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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 14D-9
(Rule 14d-101)
SOLICITATION / RECOMMENDATION STATEMENT UNDER SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
KLLM Transport Services, Inc.
(Name of Subject Company)
KLLM Transport Services, Inc.
(Name of Person(s) Filing Statement)
Common Stock, par value $1.00 per share
(Title of Class of Securities)
482498102
(CUSIP Number of Class of Securities)
Leland R. Speed
Chairman of the Special Committee of the Board of Directors
KLLM Transport Services, Inc.
135 Riverview Drive
Richland, Mississippi 39218
(601) 939-2545
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
With copies to:
Sidney J. Nurkin, Esq.
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
(404) 881-7000
/ / Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION.
(a) NAME AND ADDRESS. The name of the subject company is KLLM Transport
Services, Inc., a Delaware corporation (the "Company"). The address of the
principal executive offices of the Company is 135 Riverview Drive, Richland,
Mississippi 39218. The telephone number of the principal executive offices of
the Company is (601) 939-2545.
(b) SECURITIES. The title of the class of equity securities to which
this Statement relates is the common stock, par value $1.00 per share, of the
Company (the "Common Stock"), including the associated preferred share purchase
rights (the "Rights") issuable pursuant to the Stockholder Protection Rights
Agreement dated as of February 13, 1997, between the Company and Key Corp
Stockholders Services, Inc., as Rights Agent (the "Rights Plan"). Excluding the
rights, as of April 7, 2000 there were 4,110,518 shares of Common Stock
outstanding. Except where the context otherwise requires, all references herein
to the Common Stock shall include the Rights.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
(a) NAME AND ADDRESS. The name, address and business telephone number
of the Company, which is the person filing this Schedule 14D-9, are set forth in
Section 1(a) above. In addition to being the filing person, the Company is also
the subject company.
(d) TENDER OFFER. This Statement relates to the unsolicited tender
offer being made by Low Acquisition, Inc., a Delaware corporation ("Low
Acquisition"), which is wholly-owned by Robert E. Low, an individual residing in
Springfield, Missouri ("Low"), disclosed in a Tender Offer Statement on Schedule
TO filed with the U.S. Securities and Exchange Commission (the "Commission") on
April 12, 2000 (the "Schedule TO"). According to the Schedule TO, Low
Acquisition is offering to purchase all of the outstanding shares of Common
Stock not owned by it or its affiliates at a purchase price of $7.75 per share,
net to the seller in cash, without interest thereon, less applicable withholding
taxes, if any, (the "Offer Price") and upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated April 12, 2000 (the "Offer
to Purchase"), and in the related Letter of Transmittal (which, together with
the Offer to Purchase, constitutes the "$7.75 Per Share Offer").
According to the Schedule TO, the principal executive offices of Low
and Low Acquisition are located at 2740 North Mayfair, Springfield, Missouri
65803.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
(d) CONFLICTS OF INTEREST. Except as described in (i) this Schedule
14D-9 and (ii) in the section entitled "Item 7. Management's Discussion and
Analysis of Results of Operations and Financial Condition" in the Company's Form
10-K for the period ended December 31, 1999 (the "Company's 1999 Form 10-K"), no
material agreement, arrangement or understanding or actual or potential conflict
of interest exists between the Company, its executive officers, directors or
affiliates, Low or his affiliates, or Low Acquisition and its executive
officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) SOLICITATION RECOMMENDATION.
AS MORE FULLY DESCRIBED BELOW, THE SPECIAL COMMITTEE OF THE
BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT ALL HOLDERS OF
COMMON STOCK REJECT LOW ACQUISITION'S $7.75 PER SHARE OFFER AND NOT TENDER THEIR
SHARES OF THE COMPANY IN LOW ACQUISITION'S $7.75 PER SHARE OFFER.
(b) REASONS.
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In August 1999, the Company engaged Morgan Keegan & Company, Inc.
("Morgan Keegan") to act as its financial advisor to consider strategic
alternatives, including a potential sale of the Company, with a view to
enhancing stockholder value.
With respect to the potential sale of the Company, the Board authorized
Morgan Keegan to solicit potential bids to acquire the Company and prepare a
memorandum containing certain confidential information about the Company (the
"Confidential Memorandum"). Following the Board's authorization, Morgan Keegan
contacted 20 to 25 potential bidders, including Mr. Low, the President of New
Prime, Inc., one of the Company's principle competitors. Of those 20 to 25
parties, 9 entered into confidentiality agreements with the Company and were
furnished copies of the Confidential Memorandum. None of the 9 companies
conducted additional diligence of the Company. Morgan Keegan contacted Mr.
Low in October 1999 and offered to send him the Confidential Memorandum
provided that Mr. Low enter into a confidentiality agreement with the
Company, which included a two-year standstill provision. Mr. Low declined to
execute the confidentiality agreement, and, therefore, did not receive a copy
of the Confidential Memorandum. Morgan Keegan attempted several times
thereafter to get Mr. Low to begin negotiations regarding acquiring the
Company.
Over the next several months, Mr. Low acquired 539,600 shares of the
Company's common stock, or approximately 13% of its outstanding shares of
capital stock. On February 10, 2000, Mr. Low filed an amendment to his Schedule
13D and issued a press release stating that he wanted to explore a transaction
with the Company.
On February 11, 2000, Mr. John H. ("Chip") Grayson, Jr., Managing
Director of Morgan Keegan, called Mr. Low. Mr. Low expressed to Mr. Grayson a
strong interest in pursuing a friendly transaction with the Company and asked to
meet with Mr. Liles to discuss such a transaction. Mr. Low indicated that he was
interested in keeping the Company's current management team, including Mr.
Liles, in place after the consummation of any transaction.
