involves providing high-quality,
specialized services to service-sensitive shippers. To assure the most efficient
response to the differing requirements of customers at numerous shipping
locations, the Company has a network of terminals where over-the-road tractors
are based and drivers are domiciled.
The Company utilizes a satellite-linked, computerized operations system to
monitor and facilitate the movement of freight. The Company's operating
philosophy is founded on maintaining the highest level of service at market
competitive prices in the most efficient manner possible.
OPERATIONS
The Company currently conducts operations from ten terminals. Each terminal
is the base for certain over-the-road tractors and is the domicile of the
drivers who operate those tractors. These terminals have facilities and staff to
provide driver supervision, fueling and routine and heavy maintenance. The
Company also operates facilities for its dedicated operations. The Company
believes this network of facilities enhances its ability to provide responsive
service to its customers in an efficient manner.
Each customer's shipment is accorded exclusive use of a trailer, with most
shipments being transported directly from customer pick-up locations to
destinations without a change of drivers, relays or circuitous routing via
terminals. The Company operates a centralized customer service and operations
center in Greeneville, Tennessee. All facilities and drivers are linked to a
satellite communication and dispatch system which provides interactive updates
to its operations.
Since January 1998, the Company has recruited commission agents in addition
to its continuing efforts to recruit owner-operators. The Company believes that
the increased use of owner-operators and commission agents will protect the
Company during business downturns and will provide increased revenue without
adding proportionate fixed costs.
The Company's operations are divided into two primary divisions:
Common Carrier Operations. The Company's common carrier operations serve a
broad array of customers with a variety of shipping needs. The common carrier
operations' primary traffic consists of medium- and short-haul routes and is
concentrated primarily in the eastern two-thirds of the United States. Customers
of the common carrier operations include Fortune 500 companies who subscribe to
a "core-carrier" strategy as well as smaller companies with regional shipping
needs. Services include just-in-time delivery, satellite communications and
electronic data interchange, as well as tailored services required to meet
specific customer needs such as dedicated capacity, team operations and roller
bed equipment used to serve its air cargo industry customers.
Dedicated Contract Carriage. The Company's dedicated fleet operations
provide dedicated equipment and personnel on a contractual basis to each of its
customers for that customer's exclusive use, frequently as a lower cost
alternative to private carriage. While providing shippers with a higher level of
service, the implementation of a dedicated fleet program frees for other uses
that portion of a shipper's capital that would have been invested in a private
fleet. This ability to redeploy capital allows shippers to better utilize
resources in furtherance of their primary businesses. The dedicated fleet's
service also includes certain of the staffing requirements associated with
operating a private fleet.
The primary focus of the Company's marketing strategy is to increase
freight density within defined market areas that are consistent with the
Company's growth and profit objectives by capitalizing on the trend of shippers
to use a fewer number of truckload carriers in pursuit of a "core carrier"
partnership strategy and the trend to outsource private fleet transportation
requirements. The financial and operating goal of the
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<PAGE> 39
Company is to maximize profitability by achieving optimal equipment utilization
and yield, while meeting or exceeding customer service requirements.
REVENUE EQUIPMENT
The Company purchases high quality tractors to help attract and retain
drivers, promote safe operations and minimize maintenance and repair costs. When
purchasing new revenue equipment, the Company typically acquires standardized
tractors and trailers manufactured to the Company's specifications.
Standardization enables the Company to simplify driver training, control the
cost of spare parts inventory and enhance its preventive maintenance program.
The Company has purchased most of its tractors from Freightliner
Corporation and its trailers from Great Dane Corporation. The majority of the
tractors purchased are equipped with Series 60 Detroit Diesel electronic engines
which have contributed significantly to increased fuel efficiency. The Company's
purchase and lease agreements generally provide for a repurchase option by the
manufacturer at guaranteed predetermined trade values for tractors after four
years and for trailers after seven years.
As of May 31, 1998, the Company owned or leased 604 tractors and contracted
for 220 tractors from owner-operators. The average age of the Company-owned
tractor fleet was approximately 2.2 years at May 31, 1998. As of May 31, 1998,
the Company owned or leased 1,707 van trailers, of which substantially all are
53' long and 185 include specialized roller bed equipment required to serve air
cargo industry customers. By having a majority of the Company's trailer fleet
equipped with 53' trailers, the Company is able to provide its customers with
more economy and convenience and increased driver productivity. The average age
of the trailer fleet was approximately 4.2 years at May 31, 1998.
The Company has installed Qualcomm two-way satellite communication systems
in the majority of its tractors. The Qualcomm system provides the Company with
continuous communications capability in the event a driver experiences a service
delay or disruption. The Qualcomm system also allows the Company to track the
exact location and route of any particular shipment and communicate instantly
with drivers to improve operating efficiencies.
EMPLOYEES
Drivers. The Company has established several programs to increase driver
loyalty and to provide a greater stake in the Company to drivers. Drivers are
compensated on the basis of miles driven, and base pay for miles driven
increases with a driver's length of employment with the Company. Following the
Distribution, the Company will maintain a 401(k) benefit plan and stock purchase
plan for Company drivers and other employees.
Safety and Training. The Company conducts comprehensive training programs
to promote safety, customer relations, service standards, productivity and
positive attitudes. Driver training and safety programs are developed by the
Company's safety department. Drivers meet or exceed DOT qualifications. Driver
qualification files are updated at least annually to maintain compliance with
DOT regulations.
The Company's safety department focuses on: (i) recruiting and maintaining
the most qualified drivers; (ii) improving driver and management safety
training; (iii) implementing periodic reviews of driving records; (iv) creating
incentive bonuses for drivers with good safety records and (v) raising
awareness of safety-related issues on a Company-wide basis.
In March 1998, the DOT initiated a safety audit of the Company. On May 13,
1998, the Company was notified that it had retained its satisfactory rating.
OWNER-OPERATORS AND COMMISSION AGENTS
The Company intends to continue to expand its operations with
owner-operators equipment. The Company believes that the owner-operators with
whom it contracts are generally more experienced than the general driver
population and that they have a vested interest in protecting their own
equipment that motivates
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<PAGE> 40
them to operate in a cautious manner. Owner-operators are responsible for paying
all their operating expenses including fuel, maintenance, equipment payments and
all other equipment-related expenses. Owner-operators are compensated by the
Company on a rate per mile or percentage of revenue basis. As of June 30, 1998,
27% of the Company's tractors in service were contracted to the Company by
owner-operators.
The Company has recently begun to recruit commission agents. These
commission agents typically have long-term relationships with an established
customer base. Management believes that the use of commission agents may provide
additional opportunities to diversify the Company's customer base and to
establish relationships with owner-operators affiliated with commission agents.
The Company intends in the future to expand the use of commission agents.
INSURANCE AND CLAIMS
The Company's insurance and claims program provides protection of the
Company's assets and interests through a combination of insurance,
self-insurance, and excess and umbrella coverages. The Company believes that the
coverages described below are adequate and appropriate. The Company self-insures
its automobile liability and general liability exposures with a retention of
$100,000 combined single limits per occurrence. The funding obligation within
the retention is secured by letters of credit established for the benefit of its
insurance carriers. Umbrella liability policies increase both automobile and
general liability coverage to $50 million.
Workers' compensation and employer's liability exposure is covered by a
combination of self-insurance programs, self-insured excess insurance contracts
and insurance contracts. A self-insured retention of $250,000 per occurrence
applies in states where self-insurance is permitted under applicable law, with
underwriters assuming excess liability up to statutory limits for workers'
compensation. Workers' compensation and employer's liability exposure is covered
by insurance policies in other states. Coverage is provided to statutory limits
with a deductible/retention of $250,000 per occurrence. Employer's liability
coverage is $1,000,000 per occurrence. The Company's funding obligation within
the deductible retention is secured by letters of credit established for the
benefit of its insurance carriers. The Company's umbrella policy provides
coverage of $49,000,000 in excess of the underlying coverages for workers'
compensation and employer's liability.
Director and officer liability, fiduciary liability and commercial crime
coverage is provided by various policies with limits which management believes
are sufficient for the size and scope of its operations. The Company has cargo
insurance coverage with limits of $1,000,000 per loss with deductibles of
$100,000 per occurrence.
TRANSPORTATION REGULATIONS
Prior to 1996, the Company's operations in interstate commerce were
regulated by the Interstate Commerce Commission ("ICC"). Effective December 29,
1995, President Clinton signed into law the Interstate Commerce Commission
Termination Act of 1995 which closed the ICC and transferred its remaining
responsibilities to a new Surface Transportation Board and the Federal Highway
Administration. In addition, interstate motor carrier operations are subject to
safety requirements prescribed by the Department of Transportation. Such matters
as weight and dimension of equipment are also subject to federal and state
regulations. The Company's Canadian operations are subject to similar
requirements imposed by the laws and regulations of the Dominion of Canada and
various provincial laws and regulations. The Company is subject to various
federal, state and local environmental laws and regulations. Management believes
that the Company is in substantial compliance with applicable regulatory
requirements relating to its operations. Failure of the Company to comply with
the applicable regulations could result in substantial fines or revocation of
the Company's operating permits.
ENVIRONMENTAL REGULATIONS
The Company has aboveground fuel storage tanks at its Atlanta, Georgia;
Indianapolis, Indiana; Greeneville, Tennessee; and Memphis, Tennessee facilities
and underground fuel storage tanks at its
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<PAGE> 41
Columbus, Ohio facility. Such storage tanks are subject to various federal and
state environmental laws and regulations. Management believes that the Company
is in substantial compliance with applicable environmental laws and regulations.
No material increase for expenditures for compliance with federal, state and
local environmental laws and regulations is anticipated in 1998.
COMPETITION AND INDUSTRY TRENDS
The Company competes with regional, inter-regional, national truckload
carriers and private fleets, and, to a lesser extent, with less-than-truckload
carriers, railroads and overnight delivery companies. Many of the Company's
competitors have greater financial resources, more equipment or larger freight
capacity than the Company. Service and price are the principal means of
competition in the transportation industry.
The Company's principal competitive strength is its ability to consistently
provide reliable service at a competitive price. Many of the Company's customers
are high volume, time-sensitive shippers which require a flexible and dependable
motor carrier service tailored to their specific needs, including pick-up and
delivery within specified delivery times.
MAJOR CUSTOMER
One customer of the Company, Federal Express Corporation, accounted for
29.4% of combined operating revenue for the year ended December 31, 1997.
PROPERTIES
The Company's headquarters are located in Greeneville, Tennessee and will,
on or prior to the Distribution, be subleased from Services which leases such
headquarters from the Greeneville-Greene County Airport Authority under a lease
expiring in 2006. The cost to the Company of the headquarters sublease is based
upon an agreed upon percentage of usage, a rate management believes approximates
fair market value. In addition to the existing sublease for operation of its
Atlanta facility through a wholly-owned Services subsidiary, the Company expects
to sublease from Services or one of its subsidiaries a portion of the Columbus,
Indianapolis, Chicago and Detroit facilities. The Company will be responsible
for a portion of the taxes, assessments and other costs of ownership under the
sublease agreements.
The Company currently operates terminals at Columbus, Ohio; Atlanta,
Georgia; Chicago, Illinois; Greeneville, Tennessee; Indianapolis, Indiana;
Detroit, Michigan; Dallas, Texas; Olive Branch, Mississippi (near Memphis,
Tennessee); Belpre, Ohio; and Camden, South Carolina.
LEGAL PROCEEDINGS
The Company is, from time to time, a party to litigation arising in the
normal course of its business, most of which involves claims for personal injury
and property damage incurred in connection with the transportation of freight.
Management believes that none of these actions, individually or in the
aggregate, will have a material adverse effect on the financial condition or
results of operations of the Company.
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<PAGE> 42
MANAGEMENT
EXECUTIVE OFFICERS
As the sole shareholder of the Company prior to the Distribution, Services
has designated the persons who will serve as the directors and executive
officers of the Company immediately following the Distribution, most of whom
have served in similar capacities for Services prior to the Distribution. The
following table sets forth certain information concerning persons who are
currently expected to serve as executive officers of the Company as of the
Distribution.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Scott M. Niswonger..................... 51 Chairman and Chief Executive Officer
Eddie R. Brown......................... 48 President and Chief Operating Officer
Chief Financial Officer, Senior Vice President and
Edward W. Cook......................... 40 Treasurer
Richard H. Roberts..................... 44 Senior Vice President, General Counsel and Secretary
N. Jeffrey Woods....................... 40 Vice President, Operations
</TABLE>
There are no family relationships between any of the executive officers of
the Company. All officers hold office at the pleasure of the Board of Directors.
The following background material is provided for each executive officer
employed by the registrant, including employment history for at least the last
five years:
Scott M. Niswonger is a co-founder of Services and has served as a director
and as President of Services since its founding in 1981, and as Chairman of the
Board and Chief Executive Officer of Services since February 1988. Mr. Niswonger
also serves as a director of the Regional Advisory Board of First Tennessee Bank
National Association.
Eddie R. Brown joined Landair Transport as President and Chief Operating
Officer in January 1998. Since June 1991, Mr. Brown served in various management
positions for Landstar System, Inc., a $1.3 billion truckload carrier based in
Jacksonville, Florida. He was President of Landstar Ranger Transportation, Inc.
from January 1996 and Executive Vice President and Chief Operating Officer of
Landstar System, Inc. from January 1995 until December 1995. Mr. Brown's first
position with Landstar System, Inc. was as President and Chief Executive Officer
of Landstar Poole, Inc. in Evergreen, Alabama from June 1991 to December 1994.
From January 1986 to June 1991, Mr. Brown served as President and Chief
Executive Officer for Bulldog Trucking Inc. From October 1980 until January
1986, while at Builders Transport, Inc., he served in various capacities,
ranging from Terminal Manager to Vice President, Operations and Sales.
Edward W. Cook joined Services as Chief Financial Officer, Senior Vice
President and director in September 1994. Since May 1995, he also served as
Treasurer of Services. Prior to joining Services, Mr. Cook was employed by Ernst
& Young LLP for eleven years, most recently as a senior manager in the
Nashville, Tennessee office. During the period of March 1986 through February
1988, Mr. Cook served as Controller and Assistant Secretary of Ryder-Temperature
Controlled Carriage in Nashville, Tennessee.
Richard H. Roberts has served as Senior Vice President and General Counsel
of Services since July 1994, and as Secretary and director of Services since May
1995. Prior to joining Services, Mr. Roberts was a partner with the Baker,
Worthington, Crossley & Stansberry law firm from January 1991, and an associate
of the firm from June 1985. Mr. Roberts has also served as a director of Miller
Industries, Inc. since April 1994.
N. Jeffrey Woods has been Vice President of Operations of Landair Transport
since December 1990. From April 1985 to June 1990, Mr. Woods served in various
capacities with Ryder Systems, Inc., including Director of Operations Planning
and Director of Central Operations of Ryder-Temperature Controlled Carriage in
Nashville, Tennessee.
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<PAGE> 43
OTHER KEY EMPLOYEES
Harry O. Crabtree joined Landair Transport as Vice President, Safety, in
January 1998. Prior to joining Landair Transport, he served as Vice President,
Safety and Quality of Landstar Inway, Inc., a position he held from January
1997. Mr. Crabtree was Vice President, Risk Management, for Landstar TLC, Inc.
from March 1995 to January 1997, and was Director of Safety for Landstar Poole,
Inc. from March 1989 until March 1995. From June 1979 to March 1989, Mr.
Crabtree held various management positions at Landstar Poole, Inc.
P. Michael Davis joined Landair Transport in July 1998 as Vice President of
Dedicated Operations. Mr. Davis previously served as Vice President of the
Dedicated Fleet Division of Builders Transport, Inc. ("Builders Transport") in
Camden, South Carolina from February 1989 to July 1998 and as Vice President of
Sales from March 1986 to January 1989. Prior to March 1986, Mr. Davis spent 23
years with McLean Trucking Company.
Arthur Henry joined Landair Transport as Vice President, Sales and
Marketing, in January 1998. Prior to joining Landair Transport, he served as
Director of Marketing of Transport Corporation of America, Inc., a position he
held from November 1992 to December 1997. From May 1987 to November 1992, he
held a marketing position at Transport Corporation of America, Inc. From October
1978 until May 1987, Mr. Henry was Director of Marketing for Bronaugh Express,
Inc. in Lexington, Kentucky.
Jeffrey S. Kleiber joined Landair Transport in June 1996 as Director of
Claims and served as Vice President, Safety and Risk Management, of Landair
Transport from January 1997 until March 1998, when he was appointed Vice
President, Risk Management. Prior to joining Landair Transport, he served as
President of Mid Atlantic Claims, Inc. in York, Pennsylvania, a third-party
administration company which primarily handled transportation losses and claims
for Goodway Transport, Inc., where he also served as Vice President of Safety
and Risk Management from January 1992 until May 1996. From June 1978 until
January 1992, Mr. Kleiber served as Vice President of Safety at Shaffer
Trucking, Inc. in New Kingstown, Pennsylvania.
Jeffrey W. Maddison joined Landair Transport as Vice President, Maintenance
and Purchasing, in January 1996 and has held the same position with Services
since February 1996. Mr. Maddison served as Executive Vice President for Erin
Truckways, Ltd., d/b/a Digby Truck Lines from January 1992, and was Vice
President of Maintenance for Crete Carrier Corp., Shaffer Trucking, Inc.,
Sunflower Carriers, Inc. and HTL Truck Lines, Inc. from September 1987 until
December 1991.
John R. Morris began serving as President of Dedicated Operations for
Landair Transport in July 1998. Mr. Morris was President and Chief Operating
Officer of Builders Transport from January 1989 until December 1993 and from
December 1995 before joining Landair Transport. Mr. Morris served as director of
Builders Transport from January 1989 until September 1990 and from October 1990
until July 1998. Also while at Builders Transport, Mr. Morris filled the
position of President of Dedicated Services and Contract Logistics Group from
December 1993 until December 1995. He was also Chief Executive Officer for
Builders Transport on two occasions between June 1990 and November 1992. Mr.
Morris was in charge of the Dedicated Fleet operations for Builders Transport
from January 1986 until January 1989. He also spent 23 years with McLean
Trucking Company before joining Builders Transport.
Greg R. Smith joined Landair Transport in July 1998 as Vice President of
its Dedicated Operations. Mr. Smith was employed with Builders Transport as Vice
President Sales, Dedicated Services, from January 1989 until joining Landair
Transport. From April 1987 until August 1988, he served as Vice President, Sales
and Marketing, for Poole Truckline, Inc., and was Area Vice President, Sales and
Marketing, for Schneider National, Inc. from July 1980 until April 1987.
37
<PAGE> 44
DIRECTORS
Set forth is certain information concerning persons who are currently
expected to serve as directors of the Company as of the Distribution.
JERRY T. ARMSTRONG Age 60
Dallas, Texas
Mr. Armstrong is the Chairman and Chief Executive Officer of Wind
Associates, Inc., a private investment and management company, a position he has
held since June 1997. From June 1988 to June 1997, Mr. Armstrong was Chairman,
President and Chief Executive Officer of Merchants, Inc., and from February 1984
until June 1988, he was President and Chief Executive Officer of The Wedge
Group, Inc., both parent corporations of diversified transportation companies.
He also served on the Board of Directors of Landstar System, Inc. from March
1991 until May 1994. Over a forty year career, Mr. Armstrong held chief
executive positions with and served on the boards of ANR Freight Systems, Inc.,
Garrett Freight Lines, Inc., Riss International, Inc., and Johnson Motor Lines,
Inc., all transportation related companies.
EDDIE R. BROWN
Greeneville, Tennessee Age 48
Mr. Brown joined Landair Transport as President and Chief Operating Officer
in January 1998. Since June 1991, Mr. Brown served in various management
positions for Landstar System, Inc., a $1.3 billion truckload carrier based in
Jacksonville, Florida. He was President of Landstar Ranger Transportation, Inc.
from January 1996 and Executive Vice President and Chief Operating Officer of
Landstar System, Inc. from January 1995 until December 1995. Mr. Brown's first
position with Landstar System, Inc. was as President and Chief Executive Officer
of Landstar Poole, Inc. in Evergreen, Alabama from June 1991 to December 1994.
From January 1986 to June 1991, Mr. Brown served as President and Chief
Executive Officer for Bulldog Trucking Inc. From October 1980 until January
1986, while at Builders Transport, Inc., he served in various capacities,
ranging from Terminal Manager to Vice President, Operations and Sales.
GEN. DUANE H. CASSIDY
Ponte Vedra Beach, Florida Age 64
Gen. Cassidy retired in January 1998 as Corporate Senior Vice President and
Chairman of the Commercial Board of CSX Corporation, a position he held from
June 1996. From January 1992 to June 1996, he was Senior Vice President of Sales
and Marketing for CSX Transportation, Inc., a subsidiary of CSX Corporation.
From October 1989 to January 1992, he served as Vice President of Logistics
Technology, Inc. and held the position of President, CSX/Sea-Land Logistics,
Inc. From September 1985 to September 1989, he served as Commander in Chief,
Military Airlift Command, and from July 1987 to September 1989, as Commander in
Chief, United States Transportation Command, where he was the Department of
Defense advocate and single point of contact for the Defense Transportation
System -- air, land, and sea, military and commercial. In October 1989, he
retired from the Air Force as a four-star General, and currently sits on the
National Defense Transportation Association's Board of Directors as Vice
Chairman.
DR. C. JOHN LANGLEY, JR.
Knoxville, Tennessee Age 52
Dr. Langley is the John H. Dove Distinguished Professor of Logistics and
Transportation at the University of Tennessee, Knoxville. He has served as a
professor at the University of Tennessee since September 1973. From October 1984
until October 1992, he was a member of the Executive Committee of the Council of
Logistics Management, served as President of the Council from October 1990 to
October 1991, and was the 1993 recipient of the Council's Distinguished Service
Award. In addition to his university duties, he actively provides logistics
consulting services.
38
<PAGE> 45
SCOTT M. NISWONGER Age 51
Greeneville, Tennessee
Mr. Niswonger is a co-founder of Services and has served as President and a
director of Services since its founding in 1981, and Chairman of the Board and
Chief Executive Officer since February 1988. Mr. Niswonger also serves as a
director of the Regional Advisory Board of First Tennessee Bank National
Association.
RICHARD H. ROBERTS Age 44
Greeneville, Tennessee
Mr. Roberts has served as Senior Vice President and General Counsel of
Services since July 1994 and a director of Services since 1995, and as Secretary
since May 1995. Prior to joining Services, Mr. Roberts was a partner with the
Baker, Worthington, Crossley & Stansberry law firm from January 1991, and an
associate of the firm from June 1985. Mr. Roberts has also served as a director
of Miller Industries, Inc. since April 1994.
BOARD OF DIRECTORS AND COMMITTEES
In order to facilitate the activities of the Board of Directors of the
Company following the Distribution, the Board of Directors intends to create
several standing committees, including an Executive Committee, an Audit
Committee, a Compensation Committee and a Nominating Committee. These committees
will not have a formal meeting schedule, but will be required to meet at least
once each year.
Executive Committee. Initial members of the Executive Committee are
expected to be Messrs. Brown, Niswonger and Roberts. The Executive Committee
will be authorized to act on behalf of and to carry out the functions of the
Board to the extent permitted by law and the Bylaws of the Company.
Audit Committee. Initial members of the Audit Committee are expected to be
Mr. Niswonger and the non-employee directors. The Audit Committee will recommend
engagement of the independent auditors, consider the fee arrangement and scope
of the audit, review the financial statements and the independent auditors
report, consider comments made by the independent auditors with respect to the
Company's internal control structure, and review internal accounting procedures
and controls with the Company's financial and accounting staff.
Compensation Committee. Initial members of the Compensation Committee are
expected to be Mr. Niswonger and the non-employee directors. The Compensation
Committee will be responsible for determining the overall compensation levels of
certain of the Company's executive officers and administering the Company's
employee stock option plan and other employee benefit plans.
Nominating Committee. Initial members of the Nominating Committee are
expected to be Messrs. Brown and Niswonger. The Nominating Committee will be
responsible for establishing the criteria for and review the qualifications of
individuals for election as members of the Board. When a vacancy on the Board
occurs or is anticipated, the Committee will present its recommendation of a
replacement director to the Board. The Committee will also make recommendations
as to exercise of the Board's authority to determine the number of its members,
within the limits provided by the Bylaws of the Company. Shareholders wishing to
communicate with the Nominating Committee concerning potential director
candidates may do so, following the Distribution, by corresponding with the
Secretary of the Company and including the name and biographical data of the
individual being suggested.
All directors will hold office at the pleasure of the shareholders.
COMPENSATION OF DIRECTORS
Employee directors of the Company will not receive additional compensation
for Board or committee service. In lieu of an annual retainer, non-employee
directors will be paid a fee of $1,500 for each Board meeting and $1,500 for
each committee meeting attended, together with reasonable traveling expenses. No
additional fee will be paid for committee meetings held on the same day as Board
meetings.
39
<PAGE> 46
DIRECTOR OPTION PLAN
On July 21, 1998, the Board adopted, and Services as the sole shareholder
then approved, the Landair Corporation Non-Employee Director Stock Option Plan
(the "Non-Employee Director Plan"). Pursuant to the Non-Employee Director Plan,
eligible non-employee directors will be granted options to purchase 10,000
shares of Landair Corporation Common Stock on the effective date of the
Non-Employee Director Plan and will be granted options to purchase 5,000 shares
of Landair Corporation Common Stock on the first business day after each annual
meeting of shareholders of the Company at an exercise price equal to the then
applicable fair market value of the Landair Corporation Common Stock as defined
in the Non-Employee Director Plan on such date. The Company has reserved 100,000
shares for issuance pursuant to the Non-Employee Director Plan.
TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS AND OTHERS
The Company and its subsidiaries had no transactions in which any director
or executive officer, or any member of the immediate family of any director or
executive officer, had a material direct interest reportable under applicable
rules of the SEC.
40
<PAGE> 47
COMPENSATION OF EXECUTIVE OFFICERS IN 1997
SUMMARY COMPENSATION TABLE
Prior to the Distribution, the Company has been a wholly-owned subsidiary
of Services, and the Company's officers and directors have not been separately
compensated for acting in such capacities. The following table sets forth the
cash and non-cash compensation paid or to be paid by Services to the Chief
Executive Officer and the two other highest paid executive officers of Services
(the "Named Executive Officers") who are expected to serve in such capacities
for the Company after the Distribution for the years shown in all capacities in
which they served.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION NUMBER OF
---------------------------------- SECURITIES ALL OTHER
OTHER ANNUAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS (1)
- --------------------------- ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Scott M. Niswonger.............. 1997 $269,377 $169,250 $-0- -0- $10,600
Chairman, President & 1996 268,781 -0- -0- -0- 16,061
Chief Executive Officer 1995 262,080 -0- -0- -0- 16,768
Edward W. Cook.................. 1997 104,300 84,975 -0- 10,000 10,133
Chief Financial Officer, 1996 103,753 -0- -0- 10,000 8,919
Senior Vice President & 1995 100,750 -0- -0- -0- 6,359
Treasurer
Richard H. Roberts.............. 1997 90,000 89,250 -0- 10,000 9,952
Senior Vice President, 1996 89,173 -0- -0- 10,000 10,327
General Counsel & Secretary 1995 79,892 -0- -0- -0- 10,301
</TABLE>
- ---------------
(1) Includes car allowance and employer matching portion of 401(k)
contributions.
1997 OPTION GRANTS, AGGREGATED OPTION EXERCISES AND OPTION VALUES
Options granted by Services during the last year to the Named Executive
Officers are set forth in the following table.
OPTION GRANTS IN THE LAST YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL
---------------------------------------------------------- RATES OF
PERCENT OF STOCK PRICE
NUMBER OF TOTAL OPTIONS APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OR OPTION TERM
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME(1) OPTIONS GRANTED LAST YEAR ($/SHARE) DATE 5% 10%
- ------- --------------- ------------- ----------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Edward W. Cook................. 10,000 9.03 10.00 01/31/07 62,889 159,374
Richard H. Roberts............. 10,000 9.03 10.00 01/31/07 62,889 159,374
</TABLE>
- ---------------
(1) Mr. Niswonger has not been granted any options for the purchase of Services
Common Stock nor has he been granted options to purchase shares of Landair
Corporation Common Stock.
41
<PAGE> 48
The following table sets forth the year-end aggregated option exercises by
the Named Executive Officers and the year-end value of unexercised options held
by the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST YEAR
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
OPTION EXERCISES IN
LAST YEAR NUMBER OF SECURITIES VALUE OF UNEXERCISED
---------------------- UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS HELD AT YEAR-END YEAR-END(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME(1) EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edward W. Cook................. -0- -0- 25,000 25,000 165,313 263,438
Richard H. Roberts............. -0- -0- 25,000 25,000 154,063 259,688
</TABLE>
- ---------------
(1) Mr. Niswonger has not been granted any options for the purchase of Services
Common Stock.
(2) Represents the closing price for Services Common Stock on December 31, 1997,
of $24.25, less the exercise price for all outstanding exercisable and
unexercisable options for which the exercise price is less than the December
31, 1997 closing price. Exercisable options have been held at least one year
from the date of grant.
ISSUANCE OF COMPANY OPTIONS AND CONVERSION OF SERVICES OPTIONS
According to the terms of the Amended and Restated Stock Option and
Incentive Plan of Services, options to purchase shares of Services Common Stock
that are exercisable at the time of the Distribution and that are held by those
employees who will terminate employment with Services and become employees of
the Company upon the Distribution will be cancelled if not exercised prior to
such employees' termination of employment with Services. Accordingly, employees
leaving Services and continuing as employees of the Company are expected to
exercise their vested options prior to the Distribution. Under the Employee
Benefit Matters Agreement, unexercisable options held by employees of Services
who remain or become employees of the Company upon consummation of the
Distribution will be converted into options to purchase Landair Corporation
Common Stock pursuant to the terms and conditions of the Stock Plan. Such
conversion shall be on the basis of a formula contained in the Employee Benefit
Matters Agreement designed to preserve the fair market value of such converted
options on the date of the Distribution.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company does not currently, and is not expected to have upon
consummation of the Distribution, any employment agreements with any of the
Named Executive Officers. The Company does currently have an employment
agreement with Eddie R. Brown, who is expected to serve as the Company's
President and Chief Operating Officer following the Distribution. Pursuant to
such employment agreement, Mr. Brown is to be paid a base salary of $156,000 or
such greater rate as the Board of Directors of the Company determines from time
to time. Upon early involuntary termination of Mr. Brown's employment with the
Company, the Company shall pay Mr. Brown an amount equal to any then remaining
payments under the employment agreement. The agreement expires December 31,
1999. In addition to his base salary, Mr. Brown will be granted an option to
purchase 100,000 shares of Landair Corporation Common Stock at an exercise price
equal to approximately $6.92 per share, the estimated pro forma book value of
shares of Landair Corporation Common Stock on January 1, 1998, the first day of
Mr. Brown's employment.
