_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________________
FORM 10-K
(Mark One)
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1997 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. / /
The aggregate market value of the voting stock held by non-
affiliates of the registrant was $67,947,000 as of October 31, 1997.
The number of shares of registrant's common stock outstanding as
of October 31, 1997 was 8,785,762.
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 29, 1998 III
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 that provides transportation of bulk commodities
in tank trailers and tank containers to the nation's leading chemical
and dry bulk shippers. Concomitantly, the Company provides intermodal
transportation services, trailer leasing, international bulk
transportation, tank, intermediate bulk and ISO container cleaning
services, logistics management services and dedicated contract carriage
services to the chemical industry. The Company operates approximately
1,100 tractors and 2,800 trailers out of approximately 100 facilities
located in 37 states and four Canadian provinces. During fiscal 1997,
the Company passed its seventh quality audit by American Bureau of
Shipping Quality Evaluations, Inc. with all locations and logistics
services being ISO 9002 certified. There have been no significant
changes in the business operations of the Company since September 30,
1996.
The Company, through its operating subsidiaries, provides the
transportation and logistics services described below. Many of the
adjunct services provided complement the Company's bulk transportation
services. Matlack, Inc. ("Matlack"), the Company's major operating
subsidiary, is one of the nation's largest bulk trucking companies
providing liquid and dry bulk transportation primarily to the chemical
industry throughout North America.
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 37 states.
During fiscal years 1994 and 1995, the Company replaced a
significant portion of its tractor fleet by acquiring, either through
lease or purchase, 900 Mack 1995 conventional tractors. All of these
tractors were equipped with anti-lock brakes and "electronic engines"
which enabled the feeding of real-time operating information via
satellite communications. This fleet replacement program lowered fuel,
maintenance and insurance expenses while providing the Company with
additional service capability and flexibility. In fiscal 1996, the
Company balanced the size of its tractor fleet to more closely match
the then current market conditions. During fiscal 1997, the Company
acquired by lease 133 tractors. As a result of the fleet replacement
program and the acquisition of additional power units, as described
above, the average age of the Company's power fleet is approximately
2.5 years.
Capital expenditures made by the Company for the acquisition of new
and used trailers during fiscal 1997, 1996 and 1995 were $9,952,000
(366 units), $2,767,000 (118 units) and $9,349,000 (217 units),
respectively. The number of trailers available for use in the
Company's operations at the end of fiscal years 1997, 1996 and 1995
were 2,800, 2,600 and 2,700, respectively. A tank trailer typical of
those used by the Company in its operations measures 43 feet in length,
8.5 feet in width and 12 feet in height. Tank holding capacity
normally ranges between 5,000 and 7,000 gallons with a payload capacity
of up to 55,000 pounds. The Company also utilizes vans in its
operations. Typical specifications for a van trailer are 48 feet in
length, 8.5 feet in width and 13 feet in height. The Company's
trailers have an average age of 10.3 years and a useful life expectancy
of 20 years.
The Company believes that it maintains its fleet of tractors and
trailers in above average condition for the industry. Maintenance of
revenue equipment is performed by 76 mechanics employed by the Company.
In addition, the Company utilizes outside repair facilities for certain
of its tank repairs. In fiscal 1997, the Company expended
approximately $7,700,000 for fleet maintenance. This amount included
mechanics compensation and the costs associated with both internal and
external repairs of revenue equipment.
Matlack is subject to regulation by the U.S. Department of
Transportation 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 that the holder is authorized to
transport and the points of origin and destination for carriers of such
commodities. In Canada, the Company 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 federal
regulations 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% of the Company's consolidated revenues.
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 (through Brite-Sol Services, Inc.)
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 Trimac Limited, MTL Inc. and
Chemical Leaman Tank Lines, 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 some 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.
The Company also provides truck transportation services through
Safeway Chemical Transportation, Inc. This subsidiary provides
truckload van services utilizing specialized trailers to transport
packaged chemicals and waste. In addition, through Matlack Leasing
Corporation, the Company leases tank trailers, tank containers and
other specialized equipment primarily to the chemical industry and its
suppliers. This subsidiary may also provide customers with equipment
design assistance.
Through Matlack Bulk Intermodal Services, Inc., the Company enables
customer product delivery by combining the economy of bulk rail and the
flexibility of bulk truck transportation. This service is provided
through a nationwide system of 30 rail transfer facilities.
Brite-Sol Services, Inc. operates 36 facilities nationwide that
provide full-service cleaning, both internal and external, of tank
trucks, vans, tank containers, intermediate bulk containers, ISO tank
containers and other containers and vehicles. This subsidiary also
provides hose and pump cleaning and tank and container maintenance and
repairs. The Company's tank cleaning facilities are ISO 9002 certified
and operate in compliance with all applicable federal and state EPA and
OSHA requirements. Cleaning procedures utilize systematized work
processes to assure continued compliance with all environmental
regulations. Customized cleaning programs are frequently established
to meet specific customer requirements. After cleaning, valves are
vacuum tested to reduce chances of leaking and related possible product
release. Waste water is pre-treated to ensure environmental safety and
to reduce levels of waste. Container cleaning procedures also ensure
the proper handling and disposal of heels and effluents. Further, the
Company's cleaning network is operated by a team of experienced tank
cleaning professionals and is supported by centrally located technical
staff to ensure maintenance of the highest level of quality required by
ISO 9002 standards.
The Company also provides logistics management consulting services
through CPI Logistics, Inc. In addition, the Company markets dedicated
fleet operation services through Specialized Dedicated Fleets, Inc. and
through Matlack International, Inc. the Company provides international
land and sea transportation services primarily utilizing tank
containers.
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") or a comparable state agency indicating that
it has been named at 21 sites as a potentially responsible party
("PRP") with respect to the cleanup of hazardous wastes at such waste
disposal sites. At a majority of these sites, the Company has resolved
its liability by settling with one or more of the governmental agencies
or PRP groups involved. As is typical in such settlements, certain
claims, such as those relating to natural resource damages or site
cleanup cost overruns, could still be made in later years.
The Company maintains sudden and accidental pollution insurance
coverage providing protection against claims which may arise from
accidents involving spills or contamination. In addition, the Company
has purchased an Environmental Impairment Liability insurance policy
that provides coverage and protection for non-sudden pollution claims.
With regard to public liability and workers' compensation claims,
the Company retains a specific portion of insurable risks. 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.
A total of 1,059 persons were employed by the Company at September
30, 1997. Operating personnel, essentially all of which were covered
under various collective bargaining agreements, included 503 drivers,
76 mechanics and 100 tank cleaners. In addition to the operating
personnel employed by the Company, the services of leased operators are
utilized to supplement driver requirements necessary to meet customer
service needs. The Company's 380 support personnel included
dispatchers and individuals serving in clerical, administrative and
executive capacities. The Company believes that its relationships with
its employees are excellent.
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, cleaning and intermodal service business. Matlack owns or
leases approximately 100 truck terminals in 37 states and five
terminals in four Canadian provinces.
ITEM 3. LEGAL PROCEEDINGS.
There are various ordinary routine claims and legal actions pending
against the Company. With regard to claims relating to hazardous waste
sites at which the Company has been named a PRP, the Company maintains
an Environmental Legal Liability insurance policy that provides
coverage and protection against such claims. 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, 1997 and 1996, the range
of share prices for the Common Stock on the New York Stock Exchange is
as follows:
1997 1996
Fiscal Quarter High Low High Low
First $7 1/2 $6 1/4 $10 1/2 $8 1/4
Second 7 1/4 6 1/8 $ 9 3/4 $7 7/8
Third 8 1/2 5 13/16 $ 9 3/8 $8
Fourth 8 5/8 7 1/4 $ 8 3/8 $7 3/8
No dividends have been paid since the Company became publicly held in
January of 1989.
At September 30, 1997, there were 1,639 holders of record of the Common
Stock.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
FIVE-YEAR SELECTED FINANCIAL DATA
(Dollars in Thousands, Except Per Share Amounts)
<CAPTION>
Year Ended September 30, 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Revenues $231,709 $224,866 $236,257 $217,880 $204,809
Earnings (loss) before
income taxes (benefit) $ 3,698 $ (1,703)(1) $ 11,211 $ 10,516 $ 8,054
Net earnings (loss) $ 1,886 $ (1,477)(1) $ 6,601 $ 6,182 $ 4,414(2)
Earnings (loss) per share $ .21 $ (.17)(1) $ .74 $ .69 $ .50(2)
At September 30,
Total assets $142,262 $128,127 $131,974 $122,526 $105,363
Long-term indebtedness $ 42,778 $ 29,878 $ 32,970 $ 24,800 $ 20,360
Shareholders' equity $ 57,557 $ 55,676 $ 57,532 $ 50,726 $ 44,297
(1) Includes a special charge of $4,000 ($2,432 after tax benefit or $.28 per share).
(2) 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%.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Liquidity and Capital Resources
The Company's operations require periodic investment in
equipment and facilities. Capital expenditures are typically funded by
the cash flows from operations, which were $8.7 million in 1997, $11.2
million in 1996 and $14.6 million in 1995 and, when required, loans
from various financial institutions. The 1997 net capital spending of
$22.7 million, up from $7.6 million in 1996, included expenditures in
September 1997 of $5.5 million for the purchase of certain assets of a
former bulk trucking company and $4.3 million for the purchase of a
lease portfolio of specialty tank trailers. The large increase in
capital spending in the fourth quarter of 1997 increased indebtedness
during the quarter by approximately $8.5 million. Total indebtedness
at September 30, 1997 was $49.6 million compared with $36.1 million at
the end of the previous year. Based on the 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, 1997, the Company had commitments of $1.7
million to purchase transportation equipment. As necessary, 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 $40.0
million to meet equipment financing needs and letter of credit
requirements. The agreement expires on March 31, 1998, but may be
renewed on a year-to-year basis thereafter upon agreement of the
parties thereto. At September 30, 1997, a total of $.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
Fiscal Year 1997 vs. 1996
Revenues for 1997 increased by $6.8 million (3.0%) to $231.7
million from the $224.9 million reported in 1996. For the year, total
revenue miles of the Company's bulk trucking business increased by 6.0%
while the number of loads carried remained essentially flat. Revenues
from the Company's non-bulk trucking operations increased by 12.8%.
Fourth quarter revenue growth represented 83.7% of the total
year's revenue increase. Overall, revenues for the fourth quarter of
1997 increased by $5.7 million to $59.7 million from $54.0 million
reported for the fourth quarter of 1996. The number of loads carried
during the fourth quarter increased by 4.8% compared with the same
quarter last year. This increase resulted from a more favorable
supply/demand balance within the bulk trucking industry. For the
fourth quarter, the Company's overall revenue increase of 10.5%
resulted principally from an increase in volume of 5.0% with the
remainder being attributed to a favorable mix.
Operating expenses increased by $4.1 million (2.2%) reflecting
the increase in revenues. Operating expenses were 83.6% of revenues in
1997 and 84.3% of revenues in 1996. For the fourth quarter of 1997,
operating expenses were 81.1% of revenues compared with 85.1% of
revenues in the fourth quarter of 1996. The percentage improvement for
both the year and the fourth quarter resulted from the increase in
revenues discussed above and the closure of several marginal terminals
in early 1997. Fuel costs increased by $2.0 million during 1997
reflecting the increased level of business and higher fuel prices.
Outside repairs and parts expense increased by $1.5 million reflecting
the higher level of business. Driver and mechanic compensation
increased during the year by $1.2 million. The above noted operating
expense increases and other operating expense increases, which amounted
to $.8 million, were offset by a reduction in insurance expenses of
$1.5 million.
Depreciation expense increased by $1.2 million (10.0%) to $13.1
million in 1997 compared with $11.9 million in 1996. The installation
of the Qualcomm satellite communication systems in the tractors
resulted in increased depreciation of approximately $.7 million.
Completion and start-up of an integrated information system throughout
the Company accounted for the other $.5 million of the depreciation
increase. The acquisition of certain assets in September 1997, as
described above, had no impact upon depreciation during the current
year.
Selling and administrative expenses remained essentially
unchanged between 1997 and 1996. As a percentage of revenue, these
expenses were 7.8% and 8.1% in 1997 and 1996, respectively. The
stabilization of these expenses resulted from cost containment efforts
and the elimination of a regionalized management structure related to
the Company's operations.
