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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 3, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
---------- -----------
Commission File No. 0-14810
MARK VII, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction 43-1074964
of incorporation or organization) (I.R.S. Employer Identification No.)
965 Ridge Lake Boulevard, Suite 103
Memphis, Tennessee 38120
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (901) 767-4455
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.05 par value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of Common Stock, $.05 par value, held by
non-affiliates of the Registrant on March 6, 1998, based upon the last sale
price of such stock on that date was $145,821,852. At March 6, 1998, 8,938,572
shares of Common Stock, $.05 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
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Documents Form 10-K Reference
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<S> <C>
Notice of 1998 Annual Meeting of Shareholders and Proxy Statement Part III, Items 10, 11, 12 and 13
to be filed within 120 days of January 3, 1998, excluding therefrom
the sections titled "Board Compensation Committee Report on Executive
Compensation" and "Performance Graph"
</TABLE>
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MARK VII, INC. AND SUBSIDIARIES
1997 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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PART I
Page
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Item 1. Business........................................................................................ 2
Item 2. Properties...................................................................................... 5
Item 3. Legal Proceedings............................................................................... 5
Item 4. Submission of Matters to a Vote of Security Holders............................................. 5
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........................... 6
Item 6. Selected Financial Data......................................................................... 7
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 8
Item 8. Financial Statements and Supplementary Data..................................................... 10
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures........... 10
PART III
Item 10. Directors and Executive Officers of the Registrant.............................................. 10
Item 11. Executive Compensation.......................................................................... 10
Item 12. Security Ownership of Certain Beneficial Owners and Management.................................. 10
Item 13. Certain Relationships and Related Transactions.................................................. 10
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................................ 11
</TABLE>
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
Except for the historical information contained herein, this document
contains forward-looking statements based on management's current expectations
of the Company's near term results, based on current information available
pertaining to the Company. Actual future results and trends may differ
materially depending on a variety of factors, including competition in the
marketplace, changes in the carrier base, changes in capacity and changes in
government regulations.
PART I
ITEM 1. BUSINESS
GENERAL
Mark VII, Inc. (the "Company") is a holding company, the principal
assets of which are its transportation services subsidiary, Mark VII
Transportation Company, Inc. ("Mark VII") and Mark VII's subsidiaries. The
Company is a Delaware corporation, but was originally organized in 1976 as a
Missouri corporation. The Company is a service organization that acts as a
provider of transportation and logistics services. As a provider of
transportation services, the Company arranges for domestic and international
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 and regional and local distribution.
The Company has established a network of transportation sales personnel
and logistics managers at its headquarters in Memphis, Tennessee and 133 branch
sales offices in 37 states. The majority of the Company's branch offices are
operated by independent commission agents responsible for the 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 Company acts as a link between shippers and carriers. Shippers use
transportation services companies to complement 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 used 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.
SERVICES PROVIDED
The Company's transportation 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 shipment-by-shipment
basis. The transportation services company then assumes responsibility for the
transportation carrier's obligations to perform in accordance with the shipper's
specifications. Similarly, a carrier may call the transportation services
company when it has resources available to transport freight. The transportation
services company arranges a match and adds a fee to the carrier's rate.
Logistics Management Services. "Logistics management services" include
both process based and information/knowledge based services. Process based
services involve the Company taking responsibility for all transactions of a
particular type for a shipper or carrier. The Company's expertise in intermodal
service and trucking has led shippers and carriers to request the Company to
regularly arrange shipments for a pre-arranged fee. Both shippers and carriers
avail themselves of this service, often realizing financial savings due to the
Company's volume and information base and its ability to arrange shipments more
efficiently. The Company can help trucklines maintain competitive positions,
including allowing them 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, the Company currently coordinates the time-sensitive raw potato
delivery for a number of processing plants of a major potato chip manufacturer.
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Other examples of process based services currently executed by the Company are
the procurement of truck and rail services for a substantial portion of a
customer's shipments from a particular location, procurement of backhaul
shipments for private fleets, freight consolidation and forwarding for a
customer with complex logistical needs, and utilization management of an
equipment owner's fleet and operation of small dedicated fleets to serve 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 and warehousing. The Company utilizes its sales
network to design transportation and distribution programs for customers with
complex logistical needs. For example, ERX Logistics, L.L.C., 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.
TRANSPORTATION MODES
Transportation modes used by the Company 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 people and logistics
professionals.
Rail Services. Intermodal services involve arranging for the pick up
and delivery of shipments by trucks, and the shipments' transport by railroads,
in a coordinated manner. Other rail services involve rail transport by boxcar or
flatcar for shippers' heavy or bulky freight. Related services may include load
stabilization, load expediting and equipment selection.
Truck Services. Truck services involve arranging for the pick up and
delivery of shipments that will be transported over the road using trucks. In
addition to locating appropriate equipment to meet shippers' needs, trucklines
actively solicit shipments from the Company's sales offices. Although the
Company owns or leases only a limited equipment base, it has access to an
abundant supply of 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), issued by the Federal Maritime Commission, to arrange for the services
of ocean carriers.
Other Services. Other services, such as air freight forwarding, local
truckload and heavy equipment transport, are important to the Company's strategy
because they respond to a customer's total transportation needs and provide the
Company's network of sales personnel and logistics managers a complete range of
services to sell.
AGENCY NETWORK AND OPERATIONS
The Company's operations are decentralized and are conducted primarily
in branch offices. Of the 133 branch offices, 25 are operated by the Company and
108 are operated under agency agreements. 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
agency branches is responsible for obtaining its own office facilities. Offices
operated by employees, rather than agents, are structured as stand-alone
business units. Most offices have one to four operations people, who are
responsible for controlling all aspects of executing the shipment, including (i)
taking the order from the customer, (ii) arranging for transportation services,
(iii) monitoring progress of the shipment and reporting back to the customer and
(iv) billing the customer on the Company's invoices. To foster the growth of its
agency network, the Company provides new agents with advances to cover start-up
and initial operating costs. These advances are typically repaid over 24 months.
Typically, a 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 freight is handled for 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 branch office assumes responsibility for
executing individual shipment orders for that customer.
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The Company provides administrative support, such as computer systems,
sales support, credit services, collection services and accounts payable
services, to its branch office operations on a centralized basis. Specialty
operations such as the design and management of dedicated trucking operations
and truck brokerage are available to the logistics management services
operations. The Company currently uses a Data General model MV9600 computer and
customized software which integrates shipment tracking, customer records and
billing, accounts payable and general accounting. A new system currently being
developed, which is year 2000 compliant, will greatly expand the Company's
capabilities in the area of information systems. Scheduled to be implemented
during the second half of 1998, the system will employ the latest in
client/server technologies. Components of the system include a powerful Informix
Dynamic Server relational database; a SUN Ultra Enterprise Server operating on
SUN's Solaris UNIX Operating System with attached data storage facilities
capable of providing over one terabyte of available capacity, using both
magnetic and optical media; Microsoft NT Servers; and Windows 95 and Windows NT
workstations. High speed document imaging, electronic document interchange,
electronic mail, integrated electronic FAX, internet and networking capabilities
will greatly improve the Company's efficiency in processing thousands of
shipments per day as well as enhancing certain customer service offerings.
SEASONALITY
Results of operations in the transportation industry generally 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.
COMPETITION
The transportation services industry is highly competitive. The Company
competes against other integrated logistics companies, as well as transportation
companies. The Company also competes against carriers' internal sales forces.
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.
GOVERNMENT REGULATION
The Company is licensed by the United States Department of
Transportation (the "DOT") to engage in operations as a broker in arranging for
the transportation, by motor vehicle, of general commodities between points in
the United States. The DOT prescribes qualifications for acting in this
capacity, including certain surety bonding requirements. The Company also acts
as a common and contract motor carrier regulated by the DOT. Interstate motor
carrier operations are subject to safety requirements prescribed by the DOT.
Matters such as weight and dimensions of equipment are also subject to federal
regulations.
In its ocean freight forwarding business, the Company is licensed as an
ocean freight forwarder and as a non-vessel operating common carrier by the
Federal Maritime Commission (the "FMC"). The FMC prescribes qualifications for
acting as a shipping agent, including the filing of tariffs and surety bonding
requirements.
The Company's air freight forwarding business is subject to regulation,
as an indirect air cargo carrier, under the Federal Aviation Act (the "Act") by
the DOT. The DOT's Economic Aviation Regulations exempt domestic air freight
forwarders from most, but not all, of the Act's requirements. The major
provisions of the Act that remain applicable to the Company forbid solicitation
of certain rebates, require the carrier to provide safe service, equipment and
facilities, prohibit discrimination with respect to foreign air cargo
transportation, prohibit unfair or deceptive practices and authorize the DOT to
inquire into the carrier's management for certain purposes.
In certain foreign markets in which the Company operates, the air
freight forwarding business is subject to rate schedules and other restrictions
which in the first instance are agreed to by the International Air Transport
Association and subsequently approved by the governments concerned. The Company
also is subject to certain foreign regulations.
Management does not believe that current regulation of its activities
imposes significant economic restraints upon its operations or upon the entry of
new competitors into the industry in general or into the markets that are served
by the Company in particular.
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EMPLOYEES
The Company employed 308 individuals at March 6, 1998. The employees
were not represented by a collective bargaining unit. Management considers
relations with its employees to be good.
ITEM 2. PROPERTIES
All of the Company's operations at the 25 company branch locations are
conducted in office space under leases with terms of less than four years.
Although the Company owns the land and building which houses its administrative
offices in Indianapolis, Indiana, the Company's other principal administrative
office is located in leased space in Memphis, Tennessee. Each of the 108 agency
branches is responsible for obtaining its own office facilities.
The Company also owns, and is holding for sale or lease, office,
maintenance and fuel facilities in St. Joseph, Missouri, and Joplin, Missouri,
and a four acre tract in Los Angeles, California. The Los Angeles property has
been leased through December 2000 and the Joplin property has been leased
through June 2002.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings generally
incidental to its business. While the result of any litigation contains an
element of uncertainty, the Company presently believes that the outcome of any
known pending or threatened legal proceedings or claims, or all of them
combined, will not have a material adverse effect on its results of operations
or consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) A Special Meeting of Shareholders of the Company was held on
November 7, 1997.
(b) Not Applicable
(c) 1. Amendment to the Certificate of Incorporation to Increase
Authorized Shares. The Company's Certificate of Incorporation
was amended to increase the number of authorized shares of
common stock from 10 million shares to 20 million shares and
to reduce the par value from $.10 per share to $.05 per share
pursuant to the following vote:
Votes in Favor Withheld/Against Abstained
-------------- ---------------- ---------
3,529,417 1,066,455 2,100
(d) Not Applicable
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
The Company's common stock trades on the Nasdaq Stock Market's National
Market System under the symbol: MVII. The following table sets forth the high
and low sale prices per share of the common stock for the periods indicated, as
reported by the Nasdaq Stock Market:
<TABLE>
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High Low
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1996
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First Quarter..............................$ 8 15/16 $ 8
Second Quarter............................. 10 5/16 8 5/8
Third Quarter.............................. 11 10 1/16
Fourth Quarter............................. 14 3/4 10 11/16
1997
----
First Quarter..............................$ 16 1/4 $ 13 13/16
Second Quarter............................. 16 7/8 13 7/8
Third Quarter.............................. 16 3/4 14 5/8
Fourth Quarter............................. 19 13 1/2
1998
----
First Quarter (through March 6, 1998)......$ 19 $ 14 3/4
</TABLE>
On March 6, 1998, the last sale price per share of the common stock was
$18. At March 6, 1998, there were 190 holders of record, representing an
estimated 1,300 individual holders of the Company's common stock.
On November 7, 1997, the Company's Board of Directors authorized a
two-for-one stock split. All references in the accompanying financial statements
to the number of common shares and per share amounts for periods prior to
November 7, 1997 have been restated to reflect the stock split.
DIVIDENDS
The Company has never paid a cash dividend on its common stock. It is
the intention of the Board of Directors to continue to retain earnings to
finance the growth of the Company's business rather than to pay cash dividends.
Future payments of cash dividends will depend upon the financial condition,
results of operations and capital commitments of the Company, as well as other
factors deemed relevant by the Board of Directors. The Company and its
subsidiaries are currently subject to a line of credit which limits the payment
of dividends.
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ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data as of and for each
of the years in the five-year period ended January 3, 1998 are derived from the
Company's consolidated financial statements which have been audited by Arthur
Andersen LLP, independent public accountants. The following selected
consolidated financial data should be read in conjunction with the Consolidated
Financial Statements of the Company and Notes thereto, and Report of Independent
Public Accountants thereon, for the most recent three years, included elsewhere
in this Annual Report.
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FISCAL YEAR (1)
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1993 1994 1995 1996 1997
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(in thousands, except per share data)
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STATEMENTS OF INCOME INFORMATION:
Operating revenues.........................$ 341,532 $ 428,772 $ 459,160 $ 563,913 $ 667,374
Transportation costs....................... 296,656 370,232 391,845 489,292 582,843
---------- ---------- ---------- ---------- ----------
Net revenues............................... 44,876 58,540 67,315 74,621 84,531
Operating income........................... 4,457 6,847 8,489 10,205 12,358
Income from continuing operations
before income taxes..................... 4,199 6,267 8,024 9,952 12,717
Income from continuing operations..........$ 2,490 $ 3,667 $ 4,734 $ 5,772 $ 7,376
========== ========== ========== ========== ==========
Income from continuing operations
per common share (2).....................$ .26 $ .38 $ .49 $ .63 $ .80
========== ========== ========== ========== ==========
Income from continuing operations
per common share, assuming dilution (2)..$ .26 $ .37 $ .47 $ .60 $ .76
========== ========== ========== ========== ==========
Average common shares and equivalents
outstanding:
Basic................................... 9,534 9,558 9,674 9,211 9,185
Diluted................................. 9,682 9,802 9,990 9,616 9,699
BALANCE SHEET DATA:
Total assets...............................$ 65,151 $ 70,837 $ 76,152 $ 93,597 $ 108,010
Total debt................................. 11,337 10,787 1,588 747 580
Shareholders' investment................... 21,047 23,473 25,888 30,038 32,122
</TABLE>
(1) The Company's fiscal year ends on the Saturday nearest December 31. Fiscal
years 1993, 1994, 1995 and 1996 included 52 weeks and fiscal year 1997
included 53 weeks.
(2) Effective January 3, 1998, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share". Earnings per share have
been restated for the periods presented to conform to the new accounting
standard. In addition, on November 7, 1997, the Company's Board of
Directors authorized a two-for-one stock split, thereby increasing the
number of shares issued by 5,003,000 and decreasing the par value of each
share to $.05. All references to the number of common shares and per share
amounts for the periods presented have been restated to reflect the stock
split.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Except for the historical information contained herein, this document
contains forward-looking statements based on management's current expectations
of the Company's near term results, based on current information available
pertaining to the Company. Actual future results and trends may differ
materially depending on a variety of factors, including competition in the
marketplace, changes in the carrier base, changes in capacity and changes in
government regulations.
RESULTS OF OPERATIONS
Fiscal Years 1997 Compared to 1996 and 1996 Compared to 1995
The following table sets forth the percentage relationship of the
Company's revenue and expense items to operating revenues for the periods
indicated:
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FISCAL YEAR
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1997 1996 1995
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Operating revenues......................... 100.0% 100.0% 100.0%
Transportation costs....................... 87.3 86.8 85.3
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Net revenues............................... 12.7 13.2 14.7
Operating expenses:
Salaries and related costs........... 2.7 2.9 3.5
Selling, general and administrative.. 8.1 8.5 9.4
-------- -------- --------
Total operating expenses......... 10.8 11.4 12.9
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Operating income........................... 1.9 1.8 1.8
Interest and other expense................. - - .1
-------- -------- --------
Income from continuing operations
before income taxes.................. 1.9% 1.8% 1.7%
======== ======== ========
</TABLE>
General - 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, as well as revenues from fixed fee
arrangements on a portion of the Company's integrated logistics projects. 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 costs incurred by the transportation services operations and logistics
projects are for purchased transportation. Net revenues include only the
commissions and fees.
Selling, general and administrative expenses primarily consist of the
percentage of net revenue paid to agencies and independent sales contractors as
consideration for providing sales and marketing, arranging for movement of
shipments, entering billing and accounts payable information on shipments and
maintaining customer relations, as well as other company operating expenses.
Certain costs incurred by the Company's dedicated trucking fleets are also
reported in salaries and related costs and selling, general and administrative
expenses.
Revenues - The Company's total number of shipments were 627,000,
503,000, and 414,000 in 1997, 1996 and 1995, respectively. Increases in
shipments of 25% and 21% in 1997 and 1996, respectively, were the result of
expanded services to both new and existing customers. The Company also increased
the number of sales offices by 11 offices in 1996 and 20 offices in 1997.
Net Revenues. The Company's net revenues as a percentage of operating
revenues were 12.7%, 13.2% and 14.7%, in 1997, 1996 and 1995, respectively.
During 1996, the Company closed several of its unprofitable dedicated trucking
operations, resulting in decreased net revenues as a percentage of operating
revenues in 1996 and 1997. These decreases in net revenues as a percentage of
operating revenues have been offset by proportionate changes in operating
expenses as a percentage of operating revenues.
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In recent years, truck related services have grown at a faster rate
than rail and other modes. This increase in truck shipments has been fueled by
the Company's growth of comprehensive logistics management services which have
higher levels of over-the-road freight than other modes. Since operating revenue
per truck shipment averages about 60% of operating revenue per rail shipment,
the shipment count growth rate exceeded the operating revenue growth rate for
1997. The net revenue as a percentage of operating revenue is slightly higher
for truck shipments than rail shipments, however, any resulting increases in net
revenues as a percentage of operating revenues have been offset by the Company's
downsizing of dedicated trucking operations in recent years.
Operating Expenses - As discussed above in net revenues, the closing
of certain dedicated trucking fleets has resulted in fluctuations in operating
expenses as a percentage of operating revenues. In general, the Company's
dedicated trucking fleets have relatively higher fixed costs compared to
operating revenues than the Company's transportation services and logistics
management operations.
Interest and Other Expense, Net - Cash flow from operations has been
adequate to cover the Company's operating needs and capital requirements in
recent years, resulting in decreased interest expense and increased interest
income in 1997 and 1996.
Provision for Income Taxes - The Company's effective tax rates were
42% in 1997 and 1996 and 41% in 1995.
LIQUIDITY AND CAPITAL RESOURCES
In recent years, the Company's cash flows from operations have
exceeded its working capital needs. In addition, the Company has available a
$25,000,000 unsecured revolving credit facility (the "Facility"). On January 3,
1998, there were no borrowings under the Facility, but letters of credit
totaling $3,953,000 had been issued on the Company's behalf to secure insurance
deductibles and purchases of operating services, resulting in unused borrowing
capacity of $21,047,000. The interest rate for borrowings under the Facility is
a variable rate based upon the 30 day LIBOR Funding Rate, as defined, plus 50 to
125 basis points. The Company pays a varying fee of .35% to 1.00% on outstanding
letters of credit and a varying commitment fee of .15% to .30% on the unused
portion of the Facility, as defined. At January 3, 1998, the interest rate was
6.46% and the letter of credit fee and commitment fee were .35% and .15%,
respectively. The line of credit expires on July 1, 2000, but may be extended by
mutual agreement of the lender and the Company, for subsequent periods of one
year each.
Among the covenants contained in the Facility are maintenance of
certain financial ratios, including debt to net worth, cash plus accounts
receivable to current liabilities plus debt and debt to earnings before income
taxes, depreciation and amortization (all as defined). Other covenants include
the level of capital and lease expenditures, acquisitions and mergers, dividends
and redemptions of stock.
At January 3, 1998, the Company had a ratio of current assets to
current liabilities of approximately 1.24 to 1. Management believes that the
Company will have sufficient cash flow from operations and borrowing capacity to
cover its operating needs and capital requirements for the foreseeable future.
OTHER INFORMATION
In response to expanding capabilities in the area of information
systems and issues related to the year 2000, the Company is designing a new
financial and administrative system scheduled for implementation during the
second half of 1998. The total cost of this system is not expected to exceed
$1,500,000, the majority of which was expended in 1997. Additionally, the
Company is performing an in-depth review of the year 2000 compliance aspects of
all peripheral systems not included in the above system. Management is uncertain
at this time what additional costs, if any, may be incurred in connection with
these peripheral systems. Management is confident that all issues relating to
the Company's internal information systems arising from the year 2000 will be
addressed during the course of these two projects. The Company is also in the
process of seeking information concerning year 2000 compliance from vendors,
customers and other third parties upon whom the Company relies.
Results of operations in the transportation industry generally 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.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required under this item and set forth
elsewhere in this Form 10-K as indicated in the following index are incorporated
herein by reference.
