<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 8, 1995
REGISTRATION NO. 33-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
MARK VII, INC.
(Exact name of Registrant as specified in its charter)
MISSOURI 43-1074964
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10100 N.W. EXECUTIVE HILLS BOULEVARD, SUITE 200
KANSAS CITY, MISSOURI 64153
(816) 891-0500
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
--------------
J. MICHAEL HEAD
EXECUTIVE VICE PRESIDENT
MARK VII, INC.
10100 N.W. EXECUTIVE HILLS BOULEVARD, SUITE 200
KANSAS CITY, MISSOURI 64153
(816) 891-0500
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
--------------
COPIES TO:
Randall B. Sunberg, Esq. Richard C. Tilghman, Jr., Esq.
Shook, Hardy & Bacon P.C. Piper & Marbury L.L.P.
One Kansas City Place and 36 South Charles Street
1200 Main Street Baltimore, Maryland 21201
Kansas City, Missouri 64105-2118
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
--------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED (1) PER SHARE (2) OFFERING PRICE (2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.10 per
share........................... 1,269,613 shares $17.125 $21,742,122.63 $7,497.28
<FN>
(1) Includes 115,419 shares of Common Stock issuable upon exercise of the
Underwriter's over-allotment option.
(2) Estimated pursuant to Rule 457(c) of the Securities Act of 1933, based on
the average of the high and low prices of the Common Stock as reported by
the Nasdaq National Market on May 3, 1995 solely for the purpose of
calculating the registration fee.
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
MAY 8, 1995
1,154,194 SHARES
[LOGO]
COMMON STOCK
---------
All of the 1,154,194 shares of Common Stock of Mark VII, Inc. (the
"Company") offered hereby are being sold by the Company's principal shareholder
and certain related persons (the "Selling Shareholders"). See "Principal and
Selling Shareholders." The Company will not receive any of the proceeds from the
sale of the shares by the Selling Shareholders. The Common Stock is quoted on
the Nasdaq National Market under the symbol "MVII." On May 5, 1995, the last
sale price of the Common Stock as reported on the Nasdaq National Market was
$16 7/8 per share. See "Price Range of Common Stock and Dividend Policy."
--------------
SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS TO
TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) SHAREHOLDERS(1)
<S> <C> <C> <C>
Per Share................................ $ $ $
Total(2)................................. $ $ $
<FN>
(1) Before deducting offering expenses payable by the Selling Shareholders
estimated at $250,000.
(2) The Selling Shareholders have granted the Underwriter a 30-day option to
purchase up to 115,419 additional shares of Common Stock solely to cover
over-allotments, if any. To the extent that the option is exercised, the
Underwriter will offer the additional shares at the Price to Public shown
above. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Selling Shareholders
will be $ , $ and $ , respectively. See "Underwriting."
</TABLE>
--------------
The shares of Common Stock are offered by the Underwriter, subject to prior
sale, when, as and if delivered to and accepted by it, and subject to the right
of the Underwriter to reject any order in whole or in part. It is expected that
delivery of the shares of Common Stock will be made at the offices of Alex.
Brown & Sons Incorporated, Baltimore, Maryland, on or about , 1995.
ALEX. BROWN & SONS
INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1995
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 and at the Regional Offices of the
Commission at 7 World Trade Center, 13th Floor, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
information can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933 (the "Securities
Act"). This Prospectus does not contain all of the information set forth in the
Registration Statement, certain items of which are contained in exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and to the
exhibits thereto for further information with respect to the Company. Any
statements contained herein concerning the provisions of any contract, agreement
or other document are not necessarily complete and, in each instance, reference
is made to the copy of such contract, agreement or other document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
0-14810) pursuant to the Exchange Act are incorporated in and made a part of
this Prospectus by reference: (i) Annual Report on Form 10-K for the year ended
December 31, 1994; (ii) Quarterly Report on Form 10-Q for the period ended April
1, 1995; and (iii) the description of the Common Stock set forth in the
Company's Registration Statement on Form 8-A, as amended, filed with the
Commission on July 23, 1986.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering made by this Prospectus
shall be deemed to be incorporated herein by reference and to be a part hereof.
Any statements contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein (or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein) modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part of this
Prospectus, except as so modified or superseded.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. Such documents (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference) are
available to any person, including any beneficial owner, to whom this Prospectus
is delivered, on written or oral request, without charge, directed to the
Company at 5310 St. Joseph Avenue, St. Joseph, Missouri 64505 (telephone number
(816) 233-3158), Attention: Secretary.
--------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER AND CERTAIN SELLING GROUP
MEMBERS OR THEIR AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN
THE COMMON STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH
RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SEE
"UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS
PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE. PROSPECTIVE PURCHASERS OF THE
SHARES OF COMMON STOCK OFFERED HEREBY SHOULD CAREFULLY CONSIDER, AMONG OTHER
THINGS, THE INFORMATION SET FORTH UNDER THE HEADING "INVESTMENT CONSIDERATIONS."
UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO
EXERCISE OF THE UNDERWRITER'S OVER-ALLOTMENT OPTION.
THE COMPANY
Mark VII, Inc. (the "Company") is a sales, marketing and service
organization that acts as a provider of transportation services and more
recently also as a transportation logistics manager. As a provider of
transportation services, the Company arranges domestic and international
"door-to-door" transportation using a number of transportation modes, including
rail, truck, ship and air. As a logistics manager, the Company provides its
customers with value-added elements of the distribution chain, such as private
fleet management, warehousing, dedicated trucking and regional and local
distribution. Since 1992, the Company has experienced compounded annual growth
in operating revenues and income from continuing operations of approximately 27%
and 43%, respectively.
The Company has established a network of skilled transportation sales
personnel and logistics managers at its headquarters and 90 branch sales offices
in 34 states. The majority of the Company's sales offices are operated by
independent commission agents who are responsible for client relationships,
office expenses and billing. The Company supports its agency offices by
providing expertise in multiple transportation modes, rate negotiation and
logistics design, as well as administrative and credit services.
The Mark VII network acts as a link between shippers and carriers. Shippers
use transportation services companies to either complement or substitute for
in-house transportation departments. The Company complements in-house shipping
departments by providing expertise in multiple modes of transportation,
providing access to additional transportation equipment, negotiating
transportation rates and increasing the productivity of in-house personnel. The
Company provides shippers with an opportunity to outsource all or part of the
transportation function, thereby allowing them to devote assets and personnel to
their primary business. The Company's services are also utilized by
transportation carriers to supplement their in-house sales departments and to
improve equipment utilization. The Company maintains close relationships with
major railroads, trucklines, shipping lines and air freight carriers.
As a knowledge driven logistics company, the Company intends to own and
operate transportation assets only when essential to providing customer service
and likely to provide adequate financial returns. Consistent with this strategy,
in June 1994, the Company entered into an agreement for the sale of
substantially all of the assets of its former truckload subsidiary, MNX
Carriers, Inc. ("Carriers"), which was completed in October 1994 (the "Asset
Sale"). In October 1994, the Company downsized TemStar, Inc. ("TemStar"), its
refrigerated trailer subsidiary.
Roger M. Crouch, the principal Selling Shareholder, was the founder of
Carriers. He discontinued his involvement in the day-to-day management of the
Company following the Asset Sale, although he remains available to serve the
Company on an as-requested basis pursuant to an existing employment agreement
and remains subject to a non-compete agreement. Mr. Crouch intends to resign as
a director of the Company upon completion of this offering.
The Company was organized as a Missouri corporation in 1976. The Company's
corporate offices are located at 10100 N.W. Executive Hills Boulevard, Suite
200, Kansas City, Missouri 64153, and its telephone number is (816) 891-0500.
Unless the context requires otherwise, all references to the Company include the
Company and its wholly owned subsidiaries, including its transportation services
subsidiary, Mark VII Transportation Company, Inc. ("Mark VII").
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Selling Shareholders........ 1,154,194 shares
Common Stock outstanding before and after offering...... 4,834,936 shares(1)
Nasdaq National Market Symbol........................... MVII
<FN>
- --------------
(1) Excludes 1,232,349 shares reserved for issuance under the Company's stock
option plans (of which options to purchase 632,349 shares are outstanding,
with a weighted average exercise price of $10.50 per share).
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<TABLE>
<CAPTION>
FISCAL YEAR(1) THREE MONTHS(2)
----------------------------------------------------- --------------------
1990(3) 1991 1992 1993 1994 1994 1995
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME DATA:
Operating revenues........................ $ 103,806 $ 195,246 $ 264,881 $ 341,532 $ 428,772 $ 93,096 $ 105,456
Transportation costs...................... 93,229 171,196 230,100 296,656 370,232 80,949 89,791
--------- --------- --------- --------- --------- --------- ---------
Net revenues.............................. 10,577 24,050 34,781 44,876 58,540 12,147 15,665
Operating income (loss)................... (57) 1,257 3,645 4,457 6,847 925 1,441
Income (loss) from continuing operations
before income taxes...................... (700) 655 3,035 4,199 6,267 817 1,336
Income (loss) from continuing
operations............................... (420) 393 1,791 2,490 3,667 462 780
Fully diluted earnings (loss) per share
from continuing operations............... $ (.09) $ .08 $ .38 $ .51 $ .75 $ .09 $ .16
Average fully diluted common shares and
equivalents outstanding.................. 4,720 4,802 4,759 4,918 4,901 4,977 4,978
OPERATING DATA:
Total loads............................... 84,000 151,000 202,000 276,000 368,000 78,000 93,000
As of the end of the period:
Branch sales offices -- Company......... 13 13 16 18 19 19 17
-- Agency.............. 26 35 60 75 74 73 73
Employees............................... 95 163 175 282 405 321 360
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA: APRIL 1, 1995
-------------
<S> <C>
Working capital.................................................................................. $ 13,689
Total assets..................................................................................... 67,693
Total debt....................................................................................... 11,465
Shareholders' investment......................................................................... 24,528
<FN>
- ------------------
(1) The Company's fiscal year ends on the Saturday nearest December 31. Fiscal
years 1990, 1991, 1993 and 1994 included 52 weeks and fiscal year 1992
included 53 weeks.
(2) The Company's fiscal first quarters for the years 1994 and 1995 ended on
April 2 and April 1, respectively.
(3) The Company acquired Mark VII on July 2, 1989. Mark VII was a start-up
operation and incurred operating losses in early 1990 before achieving a
profitable level of operations in late 1990.
</TABLE>
4
<PAGE>
INVESTMENT CONSIDERATIONS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING AN INVESTMENT IN
THE SHARES OF COMMON STOCK OFFERED HEREBY:
POSSIBLE EFFECT OF ECONOMIC DEVELOPMENTS
Interest rate fluctuations, economic recession, customers' business cycles,
availability of qualified drivers, changes in fuel prices and supply, increases
in fuel or energy taxes and the transportation costs of third party carriers are
economic factors over which the Company has little or no control. Increased
operating expenses incurred by transportation carriers can be expected to result
in higher transportation costs, and the Company's operating margins would be
adversely affected if it were unable to pass through to its customers the full
amount of increased transportation costs. Economic recession or a downturn in
customers' business cycles, particularly in industries in which the Company has
a large number of customers, also could have a materially adverse effect on the
Company's operating results due to reduced volume of loads.
DEPENDENCE ON EQUIPMENT AND SERVICES AVAILABILITY
The Company is dependent in part on the availability of transportation
equipment, including trailers and containers, and services, including drivers
and rail service, provided by independent third parties. If the Company were
unable to secure sufficient transportation equipment or services to meet its
customers' needs, its results of operations could be materially adversely
affected. See "The Company -- Transportation Modes."
RELIANCE ON AGENTS
The Company relies upon the services of independent commission agents to
market its transportation services and to act as intermediaries with customers.
Although the Company believes its relationship with its agents is satisfactory,
there can be no assurance that the Company will continue to be successful in
retaining its agents or that agents who terminate their contracts can be
replaced by equally qualified persons. In addition, the Company relies heavily
on the efforts and abilities of R.C. Matney, its Chairman of the Board,
President and Chief Executive Officer, to attract and retain agents. Because the
agents often have the primary relationship with customers, some customers could
be expected to terminate their relationship with the Company were a particular
agent to terminate his or her relationship with the Company. See "The Company --
Agency Network and Operations."
STATUS OF AGENTS AND FLEET CONTRACTORS
Although management believes that the Company's independent commission
agents and fleet contractors are not employees of the Company under existing
interpretations of federal and state tax laws, there can be no assurance that
tax authorities will not successfully challenge this position, or that such
interpretations or tax laws will not change. If the agents and fleet contractors
were determined to be employees, such determination would materially increase
the Company's operating expenses, primarily employment taxes, workers'
compensation and health insurance. See "The Company -- Agency Network and
Operations."
COMPETITION
The transportation services industry is highly competitive. The Company
competes against other integrated logistics companies, as well as third party
brokers and carriers offering logistics services. The Company also competes
against carriers' internal sales forces and shippers' transportation
departments. This competition is based primarily on freight rates, quality of
service, reliability, transit times and scope of operations. Several other
logistics companies and third party brokers and numerous carriers have
substantially greater financial and other resources and are more established
than the Company. The Company also competes with third party brokers for the
services of independent commission agents and with trucklines for the services
of fleet contractors and drivers. See "The Company -- Competition."
5
<PAGE>
IMPORTANCE OF CERTAIN CUSTOMERS
During 1994, the Company's ten and five largest customers accounted for
approximately 26% and 19%, respectively, of operating revenues. The loss of one
or more large customers could have a materially adverse effect on the Company's
operating results.
GOVERNMENT REGULATION
Mark VII is licensed by the Interstate Commerce Commission (the "ICC") as a
broker in arranging for the transportation, by motor vehicle, of general
commodities between points in the United States. The ICC prescribes
qualifications for acting in this capacity, including certain surety bonding
requirements. In its ocean freight forwarding business, Mark VII is licensed as
an ocean freight forwarder and as a non-vessel operating common carrier by the
Federal Maritime Commission. Mark VII's air freight forwarding business is
subject to regulation, as an indirect air cargo carrier, under the Federal
Aviation Act by the Department of Transportation (the "DOT"). Mark VII also is
subject to certain foreign regulations. Several of the Company's other
subsidiaries are common and contract motor carriers regulated by the ICC and
various state agencies. The Company's motor carrier operations are subject to
safety regulations of the DOT related to such matters as hours of service by
drivers, equipment inspection and equipment maintenance. Violation of these
regulations could increase claims liability, including for uninsured punitive
damages. Violations also could subject the Company to fines or, in the event of
a serious violation, suspension or revocation of operating authority. All of
these regulatory authorities have broad powers, generally governing activities
such as authority to engage in motor carrier operations, rates and charges, and
certain mergers, consolidations and acquisitions. Although compliance with these
regulations has not had a materially adverse effect on the Company's operations
or financial condition in the past, there can be no assurance that such
regulations or changes thereto will not adversely impact the Company's
operations in the future.
