UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year Commission file number 0-14759
ended December 29, 1995
KLLM TRANSPORT SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 64-0412551
State or other jurisdiction of IRS Employer Identification No.)
incorporation or organization)
3475 Lakeland Drive
Jackson, Mississippi 39208
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(601) 939-2545
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
Aggregate market value of voting stock held by nonaffiliates of the
registrant as of the close of business on February 21, 1996: $34,979,070.
The number of shares outstanding of registrant's common stock as of
February 21, 1996: 4,358,653.<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference:
Document Part
Annual Report to Shareholders for year ended
December 29, 1995 II
Definitive Proxy Statement for Annual Meeting of
Shareholders to be held April 16, 1996 filed
with the Securities and Exchange Commission
pursuant to Regulation 14A III
Only the portions of KLLM Transport Services, Inc.'s 1995 Annual Report
to Shareholders and Proxy Statement which are expressly incorporated by
reference in this Annual Report on Form 10-K are deemed filed as part of
this report.
<PAGE>
KLLM TRANSPORT SERVICES, INC.
FORM 10-K
TABLE OF CONTENTS
PART I PAGE
1. Business............................................4
2. Properties..........................................6
3. Legal Proceedings...................................7
4. Submission of Matters to a Vote of
Security Holders....................................7
PART II
5. Market for Registrant's Common
Equity and Related Stockholder Matters..............8
6. Selected Financial Data.............................8
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......8
8. Financial Statements and Supplementary Data.........8
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..............8
PART III
10. Directors and Executive Officers
of the Registrant...................................8
11. Executive Compensation..............................9
12. Security Ownership of Certain Beneficial
Owners and Management...............................9
13. Certain Relationships and Related Transactions......9
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K.........................................10
<PAGE>
PART I
Item 1. Business.
KLLM Transport Services, Inc. (through its wholly-owned subsidiary,
KLLM, Inc., and KLLM, Inc.'s wholly-owned subsidiaries, KLLM Maintenance, Inc.,
Gulf Logistics, Inc., KLLM Contract Logistics, Inc., KLLM Trading Company, and
Fresh International Transportation Services, Inc., hereinafter referred to as
"the Company") is an irregular-route common carrier that specializes in
providing high-quality transportation service in North America. The Company
primarily serves the continental United States, Canada and Mexico.
The Company, a Delaware corporation, is the successor by merger to KLLM
Distributing, Inc. ("KLLM Distributing"), a Mississippi corporation,
incorporated in 1964. The Company owns all of the outstanding shares of KLLM,
Inc., a Texas corporation, which owns (either in fee or as lessee) and operates
substantially all of the Company's tractors and trailers and holds all of the
operating rights presently used in the Company's business.
The Company offers transportation services for both temperature-
controlled and dry commodities. It strives to provide dependable and timely
service designed to meet the specialized needs of its customers. The majority
of the Company's revenues, approximately 70%, are in the temperature-
controlled sector. Protective service is provided on commodities such as
food, medical supplies and cosmetics. Service offerings include over-the-road
long haul, regional and intermodal transportation. These services are provided
via: 1) the traditional over-the-road temperature-controlled freight operations
with both Company-operated and owner-operated equipment, 2) the intermodal, or
rail services, division, which handles movement of freight in temperature-
controlled trailers and containers on flat cars carried by the rail industry,
3) the brokerage services division, which allows the Company to contract with
other transporters for the movement of freight, when necessary, allowing the
customer to stay within the KLLM family, and 4) the dry-van over-the-road
truckload services, which began May 1, 1995 with the acquisition of
substantially all of the assets of Vernon Sawyer, Inc., a regional dry-van
truckload carrier based in Bastrop, Louisiana. At the end of 1995, the Company
discontinued that segment of the international operations aimed at maritime
containerized shipments.
The Company currently owns (or leases) and operates substantially all
of its fleet. On December 29, 1995, the Company's fleet consisted of 1,485
Company-operated tractors and 291 owner-operated tractors, 2,150 temperature-
controlled trailers and 384 dry-van trailers, and 202 temperature-
controlled rail containers. Capital expenditures, net of proceeds from
trade-ins during 1995, were approximately $8,724,000. This was much less
significant than in prior years, primarily because KLLM, Inc., in January 1995,
entered into an operating lease for the majority of its revenue equipment needs
for 1995. The payment terms of the operating lease were more favorable than
could have been obtained with financing or capital leasing. Net capital
expenditures in 1996 are expected to be approximately $25,921,000 as the
Company returns to its traditional method of investing in maintaining a
modern fleet.
Marketing and Operations
Because the Company specializes in temperature-controlled shipments,
it constantly seeks to increase the percentage of its revenue derived from
freight requiring controlled temperatures because rates on these loads are
generally higher than dry freight (non-temperature-controlled) loads and
result in higher returns on the Company's more expensive temperature-
controlled equipment. For the year ended December 29, 1995, approximately 70%
of the Company's revenues resulted from temperature-controlled loads. The
remaining 30% resulted from dry freight loads that required special service
or that positioned equipment for the next load. The Company seeks customers who
need a number of trucks per week committed to long hauls and who require
dependable service in meeting scheduling requirements.
The Company's full-time staff of ten (10) salespersons, along with
each division's executive, is responsible for developing new accounts in
assigned areas of the United States. Once a customer relationship is
established, the primary Company contact is one of eight (8) area managers.
Working from the Company's corporate headquarters in Jackson, Mississippi,
the area managers contact existing customers to solicit additional business.
The Company has driver terminal operations in Georgia, Texas,
Louisiana, California, Pennsylvania, Indiana, Mississippi, Arizona, and North
Carolina. Maintenance facilities are located in Mississippi, Georgia, and
Texas. The Company also has brokerage service operations in Mississippi,
Georgia, Texas, Florida, Pennsylvania, Louisiana, Virginia, and Washington.
The Company's largest 25, 10 and 5 customers accounted for approximately
61%, 45%, and 32%, respectively, of its revenue for the year ended December 29,
1995. During 1995, no one customer accounted for more than 10% of the
Company's revenues.
Maintenance
The Company has a comprehensive preventive maintenance program for its
tractors and trailers, which is carried out at its Jackson, Mississippi,
Dallas, Texas, and Atlanta, Georgia facilities. The Company's policy is to
purchase standardized tractors and trailers manufactured to Company
specifications.
Standardization enables the Company to control the cost of its spare parts
inventory and streamline its preventive maintenance program.
Manufacturers of tractors are required to certify that new tractors meet
federal emissions standards, and the Company receives this certification on
each new tractor it acquires. Environmental protection measures require the
Company to adhere to a fuel and oil spill prevention plan and to comply with
regulations concerning the discharge of waste oil. The Company believes it is
in compliance with all applicable provisions relating to the protection of the
environment. Management does not anticipate that compliance with these
provisions will have a material effect on the Company's capital expenditures,
earnings or competitive position.
Personnel
Drivers are recruited at all driver terminal locations. On December 29,
1995, the Company employed 1,808 drivers and had a total of 2,322 employees.
None of the Company's employees is represented by a collective bargaining unit.
Competition
The freight transportation industry has become highly competitive. The
Company competes primarily with other long-haul temperature-controlled
truckload carriers and with internal shipping conducted by existing and
potential customers. The Company also competes with other irregular-route
long-haul truckload carriers, and to a lesser extent, the railroads, for dry
freight loads. Although the increased competition resulting from deregulation
has created some pressure to reduce rates, the Company competes primarily on
the basis of its quality of service and efficiency.
Trademark
The Company's service mark, the KLLM logo, is registered with the United
States Patent and Trademark Office.
Seasonality
In the freight transportation industry generally, results of operations
show a seasonal pattern because customers reduce shipments during and after the
winter holiday season with its attendant weather variations. The Company's
operating expenses have historically been higher in the winter months primarily
due to decreased fuel efficiency and increased maintenance costs in colder
weather.
Item 2. Properties.
The Company's corporate office is situated on approximately seven acres
of land and contains approximately 20,600 square feet of office space. Most of
the Company's executive and administrative functions, except those that are
driver-related, are housed in the corporate office. The corporate office is
located in Flowood, Mississippi, a suburb of Jackson. In order to
accommodate the growth of the Company, additional space is leased in the
general vicinity of the corporate office for various executive and
administrative functions.
The Company also maintains a facility located in Richland, Mississippi,
a suburb of Jackson, which houses all driver related executive and
administrative functions, including safety, driver training, maintenance, and
driver recruiting. The Company owns a portion of the land on which this
facility is located. The remainder is owned by Benjamin C. Lee, Jr. and the
Estate of William J. Liles, Jr. The Company owns all of the improvements,
consisting of approximately 31,200 square feet of office space and
approximately 52,000 square feet of equipment repair and maintenance space.
The Company has an option to purchase the Lee and Liles part of the land
for $390,257. Mr. Lee and Mr. Liles' estate are principal shareholders
of the Company and Mr. Lee is Chairman of the Company's Board of Directors.
The Company owns and operates a maintenance and driver terminal
facility near Dallas, Texas. This facility, which consists of approximately
8,000 square feet of office space and 13,700 square feet of equipment repair
and maintenance space, is located on approximately nine acres of land.
The Company also owns and operates a maintenance and driver terminal
operation in Atlanta, Georgia. This facility, which includes two buildings
containing approximately 5,000 square feet of office space and 20,000 square
feet of maintenance space, is located on approximately eighteen acres of land.
Additionally, with the purchase of substantially all of the assets of
Vernon Sawyer, Inc., effective May 1, 1995, the Company acquired 19.715 acres
of land with all improvements thereon. The facilities located thereon include
approximately 8,054 square feet of office space and 36,484 square feet of
maintenance space.
The remaining driver terminal facilities and the Company's brokerage
operations facilities are leased by the Company pursuant to various
short-term leases.
Item 3. Legal Proceedings.
The Company is involved in various claims and routine litigation
incidental to its business. Although the amount of ultimate liability,
if any, with respect to these matters cannot be determined, management
believes that these matters will not have a materially adverse effect
on the Company's consolidated financial position.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
"Market and Dividend Information" on page 5 of the Company's
1995 Annual Report to Shareholders is incorporated herein by reference
in response to this item.
Item 6. Selected Financial Data.
"Selected Financial and Operating Data" on page 4 of the Company's
1995 Annual Report to Shareholders is incorporated herein by reference in
response to this item.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 6-9 of the Company's 1995 Annual Report to
Shareholders is incorporated herein by reference in response to this item.
Item 8. Financial Statements and Supplementary Data.
The Report of Independent Auditors and the consolidated financial
statements included on pages 10-19 of the Company's 1995 Annual Report to
Shareholders are incorporated herein by reference in response to this item.
"Selected Quarterly Data (Unaudited)" on page 5 of the Company's
31995 Annual Report to Shareholders is incorporated herein by reference in
response to this item.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information under the caption, "Election of Directors--Nominees
for Director," of the Company's definitive proxy statement for its scheduled
April 16, 1996 Annual Meeting of Shareholders filed with the Securities and
Exchange Commission pursuant to Regulation 14A, is incorporated herein by
reference in response to this item.
The information under the caption, "Election of Directors--
Management," of the Company's definitive proxy statement for its scheduled
April 16, 1996 Annual Meeting of Shareholders filed with the Securities and
Exchange Commission pursuant to Regulation 14A, is incorporated herein by
reference in response to this item.
The information under the caption, "Compliance with Section 16(a) of
the Securities and Exchange Act of 1934" of the Company's definitive proxy
statement for its scheduled April 16, 1996 Annual Meeting of Shareholders filed
with the Securities and Exchange Commission pursuant to Regulation 14A, is
incorporated herein by reference in response to this item.
Item 11. Executive Compensation.
The information under the captions, "Executive Compensation; Director
Compensation; Compensation Committee Report on Executive Compensation;
Compensation Committee Interlocks and Insider Participation; Stock Option Plan;
Employee Stock Purchase Plan ("ESPP") and Performance Graph" of the Company's
definitive proxy statement for its scheduled April 16, 1996 Annual Meeting of
Shareholders filed with the Securities Exchange Commission pursuant to
Regulation 14A, is incorporated herein by reference in response to this
item.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information under the caption "Election of Directors--Stock
Ownership," of the Company's definitive proxy statement for its scheduled
April 16, 1996 Annual Meeting of Shareholders filed with the Securities and
Exchange Commission pursuant to Regulation 14A, is incorporated herein by
reference in response to this item.
Item 13. Certain Relationships and Related Transactions.
The information contained in the section titled "Certain Transactions"
on page 5 of the Company's definitive proxy statement for its scheduled April
16, 1996 Annual Meeting of Shareholders filed with the Securities and Exchange
Commission pursuant to Regulation 14A, is incorporated herein by reference in
response to this item.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
a. The following documents are filed, as part of this
report or incorporated by reference herein:
1. Financial Statements
The following consolidated financial statements of the Company
and its subsidiaries, included in the Company's Annual Report, are
incorporated by reference in Item 8:
Consolidated Balance Sheets--December 30, 1994 and
December 29, 1995.
Consolidated Statements of Operations--Years ended
January 2, 1994, December 30, 1994 and December 29,
1995.
Consolidated Statements of Stockholders' Equity--Years
ended January 2, 1994, December 30, 1994 and December 29, 1995.
Consolidated Statements of Cash Flows--Years ended
January 2, 1994, December 30, 1994 and December 29, 1995.
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
The following consolidated financial statement schedule is
included in Item 14(d):
Schedule II - Valuation and Qualifying Accounts.
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been
omitted.
3. Listing of Exhibits
(i) Exhibits filed pursuant to Item 601 of Regulation S-K
Exhibit Number Description
3(a) Bylaws of Registrant
3(b) Certificate of Incorporation (as amended)
10(a) Amended and Restated Stock Option Plan
10(c) KLLM, Inc. Retirement Plan and Trust (as
amended)
10(g) 1986 Lease with Mr. Lee and Mr. Liles
Covering Corporate Headquarters
10(m) Employee Stock Purchase Plan (as
amended)
10(r) Options granted to Mr. Young and Dr.
Neely
10(z) First Amendment to Options granted to
Mr. Young and Dr. Neely
10(aa) KLLM, Inc. Cafeteria Plan
10(bb) KLLM Maintenance, Inc. Retirement Plan
and Trust Agreement
10(cc) Option to purchase real property on which
terminal facility is located from Messrs.
Liles and Lee
10(dd) Stock Purchase Agreement by and
between KLLM, Inc. and Fresh International
Corp.
10(ee) Revolving Credit Agreement by and
among KLLM, Inc., NationsBank
of Georgia, National Association,
The First National Bank of Chicago,
Deposit Guaranty National Bank,
and ABN Amro Bank, N.V.
10(ff) Employment Agreement between
KLLM Transport Services, Inc.
and Steven K. Bevilaqua
10(gg) Options granted to Steven K. Bevilaqua
10(hh) Asset Purchase Agreement by and
among Vernon Sawyer, Inc. and
Vernon and Nancy Sawyer as Sellers
and KLLM, Inc. as Purchaser (schedules
furnished upon request)
13 1995 Annual Report (only portions
incorporated by reference are deemed
filed)
21 List of Subsidiaries of the Registrant
23 Consent of Ernst & Young LLP
27 Financial Data Schedule
(b) Reports on Form 8-K filed in the fourth quarter of 1995: None
(c) Exhibits--The response to this portion of Item 14 is submitted
as a separate section of this report.
(d) Financial Statements Schedules--The response to this portion of
Item 14 is submitted as a separate section of this report.
INFORMATION REGARDING THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN
INCLUDED PURSUANT TO RULE 15d-21.
1. Full title of the Plan:
KLLM Transport Services, Inc. Employee Stock Purchase Plan
2. Name of issuer of the securities held pursuant to the Plan and
the address of its principal executive office:
KLLM Transport Services, Inc.
3475 Lakeland Drive
Jackson, Mississippi 39208
3. Financial Statements and Exhibits
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this annual report to
be signed on its behalf by the undersigned thereunto duly authorized.
<TABLE>
KLLM TRANSPORT SERVICES, INC.
<S> <C>
Date: March 28, 1996 By: /s/ Steven K. Bevilaqua
Steven K. Bevilaqua
President, Chief Executive Officer and
Director
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
Date: March 28, 1996 /s/ Benjamin C. Lee, Jr.
Benjamin C. Lee, Jr.
Chairman of the Board of Directors
Date: March 28, 1996 /s/ Steven K. Bevilaqua
Steven K. Bevilaqua
President, Chief Executive Officer and
Director
Date: March 28, 1996 /s/ James Leon Young
James Leon Young
Secretary and Director
Date: March 28, 1996 /s/ Walter P. Neely
Walter P. Neely
Director
Date: March 28, 1996 /s/ Leland R. Speed
Leland R. Speed
Director
Date:
C. Tom Clowe, Jr.
Director
Date: March 28, 1996 /s/ J. Kirby Lane
J. Kirby Lane
Executive Vice President and
Chief Financial Officer
Date: March 28, 1996 /s/ Cindy F. Bailey
Cindy F. Bailey
Corporate Controller
</TABLE>
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Board of Directors, administrators of the KLLM Transport Services, Inc.
Employee Stock Purchase Plan, have duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.
KLLM TRANSPORT SERVICES, INC. EMPLOYEE
STOCK PURCHASE PLAN
<TABLE>
<S> <C>
Date: March 28, 1996 By: /s/ Steven K. Bevilaqua
Steven K. Bevilaqua
President, Chief Executive Officer and
Director
</TABLE>
ITEM 14(a)(2) and (c)
FINANCIAL STATEMENT SCHEDULES
<PAGE>
KLLM TRANSPORT SERVICES, INC. and SUBSIDIARIES
SCHEDULE II - VALUATION and QUALIFYING ACCOUNTS
Years Ended January 2, 1994, December 30, 1994, and December 29, 1995
<TABLE>
BALANCE AT CHARGED TO WRITE-OFF BALANCE AT
BEGINNING COST AND OF END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS OF
PERIOD
(In Thousands)
<S> <C> <C> <C> <C>
Allowance for Claims:
Year ended January 2, 1994 $145 $ 426 $426 $145
Year ended December 30, 1994 $145 $ 954 $952 $147
Year ended December 29, 1995 $147 $ 1,239 $907 $479 <PAGE>
</TABLE>
<TABLE>
EXHIBIT INDEX
<S> <C> <C>
Exhibit Number Description Page
3(a) Bylaws of Registrant
3(b) Certificate of Incorporation
(as amended)
10(a) Amended and Restated Stock
Option Plan
10(c) KLLM, Inc. Retirement Plan and
Trust (as amended)
10(g) 1986 Lease with Mr. Lee and
Mr. Liles Covering Corporate
Headquarters
10(m) Employee Stock Purchase
Plan (as amended)
10(r) Options granted to Mr. Young
and Dr. Neely
10(z) First Amendment to Options granted
to Mr. Young and Dr. Neely
10(aa KLLM, Inc. Cafeteria Plan
10(bb KLLM Maintenance, Inc. Retirement
Plan and Trust Agreement
10(cc Option to purchase real property
on which terminal facility
is located from Messrs. Liles
and Lee
10(dd) Stock Purchase Agreement by and
between KLLM, Inc. and Fresh
International Corp.
