_______________________________________________________________________
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 [FEE REQUIRED]
For the fiscal year ended September 30, 1995 or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________________ to _______________
Commission file number 1-10105
MATLACK SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0310173
(State of Incorporation) (I.R.S. Employer Identification Number)
ONE ROLLINS PLAZA, WILMINGTON, DELAWARE 19803
(Address of principal executive offices)
Registrant's telephone number including area code (302) 426-2700
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of exchange on which
registered
Common Stock, $1 Par Value NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
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. / X /
The aggregate market value of the voting stock held by non-affiliates of
the registrant was $60,936,000 as of October 31, 1995.
The number of shares of registrant's common stock outstanding as of
October 31, 1995 was 8,800,050.
The following documents are incorporated by reference:
Part of this form into which
Document incorporated
Proxy Statement in connection with
Annual Meeting of Shareholders to be
held January 25, 1996 III
<PAGE>
PART I
ITEM 1. BUSINESS.
The Registrant, Matlack Systems, Inc., together with its subsidiaries
(herein collectively referred to as the "Company" unless the context
indicates otherwise) is a specialized logistics and transportation company
which provides specialized transportation of bulk commodities in tank
trailers and tank containers to the nation's leading chemical and dry bulk
shippers. In addition to specialized trucking, the Company provides
intermodal transportation services, trailer leasing, dedicated contract
carriage services, international bulk transportation, tank cleaning services
and logistics management services to the chemical industry. The Company
operates approximately 1,250 tractors and 2,700 trailers out of approximately
94 terminals located in 38 states and four Canadian provinces.
(a) General Development of Business
There have been no significant changes in the business of the Company
since September 30, 1994.
(b) Financial Information about Industry Segments
The Company's major operation is the transportation of bulk commodities
in tank trailers. Financial information concerning this business is included
on pages 3 to 5 and 10 through 21 of this 1995 Annual Report on Form 10-K.
(c) Narrative Description of Business
The business discussed in this section is that of the Company's major
operating subsidiary Matlack, Inc., the bulk carrier and its subsidiaries and
affiliates, collectively referred to hereinafter as "Matlack".
In terms of revenues, Matlack is one of the largest companies in the
country engaged in highway transportation of bulk commodities primarily in
tank trailers. Matlack is one of the few nationwide interstate tank truck
carriers authorized to transport chemicals and other dry and liquid products
in bulk. Matlack also operates on an intrastate basis in 38 states.
Matlack is subject to regulation by the Interstate Commerce Commission and
various state regulatory agencies. As a common and contract carrier by motor
vehicle, Matlack holds certificates of public convenience and necessity
issued by the regulatory agencies. These certificates define the commodities
which the holder is authorized to transport and the points of origin and
destination for carriers of such commodities. Matlack has terminals in
Toronto and Sarnia, Ontario; Montreal, Quebec; Vancouver, British Columbia
and Leduc, Alberta and it holds operating licenses under which it may
transport various commodities into and out of certain Canadian Provinces via
specific border entry points from the United States. To the best of its
knowledge, Matlack is in compliance with the regulations of the Interstate
Commerce Commission and those of the various state and provincial regulatory
agencies where it operates.
The business of the Company is generally not subject to seasonal
variations, however, highway transportation activities can be adversely
affected depending on the severity of the weather in the various sections of
the country during the winter months. No customer accounts for more than
7.0% of the Company's bulk transportation revenues.
Competition
For the most part, Matlack's competition consists of those bulk carriers
having operating authority in the relevant jurisdictions. Competition is
based primarily on service, rates and convenience. Competition in the bulk
trucking industry formerly was restricted and was based primarily on a
carrier's ability to obtain certificates of public convenience and necessity
to transport defined commodities in specific geographic areas. Since the
passage of the Motor Carrier Act of 1980, many bulk carriers have obtained
authority to serve expanded geographic areas on an interstate basis, which,
together with excess capacity, has resulted in the intensification of price
competition.
To the extent that competition is based on service and convenience, the
number and location of Matlack's terminals, together with its ability to
clean tank trailers places Matlack in a favorable position to increase its
business. Management believes that Matlack's fleet of trailers is one of the
largest and most diversified in the tank truck industry. Matlack's network
of strategically located terminal facilities is, in management's opinion, one
of the largest and the best in the industry.
Matlack's largest competitors in the tank truck industry, based upon a
comparison of gross revenues, are Chemical Leaman Tank Lines, Inc. and DSI
Transports Inc. In addition, there are approximately 190 other recognized
competitors operating in the various regions where Matlack has operating
authority.
The Company believes that its contractual arrangements and business
policies are adequate in securing rate increases to recover rising costs and
expenses to the extent permitted by competitive circumstances, which remain
intense. Unusual increases in fuel costs can generally be offset by fuel
surcharges to customers. Accordingly, while inflation has had an impact on
the Company's operations during the last three fiscal years, competition
within the industry has been a major factor in establishing the rates that
the Company can charge for its services.
Employees
At September 30, 1995, a total of 1,106 persons were employed by the
Company.
ITEM 2. PROPERTIES.
The Company maintains its headquarters in space leased from Rollins
Properties, Inc., a wholly-owned subsidiary of Rollins Truck Leasing Corp.,
at 2200 Concord Pike, Wilmington, Delaware. The Company's principal
properties consist of land and buildings used in its bulk trucking business.
Matlack owns or leases approximately 89 truck terminals in 38 states and five
terminals in four Canadian provinces.
ITEM 3. LEGAL PROCEEDINGS.
There are various claims and legal actions pending against the Company.
In the opinion of management, based on the advice of counsel, it is only
remotely likely that the ultimate resolution of these claims and actions will
be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NONE.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
For the fiscal years ended September 30, 1995 and 1994, the range of
share prices for the Common Stock on the New York Stock Exchange (effective
December 9, 1993) and the American Stock Exchange (prior to December 9, 1993)
is as follows:
1995 1994
Fiscal Quarter High Low High Low
First . . . . . $10 7/8 $9 3/8 $11 $ 9 1/8
Second . . . . . $12 $9 5/8 $10 7/8 $ 9
Third . . . . . $12 1/4 $9 7/8 $11 3/8 $ 9 7/8
Fourth . . . . . $11 $9 1/2 $11 3/4 $10 1/4
No dividends have been paid since the Company became publicly held in
January of 1989.
At September 30, 1995, there were 1,932 holders of record of the Common
Stock.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
FIVE YEAR SELECTED FINANCIAL DATA
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C>
Year Ended September 30, 1995 1994 1993 1992 1991
Revenues $236,257 $217,880 $204,809 $199,488 $199,090
Earnings (loss)
before income
taxes (benefit) $ 11,211 $ 10,516 $ 8,054 $ 4,043(2) $(4,439)
Net earnings (loss) $ 6,601 $ 6,182 $ 4,414(1) $ 2,153(3) $(2,826)
Earnings (loss)
per share $ .74 $ .69 $ .50(1) $ .25(3) $ (.33)
At September 30,
Total assets $131,974 $122,526 $105,363 $101,091 $106,994
Long-term indebtedness $ 32,970 $ 24,800 $ 20,360 $ 22,418 $ 35,709
Shareholders' equity $ 57,532 $ 50,726 $ 44,297 $ 39,763 $ 37,497
(1) Reduced by additional deferred income tax provision of $169 ($.02 per
share) to reflect the increase in the federal
income tax rate from 34% to 35%.
(2) Before charge of $328 to reflect a change in the method of revenue
recognition.
(3) Reduced by $190 ($.02 per share) representing the cumulative after-tax
effect to September 30, 1991 of a change
in the method of revenue recognition as of October 1, 1991.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Liquidity and Capital Resources
The Company's operations require a continuous investment in equipment and
facilities. Net capital expenditures for equipment and facilities were $25.7
million in 1995, $20.0 in 1994 and $10.5 million in 1993. Capital
expenditures are funded principally by the cash flows from operations which
were $14.6 million in 1995, $16.4 million in 1994 and $11.2 million in 1993.
The increased capital spending in 1994 and 1995 required additional funding
provided by equipment term loans from various financial institutions. Based
on its relationship with current lenders, the Company expects to continue to
be able to obtain required financing at market rates and under satisfactory
terms and conditions.
At September 30, 1995, the Company had commitments of $.2 million to
purchase transportation equipment. As required, additional funds are
available to the Company from its unsecured revolving credit facility and
from other financial institutions who have expressed an interest in providing
equipment financing. The revolving credit agreement with two banks provides
for an aggregate commitment of $30.0 million to meet equipment financing
needs and letter of credit requirements. The agreement expires on December
31, 1999, but may be renewed on a year-to-year basis thereafter upon
agreement of the parties thereto. At September 30, 1995, a total of $7.6
million was available under the revolving credit facility.
In the normal course of its business, Matlack is subject to numerous
state and federal environmental laws and regulations and also is exposed to
the cost and risk of transporting and handling materials and wastes
characterized as hazardous by various regulatory agencies. Matlack has
received notices from the United States Environmental Protection Agency
("EPA") and others indicating that it is a "potentially responsible party"
with respect to the cleanup of hazardous wastes at several waste disposal
sites. Matlack has been named as a defendant in several lawsuits brought
under the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") for recovery of costs associated with the cleanup of waste
disposal sites. In addition, Matlack has responded to various governmental
requests, principally those of the EPA pursuant to CERCLA, for information
with respect to possible disposition of waste materials attributable to it at
various waste disposal sites. Based on information currently available, the
Company's management believes its ultimate liability at these sites will not
have a material adverse effect upon the Company.
Results of Operations
The Company's principal line of business is the transportation of liquid
and dry material by tank trucks. Competition in this industry remained
intense during the past three years due to the excess capacity of the
carriers.
The Company believes that its contractual arrangements and business
policies generally are adequate in securing rate increases to recover rising
fuel and other costs and expenses to the extent permitted by competitive
circumstances, which remain intense.
Fiscal Year 1995 vs. 1994
Revenues for 1995 increased by $18.4 million (8.4%) to $236.3 million
from the $217.9 million reported in 1994. Total revenue miles increased by
7.9% in 1995 while the number of loads carried increased by 4.7% over the
prior year. In addition to the bulk transportation revenue growth, the
Company noted strong increases in tank cleaning and other service revenues.
Operating expenses increased by $13.5 million (7.5%) mainly due to costs
associated with the increased revenues and fleet size. Operating expenses
were 81.7% of revenues in 1995 and 82.5% of revenues in 1994.
Depreciation expense increased by $1.8 million (21.7%) principally due
to the increase in capital expenditures associated with the Company's tractor
replacement program, which was completed in 1995.