On February 14, 2000, Messrs. Low and Liles met in Biloxi, Mississippi,
at which time Mr. Low reiterated his interest in a friendly transaction with the
Company. Mr. Liles stated to Mr. Low that, notwithstanding the price at which
the Common Stock was then trading, he would not be interested in a sale of
the Company for less than its book value, which was approximately $12.60 per
share. Mr. Low responded by stating that such a price would represent a 100%
premium over the then current trading price of the Common Stock and that he
believed that a price in the range of $7 to $7.50 per share would represent a
fair price for the Common Stock.
Over the course of the next several weeks, Mr. Grayson had numerous
telephone conversations with Mr. Low and his representatives during which Mr.
Low indicated his desire to bring a team to the Company's principal office in
Richland, Mississippi to meet with the Company's current management team and
conduct due diligence. On February 28, 2000, Mr. Grayson informed Mr. Low via
telephone that the Company would require a written indication of interest in
the price range of $12.00 per share and a fully-executed confidentiality
agreement containing a two year standstill provision to allow Mr. Low access
to the Company's confidential, non-public information.
On March 1, 2000, Mr. Low informed Mr. Grayson via telephone that his
counsel advised him that providing the Company with a written indication of
interest would require him to amend his Schedule 13D and make such written
indication of interest a matter of public record. Mr. Low stated that he
preferred to indicate orally that he was willing to pay a purchase price for the
Company that was between the current market price and book value per share of
the Company. Mr. Grayson informed Mr. Low that he would bring Mr. Low's proposal
to the Board of Directors of the Company.
On March 16, 2000, Mr. Low sent the following letter to the Company,
which letter was filed as an Exhibit to Mr. Low's Amendment to his Schedule 13D,
making public Mr. Low's interest in exploring the possibility of acquiring the
Company.
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March 15, 2000
Mr. Jack Liles
Chairman of the Board, President and Chief Executive [O]fficer
KLLM Transport Services, Inc.
135 Riverview Drive
Richmond, Mississippi 39218
Dear Jack:
This letter is to express my interest in acquiring KLLM Transport
Services, Inc., either directly or through New Prime, Inc., a corporation
wholly-owned by me, in an all cash transaction.
Although I have not had the opportunity to conduct any due diligence
other than a preliminary review of KLLM's public documents, I think that a
premium of as much as 25% over the closing price of KLLM's common stock, as
quoted on the Nasdaq Stock Market on the trading day first preceding the
disclosure of our interest expressed in this letter, would be feasible. Based
upon Tuesday's closing price, the price per share to your stockholders would be
approximately $7.60 per share.
As you know, I have filed a Schedule 13D as a result of the level of my
ownership of KLLM shares, which requires amendment upon the occurrence of any
material change in the information contained therein. Consequently, I have filed
an amendment to my Schedule 13D contemporaneously with the delivery of this
letter disclosing my having advised you of my interest in acquiring KLLM (either
directly or indirectly) on a friendly basis and the execution by me of a consent
of stockholder for the purpose of protecting certain alternatives that may be
pursued by me in the future. A copy of the letter and the consent of stockholder
are attached as exhibits to the amendment.
I think that an all cash transaction will be attractive to your
stockholders, who currently hold a stock which is thinly traded and historically
has not paid dividends, to liquidate their investment in KLLM at a substantial
premium over current share value.
I would like to emphasize my desire to proceed with exploratory
discussions with you and your management as promptly as possible, with the dual
objectives of commencing a due diligence-review (subject, of course, to an
appropriate confidentiality agreement), and negotiating the specific terms of an
all cash transaction with KLLM on a friendly basis.
I look forward to hearing from you.
Very truly yours,
/s/ Robert E. Low
Robert E. Low
On March 17, 2000, Mr. Low executed a Consent of Stockholder providing
for, among other things, the removal of the current Board and replacing it with
Mr. Low's slate of directors. A copy of such Consent of Stockholder was
delivered to The Prentice-Hall Corporation System, Inc., the registered agent of
the Company in the State of Delaware, on the next day, thereby establishing the
record date for the record holders entitled to exercise their consent as March
17, 2000.
At a Board of Directors meeting on March 20, 2000, Mr. Lile conveyed
his interest in making a proposal to acquire the Company. In addition, on or
about March 20, 2000, Mr. Grayson informed Mr. Low via telephone that a
majority of the Board would be receptive to an offer from Mr. Low, at a
higher price than the price per share set forth in Mr. Low's March 15, 2000
letter.
Mr. Low did not increase his offered price. Accordingly, on March 23,
2000, the Board considered the price per share indicated by Mr. Low and
concluded that such price was wholly inadequate and that it was not in the
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best interests of the Company and its stockholders to allow Mr. Low, the
President of one of the Company's principal competitors, to meet with the
Company's current management team and conduct due diligence unless Mr. Low
entered into an acceptable confidentiality agreement and provided the Company
with an indication of interest at a price per share greater than set forth in
Mr. Low's March 15, 2000 letter. The Board, in making such decision,
reasoned that it was in the best interests of the Company and its
stockholders not to allow Mr. Low to conduct a due diligence review and
management interviews because allowing him to do so would lead to his
obtaining confidential, non-public information about the Company. The Board
contemplated that Mr. Low may merely be indicating his interest in the
Company to obtain such information about the Company. The Board further
reasoned that it would be detrimental to the Company and its stockholders to
allow Mr. Low, a principal competitor of the Company, to obtain such
information without first obtaining some reasonable protection for such
information through a confidentiality agreement.
In addition, on March 23, 2000, the Board created a Special Committee
of the Board of Directors to act on behalf of the Board in connection with the
potential sale of control of the Company. The Special Committee is comprised of
Leland Speed, as Chairman, Dr. Walter Neely and David Metzler. Morgan Keegan was
requested to act as financial advisor for the Special Committee.