Awards granted under the Company's Stock Plan become immediately
exercisable or otherwise nonforfeitable in full in the event of a Change in
Control of the Company (as defined in the Stock Plan), notwithstanding specific
terms of the awards providing otherwise. Furthermore, with respect to stock
options granted under the Stock Plan, following a Change in Control, the
Compensation Committee may, in its discretion, permit the cancellation of such
options in exchange for a cash payment in an amount per share equal, generally,
to the difference between the highest closing sales price during the sixty-day
period preceding the Change in Control and the exercise price. A Change in
Control is defined in the Stock Plan to include, among other things, (i) the
acquisition of securities representing a majority of the combined voting power
of
42
<PAGE> 49
all classes of capital stock by any person (other than the Company and other
related entities); (ii) the approval by the shareholders of a merger or
consolidation of the Company into or with another entity (with certain
exceptions), the sale or other disposition of all or substantially all of the
Company's assets, or the adoption of a plan of liquidation; or (iii) a change in
the composition of the Board of Directors in any two-year period such that
individuals who were Board members at the beginning of such period cease to
constitute a majority thereof (with certain exceptions).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company will be comprised of Mr.
Niswonger and two non-employee directors. The Company does not expect there to
be any Compensation Committee interlocks. See "TRANSACTIONS WITH DIRECTORS,
EXECUTIVE OFFICERS AND OTHERS."
43
<PAGE> 50
LANDAIR CORPORATION EMPLOYEE BENEFIT PLANS
1998 LANDAIR CORPORATION STOCK OPTION AND INCENTIVE PLAN
The Company's Board of Directors and its sole shareholder have approved the
Stock Plan to which officers and other key employees as well as key consultants
will be eligible to receive awards of stock options, stock appreciation rights
and restricted stock. Options granted under the Stock Plan may be "incentive
stock options" ("ISOs"), within the meaning of Section 422 of the Code, or
non-qualified stock options ("NQSOs"). Stock Appreciation Rights ("SARs") may be
granted simultaneously with the grant of an option or (in the case of NQSOs) at
any time during its term. Restricted stock may be granted in addition to or in
lieu of any other award granted under the Stock Plan.
The Stock Plan provides that awards may be granted covering up to 500,000
shares of Landair Corporation Common Stock (subject to antidilution and similar
adjustments in the event of a stock split, combination of shares,
recapitalization, or similar changes). The Stock Plan limits the number of
shares with respect to which awards (including options, SARs and restricted
stock) may be granted to any individual to no more than 100,000 shares in any
year. Unless the Stock Plan is terminated earlier by the Company's Board of
Directors, awards may be granted for a period of ten (10) years from the date of
the Distribution.
Unless otherwise determined by the Company's Board of Directors, the Stock
Plan will be administered by the Compensation Committee, which will be comprised
solely of "nonemployee directors" within the meaning of Rule 16b-3 under the
Exchange Act, or by the Company's Board of Directors if the Compensation
Committee is not so comprised (any entity administering the Stock Plan is
referred to as the "Committee"). It is currently anticipated that the members of
the Committee will also be "outside directors" within the meaning of Section
162(m) of the Code. Subject to the provisions of the Stock Plan, the Committee
will determine the type of award, when and to whom awards will be granted, and
the number of shares covered by each award. The Committee will have sole
discretionary authority to interpret the Stock Plan and to adopt rules and
regulations related thereto. In determining the persons to whom awards shall be
granted and the number of shares covered by each award, the Committee will take
into account the contribution to the management, growth and profitability of the
business of the Company by the respective persons and such other factors as the
Committee deems relevant.
The Committee will determine, in its sole discretion, the purchase price of
the shares of stock covered by an option and the kind of consideration payable
with respect to any awards; provided, however, that in the case of the ISOs, the
price must not be less than the "Fair Market Value" (as defined in the Stock
Plan) on the date of grant, and provided further that the option price must be
110% of the Fair Market Value in the case of the ISOs granted to "Ten Percent
Stockholders" (as defined in the Stock Plan). The Committee may provide for the
payment of the option price in cash, by delivery of shares of Landair
Corporation Common Stock having a Fair Market Value equal to such option price,
by a combination thereof or by any other method in accordance with the terms of
the option agreements. The Stock Plan contains special rules governing the time
of exercise in the case of death, disability, or other termination of employment
and also provides for acceleration of the exercisability of options in the event
of a "Change in Control" (as defined in the Stock Plan).
The Stock Plan also permits the Committee to grant SARs with respect to all
or any portion of the shares of Landair Corporation Common Stock covered by
options. Each SAR will confer a right to receive an amount with respect to each
share subject thereto, upon exercise thereof, equal to the excess of (i) the
Fair Market Value of one share of Landair Corporation Common Stock on the date
of exercise over (ii) the grant price of the SAR. The grant price of any SAR
granted in tandem with an option will be equal to the exercise price of the
underlying option, and the grant price of any other SAR will be such price as
the Committee determines. The Committee may, in its sole discretion, condition
the exercise of any SAR upon the attainment of specified Performance Goals (as
defined below).
The Stock Plan also provides for the grant of restricted stock awards,
which are awards of Landair Corporation Common Stock that may not be transferred
or otherwise disposed of, except by will or the laws of descent and
distribution, for such period as the Committee determines (the "Restricted
Period"). The
44
<PAGE> 51
Committee may also impose such other conditions and restrictions on the shares
as it deems appropriate, including the satisfaction of one or more of the
following performance criteria: (i) pre-tax income or after-tax income; (ii)
operating cash flow; (iii) operating profit; (iv) return on equity, assets,
capital or investment; (v) earnings or book value per share; (vi) sales or
revenues; (vii) operating expenses; (viii) Landair Corporation Common Stock
price appreciation; and (ix) implementation or completion of critical projects
or processes (the "Performance Goals"). The Performance Goals may include a
threshold level of performance below which no payment will be made (or no
vesting will occur) levels of performance at which specified payments will be
made (or specified vesting will occur), and a maximum level of performance above
which no additional payment will be made (or at which full vesting will occur).
Each of the Performance Goals will be determined, to the extent applicable, in
accordance with generally accepted accounting principles and will be subject to
certification by the Committee; provided, that the Committee will have the
authority to make equitable adjustments to the Performance Goals in recognition
of unusual or non-recurring events affecting the Company. The Committee may
provide that such restrictions will lapse with respect to specified percentages
of the awarded shares on successive future dates.
During the Restricted Period, the grantee will be entitled to receive
dividends with respect to, and to vote the shares awarded to him or her. If,
during the Restricted Period, the grantee's continuous employment with the
Company terminates for any reason, any shares remaining subject to restrictions
will be forfeited, unless otherwise determined by the Committee. The Committee
has the authority to cancel any or all outstanding restrictions prior to the end
of the Restricted Period, including cancellation of restrictions in connection
with certain types of termination of employment.
The Company's Board of Directors may at any time and from time to time
suspend, amend, modify or terminate the Stock Plan; provided, however, that no
amendment that requires shareholder approval in order for the Stock Plan to
continue to comply with Section 162(m) of the Code or any other applicable law
will be effective unless and until such amendment has received the requisite
approval by the Company's shareholders.
LANDAIR CORPORATION NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
On July 21, 1998, the Board adopted, and the sole shareholder then
approved, the Non-Employee Director Plan. Pursuant to the Non-Employee Director
Plan, eligible non-employee directors will be granted options to purchase 10,000
shares of Landair Corporation Common Stock on the effective date of the Non-
Employee Director Plan and will be granted options to purchase 5,000 shares of
Landair Corporation Common Stock on the first business day after each annual
meeting of shareholders of the Company at an exercise price equal to the then
applicable fair market value of the Landair Corporation Common Stock. The
Company has reserved 100,000 shares for issuance pursuant to the Non-Employee
Director Plan.
LANDAIR CORPORATION EMPLOYEE STOCK PURCHASE PLAN
On July 21, 1998, the Board adopted, and Services as the sole shareholder
then approved, the Landair Corporation Employee Stock Purchase Plan (the "Stock
Purchase Plan"), which Stock Purchase Plan is expected to become effective upon
consummation of the Distribution. Pursuant to the Stock Purchase Plan, employees
of the Company and its subsidiaries may purchase Landair Corporation Common
Stock through regular payroll deduction of up to 10% of the employee's annual
compensation. The Company has reserved 300,000 shares for issuance pursuant to
the Stock Purchase Plan.
In no event may a participant in the Stock Purchase Plan (i) purchase
thereunder during any calendar year Landair Corporation Common Stock that had a
fair market value on the first trading date of the year of more than $25,000 or
(ii) purchase Landair Corporation Common Stock thereunder, if, on the first
trading date of the year the employee would be deemed (under applicable tax
rules) to own 5% or more of the total combined voting power or value of all
classes of stock of the Company issued and outstanding.
The issue price of the Landair Corporation Common Stock under the Stock
Purchase Plan is equal to the lesser of (i) 85% of the market price (as defined
therein) on the first day of each option period or (ii) 85% of the market price
on the exercise date (generally, the last trading day of each option period).
Shares of Landair
45
<PAGE> 52
Corporation Common Stock will not be issued under the Stock Purchase Plan,
however, if the issue price is less than the book value of the Landair
Corporation Common Stock as of the preceding December 31.
LANDAIR CORPORATION EMPLOYEE CASH INCENTIVE PLAN
Effective upon the consummation of the Distribution, the Company will
implement an employee cash incentive plan (the "Cash Incentive Plan"), which
will provide for annual cash incentive payments to employees based on the
Company's results of operations. The goals of the Cash Incentive Plan will be
established based on operating plans for the year, and amounts payable under the
Cash Incentive Plan will be determined based on the results of the Company's
operations. The amount of the cash incentives to be paid under the Cash
Incentive Plan shall be determined annually by the Board.
46
<PAGE> 53
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Services will own all of the outstanding shares of the Landair Corporation
Common Stock until the Distribution. The following table sets forth, as of May
31, 1998, certain information with respect to the Services Common Stock
"beneficially owned" (i) by each of the Named Executive Officers of Services who
will continue to be an executive officer of the Company following the
Distribution and (ii) by all anticipated directors, nominees and executive
officers of the Company, both individually and as a group. Except as otherwise
indicated, the shareholders listed in the table have sole voting and investment
powers with respect to the Services Common Stock owned by them.
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE NUMBER OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) SHARES OUTSTANDING(2)
- --------------------------------------- ----------------------- ---------------------
<S> <C> <C>
Eddie R. Brown......................................... -- --%
Edward W. Cook......................................... 32,328(3) *
Scott M. Niswonger..................................... 3,129,520(4) 51
Richard H. Roberts..................................... 39,554(5) *
N. Jeffrey Woods....................................... 66,293(6) 1
All directors and executive officers as a group (5
persons)............................................. 3,267,695(7) 53
</TABLE>
- ---------------
* Less than one percent
(1) The business address of each listed executive officer and director is c/o
Landair Services, Inc., 430 Airport Road, Greeneville, Tennessee 37745.
(2) For the purpose of determining "beneficial ownership," the rules of the SEC
require that every person who has or shares the power to vote or dispose of
shares of stock be reported as a "beneficial owner" of all shares as to
which such power exists. As a consequence, many persons may be deemed to be
the "beneficial owners" of the same securities. The SEC rules also require
that certain shares of stock that a beneficial owner has the right to
acquire within sixty days of the date set forth above pursuant to the
exercise of stock options are deemed to be outstanding for the purpose of
calculating the percentage of ownership of such owner, but are not deemed
outstanding for the purpose of calculating the percentage ownership of any
other person.
(3) Includes 1,000 shares held by Mr. Cook's spouse and 29,000 shares which are
issuable pursuant to options which are exercisable within sixty days of the
date set forth above.
(4) Includes 300 shares held by Mr. Niswonger as custodian for his grandson and
300 shares which are held by Mr. Niswonger's spouse as custodian for one of
her children.
(5) Includes 37,500 shares which are issuable pursuant to options which are
exercisable within sixty days of the date set forth above.
(6) Includes 41,775 shares which are issuable pursuant to options which are
exercisable within sixty days of the date set forth above.
(7) Includes 108,275 shares which are issuable pursuant to options which are
exercisable within sixty days of the date set forth above.
47
<PAGE> 54
Based on information provided to the Company, in addition to Mr. Niswonger,
the Company believes the following table sets forth the beneficial owners of
five percent or more of the outstanding Services Common Stock as of the dates
set forth below:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENTAGE OF
BENEFICIAL COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OUTSTANDING
- ------------------------------------ ---------- -------------
<S> <C> <C>
Princeton Services, Inc.(1)................................. 644,100 10%
Wellington Management Company, LLP(2)....................... 434,600 7
</TABLE>
- ---------------
(1) Princeton Services, Inc. ("PSI"), 800 Scudders Mill Road, Plainsboro, NJ
08536, as a parent holding company and the general partner of Merrill Lynch
Asset Management, L.P. d/b/a Merrill Lynch Asset Management ("MLAM") and
Fund Asset Management, L.P. d/b/a Fund Asset Management ("FAM"), may be
deemed to beneficially own Services Common Stock. MLAM and FAM are
investment advisers registered under Section 203 of the Investment Advisers
Act of 1940, as amended, and may be deemed to beneficially own certain
shares by virtue of acting as investment advisers to one or more investment
companies registered under Section 8 of the Investment Company Act of 1940,
as amended, and to certain private accounts. As of May 31, 1998, one such
investment company advised by FAM, the Merrill Lynch Special Value Fund,
Inc., held 428,500 shares of the Services Common Stock. Certain accounts
managed by MLAM held, as of May 31, 1998, 215,600 shares. None of the
companies have sole voting dispositive power over the shares, and each of
the companies has shared voting and dispositive power over all of the
shares.
(2) Wellington Management Company, LLP ("WMC"), 75 State Street, Boston
Massachusetts 02109, is an investment adviser registered with the SEC under
the Investment Advisers Act of 1940, as amended. As of March 31, 1998, WMC,
in its capacity as investment adviser, may be deemed to have beneficial
ownership of 434,600 shares of Services Common Stock that are owned by
numerous investment advisory clients, none of which is known to have such
interest with respect to more than five percent of the class. As of March
31, 1998, WMC did not have sole voting or dispositive power over the shares,
had shared voting power over 260,000 shares and shared dispositive power
over all of the shares.
48
<PAGE> 55
DESCRIPTION OF COMPANY CAPITAL STOCK
The following description of the capital stock of the Company is a summary
and is qualified by reference to the provisions of the forms of Charter of the
Company (the "Company Charter") and the Bylaws of the Company (the "Company
Bylaws"), copies of which have been filed with the SEC as exhibits to the
Registration Statement on Form 10 of which this Information Statement is a part.
AUTHORIZED CAPITAL STOCK
The authorized capital stock of the Company consists of 45,000,000 shares
of Landair Corporation Common Stock and 5,000,000 shares of preferred stock, par
value $.01 per share (the "Preferred Stock"). Based upon approximately 6,195,631
shares of Services Common Stock outstanding as of July 31, 1998, approximately
6,195,631 shares of the Landair Corporation Common Stock will be issued and
outstanding upon completion of the Distribution. No shares of Preferred Stock
are outstanding and none have been reserved for issuance. Of the shares of
Landair Corporation Common Stock authorized for issuance, 500,000 shares are
reserved for issuance under the Stock Option Plan, 100,000 shares are reserved
for issuance under options granted to the Non-Employee Director Plan and 300,000
shares are reserved for issuance under the Stock Purchase Plan.
LANDAIR CORPORATION COMMON STOCK
Holders of Landair Corporation Common Stock are entitled to receive such
dividends, if any, as may from time to time be declared by the Board of
Directors of the Company. Holders of Landair Corporation Common Stock are
entitled to one vote per share on all matters on which the holders of Landair
Corporation Common Stock are entitled to vote. Because Holders of Landair
Corporation Common Stock do not have cumulative voting rights, the holders of a
majority of shares of Landair Corporation Common Stock represented at a meeting
can elect all of the directors, subject to the rights of the holders of any
shares of Preferred Stock which may be outstanding. In the event of liquidation,
dissolution or winding up of the Company, holders of Landair Corporation Common
Stock would be entitled to share ratably in all assets of the Company available
for distribution to the holders of Landair Corporation Common Stock. There are
no preemptive rights applicable to the shares of Landair Corporation Common
Stock. All of the outstanding shares of Landair Corporation Common Stock are,
and the shares of Landair Corporation Common Stock offered hereby will be, when
issued and paid for, fully paid and nonassessable. The rights, preferences and
privileges of holders of Landair Corporation Common Stock are subject to, and
may be adversely affected by, the rights of holders of shares of any series of
Preferred Stock which the Company may designate and issue in the future.
PREFERRED STOCK
The Board of Directors is authorized to issue, from time to time, without
approval of the shareholders, up to 5,000,000 shares of Preferred Stock, in one
or more series and the Board of Directors may fix for each series (i) the rate
of dividend; (ii) the price at and the terms and conditions on which shares may
be redeemed; (iii) the amount payable upon shares in the event of voluntary or
involuntary liquidation; (iv) sinking fund provisions, if any, for the
redemption or purchase of shares; (v) the terms and conditions on which shares
may be converted, if the shares of any series are issued with the privilege of
conversion; and (vi) voting rights, if any.
The Board of Directors may fix the number of votes to which each share of
Preferred Stock of a series is entitled, or deny voting rights to the shares of
any series, except to the extent voting rights are expressly granted by
applicable law. Depending upon the voting rights granted to any series of
Preferred Stock, issuance thereof could result in a reduction in the voting
power of the holders of Landair Corporation Common Stock or other Preferred
Stock.
The holders of each series of the Preferred Stock will be entitled to
receive, when and as declared by the Board of Directors, out of funds legally
available therefor, dividends in cash, property or securities of the Company
including shares of Preferred Stock, at the times and at the rates fixed by the
Board of Directors for
49
<PAGE> 56
that particular series. Dividends may or may not be cumulative. In the event of
any dissolution, liquidation or winding up of the Company, whether voluntary or
involuntary, the holders of each series of the then outstanding Preferred Stock
will be entitled to receive, prior to the distribution of any assets or funds to
the holders of Landair Corporation Common Stock, the amount fixed for such
purpose by the Board of Directors together with all accumulated and unpaid
dividends.
Preferred Stock of any series, or any part thereof, which is by its terms
redeemable, may be redeemed by the Company, subject to and in accordance with
such terms and conditions as may be designated by the Board of Directors in
creating such series. The amount payable by the Company upon redemption of the
Preferred Stock will be the redemption price fixed for the shares of each series
by the Board of Directors together with all accumulated and unpaid dividends.
The Board of Directors is authorized to determine the terms and conditions
on which the shares of any series of Preferred Stock may be converted into any
other shares of capital stock of the Company, if the shares of such series are
issued with the privilege of conversion, and to provide for the redemption or
purchase of any series of the Preferred Stock and to establish sinking or
purchase funds for this purpose.
PURPOSES AND ANTI-TAKEOVER EFFECTS OF LEGISLATION
AND CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS
GENERAL
The provisions of the Company Charter, the Company Bylaws and Tennessee law
described in this section may delay or discourage the acquisition of control of
the Company that is not approved by the Company's Board of Directors. These
provisions are designed to discourage certain types of transactions that may
involve an actual or threatened change of control of the Company and to
encourage any person who might seek to acquire control for the Company to
negotiate with the Company's Board of Directors. Management of the Company
believes that generally the interests of the Company's shareholders would be
served best if any change in control resulted from negotiations with the
Company's Board of the proposed terms, such as the price to be paid, the form of
consideration and the anticipated tax effects of the transaction.
The provisions described herein are designed to reduce the vulnerability of
the Company to an unsolicited proposal for a takeover of the Company that does
not contemplate the acquisition of all outstanding shares of capital stock at an
adequate price or is otherwise unfair to its shareholders or an unsolicited
proposal for the restructuring or sale of all or part of the Company.
Management of the Company believes that, as a general rule, such proposals
might not be in the best interests of the Company and its shareholders. However,
to the extent that these provisions do discourage takeover attempts, they could
make it more difficult to accomplish transactions that are opposed by the
incumbent Board and could deprive shareholders of opportunities to realize
takeover premiums for their shares or other advantages that large accumulations
of stock might provide.
Set forth below is a description of the relevant provisions of the Company
Charter and the Company Bylaws. The description is intended as a summary only
and is qualified by reference to the Company Charter and the Company Bylaws,
copies of which have been filed with the SEC as exhibits to the Registration
Statement on Form 10 of which this Information Statement forms a part.
PREFERRED STOCK
The Company Charter authorizes the Board of Directors of the Company,
without shareholder approval, to provide for the issuance of one or more series
of Preferred Stock and to determine, with respect to any series of Preferred
Stock, the terms and rights of such series. See "DESCRIPTION OF COMMON CAPITAL
STOCK -- PREFERRED STOCK."
The Company believes that the availability of the Preferred Stock will
provide the Company with flexibility in structuring possible future financings
and acquisitions, and in meeting other corporate needs
50
<PAGE> 57
which might arise. The authorized shares of Preferred Stock, as well as
authorized but unissued shares of Landair Corporation Common Stock, will be
available for issuance without the expense and delay of shareholder action,
unless such action is required by applicable law or the rules of the Nasdaq
National Market or any other stock exchange on which the Company's securities
may be listed. The Board of Directors has the power (subject to applicable law)
to approve the issuance of a series of Preferred Stock with terms that could
either impede or facilitate the completion of a merger, tender offer or other
takeover attempt.
The Company's Board of Directors will make any determination to issue such
shares based on its judgment as to the best interests of the Company and its
shareholders at the time of issuance.
LEGISLATION
The Tennessee Business Combination Act (the "Combination Act") provides
that any corporation to which the Combination Act applies, including the
Company, shall not engage in any "business combination" with an "interested
shareholder" for a period of five years from the date that such shareholder
became an interested shareholder unless prior to such date the board of
directors of the corporation approved either the business combination or the
transaction which resulted in the shareholder becoming an interested
shareholder.
The Combination Act defines "business combination" generally to mean any:
(i) merger or consolidation; (ii) share exchange; (iii) sale, lease, exchange,
pledge, mortgage, transfer or other disposition (in one transaction or a series
of transactions) of assets representing 10% or more of (A) the market value of
consolidated assets, (B) the market value of the corporation's outstanding
shares or (C) the corporation's consolidated net income; (iv) issuance or
transfer of shares from the corporation to the interested shareholder; (v) plan
of liquidation; (vi) transaction in which the interested shareholder's
proportionate share of the outstanding shares of any class of securities is
increased; or (vii) financing arrangements pursuant to which the interested
shareholder, directly or indirectly, receives a benefit except proportionately
as a shareholder.
Under the Combination Act an "interested shareholder" generally is defined
as any person who is the direct or indirect beneficial owner of 10% or more of
any class or series of the outstanding voting stock, or any affiliate or
associate of the corporation who has been the direct or indirect beneficial
owner of 10% or more of the voting power of any class or series of the
corporation's stock at any time within the five year period preceding the date
in question. Consummation of a business combination that is subject to the
five-year moratorium is permitted after such period provided the transaction (i)
complies with all applicable Charter and Bylaw requirements and applicable
Tennessee law and (ii) is approved by at least two-thirds of the outstanding
voting stock beneficially owned by the interested shareholder, or when the
transaction meets certain fair price criteria. The fair price criteria include,
without limitation, the requirement that the per share consideration received in
any such business combination by each of the shareholders is equal to the
highest of (i) the highest per share price paid by the interested shareholder
during the preceding five-year period for shares of the same class or series
plus interest thereon from such date at a treasury bill rate less the aggregate
amount of any cash dividends paid and the market value of any dividends paid
other than in cash since such earliest date, up to the amount of such interest;
(ii) the highest preferential amount, if any, such class or series is entitled
to receive on liquidation; or (iii) the market value of the shares on either the
date the business combination is announced or the date when the interested
shareholder reaches the 10% threshold, whichever is higher, plus interest
thereon less dividends as set forth above.
The Tennessee Control Share Acquisition Act (the "Acquisition Act")
prohibits certain shareholders from exercising in excess of 20% of the voting
power in a corporation acquired in a "control share acquisition," as defined in
the Acquisition Act, unless such voting rights have been previously approved by
the disinterested shareholders of the corporation. The Company has not elected
to make the Acquisition Act applicable to it. No assurance can be given that
such election, which must be expressed in a charter or bylaw amendment, will or
will not be made in the future.
The Tennessee Greenmail Act (the "Greenmail Act") prohibits a corporation
from purchasing or agreeing to purchase any of its securities, at a price in
excess of fair market value, from a holder of 3% or more of any class of such
securities who has beneficially owned such securities for less than two years,
unless such purchase has been approved by the affirmative vote of a majority of
the outstanding shares of each class of
51
<PAGE> 58
voting stock issued by the corporation or the corporation makes an offer of at
least equal value per share to all holders of shares of such class.
The purpose of such legislation may be to render more difficult a change of
control of a corporation by delaying, deferring or preventing a tender offer or
takeover attempt that a shareholder might consider to be in such shareholder's
best interest, including an attempt that might result in the payment of a
premium over the market price for the shares held by such shareholder, and may
promote continuity of the corporation's management by rendering it more
difficult for shareholders to remove or change the incumbent members of the
board of directors.
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
LIMITATION OF LIABILITY
The Tennessee Business Corporation Act (the "Tennessee Act") authorizes
corporations to limit or eliminate the personal liability of directors to
corporations and their shareholders for monetary damages for breach of
directors' fiduciary duty. The duty of care requires that, when acting on behalf
of the corporation, directors must exercise an informed business judgment based
upon all material information reasonably available to them. Absent the
limitations now authorized by the Tennessee Act, directors are accountable to
corporations and their shareholders for monetary damages only for conduct
constituting gross negligence in the exercise of their duty of care. Although
the statute does not change the directors' duty of care, it enables corporations
to limit available relief to equitable remedies such as injunction or
rescission. The Charter of the Company limits the liability of directors (in
their capacity as directors but not in their capacity as officers) to the
Company or its shareholders to the fullest extent permitted by the laws of the
State of Tennessee, as so amended.
Specifically, directors of the Company will not be personally liable to the
Company or its shareholders for monetary damages for breach of a director's
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty; (ii) for any acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; or (iii) for
unlawful distributions. The Charter provides that if the Tennessee Act is
amended after the effective date of the Charter to authorize corporate action
further eliminating or limiting the personal liability of the directors, then
the liability of a director of the Company will be eliminated or limited to the
fullest extent permitted by the laws of the State of Tennessee, as so amended.
The inclusion of this provision in the Charter may have the effect of
reducing the likelihood of derivative litigation against directors, and may
discourage or deter shareholders or management from bringing a lawsuit against
directors or officers for breach of their duty of care, even though such an
action, if successful, might otherwise have benefitted the Company and its
shareholders.
INDEMNIFICATION AND INSURANCE
The Company Charter and Bylaws provide that the Company shall indemnify its
directors and officers to the full extent permitted by the law of the State of
Tennessee. Section 48-15-502 of the Tennessee Act provides that a corporation
may indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or contemplated action, suit or proceeding,
whether civil, criminal or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Company, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
52
<PAGE> 59
The Company has obtained an insurance policy that insures its directors and
officers against certain liabilities.
INDEPENDENT AUDITORS
The Board of Directors of the Company expects to appoint Ernst & Young LLP
as the Company's independent auditors to audit the Company's financial
statements as of and for the year ended December 31, 1998. Ernst & Young has
served as Services' auditors for many years, including the periods covered by
the financial statements included in this Information Statement.
53
<PAGE> 60
TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
ITEM 15(A)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Combined Balance Sheets -- December 31, 1997 and 1996....... F-3
Combined Statements of Income -- Years Ended December 31,
1997, 1996 and 1995....................................... F-4
Combined Statements of Shareholder's Investment -- Years
Ended December 31, 1997, 1996 and 1995.................... F-5
Combined Statements of Cash Flows -- Years Ended December
31, 1997, 1996 and 1995................................... F-6
Notes to Combined Financial Statements -- December 31,
1997...................................................... F-7
Condensed Combined Balance Sheet -- June 30, 1998
(Unaudited)............................................... F-18
Condensed Combined Statements of Income -- Six Months Ended
June 30, 1998 and 1997 (Unaudited)........................ F-19
Condensed Combined Statements of Cash Flows -- Six Months
Ended June 30, 1998 and 1997 (Unaudited).................. F-20
Notes to Condensed Combined Financial Statements -- June 30,
1998 (Unaudited).......................................... F-21
Schedule II -- Valuation and Qualifying Accounts............ F-22
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
F-1
<PAGE> 61
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Landair Services, Inc.
We have audited the accompanying combined balance sheets of the Truckload
Business of Landair Services, Inc. (as defined in Note 1) as of December 31,
1997 and 1996, and the related combined statements of income, shareholder's
investment, and cash flows for each of the three years in the period ended
December 31, 1997. Our audits also included the financial statement schedule
listed in the Index to Financial Statements at Item 15(a). These financial
statements and schedule are the responsibility of the management of the
Truckload Business. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Truckload
Business of Landair Services, Inc. at December 31, 1997 and 1996, and the
combined results of its operations and its cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Nashville, Tennessee
July 9, 1998
F-2
<PAGE> 62
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 614 $ 28
Accounts receivable, less allowance of $175 in 1997 and
$78 in 1996............................................ 11,100 9,674
Inventories............................................... 421 340
Prepaid expenses.......................................... 2,827 2,562
Income taxes receivable................................... -- 35
Deferred income taxes..................................... 1,372 887
Receivable from Landair Services, Inc..................... 17,447 19,427
------- -------
Total current assets.............................. 33,781 32,953
Property and equipment:
Revenue equipment......................................... 88,600 75,578
Other equipment........................................... 6,075 5,468
Leasehold improvements.................................... 915 465
------- -------
95,590 81,511
Accumulated depreciation and amortization................. 32,178 25,182
------- -------
63,412 56,329
Other assets................................................ 15 10
------- -------
Total assets...................................... $97,208 $89,292
======= =======
LIABILITIES AND SHAREHOLDER'S INVESTMENT
Current liabilities:
Accounts payable.......................................... $ 5,877 $ 4,079
Accrued payroll and related items......................... 3,394 1,641
Insurance and claims accruals............................. 5,542 4,227
Income taxes payable...................................... 44 --
Other accrued expenses.................................... 3,059 2,012
Current portion of long-term debt......................... 10,495 7,701
Current portion of capital lease obligations.............. 2,950 666
------- -------
Total current liabilities......................... 31,361 20,326
Long-term debt, less current portion........................ 12,839 16,838
Capital lease obligations, less current portion............. 1,312 2,933
Deferred income taxes....................................... 12,138 10,787
Commitments and contingencies............................... -- --
Shareholder's investment.................................... 39,558 38,408
------- -------
Total liabilities and shareholder's investment.... $97,208 $89,292
======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE> 63
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating revenue:
Forward Air, Inc.......................................... $ 6,137 $ 5,881 $ 3,238
Other..................................................... 85,261 76,361 84,526
------- ------- -------
91,398 82,242 87,764
Operating expenses:
Salaries, wages and employee benefits..................... 29,865 25,599 24,497
Purchased transportation.................................. 21,471 21,352 27,404
Fuel and fuel taxes....................................... 11,272 10,385 8,730
Depreciation and amortization............................. 8,308 8,438 7,205
Insurance and claims...................................... 6,672 6,217 5,256
Operating leases.......................................... 674 1,061 2,206
Other operating expenses.................................. 9,397 8,365 8,362
------- ------- -------
87,659 81,417 83,660
------- ------- -------
Income from operations...................................... 3,739 825 4,104
Other income (expense):
Interest expense.......................................... (1,826) (2,221) (2,327)
Other, net................................................ (12) 59 227
------- ------- -------
(1,838) (2,162) (2,100)
------- ------- -------
Income (loss) before income taxes........................... 1,901 (1,337) 2,004
Income taxes (benefit)...................................... 751 (432) 1,067
------- ------- -------
Net income (loss)........................................... $ 1,150 $ (905) $ 937
======= ======= =======
</TABLE>
See accompanying notes.