Selling and administrative expenses increased by $.9 million (5.1%)
reflecting the increased level of business. These expenses were 7.9% and
8.2% of revenue in 1995 and 1994, respectively.
Interest expense increased by $1.1 million (52.4%) due to the higher
borrowing levels associated with the Company's increased level of capital
spending in 1995.
The effective income tax rates for 1995 and 1994 were 41.1% and 41.2%,
respectively.
The Company's net earnings increased by 6.5% to $6.6 million in 1995
compared with $6.2 million in 1994. The improvement in net earnings resulted
mainly from the increased revenues offset in large part by higher
depreciation and interest expense.
Fiscal Year 1994 vs. 1993
Revenues for 1994 increased by $13.1 million (6.4%) to $217.9 million
from the $204.8 million reported in 1993. Revenue miles increased by 5.6%
while the number of loads carried was up slightly. The 1994 revenue per load
increased by 3.8% while revenue per mile in 1994 was comparable to 1993.
Operating expenses increased by $11.2 million due in large part to the
increase in revenues. Operating expenses were 82.5% of revenues in 1994 and
82.2% of revenues in 1993.
Depreciation expenses decreased by $1.2 million (11.9%) mainly due to the
significant portion of the Company's bulk transportation equipment which has
become fully depreciated.
Selling and administrative expenses increased by $.8 million (4.8%) and
were 8.2% and 8.3% of revenue in 1994 and 1993, respectively. The increase
was mainly due to higher payroll and related expenses.
Interest expense decreased by $.1 million (4.4%) due to the refinancing
of higher interest rate debt offset in part by higher borrowing levels.
The effective income tax rates were 41.2% and 45.2% in 1994 and 1993,
respectively. The 1993 effective tax rate was affected by the increase in
the federal income tax rate from 34% to 35% which required an adjustment of
deferred taxes.
The Company's net earnings increased by $1.8 million (40.0%) to $6.2
million in 1994 compared with $4.4 million in 1993. The earnings improvement
resulted from the increased revenues and the Company's continued successful
efforts at cost containment.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the Company, the Independent
Auditors' Report and the financial statement schedules included in this
report are shown on the Index to the Consolidated Financial Statements and
Schedules on page 10.
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
NONE.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Except as presented below, the information called for by this Item 10 is
incorporated by reference from the Company's Proxy Statement to be filed
pursuant to Regulation 14A for the Annual Meeting of Shareholders to be held
on January 25, 1996.
Executive Officers of the Registrant. As of October 31, 1995, the
Executive Officers of the registrant were:
Name Position Age Term of Office
Patrick J. Bagley Vice President-Finance and 48 7/88 to date
Treasurer
Michael B. Kinnard Vice President-General Counsel 38 6/94 to date
and Secretary
John W. Rollins, Jr. Chairman of the Board 53 7/88 to date
G. J. Trippitelli President and Chief Executive 52 7/88 to date
Officer
Eugene C. Bonacci Vice President-Operations 55 10/92 to date
Matlack, Inc.
The Company's Executive Officers are elected for the ensuing year and
until their successors are elected.
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this Item 11 is incorporated by reference
from the Company's Proxy Statement to be filed pursuant to Regulation 14A for
the Annual Meeting of Shareholders to be held on January 25, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information called for by this Item 12 is incorporated by reference
from the Company's Proxy Statement to be filed pursuant to Regulation 14A for
the Annual Meeting of Shareholders to be held on January 25, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the year ended September 30, 1995, the following officers and/or
directors of the Company were also officers and/or directors of Rollins
Environmental Services, Inc.; Patrick J. Bagley, Michael B. Kinnard, William
B. Philipbar, Jr., John W. Rollins, John W. Rollins, Jr. and Henry B. Tippie.
The following officers and/or directors of the Company were also officers
and/or directors of Rollins Truck Leasing Corp.; Patrick J. Bagley, Michael
B. Kinnard, William B. Philipbar, Jr., John W. Rollins, John W. Rollins, Jr.
and Henry B. Tippie. John W. Rollins owns directly and of record 6.1% and
10.9% of the outstanding shares of Common Stock of Rollins Environmental
Services, Inc. and Rollins Truck Leasing Corp., respectively at October 31,
1995. The description of transactions between the Company and Rollins
Environmental Services, Inc. and between the Company and Rollins Truck
Leasing Corp. appears under the caption "Transactions with Related Parties"
on page 20 of the Company's 1995 Annual Report on Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) (1) Financial Statements - See accompanying Index to Consolidated
Financial Statements and Schedules on page 10.
(2) Financial Statement Schedules - See accompanying Index to
Consolidated Financial Statements and Schedules on page 10.
(3) Exhibits:
(3) Articles of Incorporation and By-Laws of Matlack Systems,
Inc. as filed with Registration Statement No. 33-23524 dated
August 5, 1988 are incorporated herein by reference.
(4) (a) Equipment Financing Agreement dated August 1, 1988 see
Exhibit 10(a).
(b) Rights Agreement dated as of June 14, 1989 as filed as an
Exhibit to Registration Statement on Form 8-A filed by
Registrant on June 15, 1989 is incorporated herein by
reference.
(10) (a) Equipment Financing Agreement dated August 1, 1988 as filed
with Registration Statement No. 33-23524 dated August 5,
1988 is incorporated herein by reference.
(b) First Amendment dated April 13, 1990 to the Equipment
Financing Agreement dated August 1, 1988.
(c) Second Amendment dated June 30, 1994 to the Equipment
Financing Agreement dated August 1, 1988.
(d) Matlack Systems, Inc. 1988 Stock Option Plan as filed with
Registration Statement No. 33-23524 dated August 5, 1988 is
incorporated herein by reference.
(21) Matlack Systems, Inc. Subsidiaries at September 30, 1995.
(27) Matlack Systems, Inc. Financial Data Schedule at September
30, 1995.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by Matlack Systems, Inc. during the
last quarter of the period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
DATED: December 4, 1995 Matlack Systems, Inc.
(Registrant)
BY: /s/ G. J. Trippitelli
G. J. Trippitelli
President and Chief Executive Officer
and Director
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:
/s/ Patrick J. Bagley Director, December 4, 1995
Patrick J. Bagley Vice President-Finance
and Treasurer
Chief Financial Officer
Chief Accounting Officer
/s/ John W. Rollins, Jr. Director, Chairman of the December 4, 1995
John W. Rollins, Jr. Board
/s/ John W. Rollins Director December 4, 1995
John W. Rollins
/s/ Henry B. Tippie Chairman of the Executive December 4, 1995
Henry B. Tippie Committee and Director
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
(1) Consolidated
Page(s)
Independent Auditors' Report on Financial Statements and
Financial Statement Schedules 11
Consolidated Statement of Earnings for the years ended
September 30, 1995, 1994 and 1993 12
Consolidated Balance Sheet at September 30, 1995 and 1994 13
Consolidated Statement of Cash Flows for the years ended
September 30, 1995, 1994 and 1993 14
Notes to the Consolidated Financial Statements 15 to 21
(2) Financial Statement Schedules
Matlack Systems, Inc.
Schedule I - Condensed Financial Information
Balance Sheet at September 30, 1995 and 1994 22
Statement of Earnings for the years ended
September 30, 1995, 1994 and 1993 23
Statement of Cash Flows for the years ended
September 30, 1995, 1994 and 1993 24
Note to the Financial Statements 25
Matlack Systems, Inc. and Subsidiaries Consolidated
Schedule II - Valuation and Qualifying Accounts for the
years ended September 30, 1995, 1994 and 1993 26
Any financial statement schedules otherwise required have been omitted
because they are not applicable or the required information is shown in the
financial statements or notes thereto.
<PAGE>
Independent Auditors' Report
The Shareholders and Board of Directors
Matlack Systems, Inc.:
We have audited the consolidated financial statements of Matlack Systems,
Inc. and subsidiaries as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we also have
audited the financial statement schedules as listed in the accompanying
index. These consolidated financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedules 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Matlack
Systems, Inc. and subsidiaries as of September 30, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended September 30, 1995, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
October 25, 1995
<PAGE>
CONSOLIDATED STATEMENT OF EARNINGS
Year Ended September 30,
1995 1994 1993
Revenues $236,257,000 $217,880,000 $204,809,000
Expenses:
Operating 193,131,000 179,648,000 168,400,000
Depreciation 10,079,000 8,261,000 9,517,000
Selling and administrative 18,708,000 17,837,000 17,015,000
Other (income) (110,000) (433,000) (323,000)
221,808,000 205,313,000 194,609,000
Earnings before interest
expense and income taxes 14,449,000 12,567,000 10,200,000
Interest expense 3,238,000 2,051,000 2,146,000
Earnings before income taxes 11,211,000 10,516,000 8,054,000
Income taxes 4,610,000 4,334,000 3,640,000
Net earnings $ 6,601,000 $ 6,182,000 $ 4,414,000
Earnings per share $ .74 $ .69 $ .50
Common shares and equivalents
outstanding 8,907,000 8,899,000 8,822,000
The Notes to the Consolidated Financial Statements are an integral part of
these statements.<PAGE>
CONSOLIDATED BALANCE SHEET
September 30,
1995 1994
ASSETS
Current assets
Cash $ 2,845,000 $ 5,039,000
Accounts receivable, net of allowance
for doubtful accounts: 1995-$391,000;
1994-$390,000 24,688,000 27,385,000
Inventory of tires, parts and supplies 6,307,000 7,267,000
Other current assets 3,071,000 3,073,000
Deferred income taxes 1,586,000 1,852,000
Total current assets 38,497,000 44,616,000
Property and equipment, at cost, net of
accumulated depreciation 93,454,000 77,771,000
Other assets 23,000 139,000
Total assets $131,974,000 $122,526,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 10,603,000 $ 15,748,000
Accrued liabilities 9,146,000 10,971,000
Income taxes payable 53,000 99,000
Current maturities of equipment
financing obligations and
long-term debt 6,169,000 5,656,000
Total current liabilities 25,971,000 32,474,000
Equipment financing obligations 31,065,000 22,103,000
Long-term debt 1,905,000 2,697,000
Insurance reserves 1,795,000 2,486,000
Other liabilities 2,157,000 2,216,000
Deferred income taxes 11,549,000 9,824,000
Commitments and contingencies (see Notes
to the Consolidated Financial Statements)
Shareholders' equity:
Common stock $1.00 par value
Outstanding: 1995-8,800,050 shares;
1994-8,756,326 shares 8,800,000 8,757,000
Capital in excess of par value 10,894,000 10,732,000
Retained earnings 37,838,000 31,237,000
Total shareholders' equity 57,532,000 50,726,000
Total liabilities and shareholders'
equity $131,974,000 $122,526,000
The Notes to the Consolidated Financial Statements are an integral part of
these statements.<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended September 30,
1995 1994 1993
Cash flows from operating activities:
Net earnings $ 6,601,000 $ 6,182,000 $ 4,414,000
Reconciliation of net earnings
to net cash flows from
operating activities:
Depreciation 10,079,000 8,386,000 9,517,000
Net gain on sale of equipment (110,000) (433,000) (323,000)
Changes in assets and
liabilities:
Accounts receivable 2,697,000 (3,323,000) (2,994,000)
Inventories and other assets 849,000 (616,000) (588,000)
Accounts payable and accrued
liabilities (6,970,000) 6,362,000 829,000
Current and deferred
income taxes 2,174,000 279,000 575,000
Other, net (750,000) (406,000) (275,000)
Net cash provided by operating
activities 14,570,000 16,431,000 11,155,000
Cash flows from investing
activities:
Purchase of property and
equipment (28,474,000) (22,561,000) (11,499,000)
Proceeds from the sale of
equipment 2,822,000 2,573,000 973,000
Net cash used in investing
activities 25,652,000 (19,988,000) (10,526,000)
Cash flows from financing activities:
Proceeds of equipment financing
obligations 41,002,000 25,601,000 16,183,000
Repayment of equipment
financing obligations (31,526,000) (19,392,000) (18,577,000)
Proceeds of long-term debt - 1,000,000 1,741,000
Repayment of long-term debt (793,000) (2,893,000) (337,000)
Exercise of stock options 205,000 263,000 120,000
Other - (16,000) -
Net cash provided by (used in)
financing activities 8,888,000 4,563,000 (870,000)
Net (decrease) increase in cash (2,194,000) 1,006,000 (241,000)
Cash beginning of period 5,039,000 4,033,000 4,274,000
Cash end of period $ 2,845,000 $ 5,039,000 $ 4,033,000
Supplemental information:
Interest paid $ 3,233,000 $ 2,043,000 $ 2,257,000
Income taxes paid $ 2,436,000 $ 4,055,000 $ 3,065,000
The Notes to the Consolidated Financial Statements are an integral part of
these statements.