10(ee) Revolving Credit Agreement by and
among KLLM, Inc., NationsBank
of Georgia, National Association,
The First National Bank of Chicago,
Deposit Guaranty National Bank,
and ABN Amro Bank, N. V.
10(ff) Employment Agreement between
KLLM Transport Services, Inc.
and Steven K. Bevilaqua
10(gg) Options granted to Steven K. Bevilaqua
10(hh) Asset Purchase Agreement by and among
Vernon Sawyer, Inc. and Vernon and
Nancy Sawyer as Sellers and KLLM,
Inc. as Purchaser (schedules furnished
upon request)
13 1995 Annual Report (Only portions
incorporated by reference are
deemed filed)
21 List of Subsidiaries of the Registrant
23 Consent of Ernst & Young LLP
27 Financial Data Schedule
</TABLE>
March 14, 1995
Mr. Steven K. Bevilaqua
2836 Fox Trail Road
Fayetteville, AK 72703
Dear Steve:
On behalf of the Board of Directors of KLLM Transport
Services, Inc., I am pleased to offer you the position of
President and Chief Executive Officer. Your background and
career accomplishments have clearly demonstrated your ability
to successfully lead our company.
This letter outlines the terms of our offer which is subject
to favorable results from:
A complete physical examination at a medical facility of
the company's choosing and at our expenses.
Comprehensive reference checks to be conducted on your
background and work experience/performance.
Your compensation package would include the following:
Base salary: $225,000 annually to be paid in equal
installments monthly.
Bonus opportunity: based on the company's new EVA plan,
a copy of which you have received. Your 1995 bonus under
the plan will be guaranteed at a minimum of $50,000.
Stock options: 150,000 shares to be vested 20 percent at
your date of employment and in equal amounts of 20
percent each year on your first, seconds, third and
fourth anniversaries with the company. These options
will be priced at $15.00. You will have 10 years from
the date of employment to exercise these options.
Relocation: $75,000 to paid in a lump sum the day you
begin employment. This sum is to be used to cover your
expenses related to moving, temporary living trips
to/from Arkansas during the transition, house hunting
trips, buying and selling costs for a home and other
miscellaneous expenses related to your relocation. This
amount will be grossed up to eliminate any income tax
burden to you in 1995.
Separation agreement: should KLLM deem it necessary to
terminate your employment with the company at any time on
or before January 1, 1997, you will be paid your annual
base salary in 12 equal monthly installments following
the date of your termination. The company will be under
no obligation to pay you any amount if you are terminated
for cause.
Other perquisites: as provided by company policy for all
KLLM executives.
Steve, I am truly excited about the future of KLLM and our
partnership together. I believe this financial package
reflects our strong commitment to your success. If this offer
of employment and the conditions under which it is made are
acceptable to you, please sign this letter in appropriate
space below and return it to me as soon as possible.
Other members of the Board and I are looking forward to
hosting you and Penny when you visit Jackson early next week.
Sincerely,
S/Billy
William J. Liles, Jr.
Chairman of the Board
WJL/cc
Accepted by: Date:
S/S.K. Bevilaqua 3-22-95
STOCK OPTION
KLLM TRANSPORT SERVICES, INC., a Delaware corporation
("Company"), hereby grants this stock option ("Option") to STEVEN
K. BEVILAQUA ("Optionee") effective May 31, 1995.
WHEREAS, Optionee is a key employee of outstanding
ability and the Company considers it desirable and in its best
interests that Optionee be given an increased incentive to continue
in the service of the Company and to increase his efforts for the
Company's welfare by possessing an Incentive Stock Option ("ISO")
as defined in Section 422 of the Internal Revenue Code ("Code"), to
purchase shares of Voting Common Stock (the "Stock") of the Company
in accordance with the KLLM Transport Services, Inc. Stock Option
Plan adopted by the directors of the Company on April 18, 1986,
approved by the stockholders on April 18, 1986, amended and
restated by the directors on December 15, 1986, and amended and
restated by the directors on April 18, 1989 (as now in effect and
as hereafter amended or restated, the "Plan");
WHEREAS, the Company considers it desirable and in its
best interests that Optionee be given a further incentive to
continue in the service of the Company and to increase his efforts
for the Company's welfare by possessing a non-qualified option
("NQO") to purchase shares of Stock of the Company in accordance
with the Plan;
NOW, THEREFORE, the parties agree that the Option granted
herein is subject to the following conditions:
1. Grant of ISO. In accordance with and under the
terms of the Plan, the Company hereby grants to Optionee an ISO,
giving him the right, privilege and option to purchase thirty-seven
thousand thirty-five (37,035) shares of the Company's Stock at the
purchase price of FIFTEEN AND NO/100 U.S. DOLLARS ($15.00) per
share, in the manner and subject to the conditions provided below.
2. Time of Exercise of ISO. The ISO is immediately
exercisable as to 7,407 shares and becomes exercisable as to the
balance of shares on the following schedule:
April 3, 1996 7,407 shares
April 3, 1997 7,407 shares
April 3, 1998 7,407 shares
April 3, 1999 7,407 shares
On and from the date any part of the ISO becomes exercisable, the
ISO may be exercised as to such part at any time, and from time to
time, in whole or in part, until the termination thereof as
provided in Paragraph 6 below. Further, the aggregate Fair Market
Value (as such term is defined in the Plan) of the Stock with
respect to which this or any other ISO is exercisable for the first
time by Optionee during any calendar year shall not exceed ONE
HUNDRED THOUSAND AND NO/100 U.S. DOLLARS ($100,000).
3. Grant of NQO. In accordance with and under the
terms of the Plan, the Company hereby grants to Optionee a NQO,
giving him the right, privilege and option to purchase one hundred
twelve thousand nine hundred sixty-five (112,965) shares of the
Company's Stock at the purchase price of FIFTEEN AND NO/100 U.S.
DOLLARS ($15.00) per share, in the manner and subject to the
conditions provided below.
4. Time of Exercise of NQO. The NQO is immediately
exercisable as to twenty-two thousand five hundred ninety-three
(22,593) shares and becomes exercisable as to the balance of shares
on the following schedule:
April 3, 1996 22,593 shares
April 3, 1997 22,593 shares
April 3, 1998 22,593 shares
April 3, 1999 22,593 shares
On and from the date any part of the NQO becomes exercisable, the
NQO may be exercised as such part at any time, and from time to
time, in whole or in part, until the termination thereof as
provided in paragraph 6 below.
5. Method of Exercise. The Option shall be exercised
by written notice to the Secretary of the Company at the Company's
principal executive offices, accompanied by a certified check in
payment of the option price for the number of shares specified.
The Company shall make immediate delivery of such shares. However,
the Company shall not be required to issue or deliver any
certificates for shares of Stock prior to (a) the listing of such
shares on any stock exchange on which the Stock may then be listed,
and (b) the completion of any registration or qualification of such
shares under any federal or state law, or any ruling or regulation
of any government body which the Company shall, in its sole
discretion, deem to be necessary or advisable.
6. Termination of Option. Unless otherwise provided
herein, the Option, to the extent not previously exercised, shall
terminate upon the first to occur of the following dates:
a. The expiration of three (3) months after the
date of termination of the Optionee's employment with the
Company for any reason other than death or disability;
b. The expiration of twelve (12) months after the
date on which Optionee's employment by the Company is
terminated, if such termination is by reason of Optionee's
death or permanent and total disability; or
c. May 30, 2005.
In the event of exercise of the Option after termination of
employment for any reason, Optionee may exercise the Option only
with respect to the shares of Stock which could have been purchased
by Optionee at the date of termination of employment.
7. Stock Adjustments and Mergers. In the event that
the outstanding shares of the Company's Stock is increased or
decreased, or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of any other
corporation by reason of any merger, sale of stock, consolidation,
liquidation, recapitalization, reclassification, stock splits,
combination of shares, or stock dividend, the total number of
shares subject to the Option granted herein shall be
proportionately and appropriately adjusted by the Company. If the
Company continues in existence, the number and kind of shares that
are subject to the Option and the option price per share shall be
proportionately and appropriately adjusted without any change in
the aggregate price to be paid therefor upon exercise of the
Option. If the Company will not remain in existence or
substantially all of if Stock will be purchased by a single
purchaser or group of purchasers acting together, then the Company
may (i) declare that all Options shall terminate 30 days after the
Company gives written notice to Optionee of his immediate right to
exercise all Options then outstanding (without regard to
limitations on exercise otherwise contained herein), or (ii) notify
Optionee that all Option's granted herein shall apply with
appropriate adjustments as determined by the Company to the
securities of the successor corporation to which Optionee, as
holder of the number of shares subject to the Option, would have
been entitled, or (iii) some combination of the aspects of (i) and
(ii). The determination by the Company as to the terms of any of
the foregoing adjustments shall be conclusive and binding. Any
fractional shares resulting from any of the foregoing adjustments
shall be disregarded and eliminated.
8. Rights Prior to Exercise of Option. This Option is
nontransferable by Optionee, other than by the laws of descent and
distribution, and during his lifetime is exercisable only by him.
Optionee shall have no rights as a stockholder with respect to any
shares subject to the Option until payment of the option price and
delivery to him of a certificate or certificates for such shares as
herein provided.
9. Additional Requirements. It is the Company's intent
that the ISO granted Optionee herein qualify for the favorable tax
treatment accorded options under Sections 421, 422 and 424 of the
Code. However, in order to obtain this favorable tax treatment,
Optionee must accomplish certain other requirements set forth in
the foregoing Code provisions relating to the holding period of the
Stock received upon exercise of the ISO and continued employment
with the Company. The Company shall not be held liable in any
manner for the failure of the Option granted herein to qualify for
favorable tax treatment. The NQO is not intended to qualify for
the favorable tax treatment accorded ISOs under Sections 421, 422
and 424 of the Code.
10. Binding Effect. The terms of this Option shall
inure to the benefit of and be binding upon the Company, the
Optionee, their respective heirs, executors, administrators,
successors, and assigns.
11. Governing Law. This Option shall be governed and
construed in accordance with the laws of the State of Mississippi.
IN WITNESS WHEREOF, the parties hereto have caused this
Option to be executed June 1, 1995, but effective as of May 31,
1995.
COMPANY:
KLLM TRANSPORT SERVICES, INC.
Attest:
BY: S/J. Kirby Lane
J. Kirby Lane
Executive Vice President and
Chief Financial Officer
S/ James Leon Young
James Leon Young, Secretary
OPTIONEE:
S/ Steven K. Bevilaqua
STEVEN K. BEVILAQUA
ASSET PURCHASE AGREEMENT
BY AND AMONG
VERNON SAWYER, INC., VERNON SAWYER TRANSPORTATION, INC.
AND VERNON AND NANCY SAWYER
AS SELLERS
AND
KLLM, INC.
AS PURCHASER
<PAGE>
TABLE OF CONTENTS*
1. RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. "Accrued Vacation Pay. . . . . . . . . . . . . . . . . . 1
2.2. "Assumed Liabilities . . . . . . . . . . . . . . . . . . 1
2.3. "Closing . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5. "Escrow Deposit" . . . . . . . . . . . . . . . . . . . . 2
2.6. "Excluded Assets . . . . . . . . . . . . . . . . . . . . 2
2.7. "ICC". . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.8. "Non-competition Covenants". . . . . . . . . . . . . . . 2
2.9. "Permitted Liens . . . . . . . . . . . . . . . . . . . . 2
2.10. "Purchased Assets" . . . . . . . . . . . . . . . . 2
2.11. "Purchase Price" . . . . . . . . . . . . . . . . . 3
2.12. "Purchase Price Deposit". . . . . . . . . . . . . . . . 3
2.13. "Shareholder Real Estate". . . . . . . . . . . . . 4
3. SALE OF PROPERTIES AND ASSETS. . . . . . . . . . . . . . . . . 4
3.1. General. . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2. Receivable Repurchase. . . . . . . . . . . . . . . . . . 4
4. PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1. Purchase Price . . . . . . . . . . . . . . . . . . . . . 4
4.2. Allocation of Purchase Price . . . . . . . . . . . . . . 5
4.3. Payment. . . . . . . . . . . . . . . . . . . . . . . . . 5
4.4. Obligations Not Assumed. . . . . . . . . . . . . . . . . 6
5. CLOSING DOCUMENTS AND REQUIREMENTS; FURTHER ASSURANCES. . . . . . 6
5.1. Pre-Closing Responsibilities.. . . . . . . . . . . . . . 6
5.2. Closing Responsibilities of Seller, Parent and
Shareholders . . . . . . . . . . . . . . . . . . . . . . 6
5.3. Closing Responsibilities of Purchaser. . . . . . . . . . 7
5.4. Further Assurances . . . . . . . . . . . . . . . . . . . 8
6. REPRESENTATIONS AND WARRANTIES OF SELLER, PARENT
AND SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 8
6.1. Existence and Good Standing. . . . . . . . . . . . . . . 8
6.2. Corporate Authority and Approvals. . . . . . . . . . . . 8
6.3. Ownership; Exclusivity . . . . . . . . . . . . . . . . . 8
6.4. Information. . . . . . . . . . . . . . . . . . . . . . . 8
6.5. Financial Statements . . . . . . . . . . . . . . . . . . 8
6.6. Litigation . . . . . . . . . . . . . . . . . . . . . . . 9
6.7. Tax Returns and Payments . . . . . . . . . . . . . . . . 9
6.8. Condition of Properties. . . . . . . . . . . . . . . . . 10
6.9. Title to Property; Encumbrances. . . . . . . . . . . . . 10
6.10. Immovable Property . . . . . . . . . . . . . . . . 10
6.11. Leases . . . . . . . . . . . . . . . . . . . . . . 10
6.12. Material Contracts . . . . . . . . . . . . . . . . 11
6.13. Restrictive Documents. . . . . . . . . . . . . . . 11
6.14. Intellectual Properties. . . . . . . . . . . . . . 12
6.15. Compliance with Laws . . . . . . . . . . . . . . . 12
6.16. Restrictive Documents. . . . . . . . . . . . . . . 12
6.17. Subsidiaries . . . . . . . . . . . . . . . . . . . 12
6.18. Inventory. . . . . . . . . . . . . . . . . . . . . 12
6.19. Employment Relations . . . . . . . . . . . . . . . 12
6.20. Employee Benefit Plans . . . . . . . . . . . . . . 13
6.21. Environmental Laws and Regulations . . . . . . . . 14
6.22. Interest in Customers, Suppliers . . . . . . . . . 15
6.23. Insurance. . . . . . . . . . . . . . . . . . . . . 15
6.24. Operating Rights . . . . . . . . . . . . . . . . . 15
6.25. Broker's or Finder's Fee . . . . . . . . . . . . . 15
7. REPRESENTATIONS AND WARRANTIES OF PURCHASER. . . . . . . . . . 16
7.1. Existence and Good Standing of Purchaser;
Power and Authority. . . . . . . . . . . . . . . . . . . 16
7.2. Corporate Authority and Approvals . . . . . . . . . . . 16
7.3. Restrictive Documents. . . . . . . . . . . . . . . . . . 16
7.4. Information. . . . . . . . . . . . . . . . . . . . . . . 16
7.5. Litigation . . . . . . . . . . . . . . . . . . . . . . . 16
7.6. Broker's or Finder's Fee . . . . . . . . . . . . . . . . 16
8. USE OF TRANSFERRED ASSETS BY PURCHASER PENDING
CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.1. Management Period. . . . . . . . . . . . . . . . . . . . 17
8.2. Manage . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.3. No Liens, Dispositions . . . . . . . . . . . . . . . . . 18
8.4. Consideration. . . . . . . . . . . . . . . . . . . . . . 18
8.5. Irrevocability . . . . . . . . . . . . . . . . . . . . . 18
8.6. Liabilities. . . . . . . . . . . . . . . . . . . . . . . 19
8.7. Termination of Management Period . . . . . . . . . . . . 19
9. COVENANTS OF SELLER, PARENT AND SHAREHOLDERS . . . . . . . . . 19
9.1. Cooperation. . . . . . . . . . . . . . . . . . . . . . . 19
9.2. Ordinary Course of Business. . . . . . . . . . . . . . . 19
9.3. Environmental. . . . . . . . . . . . . . . . . . . . . . 19
9.4. Dispositions and Encumbrances on Purchased
Assets . . . . . . . . . . . . . . . . . . . . . . . . . 20
10. COVENANTS OF PURCHASER . . . . . . . . . . . . . . . . . . . . 20
10.1. Cooperation. . . . . . . . . . . . . . . . . . . . . . . 20
10.2. Operating Authorities; Temporary Lease . . . . . . . . . 20
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER,
PARENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.1. Representations and Warranties True. . . . . . . . 21
11.2. Performance of Purchaser . . . . . . . . . . . . . 21
12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
PURCHASER. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
12.1. Representations and Warranties True. . . . . . . . 21
12.2. Performance of Seller. . . . . . . . . . . . . . . 21
12.3. Environmental. . . . . . . . . . . . . . . . . . . 21
12.4. Survey . . . . . . . . . . . . . . . . . . . . . . 22
12.5. Title. . . . . . . . . . . . . . . . . . . . . . . 22
13. WORKER'S COMPENSATION MATTERS. . . . . . . . . . . . . . . . . 23
14. NON-COMPETITION COVENANTS. . . . . . . . . . . . . . . . . . 23
14.1. Recitals. . . . . . . . . . . . . . . . . . . . . . . . 23
14.2. Protective Covenants. . . . . . . . . . . . . . . . . . 23
14.3. Exception. . . . . . . . . . . . . . . . . . . . . 25
15. SURVIVAL OF COVENANTS, REPRESENTATIONS AND
WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . 25
16. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 25
16.1. Indemnification by Seller. . . . . . . . . . . . . 25
16.2. Indemnification by Purchaser . . . . . . . . . . . 25
16.3. Indemnification Procedure. . . . . . . . . . . . . 26
17. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
18. DESTRUCTION OR CONDEMNATION OF PROPERTY. . . . . . . . . . . . 26
18.1. Damage or Destruction. . . . . . . . . . . . . . . 27
18.2. Condemnation . . . . . . . . . . . . . . . . . . . 27
19. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . 27
19.1. By Mutual Consent or Other Action . . . . . . . . . . . 27
19.2. By Seller . . . . . . . . . . . . . . . . . . . . . . . 27
19.3. By Purchaser. . . . . . . . . . . . . . . . . . . . . . 27
19.4. Effect. . . . . . . . . . . . . . . . . . . 27
20. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 27
20.1. Notice . . . . . . . . . . . . . . . . . . . . . . 27
20.2. Addresses. . . . . . . . . . . . . . . . . . . . . 28
20.3. Gender . . . . . . . . . . . . . . . . . . . . . . 29
20.4. No Waiver. . . . . . . . . . . . . . . . . . . . . 29
20.5. Specific Performance . . . . . . . . . . . . . . . 29
20.6. Cumulative Rights. . . . . . . . . . . . . . . . . 29
20.7. Entire Agreement . . . . . . . . . . . . . . . . . 29
20.8. Headings . . . . . . . . . . . . . . . . . . . . . 29
20.9. Interpretation; No Presumption . . . . . . . . . . 30
INDEX OF DEFINITIONS . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
EXHIBITS
A - Escrow Agreement
B - Purchase Price Deposit Escrow Agreement
C - Bill of Sale
D - Cash Deed of Shareholders
E - Employment Agreement for Vernon G. Sawyer
F - Employment Agreement for Nancy Sawyer
G - Seller's, Parent's and Shareholders' Counsel's
Opinion
H - Operating Rights
<PAGE>
SCHEDULES
2.2 List of Assumed Liabilities
2.10.1 List of tractors, trailers, communication equipment,
computers, furniture,
fixtures and tools
2.10.2 Inventories
2.13 Shareholder Real Estate
6.6 Litigation
6.8 Condition of Properties
6.9 Permitted Liens
6.11 Leases
6.12 Material Contracts
6.14 Intellectual Property
6.20 Employee Benefit Plans
6.23 Insurance Policies
8.3 Permitted Asset Dispositions
* This Table of Contents is for convenience of
reference only and does not form a part of the
Agreement.