The effective income tax rate in 1997 was 49.0%. The rate of
income tax benefit in 1996 was 13.3%. The high effective income tax
rate and the low effective rate of benefit was caused by the impact
that non-deductible expenses had upon the tax computations.
The Company's net earnings for the year were $1.9 million or
$.21 per share compared with a net loss of $1.5 million or a loss of
$.17 per share in 1996. The improvement in net earnings resulted from
the increased level of business particularly in the fourth quarter of
the year. Operating earnings as a percentage of revenues improved to
3.0% in 1997 from 2.3% (exclusive of the special charge of $4.0
million) in 1996.
Fiscal Year 1996 vs. 1995
Revenues for 1996 decreased by $11.4 million (4.8%) to $224.9
million from the $236.3 million reported in 1995. Total revenue miles
decreased by 5.7% in 1996 while the number of loads carried decreased
by 7.0% compared with the prior year. The Company's ancillary service
revenues increased during the current year but were not sufficient to
offset the decline experienced in domestic bulk trucking revenues.
Operating expenses decreased by $3.4 million (1.8%) reflecting
the decrease in revenues and a significant reduction in the Company's
utilization of leased operators. Operating expenses were 84.3% of
revenues in 1996 and 81.7% of revenues in 1995.
During the fourth quarter of 1996, the Company recorded a
special charge of $4.0 million ($2.4 million after tax benefit or $.28
per share). The charge included costs associated with a reduction in
the tractor fleet reflecting the weak business conditions of the bulk
trucking industry, provision for closing certain terminals, the
operation of which was no longer cost-effective and related costs of
$1.4 million. Also included in the charge was $1.9 million related to
reserves for medical, disability, workers' compensation and other
insurance claims which continue to be evaluated and $.7 million for
third party claims.
Depreciation expense increased by $1.8 million (17.8%)
principally due to the increase in capital expenditures associated with
the Company's tractor replacement program and several major new
facilities completed in 1995.
Selling and administrative expenses decreased by $.5 million
(2.7%) reflecting the lower level of business. These expenses were
8.1% and 7.9% of revenue in 1996 and 1995, respectively.
Interest expense decreased by $.3 million (9.4%) due to a
reduction of borrowings and lower interest rates during 1996.
The rate of income tax benefit in 1996 was 13.3%. The low
effective rate of benefit was caused by the impact that non-deductible
expenses had upon the tax computations. The effective income tax rate
in 1995 was 41.1%.
The Company's net loss for the year was $1.5 million or $.17
per share compared with net earnings of $6.6 million or $.74 per share
in 1995. Exclusive of the special charge, the Company reported net
earnings of $1.0 million or $.11 per share.
Impact of Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings Per Share." This statement, which is effective in
fiscal 1998, simplifies the standards for computing earnings per share
("EPS") by replacing the presentation of primary EPS with a
presentation of basic EPS. The Company has determined that SFAS 128
will not have a material effect on its financial statements.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income." This statement requires that comprehensive
income be reported in a financial statement that is displayed with the
same prominence as other financial statements. The adoption of this
standard on October 1, 1998, will not impact results of operations or
financial condition.
Forward-Looking Statements
The Company may make forward-looking statements relating to
anticipated financial performance, business prospects, acquisitions or
divestitures, new products, market forces, commitments, and other
matters. The Private Securities Litigation Reform Act of 1995 provides
a safe harbor for forward-looking statements. In order to comply with
the terms of the safe harbor, the Company notes that a variety of
factors could cause the Company's actual results and experience to
differ materially from the anticipated results or other expectations
expressed in the Company's forward-looking statements. Forward-looking
statements typically contain words such as "anticipates", "believes",
"estimates", "expects", "forecasts", "predicts", or "projects", or
variations of these words, suggesting that future outcomes are
uncertain.
Various risks and uncertainties may affect the operations,
performance, development and results of the Company's business and
could cause future outcomes to differ materially from those set forth
in forward-looking statements, including the following factors:
general economic conditions, competitive factors and pricing pressures,
shift in market demand, the performance and needs of industries served
by the Company, equipment utilization, management's success in
developing and introducing new services and lines of business,
potential increases in labor costs, potential increases in equipment,
maintenance and fuel costs, uncertainties of litigation, the Company's
ability to finance its future business requirements through outside
sources or internally generated funds, the availability of adequate
levels of insurance, success or timing of completion of ongoing or
anticipated capital or maintenance projects, management retention and
development, changes in Federal, State and local laws and regulations,
including environmental regulations, as well as the risks,
uncertainties and other factors described from time to time in the
Company's SEC filings and reports.
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.
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
NONE.
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 29, 1998.
Executive Officers of the Registrant. As of October 31, 1997,
the Executive Officers of the registrant were:
Name Position Age Term of Office
Patrick J. Bagley Vice President-Finance and 50 7/88 to date
Treasurer and Director
Michael B. Kinnard Vice President-General Counsel 39 6/94 to date
and Secretary
John W. Rollins, Jr. Chairman of the Board 55 7/88 to date
G. J. Trippitelli President and Chief Executive 54 7/88 to date
Officer and Director
Eugene C. Bonacci Senior Vice President and 57 10/96 to date
Chief Operating Officer
Eugene C. Bonacci was employed by the Company in 1982 as Vice
President of Operations. In 1996, he became Senior Vice President and
Chief Operating Officer.
Michael B. Kinnard has been Vice President-General Counsel and
Secretary to the Company since 1994. Mr. Kinnard also serves as Vice
President-General Counsel and Secretary to Rollins Truck Leasing Corp.
and Vice President-General Counsel to Dover Downs Entertainment, Inc.
Prior to 1995, Mr. Kinnard was a partner in the law firm of Baker,
Worthington, Crossley, Stansberry & Woolf (now known as Baker,
Donelson, Bearman & Caldwell).
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 29, 1998.
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 29, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the year ended September 30, 1997, the following
officers and/or directors of the Company were also officers and/or
directors of Laidlaw Environmental Services, Inc. (formerly 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 11.7% of the outstanding shares of Common
Stock of Rollins Truck Leasing Corp. at October 31, 1997.
The description of transactions between the Company and Laidlaw
Environmental Services, Inc. and between the Company and Rollins Truck
Leasing Corp. appears under the caption "Transactions with Related
Parties" of this 1997 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.
(2) Financial Statement Schedules - See accompanying Index to
Consolidated Financial Statements and Schedules.
(3) Exhibits:
(3) (a) 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.
(3) (b) By-Laws of Matlack Systems, Inc. as last amended on
January 30, 1997.
(4) (a) Credit Agreements and Amendments, see Exhibit 10.
(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) Master Credit Agreement dated as of March 27, 1996
between Matlack (DE), Inc. et al, Bank of America
Illinois and First Union National Bank, as filed with
the Company's report on Form 10-K dated November 27,
1996, is incorporated herein by reference.
(b) Credit Agreement dated as of March 27, 1996 between
Matlack (DE), Inc. et al and Bank of America Illinois,
as filed with the Company's report on Form 10-K dated
November 27, 1996, is incorporated herein by
reference.
(c) Credit Agreement dated as of May 22, 1996 between
Matlack (DE), Inc. et al and First Union National
Bank, as filed with the Company's report on Form 10-K
dated November 27, 1996, is incorporated herein by
reference.
(d) First Amendment dated August 9, 1996 to the Master
Credit Agreement between Matlack (DE), Inc. et al,
Bank of America Illinois and First Union National Bank
dated March 27, 1996, as filed with the Company's
report on Form 10-K dated November 27, 1996, is
incorporated herein by reference.
(e) Second Amendment dated February 7, 1997 to the Master
Credit Agreement between Matlack (DE), Inc. et al, and
Bank of America Illinois and First Union National Bank
dated March 27, 1996.
(f) Third Amendment dated September 2, 1997 to the Master
Credit Agreement between Matlack (DE), Inc. et al, and
Bank of America National Trust and Savings Association
successor by merger to Bank America Illinois and First
Union National Bank dated March 27, 1996.
(g) First Amendment dated February 7, 1997 to the Credit
Agreement between Matlack (DE), Inc. et al, and Bank
of America Illinois dated March 27, 1996.
(h) Second Amendment dated September 2, 1997 to the Credit
Agreement between Matlack (DE), Inc. et al, and Bank
of America National Trust and Savings Association
successor by merger to Bank of America Illinois dated
March 27, 1996.
(i) First Amendment dated August 29, 1997 to the Credit
Agreement between Matlack (DE), Inc. et al, and First
Union National Bank dated March 27, 1996.
(j) Second Amendment dated November 14, 1997 to the Credit
Agreement between Matlack (DE), Inc. et al, and First
Union National Bank dated March 27, 1996.
(k) Matlack Systems, Inc. 1988 Stock Option Plan as filed
with Registration Statement No. 33-23524 dated August
5, 1988 is incorporated herein by reference.
(l) Matlack Systems, Inc. 1995 Stock Option Plan, as filed
with the Company's Proxy Statement for the Annual
Meeting of Shareholders held on January 25, 1996, is
incorporated hereby by reference.
(21) Matlack Systems, Inc. Subsidiaries at September 30, 1997.
(27) Matlack Systems, Inc. Financial Data Schedule at September
30, 1997.
(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.
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 2, 1997 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,
Patrick J. Bagley Vice President-Finance December 2, 1997
and Treasurer
Chief Financial Officer
Chief Accounting Officer
/s/ John W. Rollins, Jr. Director, December 2, 1997
John W. Rollins, Jr. Chairman of the Board
/s/ John W. Rollins Director December 2, 1997
John W. Rollins
/s/ Henry B. Tippie Chairman of the Executive December 2, 1997
Henry B. Tippie Committee and Director
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
(1) Consolidated
Independent Auditors' Report on Financial Statements and
Financial Statement Schedules
Consolidated Statement of Earnings for the years ended
September 30, 1997, 1996 and 1995
Consolidated Balance Sheet at September 30, 1997 and 1996
Consolidated Statement of Cash Flows for the years ended
September 30, 1997, 1996 and 1995
Notes to the Consolidated Financial Statements
(2) Financial Statement Schedules
Matlack Systems, Inc. (Parent)
Schedule I - Condensed Financial Information
Balance Sheet at September 30, 1997 and 1996
Statement of Earnings for the years ended
September 30, 1997, 1996 and 1995
Statement of Cash Flows for the years ended
September 30, 1997, 1996 and 1995
Note to the Financial Statements
Matlack Systems, Inc. and Subsidiaries Consolidated
Schedule II - Valuation and Qualifying Accounts for the years
ended September 30, 1997, 1996 and 1995
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.
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, 1997 and
1996, and the results of their operations and their cash flows for each
of the years in the three-year period ended September 30, 1997, 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 28, 1997
CONSOLIDATED STATEMENT OF EARNINGS
Year Ended September 30,
1997 1996 1995
Revenues $231,709,000 $224,866,000 $236,257,000
Expenses
Operating 193,784,000 189,653,000 193,131,000
Special charge - 4,000,000 -
Depreciation 13,106,000 11,917,000 10,079,000
Selling and
administrative 18,155,000 18,197,000 18,708,000
Other income (218,000) (101,000) (110,000)
224,827,000 223,666,000 221,808,000
Operating earnings 6,882,000 1,200,000 14,449,000
Interest expense 3,184,000 2,903,000 3,238,000
Earnings (loss) before
income taxes (benefit) 3,698,000 (1,703,000) 11,211,000
Income taxes (benefit) 1,812,000 (226,000) 4,610,000
Net earnings (loss) $ 1,886,000 $ (1,477,000) $ 6,601,000
Earnings (loss) per share $ .21 $ (.17) $ .74
Common shares and equivalents
outstanding 8,856,000 8,812,000 8,907,000
The Notes to the Consolidated Financial Statements are an integral
part of these statements.