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Accounting Policies
The consolidated financial statements include the accounts of all
subsidiaries with appropriate elimination of intercompany transactions and
balances.
The Company recognizes revenue when shipments are delivered. Expenses
are recognized concurrently with revenues.
Inventories of transportation equipment parts and supplies are valued at
the lower of first-in, first-out cost or market. Tires on vehicles,
including new or recapped replacement tires, are valued at cost and are
written off over the expected aggregate useful life which approximates two to
three years.
Property and equipment are recorded at cost. Depreciation is provided
on a straight-line, specific item basis net of salvage or residual values.
The cost and related accumulated depreciation of property and equipment sold
or retired are eliminated from the property accounts, and the resulting gain
or loss is reflected in the statement of earnings. Repairs and maintenance
are expensed as incurred. Improvements which extend the original life of the
assets are capitalized and depreciated over the remaining lives of the
assets.
The Company retains a specific portion of insurable risks with regard to
public liability and workers' compensation claims. Retention levels are
currently $500,000. Reserves are established for claims incurred plus an
estimate for claims incurred but not reported. Reserve requirements are
evaluated and established utilizing historical trends, the Company's
experience, claim severity and other factors. Claims estimated to be paid
within one year have been classified in accrued liabilities with the balance
reflected as non-current insurance reserves.
Earnings per common share are computed assuming the conversion of all
potentially dilutive securities, namely options to purchase shares of the
Company's stock.
Property and Equipment
The Company's property and equipment accounts are as follows:
Useful
September 30, 1995 1994 Lives
Land $ 13,576,000 $ 13,264,000
Transportation equipment 136,261,000 144,850,000 4 to 12 years
Transportation service facilities 58,968,000 51,139,000 5 to 40 years
Less accumulated depreciation (115,351,000) (131,482,000)
$ 93,454,000 $ 77,771,000
The Company had commitments for the purchase of transportation equipment
of $194,000 at September 30, 1995.
Indebtedness
Equipment financing obligations are as follows:
September 30,
1995 1994
Revolving credit agreement -
$30,000,000 line $14,750,000 $ 6,000,000
Note payable to Rollins Truck Leasing Corp. - 6,000,000
Other equipment financing obligations due
banks and other financial institutions
with equipment pledged as security at
interest rates ranging from 6.5% to 8.0%,
payable in installments to 2003 21,692,000 14,967,000
Less amounts due within one year (5,377,000) (4,864,000)
$31,065,000 $22,103,000
The revolving credit agreement is unsecured but, at the option of the
banks, amounts outstanding under the agreement may be secured with unpledged
equipment and accounts receivable. During the fiscal year, interest rates on
borrowings under the agreement ranged from 6.7% to 8.2% and averaged 7.9% at
September 30, 1995. The agreement requires the maintenance of certain
financial ratios, restricts the payment of dividends and regulates payments
to affiliated companies. The credit agreement expires on December 31, 1999
but may be renewed on a year to year basis thereafter upon agreement of the
parties thereto. Termination of the agreement would result in the repayment
of the outstanding loan balance over a period of 60 months in equal monthly
installments. Otherwise, no repayments are required unless the financing
value of the equipment and accounts receivable falls below the outstanding
principal balance of the loan.
The note payable to Rollins Truck Leasing Corp. was issued in connection
with the public sale by that company of Collateral Trust Debentures. In
March of 1995, the Company repaid the $6,000,000 note payable to Rollins
Truck Leasing Corp.
Long-term debt includes real estate mortgage obligations at interest
rates ranging from 6.0% to 8.0% which are payable in installments over
various periods through the year 2000. Land and buildings with a carrying
value of $6,706,000 at September 30, 1995 are pledged as collateral.
The aggregate amounts of maturities for all indebtedness during the next
five fiscal years are as follows: 1996-$6,169,000; 1997-$6,218,000; 1998-
$5,154,000; 1999-$4,323,000 and 2000-$1,242,000.
Accrued Liabilities
Accrued liabilities are as follows:
September 30,
1995 1994
Employee compensation $ 3,851,000 $ 4,470,000
Insurance reserves 2,373,000 2,921,000
Taxes other than income 1,206,000 1,491,000
Other 1,716,000 2,089,000
$ 9,146,000 $10,971,000
<PAGE>
<TABLE>
Shareholders' Equity
Changes in the components of shareholders' equity are as follows:
$1 Par Value Capital in Total
Common Excess of Retained Shareholders'
Stock Par Value Earnings Equity
<S> <C> <C> <C> <C>
Balance at September 30, 1992 $ 5,751,000 $13,372,000 $20,640,000 $39,763,000
Net earnings 4,414,000 4,414,000
Exercise of stock options 28,000 91,000 1,000 120,000
Balance at September 30, 1993 5,779,000 13,463,000 25,055,000 44,297,000
Net earnings 6,182,000 6,182,000
Three-for-two common stock split 2,916,000 (2,932,000) (16,000)
Exercise of stock options 62,000 201,000 263,000
Balance at September 30, 1994 8,757,000 10,732,000 31,237,000 50,726,000
Net earnings 6,601,000 6,601,000
Exercise of stock options 43,000 162,000 205,000
Balance at September 30, 1995 $8,800,000 $10,894,000 $37,838,000 $57,532,000
</TABLE>
The Company is authorized to issue 24,000,000 shares of $1 Par Value
Common Stock and 1,000,000 shares of $1 Par Value Preferred Stock. The terms
and conditions of each issue of preferred shares will be determined by the
Board of Directors. No preferred shares have been issued.
Each share of common stock outstanding includes one common stock purchase
right (a "Right") which is non-detachable and non-exercisable until certain
defined events occur, including certain tender offers or the acquisition by
a person or group of affiliated or associated persons of 20% of the Company's
common stock. Upon the occurrence of certain defined events, the Right
entitles the registered holder to purchase one share of common stock of the
Company for $40 and may be modified to permit certain holders to purchase
common stock of the Company or common stock of an acquiring company at a 50%
discount. The Right expires on June 30, 1999 unless earlier redeemed by the
Company at a price of $.0067 per Right as permitted under certain conditions.
Under the terms of the revolving credit agreement, the Company's major
subsidiary may not pay dividends or make any other distribution to the
Company in an amount which exceeds 25% of its aggregate net earnings after
September 30, 1988. Net assets of this subsidiary not restricted under the
agreement totaled $3,524,000 at September 30, 1995.
<PAGE>
<TABLE>
Stock Option Plan
In July 1988, the Company adopted a stock option plan under which options to purchase up to a total
of 750,000 common shares may be granted to key salaried employees at not less than 100% of the fair
market value on the date of grant.
Option activity is summarized as follows:
Year Ended September 30,
1995 1994 1993
<S> <C> <C> <C>
Number of options:
Outstanding at beginning of year 424,128 505,969 281,715
Granted 124,900 20,115 280,800
Exercised (43,724) (87,473) (42,746)
Expired or canceled (14,286) (14,483) (13,800)
Outstanding at September 30 491,018 424,128 505,969
At September 30:
Options available for grant 44,554 155,168 160,800
Options exercisable 136,265 92,610 87,588
Per share prices:
Options granted $9.50 to $ 9.75 $9.25 to $11.33 $8.92
Options exercised $2.42 to $ 9.00 $2.42 to $ 8.92 $2.42 to $3.00
Options outstanding at September 30 $2.42 to $11.33 $2.42 to $11.33 $2.42 to $8.92
</TABLE>
Lease Commitments
The Company leases certain of its transportation service and
administrative facilities, office space and transportation equipment. These
leases are classified as operating leases and expire on various dates during
the next eight years. Minimum future payments required under operating
leases having non-cancelable terms in excess of one year as of September 30
are considered in the lease commitments.
Total rent expense incurred under operating leases for the fiscal years
ended September 30, 1995, 1994 and 1993 amounted to $13,732,000, $6,672,000
and $5,325,000, respectively.