<TABLE>
<CAPTION>
Index to Consolidated Financial Statements
Page
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Consolidated Balance Sheets................................... 15
Consolidated Statements of Income............................. 16
Consolidated Statements of Shareholders' Investment........... 17
Consolidated Statements of Cash Flows......................... 18
Notes to Consolidated Financial Statements.................... 19
Report of Independent Public Accountants...................... 26
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The sections entitled "Election of Directors" and "Executive Officers
and Key Employees" of the Company's Notice of the 1998 Annual Meeting of
Shareholders and Proxy Statement which will be filed within 120 days of January
3, 1998 are incorporated herein by reference.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The information required hereunder is incorporated by reference from
the section entitled "Compliance with Section 16(a) of the Securities Exchange
Act of 1934" of the Company's Notice of the 1998 Annual Meeting of Shareholders
and Proxy Statement which will be filed within 120 days of January 3, 1998.
ITEM 11, 12, AND 13. EXECUTIVE COMPENSATION, SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT, AND CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The information required under these items is incorporated by reference
from the Company's Notice of the 1998 Annual Meeting of Shareholders and Proxy
Statement which will be filed within 120 days of January 3, 1998.
10
<PAGE> 12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
All financial statements of the Registrant as set forth
under Item 8 of this Annual Report on Form 10-K.
(2) Financial Statement Schedules
<TABLE>
<CAPTION>
Schedule
Number Description Page of 1997 10-K
-------- ----------- -----------------
<S> <C> <C>
II Valuation and Qualifying Accounts 27
</TABLE>
The report of the Registrant's independent public accountants with
respect to the above-listed financial statements and financial statement
schedule appears on page 26 of this Annual Report on Form 10-K.
All other financial schedules not listed above have been omitted since
the required information is included in the consolidated financial statements or
the notes thereto, or is not applicable or required.
(3) Exhibits
<TABLE>
<CAPTION>
Exhibit Page Number or Incorporation
Number Description by Reference to
- ------- ----------- ----------------------------
<S> <C> <C>
2 Agreement and Plan of Merger dated as of May 2, Annex A to Proxy Statement for
1996 between Mark VII, Inc., a Missouri 1996 Annual Meeting of Shareholders
corporation ("Mark VII Missouri"), and Mark VII,
Inc., a Delaware corporation and wholly owned
subsidiary of Mark VII Missouri.
3(a) Certificate of Incorporation Annex B to Proxy Statement for
1996 Annual Meeting of Shareholders
3(b) By-Laws of Mark VII, Inc. Annex C to Proxy Statement for
1996 Annual Meeting of Shareholders
10.1 * MNX Incorporated Amended and Restated 1986 Exhibit 10(g) to 1990 Annual
Incentive Stock Option Plan Report on Form 10-K
10.2 * Amendment No. 5 to the MNX Incorporated Exhibit 10(g) to 1991 Annual
Amended and Restated 1986 Incentive Stock Report on Form 10-K
Option Plan
10.3 * MNX Incorporated 1992 Non-Qualified Stock Exhibit 10(s) to 1991 Annual
Option Plan Report on Form 10-K
10.4 * MNX Incorporated Stock Appreciation Rights Exhibit 10(o) to 1992 Annual
Program, dated April 24, 1990 Report on Form 10-K
10.5 * Employment and Noncompete Agreement between Exhibit 3 to Current Report on Form
R.C. Matney and the Registrant dated as of 8-K dated May 9, 1995
April 1, 1992. Revised Addendum to Employment
and Noncompete Agreement dated as of July 1, 1994
10.6 * Addendum No. 2 to Employment and Noncompete Filed herewith
Agreement between R.C. Matney and the Registrant
dated as of October 1, 1997
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
Exhibit Page Number or Incorporation
Number Description by Reference to
- ------- ----------- ----------------------------
<S> <C> <C>
10.7 * Employment and Noncompete Agreement between Filed herewith
Philip L. Dunavant and the Registrant dated as of
May 16, 1997
10.8 * Employment and Noncompete Agreement between Filed herewith
David H. Wedaman and the Registrant dated
as of January 1, 1997. Addendum to Employment
and Noncompete Agreement dated as of May 15, 1997
10.9 * Employment and Noncompete Agreement between Exhibit 6 to Current Report on Form
Robert E. Liss and Jupiter Transportation, Inc., 8-K dated May 9, 1995
an indirect wholly owned subsidiary of the Registrant,
dated as of July 1, 1994
10.10 * Employment and Noncompete Agreement between Exhibit 7 to Current Report on Form
James T. Graves and the Registrant dated as of 8-K dated May 9, 1995
August 1, 1992
10.11 * Employment and Noncompete Agreement between Exhibit 10.10 to 1995 Annual Report
Michael J. Musacchio and Mark VII Logistics, a on Form 10-K
Division of Mark VII Transportation Co., Inc., a
wholly owned subsidiary of the Registrant dated
as of June 1, 1995. Addendum to Employment and
Noncompete Agreement between Michael J.
Musacchio and Mark VII Logistics dated as of
September 1, 1995
10.12 * Amendment Number 1 to the Mark VII, Inc. 1992 Exhibit 99.1 to Registration
Non-Qualified Stock Option Plan (formerly the MNX Statement on Form S-8 (SEC File
Incorporated 1992 Non-Qualified Stock Option Plan) No. 33-86174)
dated September 22, 1994
10.13 Asset Purchase Agreement dated June 17, 1994 by Appendix B to Proxy Statement for
and among Swift Transportation Co., Inc. (Nevada), 1994 Annual Meeting of Shareholders
Swift Transportation Co., Inc. (Arizona), Mark VII,
Inc., MNX Carriers, Inc., and Missouri-Nebraska
Express, Inc.
10.14 Amendment No. 1 to Asset Purchase Agreement Exhibit 10.14 to 1994 Annual
dated September 30, 1994 by and among Swift Report on Form 10-K
Transportation Co., Inc. (Nevada), Swift
Transportation Co., Inc. (Arizona), Mark VII,
Inc., MNX Carriers, Inc., and Missouri-Nebraska
Express, Inc.
10.15 Mark VII, Inc. 1995 Omnibus Stock Incentive Appendix A to Proxy Statement for
Plan 1995 Annual Meeting of Shareholders
10.16 Amendment No. 1 to the Mark VII, Inc. 1995 Annex E to Proxy Statement for 1995
Omnibus Stock Incentive Plan Annual Meeting of Shareholders
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
Exhibit Page Number or Incorporation
Number Description by Reference to
- ------- ----------- ----------------------------
<S> <C> <C>
10.17 Revolving Loan and Promissory Note dated Filed herewith
July 29, 1997 by and among NationsBank of
Tennessee, N.A., Mark VII, Inc. and Mark VII
Transportation Co., Inc.
10.18 Loan Agreement dated as of July 29, 1997 by and Filed herewith
among NationsBank of Tennessee, N.A., Mark VII,
Inc. and Mark VII Transportation Co., Inc.
10.19 First Modification of Loan Agreement dated as of Filed herewith
October 20, 1997 by and among NationsBank of
Tennessee, N.A., Mark VII, Inc. and Mark VII
Transportation Co., Inc.
21 Subsidiaries of Registrant Filed herewith
23 Consent of Independent Public Accountants Filed herewith
27 Financial Data Schedule (SEC Use Only) Filed herewith
</TABLE>
- ------------
* Management contracts or compensatory plans
(b) Reports on Form 8-K
None
13
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MARK VII, INC.
By: /s/ R.C. Matney
---------------------------------
R. C. Matney
Chairman of the Board, President
and Chief Executive Officer
Date: March 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ R.C. Matney Chairman of the Board, President, March 26, 1998
- ------------------------------- Chief Executive Officer and Director
R. C. Matney
/s/ Philip L. Dunavant Executive Vice President, Chief Financial March 26, 1998
- ------------------------------- Officer (Principal Financial and Accounting
Philip L. Dunavant Officer)
/s/ James T. Graves Vice Chairman, Secretary, General Counsel March 26, 1998
- ------------------------------- and Director
James T. Graves
/s/ David H. Wedaman Executive Vice President, Chief Operating March 26, 1998
- ------------------------------- Officer and Director
David H. Wedaman
/s/ Douglass Wm. List Director March 26, 1998
- -------------------------------
Douglass Wm. List
/s/ William E. Greenwood Director March 26, 1998
- -------------------------------
William E. Greenwood
/s/ Jay U. Sterling Director March 26, 1998
- -------------------------------
Dr. Jay U. Sterling
/s/ Thomas J. Fitzgerald Director March 26, 1998
- -------------------------------
Thomas J. Fitzgerald
</TABLE>
14
<PAGE> 16
MARK VII, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
1998 1996
---------- ------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................................................. $ 3,732 $ 959
Accounts receivable, less allowances of $2,641 and
$1,693 in 1997 and 1996, respectively .................................................. 82,917 73,315
Notes and other receivables, less allowances of $537
and $1,611 in 1997 and 1996, respectively............................................... 4,399 7,583
Other current assets...................................................................... 1,755 1,131
---------- ----------
Total current assets.................................................................... 92,803 82,988
---------- ----------
Deferred Income Taxes........................................................................ 1,262 946
---------- ----------
Property and Equipment, at cost:
Transportation equipment.................................................................. 4,394 4,915
Computer equipment, furniture and other................................................... 7,026 3,817
---------- ----------
11,420 8,732
Less: Accumulated depreciation........................................................... 4,829 4,214
---------- ----------
Net property and equipment.............................................................. 6,591 4,518
---------- ----------
Intangible and Other Assets.................................................................. 7,354 5,145
---------- ----------
$ 108,010 $ 93,597
========== ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Accrued transportation charges........................................................... $ 63,094 $ 52,734
Deferred income taxes..................................................................... 5,591 2,193
Other current and accrued liabilities..................................................... 6,258 8,031
---------- ----------
Total current liabilities............................................................... 74,943 62,958
---------- ----------
Long-Term Obligations........................................................................ 945 601
---------- ----------
Contingencies and Commitments (Note 5)
Shareholders' Investment:
Common stock, $.05 par value, authorized 20,000,000 shares; issued 10,009,822
shares in 1997 and 9,901,044 shares in 1996............................................. 501 495
Paid-in capital........................................................................... 29,623 28,665
Retained earnings ........................................................................ 14,108 6,732
---------- ----------
44,232 35,892
Less: Treasury stock, at cost, 1,071,250 shares in 1997 and 664,000 shares in 1996....... (12,110) (5,854)
---------- ----------
Total shareholders' investment.......................................................... 32,122 30,038
---------- ----------
$ 108,010 $ 93,597
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
15
<PAGE> 17
MARK VII, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
---------------------------------------------
JANUARY 3, DECEMBER 28, DECEMBER 30,
1998 1996 1995
---------- ------------ ------------
<S> <C> <C> <C>
Operating Revenues ........................................................ $ 667,374 $ 563,913 $ 459,160
Transportation Costs....................................................... 582,843 489,292 391,845
---------- ---------- ----------
Net Revenues............................................................... 84,531 74,621 67,315
Operating Expenses:
Salaries and related costs.............................................. 17,894 16,501 16,170
Selling, general and administrative .................................... 54,279 47,915 42,656
---------- ---------- ----------
Total Operating Expenses.............................................. 72,173 64,416 58,826
---------- ---------- ----------
Operating Income .......................................................... 12,358 10,205 8,489
Other Expense (Income):
Interest expense........................................................ 171 266 494
Interest income......................................................... (711) (177) (193)
Other .................................................................. 181 164 164
---------- ----------- ----------
Total Other Expense (Income), Net..................................... (359) 253 465
---------- ---------- ----------
Income Before Provision For Income Taxes................................... 12,717 9,952 8,024
Provision For Income Taxes................................................. 5,341 4,180 3,290
---------- ---------- ----------
Net Income................................................................. $ 7,376 $ 5,772 $ 4,734
========== ========== ==========
Net Income Per Common Share................................................ $ .80 $ .63 $ .49
========== ========== ==========
Net Income Per Common Share, Assuming Dilution............................. $ .76 $ .60 $ .47
========== ========== ==========
Average Common Shares and Equivalents Outstanding:
Basic................................................................. 9,185 9,211 9,674
Diluted............................................................... 9,699 9,616 9,990
</TABLE>
The accompanying notes are an integral part of these statements.
16
<PAGE> 18
MARK VII, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
(In thousands)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
-------- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994................ 9,562 $ 478 $ 26,769 $ (3,774) $ - $ 23,473
Net income............................. - - - 4,734 - 4,734
Issuance of common stock under
stock-based compensation plans....... 214 11 1,106 - - 1,117
Purchase of treasury stock
(400 shares)......................... - - - - (3,436) (3,436)
-------- --------- -------- ---------- ---------- ----------
Balance, December 30, 1995................ 9,776 489 27,875 960 (3,436) 25,888
Net income............................. - - - 5,772 - 5,772
Issuance of common stock under
stock-based compensation plans....... 125 6 790 - - 796
Purchase of treasury stock
(264 shares)......................... - - - - (2,418) (2,418)
-------- --------- -------- ---------- ---------- ----------
Balance, December 28, 1996................ 9,901 495 28,665 6,732 (5,854) 30,038
Net income............................. - - - 7,376 - 7,376
Issuance of common stock under
stock-based compensation plans....... 109 6 958 - - 964
Purchase of treasury stock
(407 shares)......................... - - - - (6,256) (6,256)
-------- --------- -------- ---------- ---------- ----------
Balance, January 3, 1998.................. 10,010 $ 501 $ 29,623 $ 14,108 $ (12,110) $ 32,122
======== ========= ======== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
17
<PAGE> 19
MARK VII, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
-----------------------------------------------
JANUARY 3, DECEMBER 28, DECEMBER 30,
1998 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Operating Activities:
Net income ............................................................. $ 7,376 $ 5,772 $ 4,734
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation........................................................ 1,054 1,130 1,154
Amortization........................................................ 250 254 330
Provision for doubtful accounts and notes receivable................ 2,672 2,014 2,102
Provision for deferred income taxes................................. 1,737 1,803 2,139
Changes in assets and liabilities:
Accounts receivable............................................... (11,205) (19,009) (5,171)
Accrued transportation charges.................................... 10,360 9,488 9,599
Other ............................................................ (536) 3,249 (3,676)
---------- ---------- ----------
Net cash provided by operating activities............................... 11,708 4,701 11,211
---------- ---------- ----------
Investing Activities:
Additions to property and equipment..................................... (3,600) (1,821) (767)
Retirements of property and equipment................................... 473 572 524
---------- ---------- ----------
Net cash used for investing activities.................................. (3,127) (1,249) (243)
---------- ---------- ----------
Financing Activities:
Exercise of stock options............................................... 615 494 769
Repayments of long-term obligations..................................... (135) (183) (1,419)
Net repayments under line of credit..................................... (32) (658) (7,856)
Purchase of treasury stock.............................................. (6,256) (2,418) (3,436)
---------- ---------- ----------
Net cash used for financing activities.................................. (5,808) (2,765) (11,942)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents....................... 2,773 687 (974)
Cash and cash equivalents:
Beginning of year....................................................... 959 272 1,246
---------- ---------- ----------
End of year............................................................. $ 3,732 $ 959 $ 272
========== ========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest.............................................................. $ 150 $ 196 $ 361
Income taxes, net of refunds received................................. 2,930 2,731 1,180
Supplemental Schedule of Non-cash Financing Activities:
Direct financings under debt and capital lease obligations.............. $ - $ - $ 77
</TABLE>
The accompanying notes are an integral part of these statements.
18
<PAGE> 20
MARK VII, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include Mark VII, Inc., a Delaware
corporation, and its wholly owned subsidiaries, collectively referred to herein
as the "Company." The Company is a sales, marketing and service organization
that acts as a provider of transportation services and a transportation
logistics manager. The Company has a network of transportation sales personnel
that provides services throughout the United States, as well as Mexico and
Canada. The principal operations of the Company are conducted by its
transportation services subsidiary, Mark VII Transportation Company, Inc. ("Mark
VII").
REVENUE
Revenues earned as a third party agent include the carriers' charges for
carrying the shipment plus commissions and fees, as well as revenues from fixed
fee arrangements on a portion of the Company's integrated logistics projects.
Revenues and related expenses are recognized on completion of the Company's
service obligation.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization of
property and equipment are provided using the straight-line method based on the
estimated useful lives of the respective assets as follows:
Transportation equipment 3 to 7 years
Computer equipment, furniture and other 3 to 10 years
The accompanying financial statements include depreciation expense of
$1,054,000, $1,130,000 and $1,154,000 in 1997, 1996 and 1995, respectively.
CASH AND CASH EQUIVALENTS
The Company considers cash on hand, deposits in banks, certificates of deposit
and short-term marketable securities with maturities of 90 days or less when
purchased, as cash and cash equivalents.
The Company utilizes a cash management system under which cash overdrafts exist
in the book balances of its primary disbursing accounts. These overdrafts
represent the uncleared checks in the disbursing accounts. The cash amounts
presented in the consolidated financial statements represent balances on deposit
at other locations, prior to their transfer to the primary disbursing accounts.
Uncleared checks of $2,851,000 and $6,515,000 are included in accrued
transportation charges at January 3, 1998 and December 28, 1996, respectively.
INTANGIBLE ASSETS
Goodwill and other intangible assets are being amortized on the straight-line
basis over 10 to 20 years. Goodwill and other intangible assets consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
Goodwill and other intangible assets............. $ 5,121 $ 3,321
Less accumulated amortization.................... 1,674 1,437
-------- --------
$ 3,447 $ 1,884
======== ========
</TABLE>
19
<PAGE> 21
FISCAL YEAR
The Company's fiscal year ends on the Saturday nearest December 31. Fiscal years
1995 and 1996 included 52 weeks and fiscal year 1997 included 53 weeks.
EARNINGS PER SHARE
Effective January 3, 1998, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share". Earnings per share have been restated
for the periods presented to conform to the new accounting standard. In
addition, on November 7, 1997, the Company's Board of Directors authorized a
two-for-one stock split, thereby increasing the number of shares issued by
5,003,000 and decreasing the par value of each share to $ .05. All references to
the number of common shares and per share amounts for the periods presented have
been restated to reflect the stock split.
A reconciliation between basic earnings per share and diluted earnings per share
follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Net income..................................................$ 7,376 $ 5,772 $ 4,734
======== ======== ========
Average common shares and equivalents outstanding:
Basic..................................................... 9,185 9,211 9,674
Effect of dilutive options................................ 514 405 316
-------- -------- --------
Diluted................................................... 9,699 9,616 9,990
======== ======== ========
Per share amounts:
Net income per common share...............................$ .80 $ .63 $ .49
======= ======== ========
Net income per common share, assuming dilution............$ .76 $ .60 $ .47
======= ======== ========
</TABLE>
RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 and 1995 financial
statements to conform to the 1997 presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(2) CREDIT FACILITY
The Company has a $25 million unsecured revolving credit facility (the
"Facility"). The Facility bears a variable interest rate based upon the 30 day
LIBOR Funding Rate, as defined, plus 50 to 125 basis points. The Company pays a
varying fee of .35% to 1.00% on outstanding letters of credit and a varying
commitment fee of .15% to .30% on the unused portion of the Facility, as
defined. At January 3, 1998, the interest rate was 6.46% and the letter of
credit fee and commitment fee were .35% and .15%, respectively. The line of
credit expires on July 1, 2000, but may be extended by mutual agreement of the
lender and the Company, for subsequent periods of one year each.
20
<PAGE> 22
The following is a summary of data on the credit facility:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------- --------
(dollars in thousands)
<S> <C> <C> <C>
Balance outstanding at end of period...........$ - $ 32 $ 690
Average amount outstanding..................... - 75 1,596
Maximum month end balance outstanding.......... - 1,750 9,310
Interest rate at year end...................... 6.46% 8.8% 9.0%
Weighted average interest rate................. - 8.8% 9.3%
</TABLE>
Among the covenants contained in the Facility are maintenance of certain
financial ratios, including debt to net worth, cash plus accounts receivable to
current liabilities plus debt and debt to earnings before income taxes,
depreciation and amortization (all as defined). Other covenants include the
level of capital and lease expenditures, acquisitions and mergers, dividends and
redemptions of stock.