On March 29, 2000, the Special Committee held a telephonic meeting to
discuss the process for seeking the best price and terms for the sale of the
Company. At that meeting, the Special Committee discussed indications by Mr.
Liles that Mr. Liles was putting together an offer to acquire all of the
outstanding capital stock of the Company not owned by him or related family
interests. The members of the Special Committee agreed that the Company should
endeavor to obtain a suitable confidentiality agreement from both Messrs. Low
and Liles so that they could treat each of them equally and conduct an orderly
auction of the Company in an attempt to maximize stockholder value.
On March 29, 2000, Mr. Grayson sent Mr. Low a form of confidentiality
agreement that had been signed on behalf of the Company. Mr. Grayson asked Mr.
Low to execute such agreement so that the Company could allow Mr. Low to conduct
a due diligence review of the Company. On March 29, 2000, Mr. Nurkin sent Ms.
Dionne Rousseau of Jones, Walker, Waechter, Poitevant, Carrere & Denegre,
L.L.P., counsel to Mr. Liles, a form of confidentiality agreement for Mr.
Liles' execution. The form of confidentiality agreements sent to Messrs. Low
and Liles were substantially identical and each contained a two-year
standstill provision. According to the Schedule TO and a letter dated March
30, 2000 from Mr. Low to Mr. Grayson, Mr. Low did not execute the
confidentiality agreement because he believed that it was unacceptable,
primarily because of the two-year standstill provision. On March 30, 2000,
Ms. Rousseau informed Mr. Nurkin via telephone that Mr. Liles would not enter
into a confidentiality agreement with the Company until Mr. Low did so.
On March 30, 2000, the Company filed its Annual Report on Form 10-K for
its fiscal year ended December 31, 1999, wherein it was disclosed that KLLM,
Inc., a wholly owned subsidiary of the Company, had entered into in December
1999 change in control agreements with Mr. Liles, Steven L. Dutro and Nancy
M. Sawyer, each an executive officer of the Company, as well as several
others and anticipates entering into change in control agreements with
certain additional employees. These agreements provide for, among other
things, a bonus payment if such employee's employment with the Company shall
have terminated within 12 months after a change in control as a result of
such executive's termination by the Company without cause or such executive's
resignation for good reason. The change in control agreements provide that
such bonus is payable in full on the date of such termination and will cause
the Company to pay such employees, upon certain triggering events, in the
aggregate approximately $1,876,600.
On March 30, 2000, Mr. Liles filed an amendment to his Schedule 13D, in
which Mr. Liles stated that he had communicated to the Board of Directors of the
Company that he had a strong interest in acquiring the Company and was in the
process of developing a proposal for such an acquisition.
On April 5, 2000, Mr. Low sent the following letter to the Company
demanding access to, among other things, the Company's stockholder list and
securities listing position.
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April 5, 2000
Via Overnight Delivery
Corporate Secretary
KLLM Transport Services, Inc.
135 Riverview Drive
Richland, Mississippi 39218
The Prentice-Hall Corporation System, Inc. as Registered Agent of
KLLM Transport Services, Inc. 1013 Centre Road Wilmington, Delaware
Ladies and Gentlemen:
I am a stockholder of record of 100 shares of Common Stock, par value
$1.00 per share, including the associated rights to purchase preferred stock
("Common Stock"), of KLLM Transport Services, Inc., a Delaware corporation (the
"Company"). I also beneficially own 539,500 shares of Common Stock.
Pursuant to ss. 220 of the Delaware General Corporation Law, I hereby
demand that at a time not later than the opening of business on April 13, 2000
you make available for inspection and copying the Company's stock ledger and a
list of stockholders dated as of March 17, 2000.
In addition to and as part of the foregoing demand, I hereby request:
(a) A list of the record holders of the Company, dated as of March 17,
2000 and certified by the Company or its transfer agent, showing the names and
addresses of each record holder of the Company and their stockholdings.
(b) A magnetic computer tape list of the stockholders of the Company as
of March 17, 2000 showing the names, addresses and number of shares of Common
Stock held by such stockholders, together with such computer processing data as
is necessary for me to make use of such magnetic computer tape for verification
purposes.
(c) All information in or which comes into the Company's possession or
control, or which can reasonably be obtained from brokers, dealers, banks,
clearing agencies or voting trustees or their nominees concerning the names,
addresses and number of shares of Common Stock held by the participating brokers
and banks named in the individual nominee names of Cede & Co., Pacific & Co.,
Kray & Co., Philadep, DLJ and other similar nominees, and a list or lists
containing the name, address and number of shares of Common Stock attributable
to any participant in any Company employee stock ownership or comparable plan in
which the decision regarding the voting of Common Stock held by such plan is
made, directly or indirectly, individually or collectively, by the participants
in the plan.
(d) All information in or which comes into the Company's possession or
control, or which can reasonably be obtained from brokers, dealers, banks,
clearing agencies or voting trustees relating to the names of the beneficial
owners of shares of Common Stock ("NOBO's") in the format of a printout in
descending order balance.
I will bear the reasonable costs incurred by the Company (including
those of its transfer agent) in connection with the production of the above
information.
The purpose of this demand is to enable me to communicate with my
fellow Company stockholders on matters relating to our mutual interests as
stockholders including the solicitation of written consents for the removal of
the Company's current Board of Directors.
I hereby designate and authorize Steven D. Crawford and Gallop, Johnson
& Neuman, L.C., their respective partners, officers and employees, and any other
persons to be designated by me, acting together, singly or in combination, to
conduct, as my agents, the inspection and copying herein requested.
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Please advise Steven D. Crawford (800-848-4560) immediately whether you
will voluntarily supply the requested information or when and where the items
demanded above will be readily available to me.