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is entered
into on the 1st day of May, 1995 (the "Effective Date"), by
and between VERNON SAWYER, INC., tax identification number 72-
1071773, a Louisiana corporation domiciled in Morehouse
Parish, Louisiana ("Seller"), represented herein by its duly
authorized President, Vernon G. Sawyer, VERNON SAWYER
TRANSPORTATION, INC., tax identification Number 72-1007374, a
Louisiana Corporation domiciled in Morehouse Parish, Louisiana
("Parent"), VERNON G. SAWYER, and NANCY ANN MARUS SAWYER, in
their individual capacities, individual residents of Morehouse
Parish, Louisiana (hereafter, Vernon G. Sawyer and Nancy
Sawyer may be individually referred to as a "Shareholder" or
jointly as the "Shareholders"), and KLLM, INC., tax
identification number 64-0577750, a Texas corporation
domiciled in Rankin County, Mississippi ("Purchaser"),
represented herein by its duly authorized President, Steve
Bevilaqua, who declare and agree that:
1. RECITALS. For many years, Seller has engaged in the
interstate trucking business throughout the United States (the
"Business"). Seller is a wholly-owned subsidiary of Parent.
The Business has operated facilities on property owned by the
Shareholders. Most of the rolling stock used in the operation
of the Business is owned by Parent and leased to Seller.
Seller and Parent desire to sell and Purchaser desires to
purchase substantially all of the assets of the Business on
the terms and conditions and for the consideration described
below. Shareholders desire to sell and Purchaser desires to
purchase the real property and improvements thereon on which
the Business has been operating, all on the terms and
conditions and for the consideration described below.
2. DEFINITIONS. As used in this Agreement, the
following terms shall have the meanings set forth below:
2.1. "Accrued Vacation Pay" means the sum of
$23,160.60 representing the obligation for drivers' vacation
pay as of April 30, 1995 assumed by Purchaser under Section
4.3.1.
2.2. "Assumed Liabilities" means Seller's notes
payable which relate to Seller's financing of its purchase of
tractors, trailers and other transportation equipment set
forth on Schedule 2.2 and Accrued Vacation Pay.
2.3. "Closing" shall mean the closing of the
transaction contemplated by this Agreement in the offices of
Young, Williams, Henderson & Fuselier, P.A., 2000 Deposit
Guaranty Plaza, Jackson, Mississippi, on the Closing Date
(defined below) or at such other place as may be mutually
agreed upon by the parties hereto.
2.4. "Closing Date" shall mean on or before June 20,
1995, or such other date and time as Seller and Purchaser may
agree.
2.5. "Escrow Deposit" shall mean the sum of
$250,000.00 which shall be held out of the Purchase Price at
Closing to secure Seller's obligations to repurchase
receivables and Seller's and Shareholders' representations,
warranties and covenants set forth herein and deposited in
escrow in accordance with the terms of the Escrow Agreement in
the form and substance of Exhibit A.
2.6. "Excluded Assets" shall mean the following
assets and properties:
2.6.1. Seller's cash on hand on the Closing
Date including, but not limited to, bank accounts of
Seller and petty cash;
2.6.2. Seller's receivables other than trade
receivables;
2.6.3. Seller's rights to claims for refund
of taxes of every kind and nature whatsoever;
2.6.4. Seller's corporate minutes and other
corporate records.
2.7. "ICC" means the United States Interstate
Commerce Commission, or any successor agency.
2.8. "Non-competition Covenants" shall mean those
certain covenants of the Seller, Parent and Shareholders set
forth in Section 14 of this Agreement.
2.9. "Permitted Liens" shall have the meaning
ascribed to it in Section 6.9.
2.10. "Purchased Assets" shall mean the
Shareholder Real Estate and all right, title and interest in
and to all the properties and assets of every kind (tangible
and intangible) belonging to, owned, or otherwise held by
Seller used or associated with the Business (other than
Excluded Assets) including, but not limited to:
2.10.1. tractors, trailers, communications
equipment, computers, computer software, furniture,
fixtures, equipment, and tools (whether owned or leased)
as listed in Schedule 2.10.1;
2.10.2. Seller's inventories including, but
not limited to, those parts, tires, fuel and supplies set
forth on Schedule 2.10.2;
2.10.3. Sellers' trade receivables
(subject to Sellers' obligation to repurchase as
set forth in Section 3.2).
2.10.4. all outstanding purchase orders,
bids, and contracts related to the Business and not yet
filled or performed at the time of Closing;
2.10.5. all loads in transit;
2.10.6. copies of all of Seller's books and
records pertaining to the Business, including, but not
limited to, all of its accounting records, financial
statements, tax returns, customer lists (including names,
addresses, telephone numbers, contact persons, pricing
terms, sales records);
2.10.7. vendor contracts
2.10.8. all rights regarding the trademarks,
service marks and/or trade names "VERNON SAWYER", "VERNON
SAWYER, INC.", "VSI" and any other trademarks, service
marks, logos and trade names used in the operation of the
Business, and all goodwill associated therewith, for
future use by Purchaser;
2.10.9. all of Seller's sales and promotional
literature;
2.10.10. all of Seller's telephone numbers and
post office boxes; and utility deposits;
2.10.11. Seller's operating rights, permits,
motor vehicle licenses and registrations; and
2.10.12. the Non-competition Covenants.
2.11. "Purchase Price" shall have the meaning
ascribed to it in Section
4.1.
2.12. "Purchase Price Deposit" means the sum of
$6,399,465.75 deposited by Purchaser in accordance with the
terms of the Purchase Price Deposit Escrow Agreement being
executed by the parties simultaneously herewith in the form
and substance as is attached as Exhibit B.
2.13. "Shareholder Real Estate" shall mean that
certain immovable property (real estate) and all improvements
and fixtures thereon located in Morehouse Parish, Louisiana,
more particularly described in Schedule 2.13.
83. SALE OF PROPERTIES AND ASSETS.
3.1. General At the Closing, Seller and
Shareholders will sell, transfer, assign, convey
and deliver to Purchaser, and Purchaser will
purchase, accept and acquire from Seller and
Shareholders, all of the Purchased Assets.
3.2. Receivable Repurchase. Seller guarantees
the collectability of all receivables which are
among the Purchased Assets. If Purchasers has not
received full payment of any such receivable within
sixty (60) days of its due date Seller shall
repurchase such receivable upon the written request
of Purchaser. The purchase price for such
repurchased receivable shall equal the amount of
Purchase Price allocated to such receivable at the
Closing. Closing of the repurchase shall be held
within five (5) business days of the day Purchaser
requests repurchase and the purchase price shall be
paid to Purchaser in full at closing by drawing on
the Escrow Deposit. At the closing of any
repurchase, Purchaser shall assign to Seller all of
its right, title and interest in and to any
receivable being repurchased, without warranty or
recourse.
4. PURCHASE PRICE.
4.1. Purchase Price. The purchase price for the
Purchased Assets (the "Purchase Price") shall be the total of
the following:
4.1.1. $700,000.00 for the Shareholder Real
Estate;
4.1.2. $750,000.00 for the Non-competition
Covenants;
4.1.3. $214,485.09 for shop equipment, spare
parts, tools, inventories and any other Purchased Assets
not specifically referenced elsewhere in this Section
4.1; subject to completed invenotry of the parties to be
made.
4.1.4. The book value of trade receivables
as of the Closing Date, computed on a basis consistent
with that of preceding years or periods;
4.1.5. $7,400,000.00 for tractors, trailers
and other transportation equipment; provided, however,
this purchase price is subject to adjustment for any
additions or dispositions of equipment between March 30,
1995, and the Closing Date (upon disposition, the market
value shown opposite such equipment on Schedule 2.10.1
shall be deducted; upon acquisition, the book value shall
be added); and
4.1.6. A portion of the net value equal to
net revenues less accrued expenses regarding loads in
transit as of April 30, 1995, as mutually agreed to and
computed by Seller and Purchaser.
4.2. Allocation of Purchase Price. The purchase
price shall be allocated among the categories of Purchased
Assets as shown in Section 4.1. Allocations of Purchase Price
among Purchased Assets within categories shall be made as
determined by Purchaser in its sole discretion and in
accordance with all applicable tax laws and regulations. At
the Closing, Purchaser, Seller and Shareholders shall execute
Forms 8594 allocating the Purchase Price as so determined and
shall use such form (without amendments other than those that
may be agreed upon in writing by all of the parties hereto) in
connection with all tax returns filed which may refer to the
transactions contemplated by this Agreement.
4.3. Payment. The Purchase Price shall be paid at
Closing as follows:
4.3.1. Assumption or Pay-off of Liability.
Purchaser shall discharge and perform when due all
obligations, responsibilities, covenants and liabilities,
accruing in accordance with Schedule 2.2 which arise
under the Assumed Liabilities and are due from May 1,
1995, until the Closing or earlier termination of this
Agreement in accordance with its terms (subject to Seller
remaining liable for any accrued interest with respect to
periods prior to May 1, 1995). At or prior to Closing,
Purchaser shall either: (i) assume and use its best
efforts to cause Seller to be fully and unconditionally
released from, the Assumed Liabilities effective upon the
Closing and assume and indemnify Seller from Accrued
Vacation Pay; or (ii) pay-off Assumed Liabilities other
than Accrued Vacation Pay and assume and agree to hold
Seller harmless from Accrued Vacation Pay. Purchaser
shall indemnify Seller after Closing from any of the
Assumed Liabilities as to which releases are not
obtainable from creditors of Seller and from Accrued
Vacation Pay.
4.3.2. Cash Payment. The cash portion of
the Purchase Price due at the Closing shall equal the
Purchase Price minus:
4.3.2.1. (i) the balance of the Assumed
Liabilities as of April 30, 1995, as confirmed by
the lenders thereof, or (ii) if lender
confirmations of such amounts cannot be obtained
prior to Closing, then the balance of Assumed
Liabilities as shown on the balance sheet of Seller
as of March 31, 1995, but subject to post-Closing
adjustment and indemnification for any difference
between such balance sheet amount and the actual
amount of such liabilities as of April 30, 1995
confirmed by lenders upon confirmation;
4.3.2.2. Accrued Vacation Pay; and
4.3.2.3. The Escrow Deposit
4.4. Obligations Not Assumed. Purchaser does not
assume, accept or agree to pay any indebtedness, obligations
or liabilities of Seller, Parent or Shareholders, except those
which are expressly required to be assumed, accepted or paid
by Purchaser pursuant to this Agreement.
5. CLOSING DOCUMENTS AND REQUIREMENTS; FURTHER
ASSURANCES.
5.1. Pre-Closing Responsibilities. On the
Effective Date:
5.1.1. Seller, Shareholders and
Purchaser shall execute and deliver the
Purchase Price Deposit Escrow Agreement
in the form and substance as is attached
as Exhibit B.
5.1.2. On the Effective Date,
Purchaser shall deposit the Purchase
Price Deposit pursuant to the terms of
the Purchase Price Deposit Agreement.
The Purchase Price Deposit represents the
parties' estimate of the cash portion of
the Purchase Price that will be due at
Closing. Upon its release to Seller and
Shareholders at Closing, the Purchase
Price Deposit, together with any interest
earned thereon, shall be credited against
the cash portion of the Purchase Price
due at Closing. This Purchase Price
Deposit shall be refunded to Purchaser
only if this Agreement is terminated
pursuant to Section 19 or, if there is an
excess of funds as compared to what is
due at Closing, such excess shall be
refunded.
5.1.3. Purchaser shall assume its
management responsibilities relating to
the Business in accordance with Section 8
of this Agreement.
5.2. Closing Responsibilities of Seller, Parent and
Shareholders. At the Closing, Seller, Parent and Shareholders
shall deliver to Purchaser:
5.2.1. An Escrow Agreement executed by
Seller, Parent and Shareholders in the form and
substance as is attached as Exhibit A.
5.2.2. A bill of sale executed by Seller and
Parent, conveying the Purchased Assets (other than real
estate), free and clear of any liens or encumbrances
(other than Permitted Liens), in the form and substance
as attached as Exhibit C.
5.2.3. A Cash Deed executed by Shareholders
conveying good and marketable title to the Shareholder
Real Estate, free and clear of any liens or encumbrances
(other than Permitted Liens) in the form and substance as
attached as Exhibit D.
5.2.4. Such other instrument or instruments
of transfer as shall be reasonably necessary or
appropriate to vest in Purchaser good and marketable
title to the Purchased Assets.
5.2.5. The Employment Agreements executed by
the Shareholders in the form and substance as are
attached as Exhibits E and F.
5.2.6. An opinion of Sellers', Parent's
and Shareholders' counsel substantially in the form
and substance as is attached as Exhibit G.
5.2.7. Joint written instructions to the escrow
agent under the Purchase Price Deposit Escrow Agreement
to release the escrowed funds to Seller, Parent and
Shareholders.
5.3. Closing Responsibilities of Purchaser. At the
Closing, Purchaser shall deliver to Seller:
5.3.1. Wire-transferred or certified
funds in an amount which when added to the Purchase
Price Deposit will equal the cash portion of the
Purchase Price due at Closing.
5.3.2. Employment Agreements executed by
the Purchaser in the forms as are attached as
Exhibits E and F.
5.3.3. A Closing Escrow Agreement
executed by Purchaser in the form and substance as
is attached as Exhibit A.
5.3.4. Joint written instructions to the escrow
agent under the Purchase Price Deposit Escrow Agreement
to release the escrowed funds to Seller, Parent and
Shareholders.
5.4. Further Assurances. Following the Closing, at
the request of Purchaser, Seller, Parent and Shareholders
shall deliver any further instruments of transfer and take all
reasonable action as may be necessary or appropriate (i) to
vest in Purchaser good and marketable title to the Purchased
Assets, free and clear of any liens or encumbrances (other
than Permitted Liens) and (ii) to transfer to Purchaser all
licenses, agreements, contract rights, accounts, premiums, and
permits necessary for the operation of the Business.
6. REPRESENTATIONS AND WARRANTIES OF SELLER, PARENT AND
SHAREHOLDERS. Seller, Parent and Shareholders, jointly and
severally, represent and warrant to Purchaser as follows:
6.1. Existence and Good Standing. Seller is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Louisiana. Seller has
the power to own its properties and to carry on its business
as now being conducted. Seller is duly qualified to do
business in and is in good standing in all jurisdictions in
which the character or the location of the properties owned or
leased by Seller or the nature of the business conducted by
Seller makes such qualification necessary.
6.2. Corporate Authority and Approvals. Seller and
Parent have the corporate power and authority to make,
execute, deliver and perform this Agreement, and this
Agreement has been duly authorized and approved by all
required corporate action of Seller and Parent. This
Agreement has been duly executed and delivered by Seller,
Parent and Shareholders and constitutes a legal, valid and
binding obligation enforceable against each of Seller, Parent
and Shareholders in accordance with its terms.
6.3. Ownership; Exclusivity. No person other than
Purchaser has any right or option to acquire any ownership
rights or equity in and to the Purchased Assets.
6.4. Information. None of the schedules, exhibits
or other written material required under this Agreement, or
any document referred to within this Agreement, contains, nor
will it contain, any statement which is false or misleading
with respect to any material fact, or omits, nor will it omit,
to state a material fact necessary in order to make the
statements therein not false or misleading.
6.5. Financial Statements. The financial statements
of Seller that have been provided to Purchaser have been
prepared on a basis consistent with that of the preceding
years or periods and fairly represent in all material respects
the financial position of Seller and Parent and the results of
its operations as of the dates and for the periods indicated.
Since February 28, 1995, there has been (i) no material
adverse change in the assets or liabilities, or in the
business or condition, financial or otherwise, or in the
results of operations or prospects, of the Seller and Parent,
whether as a result of any legislative or regulatory change,
revocation of any licenses or rights to do business, fire,
explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation or act of God or other public force
or otherwise, and (ii) no change in the assets or liabilities,
or in the business or condition, financial or otherwise, or in
the results of operations or prospects, of the Seller and
Parent except in the ordinary course of business; and to the
best knowledge, information and belief of Seller, Parent and
Shareholders, no fact or condition exists or is contemplated
or threatened which might cause such change in the future.
6.6. Litigation. Except for those matters described
in Schedule 6.6 attached hereto, there is no action, suit,
proceeding at law or in equity, arbitration or administrative
or other proceeding by or before (or, to the best knowledge,
information and belief of Seller, Parent and Shareholders, any
investigation by) any governmental or other instrumentality or
agency, pending or, to the best knowledge, information and
belief of Seller, Parent and Shareholders, threatened, against
or affecting the Business, or any of the Purchased Assets,
which could materially and adversely affect the right or
ability of the Seller or Purchaser to carry on the Business as
now being conducted, or which could materially and adversely
affect the condition, whether financial or otherwise, or
properties of the Business; and the Seller does not know of
any valid basis for any such action, proceeding or
investigation. Neither the Seller, Parent nor the Business is
subject to any judgment, order or decree entered in any
lawsuit or proceeding which may have a materially adverse
effect on any of their operations, business practices, or on
their ability to acquire any property or conduct business in
any area.
6.7. Tax Returns and Payments. Seller and Parent
have duly filed or shall file all federal, state and local tax
returns and reports required to be filed for the period ending
as of May 31, 1994, and has, to Seller's, Parent's and
Shareholders' knowledge, duly paid or established adequate
reserves for the proper payment of all taxes and other
governmental charges upon it or its properties, assets,
income, franchises, licenses or sales for said period. Such
returns and reports reflect accurately all liability for taxes
of Seller and Parent for the periods covered thereby. No
examination of any tax return of Seller and Parent is
currently in progress. There are no outstanding agreements or
waivers extending the statutory period of limitation
applicable to any tax return of Seller and Parent. All monies
required to be withheld have been withheld and either paid to
the respective governmental agencies or set aside in accounts
for such purpose, or accrued, reserved against, and entered
upon the books of Seller and Parent. To Seller's, Parent's
and Shareholders' knowledge, there is no basis for the
assertion by any governmental agency or authority of any liens
or claims against the Purchased Assets for unpaid taxes or
other government charges.