(3) INCOME TAXES
Components of the provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Federal -
Currently payable ............................$ 2,856 $ 1,833 $ 709
Deferred...................................... 1,562 1,610 1,910
-------- -------- --------
Total federal.............................. 4,418 3,443 2,619
-------- -------- --------
State -
Currently payable............................. 748 544 442
Deferred...................................... 175 193 229
-------- -------- --------
Total state................................ 923 737 671
-------- -------- --------
$ 5,341 $ 4,180 $ 3,290
======== ======== ========
</TABLE>
A reconciliation between the provision for income taxes and the expected taxes
using the federal statutory income tax rate follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- --------
(in thousands)
<S> <C> <C> <C>
Federal statutory rate........................... 34.2% 34% 34%
Tax at statutory rate............................$ 4,349 $ 3,384 $ 2,728
Increase from -
State income taxes, net....................... 609 486 443
Other......................................... 383 310 119
-------- -------- --------
$ 5,341 $ 4,180 $ 3,290
======== ======== ========
</TABLE>
21
<PAGE> 23
Deferred tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
Deferred Tax Assets:
Claims and other reserves............................$ 2,140 $ 2,381
Basis difference on property and equipment........... 778 892
Other................................................ 503 158
-------- --------
Total deferred tax assets........................... 3,421 3,431
-------- --------
Deferred Tax Liabilities:
Prepaid expenses..................................... (35) (1)
Deferred revenue..................................... (4,910) (4,573)
Other................................................ (2,805) (104)
-------- --------
Total deferred tax liabilities...................... (7,750) (4,678)
-------- --------
Net deferred tax liabilities........................$ (4,329) $ (1,247)
======== ========
</TABLE>
(4) LONG-TERM DEBT AND OPERATING LEASES
Long-term debt included the following:
<TABLE>
<CAPTION>
1997 1996
-------- ---------
(in thousands)
<S> <C> <C>
Capital lease obligations for transportation equipment,
9.1%, payable through 2002.............................. $ 580 $ 715
Less - Current maturities................................. 116 114
-------- --------
$ 464 $ 601
======== ========
</TABLE>
Property and equipment included the following amounts related to capital lease
obligations:
<TABLE>
<CAPTION>
1997 1996
-------- ---------
(in thousands)
<S> <C> <C>
Transportation equipment...................................$ 915 $ 991
Less - Accumulated depreciation............................ 371 329
-------- --------
$ 544 $ 662
======== ========
</TABLE>
Scheduled annual payments on the Company's long-term obligations and commitments
for operating leases are as follows:
<TABLE>
<CAPTION>
Capital Leases
------------------------------------
Future Interest Principal Operating
Payments Portion Portion Leases
-------- -------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C>
1998..................... $ 155 $ 39 $ 116 $ 1,834
1999..................... 161 36 125 1,692
2000..................... 161 25 136 1,664
2001..................... 162 13 149 1,158
2002..................... 55 1 54 157
------- -------- -------- --------
$ 694 $ 114 $ 580 $ 6,505
======= ======== ======== ========
</TABLE>
Excluded from the operating lease commitments are scheduled rentals on tractors,
trailers and containers with lease terms of one to five years which have annual
cancellation provisions. If these leases are not canceled, the additional future
lease payments would be approximately $1,403,000, $903,000, $825,000, $268,000
and $114,000 in 1998, 1999, 2000, 2001 and 2002, respectively. The accompanying
financial statements include rent expense of $5,025,000, $5,737,000 and
$6,220,000 in 1997, 1996 and 1995, respectively.
22
<PAGE> 24
(5) CONTINGENCIES AND COMMITMENTS
The Company is involved in various legal proceedings generally incidental to its
business. While the result of any litigation contains an element of uncertainty,
the Company presently believes that the outcome of any known pending or
threatened legal proceedings or claims, or all of them combined, will not have a
material adverse effect on its results of operations or consolidated financial
position.
(6) STOCK COMPENSATION PLANS
At January 3, 1998, the Company has three stock-based compensation plans: The
1995 Omnibus Stock Incentive Plan (the "1995 Plan"), the 1992 Non-qualified
Stock Option Plan (the "1992 Plan"), and the Amended and Restated 1986 Incentive
Stock Option Plan (the "1986 Plan"). No awards may be granted under the 1992 and
1986 Plans. The Company applies Accounting Principles Board (APB) Opinion No.
25, "Accounting for Stock Issued to Employees," and related Interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for its stock option plans. Had compensation cost for the Company's stock-based
compensation plans been determined consistent with Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation,"
the Company's net income and earnings per share would have been reduced to the
pro forma amounts indicated below (dollars in thousands, except per share
amounts):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C> <C>
Net Income: As reported $7,376 $5,772 $4,734
Pro forma $7,053 $5,617 $4,694
Net Income Per Common Share: As reported $.80 $.63 $.49
Pro forma $.77 $.61 $.49
Net Income Per Common Share,
Assuming Dilution: As reported $.76 $.60 $.47
Pro forma $.73 $.58 $.47
</TABLE>
The effects of applying SFAS No. 123 in this pro forma disclosure may not be
indicative of future amounts because SFAS No. 123 does not apply to awards prior
to January 1, 1995, and additional awards in future years are anticipated.
Under the provisions of the Company's 1995 Plan, options may be granted to
employees of the Company and to directors who are not employees of the Company
to purchase shares of common stock at a price not less than 100% of its fair
market value at the date of grant. At January 3, 1998, 2,122,748 shares of
common stock were reserved for issuance under all of the Company's stock option
plans. Options granted have a maximum life of 10 years. Vesting requirements are
determined at the discretion of the Compensation/Stock Option Committee of the
Board of Directors. Presently, option vesting periods range from immediate
vesting to vesting over 8 years.
Beginning with the grants issued on or after January 1, 1995, the fair value of
each stock option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Dividend yield none none none
Expected volatility 43.0% 41.0% 43.0%
Risk-free interest rate 6.5% 6.8% 6.0%
Expected lives 7.5 years 6.5 years 7.7 years
</TABLE>
23
<PAGE> 25
A summary of the status of stock options granted under the Company's stock
option plans as of January 3, 1998, December 28, 1996 and December 30, 1995 and
changes during the years ended on those dates is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ----------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Stock Options Shares Price Shares Price Shares Price
- ------------- --------- ---------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 1,217,976 $ 6.11 1,244,698 $ 5.54 1,365,500 $ 5.05
Granted 160,000 14.60 93,000 11.11 98,000 7.94
Exercised (100,778) 4.94 (119,722) 4.11 (213,404) 3.60
Canceled (4,000) 5.63 - - (5,398) 2.13
--------- --------- ---------
Outstanding at end of year 1,273,198 $ 7.27 1,217,976 $ 6.11 1,244,698 $ 5.54
========= ========= =========
Options exercisable at year-end 674,031 612,176 581,598
========= ========= =========
Options available for future grant 849,550 1,017,550 1,114,350
========= ========= =========
Weighted average fair value of
options granted during the year $ 8.37 $ 5.35 $ 4.53
========= ========= =========
</TABLE>
The following table summarizes information about stock options outstanding at
January 3, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------- ------------------------
Wgtd. Avg.
Range of Number Remaining Wgtd. Avg. Number Wgtd. Avg
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 1/3/98 Life Price at 1/3/98 Price
- ---------------- ----------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
$ 2.13 to $ 5.63 430,198 4.5 years $ 3.91 400,198 $ 3.78
$ 6.88 to $10.00 606,000 6.2 years 7.21 245,500 7.31
$10.63 to $14.63 237,000 8.1 years 13.54 28,333 12.81
--------- --------- ------- ------- --------
$ 2.13 to $14.63 1,273,198 6.0 years $ 7.27 674,031 $ 5.44
========= ========= ======= ======= ========
</TABLE>
In 1990, the Company granted stock appreciation rights for 52,000 shares of the
Company's common stock at a base price of $2.13 per share to key employees of
the Company. On October 1, 1997, the Company issued stock appreciation rights
for an additional 6,000 shares at a base price of $14.50. Stock appreciation
rights for 34,000 shares were outstanding at January 3, 1998. The rights provide
for cash payments to holders of the rights for increases in the market price of
the Company's common stock as of April 1 of each year until and including April
1, 2000. The base price is adjusted each April 1 if the market closing price on
that date is greater than the previous base price. The adjusted base prices as
of April 1, 1997, 1996 and 1995 were $15.25, $8.63 and $8.63 per share,
respectively. Compensation of $128,000, $203,000 and $47,000 was expensed under
this plan in 1997, 1996 and 1995, respectively. The 1997 compensation has been
accrued based on the closing market price of $16.75 per share on January 3,
1998.
24
<PAGE> 26
QUARTERLY FINANCIAL DATA (Unaudited):
The results of operations for each of the four quarters of 1997 and 1996 are
summarized below. Effective January 3, 1998, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share". Earnings per share
have been restated for 1996 to conform to the new accounting standard. The
amounts below are unaudited, but, in the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such periods have been made (in thousands, except per share
data).
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
1997
- ----
Operating revenues..................................... $ 145,914 $ 164,877 $ 168,011 $ 188,572
Operating income ...................................... 2,113 3,462 3,452 3,331
Income before income taxes............................. 2,127 3,563 3,615 3,412
Net income............................................. 1,234 2,066 2,097 1,979
Net income per common share............................ $ .13 $ .22 $ .23 $ .22
Net income per common share, assuming dilution......... $ .13 $ .21 $ .22 $ .21
1996
- ----
Operating revenues..................................... $ 122,030 $ 142,755 $ 143,701 $ 155,427
Operating income ...................................... 1,739 2,870 2,990 2,606
Income before income taxes............................. 1,646 2,790 2,947 2,569
Net income............................................. 955 1,618 1,709 1,490
Net income per common share............................ $ .10 $ .18 $ .19 $ .16
Net income per common share, assuming dilution......... $ .10 $ .17 $ .18 $ .15
</TABLE>
25
<PAGE> 27
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Mark VII, Inc.:
We have audited the accompanying consolidated balance sheets of MARK VII,
INC. (a Delaware corporation) AND SUBSIDIARIES as of January 3, 1998, and
December 28, 1996, and the related consolidated statements of income,
shareholders' investment and cash flows for each of the three years in the
period ended January 3, 1998. These financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mark VII, Inc. and
Subsidiaries as of January 3, 1998, and December 28, 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended January 3, 1998 in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. Schedule II is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not a required part of the basic consolidated financial statements. This
schedule has been subjected to the auditing procedures applied in our audits of
the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic consolidated financial statements
taken as a whole.
/s/ Arthur Andersen LLP
Memphis, Tennessee,
February 11, 1998
26
<PAGE> 28
SCHEDULE II
MARK VII, INC. AND SUBSIDIARIES
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING CHARGED TO BALANCE AT
OF YEAR EXPENSE DEDUCTIONS OTHER END OF YEAR
---------- ---------- ---------- ----- -----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
(deducted from accounts receivable):
1995 ...................................... $ 1,285 $ 581 $ 530 $ - $ 1,336
1996 ...................................... 1,336 1,472 1,115 - 1,693
1997 ...................................... 1,693 1,603 655 - 2,641
Allowance for uncollectible notes
(deducted from notes and other receivables):
1995 ...................................... $ 517 $ 1,521 $ - $ - $ 2,038
1996 ...................................... 2,038 542 969 - 1,611
1997 ...................................... 1,611 1,069 2,143 - 537
</TABLE>
27
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
10.6 Addendum No. 2 to Employment and Noncompete
Agreement between R.C. Matney and the Registrant
dated as of October 1, 1997
10.7 Employment and Noncompete Agreement between
Philip L. Dunavant and the Registrant dated as of
May 16, 1997
10.8 Employment and Noncompete Agreement between
David H. Wedaman and the Registrant dated
as of January 1, 1997. Addendum to Employment
and Noncompete Agreement dated as of May 15, 1997
10.17 Revolving Loan and Promissory Note dated
July 29, 1997 by and among NationsBank of
Tennessee, N.A., Mark VII, Inc. and Mark VII
Transportation Co., Inc.
10.18 Loan Agreement dated as of July 29, 1997 by and
among NationsBank of Tennessee, N.A., Mark VII,
Inc. and Mark VII Transportation Co., Inc.
10.19 First Modification of Loan Agreement dated as of
October 20, 1997 by and among NationsBank of
Tennessee, N.A., Mark VII, Inc. and Mark VII
Transportation Co., Inc.
21 Subsidiaries of Registrant
23 Consent of Independent Public Accountants
27 Financial Data Schedule (SEC Use Only)
</TABLE>
<PAGE> 1
Exhibit 10.6
ADDENDUM NO. 2 TO EMPLOYMENT
AND NON-COMPETE AGREEMENT
R. C. MATNEY
THIS AGREEMENT dated this 1st day of October, 1997 is made by and between
R. C. MATNEY, resident of the State of Indiana ("Executive") and MARK VII, INC.
now a Delaware corporation (originally incorporated in Missouri), ("Employer").
RECITALS
Executive and Employer entered into an Employment and Non-Compete Agreement
dated April 1, 1992 ("Agreement") which superseded an earlier Employment
Agreement dated March 31, 1989 in its entirety. Thereafter, the April 1, 1992
Agreement was modified to the extent expressly stated in an Addendum dated July
1, 1994. Parties hereto hereby undertake and agree to modify the April 1, 1992
Agreement and the Addendum dated July 1, 1994 to the extent expressly stated
herein. In all other respects, said April 1, 1992 Agreement and July 1, 1994
Addendum shall remain as originally stated.
AGREEMENT
In consideration of the mutual promises, covenants, and agreements herein
contained and in the underlying agreement and its addendum, the parties do
hereby further agree as follows:
I. BASE SALARY.
The base salary of Executive shall be $280,000 a year commencing
January 1, 1998.
II. MONTHLY SHAREHOLDER VALUE BONUS.
Commencing January 1, 1998, Executive shall be paid a monthly bonus
equal in amount to the current average fair-market value of the Company's common
stock during the month for which the bonus is paid multiplied by 600.
III. ANNUAL PERFORMANCE BONUSES.
Commencing in 1998 Executive shall be paid two annual cash bonuses.
A. Bonus based upon Employer's increase in consolidated income from
continuing operations before income tax compared to Plan.
This bonus shall be paid immediately following the completion of the
annual audit of the fiscal year based upon the increase in consolidated income
from continuing operations before income tax ("net pre-tax income") for the
fiscal year.
1. In a fiscal year when the increase in net pre-tax income
over the prior year equals that specified in the operating Plan, as approved by
the Employer's Board of Directors, Executive's bonus shall be equal to 50% of
his annual base salary.
2. In a fiscal year when the increase in net pre-tax income
over the prior year is greater or lesser than the amount specified in the
operating
<PAGE> 2
Plan approved by the Board of Directors, Executive shall be paid the
same pro-rata share or percentage of the bonus specified in the above paragraph
as the portion or percentage of Plan increase in net income actually attained by
Employer.
3. For any fiscal year when 25% of the Plan increase in net
operating profit compared to the previous fiscal year is not attained, none of
this bonus shall be paid.
Schedule A attached provides examples of the calculation of this bonus.
B. Bonus based on stock price performance. The second bonus shall not
exceed half of the base salary of the Executive and shall be paid immediately
following June 30 each year in an amount equal to that percentage of the base
salary of the Executive by which the increase (if any) in the per share price of
the common stock of Mark VII, Inc. from July 1, 1997 to June 30, 1998 and each
subsequent year thereafter during the term hereof,exceeds the increase in the
average of per share prices of the common stock of certain other companies in
the Employer's industry (the "Transportation Services Peer Group").
Employer's Board of Directors shall identify those companies deemed to
constitute Employer's "Peer Group" from time-to-time in its sole discretion. It
is agreed, however, that currently said "Peer Group" is deemed by said Board to
constitute the following companies:
Circle Financial Corp. (Harper Group)
The Hub Group
Air Express International Corporation
Expediter's International, Inc.
Fritz Companies, Inc.
V. PARAGRAPHS 3.02 AND 3.03 OF THE APRIL 1, 1992 AGREEMENT.
Paragraph 3.02 "Bonus" and 3.03 "Fringe Benefits" are hereby deleted in their
entirety. In lieu thereof, 3.03 "Fringe Benefits" shall instead read as follows:
"Executive shall receive standard Employer's fringe benefits, including
3 weeks of vacation pay each year, a car allowance and medical plan
benefits."
VI. RELEASE AS TO "BONUS" AND "FRINGE BENEFITS".
Executive does hereby and discharge the Employer from any and all claims based
upon, arising out of, or related to paragraphs 3.02 and 3.03 as originally
provided in the agreement of April 1, 1992.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum and Release
on the 8th day of December, 1997 to be effective on the day and year first
above written.
<PAGE> 3
"EXECUTIVE"
/s/ R. C. Matney
-----------------------------------------
R. C. Matney
"EMPLOYER"
MARK VII, INC. a Delaware Corporation
By: /s/ James T. Graves
--------------------------------------
James T. Graves, Vice-Chairman & Secretary
<PAGE> 1
Exhibit 10.7
EMPLOYMENT AND NONCOMPETE AGREEMENT
THIS AGREEMENT, dated this 16th day of May, 1997, is made by and among
PHILIP L. DUNAVANT, a resident of the State of Tennessee ("Executive"); MARK VII
TRANSPORTATION COMPANY, INC., a Delaware corporation ("Employer"), a wholly
owned subsidiary of MARK VII , INC., a Delaware corporation ("MARK VII").
RECITALS
A. Employer, MARK VII, and its subsidiaries, are engaged in the
business of freight transportation services, both providing and arranging
transportation of goods. Subsequent references to Employer herein shall be
deemed to also include MARK VII and its subsidiary corporations.
B. Executive desires to continue to be employed by Employer as its
Executive Vice President and Chief Financial Officer and Employer desires to
employ Executive in such capacity under the terms set forth herein.
AGREEMENT
In consideration of the mutual promises, covenants and agreements
contained herein and other good and valuable consideration, sufficiency of which
is hereby acknowledged by Executive and Employer, the parties agree as follows:
1. Employment and Term of Employment.
Employer hereby employs Executive and Executive hereby accepts
employment which Employer for the term commencing on the date hereof and
continuing until December 31, 2000, unless sooner terminated as provided in
Section 5.
2. Duties and Authority.
2.01 Duties and Position of Executive.
(a) Executive shall undertake and assume the
responsibility for those duties that Employer's Board of Directors shall, from
time to time, assign to Executive. Executive's principal duties as of the date
of this Agreement shall be and are those typically performed by an Executive
Vice President and Chief Financial Officer of a company.
<PAGE> 2
(b) By appropriate action of Employer's Board of
Directors, Executive has been elected as Executive Vice President and Chief
Financial Officer of Employer. Executive shall be permitted to continue to serve
as Executive Vice President and Chief Financial Officer of Employer for the
duration of this Agreement provided and for so long as the performance standards
of Paragraph 5.02 (c) below are attained.
(c) Executive shall, at all times, faithfully and to the
best of his ability, experience and talents, perform the duties set forth herein
or to which Executive may, in the future, be assigned, always acting solely in
the best interests of the Employer.
2.02 Time Devoted to Employment. Executive shall devote full time and
attention to performance of assigned employment duties; provided, however, he
shall be allowed to also pursue those separate and personal business interests
which do not conflict or compete with the business of the employer directly or
indirectly and which do not require personal services of the Executive. During
the term of this Agreement, the Executive will not be involved in any
transportation ventures other than those of the employer without the advance
written authorization of the Employer's Board of Directors.
It is also understood that the Executive is not hereby precluded from
engaging in limited appropriate civic, charitable or religious activities.
In the event the Employer's Board of Directors shall reassign the
duties of Executive as Executive Vice President and Chief Financial Officer to
another person, the Executive shall thereafter continue to serve the Employer
engaged in the consultation, performance and management of those specific
projects or duties to which he is assigned by the Employer and which are
consistent with his experience and competence.
3. Compensation.
During the term of this Agreement, Employer shall pay to Executive the
following compensation:
3.01 Base Salary. Executive shall be paid an initial base salary of One
Hundred Twenty-Five Thousand Dollars and No/100 Dollars ($125,000) per year
("Base Salary") payable in equal weekly installments of $2403.85. The
Compensation Committee of the Employer's Board of Directors ("Committee") may
review Executive's performance and adjust his Base Salary in its sole and
absolute discretion. The Committee may increase the salary of the Executive at
any time; provided, however, that the Committee may not reduce the Base Salary
fixed in this Agreement.
3.02 Bonus. In addition to the Base Salary, in each fiscal year
(commencing with the fiscal year ending December 31, 1997), in which
consolidated pre-tax profit (calculated on the basis of generally accepted
accounting principles consistently applied) earned by Mark VII is equal to the
consolidated Business Plan (as defined at 5.02 (c)) or exceeds 120% of the
consolidated pre-tax profit earned in the previous fiscal year, Employer will
pay Executive within 90 days following the close of the fiscal year a bonus
equal to 40% of his base salary.
<PAGE> 3
Provided, however, in any fiscal year in which Mark VII does not attain
Business Plan results but in which Mark VII earns consolidated pre-tax profit
greater than the 1997 consolidated Business Plan, Executive shall be paid a
minimum alternative bonus equal to 25% of his base salary for that fiscal year.
In each plan year business plan revenue or business plan pre-tax profit
shall be adjusted by the amount of the following items:
(a) All charges of Employer to any affiliated company for services
rendered shall be at present standards with any new services to be to charged
at cost;
(b) Any gain on the sale, casualty or other disposition of any capital
asset of the Employer shall be deducted;
(c) Any other income which was not the result of ordinary operations
of the Employer shall be excluded;
(d) Services of affiliated companies or business units shall be at cost
or as agreed. If not, Executive may cause Employer to purchase such goods or
services from unaffiliated sources.
"Pre-tax profit", as defined above shall be based upon generally accepted
accounting principles consistently applied and as finally determined by the
Company's independent CPA auditing firm.