SEASONALITY
In the transportation industry generally, results of operations show a
seasonal pattern, as customers reduce shipments during and after the winter
holiday season. In recent years, the Company's operating income and earnings
have been higher in the second and third quarters than in the first and fourth
quarters.
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent upon the efforts and abilities of Mr.
Matney. Although the Company believes that it has developed an experienced and
talented management team, the loss of Mr. Matney could have a materially adverse
effect on the Company. The Company has a long-term employment contract with Mr.
Matney and maintains key man life insurance with respect to Mr. Matney in the
face amount of $3 million. See "Management."
POSSIBLE FLUCTUATIONS IN STOCK PRICE
The market price of the Common Stock could be subject to significant
fluctuations in response to variations in the Company's quarterly operating
results, general trends in the transportation industry, general market and
economic conditions and other factors, many of which are beyond the control of
the Company.
6
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the Common
Stock offered hereby.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is quoted on the Nasdaq National Market under the symbol
"MVII." The following table sets forth the high and low sales prices per share
of the Common Stock as reported on the Nasdaq National Market for the fiscal
periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
----------- -----------
<S> <C> <C>
1993:
First Quarter................................................................................. $ 81/4 $ 53/4
Second Quarter................................................................................ 87/8 53/4
Third Quarter................................................................................. 111/4 83/4
Fourth Quarter................................................................................ 131/8 91/2
1994:
First Quarter................................................................................. $ 151/4 $ 115/8
Second Quarter................................................................................ 147/8 117/8
Third Quarter................................................................................. 14 91/8
Fourth Quarter................................................................................ 115/8 91/4
1995:
First Quarter................................................................................. $ 181/2 $ 111/8
Second Quarter (through May 5, 1995).......................................................... 177/8 161/2
</TABLE>
On May 5, 1995, the last reported sale price of the Common Stock on the
Nasdaq National Market was $16 7/8 per share. As of March 15, 1995 there were
264 shareholders of record, representing approximately 1,500 beneficial holders
of the Common Stock.
The Company has never paid a cash dividend on the Common Stock. It is the
intention of the Board of Directors to continue to retain earnings to finance
the growth of the Company's business rather than to pay cash dividends. Future
payments of cash dividends will depend upon the financial condition, results of
operations and capital commitments of the Company, as well as other factors
deemed relevant by the Board of Directors. The Company and its subsidiaries are
currently subject to the terms of a line of credit that requires approval of the
lender before paying dividends. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
7
<PAGE>
THE COMPANY
INDUSTRY OVERVIEW
According to the most recently available industry data, domestic
transportation is an approximately $390 billion a year industry. Approximately
$312 billion, or 80%, is generated by the trucking industry, $190 billion of
which is generated by non-local trucking, and $31 billion, or 8%, by rail. The
largest segment of the non-local trucking industry is comprised of private
fleets owned and operated by the shipper, a $100 billion segment. This segment
has been gradually shrinking since 1980 as truckload carriers have become more
service oriented in a deregulated environment. The shippers' focus on
profitability has driven a trend toward outsourcing the ownership and management
of private fleets. The next largest segment, for-hire truckload, is a $53
billion segment, over half of which is comprised of specialized niches such as
household goods, temperature-controlled, flats and tanks. Truckload carriers
have traditionally focused on providing services within only one of these
niches, with few dominating any particular niche or operating equipment in
multiple niches.
The majority of the rail industry consists of traditional equipment, such as
boxcar and hopper, utilized in single mode service. A significant portion of
rail is characterized as intermodal business, where rail service is augmented by
other modes of transportation, usually truckline, for parts of the shipment's
journey. Intermodal service utilizes trailer-on-flat car, container-on-flat car
and double stack container for the rail portion of the journey. Railroads have
traditionally marketed their own services. However, in the intermodal segment,
railroads have relied almost exclusively on third party sales agents, primarily
due to the need to arrange other transportation modes on either end of the rail
journey. In recent years, railroads have imposed volume minimums and higher
credit standards on third party brokerage firms that wish to arrange intermodal
transportation, thus creating growth opportunities for larger transportation
services companies and contributing to further consolidation. The Company is one
of a few large transportation services companies, with the majority of the
market consisting of small brokers.
Historically, most transportation services have been provided by brokers
with capabilities in only one or a very limited number of modes. Mark VII has
differentiated itself by providing traditional transportation services in
virtually every mode, as well as by combining these services with logistics
services, including private fleet management, warehousing, dedicated trucking
and regional and local distribution. Mark VII's logistics managers have the
ability to utilize a portfolio of transportation products and design optimal
transportation solutions for shippers. Mark VII's competitive advantage results
from the experience and knowledge of its logistics managers and in the market
information it possesses from its diverse revenue base.
Shippers increasingly use computer technology to control inventory carrying
costs and improve customer service by decreasing shipping time through
"just-in-time" delivery systems. The complex distribution systems that result
require not only selection of the proper mode to transport freight, but
management in a way that minimizes overall logistics costs. At the same time, in
an effort to reduce overhead costs and introduce the expertise necessary to
manage their distribution systems, many shippers have sought to downsize their
transportation departments by outsourcing all or a portion of the traffic
function, particularly private fleet management.
GENERAL
The Company is a sales, marketing and service organization that acts as a
provider of transportation services and more recently also as a transportation
logistics manager. As a provider of transportation services, the Company
arranges domestic and international "door-to-door" transportation using a number
of different transportation modes, including rail, truck, ship and air. As a
logistics manager, the Company provides its customers with value-added elements
of the distribution chain, such as private fleet management, warehousing,
dedicated trucking and regional and local distribution.
The Company has established a network of skilled transportation sales
personnel and logistics managers at its operating headquarters in Memphis,
Tennessee and 90 branch sales offices in 34 states. Most of the Company's sales
offices are operated by independent commission agents responsible for
8
<PAGE>
client relationships, office expenses and billing. The Company supports its
agency offices by providing expertise in multiple transportation modes, rate
negotiation and logistics design, as well as administrative and credit services.
The Mark VII network of agents acts as a link between shippers and carriers.
Shippers use transportation services companies to either complement or
substitute for in-house transportation departments. The Company augments
in-house shipping departments by providing expertise in multiple modes of
transportation, providing access to additional transportation equipment,
negotiating transportation rates and increasing the productivity of in-house
personnel. The Company provides shippers with an opportunity to outsource all or
part of the transportation function, thereby allowing them to devote assets and
personnel to their primary business. The Company's services are also utilized by
transportation carriers to supplement their in-house sales departments and to
improve equipment utilization. The Company maintains close relationships with
major railroads, trucklines, shipping lines and air freight carriers.
STRATEGY
The Company's mission is to solve customers' transportation problems, not
just sell individual transportation products. The Company's business strategy
includes the following principal elements:
EXPERTISE IN MULTIPLE MODES OF TRANSPORTATION. Mark VII provides a
network of logistics professionals with expertise in virtually every mode of
transportation, allowing a shipper to work with a single source for all of
its shipping requirements. These professionals arrange the mode of service
which best fits each customer's unique time, rate and reliability
specifications. These specifications may involve the use of a simple
commodity service or a complex system design. Mark VII also provides
carriers access to freight that might not otherwise be available to them.
Mark VII's broad expertise and substantial customer base allow the Company
to negotiate effectively with both shippers and carriers.
EXPERTISE IN LOGISTICS SERVICES. While Mark VII has traditionally
offered services involving different modes of transportation, it also offers
logistics services in response to customers' trends towards outsourcing
their transportation needs. Management believes that Mark VII's expertise in
logistics services gives the Company a competitive advantage, in attracting
new and repeat business, over traditional freight brokers and companies
offering a single mode of transportation.
LIMITED OWNERSHIP OF TRANSPORTATION EQUIPMENT. Mark VII intends to own
and operate transportation assets only when essential to providing customer
service and likely to provide adequate financial returns. The Company
believes that this strategy requires less capital for growth than a more
intensive asset ownership operation and evidences Mark VII's dedication to
seek the mode of transportation most advantageous to the customer, rather
than seeking to improve utilization of owned equipment.
EXPANSION OF THE MARK VII NETWORK. The Company has established a
nationwide network of employee and agent sales personnel and employee
logistics managers. The Company has linked a network of individuals who have
expertise in various modes of transportation to create a full service
organization. To attract additional sales personnel and retain existing
personnel, Mark VII provides its employees and agents with quality support
services through product line management and purchasing power with carriers.
The Company believes that it will continue to be able to attract qualified
agents due to its size and the scope of the services it provides.
FOCUS ON QUALITY. The Company believes that providing quality service
has been a critical factor in its past success. Accuracy and completeness of
documentation, on-time delivery and availability of logistics information
are important measures of the quality of Mark VII's service. Mark VII has
received DISTRIBUTION MAGAZINE'S "Quest for Quality" award for 1992, 1993
and 1994.
EXPANSION OF SERVICES TO EXISTING CUSTOMERS. The Company believes that
its customers represent a receptive market for additional transportation and
logistics services.
9
<PAGE>
SERVICES PROVIDED
The Company's services can be broadly classified into the following
categories:
TRANSACTION-BASED SERVICES. "Transaction-based" services are identified
with the traditional freight brokerage business where a shipper calls a
transportation services company to arrange for service on a load-by-load
basis. The transportation services company then assumes responsibility for
the transportation carrier to perform in accordance with the shipper's
specifications. Traditionally, a shipper calls a transportation services
company when it cannot find needed transportation equipment. Similarly, a
carrier may call a transportation services company when it needs freight to
transport. The transportation services company arranges a match and adds a
fee to the carrier's rate.
LOGISTICS MANAGEMENT-BASED SERVICES. "Logistics management-based"
services include both process-based and information/knowledge-based
services. Process-based services involve Mark VII taking responsibility for
all transactions of a particular type for a shipper or carrier. The
Company's expertise in intermodal and truck brokerage has led shippers and
carriers to request Mark VII to regularly arrange loads for a pre-arranged
fee. Both shippers and carriers avail themselves of this service, often
realizing financial savings due to Mark VII's volume discounts and
information base and its ability to arrange loads more efficiently. Mark VII
can help trucklines maintain competitive positions, including providing them
the ability to supplement their sales and marketing efforts without
incremental fixed costs. Process-based services generally are a result of
the full or partial outsourcing of internal traffic department functions.
For example, Mark VII currently coordinates the time-sensitive raw potato
delivery for a number of processing plants of a major potato chip
manufacturer. Other examples of logistics management based services
currently being executed by Mark VII are the procurement of truck and rail
services for a substantial portion of a shipper's loads from a particular
location, procurement of backhaul loads for private fleets, freight
consolidation and forwarding for a customer with complex logistical needs,
utilization management of an equipment owner's fleet and operation of small
dedicated fleets to service several logistics customers.
Information/knowledge-based services involve management and consultation
on any and all aspects of transportation for a shipper or carrier, including
dedicated fleet, warehousing and risk management. Mark VII utilizes its
sales network to design transportation and distribution programs for
customers with complex logistical needs. For example, ERX Logistics, a joint
venture between the Company and a warehousing firm, provides a major
household appliance manufacturer with warehousing and time-sensitive
delivery of its appliances to its dealers and building contractor customers.
As part of its private fleet management services, the Company offers risk
management and single source leasing. The risk management group provides
consultation services, driver recruiting, safety program design, regulatory
compliance and claims handling. These services are being marketed by the
Company to transportation companies and may be used separately or combined
with the overall logistics management function. Under the Company's single
source leasing program, the Company will arrange the lease of a fully
licensed and insured tractor, trailer and driver on behalf of the fleet
operator.
TRANSPORTATION MODES
Transportation modes used in the Company's services have been organized into
product lines. Each product line has one or more managers to provide marketing
and operational support to the Company's network of sales and logistics
professionals.
INTERMODAL SERVICES. Intermodal services involves the Company's arranging
for the pick up and delivery of shipments by trucklines, and the shipments'
transport by railroads, in a coordinated manner. Related services may include
load stabilization, transfer of loads from one container to another and
arranging for customs brokerage.
10
<PAGE>
TRUCK BROKERAGE. Truck brokerage often involves daily negotiating and spot
pricing, as compared to longer-term pricing with railroads. In addition,
trucklines actively solicit loads from Mark VII's sales offices. Although the
Company owns or leases only a limited equipment base, it has access to over
400,000 truckload units provided by trucklines meeting the Company's safety and
service criteria.
NVOCC BROKERAGE. Ocean freight brokerage involves acting as agents for
shippers and importers under non-vessel operating common carrier authority
(NVOCC) to arrange for the services of ocean carriers.
RAIL SERVICES. Rail services, separate from intermodal services, involve
obtaining rail transport by boxcar or gondola for shippers' heavy or bulky
freight.
OTHER SERVICES. Other services, such as air freight forwarding, local
truckload and heavy equipment transport, are important to Mark VII's strategy
because they respond to a customer's total transportation needs and provide the
Mark VII network of sales personnel and logistics managers a complete range of
services to sell.
AGENCY NETWORK AND OPERATIONS
Mark VII's operations are decentralized and are conducted primarily in
branch offices. Of the 90 branch offices, 17 are operated by Mark VII and 73 are
operated under agency agreements, for a total of 249 agent sales personnel.
Contracts with agents have a duration of ten years and are terminable by either
party on each anniversary of the agreement by giving 30 days' notice. Although
the Company's contracts with its agents are non-exclusive, the Company's agents
generally do not provide services on behalf of other transportation services
companies. Agency offices operate as independent businesses, responsible for all
costs associated with sales, operations, billing and any related overhead for
these items and are compensated by a percentage of fees associated with
transportation arranged. Each of the 73 agency branches is responsible for
obtaining its own office facilities. Offices operated by Company employees,
rather than agents, are structured as stand-alone business units. Most sales
offices have one to three operations people, who are responsible for controlling
all aspects of executing the load, including (i) taking the order from the
customer, (ii) arranging for carriers' services, (iii) monitoring progress of
the load and reporting back to the customer and (iv) billing the customer on the
Company's invoice forms. After billing, the Company's credit and collections
department assumes responsibility for collections, through its central corporate
lockbox arrangement. To foster the growth of its agency network, the Company
provides new agents with advances to cover start-up and initial operating costs,
which advances are repaid generally over 24 months.
Typically, an employee or agent sales person identifies a potential customer
and determines its transportation requirements. The sales person then prepares a
rate proposal from pricing data negotiated by the Company with representatives
of the carriers and the providers of other services that may be required. Before
any rate proposal is presented to a customer, credit approval must be obtained
from the Company's corporate credit department. Upon customer acceptance of a
rate proposal, the operations unit in the sales office assumes responsibility
for executing individual load orders for that customer.