Minimum future payments are as follows:
Year Ending September 30,
1996 $10,058,000
1997 9,192,000
1998 6,712,000
1999 4,217,000
2000 1,494,000
Later years 967,000
Total minimum payments required $32,640,000
Income Taxes
The tax provisions for the three years ended September 30, 1995 are
comprised as follows:
Year Ended September 30,
1995 1994 1993
Current: Federal $2,270,000 $2,699,000 $1,868,000
State 556,000 739,000 912,000
Deferred: Federal 1,469,000 759,000 671,000
State 315,000 137,000 20,000
Rate change - - 169,000
Total income taxes $4,610,000 $4,334,000 $3,640,000
A reconciliation of the tax provisions for the three years ended
September 30, 1995 with amounts calculated by applying the statutory federal
income tax rate for those years to earnings before income taxes is as
follows:
Year Ended September 30,
1995 1994 1993
Federal tax at statutory rate $3,924,000 $3,580,000 $2,738,000
State taxes 567,000 577,000 615,000
Rate change - - 169,000
Other 119,000 177,000 118,000
Total income taxes $4,610,000 $4,334,000 $3,640,000
The tax effect of temporary differences which comprise the current and
non-current deferred income tax amounts shown on the balance sheet are as
follows:
September 30,
1995 1994
Depreciation $11,590,000 $10,079,000
Expenses deductible when paid (1,815,000) (2,143,000)
Other 188,000 36,000
Deferred income taxes, net $ 9,963,000 $ 7,972,000
Pension Plans
The Company maintains a noncontributory pension plan for eligible
employees not covered by pension plans under collective bargaining
agreements. Pension costs for this plan are funded in accordance with the
provisions of the Internal Revenue Code. The Company also maintains a
nonqualified, non-contributory defined benefit pension plan for certain
employees to restore pension benefits reduced by federal income tax
regulations. The cost associated with the plan is determined using the same
actuarial methods and assumptions as those used for the Company's qualified
pension plan.
The components of net periodic pension cost are as follows:
Year Ended September 30,
1995 1994 1993
Service cost $ 510,000 $ 496,000 $ 412,000
Interest cost 591,000 520,000 445,000
Return on plan assets (1,309,000) (7,000) (816,000)
Net amortization and deferral 772,000 (551,000) 302,000
Net periodic pension cost $ 564,000 $ 458,000 $ 343,000
The following table sets forth the plan's funded status and the amount
recognized in the Company's balance sheet for the plans:
September 30,
1995 1994
Actuarial present value of accumulated
benefit obligation:
Vested $6,581,000 $5,611,000
Non-vested 251,000 262,000
$6,832,000 $5,873,000
Projected benefit obligation $8,408,000 $7,492,000
Plan assets at market value 7,627,000 5,860,000
Projected benefit obligation in
excess of plan assets 781,000 1,632,000
Unrecognized gain 1,110,000 329,000
Unrecognized prior service cost (113,000) (128,000)
Unrecognized overfunding at adoption 81,000 97,000
Accrued pension liability $1,859,000 $1,930,000
The discount rate and the rate of assumed compensation increase for all
three years were 8.0% and 5.0%, respectively. The expected long-term rate of
return on assets was 9.0% for 1995 and 9.5% for 1994 and 1993.
At September 30, 1995, the assets of the pension plans were invested 76%
in equity securities and 24% in fixed income securities.
Effective October 1, 1994, the Company established a defined contribution
401(k) plan which permits participation by substantially all employees not
represented under a collective bargaining agreement.
The Company expensed payments to multi-employer pension plans required
by collective bargaining agreements of $3,082,000 in 1995, $2,731,000 in 1994
and $2,639,000 in 1993. The actuarial present value of accumulated plan
benefits and net assets available for benefits to employees under these plans
are not available.
Transactions with Related Parties
Certain directors and officers of the Company are also directors and
officers of Rollins Environmental Services, Inc. and of Rollins Truck Leasing
Corp.
The Company provided transportation services to Rollins Environmental
Services, Inc. and realized revenues therefrom of $13,265,000 in 1995,
$3,175,000 in 1994 and $1,714,000 in 1993.
The Company purchased materials, administrative services, insurance and
rented office space from Rollins Truck Leasing Corp., its subsidiaries and
affiliates. The aggregate cost of these materials, services and rents, which
have been included in operating expenses or selling and administrative
expenses, as appropriate, in the Consolidated Statement of Earnings, was
$3,286,000 in 1995, $2,949,000 in 1994 and $3,077,000 in 1993.
In connection with the note payable to Rollins Truck Leasing Corp., the
Company incurred interest expense which was paid to Rollins Truck Leasing
Corp. of $272,000 in 1995, $593,000 in 1994 and $1,023,000 in 1993.
An officer of the Company is the trustee of an employee benefits trust
which provides certain insurance and health care benefits to employees of the
Company. Contributions to the trust, which were charged to operating or
selling and administrative expenses, as appropriate, were $2,567,000 in 1995,
$2,529,000 in 1994 and $2,747,000 in 1993.
In the opinion of management of the Company, the foregoing transactions
were effected at rates which approximate those which the Company would have
realized or incurred had such transactions been effected with independent
third parties.
Commitments and Contingencies
In the normal course of its business, Matlack is subject to numerous
state and federal environmental laws and regulations and is also exposed to
the cost and risk of transporting and handling materials and wastes
characterized as hazardous by various regulatory agencies. Matlack has
received notices from the United States Environmental Protection Agency
("EPA") and others indicating that it is a "potentially responsible party"
with respect to the clean-up of hazardous wastes at several waste disposal
sites. Matlack has been named as a defendant in several lawsuits brought
under the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") for recovery of costs associated with the clean-up of waste
disposal sites. In addition, Matlack has responded to various governmental
requests, principally those of the EPA pursuant to CERCLA, for information
with respect to possible disposition of waste materials attributable to it at
various waste disposal sites.
Where losses are probable, provision has been made based upon available
information with respect to the cost of all such claims. In determining the
Company's liability with respect to such claims, consideration is given to
the total cost to remediate the site, the Company's contribution of waste at
the site, the participation of other responsible parties and all other
relevant circumstances of the claim. All claims and litigations are reviewed
to determine the likelihood that their ultimate resolution would have a
material adverse effect upon the Company.
Matlack is involved in ordinary routine litigation incidental to the
operation of its business. In the opinion of management, based on the advice
of counsel, it is only remotely likely that the ultimate resolution of these
claims and actions will be material.
Quarterly Results (Unaudited)
December March June September
1995 31 31 30 30
Revenues $57,085,000 $60,750,000 $61,301,000 $57,121,000
Gross profit $ 7,078,000 $ 8,252,000 $ 9,125,000 $ 8,592,000
Earnings before
income taxes $ 1,734,000 $ 2,739,000 $ 3,789,000 $ 2,949,000
Net earnings $ 1,014,000 $ 1,602,000 $ 2,238,000 $ 1,747,000
Earnings per share $ .11 $ .18 $ .25 $ .20
1994
Revenues $49,900,000 $54,679,000 $56,129,000 $57,172,000
Gross profit $ 5,563,000 $ 7,079,000 $ 8,518,000 $ 8,811,000
Earnings before
income taxes $ 1,004,000 $ 2,223,000 $ 3,513,000 $ 3,776,000
Net earnings $ 583,000 $ 1,289,000 $ 2,071,000 $ 2,239,000
Earnings per share $ .07 $ .14 $ .23 $ .25
PAGE
<PAGE>
SCHEDULE I - Condensed Financial Information
MATLACK SYSTEMS, INC.
BALANCE SHEET
($000 Omitted)
Assets September 30,
1995 1994
Current Assets
Cash $ 18 $ 608
Other current assets 111 32
129 640
Investments in subsidiaries, at equity* 59,108 50,385
Other assets 35 -
$59,272 $51,025
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 14 $ 14
Accrued liabilities 130 83
Income taxes payable 135 163
279 260
Advance from subsidiary* 1,257 -
Other liabilities - 15
Deferred federal income taxes 204 24
Shareholders' equity
Common shares $1 Par Value, 24,000,000 shares
authorized; issued and outstanding:
1995: 8,800,050; 1994: 8,756,326 8,800 8,757
Capital in excess of par values 10,894 10,732
Retained earnings 37,838 31,237
57,532 50,726
$59,272 $51,025
* Eliminated in consolidation.
The Note to the Financial Statements is an integral part of these statements.
<PAGE>
SCHEDULE I - Condensed Financial Information
(continued)
MATLACK SYSTEMS, INC.
STATEMENT OF EARNINGS
($000 Omitted)
Year Ended September 30,
1995 1994 1993
Revenues:
Dividends from subsidiaries $ 250 $ 900 $ 200
Administrative expenses 110 315 137
Earnings before income taxes 140 585 63
Income tax (benefit) 84 (129) (26)
Net earnings of Matlack Systems, Inc. 56 714 89
Equity in undistributed net earnings
of subsidiaries 6,545 5,468 4,325
Net earnings $6,601 $6,182 $4,414
The Note to the Financial Statements is an integral part of these statements.
<PAGE>
SCHEDULE I - Condensed Financial Information
(continued)
MATLACK SYSTEMS, INC.
STATEMENT OF CASH FLOWS
($000 Omitted)
Year Ended September 30,
1995 1994 1993
Cash flows from operating activities:
Earnings prior to equity in
subsidiaries' undistributed earnings $ 56 $ 714 $ 89
Reconciliation of earnings to net
cash flows from operating activities:
Changes in assets and liabilities:
Accounts receivable - 63 (63)
Accounts payable and accrued
liabilities 47 (10) 94
Current and deferred income taxes 152 135 (55)
Other, net (129) 1 3
Net cash flows from operating activities 126 903 68
Cash flows from investing activities - - -
Cash flows from financing activities:
Proceeds of stock options exercised 205 263 120
Capital contribution to subsidiary (2,178) (700) (200)
Advance from subsidiary 1,257 - -
Other - (16) -
Net cash flows used in financing
activities (716) (453) (80)
Net (decrease) increase in cash (590) 450 (12)
Cash beginning of period 608 158 170
Cash end of period $ 18 $ 608 $ 158
Supplemental information:
Interest paid $ - $ - $ -
Income taxes paid $1,743 $3,249 $2,874
The Note to the Financial Statements is an integral part of these statements.<PAGE>
SCHEDULE I - Condensed Financial Information
(continued)
MATLACK SYSTEMS, INC.
Note to the Financial Statements
Accounting Policies
The accounting policies of the Registrant and its subsidiaries are set
forth on page 15 of this 1995 Annual Report on Form 10-K.
The Company's principal source of earnings is dividends paid by its
subsidiaries. Certain loan agreements restrict payments to the Company by
its subsidiaries. Net assets of subsidiaries not restricted under such loan
agreements totaled $6,074,000 at September 30, 1995. The Company also
realizes cash receipts by assessing subsidiaries for federal taxes on income
and expends cash in payment of such taxes on a consolidated basis. Tax
assessments are based on the amount of federal income taxes which would be
payable (recoverable) by each subsidiary company based on its current year's
earnings (loss) reduced by that subsidiary's applicable portion of any
consolidated credits utilized currently in the consolidated federal income
tax return.