3.03 Car Allowance. In addition, the Executive shall receive $500 a
month as a car allowance, plus the costs he incurs in operating his private
automobile with respect to insurance, fuel, oil, filters, hoses, belts, license
tags, one set of tires every four years and sales tax upon acquisition.
3.04 Fringe Benefits/Vacation. Executive shall receive standard Mark
VII fringe benefits, including three (3) weeks of vacation with pay each year.
3.05 Reimbursement of Expenses. Employer shall reimburse Executive for
ordinary, necessary and reasonable business expenses incurred to conduct or
promote Employer's business, including travel and entertainment, provided
Executive submits an itemization of such expenses and supporting documentation
thereof, all according to Employer's generally applicable procedures.
3.06 Stock Options and Stock Appreciation Rights. All Stock Options and
Stock Appreciation Rights related to the Common Stock of Mark VII previously
granted to the Executive by agreement between Mark VII and the Executive shall
continue in full force and effect in accordance with their respective terms and
conditions. By separate agreement, Employer shall provide Executive with an
additional non-qualified option to purchase 10,000 shares of the common stock of
Mark VII, Inc. exercisable at $29 per share. The option shall vest in three
equal annual installments of 3,333 shares each commencing on May 16, 1998. Each
portion of the option shall be exercisable subsequent to vesting and the entire
option shall lapse on May 16, 2007, ten years subsequent to the effective date
of grant. In addition, Executive will receive 3,000 stock appreciation rights
under a separate agreement with an effective date of May 16, 1997 at a strike
price of $29.
4. Nondisclosure and Noncompetition.
Executive hereby covenants and agrees as follows:
<PAGE> 4
4.01 Confidentiality. Executive acknowledges that as a result of his
employment by Employer, he has, in the past, used and acquired and, in the
future, will use and acquire knowledge and information used by Employer in its
business and which is not generally available to the public or to persons in the
transportation industry, including, without limitation, its future products,
services, patents and trademarks; designs; plans; specifications; models;
computer software programs; test results; data; manuals; methods of accounting;
financial information; devices; systems; procedures; manuals; internal reports;
lists of shippers and carriers; methods used for and preferred by its customers;
and the pricing structure of its existing and contemplated products and service,
except such information known by Executive prior to his employment by Employer
("Confidential Information"). As a material inducement to Employer to enter into
this Agreement, and to pay to Executive the compensation set forth herein,
Executive agrees that, during the term of this Agreement and, subject to the
provisions of section 6.05 below, for a period of three (3) years after the
termination of this Agreement, Executive shall not, directly or indirectly,
divulge or disclose to any person, for any purpose, any Confidential
Information, except to those persons authorized by Employer to receive
Confidential Information and then only if use by such person is for Employer's
benefit.
4.02 Covenant Against Competition. During the term of this Agreement
and for a period of three (3) years after the termination of this Agreement and
subject to the provisions of section 6.05 below, Executive shall not have any
interest in or be engaged by any business or enterprise that is in the business
of providing motor freight transportation services or arranging for the
transportation of goods, including any business that acts as a licensed property
broker or shipper's agent, which is directly competitive with any aspect of the
business Employer now conducts or which Employer is conducting or is in the
process of developing at the time of any competitive actions by Executive
("Prohibited Activity") except to the extent provided in section 2. For purposes
of this Section 4.02, Executive shall be deemed to have an "interest in or be
engaged by a business or enterprise" if Executive acts (a) individually, (b) as
a partner, officer, director, shareholder, employee, associate, agent or owner
of any entity or (c) as an advisor, consultant, lender or other person related,
directly or indirectly, to any business or entity that is engaging in, or is
planning to engage in, any Prohibited Activity. Ownership of less than five
percent (5%) of the outstanding capital stock of a publicly traded entity that
engages in any Prohibited Activity shall not be a violation of this Section
4.02.
4.03 Employment of Other Employees by Executive. During the term of
this Agreement and, subject to the provisions of section 6.05 below, for a
period of three (3) years after the termination of this Agreement, Executive
shall not directly or indirectly solicit for employment, or employ, except on
behalf of Employer, any person who was an employee of Employer at any time
during the six (6) months preceding such solicitation or employment.
4.04 Judicial Amendment. If a court of competent jurisdiction
determines any of the limitations contained in this Agreement are unreasonable
and may not be enforced as herein agreed, the parties hereto expressly agree
this Agreement shall be amended to delete all limitations judicially determined
to be unreasonable and to substitute for those limitations found to be
unreasonable the maximum limitations such court finds to be reasonable under the
circumstances.
<PAGE> 5
4.05 Irreparable Injury. Executive acknowledges that his abilities and
the services he will provide to Employer are unique and that his failure to
perform his obligations under this Section 4 would cause Employer irreparable
harm and injury. Executive further acknowledges that the only adequate remedy is
one that would prevent him from breaching the terms of Section 4. As a result,
Executive and Employer agree that Employer's remedies may include preliminary
injunction, temporary restraining order or other injunction relief against any
threatened or continuing breach of this Section 4 by Executive. Nothing
contained in this Section 4.05 shall prohibit Employer from seeking and
obtaining any other remedy, including monetary damages, to which it may be
entitled.
5. Termination.
5.01 Events Causing Termination. This Agreement shall terminate upon
the first of the following events to occur:
a) Lapse of the term hereof on December 31, 2000
b) On the date of Executive's death;
c) At Employer's option, upon Executive's disability as defined in
section 5.02 (a) below, effective on the day Executive receives notice from
Employer that it is exercising its option granted by this Section to terminate
this Agreement;
d) On the day Executive receives written notice from Employer that
Executive's employment is being terminated for cause, as defined in section 5.02
(b) below;
e) Subject only to an exception specified in Section 5.02 (d) below,
fifteen (15) days after receipt by Executive of notice from Employer specifying
any act of insubordination or failure to comply with any instructions of the
Chief Executive Officer of Mark VII or any act or omission that the Chief
Executive Officer believes, in good faith, does, or may, adversely affect
Employer's business or operations provided Executive fails to remedy or cease
said acts within said fifteen (15) day period;
f) On the date Executive resigns or, at the Employer's option, the
date Executive commits any act that is a material breach of this Agreement; and
g) At Executive's option, on the date Employer commits any act that is
a material breach of this Agreement.
h) At Employer's option, upon the failure of Executive to attain the
performance standards of Section 5.02 (c) below.
5.02 Definitions. For purposes of Section 5.01 the following
definitions shall apply:
a) "Disability" means Executive's inability, because of sickness or
other incapacity, whether physical or mental, to perform his duties under this
Agreement for a period in excess of one hundred eight (180) substantially
consecutive days, as professionally determined by two medical doctors licensed
to practice medicine, one of which is selected by the Employer and one of which
is selected by the Executive. In the event the doctors should disagree as to
<PAGE> 6
whether the Executive is disabled, they shall select a third licensed medical
doctor to make such termination which shall be binding on the parties hereto.
b) "Cause" means (i) a willful failure by Executive to substantially
perform his duties hereunder, other than a failure resulting from Executive's
incapacity to do so because of physical or mental illness (ii) a willful act by
Executive that constitutes gross misconduct and which is materially injurious to
Employer, (iii) Executive's commitment of any act of dishonesty toward Employer,
theft of corporate property or unethical business conduct or (iv) Executive's
conviction of any felony involving dishonest, or immoral conduct.
c) "Business Plan" means that the Executive has participated in the
preparation of a business plan of Mark VII for 1997, which has been submitted
to, and approved by, the Board of Directors of MARK VII and Executive. For each
calendar year thereafter, through and including 2000, annual business plans
shall be submitted to, and approved by, the Board of Directors of MARK VII and
Executive, which shall constitute the basis of annual performance reviews. If,
at the time of any such annual performance review, Employer has attained less
than 50% of the pre-tax profit projected in plan, then the Employer shall, in
its sole and exclusive discretion, have the right to terminate this Agreement
pursuant to Section 5.01 (h) above. For any year in which the Executive does not
approve of the plan adopted by the Board, the performance standard shall amount
to 110% of the previous year's consolidated pre-tax profit as defined in
Paragraph 3.02 above.
6. Payments Upon Termination.
6.01 Payments Upon Executive's Death, Disability or Failure to Make
Plan. Upon the termination of this Agreement pursuant to Section 5.01 (b)
(death), Section 5.01 (c) (disability) or Section 5.01 (h) (failure to make
plan), Employer shall pay, or cause to be paid, to Executive, his designated
beneficiary or his legal representative,
a) the current Base Salary as provided in Section 3.02 and fringe
benefits as set forth in Section 3.04 through the period ending twelve (12)
months after occurrence of the event causing termination; and
b) all necessary, ordinary, and reasonable business expenses incurred
by Executive prior to termination of this Agreement.
c) plus in the event of death or disability, bonus pursuant to Section
3.02 pro-rated to the date of termination.
Employer shall not be obligated to make any other payments to Executive.
6.02 Payments Upon Termination for Cause, Insubordination, Resignation
or Breach by Executive. Upon termination of this Agreement pursuant to Section
5.01 (d) (cause), Section 5.01 (e) (insubordination), or Section 5.01 (f)
(resignation or breach by Executive), Employer shall pay, or cause to be paid,
to Executive,
a) the Base Salary and fringe benefits (not including bonus) for the
period ending on the date this Agreement is terminated pursuant to the
appropriate subsection of Section 5.01; and
b) all necessary, ordinary, and reasonable business expenses incurred
by Executive prior to termination hereof.
<PAGE> 7
Employer shall not be obligated to make any other payments to Executive.
6.03 Payments Upon Expiration of Term or Termination for Breach by
Employer. Upon termination of this Agreement pursuant to Section 5.01 (g)
(Employer's breach), Employer shall pay to Executive the Base Salary set forth
in Section 3.01, through December 31, 2000 plus bonus pursuant to Section 3.02.
All compensation paid by Employer under the terms of this Section 6.03 shall be
paid in the manner set forth in Section 3.
6.04 Payment of Amounts Due Upon Termination and Mitigation. If
Executive is entitled to payment of Base Salary, fringe benefits or business
expenses upon termination of this Agreement, Employer shall make said payments
within the ordinary course of its business and pursuant to the terms hereof. All
compensation to which the Executive is entitled following termination such
payment shall be reduced by the amount of compensation earned by the Executive
from other employment.
6.05 Effect of Termination on Nondisclosure, Noncompete and
Nonsolicitation Provisions.
a) The provisions of Sections 4.01, 4.02 and 4.03 (confidentiality,
non-compete and nonemployment of other employees) of this Agreement shall
survive termination hereof pursuant to Section 5.01 (d) (cause), Section 5.01
(e) (insubordination) or Section 5.01 (f) (resignation) even though the
remaining terms and provisions of this Agreement shall be void, including the
terms of Section 3 (compensation).
b) Upon termination of this Agreement pursuant to Section 5.01 (a)
(lapse of term) or Section 5.01 (h) (failure to make plan), Employer may elect
to continue the obligations of Executive set forth in Section 4
(confidentiality, noncompete and nonemployment of other employees) for so long
as the Employer continues to provide 125% of all compensation set forth in
Section 3, but not to exceed three years subsequent to termination.
c) Upon termination pursuant to Section 5.01 (c) (disability) the
provisions of Section 4 (confidentiality, noncompete and nonemployment of other
employees) shall survive for one year thereafter.
d) Upon termination of this Agreement pursuant to Section 5.01 (g)
(Employer breach), all of the provisions of Section 4 (confidentiality,
noncompete and nonemployment of other employees) shall be void.
7. Conflict of Interest.
During the term of this Agreement, Executive shall not, directly or
indirectly, have any interest in any business which is a supplier of Employer
without the express written consent of Employer's Board of Directors. Such
interest shall include, without limitation, an interest as a partner, officer,
director, stockholder, advisor or employee of or lender to such a supplier. An
ownership interest of less than five percent (5%) in a supplier whose stock is
publicly held or regularly traded shall not be a violation of this Section 7.
8. Indemnification of Executive.
The Employer will indemnify the Executive and hold him harmless
(including reasonable attorney fees and expenses) to the fullest extent now or
hereafter
<PAGE> 8
permitted by law in connection with any actual or threatened civil,
criminal, administrative or investigative action, suit or proceeding in which
the Executive is a party or witness as a result of his employment with the
Employer. This indemnification shall survive the termination of this Agreement.
9. General Provisions.
9.01 Location of Employment. Executive's principal office shall be
located at Memphis, Tennessee, or at such other location where Employer and
Executive shall mutually agree.
9.02 Assignment. Neither party may assign any of the rights or
obligations under this Agreement without the express written consent of the
other party. For purposes of the foregoing sentence, the term "assign" shall not
include an assignment of this Agreement by written agreement or by operation of
law to any of Employer's wholly owned subsidiaries.
9.03 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties' heirs, successors and assigns, to the extent
allowed herein.
9.04 Severability. The provisions of this Agreement are severable. The
invalidity or unenforceability of any one or more of the provisions hereof shall
not affect the validity or enforceability of any other part of this Agreement.
9.05 Waiver. Waiver of any provision of this Agreement or any breach
thereof by either party shall not be construed to be a waiver of any other
provision or any subsequent breach of this Agreement.
9.06 Notices. Any notice or other communication required or permitted
herein shall be sufficiently given if delivered in person or sent by certified
mail, return receipt requested, postage prepaid addressed to:
Employer: R. C. Matney, Chairman
Mark VII, Inc.
600 N. Emerson
Greenwood, IN 46143
cc: James T. Graves
Vice Chairman and General Counsel
Mark VII, Inc.
5310 St. Joseph Avenue
St. Joseph, Missouri 64505
Executive: Philip L. Dunavant
1586 Quail Pointe Cir. W.
Memphis, Tennessee 38120
or such other address as shall be furnished in writing by any such party. Any
notice sent by the above-described method shall be deemed to have been received
on the date personally delivered or so mailed. Notices sent by any other method
shall be deemed to have been received when actually received by the addressee or
its or his authorized agent.
<PAGE> 9
9.07 Applicable Law. Except to the extent preempted by federal law,
this Agreement shall be governed by, and construed and enforced in accordance
with, the laws of the State of Tennessee, without considering its laws or rules
related to choice of law.
9.08 Ownership and Return of Documents and Objects. Every plan,
drawing, blueprint, flowchart, listing of source or object code, notation,
record, diary, memorandum, worksheet, manual or other document, magnetic media
and every physical object created or acquired by Executive as part of his
employment by Employer, or which relates to any aspect of Employer's business,
is and shall be the sole and exclusive property of Employer. Executive shall,
immediately upon Employer's request or upon termination of this Agreement for
any reason, deliver to Employer each and every original, copy, complete or
partial reproduction, abstract or summary, however reproduced, of all documents
and all original and complete or partial reproductions of all magnetic media or
physical objects owned by Employer then in Executives' possession.
9.09 Arbitration. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Commercial Arbitration rules of the American Arbitration
Association and judgement upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof.
9.10 Attorney's Fees. If either party initiates arbitration proceedings
to enforce the terms hereof, the prevailing party in such proceeding, on
arbitration hearing, judicial trial or appeal, shall be entitled to its
reasonable attorney's fees, costs and expenses to be paid by the losing party as
fixed by the arbitrator.
WITNESS WHEREOF, the parties have executed this Agreement on the 10th
day of April, 1997 to be effective on the day and year first above written.
THIS AGREEMENT CONTAINS A BINDING
ARBITRATION PROVISION WHICH MAY
BE ENFORCED BY THE PARTIES.
MARK VII, INC.
By: /s/ R. C. Matney
----------------------------------
R. C. Matney, Chairman
MARK VII TRANSPORTATION CO., INC.
By: /s/ R. C. Matney
-----------------------------------
R. C. Matney, Chairman
/s/ Philip L. Dunavant
---------------------------------------
Philip L. Dunavant, in his
individual capacity (Executive)
<PAGE> 1
Exhibit 10.8
EMPLOYMENT AND NONCOMPETE AGREEMENT
THIS AGREEMENT, dated this first day of January, 1997, is made by and
among DAVID H. WEDAMAN, a resident of the State of Tennessee ("Executive"); MARK
VII TRANSPORTATION COMPANY, INC., a Delaware corporation ("Employer"), a wholly
owned subsidiary of MARK VII , INC., a Delaware corporation ("MARK VII").
RECITALS
A. Employer, MARK VII, and its subsidiaries, are engaged in the
business of freight transportation services, both providing and arranging
transportation of goods. Subsequent references to Employer herein shall be
deemed to also include MARK VII and its subsidiary corporations.
B. Executive desires to continue to be employed by Employer as its
President and Chief Operating Officer and Employer desires to employ Executive
in such capacity under the terms set forth herein.
AGREEMENT
In consideration of the mutual promises, covenants and agreements
contained herein and other good and valuable consideration, sufficiency of which
is hereby acknowledged by Executive and Employer, the parties agree as follows:
1. Employment and Term of Employment.
Employer hereby employs Executive and Executive hereby accepts
employment which Employer for the term commencing on the date hereof and
continuing for a period of three (3) years subsequent to January 1, 1997, unless
sooner terminated as provided in Section 5.
2. Duties and Authority.
2.01 Duties and Position of Executive.
(a) Executive shall undertake and assume the
responsibility for those duties that Employer's Board of Directors shall, from
time to time, assign to Executive. Executive's principal duties as of the date
of this Agreement shall be and are those typically performed by an the President
and Chief Operating Officer of a company.
<PAGE> 2
(b) By appropriate action of Employer's Board of
Directors, Executive has been elected as President and Chief Operating Officer
of Employer. Executive shall be permitted to continue to serve as President and
Chief Operating Officer of Employer for the duration of this Agreement provided
and for so long as the performance standards of Paragraph 5.02 (c) below are
attained.
(c) Executive shall, at all times, faithfully and to the
best of his ability, experience and talents, perform the duties set forth herein
or to which Executive may, in the future, be assigned, always acting solely in
the best interests of the Employer.
2.02 Time Devoted to Employment. Executive shall devote full time and
attention to performance of assigned employment duties; provided, however, he
shall be allowed to also pursue those separate and personal business interests
which do not conflict or compete with the business of the employer directly or
indirectly and which do not require personal services of the Executive. During
the term of this Agreement, the Executive will not be involved in any
transportation ventures other than those of the employer without the advance
written authorization of the Employer's Board of Directors.
It is also understood that the Executive is not hereby precluded from
engaging in limited appropriate civic, charitable or religious activities.
In the event the Employer's Board of Directors shall reassign the
duties of Executive as President and Chief Operating Officer to another person,
the Executive shall thereafter continue to serve the Employer engaged in the
consultation, performance and management of those specific projects or duties to
which he is assigned by the Employer and which are consistent with his
experience and competence.
3. Compensation.
During the term of this Agreement, Employer shall pay to Executive the
following compensation:
3.01 Base Salary. Executive shall be paid an initial base salary of
Two Hundred Forty Thousand Dollars and No/100 Dollars ($240,000) per year ("Base
Salary") payable in equal weekly installments of $4,615.38. The Compensation
Committee of the Employer's Board of Directors ("Committee") may review
Executive's performance and adjust his Base Salary in its sole and absolute
discretion. The Committee may increase the salary of the Executive at any time;
provided, however, that the Committee may not reduce the Base Salary fixed in
this Agreement.
3.02 Bonus. In addition to the Base Salary, in each fiscal year
(commencing with the fiscal year ending December 31, 1997), Employee will
provide a bonus to Executive payable within 90 days following the close of the
employer's fiscal year. The annual bonus shall be based upon pre-tax profit
(computed on the basis of generally accepted accounting principles consistently
applied) earned by Employer (exclusive of operating divisions assigned to the
management supervision of others) as compared to the pre-tax profit earned in
the prior year. For example, and based upon pre-tax profit of $10,750,00 for the
Base Year 1996:
<PAGE> 3
Base Year 1996 - Estimated Pre-Tax $10,750,000.00
Year 1997
110% of base or $11,825,000 bonus earned equals 30% of salary
115% of base or $12,362,000 bonus earned equals 40% of salary
120% of base or $12,900,000 bonus earned equals 50% of salary
125% of base or $13,437,000 bonus earned equals 70% of salary
Year 1998 if 1997 Base is $12,900,000
110% of base or $14,190,000 bonus earned equals 35%
115% of base or $14,835,000 bonus earned equals 50%
120% of base or $15,480,000 bonus earned equals 60%
125% of base or $16,125,000 bonus earned equals 70%
Year 1999 if 1998 Base is $15,000,000
110% of base or $16,500,000 bonus earned equals 35%
115% of base or $17,250,000 bonus earned equals 50%
120% of base or $18,000,000 bonus earned equals 60%
125% of base or $18,750,000 bonus earned equals 70%
Provided, however, in any year in which results equal to the 1997 business plan
pre-tax profit are attained, Executive shall receive a minimum alternative bonus
equal to 25% of base salary.