6.8. Condition of Properties. Except as set forth on
Schedule 6.8, the Purchased Assets are in good repair and
condition and adequate for the ordinary course of operation of
Seller's Business as presently conducted and no person other
than Seller or Parent owns any Purchased Assets.
6.9. Title to Property; Encumbrances. Seller has
good, valid and marketable title to all of its material
properties and assets (immovable and movable, tangible and
intangible) heretofore used in the operation of the Business,
in each case subject to no encumbrance, lien, charge or other
restriction of any kind or character, except for (i) liens
consisting of zoning or planning restrictions, easements,
permits and other restrictions or limitations on the use of
immovable property or irregularities in title thereto which do
not materially detract from the value of, or impair the use
of, such property by Seller and the operation of the Business;
(ii) liens described in Schedule 6.9 attached hereto; (iii)
liens securing Assumed Liabilities; and (iv) liens for current
taxes, assessments or governmental charges or levies on
property not yet due and delinquent (liens of the type
described in clauses (i) through (iv) above may be hereafter
sometimes referred to as "Permitted Liens"). Shareholders
have good, valid and marketable title to the Shareholder Real
Estate, subject to no encumbrance other than Permitted Liens.
6.10. Immovable Property. Schedule 2.13
attached hereto contains an accurate and complete list of the
shareholder Real Estate (hereafter, such immovable property
may be referred to as the "Real Property"), and includes the
name of the record titleholder(s) thereof. Shareholders have
good and marketable title in fee simple to all the Real
Property, free and clear of all encumbrances, liens, charges
or other restrictions of any kind or character, except for
Permitted Liens. All of the buildings, structures and
appurtenances situated on the Real Property are in good
operating condition and in a state of good maintenance and
repair, are adequate and suitable for the purposes to which
they are presently being used and, with respect to each,
Seller and Shareholders have adequate rights of ingress and
egress for the operation of the Business in the ordinary
course. None of such buildings, structures or appurtenances
(or any equipment therein), nor the operation or maintenance
thereof, violates any restrictive covenant or any provision of
any federal, state or local law, ordinance, rule or regulation
or encroaches on any property owned by others. No
condemnation procedure is pending or, to the best knowledge,
information and belief of Seller and Shareholders, threatened,
which would preclude or impair the use of such property by
Seller or Purchaser for the purposes for which it is currently
used by the Business.
6.11. Leases. Schedule 6.11 attached hereto
contains an accurate and complete list and description of the
terms of all leases to which Seller is a party (as lessee or
lessor) which relate to the Business. Each lease set forth in
Schedule 6.11 (or required to be set forth in Schedule 6.11)
is in full force and effect; all rents and additional rents
due to date on each such lease have been paid; in each case,
the lessee has been in peaceable possession since the
commencement of the original term of such lease and is not in
default thereunder, and no waiver, indulgence or postponement
of the lessee's obligations thereunder has been granted by the
lessor, and there exists no event of default or event,
occurrence, condition or act (including the sale or transfer
of the Purchased Assets hereunder) which, with the giving of
notice, lapse of time or the happening of any further event or
condition, would become a default under such lease. Seller
has not violated any of the terms and conditions under any
such lease in any material respect, and, to the best
knowledge, information and belief of Seller, all the covenants
to be performed by any other party under any such lease have
been fully performed.
6.12. Material Contracts. Except as set forth
in Schedule 6.12 attached hereto, Seller and Parent are not
bound by (a) any agreement, contract or commitment relating to
the employment of any person by Seller relating to the
Business; (b) any management service, consulting or any other
similar type of contract relating to the Business; (c) any
agreement, contract or commitment limiting the freedom of
Seller to engage in any line of business or to compete with
any person; (d) any agreement, contract or commitment not
entered into in the ordinary course of business which involves
$5,000.00 or more and is not cancelable without penalty within
thirty (30) days; or (e) any agreement, contract or commitment
which might reasonably be expected to have a potential adverse
impact on the Business or operations of the Business. Each
contract or agreement set forth in Schedule 6.12 (or required
to be set forth in Schedule 6.12) is in full force and effect,
and there exists no default or event of default or event,
occurrence, condition or act (including the sale or transfer
of the Purchased Assets hereunder) which, with the giving of
notice, lapse of time or the happening of any other event or
condition, would become a default or event of default
thereunder. Seller has not violated any of the terms or
conditions of any contract or agreement set forth in Schedule
6.12 (or required to be set forth in Schedule 6.12) in any
material respect and, to the best knowledge, information and
belief of Seller, all of the covenants to be performed by any
other party thereto have been fully performed.
6.13. Restrictive Documents. Other than as may
be required by the Interstate Commerce Act or equivalent state
laws, Seller and Parent are not subject to, or a party to, any
charter, bylaw, mortgage, lien, lease, license, permit,
agreement, contract, instrument, law, rule, ordinance,
regulation, order, judgment, or decree, or any other
restriction of any kind or character, which materially and
adversely affects the business practices, operations or
condition of the Business or any of Seller's, Parent's or
Shareholders' assets or properties used in the Business, or
which would prevent consummation of the transactions
contemplated by this Agreement, compliance by Seller, Parent
or Shareholders with the terms, conditions and provisions
hereof, or the continued operation of the Business after the
Commencement Date on substantially the same basis as
heretofore operated, or which would restrict the ability of
the Business to acquire any property or conduct business in
any area.
6.14. Intellectual Properties. The operation of
the Business requires no rights under Intellectual Property
(defined below) other than rights under Intellectual Property
listed on Schedule 6.14 attached hereto and rights granted to
Seller pursuant to agreements listed on Schedule 6.14. Seller
owns all right, title and interest in the Intellectual
Property listed on Schedule 6.14. Except as set forth on
Schedule 6.14, no claim adverse to the interest of Seller and
Intellectual Property or agreements listed in Schedule 6.14
has been made in litigation. To the best knowledge,
information and belief of Seller, no such claim has been
threatened or asserted, no basis exists for any such claim,
and no person has infringed or otherwise violated Seller's
right in any of the Intellectual Property or agreements listed
on Schedule 6.14. Except as set forth on Schedule 6.14, no
litigation is pending wherein Seller is accused of infringing
or otherwise violating intellectual property rights of
another, or breaching a contract conveying rights under
Intellectual Property. To the best knowledge, information and
belief of Seller, no such claim has been asserted or
threatened, nor are there any facts that would give rise to
such claim. For purposes of this section 6.14, "Intellectual
Property" means domestic and foreign patents, patent
applications, registered and unregistered trademarks and
service marks, registered and unregistered copyrights,
computer programs, databases, trade secrets and proprietary
information.
6.15. Compliance with Laws. Seller and the
Business are in compliance in all material respects with all
applicable laws, regulations, orders, judgments and decrees.
6.16. Restrictive Documents. Seller and
Shareholders are not subject to any charter, bylaws, mortgage,
lien, lease agreement, instrument, order of law, rule
regulation, judgment or decree, or any other restriction of
any kind or character, which would prevent consummation of the
transactions contemplated by this Agreement.
6.17. Subsidiaries. Seller is a wholly-owned
subsidiary of Parent. Shareholders own one-hundred percent
(100% of the issued and outstanding stock of Parent. Except
as set forth above, Seller has no subsidiaries and no entities
affiliated through common ownership or otherwise that conduct
any business related to the Business.
6.18. Inventory. Seller's inventories were
acquired and have been maintained in accordance with the
regular business practice of Seller and consists of items of
a quality usable in the ordinary course of Seller's business.
6.19. Employment Relations.
6.19.1. Seller has in place on the date of
this Agreement ______ drivers. Except as contemplated by
this Agreement, there are no plans or policies which
would give rise to any severance, termination, change-in-
control, or other similar payment to Seller's employees
as a result of the consummation of this Agreement;
Seller has taken no action in respect
of its employees that would require notice (or if any
action requiring notice has occurred, notice has been
given) or create liability under the Worker Adjustment
and Retraining Notification Act, or any state
counterpart;
6.19.3. Seller is in substantial compliance
with all federal, state or other applicable laws,domestic or foreign,
respecting employment and employment practices, terms and conditions
of employment and wages and hours, and has not and is not engaged in
any unfair labor practice;
6.19.4. No unfair labor practice complaint
against Seller is pending before the National Labor
Relations Board;
6.19.5. There is no labor strike, disputes,
slow down or stoppage actually pending or threatened
against or involving Seller;
6.19.6. No representation question exists
respecting the employees of Seller;
6.19.7. No grievance which might have an
adverse effect upon Seller for the conduct of the
Business exists, no arbitration proceeding arising out of
or under any collective bargaining agreement is pending
and no claim therefor has been asserted;
6.19.8. Seller is not a party to any
collective bargaining agreement and no collective
bargaining agreement is currently being negotiated by
Seller; and
6.19.9. Seller has not experienced any
material labor difficulty during the last three (3)
years. There has not been, and to the best knowledge,
information and belief of Seller there will not be, any
material adverse change in relations with employees of
Seller as a result of any announcement of the terms of
this Agreement.
6.20. Employee Benefit Plans. Set forth in
Schedule 6.20 attached hereto is an accurate and complete list
of all employee benefit plans ("Employee Benefit Plans"),
within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and
regulations thereunder ("ERISA"), whether or not any such
Employee Benefit Plans are otherwise exempt from the
provisions of ERISA, established, maintained or contributed to
by Seller, Parent or any of their affiliates. All Employee
Benefit Plans are in substantial compliance with ERISA.
Neither the Seller, Parent nor any of their affiliates has
incurred any liability to the Pension Benefit Guaranty
Corporation in connection with any Employee Benefit Plan
covering any employees of Seller. Neither Seller, Parent nor
any of their affiliates maintain any group health plan that
has not been administered and operated in all respects in
compliance with the applicable requirements of ERISA and the
Internal Revenue Code.
6.21. Environmental Laws and Regulations.
Seller, Parent and Shareholders have previously made available
to Purchaser information relating to the following items:
(a) the nature and quantities of any Hazardous
Materials (defined below) generated, transported or
disposed of by Seller, Parent or Shareholders during the
past three years, together with a description and the
location of each such activity; and
(b) a summary of the nature and quantities of any
Hazardous Materials that have been disposed of or found
at the Shareholder Real Estate or any site or facility
owned or operated presently or any previous time by
Seller. Seller, Parent and Shareholders are in
compliance in all material respects with all applicable
federal, state and local laws and regulations relating to
product registration, pollution control and environmental
contamination including, but not limited to, all laws and
regulations governing the generation, use, collection,
discharge or disposal of Hazardous Materials and all laws
and regulations with regard to record keeping,
notification and reporting requirements respecting
Hazardous Materials. Seller, Parent or Shareholders have
not been alleged to be in violation of, or have been
subject to any administrative or judicial proceeding
pursuant to such laws or regulations, either now or any
time during the past three years. There are no facts or
circumstances which Seller, Parent or Shareholders
reasonably expect could form the basis for the assertion
of any Claim (as defined below) against Seller, Parent or
Shareholders relating to environmental matters including,
but not limited to, any Claim arising from past or
present environmental practices asserted under CERCLA
(defined below) and RCRA (defined below) or any other
federal, state or local environmental statute, which
Seller, Parent or Shareholders believe might have a
material adverse effect on the business, results of
operations, financial condition or prospects of Seller,
Parent or Shareholder.
For purposes of this Section 6.21, the following terms
shall have the following meanings:
(a) "Hazardous Materials" shall mean materials
defined as "hazardous substances", "hazardous waste", or
"solid waste" in (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601-9657,
and any amendments thereto ("CERCLA"), (ii) the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901-6987, and any
amendments thereto ("RCRA"), and (iii) any similar federal,
state or local environmental statute; and
(b) "Claim" shall mean any and all claims, demands,
causes of action, suits, proceedings, administrative
proceedings, losses, judgments, decrees, debts, damages,
liabilities, court costs, attorneys fees and any other
expenses incurred, assessed or sustained by or against Seller.
6.22. Interest in Customers, Suppliers. Neither
Seller, Parent, Shareholders nor any officer, director or
shareholder of Seller or Parent possesses, directly or
indirectly, any financial interest in, or is a director,
officer or employee of, any corporation, firm, association or
business organization which is a client, supplier, customer,
lessor, lessee or competitor or potential competitor of
Seller, the Business or Purchaser. Ownership of securities of
a company whose securities are registered under the Securities
Exchange Act of 1934 not in excess of one percent (1%) of any
class of such security shall not be deemed to be a financial
interest for purposes of this Section 6.22.
6.23. Insurance. Set forth in Schedule 6.23
is a complete list of insurance policies which Seller, Parent
and Shareholders maintain with respect to the Purchased
Assets, Seller's Business, properties, or employees and the
Shareholder Real Estate. Such policies are in full force and
effect. Such policies, regarding their amounts and types of
coverage, are adequate to insure fully against risks to which
Seller, Parent and Shareholders are normally exposed in the
operation of the Business. Since May 1, 1994, there has not
been any materially adverse change in the Seller's, Parent's
or Shareholders' relationship with their insurers or in the
premiums payable pursuant to such policies.
6.24. Operating Rights. Seller has proper
Interstate Commerce Commission and intrastate authority to
operate the Business as it is presently being conducted and
operated, and copies of such intrastate authorities are
attached hereto as Exhibit H. There is no action pending with
any regulatory body concerning Seller's operating authorities.
6.25. Broker's or Finder's Fee. No agent,
broker, person or firm acting on behalf of Seller, Parent or
Shareholders is or will be entitled to any commission or
broker's or finder's fee from any of the parties hereto, nor
from any person controlling, controlled by, or under common
control with any of the parties hereto, in connection with any
of the transactions contemplated by this Agreement.
7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to Seller, Parent and
Shareholders as follows:
7.1. Existence and Good Standing of Purchaser; Power
and Authority. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Texas. Purchaser has the power to own its properties
and to carry on its business as now being conducted.
Purchaser is duly qualified to do business and is in good
standing in all jurisdictions in which the character or the
location owned or leased by Purchaser or the nature of the
business conducted by Purchaser makes such qualifications
necessary.
7.2. Corporate Authority and Approvals. Purchaser
has the corporate power and authority to make, execute,
deliver and perform this Agreement and this Agreement has been
duly authorized and approved by all required corporate action
of Purchaser. This Agreement has been duly executed and
delivered by Purchaser and constitutes a legal, valid and
binding obligation enforceable against Purchaser in accordance
with its terms.
7.3. Restrictive Documents. Other than as may be
required by the Interstate Commerce Act or equivalent state
laws, Purchaser is not subject to any charter, bylaws,
mortgage, lien, lease agreement, instrument, order, law, rule
regulation, judgment or decree, or any other restriction of
any kind or character, which would prevent consummation of the
transactions contemplated by this Agreement.
7.4. Information. None of the representations
contained in this Section 7 contain, nor will they contain,
any statement which is false or misleading with respect to any
material fact, or omits, nor will it omit, to state a material
fact necessary in order to make the statements therein not
false or misleading.
7.5. Litigation. There is no action, suit,
proceeding at law or in equity, arbitration or administrative
or other proceeding by or before (or to the best knowledge,
information and belief of Purchaser, any investigation by) any
governmental or other instrumentality or agency, pending or,
to the best knowledge, information and belief of Purchaser,
threatened, which could materially and adversely affect the
right or ability of Purchaser to consummate the transactions
which are the subject of this Agreement.
7.6. Broker's or Finder's Fee. No agent, broker,
person or firm acting on behalf of Purchaser is, or will be,
entitled to any commission or broker's or finder's fee from
any of the parties hereto, or from any person controlling or
controlled by, or under common control with, any of the
parties hereto, in connection with any of the transactions
contemplated herein.
8. USE OF TRANSFERRED ASSETS BY PURCHASER PENDING
CLOSING.
8.1. Management Period. On and from May 1, 1995,
until the earliest of the Closing or the earlier termination
of this Agreement in accordance with its terms (the
"Management Period"), Seller shall delegate to the Purchaser
the irrevocable and exclusive right to Manage (defined below)
the Business and the Purchased Assets. Any subsequent
agreements entered into by Purchaser on behalf of Seller
necessary to operate the Purchased Assets and the Business
shall not restrict or obligate, in any way, Seller subsequent
to the Management Period.
8.2. Manage. The term "Manage" shall mean the right
and responsibility of Purchaser to:
8.2.1. hold, operate, and manage in all
respects the Purchased Assets;
8.2.2. repair and maintain the Equipment
(and inventory to the extent not used) in the same
condition in which they were received, normal wear and
tear excepted;
8.2.3. receive and retain all revenues,
income, earnings and profits generated by the operation
of the Purchased Assets or by the operation of other
rolling stock by the drivers;
8.2.4. receive all benefits and discharge
all obligations (including principal, interest and other
amounts) due on or with respect to the Assumed
Liabilities;
8.2.5. manage, oversee, employ and terminate
all employees currently or during the Management Period
employed by Seller and make such changes in duty
assignments as Purchaser shall reasonably deem desirable;
8.2.6. pay to all drivers and other
employees of Seller utilized by Purchaser all amounts due
and arising from services during the Management Period,
whether in the form of wages, per diem, advances, or
otherwise, and withhold taxes and make proper deposits;
8.2.7. pay all trade payables and other
liabilities arising during the Management Period;
8.2.8. bear all risk of loss with respect to
the Purchased Assets, with any insurance proceeds
received by Purchaser as a result of loss or damage to
any of the Purchased Assets being promptly delivered to
Seller to hold as a deposit pending Closing with Seller
refunding any such insurance proceeds to Purchaser upon
Closing or retaining such deposit in the event the
Closing does not occur;
8.2.9. maintain, at Purchaser's expense,
either (A) Seller's insurance coverage on the Purchased
Assets in the amounts presently carried by Seller, and
Seller and Purchaser shall jointly arrange for Purchaser
to be named as an additional insured on all such
insurance policies, or (B) obtain comparable coverages
under Purchaser's insurance policies and arrange for
Seller to be named as an additional insured and in either
case all such policies shall contain a waiver of
subrogation of any Claims that may be brought against
Seller; and
8.2.10. take all other action necessary in
Purchaser's reasonable discretion to manage and operate
the Purchased Assets during the Management Period.
8.3. No Liens, Dispositions. Except as provided in
Schedule 8.3, Purchaser shall not sell, assign, or otherwise
dispose of, or permit the imposition of any Lien on the
Purchased Assets during the Management Period. Purchaser
shall not acquire any capital assets on behalf of Seller
during the Management Period. Purchaser may acquire parts,
tires, fuel, and other Inventory and non-capital assets of a
character required for operation of the Business in the
ordinary course, consistent with Seller's prior practices.