CONSOLIDATED BALANCE SHEET
September 30,
1997 1996
ASSETS
Current assets
Cash $ 2,524,000 $ 3,019,000
Accounts receivable, net of allowance
for doubtful accounts:
1997-$583,000; 1996-$414,000 30,417,000 24,282,000
Inventories 5,895,000 5,439,000
Other current assets 3,036,000 2,907,000
Refundable income taxes - 1,114,000
Deferred income taxes 1,066,000 1,885,000
Total current assets 42,938,000 38,646,000
Property and equipment, net 99,106,000 89,267,000
Other assets 218,000 214,000
Total assets $142,262,000 $128,127,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 8,320,000 $ 10,047,000
Accrued liabilities 9,583,000 10,174,000
Income taxes payable 590,000 -
Current maturities of long-term debt 6,831,000 6,213,000
Total current liabilities 25,324,000 26,434,000
Long-term debt 42,778,000 29,878,000
Insurance reserves 3,176,000 1,716,000
Other liabilities 1,860,000 2,023,000
Deferred income taxes 11,567,000 12,400,000
Commitments and contingencies
(see Notes to the
Consolidated Financial Statements)
Shareholders' equity:
Common stock, $1.00 par value
Outstanding: 1997-8,778,149 shares;
1996-8,762,116 shares 8,778,000 8,762,000
Additional paid-in capital 10,532,000 10,553,000
Retained earnings 38,247,000 36,361,000
Total shareholders' equity 57,557,000 55,676,000
Total liabilities and shareholders'
equity $142,262,000 $128,127,000
The Notes to the Consolidated Financial Statements are an integral
part of these statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended September 30,
1997 1996 1995
Cash flows from operating activities
Net earnings (loss) $ 1,886,000 $(1,477,000) $ 6,601,000
Adjustments to reconcile
net earnings (loss) to
net cash provided by
operating activities:
Special charge - 4,000,000 -
Depreciation and
amortization 13,127,000 11,921,000 10,079,000
Net gain on sale of
equipment (217,000) (102,000) (110,000)
Changes in assets and
liabilities:
Accounts receivable (6,135,000) 406,000 2,697,000
Inventories and other
assets (589,000) 841,000 849,000
Accounts payable and
accrued liabilities (2,318,000) (2,317,000) (6,970,000)
Current and deferred
income taxes 1,690,000 (615,000) 2,174,000
Other, net 1,297,000 (1,424,000) (750,000)
Net cash provided by
operating activities 8,741,000 11,233,000 14,570,000
Cash flows from investing activities
Purchase of property
and equipment (24,024,000) (7,895,000) (28,474,000)
Proceeds from the
sale of equipment 1,275,000 263,000 2,822,000
Net cash used in
investing activities (22,749,000) (7,632,000) (25,652,000)
Cash flows from financing activities
Proceeds of
long-term debt 64,599,000 37,960,000 41,002,000
Repayment of
long-term debt (51,081,000) (41,008,000) (32,319,000)
Exercise of stock options 71,000 46,000 205,000
Common stock acquired and
retired (76,000) (425,000) -
Net cash provided by
(used in) financing
activities 13,513,000 (3,427,000) 8,888,000
Net (decrease) increase
in cash (495,000) 174,000 (2,194,000)
Cash beginning of period 3,019,000 2,845,000 5,039,000
Cash end of period $ 2,524,000 $ 3,019,000 $ 2,845,000
Supplemental information
Interest paid $ 3,242,000 $ 2,861,000 $ 3,233,000
Income taxes paid $ 122,000 $ 389,000 $ 2,436,000
The Notes to the Consolidated Financial Statements are an integral
part of these statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Organization and Accounting Policies
Organization - Matlack Systems, Inc., together with its subsidiaries,
is a specialized logistics and transportation company that provides
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.
Consolidation - The consolidated financial statements include the
accounts of all subsidiaries with appropriate elimination of
intercompany transactions and balances.
Revenue recognition - The Company recognizes revenue when shipments
are delivered.
Earnings per share - Earnings per share are computed assuming the
conversion of all potentially dilutive securities, namely options to
purchase shares of the Company's stock.
Inventories - 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 - Property and equipment are recorded at cost.
Depreciation is provided on a straight-line basis net of salvage or
residual values. Gain or loss on the sale or retirement of property
and equipment is included in other income in the Consolidated Statement
of Earnings. Repairs and maintenance are expensed as incurred.
Improvements that extend the original life of the assets are
capitalized and depreciated over the remaining lives of the assets.
Claims and insurance reserves - 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.
Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair values of financial instruments - The carrying amounts reported
in the balance sheet for current assets and current liabilities
approximate their fair value at September 30, 1997.
Stock-based compensation - The Company adopted the provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation," on October 1, 1996.
SFAS No. 123 defines a fair-value based method of accounting for stock-
based compensation plans, however, it allows the continued use of the
intrinsic value method under Accounting Principles Board Opinion
("APB") No. 25, "Accounting for Stock Issued to Employees." The
Company has elected to continue to use the intrinsic value method.
Impairment of long-lived assets - Periodically, the Company evaluates
whether the remaining useful life of long-lived assets requires
revision and assesses the recoverability of remaining unamortized
balances. Should factors indicate that an asset should be evaluated
for possible impairment, an estimate of the asset's cash flow is
utilized in evaluating fair value. Should an impairment be determined,
the impaired asset's value would be adjusted and a charge to operations
would be recognized. To date, no impairment losses have been
recognized.
Special Charge
During the fourth quarter of 1996, the Company recorded a special
charge of $4,000,000 ($2,432,000 after tax benefit or $.28 per share).
The charge included costs associated with a reduction in the tractor
fleet reflecting the weak business conditions of the bulk trucking
industry, provision for closing certain terminals, the operation of
which was no longer cost-effective, and related costs of $1,350,000.
Also included in the charge was $1,900,000 related to reserves for
medical, disability, workers' compensation and other insurance claims
which continue to be evaluated and $750,000 for third party claims.
Property and Equipment
The Company's property and equipment accounts are as follows:
Useful
September 30, 1997 1996 Lives
Land $ 13,865,000 $ 13,861,000
Transportation equipment 144,619,000 137,434,000 4 to 12 years
Transportation service
facilities 68,838,000 63,830,000 5 to 40 years
Less accumulated depreciation (128,216,000) (125,858,000)
$ 99,106,000 $ 89,267,000
The Company had commitments for the purchase of transportation
equipment of $1,718,000 at September 30, 1997.
Long-Term Debt
Long-term debt is as follows:
September 30,
1997 1996
Revolving credit agreement -
$40,000,000 line $31,800,000 $17,700,000
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 2005 16,455,000 16,170,000
Real estate mortgage obligations, at
interest rates ranging from 6.0% to
8.0%, with land and buildings with a
carrying value of $5,061,000 pledged
as collateral, payable in installments
over various periods to 2001 1,354,000 2,221,000
Less amounts due within one year (6,831,000) (6,213,000)
$42,778,000 $29,878,000
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. Interest rates on
borrowings under the agreement averaged 7.7% at September 30, 1997.
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 March 31, 1998 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 48 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 aggregate amounts of maturities for all indebtedness during the
next five fiscal years are as follows: 1998-$6,831,000; 1999-
$5,998,000; 2000-$1,901,000; 2001-$1,056,000 and 2002-$1,011,000.
Based upon borrowing rates available to the Company for long-term
debt with similar terms and maturities, the carrying amounts
approximate the fair value of such financial instruments.
Accrued Liabilities
Accrued liabilities are as follows:
September 30,
1997 1996
Employee compensation $ 5,128,000 $ 3,722,000
Insurance reserves 1,223,000 2,577,000
Taxes other than income 1,450,000 1,394,000
Other 1,782,000 2,481,000
$ 9,583,000 $10,174,000
<TABLE>
Shareholders' Equity
Changes in the components of shareholders' equity are as follows:
<CAPTION>
$1 Par Value Additional Total
Common Paid-in Retained Shareholders'
Stock Capital Earnings Equity
<S> <C> <C> <C> <C>
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
Net loss (1,477,000) (1,477,000)
Exercise of stock options 17,000 29,000 46,000
Common stock acquired and retired (55,000) (370,000) (425,000)
Balance at September 30, 1996 8,762,000 10,553,000 36,361,000 55,676,000
Net earnings 1,886,000 1,886,000
Exercise of stock options 26,000 45,000 71,000
Common stock acquired and retired (10,000) (66,000) (76,000)
Balance at September 30, 1997 $8,778,000 $10,532,000 $38,247,000 $57,557,000
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 includes one common stock purchase right ("Right") which is non-
exercisable until certain defined events occur, including 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 holder to purchase additional
stock of the Company or 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.
Under the terms of the revolving credit agreement, the Company's major subsidiary may not
make equity distributions to the Company in an amount which exceeds $4,000,000 plus 25% of its
aggregate net earnings after September 30, 1995. Net assets of this subsidiary not restricted
under the agreement totaled $4,000,000 at September 30, 1997.
</TABLE>
<TABLE>
Stock Option Plans
Under the Company's stock option plans, options to purchase common stock of the Company
may be granted to officers and key employees at not less than 100% of the fair market value at
the date of grant. Generally, options granted vest ratably over a six-year period and have a
maximum life of eight years.
The Company accounts for these plans under APB No. 25. Accordingly, no compensation cost
has been recognized. Had compensation cost for these plans been determined consistent with SFAS
No. 123, the Company's pro forma net earnings for 1997 and pro forma net loss for 1996 would have
been $1,612,000 ($.18 per share) and $1,577,000 ($.18 loss per share), respectively. Because the
SFAS 123 method of accounting has not been applied to options granted prior to October 1, 1995,
the resulting pro forma compensation cost may not be representative of that to be expected in
future years.
As of September 30, stock option activity under the Company's plans is as follows:
<CAPTION>
1997 1996 1995
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 644,427 $8.19 491,018 $7.97 424,128 $7.11
Granted 206,400 6.38 181,200 8.25 124,900 9.74
Exercised (26,033) 2.74 (17,066) 2.71 (43,724) 4.68
Expired or canceled (19,200) 8.89 (10,725) 7.93 (14,286) 8.22
Outstanding at
September 30 805,594 $7.10 644,427 $8.19 491,018 $7.97
Exercisable at
September 30 309,271 $6.89 227,638 $7.49 136,265 $7.22
The weighted average fair value of options granted during 1997 and 1996 was $2.54 and $3.73,
respectively. The fair value for these options was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted average assumptions for both 1997 and
1996: risk-free interest rate of 6.0%; dividend yield of 0%; expected volatility of .29 and a
weighted average expected life of the option of 4.9 years in 1997 and 7 years in 1996.
</TABLE>
The following table summarizes information regarding stock options
outstanding and exercisable at September 30, 1997:
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
$2.42-$3.00 51,015 1.1 yrs. $2.80 45,516 $2.85
$6.38-$9.25 754,579 5.5 yrs. $7.39 263,755 $7.59
In June 1997, the Company modified the terms with regard to 363,979
outstanding options, with exercise prices ranging from $8.92 to $11.33,
by amending the exercise price per share to $7.50, the then current
market value.
At September 30, 1997, a total of 186,879 shares of common stock were
available for future grants.
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 nine 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, 1997, 1996 and 1995 amounted to $12,917,000,
$14,643,000 and $13,732,000, respectively.
Minimum future payments are as follows:
Year Ending September 30,
1998 $ 9,338,000
1999 8,050,000
2000 5,460,000
2001 2,202,000
2002 559,000
Later years 178,000
Total minimum payments required $25,787,000
Income Taxes
The tax provisions (benefit) for the three years ended September 30,
1997 are comprised as follows:
Year Ended September 30,
1997 1996 1995
Current: Federal $1,078,000 $(223,000) $2,270,000
State 472,000 77,000 556,000
Deferred: Federal 328,000 (68,000) 1,469,000
State (66,000) (12,000) 315,000
Total income taxes
(benefit) $1,812,000 $(226,000) $4,610,000
A reconciliation of the tax provisions (benefit) for the three years
ended September 30, 1997 with amounts calculated by applying the
statutory federal income tax rate for those years to earnings (loss)
before income taxes (benefit) is as follows:
Year Ended September 30,
1997 1996 1995
Federal tax $1,294,000 $(596,000) $3,924,000
State taxes, net of
federal benefit 264,000 43,000 567,000
Non-deductible business
expenses 286,000 294,000 298,000
Other (32,000) 33,000 (179,000)
Total income taxes (benefit) $1,812,000 $(226,000) $4,610,000
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,
1997 1996
Depreciation $12,822,000 $12,808,000
Expenses deductible when paid (1,973,000) (2,334,000)
Other (348,000) 41,000
Deferred income taxes, net $10,501,000 $10,515,000
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, noncontributory 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,
1997 1996 1995
Service cost $ 558,000 $ 545,000 $ 510,000
Interest cost 698,000 686,000 591,000
Return on plan assets (2,495,000) (1,004,000) (1,309,000)
Net amortization and deferral 1,584,000 280,000 772,000
Net periodic pension cost $ 345,000 $ 507,000 $ 564,000
The following table sets forth the funded status and the amount
recognized in the Company's balance sheet for the plans:
September 30,
1997 1996
Actuarial present value of accumulated
benefit obligation:
Vested $ 8,216,000 $7,733,000
Non-vested 436,000 271,000
$ 8,652,000 $8,004,000
Projected benefit obligation $10,150,000 $9,651,000
Plan assets at market value 11,889,000 9,239,000
Projected benefit obligation
(under) in excess of plan assets (1,739,000) 412,000
Unrecognized gain 3,219,000 1,141,000
Unrecognized prior service cost (94,000) (104,000)
Unrecognized overfunding at adoption 48,000 65,000
Accrued pension liability $ 1,434,000 $1,514,000
The discount rate, the rate of assumed compensation increase and the
expected long-term rate of return on assets for 1997, 1996 and 1995
were 8.0%, 5.0% and 9.0%, respectively.