In each plan year business plan revenue or business plan pre-tax profit shall be
adjusted by the amount of the following items:
(a) All charges of Employer to any affiliated company for services
rendered shall be at present standards with any new services to be to charged at
cost;
(b) Any gain on the sale, casualty or other disposition of any capital
asset of the Employer shall be deducted;
(c) Any other income which was not the result of ordinary operations of
the Employer shall be excluded;
(d) Services of affiliated companies or business units shall be at cost
or as agreed. If not, Executive may cause Employer to purchase such goods or
services from unaffiliated sources.
"Pre-tax profit", as defined above shall be based upon generally accepted
accounting principles consistently applied and as finally determined by the
Company's independent CPA auditing firm.
3.03 Car Allowance. In addition, the Executive shall receive $500 a
month as a car allowance, plus the costs he incurs in operating his private
automobile with respect to insurance, fuel, oil, filters, hoses, belts, license
tags, one set of tires every four years and sales tax upon acquisition.
3.04 Fringe Benefits/Vacation. Executive shall receive standard Mark
VII fringe benefits, including three (3) weeks of vacation with pay each year.
<PAGE> 4
3.05 Reimbursement of Expenses. Employer shall reimburse Executive for
ordinary, necessary and reasonable business expenses incurred to conduct or
promote Employer's business, including travel and entertainment, provided
Executive submits an itemization of such expenses and supporting documentation
thereof, all according to Employer's generally applicable procedures.
3.06 Stock Options and Stock Appreciation Rights. All Stock Options and
Stock Appreciation Rights related to the Common Stock of Mark VII previously
granted to the Executive by agreement between Mark VII and the Executive shall
continue in full force and effect in accordance with their respective terms and
conditions. By separate agreement, Employer shall provide Executive with an
additional non-qualified option to purchase 20,000 shares of the common stock of
Mark VII, Inc. exercisable at $29.25 per share. The option shall vest in five
equal annual installments of 4,000 shares each commencing on April 10, 1998.
Each portion of the option shall be exercisable one year subsequent to vesting
and the entire option shall lapse on April 9, 2007, ten years subsequent to the
effective date of grant.
4. Nondisclosure and Noncompetition.
Executive hereby covenants and agrees as follows:
4.01 Confidentiality. Executive acknowledges that as a result of his
employment by Employer, he has, in the past, used and acquired and, in the
future, will use and acquire knowledge and information used by Employer in its
business and which is not generally available to the public or to persons in the
transportation industry, including, without limitation, its future products,
services, patents and trademarks; designs; plans; specifications; models;
computer software programs; test results; data; manuals; methods of accounting;
financial information; devices; systems; procedures; manuals; internal reports;
lists of shippers and carriers; methods used for and preferred by its customers;
and the pricing structure of its existing and contemplated products and service,
except such information known by Executive prior to his employment by Employer
("Confidential Information"). As a material inducement to Employer to enter into
this Agreement, and to pay to Executive the compensation set forth herein,
Executive agrees that, during the term of this Agreement and, subject to the
provisions of section 6.05 below, for a period of three (3) years after the
termination of this Agreement, Executive shall not, directly or indirectly,
divulge or disclose to any person, for any purpose, any Confidential
Information, except to those persons authorized by Employer to receive
Confidential Information and then only if use by such person is for Employer's
benefit.
4.02 Covenant Against Competition. During the term of this Agreement
and for a period of three (3) years after the termination of this Agreement and
subject to the provisions of section 6.05 below, Executive shall not have any
interest in or be engaged by any business or enterprise that is in the business
of providing motor freight transportation services or arranging for the
transportation of goods, including any business that acts as a licensed property
broker or shipper's agent, which is directly competitive with any aspect of the
business Employer now conducts or which Employer is conducting or is in the
process of developing at the time of any competitive actions by Executive
("Prohibited Activity") except to the extent provided in section 2. For purposes
of this Section 4.02, Executive shall be deemed to have an "interest in or be
engaged by a business or enterprise" if Executive acts (a) individually, (b) as
a partner, officer, director, shareholder, employee, associate, agent or owner
of any entity or (c) as an advisor, consultant, lender or other person
<PAGE> 5
related, directly or indirectly, to any business or entity that is engaging in,
or is planning to engage in, any Prohibited Activity. Ownership of less than
five percent (5%) of the outstanding capital stock of a publicly traded entity
that engages in any Prohibited Activity shall not be a violation of this Section
4.02.
4.03 Employment of Other Employees by Executive. During the term of
this Agreement and, subject to the provisions of section 6.05 below, for a
period of three (3) years after the termination of this Agreement, Executive
shall not directly or indirectly solicit for employment, or employ, except on
behalf of Employer, any person who was an employee of Employer at any time
during the six (6) months preceding such solicitation or employment.
4.04 Judicial Amendment. If a court of competent jurisdiction
determines any of the limitations contained in this Agreement are unreasonable
and may not be enforced as herein agreed, the parties hereto expressly agree
this Agreement shall be amended to delete all limitations judicially determined
to be unreasonable and to substitute for those limitations found to be
unreasonable the maximum limitations such court finds to be reasonable under the
circumstances.
4.05 Irreparable Injury. Executive acknowledges that his abilities and
the services he will provide to Employer are unique and that his failure to
perform his obligations under this Section 4 would cause Employer irreparable
harm and injury. Executive further acknowledges that the only adequate remedy is
one that would prevent him from breaching the terms of Section 4. As a result,
Executive and Employer agree that Employer's remedies may include preliminary
injunction, temporary restraining order or other injunction relief against any
threatened or continuing breach of this Section 4 by Executive. Nothing
contained in this Section 4.05 shall prohibit Employer from seeking and
obtaining any other remedy, including monetary damages, to which it may be
entitled.
5. Termination.
5.01 Events Causing Termination. This Agreement shall terminate upon
the first of the following events to occur:
a) At the end of three (3) years subsequent to January 1, 1997;
b) On the date of Executive's death;
c) At Employer's option, upon Executive's disability as defined in
section 5.02 (a) below, effective on the day Executive receives notice from
Employer that it is exercising its option granted by this Section to terminate
this Agreement;
(d) On the day Executive receives written notice from Employer that
Executive's employment is being terminated for cause, as defined in section 5.02
(b) below;
(e) Subject only to an exception specified in Section 5.02 (d) below,
fifteen (15) days after receipt by Executive of notice from Employer specifying
any act of insubordination or failure to comply with any instructions of the
Chief Executive Officer of Mark VII or any act or omission that the Chief
Executive Officer believes, in good faith, does, or may, adversely affect
<PAGE> 6
Employer's business or operations provided Executive fails to remedy or cease
said acts within said fifteen (15) day period;
(f) On the date Executive resigns or, at the Employer's option, the
date Executive commits any act that is a material breach of this Agreement; and
(g) At Executive's option, on the date Employer commits any act that is
a material breach of this Agreement.
(h) At Employer's option, upon the failure of Executive to attain the
performance standards of Section 5.02 (c) below.
5.02 Definitions. For purposes of Section 5.01 the following
definitions shall apply:
a) "Disability" means Executive's inability, because of sickness or
other incapacity, whether physical or mental, to perform his duties under this
Agreement for a period in excess of one hundred eight (180) substantially
consecutive days, as professionally determined by two medical doctors licensed
to practice medicine, one of which is selected by the Employer and one of which
is selected by the Executive. In the event the doctors should disagree as to
whether the Executive is disabled, they shall select a third licensed medical
doctor to make such termination which shall be binding on the parties hereto.
b) "Cause" means (i) a willful failure by Executive to substantially
perform his duties hereunder, other than a failure resulting from Executive's
incapacity to do so because of physical or mental illness (ii) a willful act by
Executive that constitutes gross misconduct and which is materially injurious to
Employer, (iii) Executive's commitment of any act of dishonesty toward Employer,
theft of corporate property or unethical business conduct or (iv) Executive's
conviction of any felony involving dishonest, or immoral conduct.
c) "Business Plan" means that the Executive has participated in the
preparation of a business plan of Mark VII for 1997, which has been submitted
to, and approved by, the Board of Directors of MARK VII and Executive. For each
calendar year thereafter, through and including 1999, annual business plans
shall be submitted to, and approved by, the Board of Directors of MARK VII and
Executive, which shall constitute the basis of annual performance reviews. If,
at the time of any such annual performance review, Employer has attained less
that 50% of the pre-tax profit projected in plan, then the Employer shall, in
its sole and exclusive discretion, have the right to terminate this Agreement
pursuant to Section 5.01 (h) above. For any year in which the Executive does not
approve of the plan adopted by the Board, the performance standard shall amount
to 110% of the previous year's pre-tax profit as defined in Paragraph 3.02
above.
d) Whenever, as the result of a change of control of Mark VII, Inc.
consisting of either a change in ownership of 50% or more of the outstanding
voting shares or a majority of the members of the Board of Directors, R. C.
Matney no longer serves as Chief Executive Officer of Mark VII, Inc., in the
event Executive is thereafter terminated for insubordination by failure to
comply with any direction or order given by the successor Chief Executive
Officer which controvenes prior business policy or established practice or
procedure of Employer, then Executive shall, not withstanding the provisions of
Sections 6.02 (a) and 6.05 (a), be entitled to receive all compensation provided
by Paragraph 3 for the balance of the term hereof and shall no longer be subject
to the requirements to not compete set forth in Sections 4.02 and 6.05 (a).
<PAGE> 7
6. Payments Upon Termination.
6.01 Payments Upon Executive's Death, Disability or Failure to Make
Plan. Upon the termination of this Agreement pursuant to Section 5.01 (b)
(death), Section 5.01 (c) (disability) or Section 5.01 (h) (failure to make
plan), Employer shall pay, or cause to be paid, to Executive, his designated
beneficiary or his legal representative,
a) the current Base Salary as provided in Section 3.02 and fringe
benefits as set forth in Section 3.04 through the period ending twelve
(12) months after occurrence of the event causing termination; and
b) all necessary, ordinary, and reasonable business expenses incurred
by Executive prior to termination of this Agreement.
c) plus in the event of death or disability, bonus pursuant to
Section 3.02 pro-rated to the date of termination.
Employer shall not be obligated to make any other payments to Executive.
6.02 Payments Upon Termination for Cause, Insubordination, Resignation
or Breach by Executive. Upon termination of this Agreement pursuant to Section
5.01 (d) (cause), Section 5.01 (e) (insubordination), or Section 5.01 (f)
(resignation or breach by Executive), Employer shall pay, or cause to be paid,
to Executive,
a) the Base Salary and fringe benefits (not including bonus) for the
period ending on the date this Agreement is terminated pursuant to the
appropriate subsection of Section 5.01; and
b) all necessary, ordinary, and reasonable business expenses incurred
by Executive prior to termination hereof.
Employer shall not be obligated to make any other payments to Executive.
6.03 Payments Upon Expiration of Term or Termination for Breach by
Employer. Upon termination of this Agreement pursuant to Section 5.01 (g)
(Employer's breach), Employer shall pay to Executive the Base Salary set forth
in Section 3.01, through December 31, 1999 plus bonus pursuant to Section 3.02.
All compensation paid by Employer under the terms of this Section 6.03 shall be
paid in the manner set forth in Section 3.
6.04 Payment of Amounts Due Upon Termination and Mitigation. If
Executive is entitled to payment of Base Salary, fringe benefits or business
expenses upon termination of this Agreement, Employer shall make said payments
within the ordinary course of its business and pursuant to the terms hereof. All
compensation to which the Executive is entitled following termination such
payment shall be reduced by the amount of compensation earned by the Executive
from other employment.
6.05 Effect of Termination on Nondisclosure, Noncompete and
Nonsolicitation Provisions.
a) The provisions of Sections 4.01, 4.02 and 4.03 (confidentiality,
non-compete and nonemployment of other employees) of this Agreement shall
<PAGE> 8
survive termination hereof pursuant to Section 5.01 (d) (cause), Section 5.01
(e) (insubordination) or Section 5.01 (f) (resignation) even though the
remaining terms and provisions of this Agreement shall be void, including the
terms of Section 3 (compensation).
b) Upon termination of this Agreement pursuant to Section 5.01 (a)
(lapse of term) or Section 5.01 (h) (failure to make plan), Employer may elect
to continue the obligations of Executive set forth in Section 4
(confidentiality, noncompete and nonemployment of other employees) for so long
as the Employer continues to provide all compensation set forth in Section 3,
but not to exceed three years subsequent to termination.
c) Upon termination pursuant to Section 5.01 (c) (disability) the
provisions of Section 4 (confidentiality, noncompete and nonemployment of other
employees) shall survive for one year thereafter.
d) Upon termination of this Agreement pursuant to Section 5.01 (g)
(Employer breach), all of the provisions of Section 4 (confidentiality,
noncompete and nonemployment of other employees) shall be void.
7. Conflict of Interest.
During the term of this Agreement, Executive shall not, directly or
indirectly, have any interest in any business which is a supplier of Employer
without the express written consent of Employer's Board of Directors. Such
interest shall include, without limitation, an interest as a partner, officer,
director, stockholder, advisor or employee of or lender to such a supplier. An
ownership interest of less than five percent (5%) in a supplier whose stock is
publicly held or regularly traded shall not be a violation of this Section 7.
8. Indemnification of Executive.
The Employer will indemnify the Executive and hold him harmless
(including reasonable attorney fees and expenses) to the fullest extent now or
hereafter permitted by law in connection with any actual or threatened civil,
criminal, administrative or investigative action, suit or proceeding in which
the Executive is a party or witness as a result of his employment with the
Employer. This indemnification shall survive the termination of this Agreement.
9. General Provisions.
9.01 Location of Employment. Executive's principal office shall be
located at Memphis, Tennessee, or at such other location where Employer and
Executive shall mutually agree.
9.02 Assignment. Neither party may assign any of the rights or
obligations under this Agreement without the express written consent of the
other party. For purposes of the foregoing sentence, the term "assign" shall not
include an assignment of this Agreement by written agreement or by operation of
law to any of Employer's wholly owned subsidiaries.
9.03 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties' heirs, successors and assigns, to the extent
allowed herein.
<PAGE> 9
9.04 Severability. The provisions of this Agreement are severable. The
invalidity or unenforceability of any one or more of the provisions hereof shall
not affect the validity or enforceability of any other part of this Agreement.
9.05 Waiver. Waiver of any provision of this Agreement or any breach
thereof by either party shall not be construed to be a waiver of any other
provision or any subsequent breach of this Agreement.
9.06 Notices. Any notice or other communication required or permitted
herein shall be sufficiently given if delivered in person or sent by certified
mail, return receipt requested, postage prepaid addressed to:
Employer: R. C. Matney, Chairman
Mark VII, Inc.
600 N. Emerson
Greenwood, IN 46143
cc: James T. Graves
Vice Chairman and General Counsel
Mark VII, Inc.
5310 St. Joseph Avenue
St. Joseph, Missouri 64505
Executive: David H. Wedaman
1847 Woodridge Cove
Memphis, Tennessee 38138
or such other address as shall be furnished in writing by any such party. Any
notice sent by the above-described method shall be deemed to have been received
on the date personally delivered or so mailed. Notices sent by any other method
shall be deemed to have been received when actually received by the addressee or
its or his authorized agent.
9.07 Applicable Law. Except to the extent preempted by federal law,
this Agreement shall be governed by, and construed and enforced in accordance
with, the laws of the State of Tennessee, without considering its laws or rules
related to choice of law.
9.08 Ownership and Return of Documents and Objects. Every plan,
drawing, blueprint, flowchart, listing of source or object code, notation,
record, diary, memorandum, worksheet, manual or other document, magnetic media
and every physical object created or acquired by Executive as part of his
employment by Employer, or which relates to any aspect of Employer's business,
is and shall be the sole and exclusive property of Employer. Executive shall,
immediately upon Employer's request or upon termination of this Agreement for
any reason, deliver to Employer each and every original, copy, complete or
partial reproduction, abstract or summary, however reproduced, of all documents
and all original and complete or partial reproductions of all magnetic media or
physical objects owned by Employer then in Executives' possession.
9.09 Arbitration. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Commercial Arbitration rules of the American Arbitration
<PAGE> 10
Association and judgement upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof.
9.10 Attorney's Fees. If either party initiates arbitration proceedings
to enforce the terms hereof, the prevailing party in such proceeding, on
arbitration hearing, judicial trial or appeal, shall be entitled to its
reasonable attorney's fees, costs and expenses to be paid by the losing party as
fixed by the arbitrator.
WITNESS WHEREOF, the parties have executed this Agreement on the 10th
day of April, 1997 to be effective on the day and year first above written.
THIS AGREEMENT CONTAINS A BINDING
ARBITRATION PROVISION WHICH MAY
BE ENFORCED BY THE PARTIES.
MARK VII, INC.
By:/s/ R. C. Matney
-------------------------------
R. C. Matney, Chairman
MARK VII TRANSPORTATION CO., INC.
By:/s/ R. C. Matney
-------------------------------
R. C. Matney, Chairman
/s/ David H. Wedaman
--------------------------------------
David H. Wedaman, in his
individual capacity (Executive)
<PAGE> 11
ADDENDUM TO EMPLOYMENT AND NONCOMPETE AGREEMENT
DAVID H. WEDAMAN
THIS AGREEMENT; dated this 15th day of May , 1997 is made by and among
David H. Wedaman, a resident of the State of Tennessee ("Executive"); Mark VII
Transportation Company, Inc. a Delaware corporation ("Employer"), a wholly owned
subsidiary of Mark VII, Inc., a Delaware corporation ("Mark VII").
RECITALS
A. Executive, Employer and Mark VII previously entered into an
"Employment and Noncompete Agreement" on April 10, 1997 effective January 1,
1997 ("Agreement"). The parties hereby undertake and agree to modify said
Agreement to the extent expressly stated herein. In other respects, said
Agreement shall remain as originally stated and executed.
B. The changes expressed in this Addendum are occasioned by the
assignment of an operating division, Mark VII Consumer Delivery Network ("CDN"),
to the management supervision of Executive.
AGREEMENT
In consideration of the mutual promises, covenants and agreements
contained herein and in the underlying Agreement, the parties do hereby further
agree as follows:
I. Management Responsibility for Consumer Delivery Network.
In September of 1996, Mark VII Transportation Company, Inc. acquired
the assets of Consumer Delivery Network, Inc. which have been subsequently
operated as a division of Mark VII Transportation Company, Inc. under the direct
management supervision of R. C. Matney, Chairman. Effective May 16, 1997,
principal management supervision responsibility of Consumer Delivery Network, an
operating division of Mark VII Transportation Company, Inc. was transferred to
Executive by mutual agreement.
II. Impact on Bonus Calculation.
The results of operation of CDN division shall not be included in the
calculation of pre-tax profit upon which Executive's bonus is based pursuant to
Paragraph 3.02 of his Agreement until July 1, 1998.
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Addendum on
the day and year first above written.
MARK VII, INC.
BY:/s/ R. C. Matney
----------------------------------
R. C. Matney, Chairman
MARK VII TRANSPORTATION CO, INC.
BY:/s/ R. C. Matney
----------------------------------
R. C. Matney, Chairman
/s/ David H. Wedaman
-------------------------------------
David H. Wedaman, in his individual capacity
(Executive)
<PAGE> 1
Exhibit 10.17
NationsBank of Tennessee, N.A.
REVOLVING LOAN
PROMISSORY NOTE
July 29, 1997 $25,000,000.00 Maturity Date: July 1, 2000
Bank: Borrower:
NationsBank of Tennessee, N.A. Mark VII, Inc.
6363 Poplar Avenue Mark VII Transportation Company, Inc.
Memphis, TN 38119 965 Ridge Lake Boulevard
Memphis, TN 38120
FOR VALUE RECEIVED, the undersigned Borrower unconditionally (and jointly and
severally, if more than one) promises to pay to the order of Bank, its
successors and assigns, without setoff, at its offices indicated at the
beginning of this Note, or at such other place as may be designated by Bank, the
principal amount of Twenty-Five Million and No/100 Dollars ($25,000,000.00), or
so much thereof as may be advanced from time to time in immediately available
funds as set forth in that certain Loan Agreement of even date herewith (the
"Loan Agreement"), together with interest computed daily on the outstanding
principal balance hereunder, at an annual interest rate, and in accordance with
the payment schedule, indicated below.
1. RATE. The unpaid principal balance of this Note from day to day outstanding
which is not past due shall bear interest at a rate per annum equal to the
lesser of (i) the Maximum Rate (hereinafter defined) or (ii) the Stated Rate
(hereinafter defined) fixed for periods of one (1) month each and computed on
the Annual Basis (hereinafter defined).
(a) The term "Stated Rate" means the LIBOR Funding Rate plus the Applicable
Margin (as hereinafter set forth).
(b) The term "LIBOR Funding Rate" means the thirty (30) day rate of
interest set by Bank as the LIBOR Funding Rate as of and at any time during the
second Business Day immediately preceding the first day of such Interest Period,
for a term comparable to such Interest Period, as adjusted from time to time in
Bank's sole discretion for then applicable reserve requirements, deposit
insurance assessment rates and other regulatory costs.