<PAGE>
MATLACK SYSTEMS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
($000 OMITTED)
<TABLE>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Additions
Balance at Charged to Charged Balance at
Beginning Costs and to Other End of
Description of Period Expenses Accounts Deductions Period
Year Ended
September 30,
<S> <C> <C> <C> <C> <C>
1995: Allowance for doubtful accounts $390 $129 $146(1) $274(2) $391
1994: Allowance for doubtful accounts $381 $194 $196(1) $381(2) $390
1993: Allowance for doubtful accounts $ 362 $91 $265(1) $337(2) $381
(1) Recoveries.
(2) Bad debt write-offs.<PAGE>
</TABLE>
Matlack Systems, Inc.
Exhibits to Form 10-K
For Fiscal Year Ended September 30, 1995
Index to Exhibits Page Nos.
Exhibit 10b First Amendment dated April 13, 1990 28
to the Equipment Financing Agreement
dated August 1, 1988
Exhibit 10c Second Amendment dated June 30, 1994 35
to the Equipment Financing Agreement
dated August 1, 1988
Exhibit 21 Matlack Systems, Inc. 44
Subsidiaries at September 30, 1995
Exhibit 27 Matlack Systems, Inc. 45
Financial Data Schedule at
September 30, 1995
<PAGE>
<PAGE>
Exhibit 21
Matlack Systems, Inc.
Subsidiaries at September 30, 1995
Jurisdiction of
Name Incorporation
Matlack (DE), Inc. Delaware
Bayonne Terminals, Inc. Pennsylvania
Matlack International, Inc. Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,845
<SECURITIES> 0
<RECEIVABLES> 25,079
<ALLOWANCES> (391)
<INVENTORY> 6,307
<CURRENT-ASSETS> 38,497
<PP&E> 208,805
<DEPRECIATION> (115,351)
<TOTAL-ASSETS> 131,974
<CURRENT-LIABILITIES> 25,971
<BONDS> 32,970
<COMMON> 8,800
0
0
<OTHER-SE> 48,732
<TOTAL-LIABILITY-AND-EQUITY> 131,974
<SALES> 236,257
<TOTAL-REVENUES> 236,257
<CGS> 0
<TOTAL-COSTS> 203,210
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,238
<INCOME-PRETAX> 11,211
<INCOME-TAX> 4,610
<INCOME-CONTINUING> 6,601
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,601
<EPS-PRIMARY> .74
<EPS-DILUTED> .74
</TABLE>
FIRST AMENDMENT TO EQUIPMENT FINANCING AGREEMENT
THIS FIRST AMENDMENT dated as of April 18, 1990 (this
"Amendment"), to Equipment Financing Agreement dated as of August 1,
1988, (the "Agreement") is by and between MATLACK, INC., a
Pennsylvania corporation (the "Company"), CONTINENTAL BANK N.A.
(formerly known as Continental Illinois National Bank and Trust
Company of Chicago), a national banking association ("Continental"),
individually and as Collateral Agent, and FIDELITY BANK, N.A.
("Fidelity" and, together with Continental and its individual
capacity, the "Banks"). Unless otherwise defined herein,
capitalized terms used herein have the respective meanings assigned
thereto in the Agreement.
W I T N E S S E T H
WHEREAS, the Company and the Banks desire to amend the Agreement
in certain respects:
NOW, THEREFORE, the Company and the Bank agree as follows:
SECTION 1 AMENDMENTS. The Agreement is hereby amended as
follows:
1.1 Amendment of Section 1.1. Section 1.1 of the Agreement
is hereby amended (a) by adding thereto in proper alphabetical order
the following definitions:
"'Account Debtor' means the party who is obligated on or
under any Account Receivable."
"'Account Receivable' means any right of the Company to
payment for goods sold or leases or for services rendered."
"'Accounts Receivable Collateral' means all Accounts
Receivable (whether or not Eligible Accounts Receivable),
Contract Rights and documents of title of the Company; all
chattel paper and instruments evidencing any obligation to the
Company for payment for goods sold or leased or for services
rendered; all guaranties and other property securing the payment
of or performance under, any Accounts Receivable, Contract
Rights or any such chattel paper or instruments; to the extent
related to the property herein described, all books,
correspondence, credit files, records, invoices and other papers
and documents, including, without limitation, to the extent so
related, all tapes, cards, computer runs, computer programs and
other papers and documents in the possession or control of the
Company or any computer bureau from time to time acting for the
Company; and, to the extent so related, all rights in, to and
under all policies of insurance, including claims of rights to
payments thereunder and proceeds therefrom, including any credit
insurance; and all proceeds and products of any of the
foregoing."
"'Application' means an application by the Company, in a
form and containing terms and provisions acceptable to
Continental, for the issuance by Continental of a Letter of
Credit."
"'Contract Right' means any right of the Company to payment
under a contract for the sale or lease of goods or the rendering
of services, which right is at the time not yet earned by
performance."
"'Eligible Account Receivable' means an Account Receivable
which meets each of the following requirements: (i) if it arises
from the sale or lease of goods, such goods have been shipped or
delivered, and not returned or subject to return (other than
warranty returns and rights of distributors to exchange
inventory for other inventory in the ordinary course of
business), to the Account Debtor under such Account Receivable;
(ii) it is a valid, legally enforceable obligation of the
Account Debtor thereunder (subject, as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other
similar laws from time to time in effect affecting creditors'
rights, and to the application of equitable principles
generally), and is not subject to any offset, rebate, refund,
allowance, counterclaim, debt memorandum, or other defense on
the part of such Account Debtor or to any claim on the part of
such Account Debtor denying liability thereunder in whole or in
part (as used herein, the foregoing defense to payment shall not
mean any discount for timely payment in the ordinary course of
business); (iii) it is not subject to any Lien or security
interest whatsoever, other than Liens permitted hereunder and
the security interest of the Bank; (iv) it is evidenced by an
invoice (dated not later than the date of shipment or
performance or lease contract applicable thereto and having
standard trade payment terms) rendered to such Account Debtor,
and is not evidenced by any instrument or chattel paper; (v) it
is not owing by any Account Debtor whose obligations the Bank,
acting in its reasonable discretion, shall have notified the
Borrower in writing are not deemed to constitute Eligible
Accounts Receivable; (vi) the invoice evidencing such Account
Receivable is not more than 90 days overdue; (vii) it is owing
either by (a) an Account Debtor whose principal place of
business is located in the United States, or (b) an Account
Debtor whose principal place of business may be located outside
the United States, but which maintains a place of business
located in the Untied States and where the goods or services
giving rise to such Account Receivable are delivered or
performed in the United States; and (viii) the Account Debtor is
neither the federal or any state or local government, nor any
unit, branch, agency or subdivision thereof. An Account
Receivable which is at any time an Eligible Account Receivable,
but which subsequently fails to meet any of the foregoing
requirements, shall forthwith cease to be an Eligible Account
Receivable.
"'Letter of Credit' means a letter of credit issued by
Continental, in its discretion, on the Application of the
Company pursuant to this Agreement."
"'Letter of Credit Obligations' means an amount equal to the
aggregate of the original face amounts of all Letters of Credit
minus the sum of (i) the amount of any reduction(s) in the
original face amount of any Letter of Credit which did not
result from a draw made under such Letter of Credit, (ii) the
amount of any payments made by the Banks or either of them with
respect to a Letter of Credit (A) which, from and after the date
of such payment, constitutes an Advance pursuant to Section
2.4(d), or (B) for which the Company has reimbursed the
Collateral Agent, and (iii) the undrawn portion of any issued,
but expired, Letter of Credit."
"'Security Agreement - Accounts Receivable' means a security
agreement of the Company in the form set forth as Exhibit N with
appropriate insertions."
and (b) by deleting therefrom the definition of the term "Borrowing
Base" and substituting therefor the following definition:
"'Borrowing Base' means, at any time, an amount equal to (i)
the Security Value of the Vehicles at such time, [minus (ii)
certain Indebtedness of the Company as more particularly
described on a Borrowing Base Certificate,] plus (iii) up to 80%
of the net amount of the Company's Eligible Accounts Receivable,
as calculated pursuant to a Borrowing Base Certificate."
1.2 Amendment of Section 2.1. Section 2.1 of the Agreement
is hereby amended by (i) adding the phrase ", minus the Letter of
Credit Obligations" at the end of the first sentence thereof, and
(ii) adding the phrase "and the Letter of Credit Obligations" after
the phrase "including the Advances" in the second sentence thereof.
1.3 Amendment of Section 2. Section 2 of the Agreement is
hereby amended by adding the following Section 2.4 thereto:
"2.4 Letters of Credit.
(a) In addition to Advances made pursuant to Section
2.1, Continental shall, subject to the terms and conditions of
this Agreement, upon receipt of duly executed Applications and
such other documents, instruments and/or agreements as
Continental may require, open Letters of Credit for the account
of the Company on such terms as are satisfactory to Continental,
provided that (i) the aggregate face amount of Letters of Credit
issued hereunder may not exceed $10,000,000 at any one time
outstanding; (ii) no Letter of Credit will be issued if, before
or after taking such Letter of Credit into account, the
aggregate Letter of Credit Obligations exceed or would exceed
the lesser of (A) $30,000,000 minus the outstanding principal
balance of the Advances minus the Letter of Credit Obligations
or (B) the Borrowing Base minus the outstanding principal
balance of the Advances minus the Letter of Credit Obligations
and (iii) no Letter of Credit shall have an expiration date
later than the earlier to occur or (y) the first anniversary of
the date such Letter of Credit was issued, or (z) the
Termination Date.
(b) The Company may request Continental to issue a
Letter of Credit by delivering to Continental, at its address
set forth on the signature pages hereof, an Application
completed to the satisfaction of and acceptable to Continental
in its reasonable discretion.
(c) Effective in the case of each Letter of Credit as
of the date of the opening thereof, Continental agrees to allot
and does allot, to itself and each other Bank, and each Bank
severally and irrevocably agrees to take and does take an
undivided participating interest in such Letter of Credit in a
percentage equal to the percentage such Bank's commitment set
forth opposite its signature hereto bears to the aggregate of
all the Banks' commitments.