F-4
<PAGE> 64
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
COMBINED STATEMENTS OF SHAREHOLDER'S INVESTMENT
<TABLE>
<CAPTION>
SHAREHOLDER'S INVESTMENT
------------------------
(IN THOUSANDS)
<S> <C>
Balance at December 31, 1994................................ $38,376
Net income for 1995....................................... 937
-------
Balance at December 31, 1995................................ 39,313
Net loss for 1996......................................... (905)
-------
Balance at December 31, 1996................................ 38,408
Net income for 1997....................................... 1,150
-------
Balance at December 31, 1997................................ $39,558
=======
</TABLE>
See accompanying notes.
F-5
<PAGE> 65
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ 1,150 $ (905) $ 937
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................. 8,308 8,438 7,205
Loss (gain) on sale of property and equipment............. 385 (92) (503)
Provision for losses on receivables....................... 88 45 60
Deferred income taxes..................................... 866 1,998 4,709
Changes in operating assets and liabilities:
Accounts receivable.................................... (1,514) (446) 1,419
Inventories............................................ (81) (194) (3)
Prepaid expenses....................................... (265) (67) (1,383)
Receivable from Landair Services, Inc.................. 1,980 (2,044) 1,795
Accounts payable and accrued expenses.................. 5,913 2,117 1,331
Income taxes........................................... 79 671 (706)
-------- -------- --------
Net cash provided by operating activities......... 16,909 9,521 14,861
INVESTING ACTIVITIES
Purchases of property and equipment......................... (15,841) (4,677) (23,070)
Proceeds from disposal of property and equipment............ 1,259 1,259 3,062
Other....................................................... (5) 5 156
-------- -------- --------
Net cash used in investing activities....................... (14,587) (3,413) (19,852)
FINANCING ACTIVITIES
Proceeds from long-term debt................................ 6,873 1,837 16,329
Payments of long-term debt.................................. (8,078) (10,820) (7,412)
Payments of capital lease obligations....................... (531) (784) (854)
-------- -------- --------
Net cash provided by (used in) financing activities......... (1,736) (9,767) 8,063
-------- -------- --------
Net increase (decrease) in cash and cash equivalents........ 586 (3,659) 3,072
Cash and cash equivalents at beginning of year.............. 28 3,687 615
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 614 $ 28 $ 3,687
======== ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE> 66
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying combined financial statements include the accounts
comprising the truckload operations of Landair Services, Inc. ("Services"), and
are based on historical amounts included in the consolidated financial
statements of Services. The truckload operations are referred to in these
financial statements as the "Truckload Business" or "Truckload". The Truckload
Business is an irregular route, high-service truckload carrier that transports a
wide range of commodities in both intrastate and interstate commerce. The
Truckload Business provides dry van common carrier and dedicated contract
carriage for shippers of a variety of products in the medium- and short-haul
markets. All significant intercompany transactions and accounts between the
combined truckload operations have been eliminated.
On July 9, 1998, the Board of Directors of Services authorized management
to proceed with the pro rata distribution (the "Distribution") by Services to
its shareholders of all of the outstanding shares of common stock of a new
truckload holding company, Landair Corporation. The Distribution will result in
the separation of Services into two publicly-held corporations, one owning and
operating the deferred air freight operations and the other owning and operating
the Truckload Business. Management anticipates the transaction will be completed
on a date in September 1998 (the "Distribution Date").
Pursuant to the Distribution, the common stock of Landair Corporation will
be distributed to the shareholders of Services on a pro rata basis of one share
of Landair Corporation common stock for every one share of Services common stock
held. Subsequent to the Distribution, Landair Corporation will be the legal
entity that will own and operate the Truckload Business through its operating
subsidiaries, and Services will be the legal entity that will continue to own
and operate the deferred air freight operations through its operating
subsidiaries. Landair Corporation and its operating subsidiaries are referred to
in these financial statements as "the Company". The deferred air freight
operations are referred to as "Forward Air".
These historical combined financial statements include the assets and
liabilities and results of operations directly related to the Truckload Business
for all periods presented. Significant changes could have occurred in the
funding and operations of the Truckload Business had it been operated as an
independent stand-alone entity during those periods, which could have had a
significant impact on its financial position and results of operations. As a
result, the financial information included in these financial statements is not
necessarily indicative of the financial position and results of operations of
the Truckload Business which might have occurred had it been an independent
stand-alone entity.
CAPITALIZATION OF TRUCKLOAD
For accounting purposes, the historical equity (shareholder's investment)
of the Truckload Business consists of the contributed capital and the
accumulated retained earnings of the Truckload operations.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
OWNERSHIP
Scott M. Niswonger (Chairman, President and Chief Executive Officer of
Services) will be the majority shareholder of the Company upon the effectiveness
of the Distribution.
F-7
<PAGE> 67
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
OPERATING REVENUE
Operating revenue and related costs are recognized as of the date shipments
are completed.
CASH EQUIVALENTS
The Truckload Business considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
INVENTORIES
Inventories of tires, replacement parts, supplies and fuel for revenue
equipment are stated at the lower of cost or market utilizing the FIFO
(first-in, first-out) method of determining cost.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of property and
equipment is calculated based upon the cost of the asset, reduced by its
estimated salvage value, using the straight-line method over the estimated
useful lives as follows:
<TABLE>
<S> <C>
Revenue equipment........................................... 3-7 years
Other equipment............................................. 3-10 years
Leasehold improvements...................................... 1-15 years
</TABLE>
Interest payments during 1997, 1996 and 1995 were $1,806,000, $2,265,000
and $2,290,000, respectively. No interest was capitalized during the three years
ended December 31, 1997. During 1997, 1996 and 1995, the Truckload Business
added revenue equipment of $1,563,000, $-0- and $2,682,000 through capital
leases, respectively.
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. The measurement of possible impairment is based upon determining
whether projected undiscounted future cash flows from the use of the asset over
the remaining depreciation or amortization period is less than the carrying
value of the asset. As of December 31, 1997, in the opinion of management, there
has been no such impairment.
INSURANCE AND CLAIMS ACCRUALS
The primary claims in the Truckload Business are workers' compensation,
property damage, auto liability and medical benefits. Most of Truckload's
insurance coverage provides for self-insurance levels with primary and excess
coverage which management believes is sufficient to adequately protect the
Truckload Business from catastrophic claims. In the opinion of management,
adequate provision has been made for all incurred claims up to the self-insured
limits.
NET INCOME (LOSS) PER SHARE
The financial statements of the Truckload Business include the accounts
comprising the truckload operations of Services. The truckload operations did
not have separate outstanding shares of capital stock. Accordingly, net income
(loss) per share data is not considered to provide meaningful information about
the results of operations of the Truckload Business.
F-8
<PAGE> 68
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTIONS
The Company intends to grant options for a fixed number of shares to
employees and outside directors with an exercise price generally equal to the
fair value of the shares at the grant date. The Company intends to account for
stock option grants in accordance with Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees, and, accordingly, recognizes no
compensation expense for the stock option grants issued at fair value.
ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, Reporting Comprehensive Income. The Statement is effective beginning in
1998, and establishes standards for the reporting and display of comprehensive
income and its components. The Statement requires that all items that are income
be reported in a financial statement that is displayed with the same prominence
as other financial statements. Management does not expect the effect of adoption
of Statement No. 130 to be material to the combined financial statements.
In February 1998, the Financial Accounting Standards Board issued Statement
No. 131, Disclosures About Segments of an Enterprise and Related Information,
which is effective for fiscal years beginning after December 15, 1997. Statement
No. 131 changes the way public companies report segment information in annual
financial statements and also requires those companies to report selected
segment information in interim financial reports to shareholders. Management
does not expect the effect of adoption of Statement No. 131 to be material to
the combined financial statements.
MAJOR CUSTOMER
One customer of the Truckload Business, Federal Express Corporation,
accounted for 29.4% and 17.1% of combined operating revenue for the year ended
December 31, 1997 and 1996, respectively. No single customer accounted for more
than 10% of operating revenue in 1995.
COMMON EXPENSES
Certain administrative expenses consisting of payroll, legal, accounting,
rent and depreciation for shared facilities, and other common expenses which
could not be specifically identified to either the deferred air freight
operations or the truckload operations have been allocated by Services to the
Truckload Business based on its relative percentage of consolidated operating
revenue. These administrative expenses, which were allocated to the Truckload
Business and which would have been incurred by the Truckload Business if it had
been operated as an independent stand-alone entity, totaled $4,420,000,
$3,225,000 and $3,778,000 in 1997, 1996 and 1995, respectively.
Interest expense of $1,826,000, $2,221,000 and $2,327,000 for 1997, 1996
and 1995, respectively, has been allocated by Services to the Truckload Business
based upon the pro rata share of average operating assets of Truckload and
Forward Air.
Management believes these allocation methods are reasonable.
2. TRANSACTIONS WITH SERVICES
The Truckload Business and Services routinely engage in intercompany
transactions as the Truckload Business hauls deferred air freight shipments for
Services which are in excess of Services' scheduled capacity. Truckload's
operating revenue from these shipments is shown separately in the accompanying
statements of income.
F-9
<PAGE> 69
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Receivable from Landair Services, Inc. in the accompanying balance
sheets represents the net balance resulting from various intercompany
transactions between Services and the Truckload Business. There are no terms of
settlement or interest charges associated with the account balance. The balance
is primarily the result of Truckload's participation in Services' central cash
management program, wherein all of Services' cash receipts are remitted to a
Truckload Business subsidiary and all cash disbursements are funded by a
Truckload Business subsidiary. Other transactions include intercompany freight
transactions as discussed above, the federal income tax liability (benefit)
provided by the Truckload Business to the consolidated tax liability, and
miscellaneous other common expenses incurred between the Truckload Business and
Services. In connection with the Distribution, Services expects to settle all
intercompany balances for cash, which will then be used to pay down the
long-term debt of the Truckload Business.
An analysis of transactions in the Receivable from Landair Services, Inc.
account follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year.............................. $19,427 $17,383 $19,178
Net cash remitted from Services........................... (2,065) (1,492) (1,864)
Net intercompany freight transactions..................... 6,137 5,881 3,238
Current federal income tax benefit provided to Services... 194 3,101 2,936
Net administrative expenses and interest allocated from
Services................................................ (6,246) (5,446) (6,105)
------- ------- -------
Balance at end of year.................................... $17,447 $19,427 $17,383
======= ======= =======
</TABLE>
In connection with the Distribution, Services and the Company will enter
into certain agreements which will be effective upon the actual separation of
the two companies. The agreements are intended to facilitate orderly changes
from an integrated transportation company to separate deferred air freight and
truckload operations companies in a way which is minimally disruptive to each
entity. Following are summaries of the principal agreements:
Distribution Agreement
The Distribution Agreement will provide for, among other things, the
principal corporate transactions required to effect the Distribution and the
allocation of certain assets and liabilities between the Company and Services.
The Distribution Agreement will provide that the Company and Services will each
have sole responsibility for claims arising out of their respective activities
after the Distribution. It also will provide that each party will indemnify the
other in the event of certain liabilities arising under the federal securities
laws, and that, for a period of three years after the Distribution, neither the
Company nor Services will directly solicit the employment of any employee of the
other company or its affiliates without the prior written consent of such other
company.
Transition Services Agreement
The Transition Services Agreement will describe the services which the
Company and Services will provide to each other following the Distribution.
Services performed under the Transition Services Agreement will be negotiated
and paid for on an arm's-length basis. The Transition Services Agreement will
have an eighteen-month term, except that information technology services to be
provided by Services to the Company will have a thirty-six month term.
Notwithstanding the stated term of the Transition Services Agreement, Services
or the Company, as recipients of the services, will be able to terminate any or
all such services at any time on three months' irrevocable written notice, and
Services or the Company, as providers of the services, may at any time after the
first anniversary of the Distribution, terminate any or all of the services,
other than the information technology services, on six months' irrevocable
notice.
F-10
<PAGE> 70
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Employee Benefit Matters Agreement
The Employee Benefit Matters Agreement will provide for the treatment of
employee benefit matters and other compensation arrangements for the employees
of Services and the Company after the Distribution. Pursuant to this agreement,
Services will continue sponsorship of the various employee benefit plans and
welfare plans of Services with respect to Services' employees after the
Distribution and the Company will be required to establish such similar plans
which will allow the Company to provide to its employees after the Distribution
substantially the same benefits currently provided to them as employees of
Services. This Employee Benefit Matters Agreement will also provide for the
adjustment and conversion of the existing non-exercisable stock options of
Services into options of the Company for those employees that continue
employment with the Company after the Distribution. (See Note 4.)
Tax Sharing Agreement
The Tax Sharing Agreement will describe the responsibilities of Services
and the Company with respect to all tax matters occurring prior to and after the
Distribution. The Tax Sharing Agreement will provide for the allocation of tax
expense, assessments, refunds and other tax benefits. The Agreement will also
set forth the responsibility for filing tax returns and provide for reasonable
cooperation in the event of any audit, litigation or other proceeding with
respect to any federal, state or local tax.
Prior to the Distribution, Services is expected to acquire certain assets,
consisting principally of revenue equipment, associated with the Forward Air
operations held by the Truckload Business, at net book value which approximates
fair market value. The net book value of these assets at December 31, 1997 was
$6.4 million. Services will also assume the capital lease obligations related to
these assets. No gain or loss is expected on the transaction for financial
statement or income tax reporting purposes. The operating revenue and expenses
associated with the transportation of Forward Air deferred air freight using
these assets have been included in the statements of income of Services and have
been excluded from the accompanying statements of income of the Truckload
Business.
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Line of credit.............................................. $ -- $ --
Installment Equipment Loan Agreements....................... 13,457 11,387
Installment notes payable with a finance company through
1999, including interest at the 30-day commercial paper
rate plus 1.8% (7.6% and 7.8% at December 31, 1997 and
1996, respectively) and interest ranging from 6.7% to
7.3%, collateralized by revenue equipment................. 7,823 12,025
Other notes payable, including interest ranging from 6.9% to
7.9%...................................................... 2,054 1,127
------- -------
23,334 24,539
Less current portion........................................ 10,495 7,701
------- -------
$12,839 $16,838
======= =======
</TABLE>
Services has a $15 million line of credit agreement with a Tennessee bank
which expires in May 1999. Advances outstanding under the line bear interest at
the bank's base rate less 1.0% (7.5% and 7.3% at December 31, 1997 and 1996,
respectively) and are collateralized primarily by accounts receivable of
Services. The agreement contains, among other things, restrictions that do not
allow the payment of dividends, and requires the maintenance of certain levels
of net worth and other financial ratios. At December 31, 1997,
F-11
<PAGE> 71
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Services had no borrowings outstanding under the line applicable to the
Truckload Business and had utilized $5,182,000 of availability for outstanding
letters of credit for the Truckload Business.
Services has equipment loan agreements (the "Equipment Loan Agreements")
with two Tennessee banks which permit Services to borrow up to $30 million for
the purchase of revenue equipment. Advances outstanding under the Equipment Loan
Agreements bear interest at the 30-day LIBOR rate plus 1.0% to 1.6% (6.7% to
7.3% and 6.4% to 7.0% at December 31, 1997 and 1996, respectively). The advances
are collateralized by revenue equipment purchased with the proceeds from the
Equipment Loan Agreements, are guaranteed by Services, and contain restrictions
and covenants similar to the line of credit agreement described above. At
December 31, 1997, $13,457,000 of borrowings were outstanding under the
Equipment Loan Agreements applicable to the Truckload Business.
Revenue equipment of the Truckload Business collateralizing these
agreements has a carrying value of approximately $27,678,000 and $27,221,000 at
December 31, 1997 and 1996, respectively.
Maturities of long-term debt, before replacing the line of credit and
equipment loan agreements as discussed below, are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $10,495
1999........................................................ 6,596
2000........................................................ 2,617
2001........................................................ 1,474
2002........................................................ 755
Thereafter.................................................. 1,397
-------
$23,334
=======
</TABLE>
In preparation for the Distribution, Services is negotiating with its
present lenders to obtain separate credit facilities for each of the Company and
Services. In addition, Services expects to eliminate guarantees of indebtedness
and cross-collateralization between the Company and Services. The Company's
proposed new credit facilities are to include a working capital line of credit
and an equipment financing facility. These credit facilities are expected to
permit the Company to borrow up to $15 million under the working capital line of
credit and $20 million under the equipment financing facility. Interest rates
for advances under the facilities will vary based on various covenants related
to total indebtedness, cash flows, results of operations and other ratios. The
facilities will bear interest at LIBOR plus 1.0% to 1.6%, expire in August 2000,
and will be secured by accounts receivable and certain revenue equipment.
Availability under the proposed line of credit is expected to be reduced by the
amount of outstanding letters of credit. Among other restrictions, the terms of
the proposed line of credit are expected to require maintenance of certain
levels of net worth and other financial ratios.
4. EMPLOYEE BENEFIT PLANS
Employee Stock Option and Incentive Plan. After the Distribution, the
Company plans to follow Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related Interpretations in accounting for
employee stock options because the alternative fair value accounting provided
for under Statement No. 123, Accounting for Stock-Based Compensation, requires
use of option valuation models that were not developed for use in valuing
employee stock options. Under Opinion No. 25, when the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense will be recognized.
In connection with the Distribution, it is anticipated that the Company
will reserve approximately 500,000 shares of its common stock under a Stock
Option and Incentive Plan with terms similar to that of
F-12
<PAGE> 72
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Services'. Options to be issued under the Plan are expected to have a ten year
term and vest over a four year period.
Under the provisions of Services' stock option plan, options to purchase
shares of Services common stock that are exercisable at the time of the
Distribution and that are held by those employees who will terminate employment
with Services and become employees of the Company upon the Distribution will be
cancelled if not exercised prior to such employees' termination of employment
with Services. Accordingly, employees leaving Services and continuing as
employees of the Company are expected to exercise their vested options prior to
the Distribution. Unexercisable options held by employees of Services who remain
or become employees of the Truckload Business upon consummation of the
Distribution will be converted into options to purchase Company common stock
under the Company's Stock Option and Incentive Plan. Such conversion shall be on
the basis of a formula designed to preserve the fair market value of such
converted options on the date of the Distribution.
At December 31, 1997, approximately 82,000 options were outstanding to
purchase Services' common stock that were held by Truckload Business employees
and are eligible for conversion into options of the Company.
Employee Stock Purchase Plan. In connection with the Distribution, the
Company plans to implement an employee stock purchase plan with terms similar to
the existing plan of Services. Under the plan, participating employees will be
entitled to purchase the Company's common stock through payroll deduction of up
to 10% of the employee's annual compensation. The issue price of the common
stock will be equal to the lesser of (1) 85% of market price on the first
trading day of the semi-annual enrollment period or (2) 85% of market price on
the last trading day of the semi-annual enrollment period. The Company plans to
reserve 300,000 shares of its common stock for issuance pursuant to the plan.
Employee 401(k) Plan. In connection with the Distribution, the Company
intends to adopt a retirement savings plan (the "401(k) Plan") with terms
similar to the existing retirement savings plan of Services. Employees of the
Company who participated in Services' 401(k) Plan will be entitled to transfer
their participation into the Company's 401(k) Plan. The 401(k) Plan will be a
defined contribution plan whereby employees who have completed one year of
service, a minimum of 1,000 hours of service and are age 21 or older will be
eligible to participate. The 401(k) Plan is expected to allow eligible employees
to make contributions of 2% to 10% of their annual compensation. Employer
contributions are expected to be made at 25% of the employee's contribution up
to a maximum of 4% of total annual compensation. Employer contributions are
expected to vest 20% after two years of service and continue vesting 20% per
year until fully vested. The matching contribution by the Truckload Business for
1997, 1996 and 1995 was approximately $76,000, $78,000 and $73,000,
respectively.
F-13
<PAGE> 73
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
5. INCOME TAXES
The operations of the Truckload Business have historically been included in
the consolidated federal income tax return of Services. The provision (benefit)
for income taxes reflects an allocation of federal income taxes computed on a
separate return basis. The provision (benefit) for income taxes consists of the
following:
<TABLE>
<CAPTION>
1997 1996 1995
----- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................... $ (94) $(2,172) $(3,128)
State..................................................... (21) (258) (514)
----- ------- -------
(115) (2,430) (3,642)
Deferred:
Federal................................................... 748 1,759 4,122
State..................................................... 118 239 587
----- ------- -------
866 1,998 4,709
----- ------- -------
$ 751 $ (432) $ 1,067
===== ======= =======
</TABLE>
The historical income tax expense (benefit) differs from the amounts
computed by applying the federal statutory rate of 34% to income before income
taxes as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ----- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax expense (benefit) at the statutory rate................. $646 $(455) $ 681
State income taxes (benefit), net of federal benefit........ 86 (32) 71
Meals and entertainment..................................... 19 55 315
---- ----- ------
$751 $(432) $1,067
==== ===== ======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the deferred tax liabilities and assets of the Truckload Business are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation................................ $11,970 $10,595
Prepaid expenses deductible when paid..................... 1,024 938
Other..................................................... 169 191
------- -------
Total deferred tax liabilities.................... 13,163 11,724
Deferred tax assets:
Accrued expenses.......................................... 2,333 1,796
Allowance for doubtful accounts........................... 64 28
------- -------
Total deferred tax assets......................... 2,397 1,824
------- -------
Net deferred tax liabilities...................... $10,766 $ 9,900
======= =======
</TABLE>
Management believes that the deferred tax assets will ultimately be
realized. Management's conclusion is based on future taxable income that will
result from the reversal of the existing temporary differences. Additionally,
management expects future taxable income from operations, exclusive of the
reversal of temporary differences.
F-14
<PAGE> 74
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The balance sheet classification of deferred income taxes is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Current assets.............................................. $(1,372) $ (887)
Noncurrent liabilities...................................... 12,138 10,787
------- -------
$10,766 $ 9,900
======= =======
</TABLE>
Total income tax payments, including payments to (from) Services for
Truckload's allocated share of federal taxes (benefit) during fiscal 1997, 1996
and 1995 were $(194,000), $(3,101,000) and $(2,936,000), respectively.
6. LEASES
The Truckload Business leases certain revenue and other equipment under
capital leases. These leases expire in various years through 2001. Certain of
the revenue equipment leases contain guarantees of residual values which have
been included in minimum lease payments.
Property and equipment include the following amounts for leases that have
been capitalized:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Revenue equipment........................................... $6,659 $5,465
Less accumulated amortization............................... 2,596 2,123
------ ------
$4,063 $3,342
====== ======
</TABLE>
Amortization of leased assets is included in depreciation and amortization
expense.
The Truckload Business also leases certain facilities and revenue equipment
under noncancelable operating leases that expire in 1998. Certain of these
leases may be renewed for periods varying from one to three years. The Truckload
Business also shares certain facilities leased by Services, and has been
allocated a portion of the rent expense related thereto (see Note 1 -- Common
Expenses). As discussed below, the Company will enter into lease or sublease
agreements with Services related to certain facilities on or prior to the date
of the Distribution.
Included in operating leases is a terminal facility leased from a company
wholly-owned by Services' majority shareholder which expired in January 1997,
and the lease was not renewed. The net rent expense for this lease was $-0-,
$60,000 and $84,000 in 1997, 1996 and 1995, respectively.
F-15
<PAGE> 75
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum rental payments under capital leases and noncancelable
operating leases with initial terms of one year or more consisted of the
following at December 31, 1997:
<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEAR LEASES LEASES
- ----------- ------- ---------
(IN THOUSANDS)
<S> <C> <C>
1998........................................................ $3,175 $150
1999........................................................ 616 --
2000........................................................ 612 --
2001........................................................ 200 --
------ ----
Total minimum lease payments...................... 4,603 $150
====
Amounts representing interest............................... (341)
------
Present value of net minimum lease payments
(including current portion of $2,950)..................... $4,262
======
</TABLE>
Payment of certain of the capital and operating leases is guaranteed by
Services. In connection with the Distribution, Services expects to eliminate
guarantees of lease obligations involving the Truckload Business.
Services, through a wholly-owned subsidiary, currently leases to a
wholly-owned subsidiary of the Company a portion of its terminal facility in
Atlanta, Georgia. Rental payments under the lease agreement are based upon the
cost of such facility and an agreed upon percentage of usage. In addition, on or
prior to the date of the Distribution, Services will enter into subleases with
the Company pursuant to which Services will sublease to the Company (i) a
portion of its terminal facility in Columbus, Ohio that is leased by Services
from the Director of Development of the State of Ohio; (ii) a portion of the
facility leased by Services in Indianapolis, Indiana; (iii) a portion of its
terminal facility in Chicago, Illinois that is leased by a Services subsidiary;
(iv) a portion of its terminal facility in Detroit, Michigan that is leased by a
Services subsidiary; and (v) a portion of the headquarters of Services in
Greeneville, Tennessee that is leased by Services from the Greeneville-Greene
County Airport Authority. Services expects to sublease the Columbus terminal
facility for consideration based upon the cost of such facility to Services and
an agreed upon percentage of usage. Services expects to sublease the
Indianapolis, Chicago, Detroit and Greeneville facilities for consideration
based upon an agreed upon percentage of usage.
7. COMMITMENTS AND CONTINGENCIES
The Truckload Business is, from time to time, a party to litigation arising
in the normal course of its business, most of which involve claims for personal
injury and property damage incurred in connection with the transportation of
freight. Management believes that none of these actions, individually or in the
aggregate, will have a material adverse effect on the financial condition or
results of operations of the Truckload Business.
8. FINANCIAL INSTRUMENTS
Off Balance Sheet Risk
At December 31, 1997, letters of credit attributable to the Truckload
Business totaled $5,182,000, all of which relate to obligations carried on the
balance sheet.
Concentrations of Credit Risk
Financial instruments that potentially subject the Truckload Business to
significant concentrations of credit risk consist principally of cash
investments and trade accounts receivable. The Truckload Business does not
generally require collateral from its customers. Concentrations of credit risk
with respect to trade accounts
F-16
<PAGE> 76
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
receivable are limited due to the large number of entities comprising
Truckload's customer base and their dispersion across many different industries.
Fair Value of Financial Instruments
The following methods and assumptions were used by the Truckload Business
in estimating its fair value disclosures for financial instruments with third
parties:
Cash and cash equivalents: The carrying amount reported in the
balance sheets for cash and cash equivalents approximates its fair value.
Accounts receivable and accounts payable: The carrying amounts
reported in the balance sheets for accounts receivable and accounts payable
approximate their fair value.
Long-and short-term debt: The fair value of Truckload's long-term
debt and capital lease obligations is estimated using discounted cash flow
analyses, based on Truckload's current incremental borrowing rates for
similar types of borrowing arrangements.
The carrying amounts and fair values of Truckload's financial instruments
with third parties are as follows:
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and cash equivalents....................... $ 614 $ 614 $ 28 $ 28
Accounts receivable............................. 11,100 11,100 9,674 9,674
Accounts payable................................ 5,877 5,877 4,079 4,079
Long-term debt and capital lease obligations.... 27,596 27,596 28,138 28,138
</TABLE>
F-17
<PAGE> 77
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
CONDENSED COMBINED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
1998
--------------
(IN THOUSANDS)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 61
Accounts receivable, less allowance of $155............... 10,663
Other current assets...................................... 7,144
Receivable from Landair Services, Inc..................... 12,393
--------
Total current assets.............................. 30,261
Property and equipment...................................... 103,189
Less accumulated depreciation and amortization.............. (35,127)
--------
68,062
Other assets................................................ 33
--------
Total assets...................................... $ 98,356
========
LIABILITIES AND SHAREHOLDER'S INVESTMENT
Current liabilities:
Accounts payable.......................................... $ 5,394
Accrued expenses.......................................... 12,271
Current portion of long-term debt......................... 9,662
Current portion of capital lease obligations.............. 2,683
--------
Total current liabilities......................... 30,010
Long-term debt, less current portion........................ 13,922
Capital lease obligations, less current portion............. 955
Deferred income taxes....................................... 12,566
Shareholder's investment.................................... 40,903
--------
Total liabilities and shareholder's investment.... $ 98,356
========
</TABLE>
See notes to condensed combined financial statements.
F-18
<PAGE> 78
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Operating revenue:
Forward Air, Inc.......................................... $ 2,354 $ 2,575
Other..................................................... 49,189 40,050
------- -------
51,543 42,625
Operating expenses:
Salaries, wages, and employee benefits.................... 16,949 13,906
Purchased transportation.................................. 12,495 10,268
Fuel and fuel taxes....................................... 5,959 5,325
Depreciation and amortization............................. 4,616 4,096
Insurance and claims...................................... 2,957 3,543
Operating leases.......................................... 429 256
Other operating expenses.................................. 5,045 4,261
------- -------
48,450 41,655
------- -------
Income from operations...................................... 3,093 970
Other income (expense):
Interest expense.......................................... (924) (933)
Other, net................................................ 26 (71)
------- -------
(898) (1,004)
------- -------
Income (loss) before income taxes........................... 2,195 (34)
Income taxes (benefit)...................................... 850 (11)
------- -------
Net income (loss)................................. $ 1,345 $ (23)
======= =======
</TABLE>
See notes to condensed combined financial statements.
F-19
<PAGE> 79
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Cash from operations........................................ $ 9,060 $ 7,242
Investing activities:
Proceeds from disposal of property and equipment.......... 1,447 804
Purchases of property and equipment....................... (10,668) (4,751)
Other..................................................... (18) (1)
------- -------
(9,239) (3,948)
Financing activities:
Proceeds from long-term debt.............................. 6,481 652
Payments of long-term debt................................ (6,231) (3,524)
Payments of capital lease obligations..................... (624) (422)
------- -------
(374) (3,294)
Increase in cash and cash equivalents....................... $ (553) $ --
======= =======
</TABLE>
See notes to condensed combined financial statements.
F-20
<PAGE> 80
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed combined financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six month period ended June 30, 1998 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1998. For further information, refer to the combined financial statements and
footnotes thereto included herein.
NOTE 2. ACCOUNTING PRONOUNCEMENT
As of January 1, 1998, the Truckload Business adopted Statement No. 130,
Reporting Comprehensive Income. Statement No. 130 establishes standards for the
reporting and display of comprehensive income and its components; however, the
adoption of this Statement had no impact on the Truckload Business' net income
or shareholder's investment. The Truckload Business has no items of other
comprehensive income to be reported under the provisions of Statement No. 130.