(c) The term "Business Day" shall mean a day on which Bank is open for
business and dealing in deposits in Memphis, Tennessee.
(d) The term "Interest Period" shall mean, with respect to any LIBOR
Borrowing (hereinafter defined), a period from the 15th day of each month in
which the LIBOR Funding Rate shall become effective as to such LIBOR Borrowing
to the 14th day of the following month, subject however to the following:
(i) if any Interest Period would otherwise end on a day which is not a
Business Day, the LIBOR Funding Rate shall be determined the immediately
preceding business day; and
(ii) no Interest Period shall extend beyond the final maturity
date; and
(e) The term " Applicable Margin" means the percentage added to the LIBOR
Funding Rate and shall be a function of the Funded Debt/EBITDA ratio as follows:
<PAGE> 2
<TABLE>
<CAPTION>
Funded Debt/EBITDA LIBOR Applicable Margin
<S> <C>
(i) less than 1.00 0.50%
(ii) greater than = 1.00 and less than 1.50 x .75%
(iii) greater than = 1.50 and less than 2.00 x 1.00%
(iv) greater than = 2.00 and less than 2.25 1.25%
</TABLE>
(f) The term "LIBOR Borrowing" as used herein means a separate and distinct
portion of the indebtedness evidenced by the Note bearing interest at a LIBOR
Funding Rate.
The term "Maximum Rate" as used in this Note means the maximum nonusurious rate
of interest per annum permitted by whichever of applicable United States federal
law or the law of the state of Tennessee permits the higher interest rate,
including to the extent permitted by applicable law, any amendments thereof
hereafter or any new law hereafter coming into effect to the extent a higher
Maximum Rate is permitted thereby. The Maximum Rate shall be applied by taking
into account all amounts characterized by applicable law as interest on the debt
evidenced by this Note, so that the aggregate of all interest does not exceed
the maximum nonusurious amount permitted by applicable law.
Notwithstanding any provision of this Note, Bank does not intend to charge and
Borrower shall not be required to pay any amount of interest or other charges in
excess of the Maximum Rate; if any higher rate ceiling is lawful, then that
higher rate ceiling shall apply. Any payment in excess of such Maximum Rate
shall be refunded to Borrower or credited against principal, at the option of
Bank.
2. ANNUAL BASIS OR ACCRUAL METHOD. "Annual Basis" means computation of interest
at the Rate set forth above using a 365/360 day method (a daily amount of
interest is computed for a hypothetical year of 360 days; that amount is
multiplied by the actual number of days for which any principal is outstanding
hereunder).
3. RATE CHANGE DATE. The Stated Rate will change on the 15th day of each
month.
4. PAYMENT SCHEDULE.
All payments received hereunder shall be applied first to the payment
of any expense or charges payable hereunder or under any other loan documents
executed in connection with this Note, then to interest due and payable, with
the balance applied to principal, or in such other order as Bank shall determine
at its option. Availability under the revolving loan shall terminate on July 1,
2000, at which time the entire outstanding principal balance, plus all accrued
and unpaid interest, shall be due and payable in full. Interest calculated at
the variable rate set forth above shall be paid monthly (if not earlier paid as
set forth in Section 6 hereof) commencing on the 1st day of August, 1997, and
continuing on the same day of each and every month thereafter until maturity.
5. REVOLVING FEATURE.
Borrower may borrow, repay and reborrow hereunder at any time, up to a
maximum aggregate outstanding balance allowed at any one time of Twenty-Five
Million and No/100 Dollars ($25,000,000.00) provided that Borrower is not in
default under any provision of this Note, the Loan Agreement, any other
documents executed in connection with this Note, or any other note or other loan
documents now or hereafter executed in connection with any other obligation of
Borrower to Bank, and provided that the borrowings hereunder do not exceed any
borrowing base or other limitation on borrowings by Borrower. Bank shall incur
no liability for its refusal to advance funds based upon its determination that
any conditions of such further advances have not been met. Bank records of the
amounts borrowed from time to time shall be conclusive proof thereof.
6. AUTOMATIC BORROWING AND PAYMENT.
Borrower has elected to authorize Bank to effect payment of sums due under
this Note by means of debiting Borrower's account number 1800816405. Excess
collected deposit balances shall be applied daily to any accrued interest or
principal balances, or used to advance funds as needed if no sums are
outstanding under the loan. This authorization shall not affect the obligation
of Borrower to pay such sums when due, without notice, if there are insufficient
funds in such account to make such payment in full on the due date thereof, or
if Bank fails to debit the account.
7. WAIVERS, CONSENTS AND COVENANTS. Borrower, any indorser or guarantor hereof,
or any other party hereto (individually an "Obligor" and collectively
"Obligors") and each of them jointly and severally: (a) waive presentment,
demand, protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
dishonor, and any other notice required to be given under the law to any Obligor
in connection with the delivery, acceptance, performance, default or enforcement
of this Note, any indorsement or guaranty of this Note, or any other documents
executed in connection with this Note or any other note or other loan documents
now or hereafter executed in connection with any obligation of Borrower to
<PAGE> 3
Bank (the "Loan Documents"); (b) consent to all delays, extensions, renewals or,
other modifications of this Note or the Loan Documents, or waivers of any term
hereof or of the Loan Documents, or release or discharge by Bank of any of
Obligors, or release, substitution or exchange of any security for the payment
hereof, or the failure to act on the part of Bank, or any indulgence shown by
Bank (without notice to or further assent from any of Obligors), and agree that
no such action, failure to act or failure to exercise any right or remedy by
Bank shall in any way affect or impair the obligations of any Obligors or be
construed as a waiver by Bank of, or otherwise affect, any of Bank's rights
under this Note, under any indorsement or guaranty of this Note or under any of
the Loan Documents; and (c) agree to pay, on demand, all costs and expenses of
collection or defense of this Note or of any indorsement or guaranty hereof
and/or the enforcement or defense of Bank's rights with respect to, or the
administration, supervision, preservation, or protection of, or realization
upon, any property securing payment hereof, including, without limitation,
reasonable attorney's fees, including fees related to any suit, mediation or
arbitration proceeding, out of court payment agreement, trial, appeal,
bankruptcy proceedings or other proceeding, in such amount as may be determined
reasonable by any arbitrator or court, whichever is applicable.
8. PREPAYMENTS. Prepayments may be made in whole or in part at any time
without penalty.
9. DELINQUENCY CHARGE. To the extent permitted by law, a delinquency charge
may be imposed in an amount not to exceed four percent (4%) of any payment that
is more than fifteen (15) days late.
10. EVENTS OF DEFAULT. The following are events of default hereunder: (a) the
failure to pay or perform any obligation, liability or indebtedness of any
Obligor to Bank, or to any affiliate or subsidiary of NationsBank Corporation,
whether under this Note, the Loan Agreement, or any of the other Loan Documents,
as and when due (whether upon demand, at maturity or by acceleration) which
failure to pay is not cured within five (5) days of the date when due, and which
failure to perform is not cured within thirty (30) days after notice from Bank
to Borrower; (b) the failure to pay or perform any other obligation, liability
or indebtedness of any Obligor to any other party and such failure is not cured
within any applicable cure period; (c) the commencement of a proceeding against
any Obligor for dissolution or liquidation, the voluntary or involuntary
termination or dissolution of any Obligor or the merger or consolidation of any
Obligor with or into another entity (except as permitted by the Loan Documents);
(d) the insolvency of, the business failure of, the appointment of a custodian,
trustee, liquidator or receiver for or for any of the property of, the
assignment for the benefit of creditors by, or the filing of a petition under
bankruptcy, insolvency or debtor's relief law or the filing of a petition for
any adjustment of indebtedness, composition or extension by or against any
Obligor which is not dismissed within sixty (60) days after such filing; (e) the
determination by Bank that any representation or warranty made to Bank by any
Obligor in any Loan Documents or otherwise is or was, when it was made, untrue
or materially misleading; (f) the failure of any Obligor to timely deliver such
financial statements, including tax returns, other statements of condition or
other information, as Bank shall reasonably request from time to time; or (g)
the seizure or forfeiture of, or the issuance of any writ of possession,
garnishment or attachment, or any turnover order for any property of any
Obligor; (h) the entry of a judgment against any Obligor which Bank deems to be
of a material nature, in Bank's reasonable discretion, which judgment is not
appealed within the time period allowed by applicable law; (i) the reasonable
determination by Bank that it is insecure for any reason; (j) the reasonable
determination by Bank that a material adverse change has occurred in the
financial condition of any Obligor; or (k) the failure of Borrower's business to
comply in all material respects with any law or regulation controlling its
operation.
11. REMEDIES UPON DEFAULT. Whenever there is a default under this Note (a) the
entire balance outstanding hereunder and all other obligations of any Obligor to
Bank (however acquired or evidenced) shall, at the option of Bank, become
immediately due and payable and any obligation of Bank to permit further
borrowing under this Note shall immediately cease and terminate, and/or (b) to
the extent permitted by law, the Rate of interest on the unpaid principal shall
be increased at Bank's discretion up to the Maximum Rate, or if none, 25% per
annum (the "Default Rate"). The provisions herein for a Default Rate shall not
be deemed to extend the time for any payment hereunder or to constitute a "grace
period" giving Obligors a right to cure any default. At Bank's option, any
accrued and unpaid interest, fees or charges may, for purposes of computing and
accruing interest on a daily basis after the due date of the Note or any
installment thereof, be deemed to be a part of the principal balance, and
interest shall accrue on a daily compounded basis after such date at the Default
Rate provided in this Note until the entire outstanding balance of principal and
interest is paid in full. Upon a default under this Note, Bank is hereby
authorized at any time, at its option and without notice or demand, to set off
and charge against any deposit accounts of any Obligor, (as well as any money,
instruments, securities, documents, chattel paper, credits, claims, demands,
income and any other property, rights and interests of any Obligor), which at
any time shall come into the possession or custody or under the control of Bank
or any of its agents, affiliates or correspondents, any and all obligations due
hereunder. Additionally, Bank shall have all rights and remedies available under
each of the Loan Documents, as well as all rights and remedies available at law
or in equity.
12. NON-WAIVER. The failure at any time of Bank to exercise any of its options
or any other rights hereunder shall not constitute a waiver thereof, nor shall
it be a bar to the exercise of any of its options or rights at a later date. All
rights and remedies of Bank shall be cumulative and may be pursued singly,
successively or together, at the option of Bank. The acceptance by Bank of any
partial payment shall not constitute a waiver of any default or of any of Bank's
rights under this Note. No waiver of any of its rights hereunder, and no
modification or amendment of this Note, shall be deemed to be made by Bank
unless the same shall be in writing,
<PAGE> 4
duly signed on behalf of Bank; each such waiver shall apply only with respect to
the specific instance involved, and shall in no way impair the rights of Bank or
the obligations of Obligors to Bank in any other respect at any other time.
13. APPLICABLE LAW, VENUE AND JURISDICTION. This Note and the rights and
obligations of Borrower and Bank shall be governed by and interpreted in
accordance with the law of the State of Tennessee. In any litigation in
connection with or to enforce this Note or any indorsement or guaranty of this
Note or any Loan Documents, Obligors, and each of them, irrevocably consent to
and confer personal jurisdiction on the courts of the State of Tennessee or the
United States located within the State of Tennessee and expressly waive any
objections as to venue in any such courts. Nothing contained herein shall,
however, prevent Bank from bringing any action or exercising any rights within
any other state or jurisdiction or from obtaining personal jurisdiction by any
other means available under applicable law.
14. PARTIAL INVALIDITY. The unenforceability or invalidity of any provision of
this Note shall not affect the enforceability or validity of any other provision
herein and the invalidity or unenforceability of any provision of this Note or
of the Loan Documents to any person or circumstance shall not affect the
enforceability or validity of such provision as it may apply to other persons or
circumstances.
15. BINDING EFFECT. This Note shall be binding upon and inure to the benefit of
Borrower, Obligors and Bank and their respective successors, assigns, heirs and
personal representatives, provided, however, that no obligations of Borrower or
Obligors hereunder can be assigned without prior written consent of Bank.
16. CONTROLLING DOCUMENT. To the extent that this Note conflicts with or is in
any way incompatible with any other document related specifically to the loan
evidenced by this Note, this Note shall control over any other such document,
and if this Note does not address an issue, then each other such document shall
control to the extent that it deals most specifically with an issue.
17. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
<PAGE> 5
BORROWER REPRESENTS TO BANK THAT THE PROCEEDS OF THIS LOAN ARE TO BE USED
PRIMARILY FOR BUSINESS, COMMERCIAL OR AGRICULTURAL PURPOSES. BORROWER
ACKNOWLEDGES HAVING READ AND UNDERSTOOD, AND AGREES TO BE BOUND BY, ALL TERMS
AND CONDITIONS OF THIS NOTE.
NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
MARK VII, INC.
By: /s/ Philip L. Dunavant
-----------------------------------------
Name: Philip L. Dunavant
-----------------------------------------
Title: E.V.P. - C.F.O.
-----------------------------------------
/s/ Carol L. Clement
-----------------------------------------
Attest A.V.P.
MARK VII TRANSPORTATION COMPANY, INC.
By: /s/ Philip L. Dunavant
-----------------------------------------
Name: Philip L. Dunavant
-----------------------------------------
Title: E.V.P. - Finance
-----------------------------------------
/s/ Carol L. Clement
-----------------------------------------
Attest A.V.P.
<PAGE> 1
Exhibit 10.18
NATIONSBANK OF TENNESSEE, N.A.
LOAN AGREEMENT
This Loan Agreement (the "Agreement") dated as of July 29, 1997, by and
among NATIONSBANK OF TENNESSEE, N.A., a national banking association ("Bank");
and MARK VII, INC., a Delaware corporation, and MARK VII TRANSPORTATION COMPANY,
INC., a Delaware corporation (collectively "Borrower").
RECITALS:
A. Borrower has applied to Bank for a revolving line of credit
facility (the "Loan") in the principal amount of $25,000,000.
B. One of the conditions of the Loan from Bank to Borrower is
the execution of this Agreement setting forth the terms and conditions of the
Loan.
NOW THEREFORE, in consideration of the Loan described below and the
mutual covenants and agreements contained herein, and intending to be legally
bound hereby, Bank and Borrower agree as follows:
1. DEFINITIONS AND REFERENCE TERMS. In addition to any other terms
defined herein, the following terms shall have the meaning set forth with
respect thereto:
A. ACCOUNT DEBTOR: Account Debtor means any Person (as herein
defined) which is now or hereafter obligated or indebted to Borrower on any
Account Receivable.
B. ACCOUNTS RECEIVABLE: Accounts Receivable means all amounts owed
to Borrower on account of sales, leases or rentals of goods or services rendered
in the ordinary course of trade or business to or on behalf of any Person (as
herein defined) which is now or hereafter obligated or indebted to Borrower (i)
which arise from goods theretofore sold and delivered or services or rentals
theretofore rendered or made, as the case may be, to an Account Debtor (as
herein defined); (ii) with respect to which no setoffs, counterclaims or
defenses are claimed by the Account Debtor; (iii) which constitute the binding
obligation of an Account Debtor which Bank deems, in the exercise of its
reasonable business judgment, to be solvent, to be financially able to pay its
debts and obligations as they become due and to be paying its debts and
obligations as they become due; (iv) which, in the case of "dated invoices"
which specify a due date for the payment thereof, do not remain unpaid more than
ninety (90) days after the end of the month in which such due date falls, and in
the case of all other invoices, do not remain unpaid more than ninety (90) days
after the date of such invoice; (v) with respect to which the Account Debtor is
not an officer, director, agent or employee of Borrower; and (vi) which do not
arise from a "sale on approval," "sale or return," "guaranteed sale" or
"consignment."
C. BORROWER: Mark VII, Inc., a Delaware corporation, and Mark VII
Transportation Company, Inc., a Delaware corporation; collectively.
<PAGE> 2
D. BORROWER'S ADDRESS:
965 Ridge Lake Boulevard
Memphis, Tennessee 38120
E. CURRENT LIABILITIES: Current Liabilities means the
aggregate amount of all current liabilities as determined in accordance with
GAAP, but in any event shall include all liabilities except those having a
maturity date which is more than one year from the date as of which such
computation is being made.
F. EBITDA: EBITDA means, without duplication for any period,
the following, each calculated for the trailing twelve (12) months of such
period: (a) Net Income; plus (b) any provision for (or minus any benefit from)
income or franchise taxes included in the determination of Net Income; plus (c)
interest expense deducted in the determination of Net Income; plus (d)
amortization and depreciation deducted in the determination of Net Income; plus
(e) losses from (or minus gains from) non-cash items (excluding sales, expenses
or losses related to current assets) included in the determination of Net
Income; minus (f) after tax extraordinary gains (or plus after tax extraordinary
losses) (in each case as defined under GAAP) included in the determination of
Net Income.
G. FUNDED DEBT: Funded Debt means the total indebtedness
outstanding under all recourse notes payable of Borrower, plus funded or
unfunded letters of credit issued pursuant to Borrower's application therefor,
plus capital leases of Borrower.
H. HAZARDOUS MATERIALS: Hazardous Materials include all
materials defined as hazardous materials or substances under any local, state or
federal environmental laws, rules or regulations, and petroleum, petroleum
products, oil and asbestos.
I. LOAN: Any loan described in Section 2 hereof and any
subsequent loan which states that it is subject to this Loan Agreement.
J. LOAN DOCUMENTS: Loan Documents means this Loan Agreement
and any and all promissory notes executed by Borrower in favor of Bank and all
other documents, instruments, guarantees, certificates and agreements executed
and/or delivered by Borrower, any guarantor or third party in connection with
any Loan.
K. MATERIAL ADVERSE EFFECT: Material Adverse Effect means a
material and adverse effect on the actual or prospective business, financial
conditions or operations of Borrower, Borrower's ability to pay and perform its
obligations under any of the Loan Documents or Bank's rights and remedies under
any of the Loan Documents, all as determined in Bank's reasonable discretion.
L. NET INCOME: Net Income means for any period, the net income
(or loss) of Borrower and its Subsidiaries after provision for or benefit from
income and franchise taxes determined in accordance with GAAP, but excluding:
(i) the income (or loss) of any Person (other than a Subsidiary)
- 2 -
<PAGE> 3
in which Borrower has an ownership interest unless received by Borrower in a
cash distribution; and (ii) the income (or loss) of any Person accrued prior to
the date it is merged into or consolidated with Borrower.
M. PERMITTED LIENS: Permitted Liens means any of the following:
i. Liens, in an aggregate amount not to exceed One
Million and No/100 Dollars ($1,000,000.00) outstanding at any one time, for
taxes, assessments or government charges not delinquent or being contested in
good faith by appropriate proceedings;
ii. Liens arising out of deposits in connection with workers'
compensation, unemployment insurance, old age pensions or other social security
or retirement benefits legislation;
iii. Deposits or pledges to secure bids, tenders, contracts, leases,
statutory obligations, surety and appeal bonds, and other obligations of like
nature arising in the ordinary course of Borrower's
business;
iv. Liens imposed by law, such as mechanics', workers',
materialmen's, carriers' or other like liens arising in the ordinary course of
Borrower's business which secure the payment of obligations which are not past
due or which are being diligently contested in good faith by appropriate
proceedings;
v. Rights of way, zoning restrictions, easements and similar
encumbrances affecting Borrower's real property which do not materially
interfere with the use of such property; and
vi. Purchase money security interests for the purchase of equipment
to be used in Borrower's business, encumbering only the equipment so purchased,
and which secures only the purchase money indebtedness incurred to acquire the
equipment so purchased and which indebtedness is otherwise permitted under this
Agreement.
N. PERSON: Person means any individual, partnership, corporation,
trust, unincorporated organization, limited liability company, association,
joint venture or other legally recognized entity having the capacity to contract
in its own name.
O. SUBSIDIARIES: Subsidiaries means those entities the majority
interest in which is now or hereafter owned, directly or indirectly, by Mark
VII, Inc., including at the present time, those identified on Exhibit "A"
attached hereto, as such list may be amended or restated from time to time.
P. TANGIBLE NET WORTH. Tangible Net Worth means the amount by which
total assets exceed total liabilities in accordance with GAAP.
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Q. ACCOUNTING TERMS. All accounting terms not specifically defined or
specified herein shall have the meanings generally attributed to such terms
under generally accepted accounting principles ("GAAP"), as in effect from time
to time, consistently applied, with respect to the financial statements
referenced in Section 3.H. hereof.
2. LOANS. Bank hereby agrees to make one or more loans to Borrower in
the aggregate principal face amount of Twenty-Five Million and No/100 Dollars
($25,000,000.00). The obligation to repay the loans is evidenced by a promissory
note or notes dated July 29, 1997, (the promissory note or notes together with
any and all renewals, extensions or rearrangements thereof being hereafter
collectively referred to as the "Note") having a maturity date, repayment terms
and interest rate as set forth in the Note.