Very truly yours,
/s/ Robert E. Low
Robert E. Low
The Company has provided Mr. Low with a list of the Company's
stockholders as of March 17, 2000 and a list of NOBOs pursuant to his request
above.
On April 6, 2000, Mr. Low received a letter from Mr. Grayson indicating
that the Company would be willing to consider a six-month standstill agreement.
Mr. Low once again reiterated that while he would be willing to sign a
confidentiality agreement to protect any proprietary information which may be
disclosed to Mr. Low during a due diligence review of the Company, Mr. Low would
be unwilling to agree to any form of a standstill obligation on his part. In
light of Mr. Low's commencing a consent solicitation to replace the Board, the
Special Committee made the decision to require a standstill provision in any
confidentiality agreement it obtained from Mr. Low because such an agreement
would allow the Company to undertake an orderly auction of the Company and treat
both Messrs. Low and Liles equally. Mr. Low's consent solicitation was seeking
to remove the current Board, including the members of the Special Committee, and
replace it with a new slate of directors proposed by Mr. Low, including Mr. Low
himself. The Special Committee reasoned that the standstill provision was now
necessary for an orderly process because it would force Mr. Low to withdraw his
consent solicitation, thereby eliminating the possibility that the members of
the Special Committee would be removed from office and allowing them to proceed
with an auction of the Company.
Also on April 6, 2000, Mr. Low received a call from Mr. Leland R.
Speed, a director of the Company and Chairman of the Special Committee, urging
that Mr. Low reconsider entering into a short-term standstill agreement of three
months. Mr. Low once again indicated that he would have no interest in entering
into a standstill agreement with the Company of any duration.
On April 6, 2000, Mr. Grayson informed Mr. Low via telephone that the
purpose of the Special Committee is to maximize the value of the Company for its
stockholders. Mr. Grayson also informed Mr. Low that, upon Mr. Low entering into
a satisfactory confidentiality agreement, the Special Committee was prepared to
use its best efforts to provide Mr. Low with sufficient access to the Company to
provide Mr. Low substantially the same information Mr. Liles has about the
Company.
On April 11, 2000, Mr. Nurkin reiterated to Mr. Steve Crawford, counsel
to New Prime, Inc. and, as indicated by Mr. Crawford, counsel to Mr. Low, that
upon Mr. Low entering into a satisfactory confidentiality agreement, the Special
Committee was prepared to use its best efforts to provide Mr. Low with enough
access to the Company to give Mr. Low substantially the same information Mr.
Liles has about the Company.
On April 12, 2000, Mr. Low, through Low Acquisition, Inc., commenced
the $7.75 Per Share Offer. The $7.75 Per Share Offer is subject to certain
conditions, including, making the Rights Plan inapplicable to the offer,
approving any negotiated transaction with Mr. Low in accordance with
Section 203 of the DGCL, having no other tender offer for some or all of the
shares of the Common Stock being commenced or publicly proposed to be made
and having no material amount of indebtedness of the Company accelerated by
the offer. Subsequent to the commencement of the $7.75 Per Share Offer, as
discussed below, proposal for another tender offer for all outstanding shares
of Common Stock was made to the Special Committee and was publicly announced.
Additionally, the $7.75 Per Share Offer would create a default under the
Company's existing revolving credit facility. Consequently, at least two of
the conditions of the $7.75 Per Share Offer must be waived by Mr. Low. The
$7.75 Per Share Offer is not subject to Mr. Low obtaining financing.
Contemporaneously with the commencement of the $7.75 Per Share Offer, Mr.
Lowe filed a Schedule 14A with the Commission in which he indicated his plan
to initiate a consent solicitation to permit the consummation of his
unsolicited tender offer to acquire the Company, through Low Acquisition,
Inc., as described above and therein. If Mr. Low's consent solicitation
successfully replaces the Board, the new Board will be able to redeem the
Rights Plan, approve the transactions contemplated by the $7.75 Per Share
Offer, and remove any other impediments to Mr. Low completing the
transactions contemplated by the $7.75 Per Share Offer, thereby allowing Mr.
Low to complete the $7.75 Per Share Offer upon his successfully obtaining
more than 50% of the outstanding shares of Common Stock in his unsolicited
tender offer.
On April 12, 2000, the Special Committee met to discuss Mr. Low's
unsolicited tender offer and determine how to proceed to obtain the maximum
value for the stockholders of the Company.
On April 19, 2000, Mr. Liles and others (collectively, the "Liles
Group") submitted a proposal to the Special Committee to acquire, by means of a
tender offer, all of the outstanding shares of Common Stock (other than
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those shares held in treasury or by Mr. Liles and trusts controlled by his
family) for $8.25 per share in cash. The proposal of the Liles Group is
subject to certain conditions, including requiring the Company to deal
exclusively with the Liles Group unless the Company obtains a superior
proposal, pay up to $1 million in fees, which amount includes a $750 million
cash break-up fee, if the Company enters into a transaction with a third
party, making the Rights Plan inapplicable to the offer, and approve any
negotiated transaction with the Liles Group in accordance with Section 203 of
the DGCL. The Liles Group's proposal is not subject to the Liles Group
obtaining financing, except for the requirement that the Company must execute
a commitment letter to refinance its existing revolving credit facility upon
the closing of the transaction.
On April 20, 2000, the Special Committee met via telephone conference
to discuss Mr. Liles' proposal and to determine how to proceed to obtain the
maximum value for the stockholders of the Company. After discussion, the Special
Committee concluded that it could not agree to the conditions set forth in Mr.
Liles' proposal and instructed counsel to the Committee to communicate that
conclusion to counsel for Mr. Liles. Mr. Nurkin conveyed such message to Ms.
Rousseau via telephone.
On April 21, 2000, the Special Committee sent Mr. Low a confidentiality
agreement, which did not contain a standstill agreement.