The Company provides administrative support, such as computer systems
support, sales support, credit services, collection services and accounts
payable services, to its branch office operations. Specialty operations such as
risk management, design and management of dedicated trucking operations and
truck brokerage are available to support the logistics management services
operations. The Company utilizes a Data General model MV9600 computer and
customized software which integrates load tracking, customer records and
billing, accounts payable and general accounting. This system can also access
the computer systems of railroads to maintain up-to-date information on all
loads. The Company also utilizes its electronic data interchange capabilities
with a number of carriers and shippers so that customers may follow the movement
of their shipments and receive electronic billing.
As additional equipment support for the Company's dedicated trucking
services to logistics customers, the Company manages 17 owned tractors, 89
tractors owned by fleet contractors, 34 tractors leased on a month-to-month
basis, 79 tractors leased with annual cancellation provisions and approximately
11
<PAGE>
400 owned or leased trailers. The Company also leases 154 and owns 102 domestic
containers which are used in intermodal service and owns 213
temperature-controlled trailers used primarily in intermodal service.
COMPETITION
The transportation services industry is highly competitive. The Company
competes against other integrated logistics companies, as well as transportation
services companies. The Company also competes against carriers' internal sales
forces and shippers' transportation departments. This competition is based
primarily on freight rates, quality of service (such as damage free shipments,
on-time delivery and consistent transit times), reliable pickup and delivery and
scope of operations. Other logistics companies and transportation services
companies and numerous carriers have substantially greater financial and other
resources than the Company. The Company also competes with transportation
services companies for the services of independent commission agents, and with
trucklines for the services of independent contractors and drivers.
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
The following selected consolidated financial data as of and for each of the
years in the five-year period ended December 31, 1994 are derived from the
Company's consolidated financial statements which have been audited by Arthur
Andersen LLP, independent public accountants. The following selected
consolidated financial data for the three month periods ended April 2, 1994 and
April 1, 1995 are derived from the Company's unaudited consolidated financial
statements which, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of such data. Interim results are not necessarily indicative of
results for the full year. The following selected consolidated financial data
should be read in conjunction with the Company's Consolidated Financial
Statements and Notes thereto incorporated by reference into this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR(1) THREE MONTHS(2)
----------------------------------------------------- --------------------
1990(3) 1991 1992 1993 1994 1994 1995
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME DATA:
Operating revenues....................... $ 103,806 $ 195,246 $ 264,881 $ 341,532 $ 428,772 $ 93,096 $ 105,456
Transportation costs..................... 93,229 171,196 230,100 296,656 370,232 80,949 89,791
--------- --------- --------- --------- --------- --------- ---------
Net revenues............................. 10,577 24,050 34,781 44,876 58,540 12,147 15,665
Operating expenses:
Salaries and related costs............. 4,217 6,775 8,820 10,946 13,926 3,122 3,903
Selling, general and administrative.... 6,081 14,639 19,881 25,652 32,493 7,053 8,730
Equipment rents........................ -- 934 1,874 2,850 4,006 778 1,330
Depreciation and amortization.......... 336 445 561 971 1,268 269 261
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses............. $ 10,634 $ 22,793 $ 31,136 $ 40,419 $ 51,693 $ 11,222 $ 14,224
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss).................. (57) 1,257 3,645 4,457 6,847 925 1,441
Interest and other expense, net.......... 643 602 610 258 580 108 105
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from continuing operations
before income taxes..................... (700) 655 3,035 4,199 6,267 817 1,336
Provision for (benefit from) income
taxes................................... (280) 262 1,244 1,709 2,600 355 556
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from continuing
operations.............................. (420) 393 1,791 2,490 3,667 462 780
Income (loss) from and on discontinued
operations(4)........................... 640 1,268 (2,427) (13,754) (1,286) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)........................ $ 220 $ 1,661 $ (636) $ (11,264) $ 2,381 $ 462 $ 780
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Fully diluted earnings (loss) per share:
Income (loss) from continuing
operations............................ $ (.09) $ .08 $ .38 $ .51 $ .75 $ .09 $ .16
Income (loss) from and on discontinued
operations(4)......................... .14 .27 (.51) (2.80) (.26) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)...................... $ .05 $ .35 $ (.13) $ (2.29) $ .49 $ .09 $ .16
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Average fully diluted common shares and
equivalents outstanding............... 4,720 4,802 4,759 4,918 4,901 4,977 4,978
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital of continuing
operations.............................. $ 3,466 $ 2,286 $ 5,457 $ 6,770 $ 14,928 $ 7,871 $ 13,689
Total assets of continuing operations.... 16,975 24,775 37,479 53,585 73,726 58,342 67,693
Total debt of continuing operations...... -- 4,207 5,940 11,337 10,787 12,836 11,465
Shareholders' investment................. 31,007 32,696 32,230 21,047 23,473 21,508 24,528
OPERATING DATA:
Total loads.............................. 84,000 151,000 202,000 276,000 368,000 78,000 93,000
As of the end of the period:
Branch sales offices -- Company........ 13 13 16 18 19 19 17
-- Agency............. 26 35 60 75 74 73 73
Employees.............................. 95 163 175 282 405 321 360
<FN>
- ------------------
(1) The Company's fiscal year ends on the Saturday nearest December 31. Fiscal
years 1990, 1991, 1993 and 1994 included 52 weeks and fiscal year 1992
included 53 weeks.
(2) The Company's fiscal first quarter for the years 1994 and 1995 ended on
April 2 and April 1, respectively.
(3) The Company acquired Mark VII on July 2, 1989. Mark VII was a start-up
operation and incurred operating losses in early 1990 before achieving a
profitable level of operations in late 1990.
(4) The historical operations of the Company's former truckload business have
been classified as a discontinued operation.
</TABLE>
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Selected Consolidated Financial and Operating Data of the Company in
this Prospectus sets forth certain information with respect to the Company's
financial position and results of operations which should be read in conjunction
with the following discussion and analysis. The following discussion and
analysis does not include an analysis of the Company's former truckload
operations, which were reported as discontinued operations beginning in December
1993 and substantially all of the assets of which were sold in connection with
the Asset Sale.
RESULTS OF OPERATIONS
The transportation services operation contracts with carriers for the
transportation of freight by rail, truck, ocean or air for shippers. Operating
revenues include the carriers' charges for carrying shipments plus commissions
and fees. The carriers with whom the Company contracts provide transportation
equipment, the charge for which is included in transportation costs. As a
result, the primary operating cost in the transportation services operation is
for purchased transportation. Net revenues include only the commissions and
fees. Truck brokerage operations have higher average net revenues as a
percentage of total revenues than intermodal operations; however, the amount of
average net revenues per load is lower due to the relatively smaller size of
shipments (measured in volume, weight or length of haul). Management expects
truck brokerage operations to continue to be the fastest growing part of the
Company's transportation services operations.
Selling, general and administrative expenses include the percentage of the
net revenues paid to agencies as consideration for providing sales and
marketing, arranging for movement of loads, entering billing and accounts
payable information on loads and maintaining customer relations, as well as
other operating expenses. The logistics management and dedicated trucking
operations incur a greater proportion of their costs in equipment rents,
salaries and related costs, and selling, general and administrative costs than
do the Company's transportation services operations. Lease payments for
tractors, trailers and domestic containers are included in equipment rents.
The following table sets forth the percentage relationship of the Company's
revenue and expense items to operating revenues for the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL FIRST QUARTER
------------------------------- --------------------
1992 1993 1994 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating revenues......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Transportation costs....................................... 86.9 86.9 86.3 87.0 85.1
--------- --------- --------- --------- ---------
Net revenues............................................... 13.1 13.1 13.7 13.0 14.9
Operating expenses:
Salaries, wages and related costs........................ 3.3 3.2 3.2 3.3 3.7
Selling, general and administrative...................... 7.5 7.5 7.6 7.6 8.3
Equipment rents.......................................... .7 .8 .9 .8 1.3
Depreciation and amortization............................ .2 .3 .3 .3 .2
--------- --------- --------- --------- ---------
Total operating expenses................................. 11.7 11.8 12.0 12.0 13.5
--------- --------- --------- --------- ---------
Operating income........................................... 1.4 1.3 1.7 1.0 1.4
Interest and other expense, net............................ .3 .1 .2 .1 .1
--------- --------- --------- --------- ---------
Income from continuing operations before
income taxes.............................................. 1.1 1.2 1.5 .9 1.3
Provision for income taxes................................. .4 .5 .6 .4 .6
--------- --------- --------- --------- ---------
Income from continuing operations.......................... .7% .7% .9% .5% .7%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
14
<PAGE>
FISCAL FIRST QUARTER 1995 COMPARED TO FISCAL FIRST QUARTER 1994
OPERATING REVENUES. The increase in total operating revenues is summarized
in the following table:
<TABLE>
<CAPTION>
Increase (decrease) from: QTR 1 1995
VS.
QTR 1 1994
-------------
(IN
THOUSANDS)
<S> <C>
Loads arranged.............................................. $ 7,738
Revenues per load arranged.................................. (585)
Logistics management........................................ 5,661
Dedicated trucking.......................................... 2,577
Temperature-controlled...................................... (3,031)
-------------
Total increase.............................................. $ 12,360
</TABLE>
The 19% increase in the number of loads arranged resulted from the expansion
of services to existing and new customers, an increase in the sales force and
the increase in logistics management operations. The active sales force,
including agents, was 192 as of the end of the first quarter of 1994 and 249 as
of the end of the first quarter of 1995. Average revenues per load arranged
decreased by 1% for the quarter from the corresponding period of 1994 as the
greatest increase in business was generated in truck brokerage, which produces
lower average revenues per load than intermodal operations. The Company has
continued to increase its dedicated trucking and other logistics management
operations, which had combined operating revenues of $14.4 million in the first
quarter of 1994 compared to $22.6 million in the first quarter of 1995. The
decrease in temperature-controlled revenues resulted from management's decision
during the fourth quarter of 1994 to reduce TemStar's operations to service only
a core group of customers.
TRANSPORTATION COSTS. The increase in purchased transportation expense was
the result of the following factors:
<TABLE>
<CAPTION>
Increase (decrease) from: QTR 1 1995
VS.
QTR 1 1994
-------------
(IN
THOUSANDS)
<S> <C>
Loads arranged.............................................. $ 6,895
Costs per load arranged..................................... (2,081)
Logistics management........................................ 5,553
Dedicated trucking.......................................... 641
Temperature-controlled...................................... (2,166)
-------------
Total increase.............................................. $ 8,842
</TABLE>
Average transportation costs per load decreased 3% due to increased volume
incentives from carriers, the growth in truck brokerage operations (which have
lower transportation costs per load than intermodal services) as a percentage of
total transportation services and favorable rates on purchased transportation
resulting from excess transportation equipment capacity.
15
<PAGE>
NET REVENUES. The increase in net revenues is summarized in the following
table:
<TABLE>
<CAPTION>
Increase (decrease) from: QTR 1 1995
VS.
QTR 1 1994
-------------
(IN
THOUSANDS)
<S> <C>
Loads arranged.............................................. $ 843
Net revenues per load arranged.............................. 1,496
Logistics management........................................ 108
Dedicated trucking.......................................... 1,935
Temperature-controlled...................................... (864)
-------------
Total increase.............................................. $ 3,518
</TABLE>
The increase in net revenues of 29% for the quarter was principally the
result of increased net revenues per load arranged, increased volume of loads
arranged and increased dedicated trucking operations. Net revenues per load
arranged increased from the first quarter of 1994 primarily due to the decrease
in transportation costs per load discussed above. Net revenues from dedicated
trucking operations increased substantially because a greater proportion of
their operating costs are included in salaries, wages and related costs and
selling, general and administrative expenses.
SALARIES AND RELATED COSTS. The 25% increase in this expense for the first
quarter of 1995 was a result of the following:
<TABLE>
<CAPTION>
Increase (decrease) from: QTR 1 1995
VS.
QTR 1 1994
---------------
(IN THOUSANDS)
<S> <C>
Transportation services and administration.................. $ 367
Logistics management and dedicated trucking................. 684
Temperature-controlled...................................... (270)
------
Total increase.............................................. $ 781
</TABLE>
The increase in salaries and wages was primarily due to the addition of
driver wages for the Company's dedicated trucking operations, the increase in
logistics management operations, salary increases to existing employees and the
addition of administrative and operations personnel to handle continued growth
in the number of loads arranged. This increase, as well as the increase in
selling, general and administrative expenses discussed below, exceeds the
percentage increase in operating revenues due to growth in the dedicated
trucking and logistics management operations. In addition, these operations
include new projects which have relatively higher fixed costs compared to
operating revenues in their initial stages. While management expects logistics
management and dedicated trucking to continue to grow and, consequently, these
expenses to increase as a percentage of operating revenues, the impact on
operating results should be offset by the increase in net revenues as a
percentage of operating revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The increase in these
expenses is summarized below:
<TABLE>
<CAPTION>
Increase (decrease) from: QTR 1 1995
VS.
QTR 1 1994
-------------
(IN
THOUSANDS)
<S> <C>
Transportation services and administration.................. $ 1,631
Logistics management and dedicated trucking................. 419
Fuel, maintenance and other equipment costs for
temperature-controlled..................................... (372)
-------------
Total increase.............................................. $ 1,678
</TABLE>
16
<PAGE>
Selling, general and administrative expenses increased 24% in the first
quarter of 1995. Transportation services and administration increased primarily
due to commissions paid to agency operating offices and the sales force, which
are based on a percentage of net revenues. Logistics management and dedicated
trucking operations also increased due to the addition of several large projects
subsequent to the first quarter of 1994.
EQUIPMENT RENTS. The 71% increase in this expense was due to the leasing of
additional tractors and trailers for use in dedicated trucking as well as the
leasing of additional intermodal containers.
PROVISION FOR INCOME TAXES. The Company's effective tax rates were 43.5%
and 41.6% in the first quarter of 1994 and 1995, respectively.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations
increased from $461,611, or .5% of operating revenues, in the first quarter of
1994 to $779,712, or .7% of operating revenues, in the first quarter of 1995.
Fully-diluted earnings per share increased by $0.07 from $0.09 in the first
quarter of 1994 to $0.16 in the first quarter of 1995.