NOTE 3. INCOME TAXES
For the six months ended June 30, 1998 and 1997, the effective income tax
rate (benefit) varied from the statutory federal income tax rate of 34%
primarily as a result of the effect of state income taxes, net of the federal
benefit, and permanent differences.
NOTE 4. CONTINGENCIES
The Truckload Business is, from time to time, a party to litigation arising
in the normal course of its business, most of which involve claims for personal
injury and property damage incurred in connection with the transportation of
freight. Management believes none of these actions, individually or in the
aggregate, will have a material adverse effect on the financial condition or
results of operations of Truckload.
F-21
<PAGE> 81
THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------ ---------- -------------------- ----------- ----------
ADDITIONS
--------------------
(1) (2)
CHARGED CHARGED
BALANCE AT TO COSTS TO OTHER BALANCE AT
BEGINNING AND ACCOUNTS- DEDUCTIONS- END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
----------- ---------- -------- --------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Allowance for doubtful accounts......... $53 $ 88 $ -- $ 16(2) $125
Allowance for revenue adjustments(1).... 25 226 -- 201(3) 50
--- ---- -- ---- ----
78 314 -- 217 175
Year ended December 31, 1996:
Allowance for doubtful accounts......... 33 45 -- 25(2) 53
Allowance for revenue adjustments(1).... 20 447 -- 442(3) 25
--- ---- -- ---- ----
53 492 -- 467 78
Year ended December 31, 1995:
Allowance for doubtful accounts......... 32 60 -- 59(2) 33
Allowance for revenue adjustments(1).... 55 322 -- 357(3) 20
--- ---- -- ---- ----
87 382 -- 416 53
</TABLE>
- ---------------
(1) Represents an allowance for adjustments to accounts receivable due to
disputed rates, accessorial charges and other aspects of previously billed
shipments.
(2) Uncollectible accounts written off, net of recoveries.
(3) Adjustments to billed accounts receivable due to disputed rates, accessorial
charges, etc.
F-22
<PAGE> 82
ANNEX A
DISTRIBUTION AGREEMENT
BETWEEN
FORWARD AIR CORPORATION
F/K/A LANDAIR SERVICES, INC.
AND
LANDAIR CORPORATION
A-1
<PAGE> 83
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
I. DEFINITIONS........................................................ A-3
1.1 General..................................................... A-3
II. THE DISTRIBUTION.................................................. A-5
2.1 Cooperation Prior to the Distribution....................... A-5
2.2 Conditions to Distribution.................................. A-5
2.3 The Distribution............................................ A-6
III. TRANSACTIONS RELATING TO THE DISTRIBUTION........................ A-6
3.1 The Reorganization.......................................... A-6
3.2 Company Charter and Bylaws.................................. A-7
3.3 Other Agreements............................................ A-7
3.4 Operation in the Ordinary Course of Business................ A-7
3.5 Collections and Payments after the Distribution Date........ A-7
IV. INDEMNIFICATION................................................... A-7
4.1 Indemnification by FAF...................................... A-7
4.2 Indemnification by the Company.............................. A-7
4.3 Limitations on Indemnification Obligations.................. A-7
4.4 Procedures for Indemnification.............................. A-8
4.5 Releases.................................................... A-9
4.6 Environmental Liabilities................................... A-9
V. ACCESS TO INFORMATION; SERVICES.................................... A-9
5.1 Access to Information....................................... A-9
5.2 Production of Witnesses..................................... A-10
5.3 Provision of Services....................................... A-10
5.4 Reimbursement............................................... A-10
5.5 Retention of Records........................................ A-10
5.6 Confidentiality............................................. A-10
5.7 Provision of Corporate Records.............................. A-11
5.8 Privileged Matters.......................................... A-11
VI. SHARED CLAIMS..................................................... A-11
6.1 Acknowledgment.............................................. A-11
6.2 Notification................................................ A-11
6.3 Cooperation................................................. A-11
6.4 Liability................................................... A-11
VII. MISCELLANEOUS.................................................... A-12
7.1 Complete Agreement; Construction............................ A-12
7.2 Expenses.................................................... A-12
7.3 Governing Law............................................... A-12
7.4 Notices..................................................... A-12
7.5 Amendments and Waivers...................................... A-12
7.6 Counterparts................................................ A-12
7.7 Successors and Assigns...................................... A-12
7.8 Termination................................................. A-12
7.9 No Third-Party Beneficiaries................................ A-12
7.10 Titles and Headings......................................... A-12
7.11 Legal Enforceability........................................ A-12
7.12 Further Assurances.......................................... A-12
7.13 No Solicitation of Employees................................ A-13
</TABLE>
A-2
<PAGE> 84
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (this "Agreement") is made as of this
day of , 1998 by and between FORWARD AIR CORPORATION, a
Tennessee corporation f/k/a Landair Services, Inc. ("FAF"), and LANDAIR
CORPORATION, a Tennessee corporation (the "Company").
RECITALS
WHEREAS, FAF is the holder of all of the issued and outstanding shares of
$.01 par value per share common stock of the Company (the "Company Common
Stock");
WHEREAS, the Board of Directors of FAF (the "FAF Board") has determined
that it is advisable and in the best interests of FAF, its shareholders and the
Company to distribute (the "Distribution") all of the issued and outstanding
shares of Company Common Stock to the holders of the $.01 par value per share
common stock of FAF (the "FAF Common Stock"); and
WHEREAS, FAF and the Company have determined that it is necessary and
desirable to set forth the principal corporate transactions required to effect
the Distribution and certain other agreements that will govern certain matters
relating to the Distribution and the relationships thereafter between FAF and
the Company and their respective subsidiaries following the Distribution;
NOW, THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth and other good and valuable consideration, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 General. As used in this Agreement, the following terms shall have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
ACTION: any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory
or administrative agency or commission or any arbitration tribunal.
AFFILIATE: as defined in Rule 12b-2 under the Exchange Act.
FAF GROUP: at any time following the Distribution, FAF and all
entities which are Affiliates of FAF at such time.
CODE: the Internal Revenue Code of 1986, as amended.
COMMISSION: the United States Securities and Exchange Commission.
COMPANY GROUP: at any time following the Distribution, the Company
and all entities which are Affiliates of the Company at such time.
DISTRIBUTION AGENT: SunTrust Bank, Atlanta.
DISTRIBUTION DATE: the date (as determined by the FAF Board or a
committee thereof) as of which the Distribution shall be effected.
DISTRIBUTION RATIO: the ratio of FAF Common Stock to Company Common
Stock to be distributed in the Distribution.
EMPLOYEE BENEFIT MATTERS AGREEMENT: the Employee Benefit Matters
Agreement to be entered into by FAF and the Company as of the Distribution
Date, the form of which is attached hereto as Annex A.
A-3
<PAGE> 85
ENVIRONMENTAL LIABILITIES: any Liabilities arising from, under or
relating to any environmental, health or safety law, rule, regulation,
Action, threatened Action, order or consent decree.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
FORM 10: the Registration Statement on Form 10 filed by the Company
with the Commission to effect the registration of the Company Common Stock
under the Exchange Act.
FORWARD AIR: Forward Air, Inc., a Tennessee corporation.
FORWARD AIR BUSINESS: the business of providing the
less-than-truckload movement of deferred air freight as conducted by FAF
prior to the Distribution primarily through the FAF Group.
INFORMATION STATEMENT: the Information Statement on Form 14C filed by
the Company with the Commission and included in the Form 10 at the time of
its effectiveness.
INSURANCE PROCEEDS: those monies (i) received by an insured from an
insurance carrier on an insurance claim or (ii) paid by an insurance
carrier on behalf of an insured on an insurance claim, in either case net
of any applicable deductibles, retentions or costs paid by such insured,
but such term does not refer to proceeds received from an insurer on an
employee benefits group insurance policy.
IRS: the United States Internal Revenue Service.
INTERNATIONAL: Forward Air International Airlines, Inc., a Tennessee
corporation.
LIABILITIES: any and all debts, liabilities, obligations, absolute or
contingent, asserted or unasserted, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, direct or indirect,
whenever arising, including all costs and expenses relating thereto, and
including, without limitation, those debts, liabilities and obligations
arising under any law, rule, regulation, Action, threatened Action, order
or consent decree of any governmental entity or any award of any arbitrator
of any kind, and those arising under any contract, commitment or
undertaking including those arising under this Agreement.
LICENSING: Forward Air Licensing Company, a Delaware corporation.
LOSSES: any and all debts, losses, Liabilities, claims, damages,
obligations, payments or costs and expenses, absolute or contingent,
matured or unmatured, liquidated or unliquidated, accrued or unaccrued,
known or unknown, direct or indirect (including, without limitation, the
costs and expenses of any and all Actions, threatened Actions, demands,
assessments, judgments, settlements and compromises relating thereto and
attorneys' fees and any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any such Actions or
threatened Actions).
OTHER AGREEMENTS: the Employee Benefit Matters Agreement, the
Services Agreement, the Tax Sharing Agreement and such other agreements and
understandings as are required to carry out the transactions authorized by
this Agreement.
RECORD DATE: the close of business on the date to be determined by
the FAF Board or a committee thereof as the record date for the
determination of shareholders of record of FAF entitled to receive the
Distribution.
REORGANIZATION: shall have the meaning set forth in SECTION 3.1
hereof.
ROYALTY: Forward Air Royalty Company, a Delaware corporation.
SECURITIES ACT: the Securities Act of 1933, as amended.
SERVICES AGREEMENT: the Transition Services Agreement to be entered
into by FAF and the Company as of the Distribution Date, the form of which
is attached hereto as Annex B.
SUBSIDIARIES: with respect to any entity, unless otherwise indicated,
shall be deemed to refer to both direct and indirect subsidiaries of such
entity.
A-4
<PAGE> 86
TAX SHARING AGREEMENT: the Tax Sharing Agreement to be entered into
by FAF and the Company as of the Distribution Date, the form of which is
attached hereto as Annex C.
TRANSPORT: Landair Transport, Inc., a Tennessee corporation.
TRANSPORTATION PROPERTIES: Transportation Properties, Inc., a
Tennessee corporation.
TRANSPORTATION PROPERTIES (TEXAS): Transportation Properties (Texas),
Inc., a Tennessee corporation.
TRUCKLOAD BUSINESS: the business of providing short- to medium-haul
delivery to the high-service segment of the general commodities truckload
market as conducted by FAF prior to the Distribution primarily through the
Company Group.
VOLUNTEER: Volunteer Adjustment, Inc., a Tennessee corporation.
ARTICLE II
THE DISTRIBUTION
2.1 Cooperation Prior to the Distribution. Prior to the Distribution:
(a) FAF and the Company shall prepare, and the Company shall file with
the Commission, the Form 10. FAF and the Company shall prepare, and FAF
shall mail, prior to the Distribution Date, to the holders of FAF Common
Stock, the Information Statement, which shall set forth appropriate
disclosure concerning the Company, the Distribution and other matters. The
Company shall use reasonable efforts to cause the Form 10 to become
effective under the Exchange Act.
(b) FAF and the Company shall cooperate in preparing, filing with the
Commission and causing to become effective any registration statements or
amendments thereto that are appropriate to reflect the establishment of or
amendments to any employee benefit and other plans contemplated by the
Employee Benefit Matters Agreement.
(c) Prior to the Distribution, FAF will change the symbol under which
it is listed on The Nasdaq Stock Market to "FWRD" (or such other symbol as
FAF deems appropriate) and the Company shall prepare, file and pursue an
application to permit listing of the Company Common Stock on The Nasdaq
Stock Market (and/or such other exchange as the Company deems appropriate),
under the symbol "LAND" (or such other symbol as the Company deems
appropriate).
2.2 Conditions to Distribution. The FAF Board shall in its discretion
establish the Record Date and the Distribution Date and all appropriate
procedures in connection with the Distribution. The Distribution shall be
subject to satisfaction of each of the following conditions, among other things:
(a) the consummation of the Reorganization in accordance with SECTION 3.1 hereof
and certain internal corporate reorganizations; (b) the renegotiation of certain
FAF credit facilities and debt instruments, including the execution of certain
consents, waivers and amendments thereto by lenders, all on terms satisfactory
to the Board of Directors of FAF; (c) the establishment of separate credit
facilities for the Company and FAF on terms satisfactory to the Board of
Directors of the Company and FAF; (d) the receipt of certain third-party
consents relating to certain contracts, licenses and the Other Agreements; (e)
receipt by FAF of a private letter ruling from the IRS to the effect that, among
other things, the Distribution will qualify as a tax-free distribution for
Federal income tax purposes under Section 355 of the Code, or at the option of
the FAF Board, an opinion of special tax counsel to FAF, in form and substance
satisfactory to the FAF Board, to the effect that, among other things, the
Distribution will constitute such a tax-free distribution under Section 355 of
the Code; (f) the Form 10 having become effective and no stop order being in
effect; (g) there not being in effect any statute, rule, regulation or order of
any court, governmental or regulatory body that prohibits or makes illegal the
transactions contemplated by the Distribution; and (h) approval for listing of
the Company Common Stock on The Nasdaq Stock Market. The FAF Board reserves the
right in its discretion, other than with respect to those set forth in clauses
(a), (e), (f) and (g), to waive the satisfaction of any condition to the
Distribution;
A-5
<PAGE> 87
provided, however, that the FAF Board may abandon, defer or modify the
Distribution and the related transactions at any time prior to the Distribution
Date.
2.3 The Distribution. On the Distribution Date, subject to the conditions
set forth in this Agreement, FAF shall deliver to the Distribution Agent a
certificate or certificates representing the number of then outstanding shares
of Company Common Stock to be distributed in the Distribution, endorsed in
blank, and shall instruct the Distribution Agent to distribute to each holder of
record of FAF Common Stock on the Record Date a certificate or certificates
representing one share of Company Common Stock for one share of FAF Common Stock
so held. The Company agrees to provide all certificates for shares of Company
Common Stock that the Distribution Agent shall require in order to effect the
Distribution.
ARTICLE III
TRANSACTIONS RELATING TO THE DISTRIBUTION
3.1 The Reorganization. Prior to the Distribution Date, FAF and the Company
shall cause, or have caused, the following transactions to occur (the
"Reorganization"):
(a) FAF shall take all steps necessary to cause Transport, its wholly
owned subsidiary, to incorporate FAF, Inc. ("FAF, Inc.") and Landair
Transportation Properties, Inc. ("LTP") as wholly owned Tennessee
corporations;
(b) FAF shall cause Transport to transfer such of its assets
associated with the Forward Air Business (including all goodwill and other
intangibles associated with such Forward Air Business) to FAF, Inc. in
exchange for all of the issued and outstanding stock of FAF, Inc. plus the
assumption by FAF, Inc. of liabilities associated with the transferred
assets.
(c) FAF shall cause Transport to distribute all of the issued and
outstanding stock of FAF, Inc. to its sole shareholder, FAF.
(d) FAF shall cause Transportation Properties to transfer the real
estate on which a Greene County, Tennessee maintenance facility is being
constructed to LTP in exchange for cash and/or LTP's assumption of the debt
associated with such real estate.
(e) FAF shall borrow approximately $12.1 million from an unrelated
financial institution, and use the proceeds of any such borrowing to pay
any intercompany debt owed by Forward Air to Transport. In addition, FAF
will transfer to the Company in the form of a capital contribution $5
million.
(f) FAF shall incorporate, or have incorporated, the Company as a
wholly owned Tennessee corporation for the purpose of facilitating the
Distribution and the Reorganization.
(g) FAF shall transfer all of the issued and outstanding stock of each
of Transport and Volunteer and other assets directly held by FAF (including
trademarks, tradenames goodwill and any other intangibles associated with
the Truckload Business) that are associated with the Truckload Business to
the Company in exchange for all of the issued and outstanding stock of the
Company. Immediately thereafter, the Company will transfer to Transport all
of the assets that the Company received from FAF, except for all of the
issued and outstanding stock of Transport and Volunteer and the trademarks
and tradenames associated with the Truckload Business (including any
goodwill associated with such trademarks and tradenames).
(h) Immediately prior to the Distribution Date, FAF and the Company
shall take all steps necessary to increase the outstanding shares of
Company Common Stock so that, immediately prior to the Distribution, FAF
will hold a number of shares of Company Common Stock sufficient to enable
it to complete the Distribution based on the Distribution Ratio. FAF and
the Company shall take all steps necessary to elect as directors of the
Company, on or prior to the Distribution Date, the persons named in the
Form 10 to constitute the board of directors of the Company on the
Distribution Date.
A-6
<PAGE> 88
3.2 Company Charter and Bylaws. On or prior to the Distribution Date, (a)
FAF shall approve and cause the Charter of the Company substantially in the form
of Annex D hereto to be filed with the Secretary of State of Tennessee and to be
in effect on the Distribution Date and (b) FAF shall adopt the Bylaws of the
Company substantially in the form of Annex E hereto to be in effect on the
Distribution Date.
3.3 Other Agreements. On or prior to the Distribution Date, FAF and the
Company shall enter into, and (if applicable) shall cause their respective
Subsidiaries to enter into, the Other Agreements and any other agreements
necessary or appropriate in connection with the transactions contemplated hereby
and thereby. In the event of a conflict between the terms of this Agreement and
the terms of any of the Other Agreements or any such other agreements, the terms
of this Agreement shall govern.
3.4 Operation in the Ordinary Course of Business. Prior to the
Distribution Date, the Company shall, and shall cause each of its Subsidiaries
to, conduct its business and operations in the ordinary course of business,
consistent with past practice, and shall, and shall cause each of its
Subsidiaries to, continue to provide services, pay accounts payable and
invoices, deposit and accept payments, and make capital expenditures in the
ordinary course of business, all consistent with past practice. The Company
shall not, and shall cause each of its Subsidiaries not to, undertake any
arrangement with the intent to delay receipt of any funds by the Company or its
Subsidiaries until on or after the Distribution Date or to accelerate any
payment to be made by the Company or its Subsidiaries prior to the Distribution
Date, except in each case in the ordinary course of business consistent with
past practice.
3.5 Collections and Payments after the Distribution Date. Except as may
be explicitly provided in this Agreement and the Other Agreements, any cash
receipts arising out of or relating to the assets, Liabilities or operations of
the Company or its past or present Subsidiaries received on or after the
Distribution Date shall be retained by the Company and such Subsidiaries, and
any Liabilities or obligations, arising out of, relating to or asserted on the
basis of the assets, Liabilities or operations of the Company or its past or
present Subsidiaries due and unpaid on and after the Distribution Date, or
incurred on and after the Distribution Date, shall be payable by the Company and
such Subsidiaries. The Company and FAF shall settle all payments received from
account debtors of either of them to the effect that amounts properly owing to
the Company are received by the Company and amounts properly owing to FAF are
received by FAF, with such settlements to occur by wire transfer (a) daily, for
the three-month period beginning on the Distribution Date and (b) weekly,
thereafter.
ARTICLE IV
INDEMNIFICATION
4.1 Indemnification by FAF. Except as otherwise provided by any of the
Other Agreements or as contemplated by Section 4.5 or Article VI hereof,
effective as of the Distribution Date, FAF and each other member of the FAF
Group agree to indemnify, defend and hold harmless the Company, each other
member of the Company Group, and their present or former officers, directors,
shareholders, agents, employees, representatives, successors-in-interest,
parents, Affiliates, insurers, attorneys and assigns (the "Company Indemnitees")
from and against any and all Losses of the Company Indemnitees arising out of or
related in any manner to any item set forth on Schedule 4.1 hereto.
4.2 Indemnification by the Company. Except as otherwise provided by any
of the Other Agreements or as contemplated by Section 4.5 or Article VI hereof,
effective as of the Distribution Date, the Company and each other member of the
Company Group agree to indemnify, defend and hold harmless FAF, each other
member of the FAF Group, and their present or former officers, directors,
shareholders, agents, employees, representatives, successors-in-interest,
parents, Affiliates, insurers, attorneys and assigns (the "FAF Indemnitees")
from and against any and all Losses of the FAF Indemnitees arising out of or
related in any manner to any item set forth on Schedule 4.2 hereto.
4.3 Limitations on Indemnification Obligations. The amount that either
FAF or the Company (an "Indemnifying Party") is or may be required to pay to an
indemnified party ("Indemnitee") pursuant to Section 4.1 or 4.2, or any other
section of this Agreement providing for indemnification, shall be reduced by
A-7
<PAGE> 89
any Insurance Proceeds or other amounts actually recovered by or on behalf of
such Indemnitee, in reduction of the related Loss. If an Indemnitee shall have
received the payment required by this Agreement from an Indemnifying Party in
respect of any Loss and shall subsequently actually receive Insurance Proceeds
or other amounts in respect of such Loss, then such Indemnitee shall pay to such
Indemnifying Party a sum equal to the amount of such Insurance Proceeds or other
amounts actually received (up to but not in excess of the amount of any
indemnity payment made hereunder). No insurer or other third party shall: (a) be
relieved of the responsibility to pay any claims which it would otherwise be
obligated to pay in the absence of the foregoing indemnification provisions; (b)
solely by virtue of the indemnification provisions hereof have any subrogation
rights with respect to any claims which it would otherwise be obligated to pay;
or (c) be entitled to a benefit it would not be entitled to receive in the
absence of the foregoing indemnification provisions. Any Indemnifying Party
shall succeed to the rights of any Indemnitee with respect to any matter
contemplated by this SECTION 4.3.
4.4 Procedures for Indemnification. (a) If an Indemnitee shall receive
notice or otherwise learn of the assertion of any claim or commencement of any
proceeding (including any governmental investigation) by a person who is not a
party to this Agreement (or any Affiliate of either party) (a "Third-Party
Claim") with respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to this Agreement, such Indemnitee shall give such
Indemnifying Party written notice thereof promptly after becoming aware of such
Third-Party Claim setting forth the particulars as to such claim or proceeding
in reasonable detail; provided that the failure of any Indemnitee to give notice
as provided in this SECTION 4.4(A) shall not relieve the related Indemnifying
Party of its obligations under this ARTICLE IV, unless such Indemnifying Party
is actually prejudiced by such failure to give notice, and then only to the
extent of such actual prejudice.
(b) An Indemnifying Party may, to the extent it wishes within 30 days of
receipt of notice of a Third-Party Claim and at its cost and expense, elect to
defend or to seek to settle or compromise any Third-Party Claim; provided that
the Indemnitee may participate in such settlement or defense through its chosen
counsel at its sole cost and expense. After notice from an Indemnifying Party to
an Indemnitee of its election to assume the defense of a Third-Party Claim, such
Indemnifying Party shall not be liable to such Indemnitee under this ARTICLE IV
for any legal or other expenses (except expenses approved in advance by the
Indemnifying Party) subsequently incurred by such Indemnitee in connection with
the defense thereof; provided that if the defendants in any such Third-Party
Claim include both the Indemnifying Party and one or more Indemnitees, and in
any Indemnitee's reasonable judgment a conflict of interest between one or more
of such Indemnitees and such Indemnifying Party exists in respect of such claim,
such Indemnitees shall have the right to employ separate counsel to represent
such Indemnitees. In that event, the reasonable fees and expenses of such
separate counsel (but not more than one separate counsel reasonably satisfactory
to the Indemnifying Party) shall be paid by such Indemnifying Party; provided
further if and to the extent that there is a conflict of defenses or positions
among the Indemnitees, the Indemnitees shall have the right to retain such
number of additional separate counsel, reasonably satisfactory to the
Indemnifying Party, as is reasonably necessary to avoid such conflicts, and the
Indemnifying Party shall be responsible for the reasonable fees and expenses of
such additional separate counsel; provided further that the Indemnitee may
participate in the settlement or defense of a Third-Party Claim through counsel
chosen by such Indemnitee if the fees and expenses of such counsel shall be
borne by such Indemnitee. If an Indemnifying Party elects not to assume
responsibility for defending a Third-Party Claim, such Indemnitee may defend or
seek to compromise or settle such Third-Party Claim, but shall not thereby waive
any right to indemnity therefor pursuant to this Agreement. Notwithstanding the
foregoing, the Indemnifying Party shall not be liable for any settlement of any
Third-Party Claim effected without its written consent. The Indemnifying Party
shall not, except with the consent of the Indemnitee, (i) enter into any such
settlement that does not include as an unconditional term thereof the giving by
the person or persons asserting such Third-Party Claim to all Indemnitees an
unconditional release from all Liability with respect to such Third-Party Claim,
or (ii) consent to entry of any judgment.
(c) Any claim on account of a Loss that does not result from a Third-Party
Claim shall be asserted by written notice given by the Indemnitee to the
Indemnifying Party. Such Indemnifying Party shall have a
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<PAGE> 90
period of 30 days after the receipt of such notice within which to respond
thereto. If such Indemnifying Party does not respond within such 30-day period,
such Indemnifying Party shall be deemed to have refused to accept responsibility
to make payment. If such Indemnifying Party does not respond within such 30-day
period or rejects such claim in whole or in part, such Indemnitee shall be free
to pursue such remedies as may be available to such party under this Agreement
or under applicable law.
(d) In addition to any adjustments required pursuant to SECTION 4.3, if the
amount of any Loss shall, at any time subsequent to the payment required by this
Agreement, be reduced by recovery, settlement or otherwise, the amount of such
reduction that has been received by the Indemnitee, less any expenses properly
incurred in connection therewith, shall promptly be repaid by the Indemnitee to
the Indemnifying Party.
(e) In the event of payment by an Indemnifying Party to any Indemnitee in
connection with any Third-Party Claim, such Indemnifying Party shall have all
rights of subrogation and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third-Party Claim or against any other person. Such
Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner,
and at the cost and expense of such Indemnifying Party, in prosecuting any
subrogated right or claim.
(f) Notwithstanding anything to the contrary herein or in the Other
Agreements, the foregoing indemnification provisions and procedures shall apply
to any other indemnification agreements herein or in the Other Agreements.
4.5 Releases. (a) Subject to ARTICLE VI and effective on the Distribution
Date, the Company and each other member of the Company Group releases and
forever discharges FAF, each other member of the FAF Group, and their present or
former officers, directors, shareholders, agents, employees, representatives,
successors-in-interest, parents, Affiliates, insurers, attorneys and assigns of
and from any and all Liabilities (other than those for which indemnification is
available under this ARTICLE IV and any of the Other Agreements (subject to the
provisions of SECTION 4.3)).
(b) Subject to ARTICLE VI and effective on the Distribution Date, FAF and
each other member of the FAF Group releases and forever discharges the Company,
each other member of the Company Group and their present or former officers,
directors, shareholders, agents, employees, representatives, successors-in-
interest, parents, Affiliates, insurers, attorneys and assigns of and from any
and all Liabilities (other than those for which indemnification is available
under (i) this ARTICLE IV and (ii) any of the Other Agreements (subject to the
provisions of SECTION 4.3)).
4.6 Environmental Liabilities. Notwithstanding anything contained herein
or in any of the Other Agreements to the contrary, neither party shall have any
obligation to indemnify the other party with respect to any Environmental
Liabilities.
ARTICLE V
ACCESS TO INFORMATION; SERVICES
5.1 Access to Information. From and after the Distribution Date, FAF
shall, and shall cause its Subsidiaries to, afford to the Company and its
authorized accountants, counsel and other designated representatives
(collectively, "Representatives") reasonable access (including using reasonable
efforts to give access to the person or firms possessing information) and
duplicating rights during normal business hours to all administrative records,
books, contracts and instruments, and all Company-owned computer software and
computer data and other Company-owned data and information (collectively, but
excluding all software not owned by the Company, "Information") within FAF's or
any such Subsidiary's possession or control relating to the Company or any
Company Subsidiary and to any property owned by FAF that was leased or operated
by the Company or any Company Subsidiary, insofar as such access is reasonably
required by the Company or any Company Subsidiary. Similarly, the Company shall,
and shall cause its Subsidiaries to, afford to FAF and its Representatives
reasonable access (including using reasonable efforts to give access to persons
or firms possessing Information) and duplicating rights during normal business
hours to Information within the
A-9
<PAGE> 91
Company's or any such Subsidiary's possession or control relating to FAF or any
FAF Subsidiary or relating to the Company prior to the Distribution Date and to
any property owned by the Company that was leased or operated by FAF or any FAF
Subsidiary (other than the Company and its Subsidiaries), insofar as such access
is reasonably required by FAF or any FAF Subsidiary. Information may be
requested under this ARTICLE V for, without limitation, audit, accounting,
claim, litigation and tax purposes, as well as for purposes of fulfilling
disclosure and reporting obligations and for performing this Agreement and the
transactions contemplated hereby.
5.2 Production of Witnesses. After the Distribution Date, each of FAF and
the Company shall, and shall cause its respective Subsidiaries to, use
reasonable efforts to make available to the other party and its Subsidiaries,
upon written request, its directors, officers, employees and agents as witnesses
to the extent that any such person may reasonably be required in connection with
any legal, administrative or other proceedings in which the requesting party may
from time to time be involved.
5.3 Provision of Services. In addition to any services contemplated to be
provided following the Distribution Date by any of the Other Agreements, each
party, upon written request, shall make available to the other party, during
normal business hours and in a manner that will not interfere unreasonably with
such party's business, its financial, tax, accounting, legal, employee benefits
and similar staff services (collectively, "Services") whenever and to the extent
that they may be reasonably required in connection with the preparation of tax
returns, audits, claims, litigation or administration of employee benefit plans,
and otherwise to assist in effecting an orderly transition following the
Distribution.
5.4 Reimbursement. Except to the extent otherwise provided in any of the
Other Agreements, each party providing Information, witnesses or Services under
SECTION 5.1, 5.2 or 5.3 to the other party shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payment for all
out-of-pocket costs and expenses as may be reasonably incurred in providing such
Information, witnesses or Services. For purposes of this SECTION 5.4, salaries
and other compensation payable to employees of either party shall be deemed to
be an out-of-pocket cost or expense reimbursable hereunder.
5.5 Retention of Records. Except as otherwise required by law or agreed
to in writing, each of FAF and the Company shall retain, and shall cause its
respective Subsidiaries to retain following the Distribution Date, all
significant information ("Information") relating to the business of the other
and the other's subsidiaries, for a period (a "Retention Period") consistent
with the document retention policies in effect at FAF and the Company,
respectively. In addition, such Information shall not be destroyed or otherwise
disposed of if during such period a party shall request in writing that any of
the Information be retained for additional specific and reasonable periods of
time at the expense of the party so requesting. After the applicable Retention
Period, any party may destroy or otherwise dispose of any Information at any
time, provided that, prior to such destruction or disposal, (a) such party shall
provide no less than ninety (90) days' prior written notice to the other party,
identifying the Information proposed to be destroyed or disposed of, and (b) if
the recipient of such notice shall request in writing prior to the scheduled
date for such destruction or disposal that any of the Information proposed to be
destroyed or disposed of be delivered to such requesting party, the party
proposing the destruction or disposal shall promptly arrange for the delivery of
such of the Information as was requested at the expense of the requesting party.