(d) In the event that Continental makes a payment under
any Letter of Credit, the Company shall be deemed to have given
notice pursuant to Section 2.2 requesting the Banks to make
Advances on the date on which such payment by Continental takes
place in an amount equal to the amount of such payment and the
Banks shall, notwithstanding the failure of any of the
conditions set forth in Section 10, make Advances on such date
in such amount, the proceeds of which shall be applied directly
to reimburse Continental for the amount of such payment. The
obligation of each Bank to provide Continental with such Bank's
pro rata share of the amount of any payment made by Continental
to settle its obligations under any Letter of Credit shall be
absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment
which such Bank may have or has had against Continental,
including without limitation, any defense based on the failure
of the demand for payment under such Letter of Credit to conform
to the terms of such Letter of Credit or the legality, validity,
regularity or enforceability of such Letter of Credit or any
defense based on the identity of the transferee of such Letter
of Credit or the sufficiency of the transfer if such Letter of
Credit is transferable, absent Continental's gross negligence or
willful misconduct.
(e) The Company agrees to pay Continental, on demand,
Continental's standard administrative operating fees and charges
in effect from time to time for issuing and administering any
Letters of Credit. The Company further agrees to pay
Continental pro rata for the account of the Banks a commission
on the undrawn amounts of the Letters of Credit issued by
Continental at a rate per annum equal to (i) three-eights of one
percent (3/8%) on the first $845,200 of the aggregate undrawn
face amount of Letters of Credit, and (ii) three-quarters of one
percent (3/4%) on the aggregate undrawn face amount of Letters
of Credit in excess of $845,200. Such commission shall be paid
quarterly in arrears.
(f) Notwithstanding anything to the contrary herein or
in any Application of the Company, upon the occurrence of an
Event of Default or an Unmatured Event of Default or other
termination of this credit facility, an amount equal to the
aggregate amount of the outstanding Letter of Credit Obligations
shall, without demand upon or (in the case of an Event of
Default) further notice to the Company, be deemed (as between
the Banks and the Company) to have been paid or disbursed by
Continental under the Letters of Credit issued by Continental,
(notwithstanding that such amounts may not in fact have been so
paid or disbursed), and an Advance to the Company in the amount
of such Letter of Credit Obligations to have been made and
accepted, which Advance may, at the discretion of either of the
Banks, be immediately due and payable."
1.4 Amendment of Section 5.2. The first sentence of
Section 5.2 of the Agreement is hereby amended by inserting at the
end thereof the clause "; and provided, further, that no reduction
may reduce the amount of the Credit below the Letter of Credit
Obligations as of the date of such reduction.
1.4 Amendment of Section 5.6. Section 5.6 of the Agreement
is hereby deleted in its entirety and the following is
hereby substituted therefor:
"5.6 Borrowing Base. If at any time the
outstanding unsecured Indebtedness of the Company, including the
Advances and the Letter of Credit Obligations (whether or not
said Advances and/or Letter of Credit Obligations are secured)
exceeds the Borrowing Base, the Company shall prepay the
Advances to the extent of such excess and, if, after giving
effect to such prepayment, such outstanding unsecured
Indebtedness continues to exceed the Borrowing Base, then the
Company shall deliver to Continental cash, or other collateral
of a type satisfactory to Continental, having a value, as
determined by Continental, equal to such excess. Any such
collateral received by Continental shall be held by Continental
in a separate account appropriately designated as a cash
collateral account in relation to this Agreement and the Letters
of Credit and retained by Continental as collateral security for
the Company's liabilities in respect of this Agreement and each
of the Letters of Credit; it being understood that, in the
absence of an Event of Default or Unmatured Event of Default,
the amount of collateral maintained in such cash collateral
account at any time and from time to time need not be greater
than the amount by which the outstanding unsecured Indebtedness
of the Company, including the Advances and the Letter of Credit
Obligations (whether or not said Advances and/or Letter of
Credit Obligations are secured) exceeds the Borrowing Base. Any
amounts remaining in any cash collateral account established
pursuant hereto following payment in full of all such
liabilities, which are not (as determined by Continental) (to be
applied to reimburse the Banks for amounts actually paid by
Continental in respect of a Letter of Credit shall be returned
to the Company (after deduction of Continental's expenses).
Notwithstanding anything to the contrary contained in the
foregoing, in the case of a voluntary termination of the credit
facility by the Company in accordance with the provisions
hereof, the Company may provide to Continental, in lieu of cash
collateral, an additional letter or letters of credit in form
and substance, and issued by a financial institution,
satisfactory to Continental and naming Continental as
beneficiary thereunder which shall support any liabilities of
the Company hereunder with respect to any then outstanding
Letter of Credit Obligations."
1.6 Amendment of Section 8. Section 8 of the Agreement is
hereby amended by adding thereto the following Section 8.23:
"8.23 Liens on Accounts Receivable. Not, and not
permit any Subsidiary to, create or permit to exist any Lien
with respect to Accounts Receivable Collateral whether now
existing or hereafter arising except Liens in favor of the Banks
to secure the Company's liabilities hereunder and under the
Notes."
1.7 Amendment of Section 9. Section 9 of the Agreement is
hereby amended by adding thereto the following Section 9.3:
"9.3 Accounts Receivable. (a) The Company agrees
that at any time after the occurrence of an event which but for
the passage of time or the giving of notice or both would
constitute an Event of Default either Bank may require that all
the Company's liabilities and obligations hereunder and under
the Notes be secured by a security interest in and a lien upon
all Accounts Receivable Collateral, whether now existing or
hereafter arising. Within thirty days after such notice, the
Company will execute and deliver to the Collateral Agent the
Security Agreement - Accounts Receivable, together with such
financing statements or other documents as either Bank may
reasonably request and such other financing statements or other
documents as may be advised by counsel for the Collateral Agent
as being necessary or desirable to perfect the Banks' security
interest in the Accounts Receivable Collateral.
(b) The Company will, upon twenty-four hours' notice
from either of the Banks, permit such Bank by or through any of
its respective officers, attorneys, accountants or other
authorized agents to inspect and make extracts from the
Company's books and records relating to the Accounts Receivable
Collateral, regardless of whether such books and records are in
the possession of the Company or otherwise. Notwithstanding the
provisions of the foregoing sentence, the Company will not,
without the prior written consent of the Banks, relinquish
possession of its books and records relating to the Accounts
Receivable Collateral."
1.8 Amendment of Section 12. Section 12 of the Agreement
is hereby deleted in its entirety and the following is hereby
substituted therefor:
12. CONDITION SUBSEQUENT. Upon the request of any of the
Banks under Section 9 of this Agreement, the Company will
deliver to the Banks:
12.1 Security Agreement. Its Security Agreement or
its Security Agreement - Accounts Receivable, as the case may
be, together with such financing statements, Mortgages and other
documents as the Banks or their counsel may request.
12.2 Resolutions. A copy, duly certified as of the
date of the Security Agreement or Security Agreement - Accounts
Receivable, as the case may be, by the Company's secretary or
assistant secretary of (a) the resolutions of the Company's
Board of Directors authorizing the execution, delivery and
performance of such Security Agreement, (b) all documents
evidencing other necessary corporate action; and (c) all
approvals or consents, if any, with respect to such Security
Agreement.
12.3 Incumbency. A certificate of the Company's
secretary or assistant secretary dated the date of the Security
Agreement or Security Agreement - Accounts Receivable, as the
case may be, certifying the names of the Company's officers
authorized to sign such Security Agreement an all other
documents or certificates to be delivered with respect thereto,
together with the true signatures of such officers.
12.4 Opinion. An opinion of John C. Peet, Jr.,
counsel to the Company, addressed to the Collateral Agent and
the Banks and dated the date of the Security Agreement or
Security Agreement - Accounts Receivable, as the case may be, in
substantially the form of (i) in the case of the Security
Agreement, Exhibit L hereto, and (ii) in the case if the
Security Agreement - Accounts Receivable, Exhibit O hereto.
1.9 Amendment of Signature Page. The signature page of the
Agreement is hereby amended by deleting therefrom the figure
"$15,000,000" adjacent to the signature of Continental thereon and
substituting therefor the figure "$18,000,000"; and (ii) by deleting
therefrom the figure "$10,000,000" adjacent to the signature of
Fidelity thereon and substituting therefor the figure "$12,000,000".
1.10 Amendment of Exhibit A. Exhibit A to the Agreement
is hereby deleted in its entirety and Exhibit A attached hereto is
hereby substituted therefor.
1.11 Amendment of Exhibit C. Exhibit C to the Agreement
is hereby deleted in its entirety and Exhibit C attached hereto is
hereby substituted therefor. From and after the date of this
Amendment, all references in the Agreement to Exhibit C and to the
"Notes" shall be deemed to be a reference to Exhibit C hereto and to
the Company's Notes in the form of Exhibit C hereto (hereinafter
referred to as the "First Amended and Restated Notes").
1.12 Addition of Exhibits N and O. Exhibit N and
Exhibit O attached hereto are hereby added to the Agreement,
respectively, as Exhibit N and Exhibit O thereto.
SECTION 2 REPRESENTATIONS AND WARRANTIES. In order to induce
the Bank to enter into this Amendment, the Company hereby
represents and warrants to the Bank as of the date hereof as
follows:
2.1 The representations and warranties contained in Section
7 of the Agreement are true and correct on, and as though made as of
the date hereof. No Event of Default or Unmatured Event of Default
has occurred and is continuing as of the date of hereof.
2.2 The execution and delivery by the Company of this
Amendment does not violate any provisions of the Certificate of
Incorporation or ByLaws of the Company, or any indenture, contract
or agreement to which the Company or any of its subsidiaries is a
party.
2.3 The execution and delivery by the Company of this
Amendment have been duly authorized by all necessary corporate
action.
2.4 This Amendment constitutes, and the First Amended and
Restated Notes when executed and delivered in connection herewith
will constitute, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective
terms, except to the extent such enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting the
enforceability of creditors' rights generally and general equitable
principles; and this Amendment does not constitute, to the best of
the Company's knowledge, a violation of the provisions of any
statute, regulation or judgment or decree of any court or
governmental instrumentality.
SECTION 3 CONDITIONS PRECEDENT. The amendments set forth in
Section 1 of this Amendment shall be effective upon the Bank's
receipt of all of the following, each duly executed on behalf of the
Company, in form and substance satisfactory to the Banks:
3.1 Notes. The First Amended and Restated Notes of the
Company;
3.2 Resolutions. A copy, certified by the Secretary or
Assistant Secretary of the Company, of resolutions of the Board of
Directors of the Company authorizing the execution and delivery of
this Amendment and borrowings under the Agreement as amended hereby;
3.3 Incumbency and Signatures. A certificate of the
Secretary or Assistant Secretary of the Company, certifying the
names of the officer or officers of the Company authorized to
execute and deliver this Amendment and the First Amended and
Restated Notes on behalf of the Company, together with a sample of
the true signature of each such officer;
3.4 Opinion of Counsel. The opinion of counsel to the
Company, in the form of Exhibit B hereto; and
3.5 Other. Such other documents as the Banks may
reasonably request.