At September 30, 1997, the assets of the pension plans were invested
70% in equity securities and 18% in fixed income securities and the
balance in other short-term interest bearing accounts.
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 $3,367,000 in 1997,
$3,248,000 in 1996 and $3,082,000 in 1995. 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 Truck Leasing Corp.
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 $3,600,000 in 1997, $3,542,000
in 1996 and $3,286,000 in 1995.
In connection with a note payable to Rollins Truck Leasing Corp.
(which was repaid in March of 1995), the Company incurred interest
expense that was paid to Rollins Truck Leasing Corp. of $272,000 in
1995.
Certain directors of the Company are also directors of Laidlaw
Environmental Services, Inc. (formerly Rollins Environmental Services,
Inc.) which, prior to May 16, 1997, was a related party.
The Company provided transportation services to Laidlaw
Environmental Services, Inc. and realized revenues therefrom of
$5,203,000 for the period through May 15, 1997, $13,916,000 in 1996 and
$13,265,000 in 1995.
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 $2,262,000 in 1997, $2,598,000 in 1996 and $2,567,000
in 1995.
In the opinion of management of the Company, the foregoing
transactions were effected at rates that approximate those 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 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.
Where losses are probable, provision has been made based on
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
1997 31 31 30 30
Revenues $54,557,000 $56,538,000 $60,918,000 $59,696,000
Gross profit $ 4,750,000 $ 5,357,000 $ 6,694,000 $ 8,018,000
Earnings (loss)
before income
taxes (benefit) $ (333,000) $ 431,000 $ 1,454,000 $ 2,146,000
Net earnings
(loss) $ (272,000) $ 323,000 $ 733,000 $ 1,102,000
Earnings (loss)
per share $ (.03) $ .04 $ .08 $ .12
1996
Revenues $55,562,000 $57,666,000 $57,600,000 $54,038,000
Gross profit $ 5,807,000 $ 6,527,000 $ 5,922,000 $ 1,040,000(1)
Earnings (loss)
before income
taxes (benefit) $ 469,000 $ 1,164,000 $ 622,000 $(3,958,000)(1)
Net earnings
(loss) $ 274,000 $ 629,000 $ 270,000 $(2,650,000)(1)
Earnings (loss)
per share $ .03 $ .07 $ .03 $ (.30)(1)
(1) Includes special charge of $4,000,000 ($2,432,000 after-tax benefit
or $.28 per share).
SCHEDULE I - Condensed Financial Information
MATLACK SYSTEMS, INC.
BALANCE SHEET
($000 Omitted)
Assets September 30,
1997 1996
Current assets
Cash $ 578 $ 273
Accounts receivable from subsidiaries - 4
Other current assets 44 97
Refundable income taxes 98 -
Total current assets 720 374
Investments in subsidiaries, at equity* 59,388 57,448
Total assets $60,108 $57,822
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 24 $ 12
Accrued liabilities 408 271
Income taxes payable - 247
Total current liabilities 432 530
Advance from subsidiary* 1,896 1,364
Other liabilities 63 53
Deferred income taxes 160 199
Shareholders' equity
Common stock $1 par value,
24,000,000 shares authorized;
issued and outstanding:
1997: 8,778,149; 1996: 8,762,116 8,778 8,762
Additional paid-in capital 10,532 10,553
Retained earnings 38,247 36,361
Total shareholders' equity 57,557 55,676
Total liabilities and
shareholders' equity $60,108 $57,822
* Eliminated in consolidation.
The Note to the Financial Statements is an integral part of these
statements.
SCHEDULE I - Condensed Financial Information
(continued)
MATLACK SYSTEMS, INC.
STATEMENT OF EARNINGS
($000 Omitted)
Year Ended September 30,
1997 1996 1995
Revenues:
Dividends from subsidiaries $ 504 $ 720 $ 250
Administrative expenses 38 116 110
Earnings before income taxes
(benefits) 466 604 140
Income tax (benefits) (14) (17) 84
Net earnings of
Matlack Systems, Inc. 480 621 56
Equity in undistributed
net earnings (loss)
of subsidiaries 1,406 (2,098) 6,545
Net earnings (loss) $ 1,886 $(1,477) $ 6,601
The Note to the Financial Statements is an integral part of these
statements.
SCHEDULE I - Condensed Financial Information
(continued)
MATLACK SYSTEMS, INC.
STATEMENT OF CASH FLOWS
($000 Omitted)
Year Ended September 30,
1997 1996 1995
Cash flows from operating activities:
Earnings prior to equity in
subsidiaries' undistributed
earnings (loss) $ 480 $ 621 $ 56
Adjustments to reconcile
earnings to net cash provided
by operating activities:
Changes in assets and liabilities:
Accounts receivable 4 (4) -
Accounts payable and
accrued liabilities 149 139 47
Current and deferred
income taxes (384) 107 152
Other, net 62 102 (129)
Net cash provided by
operating activities 311 965 126
Cash flows from investing activities - - -
Cash flows from financing activities:
Exercise of stock options 71 46 205
Common stock acquired and retired (76) (425) -
Capital contribution to subsidiary (534) (438) (2,178)
Advance from subsidiary 533 107 1,257
Net cash used in financing activities (6) (710) (716)
Net increase (decrease) in cash 305 255 (590)
Cash beginning of period 273 18 608
Cash end of period $ 578 $ 273 $ 18
Supplemental information:
Income taxes paid $ 530 $ 119 $ 1,743
The Note to the Financial Statements is an integral part of these
statements.
SCHEDULE I - Condensed Financial Information
(continued)
MATLACK SYSTEMS, INC.
Note to the Financial Statements
Accounting Policies
The accounting policies of the Company and its subsidiaries are set
forth in the Organization and Accounting Policies note in the
consolidated financial statements of this 1997 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 $6,909,000 at September 30, 1997. 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.
<TABLE>
<PAGE>
MATLACK SYSTEMS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
($000 OMITTED)
<CAPTION>
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>
1997: Allowance for
doubtful accounts $414 $465 $126(1) $422(2) $583
1996: Allowance for
doubtful accounts $391 $355 $162(1) $494(2) $414
1995: Allowance for
doubtful accounts $390 $129 $146(1) $274(2) $391
(1) Recoveries.
(2) Bad debt write-offs.
</TABLE>
Matlack Systems, Inc.
Exhibits to Form 10-K
For Fiscal Year Ended September 30, 1997
Index to Exhibits
Exhibit (3)(b) By-Laws of Matlack Systems, Inc.
as last amended on January 30,
1997.
Exhibit (10)(e) Second Amendment dated February 7, 1997 to
the Master Credit Agreement between Matlack
(DE), Inc. et al, and Bank of America
Illinois and First Union National Bank
dated March 27, 1996.
Exhibit (10)(f) Third Amendment dated September 2, 1997 to
the Master Credit Agreement between Matlack
(DE), Inc. et al, and Bank of America
National Trust and Savings Association
successor by merger to Bank of America
Illinois and First Union National Bank
dated March 27, 1996.
Exhibit (10)(g) First Amendment dated February 7, 1997 to
the Credit Agreement between Matlack (DE),
Inc. et al, and Bank of America Illinois
dated March 27, 1996.
Exhibit (10)(h) Second Amendment dated September 2, 1997 to
the Credit Agreement between Matlack (DE),
Inc. et al, and Bank of America National
Trust and Savings Association successor by
merger to Bank of America Illinois dated
March 27, 1996.
Exhibit (10)(i) First Amendment dated August 29, 1997 to
the Credit Agreement between Matlack (DE),
Inc. et al, and First Union National Bank
dated March 27, 1996.
Exhibit (10)(j) Second Amendment dated November 14, 1997 to
the Credit Agreement between Matlack (DE),
Inc. et al, and First Union National Bank
dated March 27, 1996.
Exhibit 21 Matlack Systems, Inc. Subsidiaries at
September 30, 1997
Exhibit 27 Matlack Systems, Inc. Financial Data
Schedule at September 30, 1997
Exhibit 21
Matlack Systems, Inc.
Subsidiaries at September 30, 1997
Jurisdiction of
Name Incorporation
Matlack (DE), Inc. Delaware
Bayonne Terminals, Inc. Pennsylvania
Matlack International, Inc. Delaware
BY-LAWS
OF
MATLACK SYSTEMS, INC.
-----------------------------------------------------------------
ARTICLE I
The Corporation
Section 1.1 Name. The title of this Corporation is MATLACK
SYSTEMS, INC.
Section 1.2 Office. The registered office of this Corporation
shall be located at One Rollins Plaza, Wilmington, County of New
Castle, State of Delaware, or at such other place as the Board of
Directors may designate in accordance with Section 133 of the Delaware
Corporation Law.
Section 1.3 Seal. The corporate seal of the Corporation shall
have inscribed thereon the name of the Corporation and the year of its
creation (1988) and the words "Incorporated Delaware".
ARTICLE II
Stockholders
Section 2.1 Annual Meeting. The annual meeting of stockholders
shall be held at such place within or without the State of Delaware as
the Board of Directors from time to time determine.
A majority of the amount of the stock issued and outstanding and
entitled to vote shall constitute a quorum for the transaction of all
business, except as otherwise provided by law, the charter of the
corporation or these by-laws. Each stockholder shall be entitled to
one vote, either in person or by proxy, for each share of stock
standing registered in his or her name on the books of the Corporation
on the record date selected by the Board of Directors in accordance
with these by-laws, unless more or less than one vote per share is, by
the terms of the instrument creating special or preferred shares,
conferred upon the holders thereof.
Notice of the annual meeting shall be mailed by the Secretary to
each stockholder at his or her last known post office address no less
than ten days and no more than fifty days prior thereto.
Section 2.2 Special Meetings. Special meetings of stockholders
for any purpose or purposes may be called at any time by the Chairman
of the Board of Directors, the Vice Chairman of the Board of Directors,
the Chairman of the Executive Committee or the President and not by any
other person.
Section 2.3 Notice of Meetings. Whenever stockholders are
required or permitted to take any action at a meeting, a written notice
of the meeting shall be given which shall state the place, date and
hour of the meeting, and, in the case of a special meeting, the purpose
or purposes for which the meeting is called. Unless otherwise provided
by law, the written notice of any meeting shall be given not less than
ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, such notice
shall be deemed to be given when deposited in the mail, postage
prepaid, directed to the stockholder at his address as it appears on
the records of the Corporation.
Section 2.4 Adjournments. Any meeting of the stockholders,
annual or special, may adjourn from time to time to reconvene at the
same or some other place, and notice need not be given of any such
adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting
the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more
than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given to each stockholder of record entitled to vote at the
meeting.
Section 2.5 Quorum. At each meeting of stockholders, except
where otherwise provided by law or the certificate of incorporation or
these by-laws, the holders of a majority of the outstanding shares of
stock entitled to vote at the meeting, present in person or by proxy,
shall constitute a quorum. In the absence of a quorum, the
stockholders so present may, by majority vote, adjourn the meeting from
time to time in the manner provided in Section 2.4 of these by-laws
until a quorum shall attend.
Section 2.6 Organization. Meetings of stockholders
shall be presided over by the Chairman of the Board, if any, or in his
absence by the Vice Chairman of the Board, if any, or in his absence by
the President, or in his absence by a Vice President, or in the absence
of the foregoing persons by a chairman designated by the Board of
Directors, or in the absence of such designation by a chairman chosen
at the meeting. The Secretary shall act as secretary of the meeting,
but in his absence the chairman of the meeting may appoint any person
to act as secretary of the meeting.