5.6 Confidentiality. FAF and each other member of the FAF Group on the
one hand, and the Company and each other member of the Company Group on the
other hand, shall use commercially reasonable efforts to hold, and cause their
Representatives to hold, in strict confidence, all Information concerning the
other in their possession or furnished by the other or the other's
Representatives pursuant to this Agreement or any of the Other Agreements
(except to the extent that such Information is (a) in the public domain through
no fault of such party or (b) later lawfully acquired by such party on a
non-confidential basis from other sources which are not subject to any
confidentiality litigation with the subject party or subsequently developed by
such party), and neither party shall release or disclose such Information to any
other person, except to its auditors, attorneys, financial advisors, bankers and
other consultants and advisors, and on terms and conditions substantially the
same as the terms and conditions on which such party releases
A-10
<PAGE> 92
its own Information, unless compelled to disclose by judicial or administrative
process or, as advised by its counsel, by other requirements of law.
5.7 Provision of Corporate Records. (a) Except as may otherwise be
provided in any of the Other Agreements, FAF shall arrange as soon as
practicable following the Distribution Date, to the extent not previously
delivered, for the delivery to the Company of the Company's books and records in
its possession, except to the extent such items are already in the possession of
the Company. Such books and records shall be the property of the Company, but
shall be available to FAF for review and duplication until FAF shall notify the
Company in writing that such records are no longer of use to FAF.
(b) Except as otherwise provided in any of the Other Agreements, the
Company shall arrange as soon as practicable following the Distribution Date, to
the extent not previously delivered, for the delivery to FAF of FAF's and its
Subsidiaries' books and records in its possession, except to the extent such
items are already in the possession of FAF or a Subsidiary of FAF. Such books
and records shall be the property of FAF, but shall be available to the Company
for review and duplication until the Company shall notify FAF in writing that
such records are no longer of use to the Company.
5.8 Privileged Matters. The Company and FAF recognize that legal and
other professional services that have been and will be provided prior to the
Distribution Date have been and will be rendered for the benefit of both FAF and
the Company and that both FAF and the Company should be deemed to be the client
for the purposes of asserting all privileges related thereto. No party may waive
any privilege which could be asserted under any applicable law, and in
connection with which the other party has a material interest, without the
consent of the other party, except to the extent reasonably required in
connection with any litigation with third parties.
ARTICLE VI
SHARED CLAIMS
6.1 Acknowledgment. Each party acknowledges that, from and after the
Distribution Date, there may be claims and proceedings against such party and
its Subsidiaries that relate (in whole or in part) to activities alleged to have
transpired prior to the Distribution Date and with respect to which it would be
fair and appropriate to apportion Liability therefor between the parties
("Shared Claims").
6.2 Notification. If any party shall receive notice or otherwise learn of
the assertion of any claim or the commencement of any proceeding which such
party believes may constitute a Shared Claim (including, without limitation, any
such claim or proceeding that names or identifies the other party or any of its
Subsidiaries as a responsible party), such party shall (a) immediately assume
the defense thereof and shall in all respects respond thereto in a timely manner
and (b) promptly provide written notice thereof to the other party, setting
forth the particulars as to such claim or proceeding in reasonable detail;
provided that the failure of such party to give such notice shall not relieve
the other party of any obligation to accept Liability unless it is actually
prejudiced by such failure, and then only to the extent of such actual
prejudice.
6.3 Cooperation. The parties shall cooperate with each other in the
defense or settlement of Shared Claims to the effect that (a) subject to the
provisions of SECTION 6.2, the party bearing the greater Liability shall be
responsible for the control and administration of any Shared Claim and (b) the
other party shall cooperate with such party with respect to such control and
administration.
6.4 Liability. The parties shall seek to apportion Liability between them
with respect to any Shared Claim, and in so doing shall take cognizance of all
relevant factors, including but not limited to, the time and duration of any
alleged activity giving rise thereto, the benefit sought to be achieved by the
activity giving rise to the Shared Claim, and the employees involved in the
activity giving rise to the Shared Claim.
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<PAGE> 93
ARTICLE VII
MISCELLANEOUS
7.1 Complete Agreement; Construction. This Agreement and the Other
Agreements, including any schedules and exhibits hereto or thereto, shall
constitute the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter.
7.2 Expenses. Except as otherwise set forth in this Agreement and the
Other Agreements, each party shall bear its own costs and expenses that are
necessary to effect the Distribution and that arise after the Distribution and
are related to the Distribution.
7.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee without regard to the
principles of conflicts of laws thereof.
7.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be delivered by hand,
mailed by registered or certified mail (return receipt requested), or sent by
cable, telegram, telecopy (confirmed by regular, first-class mail), to the
parties at the following addresses (or at such other addresses for a party as
shall be specified by like notice) and shall be deemed given on the date on
which such notice is received:
<TABLE>
<S> <C>
if to FAF: if to the Company:
Forward Air Corporation Landair Corporation
430 Airport Road 430 Airport Road
P.O. Box 1058 P.O. Box 1058
Greeneville, Tennessee 37745 Greeneville, Tennessee 37745
Attn: General Counsel Attn: General Counsel
</TABLE>
7.5 Amendments and Waivers. This Agreement may not be altered or amended,
nor may rights hereunder be waived, except by an instrument in writing executed
by the party or parties to be charged with such amendment or waiver. No waiver
of any term, provision or condition of or failure to exercise or delay in
exercising any rights or remedies under this Agreement, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, provision, condition, right or remedy or as a waiver of
any other term, provision or condition of this Agreement.
7.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same Agreement.
7.7 Successors and Assigns. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns.
7.8 Termination. This Agreement may be terminated and the Distribution
abandoned at any time prior to the Distribution Date by and in the sole
discretion of the FAF Board without the approval of the Company or the
shareholders of FAF. In the event of such termination, no party shall have any
Liability of any kind to any other party on account of such termination except
that expenses incurred in connection with the transactions contemplated hereby
shall be paid as provided in Section 7.2.
7.9 No Third-Party Beneficiaries. Except for the provisions of ARTICLE IV
relating to Indemnitees, this Agreement is solely for the benefit of the parties
hereto and their respective Affiliates and should not be deemed to confer upon
third parties (including any employee of the FAF Group or the Company Group) any
remedy, claim, reimbursement, cause of action or other right other than those
existing without reference to this Agreement.
7.10 Titles and Headings. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
7.11 Legal Enforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability
A-12
<PAGE> 94
without invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to any
rights or remedies otherwise available to any party hereto, each party hereto
acknowledges that damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
7.12 Further Assurances. In addition to the actions specifically provided
for elsewhere in this Agreement, each of the parties hereto will use its
reasonable efforts to (a) execute and deliver such further documents and take
such other actions as any other party may reasonably request in order to
effectuate the purposes of this Agreement and to carry out the terms hereof, and
(b) take, or cause to be taken, all actions, and to do, or cause to be done, all
things, reasonably necessary, proper or advisable under applicable laws,
regulations and agreements or otherwise to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
using its reasonable efforts to obtain any consents and approvals and make any
filings and applications necessary or desirable in order to consummate the
transactions contemplated by this Agreement.
7.13 No Solicitation of Employees. For a period of three years after the
Distribution Date, neither FAF nor the Company, nor any of their Subsidiaries,
will directly solicit the employment of any employee of the other company, or
any of its Subsidiaries, without the prior written consent of such other
company.
A-13
<PAGE> 95
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
FORWARD AIR CORPORATION
By:
--------------------------------------
Its:
--------------------------------------
LANDAIR CORPORATION
By:
--------------------------------------
Its:
--------------------------------------
Acknowledged and Agreed by the following entities with respect to the indicated
Sections of this Agreement:
Landair Transport, Inc.
(with respect to Sections 4.1, 4.5 and
5.6)
By:
- --------------------------------------
Its:
- --------------------------------------
Transportation Properties (Texas),
Inc.
(with respect to Sections 4.1, 4.5 and
5.6)
By:
- --------------------------------------
Its:
- --------------------------------------
Volunteer Adjustment, Inc.
(with respect to Sections 4.1, 4.5 and
5.6)
By:
- --------------------------------------
Its:
- --------------------------------------
Landair Transportation Properties,
Inc.
(with respect to Sections 4.1, 4.5 and
5.6)
By:
- --------------------------------------
Its:
- --------------------------------------
Forward Air, Inc.
(with respect to Sections 3.5, 4.2,
4.5 and 5.6)
By:
- --------------------------------------
Its:
- --------------------------------------
FAF, Inc.
(with respect to Sections 3.5, 4.2,
4.5 and 5.6)
By:
- --------------------------------------
Its:
- --------------------------------------
A-14
<PAGE> 96
SCHEDULE 4.1
Items with respect to which FAF shall indemnify the Company Indemnitees
pursuant to SECTION 4.1 in accordance with the provisions of ARTICLE IV of this
Agreement:
1. All Losses arising out of the business conducted or to be conducted
by FAF or any member of the FAF Group, whether such Losses relate to events
occurring, or whether such Losses are asserted, before or after the
Distribution Date, excluding the business conducted or to be conducted by
the Company (either directly or through a Subsidiary or Affiliate of the
Company) or the Subsidiaries and Affiliates of the Company;
2. All of FAF's and any member of the FAF Group's Losses arising out
of this Agreement or any of the Other Agreements, except as otherwise
provided in such Other Agreements;
3. All Losses arising out of or based upon any untrue statement or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, with respect to all information set
forth in the Information Statement or the Form 10 or any amendment thereto,
other than the information having been provided by the Company; and
4. All Losses arising out of Environmental Liabilities with respect to
the presence, use, storage, treatment, disposal (whether on-site or
off-site), escape, release or threatened release of any substance at, near
or from any property owned or leased by any Company Indemnitee to the
extent such presence, use, storage, treatment, disposal, escape, release or
threatened release is related to the operation of the businesses conducted
or to be conducted by FAF or any member of the FAF Group other than the
Company or its Subsidiaries. With respect to such substances, the Company's
right of indemnity hereunder shall be in addition to any rights of
indemnity owed to the Company by reason of the Real Property Leases, but
shall exclude any right of indemnity, right of contribution or other
recovery under any statutory law.
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<PAGE> 97
SCHEDULE 4.2
Items with respect to which the Company will indemnify the FAF Indemnitees
in accordance with SECTION 4.2 of this Agreement:
1. All Losses arising out of the businesses conducted or to be
conducted by the Company or any member of the Company Group, whether such
Losses relate to events occurring, or whether such Losses are asserted,
before or after the Distribution Date, excluding the businesses conducted
or to be conducted by FAF (either directly or through a Subsidiary or
Affiliate of FAF) or the Subsidiaries of FAF;
2. All of the Company's and any member of the Company Group's
Liabilities arising out of this Agreement or any of the Other Agreements,
except as otherwise provided in such Other Agreements;
3. All Losses arising out of or based upon any untrue statement or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, with respect to the information set
forth in the Information Statement or the Form 10 or any amendment thereto,
other than the information having been provided by FAF; and
4. All Losses arising out of Environmental Liabilities with respect to
the presence, use, storage, treatment, disposal (whether on-site or
off-site), escape, release or threatened release of any substance at, near
or from any property owned or leased by any FAF Indemnitee to the extent
such threatened release is related to the operation of the businesses
conduced or to be conducted by the Company or any member of the Company
Group. With respect to such substances, FAF's rights of indemnity hereunder
shall be in addition to any rights of indemnity owed to the Company by
reason of the Real Estate Leases, but shall exclude any right of indemnity,
right of contribution or right of recovery under any statutory law.
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<PAGE> 98
PART II
INFORMATION NOT INCLUDED IN INFORMATION STATEMENT
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
2.1* -- Form of Distribution Agreement between Forward Air
Corporation and Landair Corporation
3.1* -- Charter of Landair Corporation
3.2 -- Bylaws of Landair Corporation
4.1 -- Form of Common Stock Certificate
10.1* -- Form of Transition Services Agreement between Forward Air
Corporation and Landair Corporation
10.2* -- Form of Employee Benefit Matters Agreement between Forward
Air Corporation and Landair Corporation
10.3* -- Form of Tax Sharing Agreement between Forward Air
Corporation and Landair Corporation
10.4 -- Landair Corporation Stock Option and Incentive Plan
10.5 -- Non-Employee Director Stock Option Plan
10.6 -- Employee Stock Purchase Plan
10.7 -- Cash Incentive Plan
21.1 -- Subsidiaries of the Registrant
27.1* -- Financial Data Schedule (for SEC use only)
27.2 -- Financial Data Schedule (for SEC use only)
</TABLE>
- ---------------
* Previously filed.
II-1
<PAGE> 99
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, as amended, the registrant has duly caused this Amendment No. 1 to this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized.
LANDAIR CORPORATION
By: /s/ EDDIE R. BROWN
------------------------------------
Title: President and Chief Operating
Officer
Date: August 19, 1998
II-2
<PAGE> 100
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
2.1* -- Form of Distribution Agreement between Forward Air
Corporation and Landair Corporation
3.1* -- Charter of Landair Corporation
3.2 -- Bylaws of Landair Corporation
4.1 -- Form of Common Stock Certificate
10.1* -- Form of Transition Services Agreement between Forward Air
Corporation and Landair Corporation
10.2* -- Form of Employee Benefit Matters Agreement between Forward
Air Corporation and Landair Corporation
10.3* -- Form of Tax Sharing Agreement between Forward Air
Corporation and Landair Corporation
10.4 -- Landair Corporation Stock Option and Incentive Plan
10.5 -- Non-Employee Director Stock Option Plan
10.6 -- Employee Stock Purchase Plan
10.7 -- Cash Incentive Plan
21.1 -- Subsidiaries of the Registrant
27.1* -- Financial Data Schedule (for SEC use only)
27.2 -- Financial Data Schedule (for SEC use only)
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
LANDAIR CORPORATION
ARTICLE I
SHAREHOLDERS
Section 1.1 Annual Meeting. The annual meeting of the shareholders of
Landair Services, Inc. (the "Corporation") shall be held at the principal office
of the Corporation in the State of Tennessee or at such other place within or
without the State of Tennessee as may be determined by the board of directors of
the Corporation (the "Board of Directors" or the "Board") and as shall be
designated in the notice of said meeting, on such date and at such time as may
be determined by the Board of Directors. The purpose of said annual meeting
shall be to elect directors and transact such other business as may properly be
brought before the meeting.
Section 1.2 Special Meetings. Special meetings of the shareholders shall
be held at the principal office of the Corporation in the State of Tennessee or
at such other place within or without the State of Tennessee as may be
designated from time to time by the Board of Directors. Whenever the Board of
Directors shall fail to fix such place, or, whenever shareholders entitled to
call a special meeting shall call the same, the meeting shall be held at the
principal office of the Corporation in the State of Tennessee. Special meetings
of the shareholders shall be held upon call of a majority of the Board of
Directors, or, unless the Charter of the Corporation (the "Charter") otherwise
provides, upon written demand(s), signed, dated and delivered to the Secretary
of the Corporation describing the purpose or purposes for which it is to be
held, by shareholders holding at least ten percent (10%) of the shares of
capital stock of the Corporation issued and outstanding and entitled to vote on
any issue proposed to be considered at such special meeting, at such time as may
be fixed by the Secretary, and as shall be stated in the call and notice of said
meeting, except when the Tennessee Business Corporation Act, as amended (the
"Business Corporation Act"), confers upon the shareholders the right to demand
the call of such meeting and fix the date thereof. Business transacted at any
special meeting shall be confined to the purposes stated in the notice of
meeting and matters germane thereto.
1
<PAGE> 2
Section 1.3 Notice of Meetings. The notice of all meetings of
shareholders shall be in writing, shall state the date, time and place of the
meeting, and, unless it is the annual meeting, shall indicate that it is being
issued by or at the direction of the person or persons calling the meeting. The
notice of an annual meeting should state that the meeting is called for the
election of directors and for the transaction of such other business as may
properly come before the meeting and shall state the purpose or purposes of the
meeting if any other action is to be taken at such annual meeting which could be
taken at a special meeting. The notice of a special meeting shall, in all
instances, indicate that it is being issued by or at the direction of the person
or persons calling the meeting and state the purpose or purposes for which the
meeting is called. If the Board of Directors shall adopt, amend or repeal a
bylaw regulating an impending election of directors, the notice of the next
meeting fo the election of directors shall contain the bylaw so adopted, amended
or repealed, together with a concise statement of the changes made. A copy of
the notice of any meeting shall be served either personally or by mail, not less
than ten (10) days nor more than two (2) months before the date of the meeting,
to each shareholder at such shareholder's record address or at such other
address which such shareholder may have furnished in writing to the Secretary of
the Corporation. If a meeting is adjourned t another time or place and if any
announcement of the adjourned time or place is made at the meeting, it shall not
be necessary to give notice of the adjourned meeting unless the Board of
Directors, after adjournment, fixes a new record date for the adjourned meeting,
which it must do if the meeting is adjourned to a date more than four (4) months
after the date fixed for the original meeting. At the adjourned meeting any
business may be transacted that might have been transacted on the original date
of the meeting. Notice of a meeting need not e given to any shareholder who
submits to the Corporation for inclusion in the minutes or filing with the
corporate records a signed waiver of notice, in person or by proxy, before or
after the meeting. The attendance of a shareholder at a meeting without
objection at the beginning of the meeting (or promptly upon his arrival) to the
lack of notice or defective notice of such meeting shall constitute a waiver of
notice by such shareholder.
Section 1.4 Quorum. The holders of record of a majority of the
outstanding shares of the Corporation entitled to vote at the meeting, present
in person or by proxy, shall, except as otherwise provided by law or the
Charter, constitute a quorum at a meeting of shareholders, provided that when a
specified item of business is required to be voted on by a class or series,
voting as a class, the holders of a majority of the shares of such class or
series shall constitute a quorum for the transaction of such specified item of
business. When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any shareholder or for adjournment of the
meeting unless a new record date is or must be set for the meeting.
2
<PAGE> 3
Section 1.5 Conduct of Meetings. Meetings of the shareholders shall be
presided over by the Chairman of the Board, if any, or, if the Chairman of the
Board is not present, by the President, or, if the President is not present, by
a Vice President, or, if neither the Chairman of the Board, the President nor a
Vice President is present, by a chairman to be chosen at the meeting. The
Secretary of the Corporation, or in the Secretary's absence, an Assistant
Secretary, shall act as secretary of ever meeting, but if neither the Secretary
nor an Assistant Secretary is present, the meeting shall choose any person
present to act as secretary of the meeting.
Section 1.6 Voting. For each share of the capital stock of the
Corporation registered in his name on the books of the Corporation the holder
thereof shall have the number of votes per share specified in the Charter.
Whenever under the provisions of the Charter any shareholder is entitled to more
or less than one (1) vote for any share of capital stock of the Corporation held
by such shareholder, every reference in these Bylaws to a plurality or other
proportion of stock shall refer to such plurality or other proportion of the
votes of such stock. At each meeting of the shareholders, each shareholder
having the right to vote shall be entitled to vote in person or by proxy
appointed by an instrument in writing subscribed by such shareholder, or by his
duly authorized attorney, and bearing a date not more than eleven (11) months
prior to said meeting, unless said instrument provides for a longer period.
Every shareholder entitled to vote at any meeting may so vote by proxy and shall
be entitled to one (1) vote for each share entitled to vote and held by such
shareholder. At all elections of directors the voting may, but need not, be by
ballot and a plurality of the votes cast thereat shall elect, except as
otherwise required by law or the Charter. Except as otherwise required by law,
or the Charter, any other action shall be authorized by a majority of the votes
cast.
Section 1.7 Record Date. For the purpose of determining the shareholders
entitled to notice of, to demand a special meeting, to vote or take any other
action at any meeting of shareholders or any adjournment thereof, or to express
consent
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to or dissent from any proposal without a meeting, or for the purpose of
determining the shareholders entitled to receive payment of any dividend or the
allotment of any rights, or for the purpose of any other action, the Board of
Directors may fix, in advance, a date as the record date for any such
determination of shareholders. Such date shall not be more than seventy (70)
days nor less than ten (10) days before the date of such meeting, nor more than
seventy (70) days prior to any other action. If no record date is fixed, the
record date for the determination of shareholders entitled to notice of, to
demand a special meeting, to vote or take any other action at a meeting of
shareholders shall be at the close of business on the day next preceding the day
on which notice is given or, if no notice is given, the day on which the meeting
is held.
The record date for determining shareholders for any purpose other than
that specified in the preceding clause shall be at the close of business on the
day on which the resolution of the Board of Directors relating thereto is
adopted. When a determination of shareholders of record entitled to notice of,
to demand a special meeting, to vote or take any other action at any meeting of
shareholders has been made as provided in this Section 1.7, such determination
shall apply to any adjournment thereof, unless the Board of Directors fixes a
new record date under this Section 1.7 for the adjourned meeting; provided,
however, if the meeting is adjourned to a date more than four (4) months after
the date fixed for the original meeting, the Board of Directors shall fix a new
record date.
Section 1.8 Shareholder Lists. An alphabetical list by voting group, and
within each voting group by class or series of shares, of each shareholder's
name, address and share ownership entitled to notice of a shareholders' meeting
as of the record date, certified by the Secretary or other officer responsible
for its preparation, or by the transfer agent, if any, shall be available for
inspection by any shareholder, beginning two (2) business days after notice of
the meeting is given for which the list was prepared and continuing through the
meeting upon the request thereat or prior thereto of any shareholder. If the
right to vote at any meeting is challenged, the inspectors of election, if any,
or the person presiding thereat, shall require such list of shareholders to be
produced as evidence of the right of the persons challenged to vote at such
meeting, and all persons who appear from such list to be shareholders entitled
to vote thereat may vote at such meeting.
Section 1.9 Proxy Representation. Every shareholder may authorize
another person or persons to act for such
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shareholder by proxy in all matters in which a shareholder is entitled to
participate, whether by waiving notice of any meeting, voting or participating
at a meeting, or expressing consent or dissent without a meeting. Every proxy
must be signed by the shareholder or such shareholder's attorney-in-fact. No
proxy shall be valid after the expiration of eleven (11) months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the shareholder executing it, except as otherwise provided by
the Business Corporation Act.
Section 1.10 Inspectors. At all meetings of shareholders, the proxies
and ballots shall be received, taken in charge and examined, and all questions
concerning the qualification of voters, the validity of proxies and the
acceptance or rejection of proxies and of votes shall be decided by two (2)
inspectors of election. Such inspectors of election together with one alternate
to serve in the event of death, inability or refusal by any of said inspectors
of election to serve at the meeting, shall be appointed by the Board of
Directors, or, if no such appointment or appointments shall have been made, then
by the presiding officer at the meeting. If for any reason the inspectors of
election so appointed shall fail to attend, or refuse or be unable to serve, a
substitute or substitutes shall be appointed to serve as inspector or inspectors
of election, in their place or stead, by the presiding officer at the meeting.
No director or candidate for the office of director shall be appointed as an
inspector. Each inspector shall take and subscribe an oath or affirmation
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a quorum, the validity
and effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arisin in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all shareholders. On request of the person presiding at the meeting or any
shareholder, the inspectors shall make a report in writing of any challenge,
question or matter determined by them and execute a certificate as to any fact
found by them. Each inspector shall be entitled to reasonable compensation for
such inspector's services, to be paid by the Corporation.
Section 1.11 Actions Without Meetings. Whenever shareholders are
required or permitted to take any action by vote, such action may be taken
without a meeting on written
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consent, setting forth the action so taken, signed by the holders of all
outstanding shares entitled to vote thereon; unless some number less than all of
the holders of all of the outstanding shares is required by applicable law or
the Charter. This section shall not be construed to alter or modify any
provision of law or of the Charter under which the written consent of the
holders of less than all outstanding shares is sufficient for corporate action.
Section 1.12 Meaning of Certain Terms. As used herein in respect of the
right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shareholder" or "shareholders"
refers to an outstanding share or shares and to a holder or holders of record of
outstanding shares, when the Corporation is authorized to issue only one (1)
class of shares, and said reference is also intended to include any outstanding
share or shares and any holder or holders of record of outstanding shares of any
class upon which or upon whom the Charter confers such rights, where there are
two (2) or more classes or series of shares, or upon which or upon whom the
Business Corporation Act confers such rights, notwithstanding that the Charter
may provide for more than one (1) class or series of shares, one (1) or more of
which are limited or denied such rights thereunder.
ARTICLE II
DIRECTORS
Section 2.1 Functions and Definition. The business of the Corporation
shall be managed under the direction of its Board of Directors. The use of the
phrase "entire Board of Directors" herein refers to the total number of
directors which the Corporation would have if there were no vacancies.
Section 2.2 Qualification and Number. Each director shall be at least
eighteen (18) years of age. A director need not be a shareholder, a citizen of
the United States, nor a resident of the State of Tennessee. The number of
directors constituting the entire Board of Directors shall be not less than the
number required by law; such number may be fixed from time to time by action of
the Board of Directors or of the shareholders. The number of directors may be
increased or decreased by action of the Board of Directors or shareholders,
provided that any action of the Board of Directors to effect such increase or
decrease shall require the vote of a majority of the entire Board of Directors.
No decrease in the number of directors shall shorten the term of any incumbent
director.
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Section 2.3 Election and Term. Directors who are elected at an annual
meeting of shareholders, and directors who are elected in the interim to fill
vacancies and newly created directorships, shall hold office until the next
annual meeting of shareholders or until their respective successors have been
elected and qualified. In the interim between annual meetings of shareholders or
special meetings of shareholders called for the election of directors, the
creation of newly created directorships and to fill any vacancies in the Board
of Directors, including vacancies resulting from the removal of directors for
cause or without cause, may be filled by the vote of a majority of the directors
then in office, although less than a quorum exists.
Section 2.4 Quorum. A majority of the entire Board of Directors shall
constitute a quorum for the transaction of business. A majority of the directors
present, whether or not a quorum is present, may adjourn a meeting to another
time and place. Except as herein otherwise provided, the vote of a majority of
the directors present at the time of the vote, at a meeting duly assembled, a
quorum being present at such time, shall be the act of the Board of Directors.
Section 2.5 Meetings; Notice. Meetings of the Board of Directors shall
be held at such place within or without the State of Tennessee as may from time
to time be fixed by resolution of the Board of Directors, or as may be specified
in the notice of the meeting. Regular meetings of the Board of Directors shall
be held at such times as may from time to time be fixed by resolution of the
Board of Directors. Special meetings of the Board may be held at any time upon
the call of the Chairman of the Board, if any, the President, the Secretary or
any two (2) directors by oral, telegraphic or written notice duly served upon,
sent or mailed to each director not less than two (2) days before such meeting.
A meeting of the Board of Directors may be held without notice immediately after
the annual meeting of shareholders at the same place at which such meeting is
held. Notice need not be given of regular meetings of the Board of Directors
held at times fixed by resolution of the Board of Directors. Any requirement of
furnishing a notice shall be waived by any director who signs and delivers to
the Corporation a waiver of notice before or after the meeting, or who attends
the meeting without protesting, prior thereto or at its commencement, the lack
of notice to him. The notice of any meeting need not specify the purpose of the
meeting, and any and all business may be transacted at such meeting.
Section 2.6 Conduct of Meetings. The Chairman of the Board of Directors,
if any, shall preside at all meetings of
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the Board of Directors, and in the Chairman's absence or inability to act, the
President shall preside, and in the President's absence or inability to act,
such person as may be chosen by a majority of the directors present shall
preside.
Section 2.7 Committees. By resolution adopted by a majority of the
entire Board of Directors, the directors may designate from their number two (2)
or more directors to constitute an Executive Committee and other committees,
each of which, to the extent provided in the resolution designating it, shall
have the authority of the Board of Directors with the exception of any authority
the delegation of which is prohibited by law. A majority of any such committee
may determine its action and fix the time and place of its meetings, unless the
Board of Directors shall otherwise provide. The Board of Directors shall have
power at any time to fill vacancies in, to change the membership of, to
designate alternate members of, or to discharge any such committee. All actions
of the Executive Committee shall be recorded in the minutes of the Committee and
reported to the Board of Directors at its meeting next succeeding such action.
All actions of other committees shall be recorded in the minutes of each such
committee and reported to the Board of Directors (or in the case of committees
appointed by the Executive Committee, to the Executive Committee) at its meeting
next succeeding such action. The Board of Directors may allow members of the
Executive Committee or any other committee designated by the Board of Directors
or the Executive Committee a fixed fee and expenses of attendance for attendance
at meetings of such committee. Members of such committees may also receive
stated fees for their services as committee members as determined by the Board
of Directors. Nothing herein contained shall be construed to preclude any
committee member from serving the Corporation in any other capacity as officer,
agent or otherwise, and receiving compensation therefor.
Section 2.8 Compensation of Directors. The Board of Directors may, by
resolution, provide for payment to directors of a fixed fee for their services
as directors, without regard for attendance at meetings of the Board, and for
payment of expenses for attendance at such meetings. Nothing herein contained
shall be construed as precluding any director from serving the Corporation in
any other capacity as member of a committee, officer, agent or otherwise and
receiving compensation therefor.
Section 2.9 Honorary Directors. The Board of Directors may from time to
time name, in its discretion, any director who shall have resigned or shall have
declined nomination for
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a further term, an Honorary Director for such term as the Board of Directors by
resolution shall establish. An Honorary Director may, at the invitation of the
Chairman of the Board, attend meetings of the Board of Directors. Honorary
Directors shall not be entitled to vote on any business coming before the Board
of Directors nor shall any Honorary Director be counted for the purpose of
determining the number necessary to constitute a quorum, for the purpose of
determining whether a quorum is present or for any other purpose whatsoever. The
termination of any person's relationship with the Corporation as Honorary
Director shall not be deemed to create a vacancy in the position of Honorary
Director. By resolution of the Board of Directors a fixed annual fee may be
allowed to an Honorary Director. Honorary Directors shall not be directors of
the Corporation and shall not have rights, privileges or powers other than those
specifically provided in this Section 2.9 or as may be specifically given or
assigned by the Board of Directors.
Section 2.10 Dividends. Subject always to the provisions of law and the
Charter, the Board of Directors shall have full power to determine whether any,
and if any, what part of any, funds legally available for the payment of
dividends shall be declared as dividends and paid to shareholders; the division
of the whole or any part of such funds of the Corporation shall rest wholly
within the lawful discretion of the Board of Directors, and it shall not be
required at any time, against such discretion, to divide or pay any part of such
funds among or to the shareholders as dividends or otherwise; and before payment
of any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the Board of Directors
shall deem conducive to the interest of the Corporation, and the Board of
Directors may modify or abolish any such reserve in the manner in which it was
created.
Section 2.11 Resignation; Removal of Directors. A director may resign at
any time upon delivery of written notice to the Board of Directors, Chairman of
the Board, President or the Corporation. Such resignation shall be effective
upon delivery unless the notice specifies a later effective date. At any special
meeting of the shareholders, duly called as provided in these Bylaws, any
director or directors may be removed from office by the shareholders, with or
without cause, and such director's successor or directors' successors may be
elected at such meeting. One (1) or more
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directors may be removed for cause by a majority of the entire Board of
Directors.
Section 2.12 Actions Without Meetings. Any action required or permitted
to be taken by the Board of Directors or by any committee thereof may be taken
without a meeting if a majority of all members of the Board of Directors or of
any such committee consent in writing to the adoption of a resolution
authorizing the action. The resolution and the written consents thereto by the
members of the Board of Directors or of any such committee shall be filed with
the minutes of the proceedings of the Board of Directors or of any such
committee.