FISCAL YEARS 1993 COMPARED TO 1992 AND 1994 COMPARED TO 1993
OPERATING REVENUES. The increases in total operating revenues are
summarized in the following table:
<TABLE>
<CAPTION>
93 V. 92 94 V. 93
Increase (decrease) from: --------- ---------
(IN THOUSANDS)
<S> <C> <C>
Loads arranged....................................... $ 62,337 $ 71,746
Revenues per load arranged........................... (13,754) (20,561)
Logistics management................................. 22,305 32,843
Dedicated trucking................................... 9,320 8,735
Temperature-controlled............................... (3,557) (5,523)
--------- ---------
Total increase....................................... $ 76,651 $ 87,240
</TABLE>
The increases in numbers of loads of 37% and 33% in 1993 and 1994,
respectively, were the result of substantial increases in the sales force, the
increase in logistics management and dedicated trucking operations and the
acquisition of certain air freight forwarding operations in late 1993. The
active sales force at yearend, including agents, was 147 in 1992, 171 in 1993
and 226 in 1994. The increases in the sales force have enabled the Company to
increase the volume shipped by adding new customers and expanding volumes
shipped by existing customers. Average revenues per load arranged decreased by
5% and 6% for 1993 and 1994, respectively, as the greatest increase in volume
was generated in truck brokerage and air freight forwarding, which produce lower
average revenues per load than intermodal services. Additionally, the Company
has continued to increase its logistics management and dedicated trucking
operations through the addition of several large projects and the expansion of
the volume in existing projects. Temperature-controlled revenues (formerly
operated as TemStar) declined in 1994 compared to 1993 due to substantial
reductions in the trailer fleet used in this operation from approximately 500
units in 1992 and 1993 to approximately 260 units at the end of 1994. In
addition, these revenues declined in 1993 compared to 1992 in part as a result
of the flooding in the midwest.
17
<PAGE>
TRANSPORTATION COSTS. The increases in purchased transportation expense
were the result of the following factors:
<TABLE>
<CAPTION>
93 V. 92 94 V. 93
Increase (decrease) from: --------- ---------
(IN THOUSANDS)
<S> <C> <C>
Loads arranged....................................... $ 55,233 $ 63,945
Costs per load arranged.............................. (10,776) (18,220)
Logistics management................................. 18,935 27,971
Dedicated trucking................................... 5,632 3,703
Temperature-controlled............................... (2,468) (3,823)
--------- ---------
Total increase....................................... $ 66,556 $ 73,576
</TABLE>
The 4% and 6% decreases in 1993 and 1994, respectively, in average costs per
load arranged were the result of the growth in the truck brokerage and air
freight forwarding businesses which have lower average transportation costs per
load than intermodal services. Because the logistics management and dedicated
trucking operations incur a greater proportion of their costs in equipment
rents, salaries and related costs, and selling, general and administrative costs
than do the Company's transportation services operations, the overall increases
in transportation costs were substantially lower than the overall increases in
operating revenues. Transportation costs for the temperature-controlled group
declined in 1994 due to the reduction in this operation as discussed above and
in 1993 in part as a result of reduced volumes of loads caused by the flooding
in the midwest.
NET REVENUES. The increases in net revenues are summarized in the following
table:
<TABLE>
<CAPTION>
93 V. 92 94 V. 93
Increase (decrease) from: --------- ---------
(IN THOUSANDS)
<S> <C> <C>
Loads arranged......................................... $ 7,104 $ 7,801
Net revenues per load arranged......................... (2,978) (2,340)
Logistics management................................... 3,370 4,872
Dedicated trucking..................................... 3,688 5,032
Temperature-controlled................................. (1,089) (1,701)
--------- ---------
Total increase......................................... $ 10,095 $ 13,664
</TABLE>
The increases in net revenues of 29% and 30% in 1993 and 1994, respectively,
were partially the result of increased volumes of loads arranged by the Company.
The increases in the truck brokerage and air freight forwarding businesses as a
percentage of total transportation services operations in 1993 and 1994 also
contributed to this increase. Net revenues from dedicated trucking and logistics
management increased substantially because a greater proportion of their
operating costs are included in salaries, wages and related costs and selling,
general and administrative expenses. Net revenues for the temperature-controlled
group declined in 1994 due to the reduction in this operation discussed
previously and in 1993 due to reduced volumes of loads moved as a result of the
midwest floods.
SALARIES AND RELATED COSTS. The 24% and 27% increases in this expense in
1993 and 1994, respectively, were as follows:
<TABLE>
<CAPTION>
93 V. 92 94 V. 93
Increase (decrease) from: --------- ---------
(IN THOUSANDS)
<S> <C> <C>
Transportation services and administration............... $ (832) $ 1,079
Logistics management and dedicated trucking.............. 2,725 2,158
Temperature-controlled................................... 233 (257)
--------- ---------
Total increase........................................... $ 2,126 $ 2,980
</TABLE>
The increases of 21% and 35% in 1993 and 1994, respectively, in salaries and
wages (excluding temperature-controlled) were due to the addition of driver
wages for dedicated trucking operations, the increase in logistics management
operations and the acquisition of certain air freight forwarding operations
which utilize employees rather than agents, salary increases to existing
employees and the addition
18
<PAGE>
of administrative and operations personnel to handle continued growth in the
number of loads arranged. This increase, as well as the increase in selling,
general and administrative expenses (excluding temperature-controlled) discussed
below, exceeded the percentage increase in operating revenues (excluding
temperature-controlled) due to growth in the dedicated trucking and logistics
management operations. In addition, these operations include new projects which
have relatively higher fixed costs compared to operating revenues in their
initial stages. While management expects logistics management and dedicated
trucking to continue to grow and, consequently, these expenses to increase as a
percentage of operating revenues, the impact on operating results should be
offset by the increase in net revenues as a percentage of operating revenues.
Transportation services and administration decreased from 1992 to 1993 as
Carriers' sales salaries, which were paid by Mark VII and charged to Carriers in
1992, were paid directly by Carriers in 1993 and 1994. Salaries and wages for
temperature-controlled operations decreased in 1994 as TemStar's operations were
absorbed in Mark VII's or terminated and increased in 1993 primarily as a result
of an internal maintenance operation that was established in mid-1993 which
reduced outside maintenance costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The increases in these
expenses are summarized below:
<TABLE>
<CAPTION>
93 V. 92 94 V. 93
Increase (decrease) from: --------- ---------
(IN THOUSANDS)
<S> <C> <C>
Transportation services and administration............... $ 3,826 $ 2,217
Logistics management and dedicated trucking.............. 2,803 5,463
Fuel, maintenance and other equipment costs for
temperature-controlled.................................. (859) (839)
--------- ---------
Total increase........................................... $ 5,770 $ 6,841
</TABLE>
Selling, general and administrative expenses (excluding
temperature-controlled) increased 43% and 30% in 1993 and 1994, respectively.
Transportation services and administration increased primarily due to
commissions paid to agency operating offices and the sales force, which are
based on a percentage of net revenues. Administrative and operating costs
related to the dedicated trucking and logistics management operations also
increased substantially due to the addition of several large projects in 1993
and 1994, as discussed above. The decrease in costs for temperature-controlled
in 1994 from 1993 was due in part to reduced volumes of loads discussed
previously, as well as the use of the internal maintenance department to replace
outside maintenance costs. The decrease in temperature-controlled costs in 1993
from 1992 was due in part to reduced volumes of loads caused by the flooding in
the midwest.
EQUIPMENT RENTS. The 52% and 41% increases in this expense in 1993 and
1994, respectively, were due to the leasing of tractors and trailers for use in
dedicated trucking operations and the leasing of 344 intermodal containers.
DEPRECIATION AND AMORTIZATION. In 1993 and 1994, depreciation and
amortization increased 73% and 31%, respectively, from the prior periods as the
Company acquired 75 trailers and five tractors from Carriers and 100 intermodal
containers at a cost of approximately $3.1 million in the second and third
quarters, respectively, of 1994. Additionally, the Company increased its
investment in computer equipment and furniture in connection with the expansion
of operations. Also, in January and July 1994, TemStar acquired 328 trailers
which had previously been leased.
INTEREST AND OTHER EXPENSE, NET. Interest and other expenses increased 125%
in 1994 from 1993 as a result of increased borrowings under the Company's line
of credit and increases in short-term borrowing rates. Interest and other
expenses decreased 58% in 1993 from 1992 as a result of Mark VII's intercompany
borrowing position changing from a net borrower to a net lender to Carriers'
subsidiaries, which more than offset increased borrowings under the lines of
credit.
PROVISION FOR INCOME TAXES. The Company's effective tax rates were 41.0%,
40.7% and 41.5% in 1992, 1993 and 1994, respectively.
19
<PAGE>
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations
increased by 47% to $3.7 million, or $.75 per share, in 1994, from $2.5 million,
or $.51 per share, in 1993. Income from continuing operations increased by 39%
in 1993 from 1992.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital needs have been met through bank lines of
credit and cash flow from operations. Mark VII maintains a $20 million line of
credit. This line bears interest at 1/2% over the bank's prime rate and expires
in July 1997. The line is secured by accounts receivable and other assets of
Mark VII and is guaranteed by the Company.
At April 1, 1995, the available line of credit was $7.5 million and letters
of credit totaling $3.2 million had been issued on Mark VII's behalf to secure
insurance deductibles and purchases of operating services.
The line of credit has no restrictions on intercompany advances among the
Company's subsidiaries. Among other restrictions, the terms of the line of
credit require that the Company earn $2 million in consolidated income from
continuing operations annually, maintain consolidated tangible net worth of $19
million in 1995, $21 million in 1996 and $23 million thereafter and obtain
approval of the lender before paying dividends.
The Company remains contingently liable for certain potential claims which
may arise in connection with its former truckload operations.
At April 1, 1995, the Company had a ratio of current assets to current
liabilities of approximately 1.33 to 1. Management believes that the Company
will have sufficient cash flow from continuing operations and borrowing capacity
to cover its operating needs and capital requirements for at least the next two
years.
OTHER INFORMATION
In the transportation industry generally, results of operations show a
seasonal pattern, as customers reduce shipments during and after the winter
holiday season. In recent years, the Company's operating income and earnings
have been higher in the second and third quarters than in the first and fourth
quarters.
20
<PAGE>
MANAGEMENT
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- -----------------------------------------------------------
<S> <C> <C>
R. C. Matney................................. 57 Chairman of the Board, President and Chief Executive
Officer
J. Michael Head.............................. 41 Executive Vice President, Chief Financial Officer,
Treasurer and Director
James T. Graves.............................. 60 Vice Chairman of the Board, Secretary and General Counsel
David H. Wedaman............................. 37 Executive Vice President, Chief Operating Officer and
Director
Robert E. Liss............................... 44 Executive Vice President/Special Services Division of Mark
VII
Michael J. Musacchio......................... 43 Executive Vice President/Logistics Services Division of
Mark VII
Roger M. Crouch.............................. 57 Director
Douglass Wm. List............................ 39 Director
William E. Greenwood......................... 56 Director
Dr. Jay U. Sterling.......................... 61 Director
</TABLE>
All directors hold office until the next annual meeting of shareholders or
until their successors are duly elected and qualified. The executive officers
are elected annually by the Board of Directors and serve until their successors
are elected or until resignation or removal.
Mr. Matney has been a director of the Company since 1989, Chairman of the
Board since February 1992, and President and Chief Executive Officer since July
1994. From May 1991 until February 1992, Mr. Matney was President of the
Company. Since July 1987, Mr. Matney has also been Chairman of the Board of Mark
VII, and from July 1987 to February 1993, he was President of Mark VII. Prior to
July 1987, Mr. Matney was President and Chief Executive Officer of National
Piggyback Services, a third party agent that specialized in intermodal services.
Mr. Head has been a director of the Company since 1986 and Executive Vice
President, Chief Financial Officer and Treasurer of the Company since July 1994.
Mr. Head was President of the Company from February 1992 to July 1994 and Chief
Executive Officer of the Company from November 1988 to July 1994. From May 1991
to February 1992, Mr. Head served as Vice Chairman of the Board of the Company.
Mr. Head was also President of the Company from October 1984 to May 1991.
Mr. Graves has been a director of the Company since 1987, Secretary of the
Company since May 1992, General Counsel of the Company since March 1993 and Vice
Chairman of the Board of the Company since May 1993.
Mr. Wedaman has been a director of the Company since 1994, Executive Vice
President of the Company since May 1991 and Chief Operating Officer since
September 1994. He has been President of Mark VII since February 1993, and from
March 1991 to February 1993, he was Executive Vice President of Mark VII. He
joined Mark VII as Vice President in February 1989.
Mr. Liss has been Executive Vice President/Special Services Division of Mark
VII since May 1993, and Vice President of Mark VII from December 1992 to May
1993. Prior to joining Mark VII, Mr. Liss was Vice President-Intermodal with
C.H. Robinson Company, a third party agent specializing in freight and produce
brokerage.
21
<PAGE>
Mr. Musacchio has been Executive Vice President/Logistics Services Division
of Mark VII since May 1993, Vice President of Mark VII from December 1992 to May
1993, and an agent with Mark VII from August 1992 to December 1992. Prior to
joining Mark VII, Mr. Musacchio was Vice President of Transportation with C.H.
Robinson Company.
Mr. Crouch has been a director of the Company since 1976 and was Vice
Chairman of the Board of the Company from February 1992 to September 1994. Mr.
Crouch was Chairman of the Board of the Company from October 1984 to February
1992. From October 1984 to November 1988, he was also Chief Executive Officer of
the Company. Mr. Crouch was the founder of the Company's former truckload
operations. Mr. Crouch has indicated he intends to resign from the Board upon
completion of this offering. Pursuant to an existing employment agreement,
however, Mr. Crouch remains available to serve the Company on an as-requested
basis and remains subject to a non-compete agreement.
Mr. List has been a director of the Company since 1993. Since January 1988,
Mr. List has been President of List & Company, Inc., a management consulting
firm in Baltimore, Maryland. Mr. List has also been President, since 1992, of
Railway Engineering Associates, a firm involved in developing railroad
technology, and from 1988 to 1992, he was Vice President and General Manager of
Railway Engineering Associates. Mr. List is a director of Harmon Industries,
Inc., a supplier of communication and safety-related equipment for railroads
worldwide.
Mr. Greenwood has been a director of the Company since 1994 and is currently
a self-employed consultant. Mr. Greenwood served with the Burlington Northern
Railroad Company, one of the largest railroads in the United States, in various
capacities from 1963 to 1994, serving as Chief Operating Officer from 1990 to
1994. Mr. Greenwood is also a director of Transcisco Industries, Inc., a railcar
and industrial services company operating in domestic railcar maintenance and
repair, railcar leasing and management and international railcar leasing.
Dr. Sterling has been a director of the Company since 1995 and an Associate
Professor of Marketing at the University of Alabama, Tuscaloosa since 1984. Dr.
Sterling has a Doctor of Philosophy ("Ph.D.") degree in marketing and logistics
from Michigan State University. In addition to his teaching responsibilities, he
has performed research and written extensively in the areas of transportation,
distribution and logistics management and has also consulted extensively in the
areas of transportation and logistics management. Prior to obtaining his Ph.D.,
Dr. Sterling spent 25 years in industry with Whirlpool Corporation and The
Limited in various logistics related positions.