In a series of telephone calls to and among the members of the
Committee, its financial advisors and its legal advisors on April 21, 2000, the
Committee determined to send a letter to each of Mr. Low and Mr. Liles
requesting that they comply with certain bid procedures established by the
Committee, including submitting to the Committee by the close of business on May
5, 2000 agreements for the acquisition of the Company that they would be
prepared to sign and indicating their best offer, expressed on a per share
basis, for the acquisition of the capital stock of the Company (other than
shares respectively owned or controlled by them and treasury shares).
Accordingly, on April 25, the following letters were sent to Messrs. Low and
Liles, respectively by counsel to the Committee:
[Alston & Bird LLP's Letterhead]
April 25, 2000
Mr. Robert Low
Low Acquisition Inc.
2740 N. Mayfair
Springfield, MO 65803
Dear Mr. Low:
As you know, the Board of Directors of KLLM Transport Services, Inc.
(the "Company") has appointed a Special Committee (the "Committee") to consider
and act with respect to a potential change of control transaction involving the
Company. The Committee is comprised of Leland Speed, David Metzler, and Walter
Neely. Mr. Speed is Chairman of the Committee. This law firm serves as counsel
to the Committee. Morgan Keegan & Co. is the financial adviser to the Committee.
I have been asked to send this letter to you on behalf of the Committee.
You have commenced a tender offer to acquire all of the outstanding
capital stock of the Company, other than those shares owned by you or other
members of your group, at a price of $7.75 per share. You have also filed
materials with the Securities and Exchange Commission with respect to a consent
solicitation seeking to remove all of the present directors of the Company and
to replace them with your nominees. As you are also aware, a group headed by Mr.
Jack Liles (the "Liles Group") has advised the Committee of its interest in
making an offer to acquire all of the outstanding capital stock of the Company
at a price of $8.25 per share.
The Committee is of the belief that the sale of the Company is
inevitable. As such, the Committee is committed to obtaining the best price and
terms available for the benefit of the stockholders of the Company. To that end,
Mr. John Grayson, Jr. of Morgan Keegan & Co. has advised you personally, and the
undersigned has advised your attorney Mr. Steven Crawford, of the willingness of
the Committee to provide you such non-public information concerning the business
and affairs of the Company as you reasonably request in writing, subject to your
execution of an appropriate confidentiality agreement. We have previously
advised you and your counsel that
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such confidentiality agreement need not contain a standstill provision, and we
have furnished you with a copy of a form of confidentiality agreement for your
consideration. Upon your execution of a confidentiality agreement reasonably
satisfactory to the Committee, the Committee is prepared to furnish to you such
non-public information concerning the Company as you reasonably request in
writing with the expectation that such information will assist you in increasing
the financial offer that you have made for the outstanding capital stock of the
Company. Such information will be provided to you at the offices of attorneys
for the Company in Jackson, Mississippi.
The Committee has established certain guidelines which we ask you to
follow in connection with the bidding process involving the potential sale of
the Company. Specifically, we ask you to furnish to the Committee, to the
attention of the undersigned, no later than the close of business on May 5,
2000, the written agreement for the acquisition of all of the outstanding
capital stock of the Company that you are prepared to sign. Such agreement
should contain your highest and best financial offer, expressed on a per-share
basis, that you are willing to pay for all of the outstanding capital stock of
the Company. You may structure the transaction as a tender offer with a
follow-on merger or as a merger transaction.
Notwithstanding any other terms or provisions in that agreement, that
agreement must provide that, if it is accepted by the Committee, the Company
shall nonetheless have the continued right to furnish information to and engage
in discussions with other persons who have made or have expressed an interest in
making an offer for the Company that the Committee believes, in consultation
with its legal and financial advisers, is likely to result in a superior
proposal. In addition, the Company must have the right to terminate the
agreement, to withdraw any recommendation made with respect to the transactions
provided for in the agreement, and to refrain from submitting the agreement to
the stockholders of the Company for their vote (if any part of the transaction
requires a stockholder vote), in each case without incurring any liability to
you other than the payment of a reasonable break-up fee upon consummation of a
transaction with any other person.
Further, the agreement must contain covenants to the effect that, until
such time as you have acquired all of the issued an outstanding capital stock of
the Company, you will not cause the Company to incur any additional
indebtedness, nor will you cause the assets of the Company to be pledged to
secure any indebtedness incurred by you in connection with your acquisition of
such shares.
Contemporaneously with this letter to you, we are submitting a letter
to the Liles Group requesting that they too furnish to the Committee, no later
than the close of business on May 5, 2000 an agreement for the acquisition of
all of the outstanding capital stock Company that they are prepared to sign. The
Liles Group will be advised that its agreement must also contain the provisions
described in the preceding paragraphs.
The Committee intends to consider the offer made by you and any offer
that may be made by the Liles Group promptly following the close of business on
May 5, 2000. The Committee reserves the right to take any action with respect to
any offer made by you or that may be made by the Liles Group or any other person
that it believes, in the exercise of its fiduciary duties, is appropriate,
including, without limitation, negotiating further with you or with
representatives of the Liles Group for improved price and terms, entering into
agreements with you or with the Liles Group pursuant to which the Board of
Directors would, subject to its right to withdraw such recommendation, recommend
the transaction provided for in that agreement to the stockholders of the
Company, to reject and make no recommendation with regard to the offer made by
you or that may be made by the Liles Group, or to consider and act with respect
to any offer providing for the acquisition of the Company made by any other
person, if the Committee believes, in consultation with its legal and financial
advisors, that offer is likely to result in a superior proposal.
We ask that you advise the undersigned as promptly as possible if you
will agree to participate in the bidding process on the terms set forth in this
letter. If you so agree, the Committee will ask you to extend your tender offer
for an additional 20 days and to defer the commencement of your consent
solicitation until on or after May 5, 2000.