8.4. Consideration. In consideration of the rights
granted in Section 8 and the earnings and profits, if any,
generated by the Purchased Assets and drivers, Purchaser shall
pay to Seller $100 per month on the last day of each month
during the Management Period or at Purchaser's election, at
the Closing. In addition, if the transactions contemplated by
this Agreement are not consummated, Purchaser shall reimburse
Seller of any after-tax operating loss during the Management
Period. Purchaser shall be entitled to withdraw and retain
cash or other liquid assets equivalent to all profits
generated by the Purchased Assets and Business during the
Management Period as its fee, regardless of whether the
transactions contemplated by this Agreement are consummated,
and shall leave in Seller, if the Closing does not occur, cash
or other current assets equivalent to any accounts payable
accrued or due and owing upon termination of the Management
Period.
8.5. Irrevocability. Seller shall have no right
to make commitments or take any action on behalf of Seller
that would affect the operation of the Purchased Assets or
Business during the Management Period. The rights granted
Purchaser during the Management Period are irrevocable and
exclusive, and the parties acknowledge that Purchaser would
not have entered into this Agreement absent such irrevocable
rights.
8.6. Liabilities. Except as otherwise provided in
this Agreement, any liability that arises from facts or events
that span all or part of the Management Period and a period
when Seller operated Seller shall be prorated based upon the
relative responsibility of Purchaser and Seller for the
liability. As an example, in case of a fuel tax audit that
results in liability for a period including the Management
Period, Purchaser shall be liable for an amount equal to the
ratio of the amount of fuel used in the Management Period
bears to the total amount of fuel used in the audit period,
and Seller shall be liable for the balance. Purchaser shall
indemnify, defend and hold harmless Seller against liabilities
for which Purchaser is responsible under this paragraph and
Seller shall indemnify, defend and hold harmless Purchaser
against liabilities for which Seller is responsible under this
paragraph.
8.7. Termination of Management Period. In the event
that this Agreement is terminated, the Management Period shall
terminate and Purchaser shall return, as of the date of
termination of this Agreement (the "Termination Date"), the
operation of the Purchased Assets to the control of Seller.
9. COVENANTS OF SELLER, PARENT AND SHAREHOLDERS.
Seller, Parent and Shareholders, jointly and severally,
covenant and agree that from the Effective Date to the Closing
Date:
9.1. Cooperation. Seller, Parent and Shareholders
shall use their best efforts to cause the sale contemplated by
this Agreement to be consummated and, without limiting the
generality of the foregoing, to obtain all consents and
authorizations of third parties which may be necessary or
reasonably required in order for Seller, Parent and
Shareholders to effect the transactions contemplated hereby.
9.2. Ordinary Course of Business. Seller, Parent
and Shareholders will use their best efforts to preserve the
Business intact and to keep available the services of
employees and representatives and to preserve the goodwill of
Seller's employees, customers, suppliers and others having
business relations with it. Seller and Parent shall conduct
its operations only according to their ordinary and usual
course of business.
9.3. Environmental. Purchaser, or its engineers,
contractors and agents, at all reasonable times prior to the
Closing, shall have the right and privilege of going upon the
Real Property to inspect, examine or take those steps deemed
necessary by Purchaser to determine the physical
characteristics of the Real Property and to plan for the
development and use of the Real Property, including the right
to make soil bearing tests, borings, percolation tests,
engineering and environmental studies and tests, and such
other tests, studies and analyses as are necessary in the sole
discretion of Purchaser to obtain information to determine the
surface, subsurface and topographic conditions and
characteristics of the Real Property.
9.4. Dispositions and Encumbrances on Purchased
Assets. Seller, Parent and Shareholders will not, directly or
indirectly, dispose of any of the Purchased Assets or encumber
any of the Purchased Assets.
9.5. Exclusive Dealing. During the period from the
Effective Date to the Closing date, Seller, Parent and
Shareholders shall refrain from taking any action to, directly
or indirectly, encourage, initiate or engage in discussions or
negotiations with, or provide any information to any person or
entity, other than Purchaser, concerning any merger, sale of
substantially all the assets, sale of the issued and
outstanding stock of Seller or Parent or similar transaction
involving Seller or Parent.
9.6. Review of Seller. Purchaser may, prior to the
Closing date, through their representatives, review the
properties, books and records of Seller and Parent and their
financial and legal condition as Purchaser deems necessary or
advisable to familiarize itself with such properties and other
matters; such review shall not, however, affect the
representations and warranties made by Seller, Parent and
Shareholders hereunder or the remedies of Purchaser for
breaches of those representations and warranties. Seller and
Parent shall permit Purchaser and its representatives to have,
after the effective date, full access to the premises and to
all the books and records of Seller and Parent and to cause
the officers of Seller and Parent to furnish Purchaser with
such financial and operating data and other information with
respect to the business and properties of Seller and Parent as
Purchaser shall from time to time reasonably request.
10. COVENANTS OF PURCHASER. Purchaser covenants and
agrees that from the Effective Date to the Closing Date:
10.1. Cooperation. Prior to the Closing, Purchaser
shall use its best efforts to cause the sale contemplated by
this Agreement to be consummated and, without limiting the
generality of the foregoing, to obtain all consents and
authorizations of third parties which may be necessary or
reasonably required in order for Seller, Parent and
Shareholders to effect the transactions contemplated hereby.
10.2. Operating Authorities; Temporary Lease. As
soon as practicable after the date hereof, Purchaser may
petition the ICC to approve or exempt temporary common
management and control (and, in its discretion any other
governmental agency or authority having jurisdiction, to
approve or exempt the permanent transfer of intrastate
operating authorities of Seller to Purchaser and to approve or
exempt temporary transfer of all intrastate operating
authorities pending final determination of the permanent
transfer application and of all intrastate operating
authorities pending Closing). Seller, Parent and Shareholders
shall use their best efforts to assist Purchaser in obtaining
any such exemptions or approvals.
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER,
PARENT AND SHAREHOLDERS. All obligations of Seller, Parent
and Shareholders under this Agreement are subject to the
fulfillment, at the option of Seller, Parent and Shareholders
at or prior to the Closing Date, of each of the following
conditions:
11.1. Representations and Warranties True. The
representations and warranties of Purchaser herein contained
shall be true on and as of the Closing Date with the same
force and effect as though made on and as of said date.
11.2. Performance of Purchaser. Purchaser shall
have performed all of its obligations and agreements and
complied with all of its covenants contained in this Agreement
to be performed and complied with by the Purchaser prior to
the Closing Date.
12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
PURCHASER. All obligations of Purchaser under this Agreement
are subject to the fulfillment, at the option of the
Purchaser, at or prior to the Closing Date, of each of the
following conditions:
12.1. Representations and Warranties True. The
representations and warranties of Seller, Parent and
Shareholders herein contained shall be true on and as of the
Closing Date with the same force and effect as though made on
and as of said date.
12.2. Performance of Seller. Seller, Parent and
Shareholders shall have performed all of its obligations and
agreements and complied with all of its covenants contained in
this Agreement to be performed and complied with by it prior
to the Closing Date.
12.3. Environmental. Purchaser must be able to
determine to its satisfaction that the Real Property does not
contain and is not contaminated with any Hazardous Substance,
or asbestos in amounts or to an extent which is unacceptable
to Purchaser in Purchaser's reasonable discretion; and that
the Real Property is not subject to any federal, state or
local "Superfund" lien, thereof, for the clean-up, or removal
of any such Hazardous Substance from the Real Property. In
the event that the results of Purchaser's tests, inspections
or examinations as set forth above reveal that the Real
Property is contaminated with any Hazardous Substance, or
asbestos, in amounts or to an extent which is unacceptable to
Purchaser in Purchaser's reasonable discretion; or that the
Real Property is subject to any federal, state or local
"Superfund" lien, thereof, for the clean-up, or removal of any
such Hazardous Substance from the Real Property, then
Purchaser shall not be obligated to purchase the Purchased
Assets unless Seller, Parent and Shareholders elect and
proceed to remedy the situation to Purchaser's satisfaction.
If Seller, Parent and Shareholders do not so elect, this
Agreement shall be deemed null, void and of no further force
and effect, and Purchaser and Seller, Parent and Shareholders
shall have no further rights, obligations or liabilities, one
to the other, under this Agreement.
12.4. Survey. Seller shall furnish to Purchaser
a current and accurate as built survey of the Real Property
prepared and certified by a reputable land surveyor registered
under the laws of the State of Louisiana showing: (a) all
existing improvements, fences and walls on or affecting the
Real Property and their respective dimensions; (b) the total
amount of acreage contained in the Real Property; (c) the
boundaries and legal description of the Real Property; and (d)
all streets providing access to the Real Property (showing
dimensions of street). If such survey discloses matters on or
applicable to the Real Property which in Purchaser's
reasonable business judgment will interfere with the
development and use of the Real Property by Purchaser as
contemplated by Purchaser, (b) any visible or known
encroachment or projection on the Real Property by structures,
facilities, or improvements on adjoining property, or (c) any
visible or known encroachment or projection on adjoining
property by structures, facilities, or improvements located on
the Real Property, then within ten (10) days of receipt of
survey, at the exclusive election of Purchaser, exercisable in
Purchaser's absolute discretion, Purchaser either (i) may
complete the purchase of the Real Property in its existing
condition subject to such interferences and encroachments or
(ii) may declare this Agreement null and void and of no
further force and effect, and, except as set forth below,
Purchaser and Seller shall have no further rights, obligations
or liabilities, one to the other, under this Agreement.
12.5. Title. As soon as practical, Shareholders
shall deliver to Purchaser a title opinion sufficient to
enable Purchaser to obtain an owner's title insurance policy
at standard rates from a title insurance company qualified to
and doing business in the State of Louisiana, acceptable to
Purchaser ("Title Opinion") for the Real Property. Seller
shall bear the cost of the title search and preparation of the
Title Opinion. Any title insurance premium shall be paid by
Purchaser. Said Title Opinion shall show that Shareholders
have good and merchantable title in fee simple to the Real
Property free and clear of all liens, assessments, charges,
claims, actions and encumbrances, easements, rights-of-way,
restrictions and title exceptions of any kind whatsoever,
except Permitted Liens. Promptly upon receipt of such Title
Opinion, Purchaser shall notify Shareholders of any defects or
objections to Shareholders' title not expressly consented to
by Purchaser in writing and Shareholders shall have until the
Closing Date to cure any such defects or objections, at
Shareholders' sole expense. If Shareholders do not cure such
objections or defects by the Closing Date, Purchaser, at its
sole discretion: (i) may complete the purchase of the
Purchased Assets and accept such title thereto as Shareholders
are able to convey without reduction of the Purchase Price
(unless such title defects are encumbrances or liens for an
ascertainable amount not in excess of the remaining purchase
price due, in which case that amount may be deducted from the
Purchase Price) or (ii) may grant Shareholders, in writing,
one or more extensions of the time within which Shareholders
must remedy such title defects. If Shareholders fail to
remedy any title defects by Closing Date or the expiration
date of any extension granted by Purchaser, then Purchaser may
declare this Agreement null and void and of no further force
and effect, and Purchaser, Seller, Parent and Shareholders
shall have no further rights, obligations or liabilities, one
to the other, under this Agreement. A policy of title
insurance without exceptions in the amount of the purchase
price allocated to the Real Property by a title insurance
company qualified to do business in the State of Louisiana
acceptable to Purchaser would, however, satisfy any objection
to such title.
13. WORKER'S COMPENSATION MATTERS. In addition to the
Assumed Liabilities, Purchaser agrees to assume certain
responsibilities relating to Seller's worker's compensation
claims as set forth herein. Seller has insured the first
$100,000.00 of worker's compensation liability and expense
relating to each claim and maintains excess coverage
applicable to such claims which becomes operative at a higher
level, over $100,000.00. Commencing on the Effective Date,
Purchaser agrees to bear one-half (1/2) of any uninsured
expense or liability relating to Seller's worker's
compensation claims up to a maximum total collective exposure
on all claims in the amount of $50,000.00 after Closing.
Further, Purchaser agrees to administer all of Seller's
ongoing worker's compensation claims from the Effective Date
forward.
14. NON-COMPETITION COVENANTS.
14.1. Recitals. In order to protect the investment
of Purchaser in the Business and the goodwill associated
therewith Seller, Parent and Shareholders have agreed to
certain restrictions on their ability to compete with the
Business, confidentiality provisions and other terms which are
reasonable and necessary to protect the Business. Purchaser
would not have acquired the Business from Seller but for
Seller's, Parent's and Shareholders' covenants set forth below
and their full compliance with the terms and conditions
hereof.
14.2. Protective Covenants. In consideration for
the payment of the Purchase Price and other considerations
reflected in this Agreement, Seller, Parent and each of the
Shareholders, jointly and severally, covenant and agree as
follows:
14.2.1. For a period of three (3) years from
the Effective Date, Seller, Parent and each of the
Shareholders shall not engage in any business or perform any
service, directly or indirectly, in competition with the
Business of the Purchaser or have any interest, whether as a
proprietor, partner, employee, stockholder, principal, agent,
consultant, director, officer or in any other capacity or
manner whatsoever, in any enterprise that shall be so engaged,
in the following geographic area: the continental United
States without limiting the scope of the above, (to the extent
received by Louisiana law the above geographic area includes
all parishes in the Sate of Louisiana). For purposes of this
Agreement, the Business of Purchaser shall be deemed to be
common carrier transportation services, contract carrier
transportation services, rail services, international
transportation services, transportation brokerage services and
owner-operated transportation services. Notwithstanding the
foregoing provisions, nothing contained in this Section 14
shall prohibit Seller or Shareholders, on a collective basis,
from acquiring or owning not more than five percent (5%) of
the securities of any entity whose securities are traded on a
national securities market.
14.2.2. Seller, Parent and the Shareholders
shall not use or disclose to any persons, except the Purchaser
and its duly authorized officers or employees entitled thereto
(including the officers or employees of the Purchaser's
affiliates), customer lists or other confidential information
acquired by Seller, Parent and Shareholders in the course of
their ownership and affiliation with the Business.
14.2.3. If Seller, Parent or either
Shareholder violates this Agreement and the Purchaser brings
legal action for injunctive or other relief, the Purchaser
shall not, as a result of the time involved in obtaining the
relief, be deprived of the benefit of the full period of the
restrictive covenant. Accordingly, the restrictive covenant
shall be deemed to have the duration specified in subparagraph
14.2.1 hereof, computed from the date the relief is granted
but reduced by the time between the period when the
restriction began to run and the date of the first violation
of the covenant.
14.2.4. If any court shall determine that the
duration or geographical limit of any restriction contained in
this section is unenforceable, it is the intention of the
parties that the restrictive covenant set forth herein shall
not thereby be terminated but shall be deemed amended to the
extent required to render it valid and enforceable, such
amendment to apply only with respect to the operation of this
section in the jurisdiction of the court that has made the
adjudication.
14.2.5. As the former owner and shareholders
of the Business and Parent, Seller, Parent and Shareholders
have had access to customer lists, records, files, and other
confidential information of the Business acquired by Purchaser
and has established relationships with valuable customers and
suppliers of the Business. Seller, Parent and Shareholders
acknowledge that the restrictions contained in Section 14 of
this Agreement are reasonable in scope and duration and are
necessary to protect the legitimate interests of the
Purchaser, that any violation of these restrictions would
cause substantial injury to the Purchaser, and that the
Purchaser would not have purchased the Purchased Assets of the
Business without receiving the additional consideration
offered by Seller, Parent and Shareholders in binding
themselves to these restrictions. In the event of any
violation of these restrictions, the Purchaser shall be
entitled to its reasonable attorneys' fees and expenses and
preliminary and permanent injunctive relief, in addition to
any other remedy.
14.3. Exception. Notwithstanding the above
covenants, Shareholders shall have the right to own and
operate two (2) tractors.
15. SURVIVAL OF COVENANTS, REPRESENTATIONS AND
WARRANTIES. The respective representations and warranties set
forth in or incorporated by reference into this Agreement
shall survive the Closing and thereafter be fully effective
and enforceable. The respective representations and
warranties set forth in this Agreement shall not be affected
by any investigation, verification or approval by any party
hereto or by anyone on behalf of such party. The respective
covenants and agreements set forth in this Agreement, except
those covenants and agreements that are required by this
Agreement to be fully kept, performed and discharged on or
before the Closing, shall survive the Closing and thereafter
be fully effective and enforceable.
16. INDEMNIFICATION.
16.1. Indemnification by Seller, Parent and
Shareholders. Seller, Parent and Shareholders, jointly and
severally, will protect, defend, indemnify and hold harmless
Purchaser with respect to any losses, claims, damages,
liabilities or related expenses (including, but not limited
to, reasonable attorney's fees and expenses) to which
Purchaser may become subject as a result of: (i) the breach
of any of the representations, warranties, covenants or
agreements made by Seller, Parent or Shareholders in and under
this Agreement; (ii) non-compliance by Purchaser and Seller
with any bulk sales act law which may apply to the
transactions contemplated by this Agreement; and (iii) any
third party claim or claims made or threatened against
Purchaser to the extent such claim or claims are based upon
any occurrence prior to the Closing with respect to any of the
Purchased Assets unless such claim or claims are based on: (a)
the operation and use of the Purchased Assets by Purchaser
during the Management Period; or (b) workers compensation
claims to the extent liability has been assumed by Purchaser
under Section 13 of this Agreement.
16.2. Indemnification by Purchaser. Purchaser
will protect, defend, indemnify and hold harmless Seller,
Parent and Shareholders with respect to any losses, claims,
damages, liabilities or related expenses (including, but not
limited to, reasonable attorney's fees and expenses) to which
Seller, Parent or Shareholders, or their officers or
employees, may become subject as a result of: (i) the breach
of any of the representations, warranties, covenants or
agreements made by Purchaser in and under this Agreement, (ii)
any third party claim or claims made or threatened against
Seller, Parent or Shareholders arising out of any loss, injury
or damage due to an act or omission of Purchaser or, as to
worker's compensation and tort liability claims, an event
which happened or arose, during the Management Period and
subsequent to the Closing with respect to any of the Purchased
Assets, and (iii) any claim for damages to personal property
arising from Purchaser's entry upon Seller's place of business
prior to Closing.
16.3. Indemnification Procedure. The party or
parties seeking indemnification under this section (the
"Indemnitee") shall notify the party or parties against whom
such indemnification is being sought (the "Indemnitor") of any
such breach or claim, with reasonable promptness, but not
later than fifteen (15) calendar days after receipt of notice
of such claim, and solely in the case of third party claims,
the Indemnitor or its legal representative shall have, at its
election, the right to settle or defend any such matter
involving any such asserted liability through counsel of
Indemnitor's choosing and at its expense. Such notice and
opportunity to settle or defend, if applicable, shall be a
condition precedent to any liability of Indemnitor for third
party claims under this section. In the event that the
Indemnitor undertakes to settle or defend any third party
claims under this section, it shall notify the Indemnitee in
writing promptly of its intention to do so, and Indemnitee
shall fully cooperate with Indemnitor and its counsel in the
settlement or defense thereof. In the Indemnitor elects to
settle such third party claim, and the Indemnitee shall reject
the terms of such settlement, the Indemnitee shall be
responsible for defending such claim, including, without
limitation, selecting legal counsel and negotiating terms of
settlement. The Indemnitee shall be responsible for the
payment of all fees of legal counsel so selected by it. In
such event, the Indemnitor shall be responsible hereunder for
the loss, liability or judgment incurred in such third party
claim only to the extent of the amount of settlement
theretofore approved by the Indemnitor and rejected by the
Indemnitee.