Section 2.7 Voting; Proxies. Unless otherwise
provided in the certificate of incorporation, each stockholder entitled
to vote at any meeting of stockholders shall be entitled to one vote
for each share of stock held by him which has voting power upon the
matter in question. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable
and if, and only as long as, it is coupled with an interest sufficient
in law to support an irrevocable power. A stockholder may revoke any
proxy which is not irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy or
another duly executed proxy bearing a later date with the Secretary of
the Corporation. Voting at meetings of stockholders need not be by
written ballot and need not be conducted by inspectors unless the
holders of a majority of the outstanding shares of all classes of stock
entitled to vote thereon present in person or by proxy at such meeting
shall so determine. At all meetings of stockholders for the election
of directors a plurality of the votes cast shall be sufficient to
elect. All other elections and questions shall, unless otherwise
provided by law or by the certificate of incorporation or these
by-laws, be decided by the vote of the holders of a majority of the
outstanding shares of stock entitled to vote thereon present in person
or by proxy at the meeting, provided that (except as otherwise required
by law or by the certificate of incorporation or these by-laws) the
Board of Directors may require a larger vote upon any election or
question.
Section 2.8 Fixing Date for Determination of
Stockholders of Record. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion of
exchange or stock or for the purpose of any other lawful action, the
Board of Directors may fix, in advance, a record date, which shall not
be more than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. If no
record date is fixed: (1) the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be
at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; and (2)
the record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 2.9 List of Stockholders Entitled To Vote.
The Secretary shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled
to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the
name of each stockholder. Such list shall be open to the examination
of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be held. The
list shall also be produced and kept at the time and place of the
meeting during the whole time thereof and may be inspected by any
stockholder who is present. The stock ledger shall be the only
evidence as to who are the stockholders entitled to examine the stock
ledger, the list of stockholders or the books of the Corporation, or to
vote in person or by proxy at any meeting of stockholders.
Section 2.10 Action by Consent Of Stockholders. No
action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without
a meeting, and the power of stockholders to consent in writing, without
a meeting, to the taking of any action is specifically denied.
ARTICLE III
Board of Directors
Section 3.1 Number; Qualifications. The Board of Directors
shall consist of six members. Directors need not be stockholders.
Section 3.2 Election; Resignation; Removal; Vacancies. At
each annual meeting of stockholders, the stockholders shall elect
Directors to replace those Directors whose terms then expire. Any
Director may resign at any time upon written notice to the Corporation.
Stockholders may remove Directors only for cause. Any vacancy
occurring in the Board of Directors for any cause may be filled only by
the Board of Directors, acting by vote of a majority of the Directors
then in office, although less than quorum. Each Director so elected
shall hold office until the expiration of the term of office of the
Director whom he has replaced.
Section 3.3 Notice Of Nomination Of Directors. Nominations
for the election of directors may be made by the Board of Directors or
by any stockholder entitled to vote for the election of directors.
Such nominations shall be made by notice in writing, delivered or
mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than fourteen days nor more than
fifty days prior to any meeting of the stockholders called for the
election of directors; provided, however, that if less than twenty-one
days' notice of the meeting is given to stockholders, such written
notice shall be delivered or mailed, as prescribed, to the Secretary of
the Corporation not later than the close of the seventh day following
the day on which notice of the meeting was mailed to stockholders.
Notice of nominations which are proposed by the Board of Directors
shall be given by the Chairman on behalf of the Board. Each such
notice shall set forth (i) the name, age, business address and, if
known, residence address of each nominee proposed in such notice, (ii)
the principal occupation or employment of each such nominee and (iii)
the number of shares of stock of the Corporation which are beneficially
owned by each such nominee. The Chairman of the meeting may, if the
facts warrant, determine and declare to the meeting that a nomination
was not made in accordance with the foregoing procedure, and if he
should so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded.
Section 3.4 Regular Meetings. Regular meetings of the
Board of Directors may be held at such places within or without the
State of Delaware and at such times as the Board of Directors may from
time to time determine, and if so determined notices thereof need not
be given.
Section 3.5 Special Meetings. Special meetings of the
Board of Directors may be held at any time or place within or without
the State of Delaware whenever called by the President, the Chairman of
the Board of Directors, the Vice Chairman of the Board of Directors, or
by the Chairman of the Executive Committee. Reasonable notice thereof
shall be given by the person calling the meeting, not later than the
second day before the date of the special meeting.
Section 3.6 Telephonic Meetings Permitted. Members of the
Board of Directors, or any committee designated by the Board, may
participate in any meeting of such Board or committee by means of
conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this by-law shall constitute
presence in person at such meeting.
Section 3.7 Quorum; Vote Required For Action; Informal
Action. At all meetings of the Board of Directors a majority of the
whole Board shall constitute a quorum for the transaction of business.
Except in cases in which the certificate of incorporation or these
by-laws otherwise provide, the vote of a majority of the directors
present at a meeting at which a quorum is present shall be the act of
the Board of Directors. Unless otherwise restricted by the certificate
of incorporation or these by-laws, any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting if all members of the Board or
such committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of the proceedings of
the Board or committee.
Section 3.8 Organization. Meetings of the Board of
Directors shall be presided over by the Chairman of the Board, if any,
or in his absence by the Vice Chairman of the Board, if any, or in his
absence by the President, or in their absence by a chairman chosen at
the meeting. The Secretary shall act as a secretary of the meeting,
but in his absence the chairman of the meeting may appoint any person
to act as secretary of the meeting.
Section 3.9 Compensation Of Directors. The Directors and
members of standing committees shall receive such fees or salaries as
fixed by resolution of the Executive Committee and in addition will
receive expenses in connection with attendance or participation in each
regular or special meeting.
ARTICLE IV
Committees
Section 4.1 Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or
more committees, each committee to consist of one or more of the
directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the
absence or disqualification of a member of the committee, the member or
members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting
in place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of
the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall
have power or authority in reference to amending the certificate of
incorporation of the Corporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or
exchange or all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of dissolution, or amending these by-laws.
The Board of Directors shall, at the annual organization meeting
thereof, elect an Executive Committee which shall consist of not more
than four members, all of whom shall be members of the Board of
Directors. The Executive Committee shall have and may exercise all of
the powers and authority of the Board of Directors in the management of
business and affairs of the Corporation to the fullest extent permitted
by law (as presently allowed under Section 141 (c) to the Delaware
General Corporation Law as revised effective July 1, 1996, and as may
be allowed in the future pursuant to amendments or revisions to
applicable law).
Section 4.2 Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board may make,
alter and repeal rules for the conduct of its business. In the absence
of such rules each committee shall conduct its business in the same
manner as the Board of Directors conducts its business pursuant to
Article III of these by-laws.
ARTICLE V
Officers
Section 5.1 Executive Officers; Election; Qualifications;
Term of Office; Resignation; Removal; Vacancies. The officers of the
Corporation shall consist of a Chairman, Vice Chairman, President, Vice
Presidents, Secretary, Assistant Secretaries, Treasurer, Assistant
Treasurers, General Counsel, and such other officers as may from time
to time be elected or appointed by the Board of Directors. The
President shall be elected from the Board of Directors. Any officer
may resign at any time upon written notice to the Corporation. The
Board of Directors may remove any officer with or without cause at any
time, but such removal shall be without prejudice to the contractual
rights of such officer, if any, with the Corporation. Any number of
offices may be held by the same person. Any vacancy occurring in any
office of the Corporation by death, resignation, removal or otherwise
may be filled for the unexpired portion of the term by the Board of
Directors at any regular or special meeting. In the absence of any
officer, the Board of Directors may delegate his power and duties to
any other officer or to any director for the time being.
Section 5.2 Duties Of The Chairman Of The Board And The
Chairman Of The Executive Committee. The Chairman shall preside at all
meetings of the Board, shall have general and active management of the
business of the Corporation and shall see that all orders and
resolutions of the Board are carried into effect. He shall submit a
complete report of the operations and condition of the Corporation for
the year to the stockholders at their annual meeting. In all cases,
where a Chairman of the Executive Committee is elected, the Chairman of
the Executive Committee shall, in the absence of the Chairman of the
Board of Directors, act in the latter's capacity.
Section 5.3 President. The President shall be the Chief
Executive Officer of the Corporation, shall execute in the name of the
Corporation all contracts and agreements authorized by the Board or the
Executive Committee, and shall affix the seal to any instrument
requiring the same, which shall always be attested by the signature of
the President, the Vice President or the Secretary or any Assistant
Secretary or the Treasurer. He may sign certificates of stock; he
shall have general supervision and direction of all the other officers
of the Corporation; he shall submit a complete report of the operations
and condition of the Corporation for the year to the Chairman and to
the directors at their regular meetings, and from time to time shall
report to the directors all matters which the interest of the
Corporation may require to be brought to their notice. He shall have
the general powers and duties usually vested in the office of a
President of a corporation.
Section 5.4 Vice President Finance. The Vice President
Finance shall be Chief Accounting and Chief Financial Officer of the
Corporation and shall be responsible to the Board of Directors, the
Executive Committee and the President for all financial control and
internal audit of the Corporation and its subsidiaries. He shall
perform such other duties as may be assigned to him by the Board of
Directors, the Executive Committee or the President.
Section 5.5 Vice Presidents. The Vice Presidents elected
or appointed by the Board of Directors shall perform such duties and
exercise such powers as may be assigned to them from time to time by
the Board of Directors, the Executive Committee or the President. In
the absence or disability of the President, the Vice President
designated by the Board of Directors, the Executive Committee, or the
President shall perform the duties and exercise the powers of the
President. A Vice President may sign and execute contracts and other
obligations pertaining to the regular course of his duties.
Section 5.6 Secretary. The Secretary shall be ex-officio
Secretary of the Board of Directors and of the standing committees. He
shall attend all sessions of the Board, act as clerk thereof, record
all votes and keep the minutes of all proceedings in a book to be kept
for that purpose. He shall perform like duties for the standing
committees when required. He shall see that the proper notices are
given of all meetings of stockholders and directors, and perform such
other duties as may be prescribed from time to time by the Board of
Directors, the Executive Committee, Chairman or President, and shall be
sworn to the faithful discharge of his duties.
He shall keep the accounts of stock registered and
transferred in such form and manner and under such regulations as the
Board of Directors or Executive Committee may prescribe.
Section 5.7 Treasurer. The Treasurer shall keep full and
accurate accounts of receipts and disbursements in books belonging to
the Corporation and shall deposit all monies and other valuable effects
in the name and to the credit of the Corporation, in such depositories
as may be designated by the Board of Directors or Executive Committee.
He shall disburse the funds of the Corporation as may be ordered by the
Board, the Executive Committee or the President, taking proper vouchers
therefor, and shall render to the President and the Executive Committee
and Directors, whenever they may require it, an account of all his
transactions as Treasurer, and of the financial condition of the
Corporation, and at the annual organization meeting of the Board a like
report for the preceding year.
Section 5.8 General Counsel. The General Counsel shall be
the legal adviser of the Corporation and shall perform such services as
the Chairman, President, Board of Directors or Executive Committee may
require.
ARTICLE VI
Stock
Section 6.1 Certificates. Every holder of stock shall be
entitled to have a certificate signed by or in the name of the
Corporation by the Chairman or Vice Chairman of the Board of Directors,
if any, or the President of the Corporation, certifying the number of
shares owned by him in the Corporation. Any of or all the signatures
on the certificate may be a facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate, shall have ceased to be such officer,
transfer agent, or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such
officer, transfer agent, or registrar at the date of issue.
Section 6.2 Lost, Stolen Or Destroyed Stock Certificates;
Issuance Of New Certificates. The Corporation may issue a new
certificate of stock in the place of any certificate theretofore issued
by it, alleged to have been lost, stolen or destroyed, and the
Corporation may require the owner of the lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any
such certificate or the issuance of such new certificate.
ARTICLE VII
Indemnification
Section 7.1. General. The Company shall indemnify,
and advance Expenses (as hereinafter defined) to, Indemnitee (as
hereinafter defined) to the fullest extent permitted by applicable law
in effect on July 23, 1986, and to such greater extent as applicable
law may thereafter from time to time permit. The rights of Indemnitee
provided under the preceding sentence shall include, but shall not be
limited to, the rights set forth in the other Sections of this Article.