22
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth, as of April 10, 1995, unless otherwise
noted, and as adjusted to reflect the sale of the Common Stock offered hererby,
certain information concerning the beneficial ownership, as defined under
Section 13(d) of the Exchange Act, of the Common Stock by (i) the Selling
Shareholders, (ii) the only persons known to be beneficial owners of more than
five percent of the Common Stock, (iii) the directors and executive officers of
the Company and (iv) all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED OWNED AFTER THIS
PRIOR TO THIS OFFERING SHARES TO BE OFFERING(1)
------------------------------ SOLD IN THIS ------------------------
NAME AND ADDRESS OF BENEFICIAL OWNERS NUMBER PERCENTAGE OFFERING NUMBER PERCENTAGE
- ----------------------------------------- --------------- ------------- --------------- --------- -------------
<S> <C> <C> <C> <C> <C>
Roger M. Crouch
10100 N.W. Executive Hills Blvd.
Suite 200
Kansas City, Missouri 64153............ 1,240,869(2) 25.5% 875,336(3) 156,442 3.2%
The Sugar Lakes Foundation............... 130,000 2.7 118,182 11,818 *
The Catherine Fenner Crouch Charitable
Remainder Unitrust I.................... 100,000 2.1 90,909 9,091 *
Rosalie C. Sisson........................ 75,744 1.6 68,858 6,886 *
Rosalie C. Sisson, as custodian for
Alexandra C. Sisson..................... 1,000 * 909 91 *
R.C. Matney
201 S. Emerson Avenue
Suite 130
Greenwood, Indiana 46143............... 428,690 8.8 -- 428,690 8.8
RCM Capital Management
RCM Limited L.P.
RCM General Corporation
Four Embarcadero Center, Suite 2900
San Francisco, California 94111........ 406,000 8.4 -- 406,000 8.4
Wellington Management Company
75 State Street
Boston, Massachusetts 02190............ 346,300 7.2 -- 346,300 7.2
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401......... 254,900 5.3 -- 254,900 5.3
J. Michael Head.......................... 69,718 1.4 -- 69,718 1.4
James T. Graves.......................... 65,300 1.3 -- 65,300 1.3
David H. Wedaman......................... 42,871 * -- 42,871 *
Robert E. Liss........................... 7,786 * -- 7,786 *
Michael J. Musacchio..................... 4,867 * -- 4,867 *
Douglass Wm. List........................ 12,500 * -- 12,500 *
William E. Greenwood..................... 5,000 * -- 5,000 *
Dr. Jay U. Sterling...................... 5,000 * -- 5,000 *
All directors and executive officers as a
group(4)................................ 1,882,601 37.0 1,084,427 641,732 12.7
<FN>
- --------------
* Less than one percent.
(1) Assumes that the Underwriter's over-allotment option is not exercised. If
the over-allotment option is exercised in full, none of the Selling
Shareholders would own any Common Stock other than up to 48,000 shares
issuable upon exercise of options held by Mr. Crouch.
</TABLE>
23
<PAGE>
<TABLE>
<S> <C>
(2) Includes 962,869 shares owned directly; 130,000 shares owned by the Sugar
Lakes Foundation, of which Mr. Crouch is one of three trustees; 100,000
shares owned by the Catherine Fenner Crouch Charitable Remainder Unitrust
I, of which Mr. Crouch is sole trustee; and 48,000 shares issuable pursuant
to non-qualified stock options granted under the Company's 1992
Non-Qualified Stock Option Plan. The beneficial ownership of Mr. Crouch is
based on the Schedule 13D filed by him on May 4, 1995. See "Management" for
a description of the positions held by Mr. Crouch with the Company.
Mr. Crouch has an obligation to sell 55,106 shares of Common Stock to Mr.
Thomas F. Laughlin, Vice President, Chief Financial Officer and Treasurer
of Carriers, at a price per share of $5.15 pursuant to a Stock Purchase
Agreement, effective June 1, 1985. Mr. Crouch expects to satisfy this
obligation by delivering to Mr. Laughlin shares acquired upon the exercise
of options held by Mr. Crouch.
(3) Consists of 875,336 shares owned directly by Mr. Crouch.
(4) Includes 10 persons and 270,250 shares issuable upon exercise of options
granted under the Company's stock option plans prior to this offering, and
nine persons and 222,250 shares issuable upon exercise of options after
this offering.
</TABLE>
24
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
Alex. Brown & Sons Incorporated (the "Underwriter") has agreed to purchase from
the Selling Shareholders the shares of Common Stock at the public offering price
less the underwriting discounts and commissions set forth on the cover page of
this Prospectus.
The Underwriting Agreement provides that the obligations of the Underwriter
are subject to certain conditions precedent and that the Underwriter will
purchase all shares of the Common Stock offered hereby if any such shares are
purchased.
The Selling Shareholders have been advised by the Underwriter that it
proposes to offer the shares of Common Stock to the public at the public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $ per share. The
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain other dealers. After commencement of the
offering, the offering price and other selling terms may be changed by the
Underwriter.
The Selling Shareholders have granted to the Underwriter an option,
exercisable not later than 30 days after the date of this Prospectus, to
purchase up to 115,419 additional shares of Common Stock at the public offering
price less the underwriting discounts and commissions set forth on the cover
page of this Prospectus. The Underwriter may exercise the option only to cover
over-allotments made in connection with the sale of Common Stock offered hereby.
If purchased, the Underwriter will offer such additional shares on the same
terms as those on which the 1,154,194 shares are being offered.
The Underwriting Agreement contains covenants of indemnity and contribution
between the Underwriter, the Company and the Selling Shareholders with respect
to certain civil liabilities, including liabilities under the Securities Act.
The Company and its executive officers have agreed not to sell or otherwise
dispose of any shares of Common Stock for 90 days from the date of this
Prospectus without the prior consent of the Underwriter.
Pursuant to regulations promulgated by the Commission, the Underwriter and
certain selling group members who are market makers in the Common Stock
("passive market makers") may, subject to certain limitations, make bids for or
purchases of shares of Common Stock on and after the date two business days
prior to the time of commencement (the "Commencement Date") of offers or sales
of the Common Stock contemplated by this Prospectus until the earlier of the
Commencement Date or the time at which a stabilizing bid for such shares is
made. In general, during this period: (i) such market maker's net daily
purchases of the Common Stock may not exceed 30% of its average daily trading
volume in such stock for the two full consecutive calendar months immediately
preceding the filing date of the Registration Statement of which this Prospectus
forms a part, (ii) such market maker may not effect transactions in, or display
bids for, the Common Stock at a price that exceeds the highest bid for the
Common Stock by persons who are not passive market makers, and (iii) bids made
by passive market makers must be identified as such.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Shook, Hardy & Bacon P.C., Kansas City, Missouri. Certain legal
matters relating to the offering will be passed upon for the Underwriter by
Piper & Marbury L.L.P., Baltimore, Maryland.
EXPERTS
The financial statements and schedule as of January 1, 1994 and December 31,
1994 and for each of the three years in the period ended December 31, 1994
incorporated by reference into this Prospectus and the Registration Statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving such reports.
25
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference..................................... 2
Prospectus Summary............................. 3
Investment Considerations...................... 5
Use of Proceeds................................ 7
Price Range of Common Stock and Dividend
Policy........................................ 7
The Company.................................... 8
Selected Consolidated Financial and Operating
Data.......................................... 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 14
Management..................................... 21
Principal and Selling Shareholders............. 23
Underwriting................................... 25
Legal Matters.................................. 25
Experts........................................ 25
</TABLE>
1,154,194 SHARES
[LOGO]
COMMON STOCK
----------
P R O S P E C T U S
-----------------
ALEX. BROWN & SONS
I N C O R P O R A T E D
, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an itemized statement of all estimated
expenses in connection with the issuance and distribution of the securities
being registered, other than underwriting discounts and commissions. All of the
amounts shown are estimated except the Securities and Exchange Commission and
NASD registration fees:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............. $ 7,497
NASD Registration Fee........................................... 2,674
Printing Fees and Expenses...................................... 40,000
Legal Fees and Expenses......................................... 100,000
Accounting Fees and Expenses.................................... 50,000
Blue Sky Fees and Expenses...................................... 10,000
Miscellaneous................................................... 39,829
---------
Total....................................................... $ 250,000
---------
---------
</TABLE>
The Selling Shareholders shall bear all of the above expenses other than
certain marketing expenses included in the amount set forth as Miscellaneous
which will be borne by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Section 351.355 of the General Business and Corporation Law of
Missouri and the Company's charter documents, and subject to the procedures and
limitations stated therein, the Company shall indemnify any person who is made a
party or threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of his or her being or having been a director or
officer of the Company or serving or having served as a director, officer,
employee or agent of another entity at the Company's request, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, other than an action by or in the right of the corporation,
if such person acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interest of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. The Company shall also indemnify such persons
against expenses (including attorneys' fees) in actions, suits or proceedings
brought by or in the right of the Company, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable for negligence or misconduct in the performance of his or her duty to the
Company. The statute and charter documents provide that such indemnification is
not exclusive of other rights of indemnification to which such persons may be
entitled.
The Company maintains insurance policies under which its directors and
officers are insured, within the limits and subject to the limitations of the
policies, against expenses in connection with the defense of actions, suits or
proceedings, and certain liabilities that might be imposed as a result of such
actions, suits or proceedings, to which they are parties by reason of being or
having been directors or officers of the Company.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
4.1 Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.4 to the Company's
Registration Statement on Form S-8 (Registration No. 33-86174))
5.1 Form of Opinion of Shook, Hardy & Bacon P.C.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Shook, Hardy & Bacon P.C. (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature pages hereto)
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Kansas City, State of Missouri, on May 5, 1995.
MARK VII, INC.
By: /S/ R.C. MATNEY
-----------------------------------
R.C. Matney
Chairman of the Board
POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature appears
below constitutes and appoints J. Michael Head and James T. Graves, and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute and substitutes, may lawfully do or cause to be done by virtue
hereof. This Power of Attorney may be signed in several counterparts.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------- -------------------------------------------------------------- --------------
<C> <S> <C>
/S/ R.C. MATNEY
-------------------------- Chairman of the Board, President, Chief Executive Officer and May 5, 1995
R.C. Matney Director (Principal Executive Officer)
/S/ J. MICHAEL HEAD
-------------------------- Executive Vice President, Chief Financial Officer and Director May 5, 1995
J. Michael Head (Principal Financial and Accounting Officer)
/S/ JAMES T. GRAVES
-------------------------- Vice Chairman, Secretary and General Counsel and Director May 5, 1995
James T. Graves
/S/ DAVID H. WEDAMAN
-------------------------- Executive Vice President, Chief Operating Officer, and May 5, 1995
David H. Wedaman Director
/S/ ROGER M. CROUCH
-------------------------- Director May 5, 1995
Roger M. Crouch
/S/ DOUGLASS WM. LIST
-------------------------- Director May 5, 1995
Douglass Wm. List
/S/ WILLIAM E. GREENWOOD
-------------------------- Director May 5, 1995
William E. Greenwood
/S/ DR. JAY U. STERLING
-------------------------- Director May 5, 1995
Dr. Jay U. Sterling
</TABLE>
II-3
<PAGE>
1,154,194 Shares
MARK VII, INC.
Common Stock
UNDERWRITING AGREEMENT
, 1995
ALEX. BROWN & SONS INCORPORATED
135 East Baltimore Street
Baltimore, Maryland 21202
Gentlemen:
Roger M. Crouch, The Sugar Lakes Foundation, The Catherine Fenner Crouch
Charitable Remainder Unitrust I, Rosalie C. Sisson, and Rosalie C. Sisson, as
custodian for Alexandra Catherine Sisson (collectively, the "Selling
Shareholders") propose to sell to you as underwriter (the "Underwriter") an
aggregate of 1,154,194 shares (the "Firm Shares") of the Common Stock, par value
$0.10 per share, of Mark VII, Inc., a Missouri corporation (the "Company"). The
respective amounts of the Firm Shares to be sold by the Selling Shareholders are
set forth opposite their names in Schedule I hereto. The Selling Shareholders
also propose to sell at the Underwriter's option an aggregate of up to 115,419
additional shares of the Company's Common Stock (the
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"Option Shares") as set forth in Schedule II below.
As the Underwriter, you have advised the Company and the Selling Shareholders
that you are willing to purchase the Firm Shares, plus the Option Shares if you
elect to exercise the over-allotment option in whole or in part. The Firm Shares
and the Option Shares (to the extent the aforementioned option is exercised) are
herein collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company and the Selling
Shareholders.
(a) The Company represents and warrants as follows:
(i) A registration statement on Form S-3 (File No. 33- ) with respect to
the Shares has been prepared by the Company in conformity in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"Act") and the Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder and has been
filed with the Commission under the Act. The Company has complied with the
conditions for the use of Form S-3. Copies of such registration statement,
including any amendments thereto, the preliminary prospectuses (meeting the
requirements of Rule 430A of the Rules and Regulations) contained therein and
the exhibits, financial statements and schedules, as finally amended and
revised, have heretofore been delivered by the Company to you. Such registration
statement, herein referred to as the"Registration Statement," which shall be
deemed to include all information omitted therefrom in reliance upon Rule 430A
and contained in the Prospectus referred to below, has been declared effective
by the Commission under the Act and no post-effective amendment to the
Registration Statement has been filed as of the date of this Agreement. The form
of prospectus first filed by the Company with the Commission pursuant to its
Rule 424(b) and Rule 430A is herein referred to as the "Prospectus." Each
preliminary prospectus included in the Registration Statement prior to the time
it becomes effective is herein referred to as a"Preliminary Prospectus." Any
reference herein to any Preliminary Prospectus or the Prospectus shall be deemed
to refer to and include the documents incorporated by reference therein, as of
the date of such Preliminary Prospectus or Prospectus, as
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the case may be, and, in the case of any reference herein to any Prospectus,
also shall be deemed to include any documents incorporated by reference therein,
and any supplements or amendments thereto, filed with the Commission after the
date of filing of the Prospectus under Rules 424(b) and 430A, and prior to the
termination of the offering of the Shares by the Underwriter.
(ii) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Missouri, with
corporate power and authority to own its properties and conduct its business as
described in the Registration Statement; each of the subsidiaries of the Company
as listed in Exhibit A hereto (collectively, the "Subsidiaries") has been duly
organized and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, with corporate power and
authority to own or lease its properties and conduct its business as described
in the Registration Statement; the Company and each of the Subsidiaries are duly
qualified to transact business in all jurisdictions in which the conduct of
their business requires such qualification and where failure to qualify would
have a materially adverse effect upon the business or properties of the Company
and the Subsidiaries taken as a whole; the outstanding shares of capital stock
of each of the Subsidiaries have been duly authorized and validly issued, are
fully paid and non-assessable and are owned by the Company or another Subsidiary
free and clear of all liens, encumbrances and security interests, except as set
forth in Exhibit B; and, except as set forth in Exhibit B no options, warrants
or other rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into shares of capital stock or ownership
interests in the Subsidiaries are outstanding.