SECTION 4 GENERAL.
4.1 Ratification. The Agreement as amended by this
Amendment shall remain in full force and effect and in hereby
ratified, approved and confirmed in all respects. From and after
the date hereof, references in the Agreement and the documents and
instruments relating thereto shall refer to the Agreement as hereby
amended.
4.2 Counterparts. This Amendment may be executed in any
number of counterparts and each such counterpart shall be deemed to
be an original, but all such counterparts shall together constitute
but one and the same Amendment.
4.3 Governing Law. This Amendment shall be construed in
accordance with, and governed by, the internal laws of the State of
Illinois.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective duly authorized
officers as of the day and year first above written.
MATLACK, INC.
/s/ G. J. Trippitelli
Name: G. J. Trippitelli
Title: President
CONTINENTAL BANK N.A.
/s/ Edward F. Millet
Name: Edward F. Millet
Title: Vice President
FIDELITY BANK, NATIONAL ASSOCIATION
/s/ Grainne M. Pergolini
Name: Grainne M. Pergolini
Title: Vice President
SECOND AMENDMENT TO EQUIPMENT FINANCING AGREEMENT
THIS SECOND AMENDMENT TO EQUIPMENT FINANCING AGREEMENT,
dated as of June 30, 1994 (this "Amendment"), amends the
Equipment Financing Agreement, dated as of August 1, 1988, as
amended by the First Amendment to Equipment Financing Agreement
dated as of April 8, 1990, (as so previously amended, the
"Agreement"), among Matlack, Inc., a Pennsylvania corporation
(the "Company"), Continental Bank (formerly known as
Continental Bank N.A.) ("Continental"), First Fidelity Bank,
N.A. (together with Continental, the "Banks") and Continental
as collateral agent for the Banks. Terms defined in the
Agreement are, unless otherwise defined herein or the context
otherwise requires, used herein as defined therein.
WHEREAS, the parties hereto have entered into the
Agreement, which provides for the Banks to extend certain
credit facilities to the Company from time to time; and
WHEREAS, the parties hereto desire to amend the Agreement
in certain respects as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), the parties
hereto agree as follows:
SECTION 1 AMENDMENTS. Effective as of June 30, 1994, the
Agreement shall be amended in accordance with Sections 1.1
through 1.13 below.
SECTION 1.1 Definitions. Section 1.1 of the Agreement is
hereby amended by inserting the following definitions in proper
alphabetical order:
"Applicable Margin" means the rate per annum set forth
below at such time as the Company's Fixed Coverage Ratio
calculated as at the end of any fiscal quarter for the four
fiscal quarters then ending is within one of the ranges
described below:
Fixed Coverage Charge Ratio Applicable Margin
Greater than or equal to 1.75 to 1.00
1.25%
Greater than or equal to 1.60 to 1.00
1.50%
but less than 1.75 to 1.00
Greater than or equal to 1.45 to 1.00
1.75%
but less than 1.60 to 1.00
Greater than or equal to 1.30 to 1.00
2.00%
but less than 1.45 to 1.00
Greater than or equal to 1.15 to 1.00
2.25%
but less than 1.30 to 1.00
Less than 1.15 to 1.00 2.50%
The Applicable Margin shall be determined by reference to
the financial statements delivered pursuant to Section 8.1 (c)
and (b) and any change shall be effective as of the first day
of the second month after the end of any fiscal quarter.
"Eurodollar Rate" is defined in Section 4.1(c).
"Eurodollar Rate (Reserve Adjusted)" is defined in Section
4.1(c).
"Eurodollar Rate Advance" means an Advance which bears
interest at all times during an Interest Period applicable to
such Advance, at a fixed rate of interest determined by
reference to the Eurodollar Rate (Reserve Adjusted).
"Eurodollar Office" means relative to any Bank, the office
of such Bank as designated from time to time by notice from
such Bank to the Company whether or not outside the United
States, which shall be making or maintaining Eurodollar Rate
Advances of such Bank hereunder.
"Eurocurrency Reserve Percentage" is defined in Section
4.1(c).
"Fixed Charge Coverage Ratio" means for the period of four
fiscal quarters then ending, the ratio of (i) the total of (a)
net income plus (b) interest expense plus (c) rental and lease
expenses plus (d) income tax expense plus (e) depreciation
expense plus (f) amortization to (ii) (a) interest expenses
plus (b) $3,000,000 plus (c) current maturities of long term
debt as of the end of such period plus (d) rental and lease
expense plus (e) 20% of average outstanding amounts of the
Advances for the fiscal quarter then ending.
SECTION 1.2 The definitions in Section 1.1 of the
Agreement are hereby amended and restated to read in their
entirety as follows:
"Banking Day" means (i) any day on which banks are open for
business in Chicago, Illinois and Philadelphia, Pennsylvania
and (ii) with respect to Eurodollar Rate Advances, any day on
which dealings are carried on in the interbank eurodollar
market.
"Interest Period" means with respect to any Quoted Rate
Advance the period of 30, 60, or 90 days, or with respect to
any Eurodollar Rate Advance the period beginning on (and
including) the date on which such Eurodollar Rate Advance is
made or continued as or converted into, a Eurodollar Rate
Advance and ending on (but excluding) the day one or two weeks,
or one, two, or three months thereafter (or, with respect to a
one, two or three month Interest Period, if such month has no
numerically corresponding day, on the last Banking Day of such
month or if such corresponding day is not a Banking Day on the
next Banking Day unless such next Banking Day is in another
calendar month, then on the preceding Banking Day), in each
case as selected by the Company; provided that no Quoted Rate
Advance or Eurodollar Rate Advance shall have an interest
period ending after a date on which a principal payment is due
unless there are Reference Advances or other Quoted Rate
Advances or Eurodollar Rate Advances with Interest Periods
ending prior to such Payment Date in a sufficient amount to
permit such payment without breaking an Interest Period; and
provided further, that no more than five Interest Periods shall
be in effect at any time.
SECTION 1.3 The definition of "Payment Date" in the
Agreement is hereby amended by inserting after the words
"Quoted Rate Advance" the words "or any Eurodollar Rate
Advance".
SECTION 1.4 Amendment to Section 2.2. Section 2.2 of the
Agreement is hereby amended and restated to read in its
entirety as follows:
Borrowing Procedures. Each Advance shall be made pro rata
by the Banks upon telephonic notice by 10:00 a.m., Chicago time
on the date of the proposed Advance in the case of a Reference
Advance or a Quoted Rate Advance, and on not less than three
and not more than five Banking Days, in the case of a
Eurodollar Rate Advance (promptly confirmed in writing) by the
Company to each Bank. Each notice shall specify (i) the
borrowing date, which day shall be a Banking Day and (ii) the
amount and type of Advance and (iii) if such Advance is to be a
Quoted Rate Advance or a Eurodollar Rate Advance, the initial
Interest Period for such Advance. In the case of a Quoted Rate
Advance, each Bank shall determine its own Quoted Rate with
respect thereto. The Banks will pay to the Company the amount
of the Advance on the date designated in the notice of
borrowing upon receipt of the documents required under Sections
10 and 11 with respect to such Advance. Each Quoted Rate
Advance or Reference Rate Advance payment of principal with
respect thereto shall be in a minimum aggregate amount of
$100,000 or an integral multiple thereof. Each Eurodollar Rate
Advance and payment of principal with respect thereto shall be
in a minimum aggregate amount of $500,000.
SECTION 1.5 Amendment to Section 2.3. Section 2.3 of the
Agreement is hereby amended and restated to read in its
entirety as follows:
Continuation and/or Conversion of Advances. The Company
may elect (i) to continue any Quoted Rate Advance or any
Eurodollar Rate Advance from the current Interest Period of
such Advance into a subsequent Interest Period to begin on the
last day of such current Interest Period; (ii) to convert any
outstanding Quoted Rate Advance into a Eurodollar Rate Advance;
(iii) to convert any outstanding Eurodollar Rate Advance into a
Quoted Rate Advance; or (iv) to convert any outstanding
Reference Advance into a Quoted Rate Advance or into a
Eurodollar Rate Advance, giving telephonic notice by 10:00 a.m.
(promptly confirmed in writing) to the Banks of such
continuation or conversion, specifying the date, amount and
the Interest Period, if applicable. In the case of a
conversion into or a continuation of a Eurodollar Rate Advance,
the Company must give notice of such continuation or conversion
on not less than three, not more than five, Banking Days. In
the case of a requested continuation of, or conversion to, a
Quoted Rate Advance, each Bank shall determine its own Quoted
Rate with respect thereto. Absent notice of continuation or
conversion, each Quoted Rate Advance or Eurodollar Rate Advance
shall automatically convert into a Reference Advance on the
last day of the current Interest Period for such Advance,
unless paid in full on such last day. No Advance shall be
converted into a Quoted Rate Advance or into a Eurodollar Rate
Advance and no Quoted Rate Advance or Eurodollar Rate Advance
shall be continued less than thirty days before the Termination
Date or after a notice of termination pursuant to Section 14 or
at any time that an Event of Default or an Unmatured Event of
Default shall exist.
SECTION 1.6 Amendment to Section 4.1. Section 4.1 of the
Agreement is hereby amended by inserting the following new
Section 4.1(c) after Section 4.1(b) and before Section 4.1(c)
which is hereby renumbered to become Section 4.1(d):
(c) Eurodollar Rate Advances. The unpaid principal of the
Eurodollar Rate Advances shall bear interest, during each
Interest Period applicable thereto, at a rate per annum
equal to the sum of the Eurodollar Rate (Reserve Adjusted)
for such Interest Period plus the Applicable Margin in
effect for such Interest Period. Interest on Eurodollar
Rate Advances prior to maturity shall be payable on each
Payment Date.
The "Eurodollar Rate (Reserve Adjusted)" means, relative to
any Eurodollar Advance to be made, continued or maintained as,
or converted into, a Eurodollar Rate Advance for any Interest
Period, a rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) determined pursuant to the following
formula:
Eurodollar Rate = Eurodollar Rate
(Reserve Adjusted) 1.00 - Eurocurrency Reserve
Percentage
"Eurodollar Rate" means, relative to any Interest Period
for Eurodollar Rate Advances, the rate of interest equal to the
average (rounded upwards, if necessary, to the nearest 1/16 of
1%) of the rates per annum at which U.S. Dollar deposits in
immediately available funds are offered to Continental's
Eurodollar Office in the interbank market as at or about 10:00
a.m. Chicago time two Banking Days prior to the beginning of
such Interest Period for delivery on the first day of such
Interest Period, and in an amount approximately equal to the
amount of Continental's Eurodollar Rate Advance and for a
period approximately equal to such Interest Period.