Section 7.2. Proceedings Other Than Proceedings By Or
In The Right Of The Company. Indemnitee shall be entitled to the
indemnification rights provided in this Section 7.2 if, by reason of
his Corporate Status (as hereinafter defined), he is, or is threatened
to be made, a party to any threatened, pending, or completed Proceeding
(as hereinafter defined), other than a Proceeding by or in the right of
the Company. Pursuant to this Section 7.2, Indemnitee shall be
indemnified against Expenses, judgments, penalties, fines and amounts
paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such Proceeding or any claim, issue or matter
therein, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company,
and, with respect to any criminal Proceeding, had no reasonable cause
to believe his conduct was unlawful.
Section 7.3. Proceedings By Or In The Right Of The
Company. Indemnitee shall be entitled to the indemnification rights
provided in this Section 7.3 to the fullest extent permitted by law if,
by reason of his Corporate Status, he is, or is threatened to be made,
a party to any threatened, pending or completed Proceeding brought by
or in the right of the Company to procure a judgment in its favor.
Pursuant to this Section 7.3, Indemnitee shall be indemnified against
Expenses, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by him or on his behalf in connection
with such Proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
Company.
Section 7.4. Indemnification For Expenses Of A Party
Who Is Wholly Or Partly Successful. Notwithstanding any other
provision of this Article, to the extent that Indemnitee is, by reason
of his Corporate Status, a party to and is successful, on the merits or
otherwise, in any Proceeding, he shall be indemnified against all
Expenses actually and reasonably incurred by him or on his behalf in
connection therewith. If Indemnitee is not wholly successful in such
Proceeding but is successful, on the merits or otherwise, as to one or
more but less than all claims, issues or matters in such Proceeding,
the Company shall indemnify Indemnitee against all Expenses actually
and reasonably incurred by him or on his behalf in connection with each
successfully resolved claim, issue or matter. For purposes of this
Section and without limitation, the termination of any claim, issue or
matter in such a Proceeding by dismissal, with or without prejudice,
shall be deemed to be a successful result as to such claim, issue or
matter.
Section 7.5. Indemnification For Expenses Of A
Witness. Notwithstanding any other provision of this Article, to the
extent that Indemnitee is, by reason of his Corporate Status, a witness
in any Proceeding, he shall be indemnified against all Expenses
actually and reasonably incurred by him or on his behalf in connection
therewith.
Section 7.6. Advancement Of Expenses. The Company
shall advance all reasonable Expenses incurred by or on behalf of
Indemnitee in connection with any Proceeding within twenty days after
the receipt by the Company of a statement or statements from Indemnitee
requesting such advance or advances from time to time, whether prior to
or after final disposition of such proceeding. Such statement or
statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an
undertaking by or on behalf of Indemnitee to repay any Expenses
advanced if it shall ultimately be determined that Indemnitee is not
entitled to be indemnified against such Expenses.
Section 7.7. Procedure For Determination Of
Entitlement To Indemnification.
(a) To obtain indemnification under this Article,
Indemnitee shall submit to the Company a written request, including
therein or therewith such documentation and information as is
reasonably available to Indemnitee and is reasonably necessary to
determine whether and to what extent Indemnitee is entitled to
indemnification. The determination of Indemnitee's entitlement to
indemnification shall be made not later than 60 days after receipt by
the Company of the written request for indemnification. The Secretary
of the Company shall, promptly upon receipt of such a request for
indemnification, advise the Board of Directors in writing that
Indemnitee has requested indemnification.
(b) Indemnitee's entitlement to indemnification
under any of Sections 7.2, 7.3 or 7.4 of this Article shall be
determined in the specific case: (i) by the Board of Directors by a
majority vote of a quorum of the Board consisting of Disinterested
Directors (as hereinafter defined); or (ii) by Independent Counsel (as
hereinafter defined), in a written opinion, if (A) a Change of Control
(as hereinafter defined) shall have occurred and Indemnitee so
requests, or (B) if a quorum of the Board of Directors consisting of
Disinterested Directors is not obtainable or, even if obtainable, such
quorum of Disinterested Directors so directs; or (iii) by the
stockholders of the Company; or (iv) as provided in Section 7.8 of this
Article.
(c) In the event the determination of entitlement
to indemnification is to be made by Independent Counsel pursuant to
Section 7.7(b) of this Article, the Independent Counsel shall be
selected as provided in this Section 7.7(c). If a Change of Control
shall not have occurred, the Independent Counsel shall be selected by
the Board of Directors, and the Company shall give written notice to
Indemnitee advising him of the identity of the Independent Counsel so
selected. If a Change of Control shall have occurred, and if so
requested by Indemnitee in his written request for indemnification, the
Independent Counsel shall be selected by Indemnitee, and Indemnitee
shall give written notice to the Company advising it of the identity of
the Independent Counsel so selected. In either event, Indemnitee or
the Company, as the case may be, may, within 7 days after such written
notice of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection.
Such objection may be asserted only on the ground that the Independent
Counsel so selected does not meet the requirements of "Independent
Counsel" as defined in Section 7.13 of this Article, and the objection
shall set forth with particularity the factual basis of such assertion.
If such written objection is made, the Independent Counsel so selected
shall be disqualified from acting as such. If, within 20 days after
submission by Indemnitee of a written request for indemnification
pursuant to Section 7.7(a) hereof, no Independent Counsel shall have
been selected, or if selected shall have been objected to, in
accordance with this Section 7.7(c), either the Company or Indemnitee
may petition the Court of Chancery of the State of Delaware for the
appointment as Independent Counsel of a person selected by the Court or
by such other person as the Court shall designate, and the person so
appointed shall act as Independent Counsel under Section 7.7(b) hereof.
The Company shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in acting
pursuant to Section 7.7(b) hereof, and the Company shall pay all
reasonable fees and expenses incident to the procedures of this Section
7.7(c), regardless of the manner in which such Independent Counsel was
selected or appointed.
Section 7.8. Presumptions And Effect Of Certain
Proceedings. If a Change of Control shall have occurred, Indemnitee
shall be presumed (except as otherwise expressly provided in this
Article) to be entitled to indemnification under this Article upon
submission of a request for indemnification in accordance with Section
7.7(a) of this Article, and thereafter the Company shall have the
burden of proof to overcome that presumption in reaching a
determination contrary to that presumption. Whether or not a Change of
Control shall have occurred, if the person or persons empowered under
Section 7.7 of this Article to determine entitlement to indemnification
shall not have made a determination within 60 days after receipt by the
Company of the request therefor, the requisite determination of
entitlement to indemnification shall be deemed to have been made and
Indemnitee shall be entitled to such indemnification unless (i)
Indemnitee misrepresented or failed to disclose a material fact in
making the request for indemnification, or (ii) such indemnification is
prohibited by law. The termination of any Proceeding described in any
of Sections 7.2, 7.3, or 7.4 of this Article, or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon
a plea of nolo contendere or its equivalent, shall not (except as
otherwise expressly provided in this Article) of itself adversely
affect the right of Indemnitee to indemnification or create a
presumption that Indemnitee did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was
unlawful.
Section 7.9. Remedies Of Indemnitee.
(a) In the event that (i) a determination is made
pursuant to Section 7.7 of this Article that Indemnitee is not entitled
to indemnification under this Article, (ii) advancement of Expenses is
not timely made pursuant to Section 7.6 of this Article, or (iii)
payment of indemnification is not made within five (5) days after a
determination of entitlement to indemnification has been made or deemed
to have been made pursuant to Sections 7.7 or 7.8 of this Article,
Indemnitee shall be entitled to an adjudication in an appropriate court
of the State of Delaware, or in any other court of competent
jurisdiction, of his entitlement to such indemnification or advancement
of Expenses. Alternatively, Indemnitee, at his option, may seek an
award in arbitration to be conducted by a single arbitrator pursuant to
the rules of the American Arbitration Association. The Company shall
not oppose Indemnitee's right to seek any such adjudication or award in
arbitration.
(b) In the event that a determination shall have
been made pursuant to Section 7.7 of this Article that Indemnitee is
not entitled to indemnification, any judicial proceeding or arbitration
commenced pursuant to this Section 7.9 shall be conducted in all
respects as a de novo trial, or arbitration, on the merits and
Indemnitee shall not be prejudiced by reason of that adverse
determination. If a Change of Control shall have occurred, in any
judicial proceeding or arbitration commenced pursuant to this Section
7.9 the Company shall have the burden of proving that Indemnitee is not
entitled to indemnification or advancement of Expenses, as the case may
be.
(c) If a determination shall have been made or
deemed to have been made pursuant to Sections 7.7 or 7.8 of this
Article that Indemnitee is entitled to indemnification, the Company
shall be bound by such determination in any judicial proceeding or
arbitration commenced pursuant to this Section 7.9, unless (i)
Indemnitee misrepresented or failed to disclose a material fact in
making the request for indemnification, or (ii) such indemnification is
prohibited by law.
(d) The Company shall be precluded from asserting
in any judicial proceeding or arbitration commenced pursuant to this
Section 7.9 that the procedures and presumptions of this Article are
not valid, binding and enforceable and shall stipulate in any such
court or before any such arbitrator that the Company is bound by all
the provisions of this Article.
(e) In the event that Indemnitee, pursuant to this
Section 7.9, seeks a judicial adjudication of, or an award in
arbitration to enforce his rights under, or to recover damages for
breach of, this Article, Indemnitee shall be entitled to recover from
the Company, and shall be indemnified by the Company against, any and
all expenses (of the types described in the definition of Expenses in
Section 7.13 of this Article) actually and reasonably incurred by him
in such judicial adjudication or arbitration, but only if he prevails
therein. If it shall be determined in said judicial adjudication or
arbitration that Indemnitee is entitled to receive part but not all of
the indemnification or advancement of Expenses sought, the expenses
incurred by Indemnitee in connection with such judicial adjudication or
arbitration shall be appropriately prorated.
Section 7.10. Non-Exclusivity And Survival Of Rights.
The rights of indemnification and to receive advancement of Expenses as
provided by this Article shall not be deemed exclusive of any other
rights to which Indemnitee may at any time be entitled under applicable
law, the Certificate of Incorporation, the By-Laws, any agreement, a
vote of stockholders or a resolution of directors, or otherwise.
Notwithstanding any amendment, alteration or repeal of any provision of
this Article, Indemnitee shall, unless otherwise prohibited by law,
have the rights of indemnification and to receive advancement of
Expenses as provided by this Article in respect of any action taken or
omitted by Indemnitee in his Corporate Status and in respect of any
claim asserted in respect thereof at any time when such provision of
this Article was in effect. The provisions of this Article shall
continue as to an Indemnitee whose Corporate Status has ceased and
shall inure to the benefit of his heirs, executors and administrators.
Section 7.11. Severability. If any provision or
provisions of this Article shall be held to be invalid, illegal or
unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of
the remaining provisions of this Article (including without limitation,
each portion of any Section of this Article containing any such
provision held to be invalid, illegal or unenforceable, that is not
itself invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby; and
(b) to the fullest extent possible, the provisions
of this Article (including, without limitation, each portion of any
Section of this Article containing any such provision held to be
invalid, illegal or unenforceable, that is not itself invalid, illegal
or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
Section 7.12. Certain Persons Not Entitled To
Indemnification Or Advancement Of Expenses. Notwithstanding any other
provision of this Article, no person shall be entitled to
indemnification or advancement of Expenses under this Article with
respect to any Proceeding, or any claim therein, brought or made by him
against the Company.
Section 7.13. Definitions. For purposes of this
Article:
(a) "Change in Control" means a change in control
of the Company of a nature that would be required to be reported in
response to Item 5(f) of Schedule 14A of Regulation 14A (or in response
to any similar item on any similar schedule or form) promulgated under
the Securities Exchange Act of 1934 (the "Act"), whether or not the
Company is then subject to such reporting requirement; provided,
however, that, without limitation, such a Change in Control shall be
deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial
owner") (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 20% or more of
the combined voting power of the Company's then outstanding securities
without the prior approval of at least two-thirds of the members of the
Board of Directors in office immediately prior to such person attaining
such percentage interest; (ii) the Company is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board of Directors in
office immediately prior to such transaction or event constitute less
than a majority of the Board of Directors thereafter; or (iii) during
any period of two consecutive years, individuals who at the beginning
of such period constituted the Board of Directors (including for this
purpose any new director whose election or nomination for election by
the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute at
least a majority of the Board of Directors.