(iii) The outstanding shares of Common Stock of the Company, including all
Shares to be sold by the Selling Shareholders, have been duly authorized and
validly issued and are fully paid and non-assessable; and no preemptive rights
of stockholders exist with respect to any of the Shares.
(iv) The Shares conform with the statements concerning them under the
caption "Description of Capital Stock" in the Registration Statement.
(v) The Commission has not issued an order preventing or suspending the
use of any Preliminary Prospectus relating to the
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proposed offering of the Shares nor instituted proceedings for that purpose. The
Registration Statement and the Prospectus and any amendments or supplements
thereto in all material respects conform or will conform, as the case may be, to
the requirements of, the Act and the Rules and Regulations. The documents
incorporated by reference in the Prospectus, at the time they were filed with
the Commission, conformed in all material respects to the requirements of the
Securities Exchange Act of 1934 or the Act, as applicable, and the Rules and
Regulations of the Commission thereunder. Neither the Registration Statement nor
any amendment thereto, and neither the Prospectus nor any supplement thereto,
including any documents incorporated by reference therein, contains or will
contain, as the case may be, any untrue statement of a material fact or omits or
will omit to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from the
Registration Statement or the Prospectus, or any such amendment or supplement,
or any documents incorporated by reference therein, in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
the Underwriter, specifically for use in the preparation thereof.
(vi) The consolidated financial statements of the Company and the
Subsidiaries, together with related notes and schedule as set forth or
incorporated by reference in the Registration Statement, present fairly the
financial position and the results of operations of the Company and the
Subsidiaries consolidated, at the indicated dates and for the indicated periods.
Such financial statements have been prepared in accordance with generally
accepted accounting principles, consistently applied throughout the periods
involved, and all adjustments necessary for a fair presentation of results for
such periods have been made. The selected and summary financial and statistical
data included or incorporated by reference in the Registration Statement present
fairly the information shown therein and have been compiled on a basis
consistent with the financial statements presented therein.
(vii) There is no action or proceeding pending or, to the knowledge of the
Company, threatened against the Company or any of the Subsidiaries before any
court or administrative agency which is reasonably likely to result in any
materially adverse change in the business or condition of the Company and of the
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Subsidiaries taken as a whole, except as set forth in the Registration
Statement.
(viii) The Company and the Subsidiaries have good and marketable title to
all of the properties and assets reflected in the financial statements
hereinabove described (or as described in the Registration Statement), subject
to no lien, mortgage, pledge, charge or encumbrance of any kind except those
reflected in such financial statements (or as described in the Registration
Statement) or which are not material in amount. The Company and the Subsidiaries
occupy their leased properties under valid and binding leases conforming to the
description thereof set forth in the Registration Statement.
(ix) The Company and the Subsidiaries have filed all Federal, State and
foreign, if any, income tax returns which have been required to be filed and
have paid all taxes indicated by said returns and all assessments received by
them or any of them to the extent that such taxes have become due, and are not
being contested in good faith, and that failure to file would result in a
materially adverse effect on the business and operations of the Company and the
Subsidiaries taken as a whole.
(x) Since the respective dates as of which information is given in the
Registration Statement, as it may be amended or supplemented, there has not been
any materially adverse change or, to the Company's knowledge, any development
involving a prospective materially adverse change in or affecting the business,
operations or financial condition of the Company and its Subsidiaries taken as a
whole, whether or not occurring in the ordinary course of business, other than
general economic and industry conditions, and there has not been any material
transaction entered into by the Company or the Subsidiaries, other than
transactions in the ordinary course of business and changes and transactions
contemplated by the Registration Statement, as it may be amended or
supplemented. The Company and the Subsidiaries have no material contingent
obligations which are not disclosed in the Registration Statement, as it may be
amended or supplemented.
(xi) Except as set forth in the Registration Statement, neither the Company
nor any of the Subsidiaries is in default under any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by which
it or any of its properties is bound and which default is of material
significance in respect of the business or financial condition of
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the Company and the Subsidiaries taken as a whole. The consummation of the
transactions herein contemplated and the fulfillment of the terms hereof will
not conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any Subsidiary is a party, or of
the Charter or by-laws of the Company or any order, rule or regulation
applicable to the Company or any Subsidiary of any court or of any regulatory
body or administrative agency or other governmental body having jurisdiction.
(xii) Each approval, consent, order, authorization, designation, declaration
or filing by or with any regulatory, administrative or other governmental body
necessary in connection with the execution and delivery by the Company of this
Agreement and the consummation of the transactions herein contemplated (except
such additional steps as may be required by the National Association of
Securities Dealers, Inc. (the "NASD") or may be necessary to qualify the Shares
for public offering by the Underwriter under State securities or Blue Sky laws)
has been obtained or made and is in full force and effect.
(xiii) The Company and each of the Subsidiaries hold all material licenses,
certificates and permits from governmental authorities which are necessary to
the conduct of their businesses; and neither the Company nor any of the
Subsidiaries has infringed any patents, patent rights, trade names, trademarks
or copyrights, which infringement would result in a materially adverse change in
the business of the Company and the Subsidiaries taken as a whole.
(xiv) Arthur Andersen llp, who have audited certain of the financial
statements filed with the Commission as part of, or incorporated by reference
in, the Registration Statement, are independent public accountants as required
by the Act and the Rules and Regulations.
(xv) To the best of the Company's knowledge, there are no affiliations
between any member of the National Association of Securities Dealers, Inc. and
any of the Company's directors, officers or 5% or greater security holders,
except as set forth in the Registration Statement or as disclosed to the
Underwriter in writing.
(b) Each of the Selling Shareholders severally represents and
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warrants as follows:
(i) Such Selling Shareholder has and at the Closing Date or Option Closing
Date (as hereinafter defined), as the case may be, will have good and valid
title to the Firm Shares or Option Shares to be sold by such Selling
Shareholder, free of any liens, encumbrances, equities and claims, and full
right, power and authority to effect the sale and delivery of such Firm Shares
or Option Shares; and upon the delivery of and payment for such Firm Shares or
Option Shares pursuant to this Agreement, good and valid title thereto, free of
any liens, encumbrances, equities and claims, will be transferred to the
Underwriter.
(ii) The consummation by such Selling Shareholder of the transactions
herein contemplated and the fulfillment by such Selling Shareholder of the terms
hereof will not result in a breach of any of the terms and provisions of, or
constitute a default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which such Selling Shareholder is a party, or of any
order, rule or regulation applicable to such Selling Shareholder of any court or
of any regulatory body or administrative agency or other governmental body
having jurisdiction.
(iii) Such Selling Shareholder has not taken and will not take, directly or
indirectly, any action designed to, or which has constituted, or which might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock of the Company.
(iv) No offering, sale or other disposition of any Common Stock of the
Company will be made for a period of 90 days after the date of this Agreement,
directly or indirectly, by such Selling Shareholder otherwise than hereunder,
with the prior written consent of the Underwriter, or pursuant to the exercise
of options granted to Thomas F. Laughlin pursuant to a Stock Purchase Agreement
between Messrs. Crouch and Laughlin effective June 1, 1985, as described in the
section captioned "Principal and Selling Shareholders" in the Prospectus.
(v) Without having undertaken to determine independently the accuracy or
completeness of either the representations and warranties of the Company
contained herein or the information contained in the Registration Statement,
such Selling Shareholder has no reason to believe that the representations and
warranties of the Company contained in this Section 1 are not true and
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correct, is familiar with the Registration Statement and has no knowledge of any
material fact, condition or information not disclosed in the Registration
Statement which has adversely affected or may adversely affect the business of
the Company or any of the Subsidiaries; and the sale of the Firm Shares or
Option Shares, as the case may be, by such Selling Shareholder pursuant hereto
is not prompted by any material, non-public information concerning the Company
or any of the Subsidiaries which is not set forth in the Registration Statement.
In order to document the Underwriter's compliance with the reporting and
withholding provisions of the Tax Equity and Fiscal Responsibility Act of 1982
and the Interest and Dividend Tax Compliance Act of 1983 with respect to the
transactions herein contemplated, each of the Selling Shareholders agrees to
deliver to you prior to or at the Closing Date a properly completed and executed
United States Treasury Department Form W-9 (or other applicable from or
statement specified by Treasury Department regulations in lieu thereof).
2. Purchase, Sale and Delivery of the Firm Shares. On the basis of the
representations, warranties and covenants herein contained, and subject to the
conditions herein set forth, the Selling Shareholders agree to sell to the
Underwriter, and the Underwriter agrees to purchase, at a price of $ per
share, the Firm Shares. The obligations of each of the Selling Shareholders
shall be several and not joint.
Certificates in negotiable form for the total number of the Firm Shares to
be sold hereunder by the Selling Shareholders have been placed in custody with
Lathrop & Norquist, L.C. as custodian (the "Custodian") pursuant to the
Custodian Agreement executed by each Selling Shareholder for delivery of all
Firm Shares to be sold hereunder by the Selling Shareholders. Each of the
Selling Shareholders specifically agrees that the Firm Shares represented by the
certificates held in custody for the Selling Shareholders under the Custodian
Agreement are subject to the interests of the Underwriter hereunder, that the
arrangements made by the Selling Shareholders for such custody are to that
extent irrevocable, and that the obligations of the Selling Shareholders
hereunder shall not be terminable by any act or deed of the Selling Shareholders
(or by any other person, firm or corporation including the Company, the
Custodian or the Underwriter) or by operation of law (including the death of an
individual Selling Shareholder or the dissolution of a Selling Shareholder that
is a trust or other
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entity) or by the occurrence of any other event or events, except as set forth
in the Custodian Agreement. If any such event should occur prior to the delivery
to the Underwriter of the Firm Shares hereunder, certificates for the Firm
Shares shall be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such event has not occurred. The Custodian is
authorized to receive and acknowledge receipt of the proceeds of sale of the
Firm Shares held by it against delivery of such Firm Shares.
Payment for the Firm Shares to be sold by the Selling Shareholders hereunder
is to be made in New York Clearing House funds by certified or bank cashier's
checks drawn to the order of "Lathrop & Norquist, L.C., Custodian" in each case
against delivery of certificates therefor to the Underwriter. Such payment and
delivery are to be made at the offices of Alex. Brown & Sons Incorporated, 135
East Baltimore Street, Baltimore, Maryland, at 10:00 A.M., Baltimore time, on
the fifth business day after the date of this Agreement or at such other time
and date not later than five business days thereafter as you and the Company
shall agree upon, such time and date being herein referred to as the "Closing
Date." As used herein, "business day" means a day on which the New York Stock
Exchange is open for trading and on which banks in New York are open for
business and are not permitted by law or executive order to be closed. The
certificates for the Firm Shares will be delivered in such denominations and in
such registrations as the Underwriter requests in writing not later than the
third full business day prior to the Closing Date, and will be made available
for inspection by the Underwriter at least one business day prior to the Closing
Date.
In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Selling
Shareholders hereby grant an option to the Underwriter to purchase the Option
Shares at the price per share as set forth in the first paragraph of this
Section 2. The option granted hereby may be exercised in whole or in part but
only once and at any time upon written notice given within 30 days after the
date of this Agreement, by you to the Company and to the Selling Shareholders
setting forth the number of Option Shares as to which you are exercising the
option, the names and denominations in which the Option Shares are to be
registered and the time and date at which such certificates are to be delivered.
The time and date at which certificates for Option Shares are to be delivered
shall be
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determined by you but shall not be earlier than three nor later than 10 full
business days after the exercise of such option, nor in any event prior to the
Closing Date (such time and date being herein referred to as the "Option Closing
Date"). If the date of exercise of the option is three or more days before the
Closing Date, the notice of exercise shall set the Closing Date as the Option
Closing Date. The option with respect to the Option Shares granted hereunder may
be exercised only to cover over- allotments in the sale of the Firm Shares by
the Underwriter. You, as the Underwriter, may cancel such option at any time
prior to its expiration by giving written notice of such cancellation to the
Company and the Selling Shareholders. To the extent, if any, that the option is
exercised, payment for the Option Shares shall be made on the Option Closing
Date in New York Clearing House funds by certified or bank cashier's checks
drawn to the order of "Lathrop & Norquist, L.C., Custodian" against delivery of
certificates therefor at the offices of Alex. Brown & Sons Incorporated, 135
East Baltimore Street, Baltimore, Maryland.
3. Offering by the Underwriter. It is understood that the Underwriter is
to make a public offering of the Firm Shares as soon as it deems it advisable to
do so. The Firm Shares are to be offered to the public at the Price to Public
set forth in the Prospectus. The Underwriter may from time to time thereafter
change the public offering price and other selling terms. To the extent, if at
all, that any Option Shares are purchased pursuant to Section 2 hereof, the
Underwriter will offer them to the public on the foregoing terms.
4. Covenants of the Company. The Company covenants and agrees with the
Underwriter and the Selling Shareholders that:
(a) The Company will (i) prepare and timely file with the Commission under
Rule 424(b) of the Rules and Regulations a Prospectus containing information
previously omitted at the time of effectiveness of the Registration Statement in
reliance on Rule 430A of the Rules and Regulations, (ii) not file any amendment
to the Registration Statement or supplement to the Prospectus or document
incorporated by reference therein of which the Underwriter shall not previously
have been advised and furnished with a copy or to which the Underwriter shall
have reasonably objected in writing or which is not in compliance with the Rules
and Regulations, and (iii) file on a timely basis all reports and any definitive
proxy or information statements required to be filed by the Company with the
Commission subsequent to the date of the Prospectus and prior to the
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termination of the offering of the Shares by the Underwriter.
(b) The Company will advise the Underwriter promptly of any request of the
Commission for amendment of the Registration Statement or for supplement to the
Prospectus or for any additional information, or of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the institution of any proceedings
for that purpose, and the Company will use its best efforts to prevent the
issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(c) The Company will cooperate with the Underwriter in endeavoring to
qualify the Shares for sale under the securities laws of such jurisdictions as
the Underwriter may reasonably have designated in writing and will make such
applications, file such documents, and furnish such information as may be
reasonably required for that purpose, provided the Company shall not be required
to qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction where it is not now so qualified or required to file
such a consent. The Company will, from time to time, prepare and file such
statements, reports, and other documents, as are or may be required to continue
such qualifications in effect for so long a period as the Underwriter may
reasonably request for distribution of the Shares.
(d) The Company will deliver to, or upon the order of, the Underwriter,
from time to time, as many copies of any Preliminary Prospectus as the
Underwriter may reasonably request. The Company will deliver to, or upon the
order of, the Underwriter during the period when delivery of a Prospectus is
required under the Act, as many copies of the Prospectus in final form, or as
thereafter amended or supplemented, as the Underwriter may reasonably request.