A. REVOLVING LOAN FEATURE. The Loan shall consist of a revolving line
of credit facility (the "Loan") under which Borrower may from time to time,
borrow, repay and re-borrow funds. The Loan shall be repaid as set forth in the
Note with a maturity date of July 1, 2000, at which time the entire outstanding
principal balance, plus all accrued and unpaid interest, shall be due and
payable in full. Interest shall be paid monthly as more fully provided in the
Note. Notwithstanding the aggregate principal amount of the Loan, it is
understood and agreed that availability under the Loan shall be limited to the
aggregate principal sum outstanding at any time of Ten Million and no/100
Dollars ($10,000,000.00) until such time as Bank has completed to its reasonable
satisfaction, and at the sole expense of Borrower (which Borrower agrees to pay
upon demand), a field examination of Borrower's and any Subsidiaries' books and
records, as well as their respective operations, the results of which field
examination must be acceptable to Bank in its reasonable discretion. Bank shall
use its best efforts to complete such field examination within thirty (30) days
of the date hereof.
B. LETTER OF CREDIT SUBFEATURE. As a subfeature under the Loan, Bank
may from time to time issue letters of credit for the account of Borrower (each,
a "Letter of Credit" and collectively, "Letters of Credit"); provided, however,
that the form and substance of each Letter of Credit shall be subject to
approval by Bank in its sole discretion. Each Letter of Credit shall be issued
for an original term not to exceed 365 days, as designated by Borrower,
provided, however, that no Letter of Credit shall have an expiration date
subsequent to July 1, 2000. The undrawn amount of all Letters of Credit plus any
and all amounts paid by Bank in connection with drawings under any Letter of
Credit for which the Bank has not been reimbursed shall be reserved under the
Loan and shall not be available for advances thereunder. Each draft paid by Bank
under a Letter of Credit shall be deemed an advance under the Loan and shall be
repaid in accordance with the terms of the Loan; provided however, that if the
Loan is not available for any reason whatsoever, at the time any draft is paid
by Bank, or if any advance is not available under the Loan in such amount due to
any limitation of borrowing set forth herein, then the full amount of any such
draft shall be immediately due and payable, together with interest thereon, from
the date such amount is paid by Bank to the date such amount is fully repaid by
Borrower, at that rate of interest applicable to advances under the Loan. In
such event, Borrower agrees that Bank, at Bank's sole discretion may debit
Borrower's deposit account with Bank for the amount of such draft.
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<PAGE> 5
C. LETTER OF CREDIT FEE. Borrower will pay by debit to Borrower's
account maintained at Bank a Letter of Credit fee payable in advance upon the
issuance of any Letter of Credit for the time period from the date of issuance
until the first day of the next calendar quarter, and thereafter on the first
day of each calendar quarter, such fee to be paid at a rate per annum equal to
(i) .35%, if the Funded Debt/EBITDA ratio is less than 1.0 to 1.0, (ii) .50%, if
the Funded Debt/EBITDA ratio is equal to or greater than 1.0 to 1.0 and equal to
or less than 1.5 to 1.0, (iii) .75%, if the Funded Debt/EBITDA ratio is greater
than 1.5 to 1.0 and equal to or less than 2.0 to 1.0, or (iv) 1.00%, if the
Funded Debt/EBITDA ratio is greater than 2.0 to 1.0, times the average daily
amounts of any undrawn portions of any Letters of Credit during the preceding
month. Also on the first of each calendar quarter, once the actual Funded
Debt/EBITDA ratio for the preceding quarter is determined, Borrower will pay, or
be credited with, by debit or credit to Borrower's account maintained at Bank,
such amount as is necessary to compensate Bank for, or to refund to Borrower,
any deficit, or surplus, in the Letter of Credit fee actually paid by Borrower
at closing or at the first of the preceding quarter as applicable.
D. UNUSED CREDIT FEE. Borrower will pay hereafter on August 1, 1997,
and on the same day of each month thereafter for the period from and including
the date the Loan was established to and including the maturity date of the
Loan, an unused credit fee at a rate per annum equal to (i) .15%, if the Funded
Debt/EBITDA ratio is less than 1.0 to 1.0, (ii) .20%, if such ratio is equal to
or greater than 1.0 to 1.0 and equal to or less than 1.50 to 1.0, (iii) .25%, if
such ratio is greater than 1.5 to 1.0 and equal to or less than 2.0 to 1.0, or
(iv) .30%, if such ratio is greater than 2.0 to 1.0, times the average daily
available portion of the Loan during the preceding month. The Borrower may at
any time upon written notice to the Bank permanently reduce the amount of the
Loan at which time the obligation of the Borrower to pay such unused credit fee
shall thereupon correspondingly be reduced.
3. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants
to Bank as follows:
A. GOOD STANDING. Each of the Persons composing Borrower and any
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the state of its formation and has the power and authority to own its
property and to carry on its business in each jurisdiction in which such Person
does business, except where failure to have such power and authority would not
have a Material Adverse Effect.
B. AUTHORITY AND COMPLIANCE. Borrower has full power and authority to
execute and deliver the Loan Documents and to incur and perform the obligations
provided for therein, all of which have been duly authorized by all proper and
necessary action of the appropriate governing body of Borrower. No consent or
approval of any public authority or other third party is required as a condition
to the validity of any Loan Document, and each Person composing Borrower, is in
material compliance with all laws and regulatory requirements to which each is
subject, except where failure to comply would not have a Material Adverse
Effect.
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<PAGE> 6
C. BINDING AGREEMENT. This Agreement and the other Loan Documents
executed by Borrower constitute valid and legally binding obligations of
Borrower, enforceable in accordance with their respective terms, except as
enforceability may be limited by: (1) applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting the enforceability of
creditors' rights generally; (2) the effect of applicable fraudulent conveyance
and/or transfer laws, both state and federal; (3) general principles of equity
(regardless of whether considered in a proceeding in equity or at law)
including, without limitation, the possible unavailability of specific
performance, injunctive relief or any other equitable remedy; and (4) concepts
of materiality, reasonableness, good faith and fair dealing.
D. LITIGATION. There is no proceeding involving Borrower pending or, to
the knowledge of Borrower, threatened before any court or governmental
authority, agency or arbitration authority, except as disclosed to Bank in
writing and acknowledged by Bank prior to the date of this Agreement, which, if
determined adversely to Borrower, would have a Material Adverse Effect on
Borrower.
E. NO CONFLICTING AGREEMENTS. There is no charter, bylaw, stock
provision, t or other document pertaining to the organization, power or
authority of Borrower, and no provision of any existing agreement, mortgage,
indenture or contract binding on Borrower, or affecting its property, which
would conflict with or in any way prevent the execution, delivery or carrying
out of the terms of this Agreement and the other Loan Documents.
F. OWNERSHIP OF ASSETS. Borrower has good title to its respective
assets, and its assets are free and clear of liens, except for those granted to
Bank, Permitted Liens and those liens disclosed to Bank in writing prior to the
date of this Agreement.
G. TAXES. All taxes and assessments due and payable by Borrower have
been paid or are being contested in good faith by appropriate proceedings and
Borrower has filed all tax returns which it is required to file, except where
failure to pay such taxes or file such tax returns would not have a Material
Adverse Effect.
H. FINANCIAL STATEMENTS. The financial statements of Borrower
heretofore delivered to Bank have been prepared in accordance with GAAP applied
on a consistent basis throughout the period involved and fairly present
Borrower's financial condition as of the date or dates thereof, and there has
been no material adverse change in Borrower's financial condition or operations
since March 29, 1997. All factual information furnished by Borrower to Bank in
connection with this Agreement and the other Loan Documents is and will be
accurate and complete in all material respects on the date as of which such
information is delivered to Bank and is not and will not be incomplete by the
omission of any material fact necessary to make such information not misleading.
I. PLACE OF BUSINESS. Borrower's chief executive office is located at
965 Ridge Lake Boulevard
Memphis, Tennessee 38120
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<PAGE> 7
J. ENVIRONMENTAL. The conduct of Borrower's business operations and
the condition of Borrower's properties does not and will not violate in any
material manner any federal laws, rules or ordinances for environmental
protection, regulations of the Environmental Protection Agency, any applicable
local or state law, rule, regulation or rule of common law or any judicial
interpretation thereof relating primarily to the environment or Hazardous
Materials.
K. CONTINUATION OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made under this Agreement shall be deemed to be made at and as of
the date hereof and at and as of the date of any advance under the Loan.
L. SUBSIDIARIES. Other than as shown on Exhibit "A" there are no other
Subsidiaries.
4. AFFIRMATIVE COVENANTS. Until full payment and performance of all
obligations of Borrower under the Loan Documents, Borrower will, on a
consolidated basis together with any Subsidiaries, now or hereafter existing,
unless Bank consents otherwise in writing (and without limiting any requirement
of any other Loan Document):
A. FINANCIAL CONDITION. Maintain at all times Borrower's financial
condition as follows and determined, without duplication for any period, (and
exclusive of any redemptions of capital stock made by Borrower prior to the date
hereof) in accordance with GAAP applied on a consistent basis throughout the
period involved except to the extent modified by the following:
i. Maintain a ratio of Funded Debt to EBITDA of 2.25 to 1.0 or
less.
ii. Maintain a ratio of Funded Debt to Tangible Net Worth of 1.0
to 1.0 or less.
iii. Maintain a ratio of cash (and cash equivalents) plus Accounts
Receivable to Current Liabilities plus Funded Debt from the date hereof until
January 2, 1998, of 0.9 to 1.0 or greater, from January 3, 1998, until July 3,
1998, of 0.95 to 1.0 or greater and thereafter of 1.0 to 1.0 or greater.
B. FINANCIAL STATEMENTS AND OTHER INFORMATION. Maintain a
system of accounting reasonably satisfactory to Bank and in accordance with GAAP
applied on a consistent basis throughout the period involved, permit Bank's
officers or authorized representatives to visit and inspect Borrower's books of
account and other records at such reasonable times and as often as Bank may
reasonably desire, and pay the reasonable fees and disbursements of any
accountants or other agents of Bank selected by Bank for the foregoing purposes.
Unless written notice of another location is given to Bank, Borrower's books and
records will be located at Borrower's chief executive office set forth above.
All financial statements called for below shall be prepared in form and content
reasonably acceptable to Bank and by
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<PAGE> 8
independent certified public accountants reasonably acceptable to Bank.
In addition, Borrower will:
i. Furnish to Bank audited financial statements of Borrower for
each fiscal year of Borrower, within one hundred twenty (120) days after the
close of each such fiscal year, prepared by a public accounting firm reasonably
acceptable to Bank.
ii. Furnish to Bank financial statements prepared by Borrower
(including a balance sheet and profit and loss statement) of Borrower, for each
quarter of each fiscal year of Borrower, within forty five (45) days after the
close of each such period, such financial statements to be certified by the
president, vice president, chief financial officer or controller of Borrower.
iii. Furnish to Bank a compliance certificate for (and executed
by an authorized representative of) Borrower in the form of Exhibit "B" attached
hereto, concurrently with and dated as of the date of delivery of each of the
financial statements as required in paragraphs i and ii above, and at such other
times as Bank may reasonably request, containing (a) a certification that the
financial statements of even date are true and correct and that the Borrower is
not in default under the terms of this Agreement, and (b) computations and
conclusions, in such detail as Bank may reasonably request, with respect to
compliance with this Agreement, and the other Loan Documents, including
computations of all quantitative covenants.
iv. Furnish to Bank promptly such additional information,
reports and statements respecting the business operations and financial
condition of Borrower and its Subsidiaries, respectively, from time to time, as
Bank may reasonably request.
C. INSURANCE. Maintain insurance with responsible insurance companies
on such of its properties, in such amounts and against such risks as is
customarily maintained by similar businesses.
D. EXISTENCE AND COMPLIANCE. Maintain its, as well as that of its
Subsidiaries, existence, good standing and qualification to do business, where
required, and comply in all material respects with all laws, regulations and
governmental requirements including, without limitation, applicable
environmental laws or regulations that are applicable to any of its or their
property, business operations and transactions, except where failure to maintain
such qualification to do business or comply with such laws, regulations or
governmental requirements would not have a Material Adverse Effect.
E. ADVERSE CONDITIONS OR EVENTS. Promptly advise Bank in
writing of (i) any condition, event or act which comes to its attention that
would have a Material Adverse Effect on Borrower's or any Subsidiary's financial
condition or operations or Bank's rights under the Loan Documents, (ii) any
litigation filed by or against Borrower or any Subsidiary, seeking damages in
excess of One Hundred Thousand and No/100 Dollars ($100,000.00) (iii) any event
that has occurred that would
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<PAGE> 9
constitute an event of default under any Loan Documents and (iv) any uninsured
or partially uninsured loss through fire, theft, liability or property damage in
excess of an aggregate of Five Hundred Thousand and No/100 Dollars ($500,000.00)
during any fiscal year.
F. TAXES AND OTHER OBLIGATIONS. Pay all of its taxes, assessments and
other obligations, including, but not limited to taxes, costs or other expenses
arising out of this transaction, as the same become due and payable, except to
the extent the same are being contested in good faith by appropriate proceedings
in a diligent manner, and except where failure to pay such taxes, assessments or
other obligations would not have a Material Adverse Effect.
G. MAINTENANCE. Maintain all of its tangible property in good condition
and repair and make all necessary replacements thereof (except for such property
as Borrower in good faith determines is not useful in the conduct of its
business), and preserve and maintain all licenses, trademarks, privileges,
permits, franchises, certificates and the like necessary for the operation of
its business except where failure to so maintain, repair, replace or preserve
would not have a Material Adverse Effect.
H. ENVIRONMENTAL. Immediately advise Bank in writing of (i) any and all
enforcement, cleanup, remedial, removal, or other governmental or regulatory
actions instituted, completed or threatened pursuant to any applicable federal,
state, or local laws, ordinances or regulations relating to any Hazardous
Materials affecting Borrower's or any Subsidiary's business operations; and (ii)
all claims made or threatened by any third party against Borrower or any
Subsidiary relating to damages, contribution, cost recovery, compensation, loss
or injury resulting from any Hazardous Materials. Borrower shall immediately
notify Bank of any remedial action taken by Borrower with respect to Borrower's
business operations. Borrower will not use or permit any other party to use any
Hazardous Materials at any of Borrower's places of business or at any other
property owned by Borrower except such materials as are incidental to Borrower's
normal course of business, maintenance and repairs and which are handled in
material compliance with all applicable environmental laws.
5. NEGATIVE COVENANTS. Until full payment and performance of all
obligations of Borrower under the Loan Documents, Borrower will not, without the
prior written consent of Bank (and without limiting any requirement of any other
Loan Documents):
A. CAPITAL EXPENDITURES. Make capital expenditures during any fiscal
year (including capitalized leases) exceeding in the aggregate a number which is
equal to twenty five percent (25%) of the previous year's annual depreciation
plus Net Income.
B. LEASE EXPENDITURES. Incur new obligations for the lease or hire
of real or personal property other than capital leases requiring payments in any
fiscal year in excess of an aggregate of Five Hundred Thousand and No/100
Dollars ($500,000.00).
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<PAGE> 10
C. TRANSFER OF ASSETS OR CONTROL. Sell, lease, assign or otherwise
dispose of or transfer any assets, except in the normal course of its business,
or for those assets that Borrower in good faith determines are not useful in the
conduct of its business (including, but not limited to, three (3) parcels of
real property currently held for sale), or transfer control or ownership of any
Subsidiary except for transfers to each other or to a Subsidiary.
D. LIENS. Grant, suffer or permit any contractual or noncontractual
lien on or security interest in its assets (including, without limitation, any
of Borrower's intellectual property), except in favor of Bank and except for
Permitted Liens, limited liens involving non-recourse lease related loans, and
those liens disclosed to and approved by Bank prior to the date of this
Agreement.
E. EXTENSIONS OF CREDIT. Other than loans or capital contributions to
each other or to any Subsidiaries, make or permit any Subsidiary to make, loans
or advances in excess of Two Million and No/100 Dollars ($2,000,000.00) in the
aggregate outstanding at any time, or make any capital contribution to, or
participate as a partner or joint venturer with any Person, except for
extensions of credit to customers and employees in the normal course of
Borrower's business, and except for the purchase of direct obligations of the
United States or any agency thereof with maturities of less than one year, or
obligations of Bank or any subsidiary thereof.
F. BORROWINGS. Create, incur, assume or become liable in any manner for
any indebtedness (whether for borrowed money, deferred payment for the purchase
of assets, lease payments [other than lease payments permitted by Sections 5.A
or 5.B of this Agreement], as surety or guarantor for the debt for another, or
otherwise) other than to Bank, except for normal trade debts incurred in the
ordinary course of Borrower's business, and except for existing indebtedness
disclosed to Bank in writing and acknowledged by Bank prior to the date of this
Agreement.
G. DIVIDENDS AND DISTRIBUTIONS. Make any distribution (other than
dividends payable in capital stock of Borrower, or dividends payable between
persons composing Borrower or any Subsidiaries) on any shares of any class of
its capital stock or apply any of its property or assets to the purchase,
redemption or other retirement of any shares of any class of capital stock of
Borrower in any fiscal year exceeding in the aggregate a sum which is equal to
fifty percent (50%) of Net Income for the prior fiscal year (exclusive of any
redemptions of capital stock made by Borrower prior to the date hereof), or in
any way amend its capital structure.
H. CHARACTER OF BUSINESS. Change the general character of business as
conducted at the date hereof, or engage in any type of business not reasonably
related to its business as presently conducted.
I. MANAGEMENT CHANGE. Make any substantial change in its present
executive or management personnel.
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<PAGE> 11
J. NEGATIVE PLEDGE LIMITATION. Enter into any agreement with any person
other than Bank pursuant hereto which prohibits or limits the ability of
Borrower or any Subsidiary to create, incur, assume or suffer to exist any lien
upon any of the assets, rights, revenues or property, whether real, personal or
mixed, whether tangible or intangible, and whether now owned or hereafter
acquired.
K. ACQUISITIONS OR MERGERS. Acquire or enter into any merger or
consolidation, or purchase or otherwise acquire, or permit any Subsidiary to
purchase or acquire, any capital stock, assets (other than in the ordinary
course of business), obligations, or other securities of or otherwise invest in
or acquire any interest in any entity, unless:
i. The entity to be acquired had positive EBITDA during its
most recent two (2) fiscal years;
ii. The total consideration to be paid in such acquisition (as
specified in the relevant agreement) is less than ten percent (10%) of the total
assets of Borrower prior to such acquisition (provided, however, that this 10%
limitation shall not apply if the consideration for the acquisition is comprised
solely of shares of Borrower's capital stock and the price/earnings multiple for
the most recent four fiscal quarters of the entity to be acquired is less than
fifty percent (50%) of the pricing/earnings multiple (for the same period) at
which Borrower's stock is trading on a recognized exchange); and
iii. The total consideration to be paid for such acquisition (as
specified in the relevant agreement) is less than six (6) times the EBITDA of
the entity to be acquired for the most recent four fiscal quarters (provided,
however, that this six (6) times EBITDA limitation shall not apply if the
consideration for such acquisition is comprised of at least seventy-five percent
(75%) of shares of Borrower's capital stock as specified in the relevant
agreement and the price/earnings multiple for the most recent four fiscal
quarters of the entity to be acquired is less than fifty percent (50%) of the
price/earnings multiple for the same period at which Borrower's stock is trading
on a recognized exchange);
provided further, however, that in no event may Borrower enter into any
acquisition if the results of such acquisition on a pro forma basis would cause
a default hereunder.
6. DEFAULT. Borrower shall be in default under this Agreement and under
each of the other Loan Documents if it shall default in the payment of any
amounts due and owing under the Loan within five (5) days of the due date
thereof, or should it fail to timely and properly observe, keep or perform any
term, covenant, agreement or condition in any Loan Document or in any other loan
agreement, promissory note, security agreement, deed of trust, deed to secure
debt, mortgage, assignment or other contract securing or evidencing payment of
any indebtedness of Borrower to Bank or any affiliate or subsidiary of
NationsBank Corporation, and, except for the filing of any bankruptcy petition,
or the making of any assignment for the benefit of creditors (which is not
dismissed within the time permitted by the Loan Documents), and the violation of
any representations and warranties, for which no cure is possible, and any other
default hereunder which is not capable of cure, such failure shall continue
unremedied for more than thirty (30) days after such failure should occur.
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<PAGE> 12
7. REMEDIES UPON DEFAULT. If any of the foregoing defaults shall occur
and continue unremedied beyond the cure period, if any, specified for such
default, Bank shall have all rights, powers and remedies available under each of
the Loan Documents as well as all rights and remedies available at law or in
equity.
8. NOTICES. All notices, requests or demands which any party is required or
may desire to give to any other party under any provision of this Agreement must
be in writing delivered to the other party at the following address:
Borrower:
Mark VII, Inc.
Mark VII Transportation Company, Inc.