If you should have any questions about the process that the committee
desires to follow, please contact the undersigned promptly.
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Sincerely,
Sidney J. Nurkin
[Alston & Bird LLP's Letterhead]
April 25, 2000
Mr. William J. Liles, III
c/o Dionne M. Rousseau, Esq.
Jones, Walker, Waechter, Poitevent Carrere & Denegre, L.L.P.
201 St. Charles Avenue
New Orleans, LA 70170
Bernard J. Ebbers
c/o Charles P. Adams, Jr.
Adams and Reese LLP
111 Capital Building, Suite 350
111 Capital Street
Jackson, MS 39225
Dear Mr. Liles:
As you know, the Board of Directors of KLLM Transport Services, Inc.
(the "Company") has appointed a Special Committee (the "Committee") to consider
and act with respect to a potential change of control transaction involving the
Company. The Committee is comprised of Leland Speed, David Metzler, and Walter
Neely. Mr. Speed is Chairman of the Committee. This law firm serves as counsel
to the Committee. Morgan Keegan & Co. is the financial adviser to the Committee.
I have been asked to send this letter to you on behalf of the Committee.
You have advised the Committee of your interest in making an offer to
acquire all of the outstanding capital stock of the Company, other than those
shares owned by you or trusts controlled by your family, at a price of $8.25 per
share. As you are aware, Mr. Robert Low has commenced a tender offer to acquire
all of the outstanding capital stock of the Company at a price of $7.75 per
share. Mr. Low has also filed materials with the Securities and Exchange
Commission with respect to a consent solicitation seeking to remove all the
present directors of the Company and to replace them with his nominees.
The Committee is of the belief that the sale of the Company is
inevitable. As such, the Committee is committed to obtaining the best price and
terms available for the benefit of the stockholders of the Company. To that end,
the Committee is willing to provide you such non-public information concerning
the business and affairs of the Company as you reasonably request in writing,
subject to your execution of an appropriate confidentiality agreement. We have
previously furnished you with a copy of a form of confidentiality agreement for
your consideration. Upon your execution of a confidentiality agreement
reasonably satisfactory to the Committee, the Committee is prepared to furnish
to you such non-public information concerning the Company as you reasonably
request in writing with the expectation that such information will assist you in
increasing your financial offer for the outstanding capital stock of the
Company. Such information will be provided to you at the offices of attorneys
for the Company in Jackson, Mississippi.
The Committee has established certain guidelines which we ask you to
follow in connection with the bidding process involving the potential sale of
the Company. Specifically, we ask you to furnish to the Committee, to the
attention of the undersigned, no later than the close of business on May 5, 2000
the written agreement for the acquisition of all of the outstanding capital
stock of the Company that you are prepared to sign. Such agreement
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should contain your highest and best financial offer, expressed on a per-share
basis, that you are willing to pay for all of the outstanding capital stock of
the Company. You may structure the transaction as a tender offer with a
follow-on merger or as a merger transaction.
Notwithstanding any other terms or provisions in that agreement, that
agreement must provide that, if it is accepted by the Committee, the Company
shall nonetheless have the continued right to furnish information to and engage
in discussions with other persons who have made or have expressed an interest in
making an offer for the Company that the Committee believes, in consultation
with its legal and financial advisers, is likely to result in a superior
proposal. In addition, the Company must have the right to terminate the
agreement, to withdraw any recommendation made with respect to the transactions
provided for in the agreement, and to refrain from submitting the agreement to
the stockholders of the Company for their vote (if any part of the transaction
requires a stockholder vote), in each case without incurring any liability to
you other than the payment of a reasonable break-up fee upon consummation of a
transaction with any other person.
Further, the agreement must contain covenants to the effect that, until
such time as you have acquired all of the issued an outstanding capital stock of
the Company, you will not cause the Company to incur any additional
indebtedness, nor will you cause the assets of the Company to be pledged to
secure any indebtedness incurred by you in connection with your acquisition of
such shares.
Contemporaneously with this letter to you, we are submitting a letter
to Mr. Low requesting that he also furnish to the Committee, no later than the
close of business on May 5, 2000, an agreement for the acquisition of all of the
outstanding capital stock Company that he is prepared to sign. Mr. Low will be
advised that his agreement must also contain the provisions described in the
preceding paragraphs.
The Committee intends to consider any offer that you may make and any
offer that may be made by Mr. Low promptly following the close of business on
May 5, 2000. The Committee reserves the right to take any action with respect to
any offer that you may make or that may be made by Mr. Low or any other person
that it believes, in the exercise of its fiduciary duties, is appropriate,
including, without limitation, negotiating further with you or with Mr. Low for
improved price and terms, entering into agreements with you or with Mr. Low
pursuant to which the Board of Directors would, subject to its right to withdraw
such recommendation, recommend the transaction provided for in that agreement to
the stockholders of the Company, to reject and make no recommendation with
regard to any offer that you may make or that may be made by Mr. Low, or to
consider and act with respect to any offer providing for the acquisition of the
Company made by any other person if the Committee believes that offer to be a
superior proposal.
We ask that you advise the undersigned as promptly as possible if you
will agree to participate in the bidding process on the terms set forth in this
letter. If you should have any questions about the process that the committee
desires to follow, please contact the undersigned promptly.
Sincerely,
Sidney J. Nurkin
The Special Committee, in conjunction with its financial and legal
advisors, intends to continue discussions with both Mr. Low and the Liles
Group, as well as any other third party, in an attempt to obtain the highest
price possible for the Company's stockholders.