Section 2.13 Electronic Communication. Any one or more members of the
Board of Directors or any committee thereof may participate in a meeting of the
Board of Directors or any such committee by means of a conference telephone or
similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such means shall
constitute presence in person at a meeting.
ARTICLE III
OFFICERS
Section 3.1 Election. The Board of Directors promptly after the election
thereof held in each year, shall elect the officers of the Corporation, which
shall include a President and a Secretary, and which may include a Chairman of
the Board, one (1) or more Vice Presidents, a Treasurer, and a Controller, and
may also include Assistant Secretaries, Assistant Treasurers, Assistant
Controllers and such other officers, agents and employees as the Board may from
time to time deem proper, who shall hol their offices for such term and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board of Directors. The Board of Directors shall fix the salaries of
the Chairman of the Board, the President, and Vice Presidents, the Treasurer,
the Controller and the Secretary. Unless fixed by the Board of Directors or a
committee thereof, the salaries of all other officers, agents and employees
shall be fixed by the Chief Executive Officer. Any two (2) or more offices may
be held by the same person except the offices of President and Secretary. The
Chairman of the Board shall be a member of the Board of Directors.
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Section 3.2 Term. The term of office of all officers shall be until
their respective successors have been elected and qualified, but any officer may
be removed from office, either with or without cause, at any time by the
affirmative vote of a majority of the whole Board of Directors. Any vacancy in
any office arising from any cause may be filled for the unexpired portion of the
term by the Board of Directors.
Section 3.3 Duties. The officers of the Corporation shall each have such
powers and duties as are set forth in these Bylaws and such additional powers
and duties as from time to time may be conferred upon them by the Board of
Directors, and, subject thereto, such powers and duties as generally pertain to
their respective offices, and the Board of Directors may from time to time
impose and confer any or all of the powers and duties hereinafter specifically
prescribed for any officer upon any other officer or officers.
Section 3.4 Resignation; Removal of Officers. An officer may resign at
any time upon delivery of notice to the Corporation. Such resignation shall be
effective upon delivery unless the notice specifies a later effective date. In
the event that an officer specifies in his notice a later effective date, and
the Corporation accepts the future effective date, the Board may fill the
pending vacancy prior to the effective date; provided, however, that the Board
designates that the successor officer does not take office until such effective
date. Any officer may be removed from office, either with or without cause, at
any time by the affirmative vote of a majority of the whole Board of Directors.
Further, any officer or assistant officer, if appointed by another officer, may
likewise be removed by such officer.
Section 3.5 Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the shareholders and the Board of Directors at which
he shall be present and shall furnish advice and counsel to the Board of
Directors. In the absence of a Chief Executive Officer, the Chairman of the
Board shall be the Chief Executive Officer of the Corporation. The Chairman of
the Board shall exercise the powers and perform the duties usual to a chairman
of the board of a corporation, and shall hav such other powers and duties as may
be assigned to him by the Board of Directors.
Section 3.6 Chief Executive Officer. The Chief Executive Officer shall
be the chief executive officer of the Corporation and direct the business,
affairs and property of the Corporation. The Chief Executive Officer shall
exercise the powers and perform the duties usual to a chief executive
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officer and shall have such other powers and duties as may be assigned to him
from time to time by the Board of Directors. In the absence of a Chairman of the
Board, the Chief Executive Officer shall preside at all meetings of the
shareholders and the Board of Directors.
Section 3.7 President. The President, in the absence of a Chairman of
the Board or a Chief Executive Officer, shall preside at all meetings of the
shareholders and the Board of Directors at which he shall be present. The
President shall be the Chief Operating Officer and shall direct the operations
of the business of the Corporation, and report to the Chief Executive Officer.
In the absence of a Chief Executive Officer or a Chairman of the Board, the
President shall report directly to the Boar of Directors. In the absence of a
Chief Executive Officer, and in the event the Board of Directors has not vested
such powers in a Chairman of the Board, the President shall be the Chief
Executive Officer. He shall have such other powers and duties as may be assigned
to him from time to time by the Board of Directors.
Section 3.8 Vice Presidents. The Vice Presidents shall be of such number
and shall have such titles of designation as may be determined from time to time
by the Board of Directors. They shall perform such duties as may be assigned to
them, respectively, from time to time by the Board of Directors.
Section 3.9 Secretary. The Secretary shall give, or cause to be given,
notice of all meetings of shareholders and directors, and all other notices
required by law or by these Bylaws, and in the case of his absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the Chairman of the Board, or by the directors or shareholders upon whose
request the meeting is called as provided in these Bylaws. He shall record all
the proceedings of the meetings of shareholders, the Board of Directors and
Executive Committee in a book to be kept for that purpose, and shall perform
such other duties as may be assigned to him by the Board of Directors or the
Chief Executive Officer. The Secretary shall have the custody of the records and
the seal, if any, of the Corporation. He shall affix the seal, if any, to any
instrument requiring it, when signed by a duly authorized officer or when
specifically authorized by the Board of Directors or the Chairman of the Board,
and attest the same. In the absence or incapacity of the Secretary, any
Assistant Secretary may affix the seal, if any, to any such instrument and
attest the same.
Section 3.10 Assistant Secretaries. The Assistant Secretaries shall have
such powers and shall perform such
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duties as may be assigned to them from time to time by the Board of Directors,
the Chief Executive Officer or the Secretary.
Section 3.11 Treasurer. The Treasurer shall be responsible for
establishing and executing programs providing for long and short term financing
needs of the Corporation. He shall establish policies for the receipt, custody
and disbursement of the Corporation's monies and securities, and for investment
of the Corporation's funds. He shall perform such other duties as may be
assigned to him from time to time by the Board of Directors or the Chief
Executive Officer.
Section 3.12 Assistant Treasurers. The Assistant Treasurers shall have
such powers and shall perform such duties as may be assigned to them from time
to time by the Board of Directors, the Chief Executive Officer or the Treasurer.
Section 3.13 Controller. The Controller shall be responsible for the
development and maintenance of accounting policies and systems properly to
record, report and interpret the financial position and the results of
operations of the Corporation. He shall be responsible for development and
maintenance of adequate plans for the financial control of operations and the
protection of the assets of the Corporation. He shall perform such other duties
as may be assigned to him from time to time by the Board of Directors or the
Chief Executive Officer.
Section 3.14 Assistant Controllers. The Assistant Controllers shall have
such powers and shall perform such duties as may be assigned to them from time
to time by the Board of Directors, the Chief Executive Officer or the
Controller.
Section 3.15 Presiding Officer at Meetings of the Shareholders and Board
of Directors. The presiding officer at any meeting of the shareholders or the
Board of Directors at which the Chairman of the Board and the Chief Executive
Officer are absent shall be the President, or such other officer designated to
so preside by the Chairman of the Board. If the Chairman of the Board, for any
reason, shall not have designated any officer to preside at any such meeting,
then the Chief Executive Officer o President shall preside. In the event that
both the Chief Executive Officer and President shall be absent, then the
Executive Vice President-Finance, if there be such an officer, and he is a
member of the Board, shall preside. If the Executive Vice President-Finance
shall also be absent or if there be no such
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officer, then the most senior (in terms of time served in the office of
Executive Vice President) of the other Executive Vice Presidents, if there be
such an officer, and he is a member of the Board, shall preside.
Section 3.16 Corporation as Security Holder. Unless otherwise ordered by
the Board of Directors, the President, or, in the event of the President's
inability to act, the Vice President designated by the Board of Directors to act
in the absence of the President or, in the absence of such designation, in the
order of such Vice President's seniority, shall have full power and authority on
behalf of the Corporation to attend and to act and to vote at any meetings of
security holders of corporations in which the Corporation may hold securities,
and at such meetings shall possess and may exercise any and all rights and
powers incident to the ownership of such securities, and which as the owner
thereof the Corporation might have possessed and exercised, if present. The
Board of Directors by resolution from time to time may confer like powers upon
any other person or persons.
ARTICLE IV
CERTIFICATES REPRESENTING SHARES
Section 4.1 Certificates; Signatures. The interest of each shareholder
of the Corporation shall be evidenced by certificates representing shares in
such form not inconsistent with the Charter as the Board of Directors may from
time to time prescribe. Certificates representing shares shall have set forth
thereon the statements prescribed by law and shall be signed by the Chairman,
President or a Vice President and by the Secretary or an Assistant Secretary or
Treasurer or an Assistant Treasurer and may be sealed with the corporate seal or
a facsimile thereof. The signatures of the officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent or registered
by a registrar other than the Corporation itself or its employee. In case any
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Corporation with the same effect as if such
officer were an officer at the date of its issue.
Section 4.2 Transfer of Shares. Upon compliance with provisions
restricting the transferability of shares, if any, transfers of shares of the
Corporation shall be made only on the share record of the Corporation by the
registered holder thereof, or by such holder's attorney thereunto authorized by
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power of attorney duly executed and filed with the Secretary of the Corporation
or with a transfer agent or a registrar, if any, and upon the surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes due thereon. A certificate representing shares shall not be issued
until the full amount of consideration therefor has been paid, except as the
Business Corporation Act may otherwise permit.
Section 4.3 Fractional Shares. The Corporation may issue certificates
for fractions of a share where necessary to effect transactions authorized by
the Business Corporation Act which shall entitle the holder, in proportion to
such holder's fractional holdings, to exercise voting rights, receive dividends
and participate in liquidating distributions; or the Corporation may pay in cash
the value of fractions of a share as of the time when those entitled to receive
such fractions is determined; or it may issue scrip in registered or bearer form
over the manual or facsimile signature of an officer of the Corporation or of
its agent, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a shareholder except as therein
provided. The Board of Directors shall have power and authority to make all such
rules and regulations as it may deem expedient concerning the issue, transfer
and registration of certificates representing shares of the Corporation.
Section 4.4 Replacement Certificates. No certificates representing
shares shall be issued in place of any certificate alleged to have been lost,
destroyed or stolen, except on production of such evidence of such loss,
destruction or theft as the Board of Directors may require, and on delivery to
the Corporation, if the Board of Directors shall so require, of a bond of
indemnity in such amount, upon such terms and secured by such surety as the
Board of Directors may in its discretion require.
Section 4.5 Registered Shareholders. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to, or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of the State of Tennessee.
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ARTICLE V
FISCAL YEAR
The fiscal year of the Corporation shall be fixed from time to time by
resolution of the Board of Directors.
ARTICLE VI
CORPORATE SEAL
The Corporation may, but shall not be required to, adopt a corporate
seal. The corporate seal shall have inscribed thereon the name of the
Corporation and the year of its incorporation, and shall be in such form and
contain such other words and/or figures as the Board of Directors shall
determine. The corporate seal may be used by printing, engraving, lithographing,
stamping or otherwise making, placing or affixing, or causing to be printed,
engraved, lithographed, stamped or otherwise made, placed or affixed upon any
paper or document, by any process whatsoever, an impression, facsimile or other
reproduction of said corporate seal.
ARTICLE VII
INDEMNIFICATION
The Corporation shall indemnify to the full extent permitted by law any
person made or threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person or such person's testator or intestate is or was a director,
officer or employee of the Corporation or serves or served at the request of the
Corporation any other enterprise as a director, officer or employee. Expenses
incurred by any such person in defending any such action, suit or proceeding
shall be paid or reimbursed by the Corporation promptly upon receipt by it of an
undertaking of such person to repay such expenses if it shall ultimately be
determined that such person is not entitled to be indemnified by the
Corporation. The rights provided to any person by this bylaw shall be
enforceable against the Corporation by such person who shall be presumed to have
relied upon it in serving or continuing to serve as a director, officer or
employee as provided above. No amendment of this bylaw shall impair the rights
of any person arising at any time with respect to events occurring prior to such
amendment. For purposes of
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this article, the term "Corporation" shall include any predecessor of the
Corporation and any constituent corporation (including any constituent of a
constituent) absorbed by the Corporation in a consolidation or merger; the term
"other enterprise" shall include any corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise; service "at the request of the
Corporation" shall include service as a director, officer or employee of the
Corporation which imposes duties on, or involves services by, such director,
officer or employee with respect to an employee benefit plan, its participants
or beneficiaries; any excise taxes assessed on a person with respect to an
employee benefit plan shall be deemed to be indemnifiable expenses; and action
taken or omitted by a person with respect to an employee benefit plan which such
person reasonably believes to be in the interest of the participants and
beneficiaries of such plan shall be deemed to be action not opposed to the best
interests of the Corporation.
ARTICLE VIII
GENERAL
Section 8.1 Financial Reports. The directors may appoint the Treasurer
or other fiscal officer and/or the Secretary or any other officer to cause to be
prepared and furnished to shareholders entitled thereto any special financial
notice and/or financial statement, as the case may be, which may be required by
any provision of law.
Section 8.2 Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of the shareholders, of the Board of Directors, and/or any committee which the
directors may appoint, and shall keep at the office of the Corporation in the
State of Tennessee or at the office of the transfer agent or registrar, if any,
in said state, a record containing the names and addresses of all shareholders,
the number and class of shares held by each, and the dates when such
shareholders respectively became the owners of record thereof. Any of the
foregoing books, minutes or records may be in written form or in any other form
capable of being converted into written form within a reasonable time.
17
<PAGE> 18
ARTICLE IX
AMENDMENTS
An affirmative vote of a majority of the shareholders entitled to vote
in the election of directors may make, alter, amend or repeal the Bylaws and may
adopt new Bylaws. Except as otherwise required by law, the Charter or by the
provisions of these Bylaws, the Board of Directors may also make, alter, amend
or repeal the Bylaws and adopt new Bylaws, but Bylaws adopted by the Board of
Directors may be altered, amended or repealed by the said shareholders.
18
<PAGE> 1
EXHIBIT 4.1
COMMON STOCK $.01 PAR VALUE
NUMBER SHARES
LC
[LOGO] LANDAIR CORPORATION
GREENVILLE, TENNESSEE
INCORPORATED UNDER THE LAWS OF THE STATE OF TENNESSEE
SEE REVERSE FOR ADDITIONAL INFORMATION
AND CERTAIN DEFINITIONS
CUSIP 514757 10 3
THIS CERTIFIES THAT
in the owner of
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE, OF
LANDAIR CORPORATION
CERTIFICATE OF STOCK
transferable only on the books of the Corporation in person or by Attorney on
surrender of this Certificate properly endorsed. This Certificate is not valid
until countersigned and registered by the Transfer Agent and Registrar.
In Witness Whereof the Corporation has caused this Certificate to be signed
by the facsimile signatures of its duly authorized officers.
DATED:
/S/ Richard H. Roberts /s/ Scott M. Niswonger
SECRETARY CHAIRMAN
COUNTERSIGNED AND REGISTERED:
SUNTRUST BANK, ATLANTA
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<TABLE>
<CAPTION>
- ------------------------------------------- -----------------------------------------------------
<S> <C>
AMERICAN BANK NOTE COMPANY PRODUCTION COORDINATOR: BELINDA BECK: 215-830-2198
680 BLAIR MILL ROAD PROOF OF AUGUST 5, 1998
HORSHAM, PA 19044 LANDAIR CORPORATION
(215) 657-3480 H 58140 FACE
- ------------------------------------------- -----------------------------------------------------
SALES: A. HOBBS: 404-525-1455 OPERATOR LR
- ------------------------------------------- -----------------------------------------------------
/NET/BANKNOTE/HOME 42/LANDAIR H58140 NEW
- ------------------------------------------- -----------------------------------------------------
</TABLE>
<PAGE> 2
LANDAIR CORPORATION
The Corporation will furnish to any shareholder, without charge and upon
request addressed to the Corporation at its principal office at 430 Airport
Road, Greeneville, Tennessee 37745, a full statement of the designations,
preferences, limitations, and relative rights of the shares of each class or
series authorized to be issued, so far as they have been determined, and the
authority of the Corporation's Board of Directors to determine the relative
rights and preferences of subsequent classes or series of shares.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT -__________CUSTODIAN__________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of survivorship Under Uniform Gifts to Minors
and not as tenants in common Act___________
(State)
Additional abbreviations may also be used though not in the above list.
For value received,_____________________________________________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFICATION NUMBER OF ASSIGNEE
_____________________________________________________________________________________________________________
_____________________________________________________________________________________________________________
Please print or typewrite name and address including postal zip code of assignee
_____________________________________________________________________________________________________________
_____________________________________________________________________________________________________________
_______________________________________________________________________________________________________Shares
of the Common Stock represented by the within Certificate and do hereby irrevocably constitute and appoint
_____________________________________________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named Corporation with full power of
substitution in the premises.
DATED_______________________________ ____________________________________________________________________
NOTICE: THIS SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURES(S)GUARANTEED:____________________________________________________________________
THE SIGNATURES(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17 Ad-15.
------------------------------------------- -----------------------------------------------------
AMERICAN BANK NOTE COMPANY PRODUCTION COORDINATOR: BELINDA BECK: 215-830-2198
680 BLAIR MILL ROAD PROOF OF AUGUST 5, 1998
HORSHAM, PA 19044 LANDAIR CORPORATION
(215) 657-3480 H 58140 BACK
------------------------------------------- -----------------------------------------------------
SALES: A. HOBBS: 404-525-1455 OPERATOR LR
------------------------------------------- -----------------------------------------------------
/NET/BANKNOTE/HOME 42/LANDAIR H58140 NEW
------------------------------------------- -----------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.4
LANDAIR CORPORATION
-----------------------------------------------------------------
STOCK OPTION AND INCENTIVE PLAN
-----------------------------------------------------------------
1. PURPOSE; TYPES OF AWARDS; CONSTRUCTION.
The purpose of the Landair Corporation Stock Option and Incentive Plan
(the "Plan") is to enable Landair Corporation (the "Company") to attract, retain
and reward key employees of, and any consultant or other person providing key
services to, the Company and its Subsidiaries, and strengthen the mutuality of
interests between such persons and the Company's shareholders by offering such
persons performance-based stock incentives and/or other equity interests or
equity-based incentives in the Company.
It is further intended that options granted by the Compensation or
other Committee (the "Committee") of the Board of Directors of the Company (the
"Board") pursuant to Section 8 of the Plan shall constitute "incentive stock
options" ("Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended and any successor thereto (the
"Code"), and options granted by the Committee pursuant to Section 7 of the Plan
shall constitute "nonqualified stock options" ("Nonqualified Stock Options").
The Committee may also grant stock appreciation rights ("Stock Appreciation
Rights" or "SARs") pursuant to Section 9 of the Plan and shares of restricted
stock ("Restricted Stock") pursuant to Section 10 of the Plan.
The provisions of the Plan are intended to satisfy the requirements of
Section 16(b) of the Securities Exchange Act of 1934, and shall be interpreted
in a manner consistent with the requirements thereof, as now or hereafter
construed, interpreted, and applied by regulations, rulings, and cases. The Plan
is also designated so that awards granted hereunder intended to comply with the
requirements for "performance-based" compensation under Section 162(m) of the
Code may comply with such requirements. The creation and implementation of the
Plan shall not diminish or prejudice other compensation plans or programs
approved from time to time by the Board.
2. DEFINITIONS.
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "Cause" means a felony conviction of a participant or the failure
of a participant to contest prosecution for a felony, or a participant's gross
negligence, willful misconduct or dishonesty, any of which is directly or
materially harmful to the business or reputation of the Company or any
Subsidiary, as determined by the Committee in its sole discretion.
<PAGE> 2
(b) "Common Stock" shall mean shares of Common Stock, par value $.01
per share, of the Company.
(c) "Disability" shall mean a disability as determined under procedures
established by the Committee for purposes of this Plan.
(d) "Fair Market Value" per share of Common Stock as of a particular
date shall mean (i) the closing sales price per share of Common Stock on the
national securities exchange on which the Common Stock is principally traded,
for the last preceding date on which there was a sale of such Common Stock on
such exchange, or (ii) if the shares of Common Stock are then traded in an
over-the-counter market, the average of the closing bid and asked prices for the
shares of Common Stock in such over-the-counter market for the last preceding
date on which there was a sale of such Common Stock in such market, or (iii) if
the shares of Common Stock are not then listed on a national securities exchange
or traded in an over-the-counter market, such value as the Committee, in its
sole discretion, shall determine. Notwithstanding any provision of the Plan to
the contrary, no determination made with respect to the Fair Market Value of a
share of Common Stock subject to Incentive Stock Option shall be inconsistent
with Section 422 of the Code or regulation thereunder.
(e) "Immediate Family" shall mean any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include
adoptive relationships.
(f) "Option" or "Options" shall mean a grant to a Grantee of an option
or options to purchase shares of Common Stock. Options granted by the Committee
pursuant to the Plan shall constitute either Incentive Stock Options or
Nonqualified Stock Options.
(g) "Parent" shall mean any company (other than the Company) in an
unbroken chain of companies ending with the Company if, at the time of granting
an Option, each of the companies other than the Company owns stock or equity
interests (including partnership interests) possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock or equity
interests in one of the other companies in such chain.
(h) "Performance Goals" means performance goals based on one or more of
the following criteria: (i) pre-tax income or after-tax income; (ii) operating
cash flow; (iii) operating profit; (iv) return on equity, assets, capital, or
investment; (v) earnings or book value per share; (vi) sales or revenues; (vii)
operating expenses; (viii) Common Stock price appreciation; and (ix)
implementation or completion of critical projects or processes. Where
applicable, the Performance Goals may be expressed in terms of attaining a
specified level of the particular criteria or the attainment of a percentage
increase or decrease in the particular criteria, and may be applied to one or
more of the Company or any Subsidiary, or a division or strategic business unit
of the Company, or may be applied to the performance of the Company relative to
a market index, a group of other companies, or a combination thereof, all as
determined by the Committee. The Performance Goals
2
<PAGE> 3
may include a threshold level of performance below which no payment will be made
(or no vesting will occur), levels of performance at which specified payments
will be made (or specified vesting will occur), and a maximum level of
performance above which no additional payment will be made (or at which full
vesting will occur). Each of the foregoing Performance Goals shall be
determined, to the extent applicable, in accordance with generally accepted
accounting principles and shall be subject to certification by the Committee;
provided, that the Committee shall have the authority to make equitable
adjustments to the Performance Goals in recognition of unusual or non-recurring
events affecting the Company or any Subsidiary or the financial statements of
the Company or any Subsidiary, in response to changes in applicable laws or
regulations, or to account for items of gain, loss, or expense determined to be
extraordinary or unusual in nature or infrequent in occurrence or related to the
disposal of a segment of business or related to a change in accounting
principles.
(i) "Subsidiary" shall mean any company (other than the Company) in an
unbroken chain of companies beginning with the Company if, at the time of
granting an Option, each of the companies other than the last company in the
unbroken chain owns stock or equity interests (including partnership interests)
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock or equity interests in one of the other companies in such
chain.
(j) "Ten Percent Stockholder" shall mean a Grantee who, at the time an
Incentive Stock Option is granted, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any Parent or Subsidiary.
(k) "Retirement" means retirement by an employee from active employment
with the Company or any Subsidiary (i) on or after attaining age 65, or (ii)
with the express consent, for the purposes of this Plan, of the Committee or
such officer of the Company as the Committee may designate from time to time at
or before the time of such retirement, from active employment with the Company
or any Subsidiary after age 55.
3. ADMINISTRATION.
The Plan shall be administered by the Committee, which will be
comprised solely of "Non-Employee Directors" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
by the Board if for any reason the Committee is not so comprised, in which case
all references herein to the Committee shall refer to the Board.
The Committee shall have the authority in its discretion, subject to
and not inconsistent with the express provisions of the Plan, to administer the
Plan and to exercise all the powers and authorities either specifically granted
to it under the Plan or necessary or advisable in the administration of the
Plan, including, without limitation, the authority to grant Options, SARs, and
Restricted Stock; to determine which Options shall constitute Incentive Stock
Options and which Options shall constitute Nonqualified Stock Options and
whether such Options will be accompanied by Stock Appreciation Rights; to
determine the purchase price of the shares of Common Stock
3
<PAGE> 4
covered by each Option (the "Option Price") and SARs and the kind of
consideration payable (if any) with respect to awards; to determine the period
during which Options may be exercised and during which Restricted Stock shall be
subject to restrictions, and whether in whole or in installments; to determine
the persons to whom, and the time or times at which awards shall be granted
(such persons are referred to herein as "Grantees"); to determine the number of
shares to be covered by each award; to determine the terms, conditions, and
restrictions of any Performance Goals and the number of Options, SARs, or shares
of Restricted Stock subject thereto; to interpret the Plan; to prescribe, amend,
and rescind rules and regulations relating to the Plan; to determine the terms
and provisions of the agreements (which need not be identical) entered into in
connection with awards granted under the Plan (the "Agreements"); to cancel or
suspend awards, as necessary; and to make all other determinations deemed
necessary or advisable for the administration of the Plan.
The Committee may delegate to one or more of its members or to one or
more agents such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may employ
one or more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan. All decisions, determinations,
and interpretations of the Committee shall be final and binding on all persons,
including the Company and Grantees of any awards under this Plan.
The Board shall fill all vacancies, however caused, in the Committee.
The Board may from time to time appoint additional members to the Committee, and
may at any time remove one or more Committee members and substitute others. One
member of the Committee shall be selected by the Board as chairman. The
Committee shall hold its meetings at such times and places as it shall deem
advisable. All determinations of the Committee shall be made by a majority of
its members either present in person or participating by conference telephone at
a meeting or by written consent. The Committee may appoint a secretary and make
such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings.
No members of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any award
granted hereunder. To the fullest extent permitted by law, the Company shall
indemnify each person made or threatened to be made a party to any civil or
criminal action or proceeding by reason of the fact that such person, or his or
her testator or intestate, is or was a member of the Committee.
4. ELIGIBILITY.
Officers and other key employees of the Company or any Subsidiary, and
any consultant or other person providing key services to the Company or any
Subsidiary shall be eligible to receive awards hereunder (excluding members of
the Committee and any person who serves only as a director). In determining the
persons to whom awards shall be granted and the number of shares to be covered
by each award, the Committee, in its sole discretion, shall take into account
the
4
<PAGE> 5
contribution by the eligible participants to the management, growth, and
profitability of the business of the Company and such other factors as the
Committee shall deem relevant.
5. STOCK.
The maximum number of shares of Common Stock reserved for the grant of
awards under the Plan shall be 500,000 (including shares of Common Stock
reserved for the grant of awards issued in connection with the Distribution
Agreement dated as of _______, 1998, by and between the Company and Landair
Services, Inc., a Tennessee corporation (the "Distribution Agreement")) subject
to adjustment as provided in Section 11 hereof. Such shares may, in whole or in
part, be authorized but unissued shares or shares that shall have been or may be
reacquired by the Company. No Grantees shall be eligible to receive awards
relative to shares of Common Stock which exceed 100,000 shares in any fiscal
year.
If any outstanding award under the Plan should, for any reason, expire
or be canceled, forfeited, or terminated, without having been exercised in full,
the shares of Common Stock allocable to the unexercised, canceled, forfeited, or
terminated portion of such award shall (unless the Plan shall have been
terminated) become available for subsequent grants of awards under the Plan.
6. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted pursuant to the Plan shall be evidenced by a
written agreement between the Company and the Grantee (the "Option Agreement"),
in such form as the Committee shall from time to time approve, which Option
Agreement shall comply with and be subject to the following terms and
conditions:
(a) Number of Shares. Each Option Agreement shall state the
number of shares of Common Stock to which the Option relates.
(b) Type of Option. Each Option Agreement shall specifically
state that the Option constitutes an Incentive Stock Option or a Nonqualified
Stock Option. Incentive Stock Options may be granted only to individuals who are
employees of the Company or any Subsidiary.
(c) Option Price. Each Option Agreement shall state the Option
Price, which, in the case of an Incentive Stock Option, shall not be less than
one hundred percent (100%) of the Fair Market Value of the shares of Common
Stock covered by the Option on the date of grant. The Option Price shall be
subject to adjustment as provided in Section 11 hereof. Unless otherwise stated
in the resolution, the date on which the Committee adopts a resolution expressly
granting an Option shall be considered the day on which such Option is granted.
5
<PAGE> 6
(d) Medium and Time of Payment. The Option Price shall be paid
in full, at the time of exercise, as the Option Agreement may provide, in cash
or in shares of Common Stock having a Fair Market Value equal to such Option
Price, or in a combination of cash and Common Stock, or in such other manner as
the Committee shall determine.
(e) Term and Exercisability of Options. Each Option shall be
exercisable at such times and under such conditions as the Committee, in its
discretion, shall determine; provided, however, that in the case of an Incentive
Stock Option, such exercise period shall not exceed ten (10) years from the date
of grant of such Option. The exercise period shall be subject to earlier
termination as provided in Section 6(f) hereof. An Option may be exercised, as
to any or all full shares of Common Stock as to which the Option has become
exercisable, by giving written notice of such exercise to the Committee or its
designated agent.
(f) Termination of Employment
(i) Generally. Except as otherwise provided herein, an
Option may not be exercised unless the Grantee is then in the service or employ
of the Company or a Parent or Subsidiary (or a company or a parent or subsidiary
company of such company issuing or assuming the Option in a transaction to which
Section 424(a) of the Code applies), and unless the Grantee has remained
continuously so employed since the date of grant of the Option. Unless otherwise
determined by the Committee at or after the date of grant, in the event that the
employment of a Grantee terminates (other than by reason of death, Disability,
Retirement, or for Cause) all Options that are exercisable at the time of such
termination may be exercised for a period of 90 days from the date of such
termination or until the expiration of the stated term of the Option, whichever
period is shorter. For purposes of interpreting this Section 6(f) only, the
service of a director as a non-employee member of the Board shall be deemed to
be employment by the Company.
(ii) Death or Disability. If a Grantee dies while employed
by the Company or a Parent or Subsidiary (or within the period of extended
exercisability otherwise provided herein), or if the Grantee's employment
terminates by reason of Disability, all Options theretofore granted to such
Grantee will become fully vested and exercisable (notwithstanding any terms of
the Options providing for delayed exercisability) and may be exercised by the
Grantee, by the legal representative of the Grantee's estate, or by the legatee
under the Grantee's will at any time until the expiration of the stated term of
the Option. If an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, such
Option will thereafter be treated as a Non-Qualified Stock Option. In the event
that an Option granted hereunder is exercised by the legal representative of a
deceased or disabled Grantee, written notice of such exercise must be
accompanied by a certified copy of letters testamentary or equivalent proof of
the right of such legal representative or legatee to exercise such Option.
6
<PAGE> 7
(iii) Retirement. If a Grantee's employment terminates by
reason of Retirement, any Option held by the Grantee may thereafter be
exercised, to the extent it was exercisable at the time of such Retirement or on
such accelerated basis as the Committee may determine at or after the date of
grant (but before the date of such Retirement), at any time until the expiration
of the stated term of the Option. If an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes of Section
422 of the Code, such Option will thereafter be treated as a Non-Qualified Stock
Option.