The Company will deliver to the Underwriter at or before the Closing Date, two
signed copies of the Registration Statement and all amendments thereto including
all exhibits filed therewith, and will deliver to the Underwriter such number of
copies of the Registration Statement, including documents incorporated by
reference therein, but without exhibits, and of all amendments thereto, as the
Underwriter may reasonably request.
(e) If during the period in which a prospectus is required by law to be
delivered by the Underwriter or a dealer, any event
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shall occur as a result of which, in the judgment of the Company or in the
opinion of counsel for the Underwriter, it becomes necessary to amend or
supplement the Prospectus in order to make the statements therein, in the light
of the circumstances existing at the time the Prospectus is delivered to a
purchaser, not misleading, or, if it is necessary at any time to amend or
supplement the Prospectus to comply with any law, the Company promptly will
either (i) prepare and file with the Commission an appropriate amendment to the
Registration Statement or supplement to the Prospectus or (ii) prepare and file
with the Commission an appropriate filing under the Securities Exchange Act of
1934 which shall be incorporated by reference in the Prospectus so that the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when it is so delivered, be misleading, or so that the Prospectus
will comply with law.
(f) The Company will make generally available to its security holders, as
soon as it is practicable to do so, but in any event not later than 15 months
after the effective date of the Registration Statement, an earnings statement
(which need not be audited) in reasonable detail, covering a period of at least
12 consecutive months beginning after the effective date of the Registration
Statement, which earnings statement shall satisfy the requirements of Section
11(a) of the Act and Rule 158 of the Rules and Regulations and will advise you
in writing when such statement has been so made available.
(g) The Company will, for a period of five years from the Closing Date,
deliver to the Underwriter copies of annual reports and copies of all other
documents, reports and information furnished by the Company to its stockholders
or filed with any securities exchange pursuant to the requirements of such
exchange or with the Commission pursuant to the Act or the Securities Exchange
Act of 1934, as amended. The Company will deliver to the Underwriter similar
reports with respect to significant subsidiaries, as that term is defined in the
Rules and Regulations, which are not consolidated in the Company's financial
statements.
(h) No offering, sale or other disposition of any Common Stock of the
Company will be made for a period of 90 days after the date of this Agreement,
directly or indirectly, by the Company otherwise than hereunder or with the
prior written consent of the Underwriter, except that the Company may, without
such consent, issue shares upon the exercise of options outstanding on the date
of this Agreement issued pursuant to the
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Company's employee benefit plans or issued as consideration for future
acquisitions.
5. Costs and Expenses. The Company will pay all costs, expenses and fees
incident to the performance of its obligations and those of the Selling
Shareholders under this Agreement, including, without limiting the generality of
the foregoing, the following: accounting fees of the Company; the fees and
disbursements of counsel for the Company; the cost of printing and delivering
to, or as requested by, the Underwriter copies of the Registration Statement,
Preliminary Prospectuses, the Prospectus, this Agreement, the Blue Sky Survey
and any supplements or amendments thereto; the filing fees of the Commission;
the filing fees and expenses excluding the fees and disbursements of counsel for
the Underwriter incident to securing any required review by the National
Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of
the Shares; and the expenses, including the fees and disbursements of counsel
for the Underwriter, incurred in connection with the qualification of the Shares
under State securities or Blue Sky laws. The Selling Shareholders will promptly
reimburse the Company for any and all expenses incurred by the Company pursuant
to this Agreement (including, but not limited to, accounting and legal fees,
printing costs, filing fees and blue sky fees, but excluding travel and
out-of-pocket expenses incurred in connection with the Company's marketing
efforts). The Selling Shareholders will also pay any and all underwriting
discounts and commissions, and will pay the legal fees of Lathrop & Norquist,
L.C., counsel for the Selling Shareholders. The obligations of the Selling
Shareholders shall be satisfied by the Custodian out of the proceeds of sale of
the Shares. Any transfer taxes imposed on the sale of the Shares to the
Underwriter will be paid by the Selling Shareholders pro rata. The Company shall
not, however, be required to pay for any of the Underwriter's expenses (other
than those related to qualification under State securities or Blue Sky laws)
except that, if this Agreement shall not be consummated because the conditions
in Section 7 hereof are not satisfied, or because this Agreement is terminated
by the Underwriter pursuant to Section 6 hereof, or by reason of any failure,
refusal or inability on the part of the Company or the Selling Shareholders to
perform any undertaking or satisfy any condition of this Agreement or to comply
with any of the terms hereof on its part to be performed, unless such failure to
satisfy said condition or to comply with said terms be due to the default or
omission of the Underwriter, then the Company shall reimburse the Underwriter
for reasonable out-of-pocket expenses,
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including fees and disbursements of counsel, reasonably incurred in connection
with investigating, marketing and proposing to market the Shares or in
contemplation of performing their obligations hereunder; but the Company and the
Selling Shareholders shall not in any event be liable to the Underwriter for
damages on account of loss of anticipated profits from the sale by them of the
Shares.
6. Conditions of Obligations of the Underwriter. The obligations of the
Underwriter to purchase the Firm Shares on the Closing Date and the Option
Shares, if any, on the Option Closing Date are subject to the accuracy, as of
the Closing Date or the Option Closing Date, as the case may be, of the
representations and warranties of the Company and the Selling Shareholders
contained herein, and to the performance by the Company and the Selling
Shareholders of their covenants and obligations hereunder and to the following
additional conditions:
(a) No stop order suspending the effectiveness of the Registration
Statement, as amended from time to time, shall have been issued and no
proceedings for that purpose shall have been taken or, to the knowledge of the
Company or the Selling Shareholders, shall be contemplated by the Commission.
(b) The Underwriter shall have received on the Closing Date or the Option
Closing Date, as the case may be, the opinion of Shook, Hardy & Bacon P.C.,
counsel for the Company, dated the Closing Date or the Option Closing Date, as
the case may be, addressed to the Underwriter to the effect that:
(i) The Company has authorized and outstanding capital stock as set
forth in, or incorporated by reference in, the Prospectus; the certificates for
the Shares are in due and proper form; and, the shares of Common Stock,
including the Option Shares, if any, to be sold by the Selling Shareholders
pursuant to this Agreement have been duly authorized and are validly issued,
fully paid and non-assessable.
(ii) The Registration Statement has become effective under the Act and,
to the best of the knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under the Act.
(iii) The Registration Statement, all Preliminary Prospectuses, the
Prospectus and each amendment or supplement thereto and document incorporated by
reference therein comply
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as to form in all material respects with the requirements of the Act or the
Securities Exchange Act of 1934, as applicable and the applicable rules and
regulations thereunder (except that such counsel need express no opinion as to
the financial statements, schedules and other financial or statistical
information included or incorporated by reference therein).
(iv) To such counsel's actual knowledge, there are no contracts or
documents required to be filed as exhibits to or incorporated by reference in
the Registration Statement or described in the Registration Statement or the
Prospectus which are not so filed, incorporated by reference or described as
required, and such contracts and documents as are summarized in the Registration
Statement or the Prospectus are fairly summarized in all material respects.
(v) This Agreement has been duly authorized, executed and delivered by
the Company.
(vi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the National Association of Securities
Dealers, Inc. or as required by State securities and Blue Sky laws as to which
such counsel need express no opinion) except such as have been obtained or made,
specifying the same.
In rendering such opinion, Shook, Hardy & Bacon P.C. may rely as to matters
governed by the laws of states other than Missouri or Federal laws on local
counsel in such jurisdictions, provided that in each case Shook, Hardy & Bacon
P.C. shall state that they believe that they and the Underwriter are justified
in relying on such other counsel. In addition to the matters set forth above,
such opinion shall also include a statement to the effect that nothing has come
to the attention of such counsel which leads them to believe that the
Registration Statement, as of the time it became effective under the Act, the
Prospectus or any amendment or supplement thereto, on the date it was filed
pursuant to Rule 424(b) or any of the documents incorporated by reference
therein, as of the date of effectiveness of the Registration Statement or, in
the case of documents incorporated by reference in the Prospectus after the date
of effectiveness of the Registration Statement, as of the respective dates when
such
<PAGE>
documents were filed with the Commission and the Registration Statement and the
Prospectus, or any amendment or supplement thereto, as of the Closing Date or
the Option Closing Date, as the case may be, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (except that such counsel need express no
view as to financial statements, schedules and other financial or statistical
information included or incorporated by reference therein). With respect to such
statement, Shook, Hardy & Bacon P.C. may state that their belief is based upon
the procedures set forth therein, but is without independent check and
verification.
(c) The Underwriter shall have received on the Closing Date or the Option
Closing Date, as the case may be, the opinion of James T. Graves, Esq., Vice
Chairman, Secretary, and General Counsel of the Company, dated the Closing Date
or the Option Closing Date, as the case may be, addressed to the Underwriter to
the effect that:
(i) The Company has been duly organized as a corporation in good
standing under the laws of the State of Missouri, with corporate power and
authority to own its properties and conduct its business as described in the
Prospectus; each of the Subsidiaries has been duly organized as a corporation in
good standing under the laws of the jurisdiction of its incorporation, with
corporate power and authority to own its properties and conduct its business as
described in the Prospectus; the Company and each of the Subsidiaries are duly
qualified to transact business in all jurisdictions in which the conduct of
their business requires such qualification, and in which the failure to qualify
would have a materially adverse effect upon the business of the Company and the
Subsidiaries taken as a whole; and the outstanding shares of capital stock of
each of the Subsidiaries have been duly authorized and validly issued, are fully
paid and non-assessable and are owned by the Company or a Subsidiary; and, to
the best of such counsel's knowledge, the outstanding shares of capital stock of
each of the Subsidiaries is owned free and clear of all liens, encumbrances and
security interests, and no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert any
obligations into any shares of capital stock or of ownership interests in the
Subsidiaries are outstanding.
<PAGE>
(ii) The authorized shares of the Company's Common Stock have been duly
authorized; the outstanding shares of its Common Stock have been duly authorized
and validly issued and are fully paid and non-assessable; all of the Shares
conform in all material respects to the description thereof contained in, or
incorporated by reference in, the Prospectus; and no preemptive rights of
stockholders exist with respect to any of the Shares.
(iii) Such counsel knows of no material legal proceedings pending or
threatened against the Company or any of the Subsidiaries except as set forth in
the Prospectus.
(iv) The execution and delivery of this Agreement and the consummation
of the transactions herein contemplated do not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under, the
Charter or by-laws of the Company, or any agreement or instrument known to such
counsel to which the Company or any of the Subsidiaries is a party or by which
the Company or any of the Subsidiaries may be bound.
(v) The statements under the caption "Investment Considerations --
Government Regulation" in the Prospectus, the statements under the caption
"Business -- Government Regulation" and "Legal Proceedings" in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 and the
statements under the caption "Certain Relationships and Related Transactions" in
the Company's Notice of 1995 Annual Meeting of Shareholders and Proxy Statement,
insofar as such statements constitute a summary of documents referred to therein
or matters of law, are accurate summaries and fairly and correctly present the
information called for with respect to such documents and matters.
(d) The Underwriter shall have received on the Closing Date the opinion of
Lathrop & Norquist, L.C., counsel for the Selling Shareholders, dated the
Closing Date or the Option Closing Date, as the case may be, addressed to the
Underwriter to the effect that:
(i) This Agreement has been duly authorized, executed and delivered on
behalf of each of the Selling Shareholders.
(ii) Each Selling Shareholder has full legal right, power and
authority, and any approval required by law (other than
<PAGE>
as required by State securities and Blue Sky laws as to which such counsel need
express no opinion), to sell, assign, transfer and deliver the portion of the
Firm Shares or Option Shares, as the case may be, to be sold by such Selling
Shareholder.
(iii) The Custodian Agreement executed and delivered by each Selling
Shareholder is a valid, irrevocable instrument legally sufficient for the
purposes intended.
(iv) The Underwriter (assuming that it is a bona fide purchaser within
the meaning of the Uniform Commercial Code) has acquired good and marketable
title to the Firm Shares or Option Shares, as the case may be being sold by each
Selling Shareholder on the Closing Date or Option Closing Date, free and clear
of all claims, liens, encumbrances and security interests whatsoever.
In rendering such opinion, Lathrop & Norquist, L.C. may rely as to matters
governed by the laws of states other than Missouri or Federal laws on local
counsel in such jurisdictions, provided that in each case Lathrop & Norquist,
L.C. shall state that they believe that they and the Underwriter are justified
in relying on such other counsel.
(e) The Underwriter shall have received from Piper & Marbury llp, its
counsel, an opinion dated the Closing Date or the Option Closing Date, as the
case may be, substantially to the effect specified in subparagraphs (ii) and (v)
of Paragraph (b), subparagraph (ii) of Paragraph (c), and subparagraph (i) of
Paragraph (d) of this Section 6, and that the Company is a validly organized and
existing corporation under the laws of the State of Missouri. In rendering such
opinion Piper & Marbury llp may rely as to all matters governed other than by
the laws of the State of Maryland or Federal laws on the opinions of counsel
referred to in paragraphs (b), (c) and (d) of this Section 6. In addition to the
matters set forth above, such opinion shall also include a statement to the
effect that nothing has come to the attention of such counsel which leads them
to believe that the Registration Statement, as of the time it became effective
under the Act, and the Prospectus or any amendment or supplement thereto, on the
date it was filed pursuant to Rule 424(b) or any of the documents incorporated
by reference therein, as of the date of effectiveness of the Registration
Statement or, in the case of documents incorporated by reference in the
Prospectus after the date of effectiveness of the Registration Statement, as
<PAGE>
of the respective dates when such documents were filed with the Commission and
the Registration Statement and the Prospectus, or any amendment or supplement
thereto, as of the Closing Date or the Option Closing Date, as the case may be,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading (except that such counsel need express no view as to financial
statements, schedules and other financial or statistical information included or
incorporated by reference therein). With respect to such statement, Piper &
Marbury llp may state that their belief is based upon the procedures set forth
therein, but is without independent check and verification.
(f) The Underwriter shall have received at or prior to the Closing Date
from Piper & Marbury llp a memorandum or summary, in form and substance
satisfactory to the Underwriter, with respect to the qualification for offering
and sale by the Underwriter of the Shares under the State securities or Blue Sky
laws of such jurisdictions as the Underwriter may reasonably have designated to
the Company.
(g) The Underwriter shall have received on the Closing Date or the Option
Closing Date, as the case may be, a signed letter from Arthur Andersen llp,
dated the Closing Date or the Option Closing Date, as the case may be, which
shall confirm, on the basis of a review in accordance with the procedures set
forth in the letter signed by such firm and dated and delivered to the
Underwriter on the date hereof that nothing has come to their attention during
the period from the date five days prior to the date hereof, to a date not more
than five days prior to the Closing Date or the Option Closing Date, as the case
may be, which would require any change in their letter dated the date hereof if
it were required to be dated and delivered on the Closing Date or the Option
Closing Date, as the case may be. All such letters shall be in form and
substance satisfactory to the Underwriter.