"Eurocurrency Reserve Percentage" means, relative to any
Interest Period for Eurodollar Rate Advances, the reserve
percentage (expressed as a decimal) equal to the daily average
during such Interest Period of the percentages in effect on
each day of such Interest Period, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor), for
determining reserve requirements applicable to "Eurocurrency
Liabilities", as currently defined in Regulation D of the Board
of Directors of the Federal Reserve System ("Regulation D").
For purposes of this definition, any Eurodollar Rate Advances
hereunder shall be deemed to be "Eurocurrency Liabilities" as
defined in Regulation D.
SECTION 1.7 Amendment to Section 4.3. Section 4.3 of the
Agreement is hereby amended by inserting after the words
"Quoted Rate Advance" the words "and each Eurodollar Rate
Advance".
SECTION 1.8 Amendment to Section 4. Section 4 of the
Agreement is hereby amended by inserting immediately following
Section 4.3 of the Agreement the following Section 4.4, 4.5,
4.6, and 4.7:
Section 4.4 Eurodollar Rate Lending Unlawful. If any
Bank shall determine (which determination shall, upon notice
thereof to the Company, be conclusive and binding on the
Company) that the introduction of or any change in or in the
interpretation of any law makes it unlawful, or any central
bank or other governmental authority asserts that it is
unlawful, for such Bank to make, continue or maintain any
Advance as, or to convert any Advance into a Eurodollar Rate
Advance, the obligations of all Banks to make, continue,
maintain or convert into any such Advances shall, upon such
determination, forthwith be suspended until such Bank shall
notify the Company that the circumstances causing such
suspension no longer exist, and all Eurodollar Rate Advances
shall automatically convert into Reference Advances at the end
of the then current Interest Periods with respect thereto or
sooner, if required by such law or assertion.
Section 4.5 Deposits Unavailable. If either Bank
shall have determined that by reason of circumstances affecting
its relevant market, adequate means do not exist for
ascertaining the interest rate applicable hereunder to
Eurodollar Rate Advances, then upon notice from the said Bank
to the Company and the Banks, the obligations of all Banks to
make or continue any Advances as, or to convert any Advances
into, Eurodollar Advances shall forthwith be suspended until
said Bank shall notify the Company and the Banks that the
circumstances causing such suspension no longer exist.
Section 4.6 Increased Eurodollar Rate Advances Costs,
etc. The Company agrees to reimburse each Bank if as a result
of any change in any law, rule, regulation, treaty or directive
or in the administration or interpretation thereof, or
compliance by any Bank with any request or directive (whether
or not having force of law) with respect to any such change
from any court, central bank, governmental authority, agency or
instrumentality, or comparable agency there is any increase in
the cost to such Bank of, or any reduction in the amount of any
sum receivable by such Bank in respect of, making, continuing
or maintaining (or of its obligation to make, continue or
maintain) any Advances as, or of converting (or of its
obligation to convert) any Advances into, a Eurodollar Rate
Advances. Such Bank shall promptly notify the Company in
writing of the occurrence of any such event, such notice to
state, in reasonable detail, the reasons therefor and the
additional amount required fully to compensate such Bank for
such increased cost or reduced amount. Such additional amounts
shall be payable by the Company directly to such Bank within
five days of its receipt of such notice, and such notice shall
be rebuttably presumptively correct.
Section 4.7 Funding Losses. In the event any Bank
shall incur any loss or expense (including any loss or expense
incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Bank to make, continue
or maintain any portion of the principal amount of any Advance
as, or to convert any portion of the principal amount of any
Advance into, a Eurodollar Rate Advance) as a result of:
(a) any conversion or repayment or prepayment of the
principal amount of any Eurodollar Rate Advances on a date
other than the schedules last day of the Interest Period
applicable thereto;
(b) Any Advances not being made as Eurodollar Rate
Advances in accordance with Section 2.2; or
(c) any Advances not being continued as, or converted
into Eurodollar Rate Advances in accordance with Section 2.3,
then, upon the written notice of such Bank to the Company (with
a copy to the Banks), the Company shall, within five days, of
its receipt thereof, pay directly to such Bank such amount as
will (in the reasonable determination of such Bank) reimburse
such Bank for such loss or expense. Such written notice (which
shall include calculations in reasonable detail) shall, in the
absence of manifest error, be conclusive and binding on the
Company.
SECTION 1.9 Amendment to Section 5.2. Section 5.2 of the
Agreement is hereby amended by inserting after the words
"Quoted Rate Advance" the words "or a Eurodollar Rate Advance".
SECTION 1.10 Amendment to Section 8. Section 8 of the
Agreement is hereby amended by adding the following new Section
8.24 immediately following Section 8.23.
8.24 Fixed Charge Coverage Ratio. Not permit ont
he last day of each fiscal quarter the Fixed
Charge Coverage Ratio for the Company and its
Subsidiaries on a consolidated basis to be
less than 1.0 to 1.0.
SECTION 1.11 Amendment to Section 8.6. Section 8.6 of the
Agreement is hereby amended by deleting the amount
"$35,000,000" and replacing it with "$40,000,000".
SECTION 1.12 Amendment to Section 8.10. Section 8.10 of
the Agreement is hereby amended by deleting the amount
"$1,000,000" and replacing it with "$11,000,000" and by
deleting the amount "$10,000,000" and replacing it with
"$45,000,000" and by deleting the period at the end of such
paragraph and inserting thereafter the following:
; provided however, that if by May 30, 1995, the
Company has not exercised lease options to lease 300 additional
tractors, the above mentioned amounts shall be reduced to
$8,500,000 and $35,000,000 respectively, provided further, that
if said amounts have been reduced pursuant to the foregoing
proviso and thereafter the Company shall lease additional
tractors, those amounts may be increased at the request of the
Company and the consent of the Banks (which consent shall not
be unreasonably withheld) to reflect said leases, but in no
event shall such amounts be increased above $11,000,000 and
$45,000,000 respectively; and provided further, that if the
Company exercises its option to cancel leases with respect to
units presently being leased by it, the above mentioned amounts
shall be reduced by the amounts of payments applicable to said
units.
Section 1.13 Amendment to Exhibit C. Exhibit C to
the Agreement is hereby amended to state in its entirely as set
forth in Exhibit C hereto.
SECTION 2 CONDITIONS PRECEDENT. This Amendment shall
become effective when each of the conditions precedent set
forth in this Section 2 shall have been satisfied, and notice
thereof shall have been given by the Banks to the Company.
SECTION 2.1 Receipt of Documents. The Banks shall have
received all of the following documents duly executed, dated
the date hereof or such other date as shall be acceptable to
the Banks, and in form and substance satisfactory to the Banks:
(a) Amendment. This Amendment, duly executed by the
Company and the Banks.
(b) Notes. The Second Amended and Restated Notes of
the Company in substantially the form of Exhibit C hereto.
(c) Consents. Copies, certified by the secretary or
an assistant secretary of the Company, of all documents
evidencing any necessary corporate action, consents and
governmental approvals (if any) with respect to this
Amendment and the other documents described herein.
(d) Secretary's Certificate. A certificate of the
secretary or an assistant secretary of the Company, as to
(i) resolutions of the Board of Directors of the Company
then in full force and effect authorizing the execution,
delivery and performance of this Amendment and each other
document described herein, and (ii) the incumbency and
signatures of those offices of the Company authorized to
act with respect to this Amendment and each other document
described herein.
SECTION 2.2 Compliance with Warranties, No Default, etc.
Both before and after giving effect to the effectiveness of
this Amendment, the following statements by the Company shall
be true and correct (and the Company, by its execution of this
Amendment, hereby represents and warrants unto each Bank that
such statements are true and correct as at such times):
(a) the warranties set forth in Section 7 of the
Agreement shall be true and correct with the same effect as
if then made (unless stated to relate solely to an earlier
date, in which case such representations and warranties
shall be true and correct as of such earlier date); and
(b) no Default shall have then occurred and be
continuing, and neither the Company, any other Obligor, nor
any of its Subsidiaries shall be in material violation of
any law or governmental regulation or court order or
decree.
SECTION 3 WARRANTIES. To induce the Banks to enter into
this Amendment, the Company hereby reaffirms, as of this date
hereof, its warranties contained in Section 7 of the Agreement,
and the Company additionally represents and warrants unto each
Bank as follows:
SECTION 3.1 Due Authorization, Non-Contravention, etc.
The execution, delivery and performance by the Company of this
Amendment are within the Company's corporate powers, have been
duly authorized by all necessary corporate action, and do not
(a) contravene the Company's organizational documents;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on
or affecting the Company; or
(c) result in, or require the creation or imposition
of, any Lien on any of the Company's properties.
SECTION 3.2 Government Approval, Regulation, etc. No
authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body
or other Person is required for the due execution, delivery or
performance by the Company of this Amendment.
SECTION 3.3 Validity, etc. This Amendment constitutes the
legal, valid and binding obligations of the Company enforceable
in accordance with its terms.
SECTION 4 MISCELLANEOUS.
SECTION 4.1 Continuing Effectiveness, etc. This Amendment
shall be deemed to be an amendment to the Agreement, and the
Agreement, as amended hereby, shall remain in full force and
effect and is hereby ratified, approved and confirmed in each
and every respect. After the effectiveness of this Amendment
in accordance with its terms, all references to the Agreement
in any document, instrument, agreement or writing shall be
deemed to refer to the Agreement as amended hereby.
SECTION 4.2 Severability. Any provision of this Amendment
which is prohibited or unenforceable in any jurisdiction shall,
as to such provision and such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Amendment or
affecting the validity or enforceability of such provision in
any other jurisdiction.
SECTION 4.3 Headings. The various headings of this
Amendment are inserted for convenience only and shall not
affect the meaning or interpretation of this Amendment or any
provisions hereof.
SECTION 4.4 Execution in Counterparts. This Amendment may
be executed by the parties hereto in several counterparts, each
of which shall be deemed to be an original and all of which
shall constitute together but one and the same agreement.
SECTION 4.5 Governing Law. THIS AMENDMENT SHALL BE DEEMED
TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF ILLINOIS.
SECTION 4.6 Successors and Assigns. This Amendment shall
be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
MATLACK, INC.
By /s/ G. J. Trippitelli
Title: President
CONTINENTAL BANK
By /s/ Thomas H. Pearson
Title: Vice President
FIRST FIDELITY BANK, N.A.
By /s/ Grainne M. Pergolini
Title: Vice President