The Special Committee made its decision herein based on indications
from the Liles Group and Mr. Low that each will comply with the terms of the
above letters dated April 25, 2000. Neither the $7.75 Per Share Offer nor the
Liles Group's proposal is contigent on obtaining financing. Therefore, in the
event the Liles Group and Mr. Low comply with such letters, the Special
Committee believes that it will be able to expeditiously conduct an orderly
auction of the Company. The Special Committee believes that, by conducting an
orderly auction, it will be able to maximize the value of the Company for its
stockholders.
In analyzing the $7.75 Per Share Offer, the Special Committee were
assisted and advised by representatives of Morgan Keegan and the Company's
counsel, who reviewed various financial, legal and other considerations in
addition to the terms of the $7.75 Offer and Offer to Purchase.
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<PAGE>
(c) INTENT TO TENDER. After making reasonable inquiry, the Company
believes that Mr. Liles and Steven Dutro, Chief Financial Officer of the
Company, will hold their shares of Common Stock. The Company is not aware of
whether any of its other executive officers, directors or affiliates will
tender, sell or hold their shares of Common Stock.
ITEM 5. PERSON /ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.
(a) SOLICITATIONS OR RECOMMENDATIONS. Morgan Keegan is acting as the
Special Committee's financial advisor in connection with the $7.75 Per Share
Offer. The Company has entered into an engagement letter with Morgan Keegan,
dated August 19, 1999, (collectively, the "Engagement Letter"), pursuant to
which the Company engaged Morgan Keegan as a financial advisor in connection
with the possible sale of all or a portion of the Company. Pursuant to the terms
of the Engagement Letter, the Company will pay Morgan Keegan a fee equal to
1% of the transaction value, which is the equity value plus the debt assumed
or paid upon completion of the $7.75 Per Share Offer. In addition, the
Company has agreed to reimburse Morgan Keegan for its reasonable expenses
incurred during its engagement and to indemnify Morgan Keegan against certain
liabilities incurred in connection with its engagement, including liabilities
under federal securities laws.
Morgan Keegan, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations of estate, corporate and other purposes. In the
ordinary course of business Morgan Keegan and its affiliates may actively trade
or hold the securities of the Company for their own account or for the accounts
of customers and, accordingly, may at any time hold a long or short position in
such securities.
Except as set forth above, neither the Company nor any person acting
on its behalf currently intends to employ, retain or compensate any other
person to make solicitations or recommendations to stockholders on its behalf
with respect to the $7.75 Per Share Offer.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(b) SECURITIES TRANSACTIONS. Except for issuing common stock pursuant
to the Company's Non-Employer Director Stock Compensation Plan, no transaction
in the shares of Common Stock has been effected during the past sixty (60) days
by the Company, or to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company.
To the best of the Company's knowledge, no executive officer, director,
affiliate and subsidiary of the Company currently intends to tender his, her or
its shares of Common Stock which he, she or it owns beneficially or of record to
Mr. Low pursuant to the $7.75 Per Share Offer.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
(d) SUBJECT COMPANY NEGOTIATIONS. Except as set forth in Items 3(d) and
4 above, the Company is not engaged in any negotiations in response to the Offer
to Purchase which relates to or would result in (i) an extraordinary
transaction, such as a merger or reorganization involving the Company or any
subsidiary of the Company; (ii) a purchase, sale or transfer of a material
amount of assets by the Company or any subsidiary of the Company; (iii) a tender
offer for or other acquisition of securities by or of the Company; (iv) any
material change in the present capitalization or dividend policy of the Company.
Except as set forth in Items 3(d) and 4 above, there are no
transactions, board resolutions, agreements in principal or signed contracts in
response to the Offer which relate to or would result in one or more of the
events referred to in this Item 7.
ITEM 8. ADDITIONAL INFORMATION.
(b) OTHER MATERIAL INFORMATION.
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ANTI-TAKEOVER PROVISIONS AND DELAWARE LAW. The Company's Certificate of
Incorporation and the Delaware General Corporation Law (the "DGCL") contain
provisions that could have the effect of delaying, deferring or preventing an
unsolicited change in control of the Company.
ISSUANCE OF PREFERRED STOCK. The Board of Directors has the
power to issue 5,000,000 shares of Preferred Stock, in one or more classes or
series and with such rights and preferences as determined by the Board of
Directors, all without stockholder approval. Because the Board of Directors has
the power to establish the preferences and rights of each class or series of
Preferred Stock, it may afford the holders in any series of Preferred Stock
preferences, powers and rights, voting or otherwise, senior to the rights of
holders of Common Stock. The Board of Directors has no present plans to issue
any shares of Preferred Stock.
DELAWARE ANTI-TAKEOVER STATUTES. Section 203 of the DGCL (the
"Business Combination Statute") purports to regulate certain business
combinations of a corporation, like the Company, which is organized under
Delaware law, with a stockholder beneficially owning 15% or more of the
outstanding voting stock of such corporation (an "Interested Stockholder"). The
Company has not opted out of the Business Combination Statute in either its
Certificate of Incorporation or Bylaws. Therefore, the Business Combination
Statute applies to the Company.
The Business Combination Statute provides, in relevant part, that the
Company shall not engage in any business combination with an Interested
Stockholder for a period of three years following the date such stockholder
first becomes an Interested Stockholder unless:
(i) prior to the date such stockholder first becomes an
Interested Stockholder, the board of directors of the corporation approved
either the business combination or the transaction which resulted in such
stockholder becoming an Interested Stockholder;
(ii) upon becoming an Interested Stockholder, the Interested
Stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced; or
(iii) on or subsequent to the date such stockholder becomes an
Interested Stockholder, the business combination is approved by the board of
directors and authorized at an annual or special meeting of stockholders of the
Company by the affirmative vote of at least two-thirds of the outstanding voting
stock of the Company which is not owned by the Interested Stockholder.
The Company's Board has not approved a business combination or other
transaction that would result in Mr. Low or Low Acquisition becoming an
Interested Stockholder. Therefore, the Business Combination Statute is
applicable to the $7.75 Offer and the transactions contemplated thereby.