965 Ridge Lake Boulevard
Memphis, Tennessee 38120
Attn: Phil Dunavant
Fax. No. 901/680-9675
Bank:
NationsBank of Tennessee, N.A.
6363 Poplar Avenue, Suite 230
Memphis, Tennessee 38119
Attention: Michael R. Frick
Fax No. 901/820-8062
or to such other address as any party may designate by written notice to the
other party. Each such notice, request and demand shall be deemed given or made
as follows:
A. If sent by mail, upon the earlier of the date of receipt or five
(5) days after deposit in the U.S. Mail, first class postage prepaid;
B. If sent by any other means , upon delivery.
9. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Bank
immediately upon demand the full amount of all costs and expenses, including
reasonable attorneys' fees incurred by Bank in connection with (a) negotiation
and preparation of this Agreement and each of the Loan Documents, and (b) all
other costs and attorneys' fees incurred by Bank for which Borrower is
obligated to reimburse Bank in accordance with the terms of the Loan Documents.
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<PAGE> 13
10. MISCELLANEOUS. Borrower and Bank further covenant and agree as
follows, without limiting any requirement of any other Loan Document:
A. CUMULATIVE RIGHTS AND NO WAIVER. Each and every right granted to
Bank under any Loan Document, or allowed it by law or equity shall be cumulative
of each other and may be exercised in addition to any and all other rights of
Bank, and no delay in exercising any right shall operate as a waiver thereof,
nor shall any single or partial exercise by Bank of any right preclude any other
or future exercise thereof or the exercise of any other right. Borrower
expressly waives any presentment, demand, protest or other notice of any kind,
including but not limited to notice of intent to accelerate and notice of
acceleration. No notice to or demand on Borrower in any case shall, of itself,
entitle Borrower to any other or future notice or demand in similar or other
circumstances.
B. APPLICABLE LAW. This Loan Agreement and the rights and obligations
of the parties hereunder shall be governed by and interpreted in accordance with
the laws of the state of Tennessee and applicable United States federal law.
C. AMENDMENT. No modification, consent, amendment or waiver of
any provision of this Loan Agreement, nor consent to any departure by Borrower
therefrom, shall be effective unless the same shall be in writing and signed by
an officer of Bank, and then shall be effective only in the specified instance
and for the purpose for which given. This Loan Agreement is binding upon
Borrower, its successors and assigns, and inures to the benefit of Bank, its
successors and assigns; however, no assignment or other transfer of Borrower's
rights or obligations hereunder shall be made or be effective without Bank's
prior written consent, nor shall it relieve Borrower of any obligations
hereunder. There is no third party beneficiary of this Loan Agreement.
D. DOCUMENTS. All documents, certificates and other items required
under this Loan Agreement to be executed and/or delivered to Bank shall be in
form and content reasonably satisfactory to Bank and its counsel.
E. PARTIAL INVALIDITY. The unenforceability or invalidity of any
provision of this Loan Agreement shall not affect the enforceability or validity
of any other provision herein and the invalidity or unenforceability of any
provision of any Loan Document to any person or circumstance shall not affect
the enforceability or validity of such provision as it may apply to other
persons or circumstances.
F. INDEMNIFICATION. Notwithstanding anything to the contrary
contained in Section 10(G), Borrower shall indemnify, defend and hold Bank and
its successors and assigns harmless from and against any and all claims,
demands, suits, losses, damages, assessments, fines, penalties, costs or other
expenses (including reasonable attorneys' fees and court costs) arising from or
in any way related to any of the transactions contemplated hereby (except to the
extent the same results from the gross negligence
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<PAGE> 14
or willful misconduct of Bank or its successors and assigns, as applicable),
including but not limited to actual or threatened damage to the environment,
agency costs of investigation, personal injury or death, or property damage, due
to a release or alleged release of Hazardous Materials, arising from Borrower's
business operations, any other property owned by Borrower or in the surface or
ground water arising from Borrower's business operations, or gaseous emissions
arising from Borrower's business operations or any other condition existing or
arising from Borrower's business operations resulting from the use or existence
of Hazardous Materials, whether such claim proves to be true or false. Borrower
further agrees that its indemnity obligations shall include, but are not limited
to, liability for damages resulting from the personal injury or death of an
employee of the Borrower, regardless of whether the Borrower has paid the
employee under the workmen' s compensation laws of any state or other similar
federal or state legislation for the protection of employees. The term "property
damage" as used in this paragraph includes, but is not limited to, damage to any
real or personal property of the Borrower, the Bank, and of any third parties.
The Borrower's obligations under this paragraph shall survive the repayment of
the Loan and any deed in lieu of foreclosure or foreclosure of any Deed to
Secure Debt, Deed of Trust, Security Agreement or Mortgage securing the Loan.
G. SURVIVABILITY. All covenants, agreements, representations and
warranties made herein or in the other Loan Documents shall survive the making
of the Loan and shall continue in full force and effect so long as the Loan is
outstanding or the obligation of the Bank to make any advances under the Loan
shall not have expired.
11. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS
AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE
CITY OF THE BORROWER'S DOMICILE AT TIME OF THE EXECUTION OF THIS INSTRUMENT,
AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING
- 14 -
<PAGE> 15
THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR
ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60
DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL
BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS ARBITRATION PROVISION; OR
(II) BE A WAIVER BY THE BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC.
91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE
BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO)
SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR
(C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT
LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A
RECEIVER. THE BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
12. NO ORAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.
- 15 -
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.
BORROWER: BANK:
MARK VII, INC. NATIONSBANK OF TENNESSEE, N.A.
By: /s/ Philip L. Dunavant By: /s/ Michael R. Frick
--------------------------- -----------------------------
Name: Philip L. Dunavant Name: Michael R. Frick
Title: Executive Vice President; Chief Title: Vice President
Financial Officer
Attest: /s/ Carol L. Clement
-----------------------
Name: Carol L. Clement
Title: Assistant Vice President
MARK VII TRANSPORTATION COMPANY, INC.
By: /s/ Philip L. Dunavant
---------------------------
Name: Philip L. Dunavant
Title: Executive Vice President - Finance
Attest: /s/ Carol L. Clement
------------------------
Name: Carol L. Clement
Title: Assistant Vice President
- 16 -
<PAGE> 17
EXHIBIT "A"
SUBSIDIARIES
<TABLE>
<CAPTION>
Name Jurisdiction of Incorporation
- ---- -----------------------------
<S> <C> <C>
1. Mark VII Transportation Company, Inc. Delaware
Subsidiaries of Mark VII Transportation Company, Inc.
a. Mark VII Trucking, Inc. Delaware
b. Apollo Express, Inc. Kansas
c. Neptune Trucking, Inc. Kansas
d. Jupiter Transportation, Inc. Kansas
e. Taurus Trucking, Inc. Kansas
f. Orion Express, Inc. Kansas
g. Capricorn Transportation, Inc. Kansas
2. Mark VII Risk Management, Inc. Delaware
3. Mark VII Transportation Solutions, Inc. Missouri
4. Mark VII Logistics, S.A. de C.V. Mexico
5. MNX Carriers, Inc.: Delaware
Subsidiaries of MNX Carriers, Inc. - MNX Transport, Inc. Missouri
Subsidiary of MNX Transport, Inc.- MNX Trucking, Inc. Missouri
</TABLE>
- 17 -
<PAGE> 1
Exhibit 10.19
FIRST MODIFICATION OF LOAN AGREEMENT
THIS FIRST MODIFICATION OF LOAN AGREEMENT ("First Modification") made
and entered into as of the 20th day of October, 1997, by and among NATIONSBANK
OF TENNESSEE, N.A., a national banking association ("Bank"), and MARK VII, INC.,
a Delaware corporation, and MARK VII TRANSPORTATION COMPANY, INC., a Delaware
corporation (collectively "Borrower").
RECITALS:
A. Borrower has previously obtained from Bank a revolving line
of credit facility (the "Loan") in the maximum principal amount of $25,000,000.
B. The terms and conditions of the Loan are set forth in that certain
Loan Agreement dated July 29, 1997 (the "Agreement")
C. Borrower has asked Bank, and Bank has agreed, to make certain
modifications to the Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the Loan from Bank to Borrower and
the mutual covenants and agreements contained herein, and intending to be
legally bound hereby, Bank and Borrower agree as follows:
1. The definition of Accounts Receivable in Section 1.B. is hereby
modified and amended by deleting subsection (iv) thereof and substituting in
place thereof the following:
(iv) which, in the aggregate, exclude the amount of
allowances, as set forth in the consolidated balance sheets of
Borrower, for those Accounts Receivables that are considered
uncollectible or not qualified, and which allowances are
acceptable to Bank in its reasonable discretion.
2. The definition of Current Liabilities in Section 1.E. of the Agreement
is hereby deleted in its entirety and substituted in place thereof shall be the
following:
E. CURRENT LIABILITIES: Current Liabilities means the aggregate amount
of all current liabilities of Borrower as determined in accordance
with GAAP, consisting primarily of accrued transportation charges and
deferred income taxes, as shown on Borrower's financial statements
provided to Bank, but excluding specifically other current and accrued
liabilities as shown on said financial
<PAGE> 2
statements consisting primarily of accrued wages and bonuses, accrued
agency fees, sales commissions, non-operating corporate expenses,
self-insurance claims and other non-operational type accruals.
3. Section 5.G. of the Agreement is hereby deleted in its entirety and
substituted in place thereof shall be the following:
G. DIVIDENDS AND DISTRIBUTIONS: Make any distribution (other
than dividends payable in capital stock of Borrower, or
dividends payable between persons composing Borrower or any
Subsidiaries) on any shares of any class of its capital stock
or apply any of its property or assets to the purchase,
redemption or other retirement of any shares of any class of
capital stock of Borrower in any fiscal year exceeding in the
aggregate for the fiscal year 1997 of Eight Million and No/100
Dollars ($8,000,000.00), and thereafter a sum which is equal
to one hundred percent (100%) of Net Income for the prior
fiscal year (exclusive of any redemptions of capital stock
made by Borrower prior to July 29, 1997), or in any way amend
its Structure.
4. All other terms, conditions and provisions of the Agreement not
expressly modified hereby shall remain in full force and effect and Borrower
does hereby ratify and affirm all terms and conditions thereof, as well as all
other documents evidencing, securing or relating to the Loan.
IN WITNESS WHEREOF, the parties have executed this First Modification
as of the date first above written.
BANK:
NATIONSBANK OF TENNESSEE, N.A.
By: /s/ Michael R. Frick
--------------------------------
Name: Michael R. Frick
Title: Vice President
<PAGE> 3
BORROWER:
MARK VII, INC.
By: /s/ Philip L. Dunavant
-----------------------------------------------
Name: Philip L. Dunavant
Title: Exec. Vice President/Chief Financial Officer
Attest: /s/ Carol L. Clement
-------------------------------------------
Name: Carol L. Clement
Title: Assistant Vice President
MARK VII TRANSPORTATION COMPANY, INC.
By: /s/ Philip L. Dunavant
-----------------------------------------------
Name: Philip L. Dunavant
Title: Exec. Vice President
Attest: /s/ Carol L. Clement
-------------------------------------------
Name: Carol L. Clement
Title: Assistant Vice President
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation
---- ---------------
<S> <C>
Mark VII Transportation Company, Inc. Delaware
Subsidiaries of Mark VII Transportation Company, Inc.:
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
Subsidiary of Orion Express, Inc.:
Mark VII Canada, ULC Nova Scotia, Canada
Union Team Leasing, Inc. Kansas
Mark VII Risk Management, Inc. Delaware
Mark VII Transportation Solutions, Inc. Missouri
Mark VII Logistics, S.A. de C.V. Mexico
MNX Carriers, Inc.: Delaware .
Subsidiary of MNX Carriers, Inc.:
MNX Transport, Inc. Missouri
Subsidiary of MNX Transport, Inc.
MNX Trucking, Inc. Missouri
</TABLE>
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K into the Company's previously filed
Registration Statements File Nos. 33-47188, 33-55618, 33-86174 and 33-60595.
/s/ Arthur Andersen LLP
Memphis, Tennessee
March 23, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARK
VII, INC. CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED JANUARY 3, 1998
AND CONSOLIDATED BALANCE SHEET AS OF JANUARY 3, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> JAN-03-1998
<CASH> 3,732
<SECURITIES> 0
<RECEIVABLES> 85,558
<ALLOWANCES> 2,641
<INVENTORY> 0
<CURRENT-ASSETS> 92,803
<PP&E> 11,420
<DEPRECIATION> 4,829
<TOTAL-ASSETS> 108,010
<CURRENT-LIABILITIES> 74,943
<BONDS> 945
0
0
<COMMON> 501
<OTHER-SE> 31,621
<TOTAL-LIABILITY-AND-EQUITY> 108,010
<SALES> 0
<TOTAL-REVENUES> 667,374
<CGS> 0
<TOTAL-COSTS> 582,843
<OTHER-EXPENSES> 71,643
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 171
<INCOME-PRETAX> 12,717
<INCOME-TAX> 5,341
<INCOME-CONTINUING> 7,376
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,376
<EPS-PRIMARY> .80
<EPS-DILUTED> .76
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-28-1996
<PERIOD-END> SEP-27-1997
<CASH> 8,718
<SECURITIES> 0
<RECEIVABLES> 74,837
<ALLOWANCES> 2,113
<INVENTORY> 0
<CURRENT-ASSETS> 88,852
<PP&E> 9,935
<DEPRECIATION> 4,591
<TOTAL-ASSETS> 100,925
<CURRENT-LIABILITIES> 66,103
<BONDS> 0
0
0
<COMMON> 500
<OTHER-SE> 33,332
<TOTAL-LIABILITY-AND-EQUITY> 100,925
<SALES> 0
<TOTAL-REVENUES> 478,802
<CGS> 0
<TOTAL-COSTS> 418,426
<OTHER-EXPENSES> 51,349
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 134
<INCOME-PRETAX> 9,305
<INCOME-TAX> 3,908
<INCOME-CONTINUING> 5,397
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,397
<EPS-PRIMARY> .58
<EPS-DILUTED> .56
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MARK VII, INC. FOR THE SIX MONTHS ENDED JANUARY 3, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-28-1996
<PERIOD-END> JUN-28-1997
<CASH> 10,491
<SECURITIES> 0
<RECEIVABLES> 66,434
<ALLOWANCES> 1,996
<INVENTORY> 0
<CURRENT-ASSETS> 82,808
<PP&E> 9,048
<DEPRECIATION> 4,368
<TOTAL-ASSETS> 93,744
<CURRENT-LIABILITIES> 59,740
<BONDS> 0
0
0
<COMMON> 497
<OTHER-SE> 32,454
<TOTAL-LIABILITY-AND-EQUITY> 93,744
<SALES> 0
<TOTAL-REVENUES> 310,791
<CGS> 0
<TOTAL-COSTS> 271,314
<OTHER-EXPENSES> 33,902
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94
<INCOME-PRETAX> 5,690
<INCOME-TAX> 2,390
<INCOME-CONTINUING> 3,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,300
<EPS-PRIMARY> .35
<EPS-DILUTED> .34
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MARK VII, INC. FOR THE THREE MONTHS ENDED MARCH 29, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-28-1996
<PERIOD-END> MAR-29-1997
<CASH> 7,680
<SECURITIES> 0
<RECEIVABLES> 64,243
<ALLOWANCES> 1,736
<INVENTORY> 0
<CURRENT-ASSETS> 75,771
<PP&E> 8,514
<DEPRECIATION> 4,119
<TOTAL-ASSETS> 86,265
<CURRENT-LIABILITIES> 54,275
<BONDS> 0
0
0
<COMMON> 497
<OTHER-SE> 85,768
<TOTAL-LIABILITY-AND-EQUITY> 86,265
<SALES> 0
<TOTAL-REVENUES> 145,914
<CGS> 0
<TOTAL-COSTS> 127,379
<OTHER-EXPENSES> 16,408
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43
<INCOME-PRETAX> 2,127
<INCOME-TAX> 893
<INCOME-CONTINUING> 1,234
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,234
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARK
VII, INC. CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 28, 1996
AND CONSOLIDATED BALANCE SHEET AS OF DECEMBER 28, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> DEC-28-1996
<CASH> 959
<SECURITIES> 0
<RECEIVABLES> 75,008
<ALLOWANCES> 1,693
<INVENTORY> 0
<CURRENT-ASSETS> 82,988
<PP&E> 8,732
<DEPRECIATION> 4,214
<TOTAL-ASSETS> 93,597
<CURRENT-LIABILITIES> 62,958
<BONDS> 601
0
0
<COMMON> 495
<OTHER-SE> 29,543
<TOTAL-LIABILITY-AND-EQUITY> 93,597
<SALES> 0
<TOTAL-REVENUES> 563,913
<CGS> 0
<TOTAL-COSTS> 489,292
<OTHER-EXPENSES> 64,403
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 266
<INCOME-PRETAX> 9,952
<INCOME-TAX> 4,180
<INCOME-CONTINUING> 5,772
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,772
<EPS-PRIMARY> .63
<EPS-DILUTED> .60
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MARK VII, INC. FOR THE NINE MONTHS ENDED SEPTEMBER 28,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> SEP-28-1996
<CASH> 414
<SECURITIES> 0
<RECEIVABLES> 65,135
<ALLOWANCES> 1,693
<INVENTORY> 0
<CURRENT-ASSETS> 70,697
<PP&E> 8,963
<DEPRECIATION> 4,665
<TOTAL-ASSETS> 81,602
<CURRENT-LIABILITIES> 53,153
<BONDS> 0
0
0
<COMMON> 490
<OTHER-SE> 27,334
<TOTAL-LIABILITY-AND-EQUITY> 81,602
<SALES> 408,486
<TOTAL-REVENUES> 408,486
<CGS> 0
<TOTAL-COSTS> 400,887
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 682
<INTEREST-EXPENSE> 215
<INCOME-PRETAX> 7,383
<INCOME-TAX> 3,101
<INCOME-CONTINUING> 4,282
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,282
<EPS-PRIMARY> .47
<EPS-DILUTED> .45
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MARK VII, INC. FOR THE SIX MONTHS ENDED JUNE 29, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> JUN-29-1996
<CASH> 409
<SECURITIES> 0
<RECEIVABLES> 63,881
<ALLOWANCES> 1,607
<INVENTORY> 0
<CURRENT-ASSETS> 69,152
<PP&E> 8,573
<DEPRECIATION> 4,436
<TOTAL-ASSETS> 79,988
<CURRENT-LIABILITIES> 52,822
<BONDS> 0
0
0
<COMMON> 489
<OTHER-SE> 26,025
<TOTAL-LIABILITY-AND-EQUITY> 79,988
<SALES> 264,785
<TOTAL-REVENUES> 264,785
<CGS> 0
<TOTAL-COSTS> 260,176
<OTHER-EXPENSES> 173
<LOSS-PROVISION> 384
<INTEREST-EXPENSE> 73
<INCOME-PRETAX> 4,436
<INCOME-TAX> 1,863
<INCOME-CONTINUING> 2,573
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,573
<EPS-PRIMARY> .28
<EPS-DILUTED> .27
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> MAR-30-1996
<CASH> 411
<SECURITIES> 0
<RECEIVABLES> 52,077
<ALLOWANCES> 1,446
<INVENTORY> 0
<CURRENT-ASSETS> 60,468
<PP&E> 8,359
<DEPRECIATION> 4,196
<TOTAL-ASSETS> 70,586
<CURRENT-LIABILITIES> 44,824
<BONDS> 0
0
0
<COMMON> 489
<OTHER-SE> 24,602
<TOTAL-LIABILITY-AND-EQUITY> 70,586
<SALES> 122,030
<TOTAL-REVENUES> 122,030
<CGS> 0
<TOTAL-COSTS> 105,725
<OTHER-EXPENSES> 14,566
<LOSS-PROVISION> 101
<INTEREST-EXPENSE> 69
<INCOME-PRETAX> 1,646
<INCOME-TAX> 691
<INCOME-CONTINUING> 955
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 955
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARK
VII, INC. CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 30, 1995
AND CONSOLIDATED BALANCE SHEET AS OF DECEMBER 30, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-30-1995
<CASH> 272
<SECURITIES> 0
<RECEIVABLES> 57,114
<ALLOWANCES> 1,336
<INVENTORY> 0
<CURRENT-ASSETS> 64,254
<PP&E> 8,392
<DEPRECIATION> 3,993
<TOTAL-ASSETS> 76,152
<CURRENT-LIABILITIES> 49,552
<BONDS> 712
0
0
<COMMON> 489
<OTHER-SE> 25,399
<TOTAL-LIABILITY-AND-EQUITY> 76,152
<SALES> 0
<TOTAL-REVENUES> 459,160
<CGS> 0
<TOTAL-COSTS> 391,845
<OTHER-EXPENSES> 58,797
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 494
<INCOME-PRETAX> 8,024
<INCOME-TAX> 3,290
<INCOME-CONTINUING> 4,734
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,734
<EPS-PRIMARY> .49
<EPS-DILUTED> .47
</TABLE>