16.4. Effect of Escrow. The establishment of the
Escrow Deposit shall not be deemed a limitation of liability
or a restriction on any party's rights and remedies under this
Agreement or at law or in equity.
17. EXPENSES. Seller, Parent Shareholders and Purchaser
shall each pay their own expenses including, without
limitation, fees and expenses of agents, representatives,
counsel, accountants and other experts, incidental to the
preparation and consummation of this Agreement. Seller shall
bear the costs associated with furnishing the survey and title
opinion. Seller and Purchaser shall each bear one-half (1/2)
of the expense relating to the environmental site assessment.
18. DESTRUCTION OR CONDEMNATION OF PROPERTY.
18.1. Damage or Destruction. In the event any
of the tangible Purchased Assets are destroyed by fire, flood
or other casualty prior to the Closing, Purchaser shall have
the option to: (i) cancel this Agreement, or (ii) proceed
with the Closing, and accept the Purchased Assets subject to
the damage. In such latter event, Seller, Parent and
Shareholders shall assign to Purchaser all of its rights to
insurance proceeds payable due to such destruction, subject to
any prior rights of any mortgagee or lienholder. In such
case, the Purchase Price shall be adjusted to reflect any
deficiency in insurance proceeds.
18.2. Condemnation. In the event any portion of
the Purchased Assets has been condemned or sold in lieu of
condemnation or is the subject of a condemnation proceeding,
Purchaser shall have the option to: (i) cancel this Agreement
(ii) purchase the Purchased Assets (or any remaining portion
thereof), and receive from Seller, Parent and Shareholders an
assignment of all payments and/or awards arising from such
condemnation. In such case, the Purchase Price shall be
adjusted to reflect any deficiency in condemnation proceeds.
19. TERMINATION.
19.1. By Mutual Consent or Other Action.
Notwithstanding anything contained in this
Agreement to the contrary, this Agreement may be
terminated (i) by mutual consent of all parties
hereto, (ii) by either party if the Closing shall
not have occurred by August 1, 1995.
19.2. By Seller. Seller, Parent and
Shareholders may terminate this Agreement if any of
the conditions to Closing contained in Section 11
shall not have been satisfied or waived prior to
the Closing.
19.3. By Purchaser. Purchaser may terminate
this Agreement if any of the conditions to Closing
contained in Section 12 shall not have been
satisfied or waived prior to the Closing.
19.4. Effect. In the event of a termination
of this Agreement as provided above, this Agreement
shall thereupon become void and there shall be no
liability on the part of any party hereto,
provided, however, nothing in this Section 19 shall
relieve any party from liability for any breach of
this Agreement.
20. MISCELLANEOUS. The following shall also apply to
this Agreement:
20.1. Notice. Any notice, permission, approval,
demand, or request affecting any obligations or terms must be
in writing and shall be deemed to be given on the date: (i)
delivered by hand, or (ii) two (2) business days after being
mailed by certified mail.
20.2. Addresses. All mailings shall be to the
address of the party shown or to any subsequent address in the
United States of America requested:
SELLER:
Vernon Sawyer, Inc.
P.O. Drawer B
Bastrop, LA 71220
Attn: Vernon G. Sawyer
PARENT:
Vernon Sawyer Transportation, Inc.
P.O. Drawer B
Bastrop, LA 71220
Attn: Vernon G. Sawyer
SHAREHOLDERS:
Vernon G. Sawyer and Nancy Sawyer
P.O. Drawer B
Bastrop, LA 71220
With a copy of any Notice to Seller, Parent or
Shareholders to:
Stephen J. Katz
Rankin, Yeldell, Herring & Katz
411 South Washington
Bastrop, LA 71220
PURCHASER:
KLLM, Inc.
P.O. Box 6098
Jackson, MS 39288
Attn: J. Kirby Lane
With a copy of any Notice to Purchaser to:
James H. Neeld, IV, Esq.
Young, Williams, Henderson & Fuselier, P.A.
Post Office Box 23059
Jackson, Mississippi 39225-3059
20.3. Gender. The singular and plural and any
gender shall include the other.
20.4. No Waiver. No waiver of any condition,
obligation, or term shall constitute a waiver of any other, or
a waiver of a subsequent right to demand strict compliance
with all conditions, obligations, and terms.
20.5. Specific Performance. Purchaser may
enforce this Agreement
by specific performance.
20.6. Cumulative Rights. The rights and
remedies herein reserved by or granted to the parties are
distinct, separate and cumulative, and the exercise of any one
of them shall not be deemed to preclude, waive or prejudice
the parties' right to exercise any or all others. Whether or
not specifically enumerated in this Agreement, the parties
reserve all rights and remedies at law and in equity, and
nothing contained in this Agreement shall be construed as a
limitation of any rights or remedies.
20.7. Entire Agreement. This Agreement,
including the documents and instruments referred to herein:
20.7.1. constitutes the entire agreement and
supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the
subject matter of this Agreement;
20.7.2. is not intended to confer upon any
other person any rights or remedies;
20.7.3. may be executed in two or more
counterparts which together shall constitute a single
agreement;
20.7.4. shall inure to the benefit of, be
binding upon and enforceable against the heirs, legal
representatives, successors, transferees, and assigns of the
parties hereto; and
20.7.5. may be amended or terminated only by
mutual agreement of the parties hereto in writing.
20.8. Headings. The headings and table of
contents contained in this Agreement are for reference
purposes only and do not affect in any way the meaning or
interpretation of this Agreement.
20.9. Interpretation; No Presumption. All
parties acknowledge that this Agreement has been reviewed and
negotiated by all parties and their attorneys and other
representatives and, therefore, no presumption shall arise
favoring any party by virtue of the authorship of any of its
provisions.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the Effective Date.
SELLER:
Vernon Sawyer, Inc., a Louisiana
corporation
By:S/Vernon G. Sawyer
Its: President
SHAREHOLDERS:
S/ Vernon G.Sawyer
Vernon G. Sawyer, Individually
S/ Nancy Ann Marus Sawyer
Nancy Ann Marus Sawyer, Individually
PARENT:
Vernon Sawyer Transportation, Inc.,
a Louisiana Corporation
By:S/ Vernon G.Sawyer
Its: president
PURCHASER:
KLLM, Inc., a Texas
corporation
BY:S/ Steve Bevilaqua
President
<PAGE>
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
This First Amendment to Asset Purchase Agreement (the
"Agreement") is made and entered into this the 26th day of July,
1995, by and between VERNON SAWYER, INC., Tax Identification No.
72-1071773, a Louisiana corporation domiciled in Morehouse Parish,
Louisiana ("Seller"), represented herein by its duly authorized
President, Vernon G. Sawyer, VERNON SAWYER TRANSPORTATION, INC.,
Tax Identification No. 72-1007374, a Louisiana corporation
domiciled in Morehouse Parish, Louisiana ("Parent"), VERNON G.
SAWYER and NANCY ANN MARUS SAWYER, in their individual capacities,
individual residents of Morehouse Parish, Louisiana (hereafter,
Vernon G. Sawyer and Nancy Ann Marus Sawyer may be individually
referred to as "Shareholder" or jointly as "Shareholders") and
KLLM, INC., Tax Identification No. 64-0577750, a Texas corporation
domiciled in Rankin County, Mississippi ("Purchaser"), represented
herein by its duly authorized President, Steven K. Bevilaqua, who
declare and agree that:
Recitals. Seller, Parent, Shareholders and Purchaser
entered into that certain Asset Purchase Agreement effective May 1,
1995 (the "Asset Purchase Agreement"), pursuant to which Seller,
Parent and Shareholders agreed to sell and Purchaser agreed to
purchase substantially all of the operating assets and business of
Seller and Parent and related real estate owned by Shareholders.
Certain of the transactions which are the subject of the Asset
Purchase Agreement require the approval of various federal and
state regulatory agencies and the related approval process has
taken longer than the parties originally anticipated. Therefore,
Seller, Parent, Shareholders and Purchaser desire to amend the
Asset Purchase Agreement as set forth in this Agreement.
All capitalized terms used and not otherwise defined
herein (including, without limitation, the language amendatory to
the Asset Purchase Agreement contained herein) shall have the
respective meanings given such terms in the Asset Purchase
Agreement. References to sections herein shall refer to sections
of the Asset Purchase Agreement.
The Asset Purchase Agreement is amended by deleting the
definition of "Closing Date" found in Section 2.4 and by
substituting in its place the following definition:
"Closing Date" shall mean on or before August
8, 1995, or such other date and time as Seller
and Purchaser may agree. The Closing Date is
subject to extension as a result of any delays
attributable to receiving necessary approvals
or exemptions from the ICC or state agencies
having jurisdiction over the transactions
contemplated by the Asset Purchase Agreement.
The Asset Purchase Agreement is amended by deleting the
first sentence of Section 6.19.1 and by substituting in its place
the following:
Seller has in place on the date of this
Agreement 109 drivers.
The Asset Purchase Agreement is amended by deleting the
date "August 1, 1995" from Section 19.1 and by substituting in its
place the date "September 15, 1995".
The Asset Purchase Agreement, as herein amended, remains
in full force and effect in accordance with its terms and Seller,
Parent, Shareholders and Purchaser hereby ratify and confirm the
same.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first written above.
SELLER:
VERNON SAWYER, INC., a Louisiana
corporation
By:S/Vernon g. Sawyer
Its: President
PARENT:
VERNON SAWYER TRANSPORTATION, INC.,
a Louisiana Corporation
By:S/ Vernon G. Sawyer
Its: President
SHAREHOLDERS:
S/Vernon G. Sawyer
VERNON G. SAWYER, Individually
S/Nancy Ann Marus Sawyer
NANCY ANN MARUS SAWYER, Individually
PURCHASER:
KLLM, INC., a Texas corporation
BY:S/Steven K. Bevilaqua
STEVEN K. BEVILAQUA
Its: President
KLLM TRANSPORT SERVICES
1995 Annual Report
Company Profile
KLLM Transport Services, Inc., through its wholly-owned subsidiary,
KLLM, Inc., specializes in providing high-quality transportation services
in North America.
KLLM Inc.'s operating divisions haul both temperature-controlled and dry
commodities. The majority of the Company's revenues, approximately 70%, are in
the temperature-controlled sector. Protective service is provided on
commodities such as food, medical supplies and cosmetics. Service offerings
include over-the-road long haul, regional, and intermodal transportation.
The shares of KLLM Transport Services, Inc. trade on The Nasdaq Stock
Market (National Market) under the symbol KLLM.
Financial And Operating Highlights
<TABLE>
(In thousands, except per share and
operating data) 1995 1994
STATEMENT OF OPERATIONS DATA:
<S> <C> <C>
Operating revenue $239,685 $210,276
Operating income from continuing operations 6,513 14,301
Net earnings from continuing operations 518 5,774
Earnings per share from continuing operations 0.12 1.28
Weighted average shares outstanding 4,479 4,536
BALANCE SHEET DATA:
Total assets 164,248 $166,077
Long-term debt, less current maturities 59,594 66,531
Stockholders' equity 65,968 67,843
OPERATING DATA:
Operating ratio 97.3% 93.2%
Total miles travelled (000s) 175,967 161,584
Average miles per tractor 112,645 115,650
Average revenue per total mile 1.14 1.16
Equipment at year-end:
Company-operated tractors 1,485 1,290
Owner-operated tractors 291 242
Total tractors 1,776 1,532
Refrigerated trailers 2,150 2,115
Dry-van trailers 384 -----
Total trailers 2,534 2,115
Refrigerated rail containers 202 150
</TABLE>
<TABLE>
Selected Financial And Operating Data
(In thousands, except per
share and operating data) 1995 1994 1993 1992 1991
STATEMENTS OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Operating revenue $239,685 $210,276 $165,259 $143,451 $129,571
Operating expenses 233,172 195,975 152,503 131,655 120,707
------- ------- ------- ------- -------
Operating income from
continuing operations 6,513 14,301 12,756 11,796 8,864
Interest and other income 32 17 11 4 18
Interest expense (5,554) (5,014) (4,384) (4,521) (4,037)
------ ------- ------- ------- -------
Earnings from continuing
operations before income taxes 991 9,304 8,383 7,279 4,845
Income taxes 473 3,530 3,436 3,050 2,025
---- ----- ----- ----- -----
Net earnings from continuing
operations 518 5,774 4,947 4,229 2,820
Loss from operations of
discontinued division, net of
tax benefits (624) (580) (195) ------- -------
Loss on disposal of
discontinued division,
net of tax benefit (441) ------- -------- ------- -------
------ ------- ------ ------- -------
Net Earnings (Loss) $(547) $5,194 $4,752 $4,229 $ 2,820
====== ======= ====== ======= =======
Earnings (Loss) per share:
From continuing operations $ 0.12 $ 1.28 $ 1.14 $ 1.23 $ 0.82
From operations of
discontinued division (0.14) (0.13) (0.05) ----- -----
From disposal of discontinued
division (0.10) ----- ----- ----- -----
------- ----- ----- ----- -----
Net earnings (loss) per
common share $(0.12) $ 1.15 $ 1.09 $ 1.23 $ 0.82
======= ===== ====== ====== ======
Weighted average common shares
outstanding 4,479 4,536 4,357 3,449 3,432
====== ===== ===== ====== ======
</TABLE>
<TABLE>
BALANCE SHEET DATA (AT YEAR-END):
<S> <C> <C> <C> <C> <C>
Net property and
equipment $122,264 $126,756 $117,322 $98,638 $74,722
Total assets 164,248 166,077 150,094 123,142 96,595
Total liabilities 98,280 98,234 86,403 84,035 62,024
Long-term debt, less current
maturities 59,594 66,531 58,514 61,256 40,592
Stockholders' equity 65,968 67,843 63,691 39,107 34,571
OPERATING DATA:
Operating ratio 97.3% 93.2% 92.3% 91.8% 93.2%
Average number of
truckloads per week 3,176 2,871 2,420 2,001 1,790
Average miles per trip 1,065 1,082 1,087 1,228 1,253
Total miles travelled (000s) 175,967 161,584 136,777 130,206 116,624
Average revenue per
total mile $ 1.14 $ 1.16 $ 1.13 $ 1.10 $ 1.10
Empty mile percentage 11.58% 9.8% 10.3% 10.6% 9.6%
Equipment at year-end:
Company-operated
tractors 1,485 1,290 1,240 1,063 939
Owner-operated tractors 291 242 85 ----- -----
----- ----- ----- ----- -----
Total tractors 1,776 1,532 1,325 1,063 939
Refrigerated trailers 2,150 2,115 1,955 1,694 1,370
Dry-van trailers 384 ----- ----- ----- -----
----- ----- ----- ----- -----
Total trailers 2,534 2,115 1,955 1,694 1,370
Refrigerated rail containers 202 150 ----- ----- -------
Ratio of tractors to non-driver
employees at year-end 3.7 2.9 2.9 2.7 2.5
Miles per gallon of fuel 6.3 6.4 6.3 6.2 6.1
</TABLE>
<PAGE>
<TABLE>
Selected Quarterly Data (Unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In Thousands, except per share amounts)
- -------------------------------------------------------------------------------
1995
<S> <C> <C> <C> <C>
Operating revenue $53,423 $60,971 $63,158 $62,133
Operating income
from continuing
operations 2,352 2,747 697 717
Net earnings
(loss) from
continuing
operations 619 810 (474) (437)
Net earnings (loss) 430 681 (515) (1,143)
Earnings (Loss)
per share $ 0.10 $ 0.15 $ (0.11) $(0.26)
</TABLE>
<TABLE>
1994
<S> <C> <C> <C> <C>
Operating revenue $46,543 $56,701 $ 55,413 $51,619
Operating income
from continuing
operations 1,965 5,087 4,082 3,167
Net earnings from
continuing
operations 521 2,362 1,747 1,144
Net earnings 337 2,167 1,568 1,122
Earnings per share $ 0.07 $ 0.48 $ 0.35 $ 0.25
</TABLE>
Market And Dividend Information
The Company's common stock is traded on The Nasdaq Stock Market (National
Market) under the symbol KLLM. The number of stockholders, including
beneficial owners holding shares in nominee or "street" name, as of February
21,1996, was approximately 1,665. The Company has never declared or paid a
cash dividend on its common stock. The current policy of the Board of
Directors is to continue to retain earnings to finance the continued growth
of the Company's business.
The following table shows quarterly high and low prices for the common stock
for each quarter of 1995 and 1994:
<TABLE>
<S> <C> <C>
FISCAL YEAR 1995 High Low
- ----------------------------------------------------------------------------
First Quarter $16 $12.75
econd Quarter $14.5 $12
Third Quarter $13.25 $ 9
Fourth Quarter $11.5 $ 9.75
FISCAL YEAR 1994 High Low
- ----------------------------------------------------------------------------
First Quarter $18.75 $14.25
Second Quarter $17 $14
Third Quarter $20 $15.5
Fourth Quarter $20 $14
</TABLE>
<PAGE>
Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
LIQUIDITY AND CAPITAL RESOURCES
KLLM Transport Services, Inc.'s primary sources of liquidity are its
cash flow from operations and existing credit agreements of KLLM, Inc., a
wholly-owned subsidiary. During each of the years ended December 29, 1995
and December 30, 1994, the Company generated $23.9 million in net cash
provided from operating activities.
Capital resources required by the Company during 1995 were much less
significant than in prior years, primarily because KLLM, Inc., in January
1995, entered into an operating lease for the majority of its revenue
equipment needs for 1995. The payment terms of the operating lease were more
favorable than could have been obtained with financing or capital leasing.
In 1995, the Company-operated fleet increased by 195 tractors, 419
trailers, and 52 rail containers, net of replacements. Of the net increase
in tractors, 400 were added under the operating lease noted above. Capital
expenditures, net of proceeds from trade-ins during 1995, were approximately
$8,724,000. Net capital expenditures in 1994 were $29,586,000. Net capital
expenditures in 1996 are expected to be approximately $25,921,000 as the
Company returns to it's traditional method of investing in maintaining a
modern fleet.
During late 1994, the Company began an internal restructuring of its
operating divisions into separate operating units in order to achieve greater
accountability within those units. In 1995, the Company continued to
fine-tune the new structure to meet the changing demands of the marketplace.