(h) The Underwriter shall have received on the Closing Date or the Option
Closing Date, as the case may be, a certificate or certificates of the Chairman
of the Board, President and Chief Executive Officer and the Executive Vice
President, Chief Financial Officer and Treasurer of the Company to the effect
that, as of the Closing Date or the Option Closing Date, as the case may be,
each of them severally represents as follows:
(i) The Registration Statement has become effective
<PAGE>
under the Act and no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for such purpose have been taken
or are, to his knowledge, contemplated by the Commission.
(ii) He does not know of any litigation instituted or threatened
against the Company of a character required to be disclosed in the Registration
Statement which is not so disclosed; he does not know of any material contract
required to be filed as an exhibit to the Registration Statement which is not so
filed; and the representations and warranties of the Company contained in
Section 1 hereof are true and correct as of the Closing Date or the Option
Closing Date, as the case may be.
(iii) He has carefully examined the Registration Statement and the
Prospectus and, in his opinion, as of the effective date of the Registration
Statement, the statements contained in the Registration Statement, including any
document incorporated by reference therein, were true and correct in all
material respects, and such Registration Statement and Prospectus or any
document incorporated by reference therein did not omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading and, in his opinion, since the effective date of the
Registration Statement, no event has occurred which should have been set forth
in a supplement to or an amendment of the Prospectus which has not been so set
forth in such supplement or amendment.
(i) The Company and the Selling Shareholders shall have furnished to the
Underwriter such further certificates and documents confirming the
representations and warranties contained herein and related matters as the
Underwriter may reasonably have requested.
(j) The Firm Shares and the Option Shares, if any, have been approved for
listing on the Nasdaq Stock Market.
The opinions and certificates mentioned in this Agreement shall be deemed to
be in compliance with the provisions hereof only if they are in all material
respects satisfactory to the Underwriter and to Piper & Marbury llp, its
counsel.
If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled when and as required by
<PAGE>
this Agreement to be fulfilled, the obligations of the Underwriter hereunder may
be terminated by the Underwriter by notifying the Company and the Selling
Shareholders of such termination in writing or by telegram at or prior to the
Closing Date or the Option Closing Date, as the case may be.
In such event, the Company, the Selling Shareholders and the Underwriter
shall not be under any obligation to each other (except to the extent provided
in Sections 5 and 8 hereof).
7. Conditions of the Obligations of the Selling Shareholders. The
obligations of the Selling Shareholders to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, (i) no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened, and (ii) the Underwriter shall have tendered
payment for the Firm Shares or the Option Shares, as the case may be.
8. Indemnification.
(a) The Company and the Selling Shareholders, jointly and severally, agree
to indemnify and hold harmless the Underwriter and each person, if any, who
controls the Underwriter within the meaning of the Act against any losses,
claims, damages or liabilities to which the Underwriter or such controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained or incorporated by reference in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Underwriter and
each such controlling person for any legal or other expenses reasonably incurred
by the Underwriter or such controlling person in connection with investigating
or defending any such loss, claim, damage, liability, action or proceeding;
provided, however, that the Company and the Selling Shareholders will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement, or omission or alleged omission made or
<PAGE>
incorporated by reference in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or such amendment or supplement, in reliance upon
and in conformity with written information furnished to the Company by or
through the Underwriter specifically for use in the preparation thereof. In no
event, however, shall the liability of any Selling Shareholder for
indemnification under this Section 8(a) exceed the lesser of (i) that proportion
of the total of such losses, claims, damages or liabilities indemnified against
equal to the proportion of the total Firm Shares sold hereunder which is being
sold by such Selling Shareholder, or (ii) the proceeds received by such Selling
Shareholder from the Underwriter in the offering. The foregoing indemnity
agreement is subject to the condition that, insofar as it relates to any such
untrue statement, omission or alleged omission made in a Preliminary Prospectus,
but eliminated in the Prospectus, such indemnity agreement shall not inure to
the benefit of the Underwriter from whom the person asserting any loss,
liability, claim or damage purchased the shares (or to the benefit of any person
who controls the Underwriter) if a copy of the Prospectus was not furnished to
such person at or prior to the time required by the Act to be so furnished. This
indemnity agreement will be in addition to any liability which the Company or
the Selling Shareholders may otherwise have.
(b) The Underwriter will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the Registration Statement,
the Selling Shareholders, and each person, if any, who controls the Company or
the Selling Shareholders within the meaning of the Act, against any losses,
claims, damages or liabilities to which the Company or any such director,
officer, Selling Shareholder or controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained or
incorporated by reference in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made; and will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, Selling Shareholder or controlling person
in connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding; provided,
<PAGE>
however, that the Underwriter will be liable in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission has been made or incorporated by reference in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Underwriter specifically
for use in the preparation thereof. This indemnity agreement will be in addition
to any liability which the Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
prejudiced by the failure to give such notice, but the failure to give such
notice shall not relieve the indemnifying party or parties from any liability
which it or they may have to the indemnified party for contribution or otherwise
than on account of the provisions of Section 8(a) or (b). In case any such
proceeding shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party and shall
pay as incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel at its own expense. Notwithstanding the foregoing, the
indemnifying party shall pay as incurred the fees and expenses of the counsel
retained by the indemnified party in the event (i) the indemnifying party and
the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be
<PAGE>
liable for the reasonable fees and expenses of more than one separate firm for
all such indemnified parties. Such firm shall be designated in writing by you in
the case of parties indemnified pursuant to Section 8(a) and by the Company and
the Selling Shareholders in the case of parties indemnified pursuant to Section
8(b). The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such consent
or if there be a final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under Section 8(a) or (b)
above in respect of any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the Selling Shareholders on
the one hand and the Underwriter on the other from the offering of the Shares.
If, however, the allocation provided by the immediately preceding sentence is
not permitted by applicable law or if the indemnified party failed to give the
notice required under Section 8(c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company and the Selling Shareholders on the one hand
and the Underwriter on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Shareholders on the one hand and the Underwriter on the other shall be deemed to
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Shareholders bear to
the total underwriting discounts and commissions received by the Underwriter, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or
<PAGE>
the Selling Shareholders on the one hand or the Underwriter on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriter agree that it
would not be just and equitable if contributions pursuant to this Section 8(d)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 8(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to above in this Section 8(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) the Underwriter shall
not be required to contribute any amount in excess of the underwriting discounts
and commissions applicable to the Shares purchased by the Underwriter, (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation, and (iii) no Selling Shareholder
shall be required to contribute any amount in excess of the lesser of (A) that
proportion of the total of such losses, claims, damages or liabilities
indemnified or contributed against equal to the proportion of the total Firm
Shares sold hereunder which is being sold by such Selling Shareholder, or (B)
the proceeds received by such Selling Shareholder from the Underwriter in the
offering.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
9. Notices. All communications hereunder shall be in writing and,
except as otherwise provided herein, will be mailed, delivered or telegraphed
and confirmed as follows: if to the
<PAGE>
Underwriter, to Alex. Brown & Sons Incorporated, 135 East Baltimore Street,
Baltimore, Maryland 21202, Attention: David G. Bannister, Managing Director; if
to the Company, to Mark VII, Inc., 10100 N.W. Executive Hills Boulevard, Suite
200, Kansas City, Missouri 64153, Attention: J. Michael Head, Executive Vice
President, Chief Financial Officer and Treasurer; if to the Selling
Shareholders, to Roger M. Crouch, 3220 Lands End Lane, Port Townsend, Washington
98368.
10. Termination. This Agreement may be terminated by you by notice to the
Company and to the Selling Shareholders as follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale, or (ii) 11:30 A.M. on the first business day following
the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any materially adverse change or any
development involving a prospective materially adverse change in or affecting
the condition, financial or otherwise, of the Company and its Subsidiaries taken
as a whole or the earnings, business affairs, management or business prospects
of the Company and its Subsidiaries taken as a whole, whether or not arising in
the ordinary course of business, (ii) any outbreak of hostilities or other
national or international calamity or crisis or change in economic or political
conditions if the effect of such outbreak, calamity, crisis or change on the
financial markets of the United States would, in your reasonable judgment, make
the offering or delivery of the Shares impracticable, (iii) suspension of
trading in securities on the New York Stock Exchange or the American Stock
Exchange or limitation on prices (other than limitations on hours or numbers of
days of trading) for securities on either such Exchange, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which in
your reasonable opinion materially and adversely affects or will materially or
adversely affect the business or operations of the Company, (v) declaration of a
banking moratorium by either federal or New York State authorities, or (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs which in your reasonable opinion has a
materially adverse effect on the securities markets in the United States; or
<PAGE>
(c) as provided in Section 6 of this Agreement.
This Agreement also may be terminated by you, by notice to the Company, as to
any obligation of the Underwriter to purchase the Option Shares, upon the
occurrence at any time prior to the Option Closing Date of any of the events
described in subparagraph (b) above or as provided in Section 6 of this
Agreement.
11. Successors. This Agreement has been and is made solely for the
benefit of the Underwriter, the Company and the Selling Shareholders and their
respective successors, executors, administrators, heirs and assigns, and the
officers, directors and controlling persons referred to herein, and no other
person will have any right or obligation hereunder. The term "successors" shall
not include any purchaser of the Shares merely because of such purchase.
12. Miscellaneous. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or its directors or officers and (c) delivery of and payment for the
Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Maryland.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the Selling
Shareholders and the Underwriter in accordance with its terms.
Very truly yours,
Mark VII, Inc.
<PAGE>
By:________________________________________
J. Michael Head
Executive Vice President, Chief
Financial Officer and Treasurer
Selling Shareholders
By:________________________________________
Roger M. Crouch
Attorney-in-Fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
Alex. Brown & Sons Incorporated
By:___________________________________________
Authorized Officer
SCHEDULE I
Schedule of Selling Shareholders
<TABLE>
<CAPTION>
Number of Firm Shares
Selling Shareholder to be Sold
<S> <C>
Roger M. Crouch 875,336
The Sugar Lakes Foundation 118,182
The Catherine Fenner Crouch
Charitable Remainder Unitrust I 90,909
Rosalie C. Sisson 68,858
Rosalie C. Sisson, as custodian for
Alexandra Catherine Sisson 909
---------
Total 1,154,194
</TABLE>
<PAGE>
SCHEDULE II
Schedule of Option Shares
<TABLE>
<CAPTION>
Maximum Number Percentage of
of Option Shares Total Number of
Name of Seller to be Sold Option Shares
<S> <C> <C>
Roger M. Crouch 87,533 75.83%
The Sugar Lakes Foundation 11,818 10.24%
The Catherine Fenner Crouch
Charitable Remainder Unitrust I 9,091 7.88%
Rosalie C. Sisson 6,886 5.97%
Rosalie C. Sisson, as custodian for
Alexandra Catherine Sisson 91 0.08%
------- ------
Total 115,419 100.0%
</TABLE>
EXHIBIT A
List of Subsidiaries
Jurisdiction of
Name of Subsidiary Incorporation
Mark VII Transportation Company, Inc. Delaware
Mark VII Trucking, Inc. Delaware
Apollo Express, Inc. Kansas
Neptune Trucking, Inc. Kansas
Jupiter Transportation, Inc. Kansas
Taurus Trucking, Inc. Kansas
Orion Express, Inc. Kansas
Capricorn Transportation, Inc. Kansas
MNX Carriers, Inc. Delaware
<PAGE>
Missouri-Nebraska Express, Inc. Iowa
MNX Transport, Inc. Missouri
MNX Trucking, Inc. Missouri
EXHIBIT B
Liens and Encumbrances on Capital Stock of Subsidiaries;
Options, Warrants or Other Rights to Purchase, Agreements or
Other Obligations to Issue or Other Rights to Convert Any
Obligations into Shares of Capital Stock or Ownership Interests
in the Subsidiaries
<PAGE>
[Form of Shook, Hardy & Bacon P.C. Opinion]
, 1995
Mark VII, Inc.
10100 N.W. Executive Hills Boulevard
Suite 200
Kansas City, Missouri 64153
Ladies and Gentlemen:
We have acted as counsel to Mark VII, Inc., a Missouri corporation
(the "Company"), in connection with the preparation of the Registration
Statement on Form S-3 of the Company (the "Registration Statement"), filed with
the Securities and Exchange Commission on May 8, 1995, relating to the
registration under the Securities Act of 1933 of approximately 1,269,613 shares
of the Company's common stock, par value $.10 per share (the "Shares"), which
will be offered for sale by certain shareholders of the Company.
In this connection, we have reviewed (i) the Registration Statement,
(ii) the Restated Articles of Incorporation of the Company as filed
as Exhibit 3(a) to the Company's Registration Statement on Form S-1 (SEC File
No. 33-6550), (iii) Amendment No. 1 to the Restated Articles of Incorporation of
the Company as filed as Exhibit 4.2 to the Company's Registration Statement on
Form S-8 (SEC File No. 33-86174) (the "Form S-8"), (iv) the Amended and Restated
Bylaws of the Company as filed as Exhibit 3(b) to the Company's Annual Report on
Form 10-K for the year ended January 1, 1994, (v) the form of Underwriting
Agreement among the Company, the Selling Shareholders (as defined therein) and
Alex. Brown & Sons Incorporated as filed as Exhibit 1.1 to the Registration
Statement, (vi) the specimen certificate evidencing the Shares as filed as
Exhibit 4.4 to the Form S-8, (vii) resolutions adopted by the Board of
Directors of the Company and (viii) such other documents, records and
instruments as we have deemed necessary or appropriate in order to give the
opinion set forth herein. We have, with your consent, relied as to factual
matters on certificates or other documents furnished by the Company or its
officers and directors and by governmental authorities and upon such other
documents and data that we have deemed appropriate. We have assumed the
legal capacity of all natural persons, the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity to original documents of all documents submitted to us as copies.
<PAGE>
Mark VII, Inc.
__________, 1995
Page 2
Based on and subject to the foregoing and the qualifications and
limitations set forth below, we are of the opinion that the Shares are legally
issued, fully paid and nonassessable.
We express no opinion as to the laws of any jurisdiction other than
the General and Business Corporation Law of the State of Missouri. The opinion
set forth in this letter is effective as of the date hereof. No expansion of
our opinion may be made by implication or otherwise. We express no opinions
other than as herein expressly set forth.
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to the undersigned under the heading
"Legal Matters" in the Prospectus included in the Registration Statement. In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
Shook, Hardy & Bacon P.C.
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
February 24, 1995, included in Mark VII, Inc.'s Form 10-K for the year ended
December 31, 1994 and to all references to our Firm included in this
registration statement.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Kansas City, MO
May 8, 1995