(b) "Corporate Status" describes the status of a
person who is or was a director, officer, employee, agent or fiduciary
of the Company or of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which such person is
or was serving at the request of the Company.
(c) "Disinterested Director" means a director of
the Company who is not and was not a party to the Proceeding in respect
of which indemnification is sought by Indemnitee.
(d) "Expenses" shall include all reasonable
attorneys' fees, retainers, court costs, transcript costs, fees of
experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees, and
all other disbursements or expenses of the types customarily incurred
in connection with prosecuting, defending, preparing to prosecute or
defend, investigating, or being or preparing to be a witness in a
Proceeding.
(e) "Indemnitee" includes any person who is, or is
threatened to be made, a witness in or a party to any Proceeding as
described in Sections 7.2, 7.3 or 7.4 of this Article by reason of his
Corporate Status.
(f) "Independent Counsel" means a law firm, or a
member of a law firm, that is experienced in matters of corporation law
and neither presently is, nor in the past five (5) years has been,
retained to represent: (i) the Company or Indemnitee in any matter
material to either such party, or (ii) any other party to the
Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not
include any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine
Indemnitee's rights under this Article.
(g) "Proceeding" includes any action, suit,
arbitration, alternate dispute resolution mechanism, investigation,
administrative hearing or any other proceeding whether civil, criminal,
administrative or investigative, except one initiated by an Indemnitee
pursuant to Section 7.9 of this Article to enforce his rights under
this Article.
Section 7.14. Miscellaneous. Use of the masculine
pronoun shall be deemed to include usage of the feminine pronoun where
appropriate.
ARTICLE VIII
Miscellaneous
Section 8.1 Fiscal Year. The fiscal year of the
Corporation shall be determined by resolution of the Board of
Directors.
Section 8.2 Waiver Of Notice Of Meetings Of Stockholders,
Directors, And Committees. Any written waiver of notice, signed by the
person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person
at a meeting shall constitute a waiver of notice of such meeting,
except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the stockholders, directors, or members
of a committee of directors need be specified in any written waiver of
notice..
Section 8.3 Interested Directors; Quorum. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of
its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason,
or solely because the director or officer is present at or participates
in the meeting of the Board or committee thereof which authorizes the
contract or transaction, or solely because his or their votes are
counted for such purpose, if: (1) the material facts as to his
relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and
the Board or the committee in good faith authorizes the contract or
transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors be less than a
quorum; or (2) the material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
(3) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors,
a committee thereof, or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes
the contract or transaction.
Section 8.4 Form Of Records. Any records maintained by the
Corporation in the regular course of its business, including its stock
ledger, books of account, and minute books, may be kept on, or be in
the form of, punch cards, magnetic tape, photographs, microphotographs,
or any other information storage device, provided that the records so
kept can be converted into clearly legible form within a reasonable
time. The Corporation shall so convert any records so kept upon the
request of any person entitled to inspect the same.
Section 8.5 Amendment Of By-Laws. The Board of Directors
of the Corporation is expressly authorized to adopt, amend or repeal
the by-laws of the Corporation by a vote of a majority of the entire
Board. The stockholders may make, alter or repeal any by-law whether
or not adopted by them, provided however, that any such additional
by-laws, alterations or repeal may be adopted only by the affirmative
vote of the holders of 75% or more of the outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class), unless such
additional by-laws, alterations or repeal shall have been recommended
to the stockholders for adoption by a majority of the Board of
Directors, in which event such additional by-laws, alterations or
repeal may be adopted by the affirmative vote of the holders of a
majority of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for
this purpose as one class).
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,524
<SECURITIES> 0
<RECEIVABLES> 31,000
<ALLOWANCES> 583
<INVENTORY> 5,895
<CURRENT-ASSETS> 42,938
<PP&E> 227,322
<DEPRECIATION> 128,216
<TOTAL-ASSETS> 142,262
<CURRENT-LIABILITIES> 25,324
<BONDS> 42,778
0
0
<COMMON> 8,778
<OTHER-SE> 48,779
<TOTAL-LIABILITY-AND-EQUITY> 142,262
<SALES> 231,709
<TOTAL-REVENUES> 231,709
<CGS> 0
<TOTAL-COSTS> 206,890
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,184
<INCOME-PRETAX> 3,698
<INCOME-TAX> 1,812
<INCOME-CONTINUING> 1,886
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,886
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
SECOND AMENDMENT TO MASTER
CREDIT AGREEMENT
THIS SECOND AMENDMENT TO MASTER CREDIT AGREEMENT ("Amendment")
is entered into as of February 7, 1997 among Matlack DE, Inc., ("the
Company"), Matlack, Inc. ("MI"), Safeway Chemical Transportation,
Inc. ("SCI"), Brite-Sol Services, Inc. ("BSS"), (the Company, MI, SCI
and BSS are referred to individually and collectively as the
"Borrower"), Bank of America Illinois, individually and as Collateral
Agent, and First Union National Bank (collectively, "the Banks").
WHEREAS, the Borrower, the Banks, and Collateral Agent have
entered into that certain Master Credit Agreement dated as of March
27, 1996, as amended by a First Amendment dated as of August 16, 1996
(the "Agreement"); and
WHEREAS, the parties desire to further amend the Agreement as
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and agreements
contained herein, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, terms used
herein have the meaning assigned to such terms in the Agreement.
2. Amendments. Subject to the terms and conditions of this
Amendment, the Agreement is hereby amended as follows:
Section 5.10 is amended by deleting it in its entirety
and substituting the following in place thereof:
"Fixed Charge Coverage Ratio. The Company shall
maintain a Fixed Charge Coverage Ratio of not less
than 1.00:1 for the fiscal quarters ending December
31, 1996 and March 31, 1997; of not less than 1.05:1
for the fiscal quarter ending June 30, 1997; and not
less than 1.15:1 thereafter."
3. Conditions Precedent. This Amendment shall become
effective when all of the following conditions have been met:
(a) the Borrower, the Banks and Collateral Agent
shall each have signed a copy of this Amendment (whether
the same or different copies); and
(b) the Collateral Agent shall have received such
other evidence as it may reasonably request to establish
the consummation of the transactions contemplated hereby,
the taking for all proceedings in connection herewith and
compliance with the conditions set forth in this Amendment.
4. Miscellaneous.
(a) Effect. This Amendment is specific in time and
in intent and does not constitute, nor should be construed
as, an amendment or waiver of any other right, power or
privilege under the Agreement or under any agreement,
contract, document or instrument mentioned in the
Agreement; nor does it preclude other or further exercise
hereof or the exercise of any other right, power or
privilege, nor shall any amendment or waiver of any right,
power, privilege or default hereunder, or under any
agreement, contract, document or instrument mentioned in
the Agreement, constitute an amendment or waiver of any
other default of the same or of any other term or
provision. Except as expressly modified hereby, all of the
terms and provisions of the Agreement shall continue in
full force and effect; and the Borrower hereby confirms
each and every one of its respective obligations under the
Agreement, as amended by this Amendment. Whenever the term
"Agreement" is used in the Agreement and whenever the
Agreement is referred to in any of the instruments,
agreements or other documents or papers executed and
delivered in connection therewith, it shall be deemed to
mean the Agreement, as amended by this Amendment.
(b) Counterparts. This Amendment may be executed in any
number of counterparts, and all of such counterparts taken
together shall be deemed to constitute one and the same
instrument.
(c) Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF ILLINOIS.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment by their duly authorized officers as of the day and year
first above written.
Matlack DE, Inc.
By:/s/ G. J. Trippitelli
Matlack, Inc.
By:/s/ G. J. Trippitelli
Safeway Chemical Transportation, Inc.
By:/s/ G. J. Trippitelli
Brite-Sol Services, Inc.
By:/s/ G. J. Trippitelli
Bank of America Illinois,
as Collateral Agent
By: /s/ Nelson D. Albrecht
Bank of America Illinois, as Bank
By: /s/ Nelson D. Albrecht
First Union National Bank, as Bank
By: /s/ Patrick A. McGovern
THIRD AMENDMENT TO MASTER
CREDIT AGREEMENT
THIS THIRD AMENDMENT TO MASTER CREDIT AGREEMENT ("Amendment") is
entered into as of September 2, 1997 among Matlack DE, Inc., ("the
Company"), Matlack, Inc. ("MI"), Safeway Chemical Transportation,
Inc. ("SCI"), Brite-Sol Services, Inc. ("BSS"), (the Company, MI, SCI
and BSS are referred to individually and collectively as the
"Borrower"), Bank of America National Trust and Savings Association,
individually and as Collateral Agent, and First Union National Bank
(collectively, "the Banks").
WHEREAS, the Borrower, the Banks, and Collateral Agent have
entered into that certain Master Credit Agreement dated as of March
27, 1996, as amended by a First Amendment dated as of August 16, 1996
and a Second Amendment dated as of February 7, 1997 (the
"Agreement"); and
WHEREAS, the parties desire to further amend the Agreement as
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and agreements
contained herein, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, terms used
herein have the meaning assigned to such terms in the Agreement.
2. Amendments. Subject to the terms and conditions of this
Amendment, the Agreement is hereby amended as follows:
(a) The introductory paragraph is amended by (i) adding
Matlack Leasing, Inc. ("MLI") and a Borrower; (ii) adding
"MLI" after "SCI" in the fourth line; and (iii) inserting
the following before "Bank of America Illinois": "Bank of
America National Trust and Savings Association, successor
by merger to".
(b) The definition of "Collateral Agent" is amended by
deleting "Bank of America Illinois" and substituting "Bank
of America National Trust and Savings Association" in place
thereof.
(c) Section 5.01 (i)(i) is amended by deleting "20 days"
and substituting "a reasonable period of time" in place
therof.
3. Conditions Precedent. This Amendment shall become
effective when all of the following conditions have been met:
(a) the Borrower, the Banks and Collateral Agent shall
each have signed a copy of this Amendment (whether the same or
different copies); and
(b) the Collateral Agent shall have received such other
evidence as it may reasonably request to establish the
consummation of the transactions contemplated hereby, the taking
for all proceedings in connection herewith and compliance with
the conditions set forth in this Amendment.
4. Miscellaneous.
(a) Effect. This Amendment is specific in time and
in intent and does not constitute, nor should be construed
as, an amendment or waiver of any other right, power or
privilege under the Agreement or under any agreement,
contract, document or instrument mentioned in the
Agreement; nor does it preclude other or further exercise
hereof or the exercise of any other right, power or
privilege, nor shall any amendment or waiver of any right,
power, privilege or default hereunder, or under any
agreement, contract, document or instrument mentioned in
the Agreement, constitute an amendment or waiver of any
other default of the same or of any other term or
provision. Except as expressly modified hereby, all of the
terms and provisions of the Agreement shall continue in
full force and effect; and the Borrower hereby confirms
each and every one of its respective obligations under the
Agreement, as amended by this Amendment. Whenever the term
"Agreement" is used in the Agreement and whenever the
Agreement is referred to in any of the instruments,
agreements or other documents or papers executed and
delivered in connection therewith, it shall be deemed to
mean the Agreement, as amended by this Amendment.
(b) Counterparts. This Amendment may be executed in
any number of counterparts, and all of such counterparts
taken together shall be deemed to constitute one and the
same instrument.
(c) Governing Law. THIS AMENDMENT SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF ILLINOIS.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment by their duly authorized officers as of the day and year
first above written.
Matlack DE, Inc.
By:/s/ G. J. Trippitelli
Matlack, Inc.
By:/s/ G. J. Trippitelli
Safeway Chemical Transportation, Inc.
By:/s/ G. J. Trippitelli
Brite-Sol Services, Inc.
By:/s/ G. J. Trippitelli
Matlack Leasing, Inc.
By:/s/ G. J. Trippitelli
Bank of America National Trust and
Savings
Association,as Collateral Agent
By: /s/ Nelson D. Albrecht
Bank of America National Trust and
Savings
Association, as Bank
By: /s/ Nelson D. Albrecht
First Union National Bank, as Bank
By: /s/ Timothy J. Barker
SECOND AMENDMENT TO CREDIT
AGREEMENT
THIS SECOND AMENDMENT TO MASTER CREDIT AGREEMENT ("Amendment")
is entered into as of February 7, 1997 among Matlack DE, Inc., ("the
Company"), Matlack, Inc. ("MI"), Safeway Chemical Transportation,
Inc. ("SCI"), Brite-Sol Services, Inc. ("BSS"), (the Company, MI, SCI
and BSS are referred to individually and collectively as the
"Borrower"), Bank of America Illinois ("the Bank").