(iv) Cause. If a Grantee's employment terminates for Cause,
the Option, to the extent not theretofore exercised, shall terminate on the date
of termination of employment.
(v) Committee Discretion. Notwithstanding the provisions
of subsections (i) through (iv) above, the Committee may, in its sole
discretion, at or after the date of grant (but before the date of termination),
establish different terms and conditions pertaining to the effect on any Option
of termination of a Grantee's employment, to the extent permitted by applicable
federal and state law.
(g) Buyout Provisions. The Committee may at any time offer to
buy out for a payment in cash, Common Stock, or Restricted Stock an option
previously granted, based on such terms and conditions as the Committee shall
establish and communicate to the Grantee at the time that such offer is made.
(h) Other Provisions. The Option Agreements evidencing Options
under the Plan shall contain such other terms and conditions, not inconsistent
with the Plan, as the Committee may determine.
7. NONQUALIFIED STOCK OPTIONS.
Options granted pursuant to this Section 7 are intended to constitute
Nonqualified Stock Options and shall be subject only to the general terms and
conditions specified in Section 6 hereof.
8. INCENTIVE STOCK OPTIONS.
Options granted pursuant to this Section 8 are intended to constitute
Incentive Stock Options and shall be subject to the following special terms and
conditions, in addition to the general terms and conditions specified in Section
6 hereof.
(a) Value of Shares. The aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is granted) of the shares
of equity securities of the Company with respect to which Incentive Stock
Options granted under this Plan and all other option plans of any Parent or
Subsidiary become exercisable for the first time by each Grantee during any
calendar year shall not exceed $100,000. To the extent such $100,000 limit has
been exceeded with respect to any Options
7
<PAGE> 8
first becoming exercisable, including acceleration upon a Change in Control, and
notwithstanding any statement in the Option Agreement that it constitutes an
Incentive Stock Option, the portion of such Option(s) that exceeds such $100,000
limit shall be treated as a Nonqualified Stock Option.
(b) Ten Percent Stockholder. In the case of an Incentive Stock
Option granted to a Ten Percent Stockholder, (i) the Option Price shall not be
less than one hundred ten percent (110%) of the Fair Market Value of the shares
of Common Stock on the date of grant of such Incentive Stock Option, and (ii)
the exercise period shall not exceed five (5) years from the date of grant of
such Incentive Stock Option.
9. STOCK APPRECIATION RIGHTS.
The Committee is authorized to grant SARs to Grantees on the following
terms and conditions:
(a) In General. Unless the Committee determines otherwise, an
SAR (i) granted in tandem with a Nonqualified Stock Option may be granted at the
time of grant of the related Nonqualified Stock Option or at any time
thereafter, and (ii) granted in tandem with an Incentive Stock Option may only
be granted at the time of grant of the related Incentive Stock Option. An SAR
granted in tandem with an Option shall be exercisable only to the extent the
underlying Option is exercisable and shall terminate when the underlying Option
terminates.
(b) SARs. An SAR shall confer on the Grantee a right to
receive an amount with respect to each share subject thereto, upon exercise
thereof, equal to the excess of (i) the Fair Market Value of one share of Common
Stock on the date of exercise over (ii) the grant price of the SAR (which in the
case of an SAR granted in tandem with an Option shall be equal to the exercise
price of the underlying Option, and which in the case of any other SAR shall be
such price as the Committee may determine).
(c) Performance Goals. The Committee may condition the
exercise of any SAR upon the attainment of specified Performance Goals, in its
sole discretion.
10. RESTRICTED STOCK.
The Committee may award shares of Restricted Stock to any eligible
person so determined by the Committee. Each award of Restricted Stock under the
Plan shall be evidenced by an instrument, in such form as the Committee shall
from time to time approve (the "Restricted Stock Agreement"), and shall comply
with the following terms and conditions (and with such other terms and
conditions not inconsistent with the terms of this Plan as the Committee, in its
discretion, shall establish including, without limitation, the requirement that
a Grantee provide consideration for Restricted Stock upon the lapse of
restrictions):
8
<PAGE> 9
(a) The Committee shall determine the number of shares of Common Stock
to be issued to the Grantee pursuant to the award.
(b) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged, hypothecated or otherwise disposed of, except by will or the laws of
descent and distribution, for such period as the Committee shall determine from
the date on which the award is granted (the "Restricted Period"). The Committee
may impose such other restrictions and conditions on the shares as it deems
appropriate including the satisfaction of Performance Goals. Certificates for
shares of stock issued pursuant to Restricted Stock awards shall bear an
appropriate legend referring to such restrictions, and any attempt to dispose of
any such shares of stock in contravention of such restrictions shall be null and
void and without effect. During the Restricted Period, such certificates shall
be held in escrow by an escrow agent appointed by the Committee. In determining
the Restricted Period of an award, the Committee may provide that the foregoing
restrictions lapse at such times, under such circumstances, and in such
installments, as the Committee may determine.
(c) Subject to such exceptions as may be determined by the Committee,
if the Grantee's continuous employment with the Company or any Parent or
Subsidiary shall terminate for any reason prior to the expiration of the
Restricted Period of an award, any shares remaining subject to restrictions
(after taking into account the provisions of Subsection (f) of this Section 10)
shall thereupon be forfeited by the Grantee and transferred to, and reacquired
by, the Company or a Parent or Subsidiary at no cost to the Company or such
Parent or Subsidiary.
(d) During the Restricted Period the Grantee shall possess all
incidents of ownership of such shares, subject to Subsection (b) of this Section
10, including the right to receive cash dividends with respect to such shares
and to vote such shares; provided, that shares of Common Stock distributed in
connection with a stock split or stock dividend shall be subject to restriction
and a risk of forfeiture to the same extent as the Restricted Stock with respect
to which such shares are distributed.
(e) Upon the occurrence of any of the events described in Section
11(c), all restrictions then outstanding with respect to shares of Restricted
Stock awarded hereunder shall automatically expire and be of no further force or
effect.
(f) The Committee shall have the authority (and the Restricted Stock
Agreement may so provide) to cancel all or any portion of any outstanding
restrictions prior to the expiration of the Restricted Period with respect to
any or all of the shares of Restricted Stock awarded on such terms and
conditions as the Committee shall deem appropriate.
(g) If and when the Restricted Period expires without a prior
forfeiture of the Restricted Stock subject to such Restricted Period,
certificates for an appropriate number of unrestricted shares shall be delivered
to the Grantee promptly.
9
<PAGE> 10
11. EFFECT OF CERTAIN CHANGES.
(a) If there is any change in the shares of Common Stock through the
declaration of extraordinary cash dividends, stock dividends, recapitalization,
stock splits, or combinations or exchanges of such shares, or other similar
transactions, the number of shares of Common Stock available for awards (both
the maximum number of shares issuable under the Plan as a whole and the maximum
number of shares issuable on a per-employee basis, each as set forth in Section
5 hereof), the number of such shares covered by outstanding awards, the
Performance Goals, and the price per share of Options or SARs shall be
proportionately adjusted by the Committee to reflect such change in the issued
shares of Common Stock; provided, that any fractional shares resulting from such
adjustment shall be eliminated; and provided, further, that, with respect to
Incentive Stock Options, such adjustment shall be made in accordance with
Section 424(h) of the Code.
(b) In the event of the dissolution or liquidation of the Company; in
the event of any corporate separation or division, including but not limited to,
split-up, split-off or spin-off; or in the event of other similar transactions,
the Committee may, in its sole discretion, provide that either:
(i) the Grantee of any award hereunder shall have the right to
exercise an Option (at its then Option Price) and receive such property, cash,
securities, or any combination thereof upon such exercise as would have been
received with respect to the number of shares of Common Stock for which such
Option might have been exercised immediately prior to such dissolution,
liquidation, or corporate separation or division; or
(ii) each Option shall terminate as of a date to be fixed by the
Committee and that not less than thirty (30) days' written notice of the date so
fixed shall be given to each Grantee, who shall have the right, during the
period of thirty (30) days preceding such termination, to exercise all or part
of such Option.
In the event of a proposed sale of all or substantially all of the assets of
the Company or the merger of the Company with or into another corporation, any
award then outstanding shall be assumed or an equivalent award shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless such successor corporation does not agree to
assume the award or to substitute an equivalent award, in which case the
Committee shall, in lieu of such assumption or substitution, provide for the
realization of such outstanding awards in the manner set forth in Section
11(b)(i) or 11(b)(ii) above.
(c) If, while any awards remain outstanding under the Plan, any of the
following events shall occur (which events shall constitute a "Change in
Control" of the Company):
(i) the "beneficial ownership," as defined in Rule 13d-3 under the
Exchange Act, of securities representing more than a majority of the combined
voting power of the Company are acquired by any "person" as defined in Sections
13(d) and 14(d) of the Exchange Act
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<PAGE> 11
(other than (A) the Company, (B) any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, (C) Scott M. Niswonger
or any member of his Immediate Family, or (D) any corporation owned, directly or
indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company); or
(ii) the shareholders of the Company approve a definitive
agreement to merge or consolidate the Company with or into another company
(other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) a majority of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation), or to sell or otherwise dispose
of all or substantially all of its assets, or adopt a plan of liquidation; or
(iii) during any period of two consecutive years, individuals who
at the beginning of such period were members of the Board cease for any reason
to constitute at least a majority thereof (unless the election, or the
nomination for election by the Company's shareholders, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of such period);
then from and after the date on which any such Change in Control shall have
occurred (the "Acceleration Date"), any Option, SAR, and share of Restricted
Stock awarded pursuant to this Plan shall be exercisable or otherwise
nonforfeitable in full, as applicable, whether or not otherwise exercisable or
forfeitable.
Following the Acceleration Date, (i) the Committee shall, in the case
of a merger, consolidation, or sale or disposition of assets, promptly make an
appropriate adjustment to the number and class of shares of Common Stock
available for awards, and to the amount and kind of shares or other securities
or property receivable upon exercise or other realization of any outstanding
awards after the effective date of such transaction, and, if applicable, the
price thereof, and (ii) the Committee may in its discretion (unless proscribed
with respect to certain Grantees), permit the cancellation of outstanding
Options, SARs, and Restricted Stock in exchange for a cash payment in an amount
equal to the Spread. The term "Spread" as used herein shall mean an amount equal
to the product computed by multiplying (i) the excess of (A) the highest Fair
Market Value per share of Common Stock during the sixty-day period preceding the
Acceleration Date over (B) the Option Price per share of Common Stock at which
such Option, SAR, or Restricted Stock is exercisable, by (ii) the number of
shares of Common Stock with respect to which the Option, SAR, or Restricted
Stock is being exercised.
Notwithstanding the foregoing, (i) with respect to any Incentive Stock
Option (or an SAR relating to an Incentive Stock Option), the Grantee may not
receive a cash payment in excess of the maximum amount that will enable such
option to continue to qualify as an Incentive Stock Option,
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<PAGE> 12
and (ii) no Grantee subject to the reporting requirements of Section 16(a) of
the Exchange Act shall be eligible to receive a cash payment in respect of any
award held for less than six months prior to exercise.
(d) In the event of a change in the Common Stock of the Company as
presently constituted that is limited to a change of all of its authorized
shares of Common Stock into the same number of shares with a different par value
or without par value, the shares resulting from any such change shall be deemed
to be the Common Stock within the meaning of the Plan.
(e) Except as herein before expressly provided in this Section 11,
the Grantee of an award hereunder shall have no rights by reason of any
subdivision or consolidation of shares of stock of any class or the payment of
any stock dividend or any other increase or decrease in the number of shares of
stock of any class or by reason of any dissolution, liquidation, merger, or
consolidation or spin-off of assets or stock of another company; and any issue
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Common
Stock subject to an award. The grant of an award pursuant to the Plan shall not
affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structures or to merge or to consolidate or to dissolve, liquidate, or sell, or
transfer all or part of its business or assets or engage in any similar
transactions.
12. SURRENDER AND EXCHANGES OF AWARDS.
The Committee may permit the voluntary surrender of all or a portion of
any Option granted under the Plan or any option granted under any other plan,
program, or arrangement of the Company or any Subsidiary ("Surrendered Option"),
to be conditioned upon the granting to the Grantee of a new Option for the same
number of shares of Common Stock as the Surrendered Option, or may require such
voluntary surrender as a condition precedent to a grant of a new Option to such
Grantee. Subject to the provisions of the Plan, such new Option (1) may be an
Incentive Stock Option or a Nonqualified Stock Option and (2) shall be
exercisable at the price, during such period, and on such other terms and
conditions as are specified by the Committee at the time the new Option is
granted. The Committee may also grant Restricted Stock in exchange for
Surrendered Options to any holder of such Surrendered Option.
13. PERIOD DURING WHICH AWARDS MAY BE GRANTED.
Awards may be granted pursuant to the Plan from time to time within a
period of ten (10) years from the effective date of the Plan, provided that
awards granted prior to such tenth anniversary date may be extended beyond such
date.
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<PAGE> 13
14. LIMITS ON TRANSFERABILITY OF AWARDS.
Awards of Incentive Stock Options (and any SAR related thereto) shall
not be transferable otherwise than by will or by the laws of descent and
distribution, and all Incentive Stock Options are exercisable during the
Grantee's lifetime only by the Grantee. Awards of Nonqualified Stock Options
(and any SAR related thereto) shall not be transferable, without the prior
written consent of the Committee, other than (i) by will or by the laws of
descent and distribution, (ii) by a Grantee to a member of his or her Immediate
Family, or (iii) to a trust for the benefit of the Grantee or a member of his or
her Immediate Family. Awards of Restricted Stock shall be transferable only to
the extent set forth in the Restricted Stock Agreement.
15. EFFECTIVE DATE OF PLAN.
The Plan shall be effective as of the date of the Distribution
Agreement, subject to the approval of the Plan by the holders of a majority of
the shares of Common Stock. Any grants made under the Plan prior to such
approval shall be effective when made (unless otherwise specified by the
Committee at the time of grant), but shall be conditioned on, and subject to,
such approval of the Plan by such shareholders.
16. AGREEMENT BY GRANTEE REGARDING WITHHOLDING TAXES.
If the Committee shall so require, as a condition of exercise of an
Option or SAR or other realization of an award, each Grantee shall agree that no
later than the date of exercise or other realization of an award granted
hereunder, the Grantee will pay to the Company or make arrangements satisfactory
to the Committee regarding payment of any federal, state, or local taxes of any
kind required by law to be withheld upon the exercise of an Option or other
realization of an award. Alternatively, the Committee may provide that a Grantee
may elect, to the extent permitted or required by law, to have the Company
deduct federal, state, and local taxes of any kind required by law to be
withheld upon the exercise of an Option or realization of any award from any
payment of any kind due to the Grantee. The Committee may, in its sole
discretion, permit withholding obligations to be satisfied in shares of Common
Stock subject to the award.
17. AMENDMENT AND TERMINATION OF THE PLAN.
The Board at any time and from time to time may suspend, terminate,
modify, or amend the Plan without stockholder approval to the fullest extent
permitted by the Exchange Act and the rules and regulations thereunder;
provided, however, that no suspension, termination, modification, or amendment
of the Plan may adversely affect any award previously granted hereunder, unless
the written consent of the Grantee is obtained.
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<PAGE> 14
18. RIGHTS AS A SHAREHOLDER.
Except as provided in Section 10(d) hereof, a Grantee or a transferee
of an award shall have no rights as a shareholder with respect to any shares
covered by the award until the date of the issuance of a stock certificate to
him or her for such shares. No adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities, or other property) or
distribution of other rights for which the record date is prior to the date such
stock certificate is issued, except as provided in Section 11 hereof.
19. NO RIGHTS TO EMPLOYMENT.
Nothing in the Plan or in any award granted or Agreement entered into
pursuant hereto shall confer upon any Grantee the right to continue in the
employ of the Company or any subsidiary or to be entitled to any remuneration or
benefits not set forth in the Plan or such Agreement or to interfere with or
limit in any way the right of the Company or any such subsidiary to terminate
such Grantee's employment. Awards granted under the Plan shall not be affected
by any change in duties or position of a Grantee as long as such Grantee
continues in the employ of the Company or any Subsidiary.
20. BENEFICIARY.
A Grantee may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may, from
time to time, amend or revoke such designation. If no designated beneficiary
survives the Grantee, the executor or administrator of the Grantee's estate
shall be deemed to be the Grantee's beneficiary.
21. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a Grantee by
the Company, nothing contained herein shall give any such Grantee any rights
that are greater than those of a general creditor of the Company. In its sole
discretion, the Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to deliver Common
Stock or payments in lieu of or with respect to awards hereunder; provided,
however, that, unless the Committee otherwise determines with the consent of the
affected participant, the existence of such trusts or other arrangements is
consistent with the "unfunded" status of the Plan.
22. GOVERNING LAW.
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Tennessee.
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EXHIBIT 10.5
LANDAIR CORPORATION
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NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
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SECTION 1. Purpose.
The purposes of the Non-Employee Director Stock Option Plan (the
"Plan") are to attract and retain well-qualified persons for service as
directors of Landair Corporation (the "Company"), to provide directors with an
opportunity to increase their ownership interest in the Company, and thereby
increase their personal interest in the Company's continued success, through the
grant of options (the "Options") to purchase shares of the $.01 par value per
share common stock of the Company (the "Common Stock").
SECTION 2. Administration.
Responsibility and authority to administer and interpret the provisions
of the Plan shall be conferred upon the Company's Compensation Committee (the
"Committee"). The Committee may employ attorneys, consultants, accountants or
other persons, and the Committee, the Company and its officers and directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All usual and reasonable expenses of the Committee shall be paid by the
Company. All actions taken and all interpretation and determinations made by the
Committee in good faith shall be final and binding upon all recipients who have
received awards, the Company and other interested persons. Notwithstanding the
foregoing, the Committee shall have no discretion with respect to the amount,
price and timing of the awards. No member of the Committee shall be personally
liable for any action, determination or interpretation taken or made in good
faith with respect to the Plan or awards made hereunder, and all members of the
Committee shall be fully indemnified and protected by the Company in respect of
any such action, determination or interpretation.
SECTION 3. Eligibility.
All directors of the Company who are neither full-time employees of the
Company nor officers of the Company shall be participants in the Plan.
SECTION 4. Options.
Each eligible participant serving as a director on the effective date
of the Plan shall automatically be granted, on such effective date, Options to
purchase ten thousand (10,000) shares of Common Stock. Each individual who
serves as a director of the Company and is an eligible participant shall
automatically be granted options to purchase five thousand (5,000) shares of
Common Stock on the first business day after each Annual Meeting of Shareholders
of the Company occurring after the effective date of the Plan. Each Option
granted hereunder shall be evidenced by an Option Agreement acceptable to the
<PAGE> 2
Company. The Options shall be registered pursuant to a Registration Statement on
Form S-8 to be filed in compliance with the Securities Act of 1933, as amended
(the "Securities Act").
SECTION 5. Terms and Conditions.
(a) Options to purchase up to one hundred thousand (100,000) shares of
Common Stock may be granted hereunder. In the event that any Option granted
hereunder expires unexercised or is canceled, surrendered, or terminated without
being exercised, in whole or in part, for any reason, then the number of shares
of Common Stock theretofore subject to such Option which expired or were
canceled, surrendered or terminated without being exercised shall be added to
the remaining number of shares of Common Stock for which Options may be granted
hereunder. The Committee shall appropriately adjust the number of shares for
which Options may be granted pursuant to the Plan in the event of
reorganization, recapitalization, stock split, reverse stock split, stock
dividend, exchange or combination of shares, merger, consolidation, rights
offering, or any change in capitalization of the Company.
(b) The Options shall be exercisable only by the participant during his
or her lifetime and may not be transferred other than by will or the laws of
descent and distribution.
(c) The exercise price per share for each Option granted under the Plan
shall be 100% of the Fair Market Value (as defined below) of a share of Common
Stock as of the date of grant. "Fair Market Value" as of a given date for
purposes of the Plan and any Option Agreement means (i) the closing sales price
per share of Common Stock on the national securities exchange on which the
Common Stock is principally traded, for the last preceding date on which there
was a sale of such Common Stock on such exchange, or (ii) if the shares of
Common Stock are then traded in an over-the-counter market, the average of the
closing bid and asked prices for the shares of Common Stock in such
over-the-counter market for the last preceding date on which there was a sale of
such Common Stock in such market, or (iii) if the shares of Common Stock are not
then listed on a national securities exchange or traded in an over-the-counter
market, such value as the Committee, in its sole discretion, shall determine.
(d) The initial Options to purchase ten thousand (10,000) shares of
Common Stock granted to directors on the effective date of the Plan shall become
exercisable in two (2) equal installments on the first and second anniversaries
of their respective dates of grant. Subsequent annual grants of Options shall
become exercisable in two (2) equal installments, the first installment becoming
exercisable twelve (12) months after the respective date of grant. The second
installment of each annual grant shall become exercisable twentyfour (24) months
after the respective date of grant. Once an Option has become exercisable, it
shall remain exercisable, to the extent not exercised, until its expiration
date.
(e) If a participant's service with the Company terminates due to the
participant's death or disability, all Options theretofore granted to the
participant will become fully vested and exercisable and may be exercised by the
participant, by the legal representative of the participant's
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<PAGE> 3
estate, or by the legatee under the participant's will at any time until the
expiration of the Option (as set forth below). If a participant's service with
the Company terminates for any other reason, all Options granted to such
participant which are not then exercisable shall be canceled, and the remaining
Options shall continue to be exercisable for ninety (90) days thereafter
(subject to expiration as provided below).
(f) Payment of the exercise price shall be in cash, in shares of Common
Stock valued at their Fair Market Value on the date of exercise, or both, as
elected by the participant. Shares of Common Stock issued pursuant to the
exercise of an Option under the Plan shall be from authorized but unissued
shares. To the extent the shares purchased through the exercise of an Option
granted hereunder are not registered under the Securities Act, they may not be
sold, assigned, transferred or otherwise disposed of in the absence of an
effective registration statement covering the shares, or an available exemption
under the Act.
(g) Notwithstanding any other provision herein to the contrary, all
Options granted hereunder shall expire on the tenth anniversary of their
respective date of grant.
SECTION 6. Change in Control.
If, while any awards remain outstanding under the Plan, any of the
following events shall occur (which events shall constitute a "Change in
Control" of the Company):
(a) the "beneficial ownership," as defined in Rule 13d-3 under
the Exchange Act, of securities representing more than a majority of the
combined voting power of the Company are acquired by any "person" as defined in
Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company, (B)
any trustee or other fiduciary holding securities under an employee benefit plan
of the Company, (C) Scott M. Niswonger or any member of his Immediate Family (as
defined below), or (D) any corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their
ownership of stock of the Company); or
(b) the shareholders of the Company approve a definitive
agreement to merge or consolidate the Company with or into another company
(other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) a majority of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation), or to sell or otherwise dispose
of all or substantially all of its assets, or adopt a plan of liquidation; or
(c) during any period of two consecutive years, individuals
who at the beginning of such period were members of the Board of Directors of
the Company (the "Board") cease for any reason to constitute at least a majority
thereof (unless the election, or the
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<PAGE> 4
nomination for election by the Company's shareholders, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of such period);
then from and after the date on which any such Change in Control shall have
occurred (the "Acceleration Date"), any Option, SAR, and share of Restricted
Stock awarded pursuant to this Plan shall be exercisable or otherwise
nonforfeitable in full, as applicable, whether or not otherwise exercisable or
forfeitable.
Following the Acceleration Date, (i) the Committee shall, in the case
of a merger, consolidation, or sale or disposition of assets, promptly make an
appropriate adjustment to the number and class of shares of Common Stock
available for awards, and to the amount and kind of shares or other securities
or property receivable upon exercise or other realization of any outstanding
awards after the effective date of such transaction, and, if applicable, the
price thereof, and (ii) the Committee may in its discretion (unless proscribed
with respect to certain Grantees), permit the cancellation of outstanding
Options, SARs, and Restricted Stock in exchange for a cash payment in an amount
equal to the Spread. The term "Spread" as used herein shall mean an amount equal
to the product computed by multiplying (i) the excess of (A) the highest Fair
Market Value per share of Common Stock during the sixty-day period preceding the
Acceleration Date over (B) the Option Price per share of Common Stock at which
such Option, SAR, or Restricted Stock is exercisable, by (ii) the number of
shares of Common Stock with respect to which the Option, SAR, or Restricted
Stock is being exercised.
Notwithstanding the foregoing, no participant subject to the reporting
requirements of Section 16(a) of the Exchange Act shall be eligible to receive a
cash payment in respect of any award held for less than six months prior to
exercise.
For purposes of this Section 6, "Immediate Family" shall mean any
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
sister-in-law, and shall include adoptive relationships.
SECTION 7. Amendment or Discontinuance.
The Board of Directors may, at any time amend, rescind or terminate the
Plan, as it shall deem advisable; provided, however, that (i) no change may be
made in any Option previously made under the Plan which would impair the
recipients' rights without their consent; (ii) no amendment to the Plan may be
made without approval of the Company's shareholders if the effect of the
amendment would be to: (a) materially increase the number of shares reserved
hereunder or benefits accruing to participants under the Plan, (b) materially
change the requirements for eligibility under Section 3 hereof, or (c)
materially modify the method for determining the number of options granted under
Section 4 hereof, except that any such increase or modification that results
from adjustments authorized by the first paragraph of Section 5 shall not
require such approval; and (iii) no amendment may be made to the Plan within six
(6) months of a prior amendment, except as required for
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<PAGE> 5
compliance with the Internal Revenue Code of 1986, as amended from time to time,
or the rules thereunder.
SECTION 8. Effective Date and Term of Plan.
The Plan shall become effective as of the date of the Distribution
Agreement dated as of ________________, 1998, by and between the Company and
Landair Services, Inc., a Tennessee corporation, subject to the approval of a
majority of the shareholders of the Company. Options granted prior to
termination of the Plan, shall, notwithstanding termination of the Plan,
continue to be effective and shall be governed by the Plan.
SECTION 9. Governing Law.
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Tennessee pertaining to contracts
made and to be performed wholly within such jurisdiction.
5
<PAGE> 1
EXHIBIT 10.6
LANDAIR CORPORATION
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EMPLOYEE STOCK PURCHASE PLAN
- --------------------------------------------------------------------------------
1. PURPOSE OF THE PLAN. The purpose of this Landair Corporation Employee
Stock Purchase Plan is to encourage stock ownership by eligible employees of
Landair Corporation and each of its participating subsidiaries, thereby
increasing eligible employees' personal interest in Landair Corporation's
continued success and progress. The Plan is intended to facilitate regular
investment in the common stock of Landair Corporation by furnishing a convenient
means for eligible employees to make stock purchases through payroll deduction.
The Plan is intended to comply with the provisions of Section 423 of the
Internal Revenue Code of 1986, as amended.
2. DEFINITIONS. For purposes of the Plan, the following terms shall have the
meanings indicated herein.
(a) "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time.
(b) "Committee" shall mean the Compensation Committee of the Board of
Directors of Landair Corporation or such other persons as the Board of Directors
of Landair Corporation appoints as the Committee from time to time pursuant to
the requirements of the Plan. The Committee shall be composed of at least two
members of the Board of Directors of Landair Corporation, each of whom is a
"non-employee director" within the meaning of Rule 16b-3 promulgated under the
Exchange Act.
(c) "Common Stock" shall mean Landair Corporation common stock, par
value $.01 per share.
(d) "Company" shall mean Landair Corporation and each Subsidiary
Employer. The term "Company" shall include any corporation into which Landair
Corporation may be merged or consolidated, provided such corporation does not
affirmatively disavow the Plan.
(e) "Compensation" shall mean the amount of a Participant's base
salary, before giving effect to any compensation reductions made in connection
with any plans described in Section 401(k) or 125 of the Code.
(f) "Custodian" shall mean any custodian appointed by the Committee
pursuant to Section 7 herein to hold the shares of Common Stock purchased under
the Plan and to maintain the Investment Accounts.
<PAGE> 2
(g) "Distribution Date" shall mean the date whereby those holders of
record of common stock, par value $.01 per share, of Landair Services, Inc.
receive a pro rata distribution of all outstanding shares of the Common Stock of
the Company.
(h) "Eligible Employee" shall mean an employee of the Company who is
eligible to participate in the Plan in any Option Period under the rules set
forth in Section 5 herein.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
it may be amended from time to time.
(j) "Exercise Date" shall mean the last trading day of each Option
Period.
(k) "Exercise Price" shall mean, for each share of Common Stock
purchased on an Exercise Date hereunder, the lesser of (i) 85% of the Fair
Market Value of such share on such Exercise Date, or (ii) 85% of the Fair Market
Value of such share on the Grant Date for the applicable Option Period.
(l) "Fair Market Value" of a share of Common Stock with respect to any
trading day shall be (i) the closing sales price on such day of a share of
Common Stock as reported on the consolidated tape for the principal securities
exchange on which shares of Common Stock are then listed or admitted to trading
or (ii) if not so reported, the last sale price as reported on The Nasdaq
National Market or (iii) if no sales occurred on such day, the average of the
closing bid and ask prices on such day, as reported on the National Association
of Securities Dealers Automated Quotation System or (iv) if not so reported, as
furnished by any member of the National Association of Securities Dealers, Inc.
selected by the Committee. In the event that the price of a share of Common
Stock shall not be so reported, the Fair Market Value of a share of Common Stock
shall be determined by the Committee in its absolute discretion.
(m) "Grant Date" shall mean the first trading day of each Option
Period.
(n) "Investment Account" shall mean a separate account maintained by
the Company or the Custodian for each Participant which reflects the number of
shares of Common Stock purchased under the Plan by such Participant and held for
such Participant.
(o) "Option Period" shall mean each successive period of six months (i)
commencing on January 1 and ending on June 30 and (ii) commencing on July 1 and
ending on December 31; provided, however, that the first Option Period shall
commence on the first trading day after the Distribution Date and end on the
following June 30 or December 31 after the Distribution Date, whichever is
earlier.
(p) "Participant" shall mean, with respect to any Option Period, each
Eligible Employee who has elected to have amounts deducted from his compensation
pursuant to Section 6(a)(i) herein for such Option Period.
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(q) "Plan" shall mean the Landair Corporation Employee Stock Purchase
Plan.
(r) "Statutory Insider" shall mean any individual subject to the
reporting requirements of Section 16(a) of the Exchange Act with respect to the
Company, and any other person so designated by resolution of the Board of
Directors of the Company.
(s) "Subsidiary Employer" means a subsidiary (within the meaning of
Section 424(f) of the Code) of Landair Corporation other than a subsidiary whose
employees have not been permitted by the Board of Directors of the Company to
participate in the Plan, or which has terminated its participation in or
withdrawn from, the Plan.
3. COMMON STOCK RESERVED FOR THE PLAN. There shall be reserved for issuance
under the Plan a total of 300,000 shares of Common Stock, subject to adjustment
as provided in Section 12 herein. Shares of Common Stock issued under the Plan
may be either authorized and unissued shares, treasury shares (whether acquired
in the open market or otherwise) or both.