The Company has continued growth of the less capital intensive owner-operator
division and contract logistics operations. Both of these operating units
have served as a favorable medium for increasing revenues with minimal capital
outlays, while maintaining positive earnings. Due to the weakened economic
conditions in 1995, the intermodal, or rail services, division was forced to
refocus on securing annual, consistent intermodal market share. While this
operating unit hasn't yet achieved profitability, the Company feels there is
a viable market for intermodal temperature-controlled services. As such,
development of the intermodal customer base is ongoing, and, at the same time,
the Company is guardedly evaluating continued participation in intermodal
operations. At the end of 1995, the Company discontinued that segment of the
international operations aimed at maritime containerized shipments. This
division proved to be unprofitable and difficult to manage; thus, in an
effort to minimize exposure on future earnings, the Company recognized a
one-time after-tax charge to 1995 earnings of $441,000, or $0.10 per share,
on the disposal of that unit. The traditional over-the-road temperature-
controlled freight operations have also made adjustments in response to
changing market conditions, including curtailed growth of the fleet.
Through a variety of measures invoked during 1995, the Company has
refocused attention on improving utilization and profitability in the
core trucking business. The more notable measures instituted in the
restructuring include consolidation of certain driver terminals, reducing
the number from thirteen at the end of 1994 to ten at the end of 1995,
and reduction in the nondriver work force of approximately 85 employees
which, on an annualized basis, will cut total annual payroll costs
by approximately $2.6 million.
In addition to fine-tuning the existing structure, effective
May 1, 1995, the Company's wholly-owned subsidiary, KLLM, Inc., acquired
substantially all of the assets of Vernon Sawyer, Inc., a regional
dry-van truckload carrier based in Bastrop, Louisiana. The assets
acquired include 126 tractors and 288 dry-van trailers, which are a
part of the overall increase in fleet size noted above. The acquisition
was financed with capital resources from operating activities in the
amount of $6,758,000 and the assumption of revenue equipment debt in the
amount of $3,795,000 for a total cost of $10,553,000.
In order to more appropriately match the terms of its revolver debt
facility with the nature of the Company's capital investments and the
expansion of divisional operations, on April 7, 1994, KLLM restructured its
revolving line of credit. The Company has a $50,000,000 unsecured
revolving line of credit with a syndication of banks. Borrowings of
$35,000,000 were outstanding at year-end. At December 29, 1995, the
weighted average interest rate on the revolving line of credit was
6.32%. Under the terms of the agreement, borrowings bear interest at
(i) the higher of prime rate or a rate based upon the Federal Funds
Effective Rate, (ii) a rate based upon the Eurodollar rates, or (iii) an
absolute interest rate as determined by each lender in the syndication
under a competitive bid process at the Company's option. Facilities
fees from 1/4% to 3/8% per annum are charged on the unused portion of
this line.
The Company entered into an interest rate swap arrangement with
a bank that effectively established a fixed interest rate of 5.23% for
two and one-half years beginning April 1, 1993 on approximately 14%, or
$5,000,000, of the Company's outstanding revolving line of credit at
December 30, 1994. The agreement expired September 29, 1995. At
December 30, 1994, the weighted average interest rate on the remaining
$31,000,000 of the revolving line of credit was 6.52%.
Working capital needs have generally been met from net cash provided
from operating activities. On April 5, 1994, in conjunction with
restructuring the revolver debt facility, the working capital line of
credit was renegotiated. The Company has $4,150,000 in unsecured working
capital lines of credit with a bank, of which $651,000 was used at
December 29, 1995, and $4,000,000 was used at December 30, 1994. Interest
is at a rate based upon the Eurodollar rates with facility fees at 1/4%
per annum on the unused portion of the line.
At December 29, 1995, the aggregate principal amount of the Company's
outstanding long-term indebtedness was approximately $66.0 million. Of
this total outstanding, $4.0 million was in the form of 10.2% notes due
July 15, 1998, $20.0 million in the form of 9.11% senior notes due
June 15, 2002, $35.0 million consisted of the revolving line of credit due
April 7, 1997, and $7.0 million principal was relative to capital leases
with varying maturities.
The required principal payments on all indebtedness are anticipated
to be $5.9 million in 1996, $39.8 million in 1997, $4.9 million in 1998,
$6.3 million in 1999, $2.9 million in 2000, and $5.7 million thereafter.
In March 1993, the Company completed an offering to the public of
1,150,000 shares of the Company's common stock, 100,000 shares of which
were sold by stockholders. The net proceeds of the offering, approximately
$19,551,000 were used to reduce the Company's borrowings under the revolving
line of credit, various capital leases and a mortgage note.
The Company anticipates that its existing credit facilities along with
cash flow from operations will be sufficient to fund operating expenses,
capital expenditures, and debt service.
RESULTS OF OPERATIONS
The following table sets forth the percentage of revenue and expense
items to operating revenue for the periods indicated.
<TABLE>
Percentage of
Operating Revenue
--------------------
<S> <C> <C> <C>
For the Year 1995 1994 1993
- ------------------------------------------------------------------------
Operating revenue 100.0% 100.0% 100.0%
Operating expenses
Salaries, wages and fringe benefits 29.1 28.8 30.6
Operating supplies and expenses 27.7 28.9 34.4
Insurance, claims, taxes and licenses 4.9 4.7 5.4
Depreciation and amortization 9.6 10.0 11.2
Purchased transportation and equipment
rent 22.3 16.7 6.4
Other 4.4 4.5 4.8
Gain on sale of revenue equipment (.7) (.4) (.5)
------ ----- -----
Total operating expenses 97.3 93.2 92.3
------ ----- -----
Operating income from continuing operations 2.7 6.8 7.7
Interest expense 2.3 2.4 2.6
----- ---- -----
Earnings from continuing operations
before income taxes 0.4 4.4 5.1
Income taxes 0.2 1.6 2.1
------ ----- -----
Net earnings from continuing operations 0.2% 2.8% 3.0%
====== ====== =====
</TABLE>
Year Ended December 29, 1995 Compared to Year Ended December 29, 1994
Operating revenue for the year ended December 29, 1995 increased by
$29,409,000 or 14% when compared to the year ended December 30, 1994.
The net revenue increase consisted of a 5% increase in the Company's
traditional over-the-road temperature-controlled freight services, of
which a 7% increase came from the owner-operator division, 1% decrease
from rail services, 4% increase from transportation brokerage services,
and 6% increase from the operation of the dry-van over-the-road truckload
services.
The basis for the net revenue increase consists primarily of a 2%
increase in available Company-owned equipment, 6% increase in available
owner-operated equipment, and a 6% increase from the new dry-van operation.
The average revenue per mile decreased $0.02 to $1.14 for the year ended
December 29, 1995 when compared to the year ended December 30, 1994.
The operating ratio increased from 93.2% to 97.3% for the year ended
December 29, 1995 when compared to the year ended December 30, 1994. The
operating ratio for the traditional over-the-road truckload services
increased from 92.5% to 97.5% primarily due to increases in certain
variable and fixed operational costs: driver pay increased approximately
$2.6 million, liability and workers' compensation insurance provision
increased approximately $1.0 million, fuel increased approximately $1.2
million, and revenue equipment rent increased approximately $0.8 million.
These increased costs accounted for 1.9%, 0.8%, 0.9% and 0.6%, respectively,
of the increase in the operating ratio. Additionally, the increased
operating ratio resulted from a significant increase in purchased
transportation and equipment rental costs associated with the newer
operations. As previously noted, these divisions are low margin which
increases the operating ratio overall; however, they are not as capital
intensive as the traditional over-the-road freight operation. At
December 29, 1995, the Company had 3.7 tractors per nondriver employee
which was higher than the prior year ratio of 2.9, and consistent with the
previously noted reduction in the nondriver work force during 1995.
Interest expense from continuing operations for the year ended
December 29, 1995 was $5,554,000, with an additional $303,000 from
discontinued operations, for a total of $5,857,000. It was
approximately $748,000 greater than the year ended December 30, 1994.
Interest expense increased due to a higher amount of outstanding debt on
the revolving line of credit throughout the first 11 months of the year
ended December 29, 1995 than was outstanding the year before and higher
weighted average interest rate on the revolving line of credit throughout
the majority of the year ended December 29, 1995 as compared to the
previous year.
The provision for income taxes for the year ended December 29, 1995
was $473,000 on continuing operations, based on a combined effective
federal and state tax rate of 48%. This reflects an increase in the
effective tax rate from 38% for the year ended December 30, 1994 as
a result of an increase in nondeductible expenses as a percentage of
pretax income.
As a result of the foregoing, net earnings from continuing
operations decreased $5,256,000 or 91% for the year ended
December 29, 1995 when compared to the year ended December 30, 1994.
Year Ended December 30, 1994 Compared to Year Ended January 2, 1994
Operating revenue for the year ended December 30, 1994 increased
by $45,017,000, or 27%, when compared to the year ended January 2, 1994.
The net revenue increase consisted of 19% from the Company's traditional
over-the-road temperature-controlled freight services, of which an 8%
increase came from the owner-operator division, 6% from rail services,
and 2% from transportation brokerage services.
Excluding the newer divisions, the basis for the net revenue increase
consisted of 8% from an increase in available Company-owned equipment,
7% from an increase in available owner-operated equipment, 2% from
improvements in freight rates, and 2% from an increase in the average
miles per week per Company-owned tractor. The average revenue per mile
increased $0.03 to $1.16 for the year ended December 30, 1994 when
compared to the year ended January 2, 1994.
The operating ratio increased from 92.3% to 93.2% for the year ended
December 30, 1994 when compared to the year ended January 2, 1994.
The operating ratio for the traditional over-the-road truckload services
remained steady at 92.5% even though operating expenses increased
approximately 0.3% due to a change in the treatment of certain
previously non-deductible reimbursable expenses to the drivers.
The impact of this change was to recognize these costs as wages to the
drivers, along with the associated Company payroll taxes; thus resulting
in an increase in operating expenses, additionally allowing for a
reduction in the effective tax rate due to the change in the status of
these costs as a deductible expense for tax purposes. Overall, the
increased operating ratio resulted from a significant increase in purchased
transportation and equipment rental costs associated with the newer
operations. As previously noted, these divisions are low margin which
increases the operating ratio overall; however, they are not
as capital intensive as the traditional over-the-road freight operation.
At December 30, 1994, the Company had 2.9 tractors per nondriver employee
which was consistent with the prior year.
Interest expense from continuing operations for the year ended
December 30, 1994 was $5,014,000, with an additional $95,000 from
discontinued operations, for a total of $5,109,000. It was approximately
$725,000 greater than the year ended January 2, 1994. Interest expense
increased due to a higher amount of outstanding debt during
the year ended December 30, 1994 than was outstanding the year before.
The provision for income taxes for the year ended December 30, 1994
was $3,530,000 on continuing operations, based on a combined effective
federal and state tax rate of 38%. This reflects a decrease in the
effective tax rate from 41% for the year ended January 2, 1994 as a
result of a decrease in nondeductible expenses as a percentage of pretax
income as previously noted.
As a result of the foregoing, net earnings from continuing operations
increased by $827,000 or 17% for the year ended December 30, 1994 when
compared to the year ended January 2, 1994.
SEASONALITY
In the transportation industry, results of operations generally show
a seasonal pattern because customers reduce shipments during and after the
winter holiday season with its attendant weather variations. The Company's
operating expenses have historically been higher in the winter months
primarily due to decreased fuel efficiency and increased maintenance costs
in colder weather.
Consolidated Balance Sheets
<TABLE>
<S> <C> <C>
At Year-End 1995 1994
- ----------------------------------------------------------------------------
ASSETS (In thousands)
CURRENT ASSETS
Cash and cash equivalents $0 $ 1,397
Accounts receivable:
Customers (net of allowances of
$479,000 in 1995 and $147,000
in 1994) 26,709 23,325
Other 1,078 738
------ ------
27,787 24,063
Inventories--at cost 1,315 1,191
Prepaid expenses:
Tires 4,096 5,314
Taxes, licenses and permits 3,254 2,812
Other 555 952
------- -------
7,905 9,078
Deferred income taxes---Note C 1,940 1,450
------- -------
TOTAL CURRENT ASSETS 38,947 37,179
PROPERTY AND EQUIPMENT---NOTE B
Revenue equipment and capital leases 158,710 162,677
Land, structures and improvements 12,664 11,123
Other equipment 8,194 8,947
------- -------
179,568 182,747
Accumulated depreciation (57,304) (55,991)
------- -------
122,264 126,756
------- -------
INTANGIBLE ASSETS,
Net of accumulated amortization of
$407,600 in 1995 and
$120,000 in 1994---Note D 2,626 2,142
OTHER ASSETS 411 ------
TOTAL ASSETS $164,248 $166,077
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks---Note B $2,758 $4,000
Accounts payable 1,247 1,356
Accrued expenses---Note I 11,829 7,314
Current maturities of long-term debt
and capital leases 5,937 2,483
------- ------
TOTAL CURRENT LIABILITIES 21,771 15,153
LONG-TERM DEBT AND CAPITAL LEASES,
Less current maturities---Note B 59,594 66,531
DEFERRED INCOME TAXES---Note C 16,915 16,550
STOCKHOLDERS' EQUITY--Notes E and G
Preferred stock, $0.01 par value;
authorized shares---5,000,000; none issued
Common stock, $1 par value;
authorized shares---10,000,000;
issued shares---4,552,219 in 1995
and 1994; outstanding shares---
4,358,653 in 1995 and 4,481,251 in 1994 4,552 4,552
Additional paid-in capital 32,815 33,121
Retained earnings 30,687 31,234
------- -------
68,054 68,907
Less Common Stock in Treasury, 193,566
shares in 1995 and 70,968 shares in 1994,
at cost (2,086) (1,064)
------- -------
TOTAL STOCKHOLDERS' EQUITY 65,968 67,843
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $164,248 $166,077
======= =========
</TABLE>
See accompanying notes.
Consolidated Statements of Operations
<TABLE>
<S> <C> <C> <C>
For The Year (In thousands, except
share and per share amounts) 1995 1994 1993
- ---------------------------------------------------------------------------
OPERATING REVENUE $239,685 $210,27 $165,259
OPERATING EXPENSES:
Salaries, wages and fringe benefits 69,706 60,572 50,574
Operating supplies and expenses 66,414 60,867 56,770
Insurance, claims, taxes and licenses 11,773 9,960 8,977
Depreciation and amortization---
Note A 23,017 20,962 18,514
Purchased transportation and
equipment rent 53,370 35,073 10,557
Other 10,481 9,357 7,864
Gain on sale of revenue equipment (1,589) (816) (753)
------- -------- -------
TOTAL OPERATING EXPENSES 233,172 195,975 152,503
-------- -------- --------
OPERATING INCOME FROM
CONTINUING OPERATIONS 6,513 14,301 12,756
OTHER INCOME AND EXPENSES:
Interest and other income 32 17 11
Interest expense (5,554) (5,014) (4,384)
--------- -------- -------
(5,522) (4,997) (4,373)
--------- -------- -------
EARNINGS FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 991 9,304 8,383
Income taxes---Note C 473 3,530 3,436
--------- -------- -------
NET EARNINGS FROM
CONTINUING OPERATIONS 518 5,774 4,947
LOSS FROM OPERATIONS OF
DISCONTINUED DIVISION
(Net of tax benefits
of $351, $355 and $136
respectively)--Note H (624) (580) (195)
LOSS ON DISPOSAL OF
DISCONTINUED DIVISION
(Net of tax benefit
of $247)--Note H (441) 0 0
---------- --------- -------
NET EARNINGS (LOSS) ($547) $5,194 $4,752
========== ========= =========
EARNINGS (LOSS) PER SHARE:
From continuing operations $0.12 $1.28 $1.14
From operations of
discontinued division (0.14) (0.13) (0.05)
From disposal of discontinued
division (0.10) 0.00 0.00
--------- --------- -------
NET EARNINGS (LOSS) PER COMMON
SHARE ($0.12) $1.15 $1.09
========== ========= =======
WEIGHTED AVERAGE NUMBER of COMMON
SHARES OUTSTANDING 4,478,827 4,536,144 4,357,200
========== ========== =========
</TABLE>
See accompanying notes.
Consolidated Statements of Stockholders' Equity
<TABLE>
Common Stock Additional Total
-------------
Treasury Stock Paid-in Retained Stock
-------------- holders'
(In thousands) Shares Amount Shares Amount Capital Earnings Equity
- -------------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 3,
1993 3,468 $3,468 $14,351 $21,288 $39,107
Common stock
issued upon
exercise
of stock options 33 33 248 281
Offering of
common stock---
Note E 1,050 1,050 18,501 19,551
Net earnings 4,752 4,752
---------------------------------------------------------------
BALANCE AT
JANUARY 2, 1994 4,551 4,551 33,100 26,040 63,691
Purchase of
treasury shares,
at cost (78) 1,158) (1,158)
Sale of common
stock---Note G 7 94 9 103
Common stock
issued upon exercise
of stock options 1 1 12 13
Net earnings 5,194 5,194
---------------------------------------------------------------
BALANCE AT
DECEMBER 30,
1994 4,552 4,552 (71)(1,064) 33,121 31,234 67,843
Purchase of
treasury shares,
at cost (172)(1,763) (1,763)
Sale of
common stock
- ---Note G 5 74 (22) 52
Common stock
issued upon
exercise
of stock options 44 667 (284) 383
Net loss (547) (547)
----------------------------------------------------------------
BALANCE AT
DECEMBER 29,
1995 4,552 $4,552 (194)($2,086) $32,815 $30,687 $65,968
================================================================
</TABLE>
See accompanying notes.
<TABLE>
Consolidated Statements of Cash Flows
<S> <C> <C> <C>
For The Year (In thousands) 1995 1994 1993
- -----------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $248,165 $215,150 $160,169
Interest and other income received 59 17 11
Cash paid to suppliers and employees (217,523) (185,072) (135,349)
Interest paid (5,999) (5,250) (4,401)
Income taxes refunded 87 391 41
Income taxes paid (856) (1,349) (1,640)
--------- --------- ------
NET CASH PROVIDED FROM
OPERATING ACTIVITIES 23,933 23,887 18,831
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of Vernon Sawyer
Assets---Note D (6,758)
Purchase of Fresh International
Transportation, Inc.---Note D (2,566)
Purchases of property and equipment (19,890) (36,108) (41,807)
Proceeds from disposition of
equipment 11,166 6,522 5,184
-------- ------- ------
NET CASH FLOWS USED IN
INVESTING ACTIVITIES (15,482) (32,152) (36,623)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from sale of common stock 52 103 19,551
Proceeds from exercise of
stock options 383 13 281
Purchase of Common Stock for
Treasury (1,763) (1,158)
Net increase (decrease) in
borrowing under revolving
line of credit (1,000) 10,500 1,500
Repayment of long-term debt
and capital leases (4,171) (2,665) (4,781)
Net change in borrowing under
working capital line of credit (3,349) 2,000 2,000
----------- ----------- --------
NET CASH FLOWS (USED IN) PROVIDED
BY FINANCING ACTIVITIES (9,848) 8,793 18,551
----------- ------------ --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,397) 528 759
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 1,397 869 110
----------- ------------ --------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $0 $1,397 $869
=========== ============= ========
RECONCILIATION OF NET EARNINGS
(LOSS) TO NET CASH
PROVIDED FROM OPERATIONS
Net income (loss) ($547) $5,194 $4,752
Noncash expenses and gain
included in income:
Depreciation and amortization 23,141 20,962 18,514
Deferred income taxes (125) 2,850 2,460
Book value of equipment written
off in accidents 375 241 178
(Increase) in accounts receivable 2,287) (1,995) (5,947)
(Increase) decrease in inventory
and prepaid expenses 1,069 (1,375) (1,962)
(Increase) in other assets (411) ----- -----
Increase (decrease) in accounts
payable and accrued expenses 4,382 (1,174) 1,589
Gain on sale of equipment (1,664) (816) (753)
---------- ---------- --------
NET CASH PROVIDED FROM OPERATIONS $23,933 $23,887 $18,831
========== =========== ========
</TABLE>
See accompanying notes.