DELAWARE MERGER STATUTE. Under Section 253 of the DGCL, if Low
Acquisition acquires, pursuant to the $7.75 Per Share Offer or otherwise, at
least 90% of the outstanding shares of Common Stock, it will be able to approve
a merger after consummation of the $7.75 Per Share Offer without a meeting of
the Company's stockholders. However, if Low Acquisition does not acquire at
least 90% of the outstanding shares of Common Stock, a meeting of the Company's
stockholders will be required under Section 253 of the DGCL to approve any
merger or other business combination between the Company and Mr. Low or Low
Acquisition.
ANTITRUST. The Offer to Purchase is subject to the
Hart-Scott-Rodino Antitrust Improvements Act (the "HSR Act"), which provides
that certain acquisition transactions may not be consummated unless certain
information has been furnished to the Federal Trade Commission ("FTC") and the
Antitrust Division of the Department of Justice ("Antitrust Division") and
certain waiting period requirements have been satisfied. The transaction
contemplated by the Offer to Purchase will require Low Acquisition and the
Company to each file a Notification and Report Form under the HSR Act.
To the Company's knowledge, neither Low nor Low Acquisition
has filed its Notification and Report Forms with respect to the Offer to
Purchase with the Antitrust Division and the FTC as of April 25, 2000.
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The Antitrust Division or the FTC may extend the waiting periods of such filing
by requesting additional information or documentary material relevant to the
acquisition. If such a request is made, the waiting period will be extended
until 11:59 P.M., Eastern Standard Time, on the tenth day after Low and Low
Acquisition have substantially complied with such request. Thereafter, such
waiting periods can be extended only by court order or consent. Although the
Company is required to file certain information and documentary material with
the Antitrust Division and the FTC in connection with the Offer to Purchase,
neither the Company's failure to make such filings nor a request to the Company
from the Antitrust Division for additional information or documentary material
will extend the waiting period.
The FTC and the Antitrust Division frequently scrutinize the
legality under the antitrust laws of transactions, such as Low Acquisition's
acquisition of the shares of Common Stock pursuant to the Offer to Purchase. At
any time before or after Low Acquisition's acceptance for payment of shares of
Common Stock, the FTC or the Antitrust Division could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the acquisition of the shares of Common Stock
pursuant to the Offer to Purchase or otherwise or seeking divestiture of the
shares of Common Stock acquired by Low Acquisition or divestiture of substantial
assets of Low Acquisition or its subsidiaries. Private parties and state
attorney generals may also bring legal action under the antitrust laws under
certain circumstances. Based upon Low Acquisition's discussions with the Company
and its examination of publicly available information with respect to the
Company, Low Acquisition indicated in the Schedule TO that it believes that its
acquisition of the shares of Common Stock will not violate the antitrust laws.
Nevertheless, there can be no assurance that a challenge to the Offer to
Purchase on antitrust grounds will not be made, or, if such a challenge is made,
of the result.
ITEM 9. EXHIBITS.
Exhibit 1 The section entitled "Item 7. Management's Discussion and Analysis
of Results of Operations and Financial Condition" in the Company's
1999 Form 10-K.*
* Included in the copy of the Company's 1999 Form 10-K filed with
the Commission on March 30, 2000.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: April 25, 2000 KLLM TRANSPORT SERVICES, INC.
By: /s/ Leland R. Speed
-------------------------------------
Leland R. Speed, Chairman of the Special
Committee of the Board of Directors
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Exhibit 1
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION. "Management's Discussion and Analysis of Results of
Operations and Financial Condition" on pages 7 - 10 of the Company's 1999 Annual
Report to Shareholders is incorporated herein by reference in response to this
item, except that the estimated net capital expenditures is expected to be
approximately $28,400,000 rather than the $40,700,000 on page 10 of the
Company's 1999 Annual Report. You should read the following discussion and
analysis and the discussion and analysis incorporated by reference from the
Company's 1999 Annual Report in conjunction with "Item 6. Selected Financial
Data" and "Item 8. Financial Statements and Supplementary Data" incorporated
herein by reference from the Company's 1999 Annual Report, which may contain
forward-looking statements relating to our future financial performance,
business strategy, financing plans and other future events that involve
uncertainties and risks. The Company's actual results could differ materially
from the results anticipated by such forward-looking statements as a result of
many known and unknown factors, including but not limited to those discussed
below, those discussed in "-Factors Affecting Future Performance" in the
Company's 1999 Annual Report and those discussed elsewhere in this report and
the Company's 1999 Annual Report. IN ADDITION TO THE "-FACTORS AFFECTING FUTURE
PERFORMANCE" INCORPORATED HEREIN BY REFERENCE FROM THE COMPANY'S 1999 ANNUAL
REPORT, ANOTHER FACTOR AFFECTING FUTURE PERFORMANCE IS THAT THE COMPANY HAS
ADOPTED MEASURES THAT HAVE ANTI-TAKEOVER EFFECTS, WHICH MAY DISCOURAGE
TRANSACTIONS THAT MAY BE BENEFICIAL TO STOCKHOLDERS. Under the Company's
Certificate of Incorporation, the Board of Directors may issue Preferred Stock,
with any rights the Company wishes to assign them, without stockholder action.
The Company has also adopted a Stockholder Rights Plan under which the Company
has distributed rights to purchase shares of its Participating Preferred Stock
to its stockholders. If certain triggering events occur, the holders of the
rights will be able to purchase shares of Common Stock at a price substantially
discounted from the then applicable market price of the Common Stock. The
Company has also entered into or anticipates entering into Change of Control
Agreements with certain employees of the Company which, upon certain triggering
events, will cause the Company to pay such employees, in the aggregate,
approximately $1,876,600.