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee. The Committee shall have the authority, consistent with the Plan, to
determine the eligibility of an employee to participate in the Plan, to
construe, interpret and enforce the terms of the Plan in good faith, to adopt,
amend and rescind rules and regulations for the administration of the Plan and
to make all determinations in connection therewith which may be necessary or
advisable, and all such actions shall be binding for all purposes under the
Plan. The Plan shall be administered at the expense of the Company.
No member of the Committee shall be liable for any action, omission or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee, and each other director or employee of
the Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated, against any cost, expense
(including reasonable attorneys' fees) or liability arising out of any action,
omission or determination relating to the Plan, unless, in either case, such
action, omission or determination was taken or made by such member, director or
employee in bad faith and without reasonable belief that it was in the best
interests of the Company.
5. ELIGIBILITY.
(a) Each employee of the Company shall be eligible to participate in
the Plan during each Option Period, other than:
(i) an employee whose date of commencement of employment with the
Company is less than one year prior to the Grant Date for such Option
Period;
(ii) an employee whose customary employment is less than 20 hours
per week;
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(iii) an employee whose customary employment is for not more than 5
months per calendar year;
(iv) an employee who, on the Exercise Date for such Option Period,
owns (within the meaning of Section 424(d) of the Code) securities
possessing 5% or more of the total combined voting power or value of all
classes of stock of the Company, or its subsidiaries, including Common Stock
which such employee would be entitled to purchase on such Exercise Date but
for this Section 5(a)(iv); and
(v) An employee who is not a citizen of the United States and who
is not permitted to participate in the Plan under applicable foreign law.
(b) Notwithstanding any provision in the Plan to the contrary, if any
employee who elects pursuant to Section 6 herein to authorize the Company to
deduct any amounts from his Compensation for any Option Period becomes an
employee described in clause (iv) of Section 5(a) herein prior to the Exercise
Date for such amounts, then the Company shall not apply such amounts to purchase
any Common Stock under the Plan pursuant to such election and such amounts shall
be returned to such employee as soon as practicable following such Exercise
Date, with no interest credited thereto.
(c) Notwithstanding any provision in the Plan to the contrary, if any
employee who elects pursuant to Section 6 herein to authorize the Company to
deduct any amounts from his Compensation for any Option Period terminates his
employment with the Company for any reason (except for termination by the
Company or termination by reason of death, retirement or disability) prior to
the Exercise Date for such amounts, then (i) no amounts shall be deducted from
such employee's Compensation after the date of such termination of employment,
(ii) the Company shall not apply any amounts deducted during such Option Period
to purchase Common Stock under the Plan, and any such amounts shall be returned
to such employee as soon as practicable following the Exercise Date for such
amounts, with no interest credited thereto, and (iii) such employee shall not be
eligible to participate in the Plan for any Option Period commencing after the
date of such termination of employment.
(d) If a participant should die while employed by the Company no
further contributions on behalf of the deceased Participant shall be made. The
legal representative of the deceased Participant may elect to withdraw the
balance in said Participant's Investment Account by notifying the Company in
writing prior to the Exercise Date in the Option Period during which the
Participant died. In the event no election to withdraw is made on or before the
Exercise Date, the balance accumulated in the deceased Participant's Investment
Account shall be used to purchase shares of Common Stock in accordance with
Section 7. Any money remaining which is insufficient to purchase a whole share
shall be paid to the legal representative.
(e) If a Participant should retire from the employment of the Company
at or after attaining age 65, no further contributions on behalf of the retired
Participant shall be made. The
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Participant may elect to withdraw the balance in his Investment Account by
notifying the Company in writing prior to the Exercise Date in the Option Period
during which the Participant retired. In the event no election to withdraw is
made on or before the Exercise Date, the balance accumulated in the retired
Participant's Investment Account shall be used to purchase shares of Common
Stock in accordance with Section 7, and any money remaining which is
insufficient to purchase a whole share shall be paid to the retired Participant.
(f) If a Participant should terminate employment with the Company on
account of disability (as determined by reference to the definition of
"disability" in any then current stock option plan of the Company under which
incentive stock options may be granted or in the absence of such a definition,
as reasonably determined by the Committee) no further contributions on behalf of
the disabled Participant shall be made. The Participant may elect to withdraw
the balance in his Investment Account by notifying the Company in writing prior
to the Exercise Date in the Option Period during which the Participant became
disabled. In the event no election to withdraw is made on or before the Exercise
Date, the balance accumulated in the disabled Participant's Investment Account
shall be used to purchase shares of Stock in accordance with Section 7, and any
money remaining which is insufficient to purchase a whole share shall be paid to
the disabled Participant.
(g) If the stock of a corporation is acquired by the Company or a
Subsidiary Employer so that the acquired corporation becomes a subsidiary within
the meaning of Section 424(f) of the Code, or if such a subsidiary is created,
the subsidiary in either case shall automatically become a Subsidiary Employer
and its employees shall become eligible to participate in the Plan on the first
Entry Date after the acquisition or creation of the subsidiary, as the case may
be. In the case of an acquisition, credit shall be given to employees of the
acquired subsidiary for service with such corporation prior to the acquisition
for purposes of Section 5(a)(i) hereof. Notwithstanding the foregoing, the Board
of Directors of the Company may by appropriate resolutions (i) provide that the
acquired or newly created subsidiary shall not be a Subsidiary Employer, (ii)
specify that the acquired or newly created subsidiary will become a Subsidiary
Employer on a date other than the first Entry Date after the acquisition or
creation, or (iii) attache any conditions whatsoever (including denial of credit
for prior service) to eligibility of the employees of the acquired or newly
created subsidiary.
6. PARTICIPATION.
(a) Regular Payroll Contributions:
(i) Each Eligible Employee shall be furnished a summary of the Plan
and an enrollment form and may elect to participate in the Plan for each
Option Period, effective on the Grant Date for such Option Period, by
completing the enrollment form provided by the Company and returning it to
the Company on or prior to the 15th day of the month preceding the month in
which such Option Period commences. For each Option Period during which an
Eligible Employee elects to participate in the Plan, such Eligible Employee
shall authorize the Company to deduct through a payroll deduction an exact
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number of dollars per month, but not less than $20.00 per month; provided,
however, that the total amount for such Option Period shall not exceed 10%
of such Eligible Employee's compensation for such Option Period. Deductions
shall be made in each regular payroll period during such Option Period.
(ii) Subject to Section 6(a)(iii) and (b) herein, after the last
date for making a participation election described in Section 6(a)(i) herein
for any Option Period a Participant shall not be entitled to increase or
reduce the amount of Compensation deducted from his Compensation for such
Option Period. A Participant may elect to reduce or increase the amount of
his Compensation deducted pursuant to the Plan effective for an Option
Period by filing a new enrollment form not later than last date for making a
participation election described in Section 6(a)(i) for such Option Period.
(iii) A Participant may elect to reduce the amount of his
Compensation deducted pursuant to the Plan to zero, effective for any
payroll period beginning after the last date for making a participation
election described in Section 6(a)(i) herein for any Option Period, by the
filing a suspension form in the form provided by the Company. A Participant
making a termination election under this Section 6(a)(iii) shall be deemed
to have terminated his participation in the Plan and may not commence
participation in the Plan again until the Grant Date of the Option Period
immediately following the Option Period in which such termination occurs
(or, in the case of a Participant who is a Statutory Insider, the Grant Date
that is at least six months after the date that is the later of the date of
his discontinuance of contributions or (if applicable) the date of his
withdrawal of the balance of his contributions) by filing a new enrollment
form pursuant to the requirements of Section 6(a)(i) herein.
(b) Lump Sum Contributions:
Subject to the limitation on the amount of contributions described in
Section 6(a)(i) and Section 8, a Participant who has not discontinued or
withdrawn his participation pursuant to Section 6(a)(ii) or 6(a)(iii) may make
no more than two lump sum contributions during each Option Period. These lump
sum contributions shall be paid by check by the Participant at any time before
the Exercise Date and shall be credited to the Participant's Investment Account.
An Eligible Employee who has not elected to participate pursuant to Section
6(a)(i) with respect to a Option Period or who has discontinued or withdrawn
participation for such Option Period pursuant to Section 6(a)(ii) or 6(a)(iii)
may not make any lump sum contribution for such Option Period nor, in the case
of an employee who is a Statutory Insider, may such employee make a lump sum
contribution with respect to any Option Period in which such employee is barred
from participation pursuant to Section 6(a)(iii).
(c) A Participant shall automatically continue to participate in the
Plan at the same amount of deductions (without regard to any election under
Section 6(b)(i) herein) until the Participant makes an election described in
Section 6(a)(ii) or (iii) herein.
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(d) No interest will be paid on any amounts of Compensation deducted
under the Plan; provided, however, the Company, in its sole discretion may set
such amounts aside in a separate account with the Custodian which shall bear
interest at a rate specified from time to time by the Company.
(e) Any election permitted by this Section 6 shall be made in writing
in the form determined by the Committee from time to time. The time by which an
election must be made as provided herein shall be subject to change by the
Committee.
(f) All Participants shall have the same rights and privileges under
this Plan, except as stated above with respect to the maximum percentage of
Compensation which a Participant may contribute to the Plan.
7. ISSUANCE OF OPTIONS; PURCHASES. On the Grant Date of each Option Period,
each Participant shall be deemed to receive an option to purchase shares of
Common Stock at the Exercise Price for such Option Period with the number of
shares determined as provided in this Section 7, subject to the maximum number
of shares specified in Section 8. All such options shall be automatically
exercised on the following Exercise Date, except for options which are cancelled
when a Participant withdraws the balance of his Investment Account or which are
otherwise terminated under the provisions of this Plan. All amounts deducted
pursuant to Section 6 hereof from a Participant's Compensation during an Option
Period, together with any interest credited thereon pursuant to Section 6(d)
hereof and any cash dividends which may have been declared and paid by the
Company on shares of Common Stock held in a Participant's Investment Account,
shall be applied by the Committee on the Exercise Date for such Option Period to
purchase from the Company the maximum number of whole shares of Common Stock
determined by dividing the Exercise Price into the balance of the Participant's
Investment Account. Any money remaining in a Participant's Investment Account
representing a fractional share shall remain in his Investment Account to be
used in the next Option Period; provided, however, that if the Participant does
not enroll for the next Option Period, the balance remaining shall be returned
to him in cash. The Committee may elect to appoint the Custodian for the Plan to
hold all shares purchased under the Plan and to maintain a separate Investment
Account for each Participant, to which purchases for such Participant and
dividends on the Common Stock purchased shall be credited. Each Participant
shall receive a statement as soon as practicable after the termination of each
Option Period reflecting purchases for his account under the Plan through the
date of such termination.
8. LIMITATION AN THE NUMBER OF SHARES OF COMMON STOCK WHICH MAY BE
PURCHASED. Notwithstanding any provision to the contrary in the Plan, no right
to purchase Common Stock under the Plan shall permit an employee to purchase
stock, together with any stock which such employee has a right to purchase under
all other "employee stock purchase plans" (within the meaning of Section 423 of
the Code) maintained by the Company and its subsidiaries (within the meaning of
Section 424(d) of the Code), at a rate which exceeds $25,000 of Fair Market
Value of such stock (determined at the Grant Date for the Option Period during
which each such share of Common Stock is purchased) for each calendar year in
which the right is outstanding at any time. The maximum
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number of shares of Common Stock which may be purchased on any Exercise Date by
any Participant hereunder shall be ONE THOUSAND THREE HUNDRED (1,300) shares.
9. RESTRICTION ON SALES OF SHARES OF COMMON STOCK. Unless otherwise
determined by the Committee, no Participant (or former Participant) shall sell
or otherwise dispose of any shares of Common Stock acquired under this Plan
(except to members of his immediate family, who will be subject to the same
restrictions as the Participant or former Participant) prior to one year after
the Exercise Date. No Statutory Insider shall transfer shares of Common Stock
acquired under this Plan to members of his immediate family prior to six months
after the Exercise Date. If a Participant sells or otherwise disposes of any
shares of Common Stock acquired under this Plan (i) prior to two (2) years after
the Grant Date of the option under which such shares were acquired, or (ii)
prior to one (1) year after the Exercise Date on which such shares were
acquired, such Participant (or former Participant) must notify the Company
immediately in writing concerning such disposition.
10. RIGHTS AS A SHAREHOLDER.
(a) From and after the Exercise Date on which shares of Common Stock
are purchased by a Participant under the Plan, such Participant shall have all
of the rights and privileges of a shareholder of the Company with respect to
such shares. A Participant shall be entitled to direct the Company, or if a
Custodian has been appointed, the Custodian, to transfer to him a certificate
representing all or any portion of the shares of Common Stock purchased by him
hereunder. Once a share certificate has been issued to a Participant, the shares
of Common Stock represented by such certificate shall no longer be treated as
being held in the Participant's Investment Account.
(b) Prior to the Exercise Date on which shares of Common Stock are
purchased by a Participant, such Participant shall not have any rights as a
shareholder of the Company with respect to such shares. Each Participant shall
be a general unsecured creditor of the Company to the extent of any amounts
deducted under the Plan from such Participant's Compensation during the period
prior to the Exercise Date on which such amounts are applied to the purchase of
Common Stock or the return of such amounts to the Participant.
(c) Participants (other than Statutory Insiders) may direct the
Custodian to cause any certificates representing all or any portion of the
shares of Common Stock purchased by him hereunder to be issued jointly with the
right of survivorship to the Participant and any other individual chosen by the
Participant or to the Participant as custodian for the Participant's child under
the Gift to Minors Act.
(d) Notwithstanding any other provision in the Plan to the contrary, no
shares of Common Stock may be issued if the Company shall determine that such
issuance would violate federal or state securities laws.
11. RIGHTS NOT TRANSFERABLE. No Participant may transfer, assign, pledge,
hypothecate or otherwise dispose of any rights granted under this Plan, except
as provided by will or the
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applicable laws of descent and distribution, and no rights under this Plan shall
be subject to execution, attachment or similar process by a Participant's
creditors. Any such attempted disposition of rights under the Plan, or levy of
attachment or similar process upon such rights not specifically permitted herein
shall be null and void and without effect. Rights under this Plan may be
exercised only by the Participant during his lifetime, or by his estate or by
the person acquiring such rights upon the Participant's death by bequest or
inheritance.
12. ADJUSTMENT FOR CHANGES IN COMMON STOCK. In the event of any change in
the number of shares of Common Stock outstanding by reason of any stock dividend
or split, recapitalization, merger, consolidation, combination or exchange of
shares or similar corporate change, the maximum aggregate number of shares of
Common Stock which may be purchased under the Plan, and the maximum number of
shares that may be purchased by any Participant on any Exercise Date pursuant to
the last sentence of Section 8 hereof, shall be appropriately adjusted by the
Committee. In the event of any change in the number of shares of Common Stock
outstanding by reason of any other event or transaction the Committee may, but
need not, make such adjustments in the number and class of shares of Common
Stock which may be purchased under the Plan as the Committee may deem
appropriate.
13. AMENDMENT OF THE PLAN. The Board of Directors of the Company may at any
time, or from time to time, amend the Plan in any respect, except that, without
the approval of a majority of the votes cast at a duly held meeting of the
shareholders of the Company at which a quorum representing a majority or all
outstanding voting stock of the Company is, either in person or by proxy,
present and voting on the Plan, no amendment shall be made to (a) increase the
total number of shares of Common Stock which may be purchased under the Plan
(except as provided in Section 12 herein), (b) extend the duration of the Plan,
(c) reduce the purchase price of Common Stock hereunder (except as provided in
Section 12 herein), (d) materially increase the benefits accruing to Statutory
Insiders under the Plan or (e) change the requirements as to eligibility for
participation in the Plan. No action by the Board of Directors under this
Section may adversely affect any rights granted hereunder without the consent of
the holder thereof.
14. GOVERNMENT AND OTHER REGULATIONS.
(a) The Plan and the purchase of Common Stock hereunder shall be
subject to all applicable federal, state and foreign laws, rules and regulations
and to such approvals by any regulatory or government agency as may, in the,
opinion of counsel for the Company, be required.
(b) The Plan and the purchase of Common Stock hereunder shall be
subject to all rules and regulations promulgated by the Committee regarding
purchases and sales of Common Stock.
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15. EFFECTIVE DATES OF THE PLAN.
(a) Subject to shareholder approval, the Plan shall become effective on
the Distribution Date in accordance with applicable law, the requirements of
Section 423 of the Code and the requirements of Rule 16b-3 promulgated under
Section 16(b) of the Exchange Act.
(b) The Plan and all rights hereunder shall terminate on the earlier to
occur of:
(i) the date on which no Common Stock remains reserved for
issuance under the Plan with respect to future deductions pursuant to
the Plan;
(ii) the termination of the Plan by the Board of Directors of
the Company; and
(iii) December 31, 2003.
In the event that the Plan terminates under circumstances described in
clause (i) above, reserved shares remaining as of the termination date shall be
allocated to Participants on a pro rata basis based on the amounts deducted from
their Compensation during the Option Period in which such termination occurs and
prior to the termination date. In the event the Plan is terminated under
circumstances described in clause (ii) above, the Committee may, at its
discretion, provide that (i) amounts deducted pursuant to the Plan and not yet
applied to purchase shares of Common Stock shall be returned to the Participants
whose Compensation such amounts were deducted from, together with a cash payment
equal to 15% of such amounts or (ii) a special Exercise Date shall occur prior
to such termination on which date amounts deducted pursuant to the Plan and not
yet applied to purchase shares of Common Stock will be applied to purchase
shares of Common Stock. In the event that the Plan terminates under
circumstances described in clause (iii) above, any rights to purchase reserved
shares remaining as of the termination date after all purchases have been made
shall expire on such date.
17. INCORPORATION BY REFERENCE. The Company intends that the rights granted
and Common Stock issued hereunder shall be treated for all purposes as granted
and issued under an employee stock purchase plan within the meaning of Section
423 of the Code and the regulations thereunder. Any provisions required to be
included in the Plan under said Code Section and Regulations are hereby included
by reference as fully as though set forth in the Plan at length.
18. MISCELLANEOUS.
(a) Nothing in this Plan shall be construed to constitute a contract of
employment between the Company and any employee or to be an inducement for the
employment of any employee. Nothing contained in this Plan shall be deemed to
give any employee the right to be retained in the service of the Company or to
interfere with the right of
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the Company to discharge any employee at any time, with or without cause,
regardless of the effect which such discharge may have upon him as a Participant
of the Plan.
(b) The rights and powers of the Company shall not be affected in any
way by its participation in this Plan, including but not limited to the right or
power of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its business or
assets.
(c) For the purposes of the Plan, unless the contrary is clearly
indicated, the use of the masculine gender shall include the feminine, and the
singular number shall include the plural and vice versa.
(d) The validity, construction, interpretation, administration and
effect of this Plan, and any rules or regulations promulgated hereunder,
including all rights or privileges of any Participants hereunder, shall be
governed exclusively by and in accordance with the laws of the State of
Tennessee, except that the Plan shall be construed to the maximum extent
possible to comply with Section 423 of the Code and the regulations promulgated
thereunder.
(e) Any headings or subheadings in this Plan are inserted for
convenience of reference only and are to be ignored in the construction of any
provisions hereof.
(f) If any provision of this Plan is held by a court to be
unenforceable or is deemed invalid for any reason, then such provision shall be
deemed inapplicable and omitted, but all other provisions of this Plan shall be
deemed valid and enforceable to the full extent possible under applicable law.
<PAGE> 1
EXHIBIT 10.7
LANDAIR CORPORATION
CASH INCENTIVE PLAN
SECTION 1. PLAN ESTABLISHMENT AND PURPOSE
1.1 Establishment. Landair Corporation (the "Company"), a Tennessee
corporation, hereby establishes an annual/quarterly compensation
program for selected management employees, which shall be known as the
Landair Corporation Cash Incentive Plan (the "Plan").
1.2 Purpose. The purpose of the Plan is to maximize the success and
profitability of the Company by providing significant incentive
opportunities to selected management employees. It is also intended to
assist in the attraction and retention of key members of management and
to further link executive and Company interests and objectives.
SECTION 2. DEFINITIONS
2.1 Definitions. Whenever used herein, the following terms shall have their
respective meanings set forth below:
(a) "Administrator" means the Executive Committee of the Board of
Directors of Landair Corporation.
(b) "Company" means Landair Corporation, and any subsidiaries.
(c) "Disability" shall have the same meaning as provided in a
long-term disability plan maintained by the Company if, at any
time during the period that this Plan is in operation, the
Company adopts a long-term disability plan. In the event of a
dispute, the determination of Disability shall be made by the
Administrator. Disability shall mean a physical or mental
condition which, in the judgment of the Administrator,
permanently prevents a Participant from performing his usual
duties for the Company or such other position or job which the
Company makes available to him and for which the Participant
is qualified by reason of his education, training and
experience. In making its determination the Administrator may,
but is not required to, rely on advice of a physician
competent in the area to which such Disability relates. The
Administrator may make the determination in its sole
discretion and any decision of the Administrator will be
binding on all parties.
(d) "Participant" means any individual designated to participate
in the Plan pursuant to Subsection 4.1.
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(e) "Plan" means the Landair Corporation Cash Incentive Plan.
(f) "Plan Quarter" means the three-month periods of January 1 to
March 31, April 1 to June 30, July 1 to September 30 and
October 1 to December 31.
(g) "Plan Year" Means the twelve month period of January 1 to
December 31.
(h) "Retirement" means the voluntary termination of a Participant
who has attained age 65.
2.2 Gender and Number. Except when otherwise indicated by the context,
words in the masculine gender, when used in the Plan, shall include the
feminine gender, the singular shall include the plural, and the plural
shall include the singular.
SECTION 3. ADMINISTRATION, NO CONTROL AND NATURE OF INTEREST
3.1 Administration. The Administrator shall have the exclusive
responsibility for the general administration of the Plan according to
the terms and provisions of the Plan and shall have all the powers
necessary to accomplish these purposes; including, but not by way of
limitation, the right, power and authority:
(a) To make rules and regulations for the administration of the
Plan;
(b) To construe all terms, provisions, conditions and limitations
of the Plan;
(c) To correct any defects, supply any omissions or reconcile any
inconsistencies that may appear in the Plan in the manner and
to the extent deemed expedient;
(d) To determine all controversies relating to the administration
of the Plan, including but not limited to, differences of
opinion which may arise between the Company or the
Administrator and the Participants;
(e) To resolve any questions necessary to promote the uniform
administration of the Plan;
All executive awards to Officers of the Company, however, are subject
to approval of the Compensation Committee of the Board of Directors. In
addition, the total annual incentive awards to be provided by the Plan
are subject to approval by the Compensation Committee.
3.2 Administrator"s Discretion. The Administrator, in exercising any power
or authority granted under this Plan, or in making any determination
under this Plan, shall perform or
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refrain from performing those acts in his sole and absolute discretion
and judgment. Any decision made by the Administrator, or any refraining
to act or any act taken by the Administrator, in good faith shall be
final and binding on all parties.
3.3 Liability and Indemnity of Administrator. The Administrator shall not
be liable for any act done or any determination made in good faith. The
Company shall, to the fullest extent permitted by law, indemnify and
hold the Administrator harmless from any and all claims, causes of
action, damages and expenses (including reasonable attorneys" fees and
expenses) incurred by the Administrator in connection with or otherwise
related to his or her service in such capacity.
3.5 No Control and Nature of Interest. The granting of rights to
Participants under the provisions of the Plan represents only a
contracted right to receive compensation. Accordingly, the Plan grants
no right to, or interest in, either express or implied, any equity
position or ownership in the Company.
SECTION 4. ELIGIBILITY AND PARTICIPATION.
4.1 Eligibility and Participation. Participants in the Plan shall be
recommended by the Chief Executive Officer of the Company and approved
by the Administrator from among those management employees of the
Company who, in the opinion of the Chief Executive Officer of the
Company and the Administrator, are in a position to contribute
materially to the Company"s continued growth and development and to its
long term financial success.
SECTION 5. INCENTIVE AWARDS
5.1 Setting Target Incentive. Annually, the Company's Chief Executive
Officers will recommend to the Administrator a list of Officer
Participants and a Target Incentive for each. In addition, on a
quarterly basis, the Company"s Chief Executive Officer will recommend
to the Administrator a list of non-officer Participants and a Target
Incentive for each. The Target Incentive will be calculated as a
percent of each Participant"s base salary at the beginning of the Plan
Year or Plan Quarterly, as applicable. Each Target Incentive will
consist of up to two components, namely:
- A Local Goal, and/or
- A Consolidated Goal
Quarterly, the Company"s Chief Executive Officer will determine the
percentage relationship that each of the established goals will
comprise of the Target Incentive. The Administrator will review the
recommendations, will approve, modify or reject each and
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will notify each Participant of his or her Target Incentive for the
Plan Year and the components included in the Target Incentive. It is
anticipated that the Target Incentive will be established and
communicated to the Participant no later than the end of the first
month of the Plan Year or Plan Quarter, as applicable.
5.2 Local Goal. The Local Goal will be based upon financial objectives
relating to the performance of a terminal, division or component of the
Company. The Local Goal may vary from quarter to quarter and for a
given period, will be recommended by the Company's Chief Executive
Officer and approved by the Administrator.
5.3 Consolidated Goal. The Consolidated Goal will be based upon financial
objectives relating to the performance of a division, other
consolidated component of the Company or the Company as a whole. The
Consolidated Goal may vary from quarter to quarter and for a given
period, will be recommended by the Company's Chief Executive Officer
and approved by the Administrator.
SECTION 6. PAYMENT OF INCENTIVE AMOUNTS
6.1 Local and Consolidated Goals. At the end of each Plan Year for Officers
and Plan Quarter for all other non-officer participants, the
Administrator will review the Company's financial performance and
calculate the amount of Local and Consolidated Goal that has been
earned by each Participant. Payment for achievement of Local and
Consolidated Goals will be based upon the schedule to be developed.
6.2 Payment and Timing. All payments under the Plan will be made in cash.
Payments will be made as soon as administratively feasible following
the finalization of the Company's financial statements for the
applicable Plan Quarter, except for those individuals who are officers
of the Company who will be paid on an annual basis upon finalization of
the Company"s financial statements for the entire fiscal year.
SECTION 7. EMPLOYMENT EVENTS
7.1 Termination of Employment. In the event that the Participant terminates
employment for any reason other than death, Disability or Retirement,
prior to payment of all or a portion of the Target Incentive which has
been earned, the unpaid portion, even if earned, shall be forfeited.
7.2 Death, Disability, Retirement. In the event that the Participant
terminates employment as a result of death, Disability or Retirement,
the Participant, or the estate of the Participant, will be entitled to
a payment based upon the Goals achieved; but the payment will be
reduced by one-third for each full month, by which the Participant"s
death, Disability or Retirement precedes the end of the Plan Period.
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SECTION 8. LIMITATION OF RIGHTS
8.1 Limitation of Rights. Nothing in this Plan shall be construed:
(a) To give any Participant any right to be awarded a Target
Incentive other than at the sole discretion of the
Administrator;
(b) To limit in any way the right of the Company to terminate a
Participant's employment with the Company at any time; or
(c) To evidence any agreement or understanding, expressed or
implied, that the Company will employ a Participant in any
particular capacity or for any particular remuneration.
SECTION 9. DURATION OF PLAN
9.0 Duration of Plan. The Plan shall remain in effect indefinitely, subject
to the Company's right to terminate the Plan pursuant to Section 10
hereof.
SECTION 10. AMENDMENT, MODIFICATION AND TERMINATION OF PLAN
10.1 Amendment, Modification and Termination of Plan. The Company may at any
time terminate the Plan, and from time to time, may amend or modify it,
provided that no such action shall adversely affect any right or
obligation with respect to any awards therefore granted.
SECTION 11. ALIENATION
11.1 Alienation. No benefit provided by this Plan shall be transferable by
the Participant except on the Participant's death, as provided in this
Plan. No right or benefit under this Plan shall be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance or
charge. Any attempt to anticipate, alienate, sell, assign, pledge,
encumber or charge any right or benefit under this Plan shall be void.
No right or benefit under this Plan shall, in any manner, be liable for
or subject to any debts, contracts, liabilities or torts of the person
entitled to the right or benefit. If any Participant becomes bankrupt
or attempts to anticipate, alienate, assign, pledge, sell, encumber or
charge any right or benefit under this Plan, then the right or benefit
shall, in the discretion of the Administrator, cease. In that event,
the Company may hold or apply the right or benefit, or any part of the
right or
5
<PAGE> 6
benefit, for the benefit of the Participant, his or her spouse,
children, or dependents, the beneficiary or any of them, in the manner
or in the proportion that the Administrator shall deem proper, in his
sole discretion, but is not required to do so.
SECTION 12. TAX WITHHOLDING
12.1 Tax Withholding. Payments under the Plan shall be subject to applicable
federal, state, and local tax withholding requirements.
SECTION 13. UNFUNDED PLAN
13.1 Unfunded Plan. The Plan shall be unfunded. The Company shall not be
required to segregate any assets that may be represented by an
Incentive Amount; the Company shall not be deemed to be a trustee of
any amounts to be paid to a Participant. Any liability of the Company
to pay any Participant with respect to an Incentive Amount shall be
based solely upon any contractual obligations created pursuant to the
provisions of the Plan; and no such obligation shall be deemed to be
secured by any pledge or encumbrance on any property of the Company.
However, the Company has the discretion at any time to segregate such
assets that may be represented by an Incentive Amount. The assets will
at all times remain property of the Company. The Participants and their
beneficiaries shall at all times be merely unsecured creditors of the
Company.
SECTION 14. SUCCESSOR COMPANY
14.1 Successor Company. In the event of a merger, consolidation, combination
or reorganization involving the Company and any other entity or
corporation, the Administrator shall have the discretion to terminate
the Plan as of the effective date of the merger, consolidation,
combination or reorganization.
SECTION 15. GOVERNING LAW
15.1 Governing Law. The Plan, and all agreements hereunder, shall be
constructed in accordance with and governed by the laws of the State of
Tennessee except to the extent superseded by federal law.
SECTION 16. EFFECTIVE DATE
16.1 Effective Date. The plan shall become effective as of January 1, 1998.
6
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE OF
NAME INCORPORATION
---- -------------
<S> <C>
Landair Transport, Inc. Tennessee
Landair Transportation Properties, Inc. Tennessee
Volunteer Adjustment, Inc. Tennessee
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED FINANCIAL STATEMENTS OF THE TRUCKLOAD BUSINESS OF LANDAIR SERVICES,
INC. FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 61
<SECURITIES> 0
<RECEIVABLES> 10,818
<ALLOWANCES> 155
<INVENTORY> 0
<CURRENT-ASSETS> 30,261
<PP&E> 103,189
<DEPRECIATION> 35,127
<TOTAL-ASSETS> 98,356
<CURRENT-LIABILITIES> 30,010
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 40,903
<TOTAL-LIABILITY-AND-EQUITY> 98,356
<SALES> 0
<TOTAL-REVENUES> 51,543
<CGS> 0
<TOTAL-COSTS> 48,450
<OTHER-EXPENSES> (26)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 924
<INCOME-PRETAX> 2,195
<INCOME-TAX> 850
<INCOME-CONTINUING> 1,345
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,345
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