<PAGE>
Notes to Consolidated Financial Statements
NOTE A---SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business. The Company, through its wholly-owned subsidiary, KLLM, Inc.,
provides transportation services in North America for both temperature-
controlled and dry commodities. Services provided include over-the-road long
haul, regional, and intermodal transportation. The demand for transportation
services is affected by general economic conditions and is subject to seasonal
demand for certain commodities and severe weather conditions.
Principles of Consolidation. The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation. Certain reclassifications have been made to conform with current
year presentation.
Cash Equivalents. Cash equivalents are stated at cost which approximates
market.
Tires in Service. The cost of original equipment and replacement tires
placed in service is capitalized and amortized over the estimated useful life
of the tires. The cost of recapping tires is expensed as incurred.
Property and Equipment. Property and equipment is stated at cost.
Depreciation of property and equipment is provided by the straight-line method
over the estimated useful lives. Gains and losses on sales or exchanges of
property and equipment are included in operations in the year of disposition.
The Company changed the estimated salvage value of certain revenue equipment
as of January 4, 1993 to reflect increases in the prices for used equipment.
The change resulted in an increase to the net loss of $281,000, or $0.06 per
share, for the year ended December 29, 1995, resulting from a decrease
to the gain on sale of revenue equipment partially offset by lower
depreciation expense, and a decrease in depreciation expense of $716,000
and an increase in net earnings of $415,000, or $0.09 per share, for each
of the years ended December 30, 1994 and January 2, 1994.
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.
Revenue Recognition. Revenue is recognized on the date the freight is
received for shipment. Estimated costs of delivery of shipments in transit
are accrued. The Company's method of revenue recognition is not materially
different from the method of recognizing revenues based on relative transit
time incurred which is considered an acceptable method of accounting for
freight-in-transit by the Emerging Issues Task Force of the Financial
Accounting Standards Board.
Earnings Per Common Share. Earnings per common share is based on the
weighted average number of common shares outstanding during each year.
Fiscal Year. The Company's fiscal year-end is the Friday nearest D
ecember 31, which was December 29, 1995 and December 30, 1994 for the past
two fiscal year ends. Prior to this, the Company's fiscal year-end was
the Sunday nearest December 31, which was January 2, 1994 for the prior
year. The change in fiscal year-end cut-off did not have a significant
effect on the Company's results of operations or financial condition for
fiscal years ended December 29, 1995 and December 30, 1994.
Impact of Recently Issued Accounting Standards. In March 1995, the
FASB issued Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, which requires impairment
losses to be recorded on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount.
Statement 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. The Company will adopt Statement 121 in the first
quarter of 1996 and, based on current circumstances, does not believe the
effect of adoption will be material.
Notes To Consolidated Financial Statements (Continued)
<TABLE>
NOTE B---CREDIT FACILITIES, DEBT AND CAPITAL LEASES
<S> <C> <C>
Long-term debt and capital leases consisted
of the following: 1995 1994
- -------------------------------------------------------------------------
(In thousands)
9.11% unsecured notes payable to
insurance companies with semi-annual
interest payments and annual principal
payments of $2,857,000 from 1996
through 2002 $20,000 $20,000
10.2% unsecured notes payable to
insurance company with semi-annual
interest payments and annual principal
payments of $1,250,000 through July 1998 3,750 5,000
Revolving line of credit with banks,
with floating interest(6.32% weighted average rate at
December 29, 1995) 35,000 36,000
Capital lease obligations with interest
rates from 6.2% to 6.68%
and monthly payments of $144,000 through
June 1999 6,781 8,014
------------- ----------
65,531 69,014
Less current maturities (5,937) (2,483)
------------- ----------
$59,594 $66,531
============= ==========
</TABLE>
Capital lease obligations represent leased revenue equipment
capitalized for $10,938,000 with accumulated amortization of
ation of
$4,443,000 and $3,228,000 at year-end 1995 and 1994, respectively.
The Company has a $50,000,000 unsecured revolving line of credit.
In accordance with the agreement, the Company has agreed to limit assets
pledged on any other borrowing. At December 29, 1995, $15,000,000 was
available to the Company under the revolving line of credit. Under the
terms of the agreement, borrowings bear interest at (i) the higher
of prime rate or a rate based upon the Federal Funds Effective Rate,
(ii) a rate based upon the Eurodollar rates, or (iii) an absolute interest
rate as determined by each lender under a competitive bid process at the
Company's option. Facilities fees from 1/4% to 3/8% per annum are charged
on the unused portion of this line.
The aggregate annual maturities of long-term debt and capital leases
at December 29, 1995 are as follows:
<TABLE>
<S> <C> <C> <C>
Long-term Capital
(In thousands) Debt Leases Total
- --------------------------------------------------------------------------
1996 $ 4,107 $ 2,204 $ 6,311
1997 39,107 1,045 40,152
1998 4,107 1,045 5,152
1999 2,857 3,498 6,355
2000 2,857 ------- 2,857
Thereafter 5,715 ------- 5,715
------------ -------- ------
58,750 7,792 66,542
Less amount
representing interest ------- (1,011) (1,011)
---------- ----------- -------
$ 58,750 $ 6,781 $65,531
========== =========== ========
</TABLE>
The Company also has $4,150,000 in unsecured working capital lines of
credit, of which $651,000 was used at December 29, 1995. Interest is at a
rate based upon London Interbank Offered Rate (LIBOR) on borrowings on the
working capital lines with facility fees at 1/4% per annum on the unused
portion of the line.
Under the terms of the lines of credit and notes payable agreements,
the Company agreed to maintain minimum levels of consolidated tangible net
worth and cash flows, to limit additional borrowing based on a debt-to-
consolidated tangible net worth ratio, and to restrict assets that can be
pledged on any other borrowings. The agreements also establish
limits on dividends, stock repurchases, and new investments. The Company is
in compliance with these provisions at year-end 1995 and 1994, as amended
subsequent to year end December 29, 1995.
Notes To Consolidated Financial Statements (Continued)
NOTE C---INCOME TAXES
The Company adopted the Financial Accounting Standards Board Statement
No. 109, "Accounting for Income Taxes" effective January 1, 1993. The
adoption of Statement 109 had no material effect on the Company's accounting
for income taxes. Prior to the adoption of Statement 109, income tax expense
and the classification of deferred income taxes were determined using the
method prescribed by Statement 96, which is superseded by Statement 109.
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.
The components of deferred tax assets and liabilities are as follows:
<TABLE>
<S> <C> <C>
(In thousands) 1995 1994
- --------------------------------------------------------------------------
Deferred Tax Assets:
Allowance for doubtful accounts $ 173 $ 57
Accrued expenses 1,767 1,393
------- ------
$1,940 $1,450
======= =======
Deferred Tax Liabilities:
Property and equipment $19,305 $17,465
Intangibles (40) -----
Net Operating Loss Carryforward (1,414) -----
Alternative minimum tax carry forward (936) (915)
--------- --------
$16,915 $16,550
========= ========
</TABLE>
<TABLE>
Income tax expense (benefit) consist of the following:
<S> <C> <C> <C>
(In thousands) 1995 1994 1993
- -----------------------------------------------------------------------
Current:
Federal $ ---- $ 230 $ 550
State ---- 95 290
-------- ------- --------
---- 325 840
Deferred:
Federal $ (115) 2,600 2,150
State (10) 250 310
-------- ------- --------
(125) 2,850 2,460
Total income tax
expense (benefit) $ (125) $3,175 $3,300
Less: Income tax benefit
allocated to discontinued
operations (351) (355) (136)
Income tax benefit
allocated
to loss on disposal of
discontinued operations (247) ----- -----
-------- -------- --------
Income Tax Expense
attributable
to continuing operations $ 473 $3,530 $ 3,436
========= ========= ========
</TABLE>
<TABLE>
The reconciliation of income tax computed at the federal statutory tax
rate to income tax expense is as follows:
<S> <C> <C> <C>
(In thousands) 1995 1994 1993
- -----------------------------------------------------------------------------
Statutory federal income
tax rate $ (228) $ 2,845 $ 2,738
Nondeductible driver related
expenses ------ ----- 294
State income taxes, net (7) 232 396
Other 110 98 (128)
------ ------ --------
$ (125) $ 3,175 $ 3,300
========= ======== =========
</TABLE>
The Company has a net operating loss carryforward for income tax purposes
of approximately $3,725,000, which expires in the year 2010.
Notes to Consolidated Financial Statements (Continued)
NOTE D---ACQUISITIONS
Effective May 1, 1995, the Company acquired substantially all of the
assets of Vernon Sawyer, Inc., a regional dry-van truckload carrier based
in Bastrop, Louisiana. Results from operations of the Company include
operations of the net assets acquired since May 1, 1995. Acquisition cost
includes $772,000 of intangibles, a three year non-compete agreement. The
non-compete agreement is being amortized by the straight-line method over
the life of the agreement.
Pro forma unaudited revenues, net income (loss) and net income (loss)
per share for the years ended December 29, 1995 and December 30, 1994,
assuming the purchase of substantially all of the assets of Vernon Sawyer,
Inc. had occurred on January 3, 1994, would have been $245,193,000,
($406,000), and ($0.09), and $226,094,000, $5,355,000, and $1.18,
respectively.
Effective March 1, 1994, the Company acquired all of the outstanding
stock of Fresh International Transportation, Inc., a company which provides
temperature controlled transportation via double-stack containers on railroads.
Results from, operations of the Company include operations of Fresh
International Transportation, Inc. since March 1, 1994. The excess
purchase price over the fair value of the assets acquired is classified
as goodwill and is included in intangibles in the accompanying balance sheet.
Goodwill is being amortized by the straight-line method over fifteen years.
Prior operations of Fresh International Transportation, Inc. are immaterial
to the Company's revenues, net earnings and earnings per sha3.
NOTE E---OFFERING OF COMMON STOCK
In March 1993, the Company completed an offering of 1,150,000 shares of
the Company's common stock, 100,000 shares of which were sold by stockholders,
with net proceeds to the Company of approximately $19,551,000. Proceeds from
the offering were used to reduce the Company's borrowing under the revolving
line of credit, capital leases and a mortgage note.
NOTE F---CONCENTRATIONS OF CREDIT RISK
The Company had one customer which accounted for operating revenues of
$23,311,000 in 1995, $29,353,000 in 1994, and $24,915,000 in 1993.
Trade accounts receivable are the principal financial instruments that
potentially subject the Company to significant concentrations of credit risk.
The Company performs periodic credit evaluations of its customers and credit
losses have been insignificant and within management's expectations.
NOTE G---EMPLOYEE BENEFIT PLANS
The Company sponsors a defined contribution plan covering substantially
all of its employees. Contributions to the plan are 200% of the employee
contribution up to 4% of each covered employee's salary. Contributions under
the plan approximated $653,000, $486,000, and $345,000 in 1995, 1994, and 1993,
respectively.
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly,
recognizes no compensation expense for the stock options granted.
Notes to Consolidated Financial Statements (Continued)
Under the Company's Incentive Stock Option Plan 533,333 shares of Common
Stock have been reserved for grant to key employees and directors. Options to
purchase an aggregate of 332,000 shares at prices ranging from $7.125 to
$21.00 per share are outstanding at December 29, 1995. At December 29, 1995,
options for 203,000 shares were exercisable.
In April 1987, the stockholders approved an employee stock purchase plan
reserving 133,333 shares of Common Stock for the plan. Substantially all
employees are eligible to participate and may subscribe for 10 to 300 shares
each. During 1995, 4,902 shares were purchased and in 1994, 6,532 shares
were issued pursuant to the plan. Subsequent to December 29, 1995, an
additional 17,489 shares have been subscribed for by employees.
NOTE H---DISCONTINUED OPERATIONS
The Company's management reached the decision to discontinue its
international division which primarily provided maritime transportation
services. Cessation of operations began on November 30, 1995, and are
expected to be completed by June 30, 1996, after certain contractual
obligations are completed.
Sales of the international division were $10,651,000, $6,869,000,
and $222,000 in 1995, 1994, and 1993, respectively. The loss on disposal
of discontinued operations includes approximately $62,000 (net of $35,000
tax benefit) of operational losses from November 30, 1995 through December
29, 1995. No additional loss from operations of the discontinued division
through the disposal date are anticipated by the Company.
Interest expense of $303,000, $95,000, and $0 was allocated to
discontinued operations in 1995, 1994 and 1993, respectively, based on the
relative net assets of the discontinued operations compared to total net
assets.
At December 29, 1995, the assets of the division consisted
primarily of trade accounts receivable of $1,658,000 and
liabilities of $1,010,000, which include estimated costs to close
the division.
NOTE I---COMMITMENTS AND CONTINGENCIES
The Company self-insures for losses related to liability and
workers' compensation claims with excess coverage by underwriters on a per
incident basis. Accrued expenses include $3,827,000 at December 29, 1995
and $2,640,000 at December 30, 1994 applicable to claims payable.
The ultimate cost for outstanding claims may vary significantly from
current estimates.
The Company leases certain revenue equipment and data processing
equipment under operating leases that expire over the next six years.
The leases require the Company to pay the maintenance, insurance, taxes
and other expenses in addition to the minimum monthly rentals.
Future minimum payments under the leases at December 29, 1995 are $7,590,000
in 1996, $7,356,000 in 1997, $6,601,000 in 1998, $4,348,000 in 1999, and
$952,000 in 2000. Rental expense applicable to noncancelable operating
leases totaled $7,042,000 in 1995, $2,769,000 in 1994, and $2,288,000 in 1993.
The Company has entered into heating oil (diesel fuel) swap agreements
in order to hedge its exposure to price fluctuations on approximately 12% of
its 1996 anticipated fuel requirements and less than 1% of its 1997
anticipated fuel requirements. Gains and losses on hedging contracts are
recognized in operating expenses as part of the fuel cost over the
hedge period. Also, the Company establishes prices for a portion of its
anticipated fuel purchases over specified periods of time through various
fuel purchase agreements.
The Company is also involved in various claims and routine litigation
incidental to its business. Management is of the opinion that the outcome
of these other matters will not have a material adverse effect on the
consolidated financial position or operations of the Company.
Report of Independent Auditors
The Board of Directors and Stockholders
KLLM Transport Services, Inc.
We have audited the accompanying consolidated balance sheets of KLLM
Transport Services, Inc. and subsidiaries as of December 29, 1995 and December
30, 1994, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended December
29, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of KLLM Transport
Services, Inc. and subsidiaries at December 29, 1995 and December 30, 1994,
and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 29, 1995, in conformity
with generally accepted accounting principles.
Jackson, Mississippi
January 29, 1996, except for Note B as to
which the date is March 13, 1996
<PAGE>
Directors And Officers
BOARD OF DIRECTORS OFFICERS (Continued)
BENJAMIN C. LEE, JR.. IRENE C. HOWARD
Chairman of the Board Corporate Group
KLLM Transport Services, Inc. Vice President--Human Resources
and
Risk Management
STEVEN K. BEVILAQUA
President and Chief Executive Officer C. ALAN CLARK
KLLM Transport Services, Inc. Corporate Group
Vice President--Information
Systems
WALTER P. NEELY, PH. D.
J. Army Brown Chair of Business JAMES T. MERRITT
Administration Transport Group
Professor of Finance Senior Vice President--
Sales and Marketing
Else School of Management,
Millsaps College
STEVEN L. DUTRO
JAMES L. YOUNG Transport Group
Attorney Vice President--Finance
Young, Williams, Henderson
and Fuselier, P.A.
WILLIAM M. CREEL
LELAND R. SPEED Transport Group
Chairman of the Board and Vice President--
Chief Executive Officer Field Operations
The Parkway Company
JOSEPH. M. STIANCHE
C. TOM CLOWE, JR. Transport Group
President and Chief Operating Officer Vice President--Maintenance
Missouri Gas Energy
VINCENT A. SCHOTT
Transport Group
OFFICERS Vice President--
Information Systems
BENJAMIN C. LEE, JR. JAMES M. RICHARDS, JR.
Chairman of the Board Transport Group
Vice President--Customer Service
STEVEN K. BEVILAQUA
President and Chief Executive Officer THOMAS J. SHEPHERD
Transport Group
J. KIRBY LANE Vice President--Dedicated Logistics
Executive Vice President and Chief
Financial Officer
JAMES P. SORRELS
President--Express Systems and
Contract Logistics
WILLIAM J. LILES III
President--Rail Services
KENNETH O. ANDERS
President--International Operations
NANCY M. SAWYER
President--Vernon Sawyer
Stockholder Information
CORPORATE OFFICES
KLLM Transport Services, Inc.
3475 Lakeland Drive
Jackson, Mississippi 39208
(601) 939-2545
TRANSFER AGENT
Society National Bank
Corporate Trust Division
P. O. Box 6477
Cleveland, Ohio 44101
(800) 542-7792
INDEPENDENT AUDITORS
Ernst & Young LLP
Jackson, Mississippi
FORM 10-K
Information about KLLM Transport Services, Inc.,
including the Form 10-K, may be obtained without charge
by writing to Mr. J. Kirby Lane, Executive Vice President,
at the Company's corporate offices.
ANNUAL MEETING
10:00 a.m.
April 16, 1996
KLLM Corporate Offices
3475 Lakeland Drive
Jackson, Mississippi
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report
(Form 10-K) of KLLM Transport Services, Inc. of our report dat4ed
January 29, 1996, except for Note B as to which the date is March 13,
1996, included in the 1995 Annual Report to Shareholders of KLLM Transport
Services, Inc.
Our audits also included the financial statement schedule of KLLM Transport
Services, Inc. listed in Item 14(a)(2). This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion
based on our audits. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects,
the information as set forth therein.
We also consent to the incorporation by reference in the Registration
Statement (Post-effective Amendment No. 6, form S08, No. 33-14545)
pertaining to the KLLM Transport Services, Inc. Employee Stock Purchase
Plan and in the related Prospectus of our report dated January 29, 1996,
except for Note B as to which the date is March 13, 1996, with respect
to the consolidated financial statements incorporated herein by
reference and our report included in the preceding paragraph with
respect to the financial statement schedule included in the Annual
Report (Form 10-K) of KLLM Transport Services, Inc.
Ernst & Young LLP
Jackson, Mississippi
March 26, 1996