WHEREAS, the Borrower and the Bank have entered into that
certain Credit Agreement dated as of March 27, 1996 (the
"Agreement"); and
WHEREAS, the parties desire to further amend the Agreement as
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and agreements
contained herein, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, terms used
herein have the meaning assigned to such terms in the Agreement.
2. Amendments. Subject to the terms and conditions of this
Amendment, the Agreement is hereby amended as follows:
The definition of "Revolving Termination Date" is
amended by deleting "March 31, 1997" and substituting
"March 31, 1998" in place thereof.
3. Conditions Precedent. This Amendment shall become
effective when all of the following conditions have been met:
(a) the Borrower, the Bank shall each have signed a
copy of this Amendment (whether the same or different
copies); and
(b) the Bank shall have received such other evidence
as it may reasonably request to establish the consummation
of the transactions contemplated hereby, the taking for all
proceedings in connection herewith and compliance with the
conditions set forth in this Amendment.
4. Miscellaneous.
(a) Effect. This Amendment is specific in time and
in intent and does not constitute, nor should be construed
as, an amendment or waiver of any other right, power or
privilege under the Agreement or under any agreement,
contract, document or instrument mentioned in the
Agreement; nor does it preclude other or further exercise
hereof or the exercise of any other right, power or
privilege, nor shall any amendment or waiver of any right,
power, privilege or default hereunder, or under any
agreement, contract, document or instrument mentioned in
the Agreement, constitute an amendment or waiver of any
other default of the same or of any other term or
provision. Except as expressly modified hereby, all of the
terms and provisions of the Agreement shall continue in
full force and effect; and the Borrower hereby confirms
each and every one of its respective obligations under the
Agreement, as amended by this Amendment. Whenever the term
"Agreement" is used in the Agreement and whenever the
Agreement is referred to in any of the instruments,
agreements or other documents or papers executed and
delivered in connection therewith, it shall be deemed to
mean the Agreement, as amended by this Amendment.
(b) Counterparts. This Amendment may be executed in any
number of counterparts, and all of such counterparts taken
together shall be deemed to constitute one and the same
instrument.
(c) Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF ILLINOIS.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment by their duly authorized officers as of the day and year
first above written.
Matlack DE, Inc.
By:/s/ G. J. Trippitelli
Matlack, Inc.
By:/s/ G. J. Trippitelli
Safeway Chemical Transportation, Inc.
By:/s/ G. J. Trippitelli
Brite-Sol Services, Inc.
By:/s/ G. J. Trippitelli
Bank of America Illinois
By: /s/ Nelson D. Albrecht
SECOND AMENDMENT TO CREDIT
AGREEMENT
THIS SECOND AMENDMENT TO MASTER CREDIT AGREEMENT ("Amendment")
is entered into as of September 2, 1997 among Matlack DE, Inc., ("the
Company"), Matlack, Inc. ("MI"), Safeway Chemical Transportation,
Inc. ("SCI"), Brite-Sol Services, Inc. ("BSS"), Matlack Leasing, Inc.
("MLI") (the Company, MI, SCI, BSS and MLI are referred to
individually and collectively as the "Borrower"), Bank of America
National Trust and Savings Association ("the Bank").
WHEREAS, the Borrower and the Banks have entered into that
certain Credit Agreement dated as of March 27, 1996 (the
"Agreement"), as amended by a First Amendment to Credit Agreement
dated as of February 7, 1997; and
WHEREAS, the parties desire to further amend the Agreement as
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and agreements
contained herein, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, terms used
herein have the meaning assigned to such terms in the Agreement.
2. Amendments. Subject to the terms and conditions of this
Amendment, the Agreement is hereby amended as follows:
(a) The introductory paragraph is amended by (i) adding
Matlack Leasing, Inc. ("MLI") and a Borrower; (ii) adding
"MLI" after "SCI" in the fourth line; and (iii) inserting
the following before "Bank of America Illinois": "Bank of
America National Trust and Savings Association, successor
by merger to".
(b) The definition of "Bank" is amended by deleting "Bank
of America Illinois" and substituting "Bank of America
National Trust and Savings Association" in place thereof.
(c) The definition of "Base Rate" is amended by deleting
"Chicago, Illinois" and substituting "San Francisco,
California" in place thereof.
(d) The definition of "Revolving Commitment" is amended by
deleting "$18,000,000" and substituting "$24,000,000" in
place thereof.
(e) The definition of "Termination Date" is amended by
deleting "five years" and substituting "four years" in
place thereof.
3. Conditions Precedent. This Amendment shall become
effective when all of the following conditions have been met:
(a) the Borrower, the Bank shall each have signed a
copy of this Amendment (whether the same or different
copies); and
(b) the Bank shall have received such other evidence
as it may reasonably request to establish the consummation
of the transactions contemplated hereby, the taking for all
proceedings in connection herewith and compliance with the
conditions set forth in this Amendment.
4. Miscellaneous.
(a) Effect. This Amendment is specific in time and
in intent and does not constitute, nor should be construed
as, an amendment or waiver of any other right, power or
privilege under the Agreement or under any agreement,
contract, document or instrument mentioned in the
Agreement; nor does it preclude other or further exercise
hereof or the exercise of any other right, power or
privilege, nor shall any amendment or waiver of any right,
power, privilege or default hereunder, or under any
agreement, contract, document or instrument mentioned in
the Agreement, constitute an amendment or waiver of any
other default of the same or of any other term or
provision. Except as expressly modified hereby, all of the
terms and provisions of the Agreement shall continue in
full force and effect; and the Borrower hereby confirms
each and every one of its respective obligations under the
Agreement, as amended by this Amendment. Whenever the term
"Agreement" is used in the Agreement and whenever the
Agreement is referred to in any of the instruments,
agreements or other documents or papers executed and
delivered in connection therewith, it shall be deemed to
mean the Agreement, as amended by this Amendment.
(b) Counterparts. This Amendment may be executed in any
number of counterparts, and all of such counterparts taken
together shall be deemed to constitute one and the same
instrument.
(c) Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF ILLINOIS.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment by their duly authorized officers as of the day and year
first above written.
Matlack DE, Inc.
By:/s/ G. J. Trippitelli
Matlack, Inc.
By:/s/ G. J. Trippitelli
Safeway Chemical Transportation, Inc.
By:/s/ G. J. Trippitelli
Brite-Sol Services, Inc.
By:/s/ G. J. Trippitelli
Bank of America National Trust and
Savings
Association
By: /s/ Nelson D. Albrecht
FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT ("Amendment
Agreement"), dated as of this 29th day of August, 1997, is by and
among FIRST UNION NATIONAL BANK, a national banking association with
offices located at 123 South Broad Street, Philadelphia, Pennsylvania
19109 (the "Bank") and MATLACK DE, INC. (the "Company"), MATLACK,
INC. ("MI"), SAFEWAY CHEMICAL TRANSPORTATION, INC. ("SCI"), BRITE-SOL
SERVICES, INC. ("BSS") (the Company, MI, SCI and BSS are herein
sometimes referred to collectively as the "Original" Borrower), and
MATLACK LEASING CORPORATION) hereinafter sometimes referred to as the
"New Borrower"). The Original Borrower and the New Borrower shall be
from time to time referred to herein as the "Borrower".
Background
A. The Bank and the Original Borrower entered into that
certain Credit Agreement, dated as of May 22, 1996 (together with all
amendments and modifications thereto, including, without limitation,
the 1997 Letter as hereinafter defined, the "Loan Agreement")
pursuant to which the Bank agreed to make available to the Original
Borrower a revolving credit facility in the maximum amount of
$12,000,000.00 to be outstanding at any time in the form of direct
advances or, for an amount not to exceed $4,000,000.00 of the
Revolving Commitment (as defined in the Loan Agreement), letters of
credit as more fully provided in the Loan Agreement.
B. In connection with the Loan Agreement and in order to
evidence the Revolving Loan, the Original Borrower executed and
delivered to the Bank that certain Revolving Credit Note, dated May
22, 1996 (together with all amendments and modifications thereto, the
"Note"), in favor of the Bank in the original principal amount of
$12,000,000.00 or so much thereof as from time to time shall have
been advanced by the Bank to the Original Borrower pursuant to the
Loan Agreement.
C. On or about March 28, 1997, in a letter to Bank the
Original Borrower requested that the Bank extend the Revolving
Termination Date under the Loan Agreement to March 31, 1998 (the
"1997 Letter"), and the Bank agreed to the Original Borrower's
request.
D. In connection with the Loan Agreement and the Note and in
order to provide for pari passu treatment of its obligations
thereunder with certain other of its obligations, the Original
Borrower, the Bank, and Bank of America Illinois, now through
succession by merger Bank of America National Trust and Savings
Association ("Bank of America") entered into that certain Master
Credit Agreement dated May 22, 1996 (together with all amendments and
modifications thereto, the "Master Credit Agreement").
E. The Loan Agreement, the Note, the Master Credit Agreement,
the L/C Related Documents (as defined in the Loan Agreement) and all
of the documents, instruments and agreements executed and delivered
in connection therewith, together with all amendments and
modifications thereto, shall be referred to hereinafter as the "Loan
Documents".
F. The Original Borrower and the New Borrower have requested
that Bank permit the New Borrower be added as a joint and several
obligor with the right to borrow and otherwise obtain credit under
the Loan Agreement, the L/C Related Documents and the other Loan
Documents and to assume, without the release of the Original Borrower
therefore, joint and several obligation of any liabilities on the
date hereof outstanding under the Loan Documents, and the Bank is
willing to do so on the terms of the Loan Documents as herein after
amended.
NOW THEREFORE, incorporating the foregoing Background herein by
reference and for other good and valuable consideration, the receipt
and legal sufficiency of which is hereby acknowledged, and intending
to be legally bound hereby, the parties agree as follows:
1. Defined Terms. Terms used herein which are capitalized but
not defined shall have the meanings ascribed to such terms in the
Loan Agreement.
2. Addition of New Borrower. The Original Borrower hereby
assigns to the New Borrower an undivided interest in all of the
rights and obligations of the Original Borrower under the Loan
Documents and the Bank consents to such assignment and hereby
acknowledges the New Borrower as a Borrower to the Loan Agreement,
the Note, the L/C Related Documents and the other Loan Documents, and
each Borrower hereby agrees and affirms that it is jointly and
severally liable for all of the obligations presently, and in the
future which may be, outstanding under the Loan Documents as a direct
and primary obligor and not as an accommodation party, without
defense, set off, claim, or counter claim. Outstanding obligations
on the date hereof are confirmed to be:
Revolving Loan Principal - $11,800,000.00
Accrued and Unpaid Interest - $135,038.36
Letters of Credit Face Amount $00.00
Unpaid Fees $00.00
3. Amendments to the Loan Agreement.
(a) The definition of "Revolving Commitment" as set forth
in Article I of the Loan Agreement shall be amended in its entirety
as follows:
"Revolving Commitment" means $16,000,000.00, provided, however,
that the aggregate outstandings to both Banks under the Master Credit
Agreement shall not at any time exceed availability under Borrowing
Base.
(b) The definition of "Revolving Termination Date" as set
forth in Article I shall be amended in its entirety as follows:
"Revolving Termination Date" means the earlier to occur of:
(a) March 31, 1998; and
(b) the date on which the Revolving Commitment terminates
in accordance with the provisions of this Agreement.
(c) The definition of "Termination Date" as set forth in
Article I shall be amended in its entirety as follows:
"Termination Date" means the earlier of four years from the
Revolving Termination Date and (b) the date on which the Commitment
terminates in accordance with the provisions of this Agreement.
4. Conditions Precedent. The effectiveness of this Amendment
Agreement and the Bank's obligations hereunder are conditioned upon
the satisfaction of the following conditions precedent to the
satisfaction of the Bank and its counsel:
(a) The Borrower shall have paid to the Bank the costs,
fees and expenses incurred by the Bank in the preparation of this
Amendment Agreement and the documents instruments and agreements
executed in connection herewith and incidental hereto.
(b) The Borrower shall have duly executed and delivered to
the Bank this Amendment Agreement.
(c) The Borrower shall have duly executed and delivered to
the Bank an Amended and Restated Revolving Credit Note in the form of
Exhibit A hereto.
(d) The Borrower and Bank of America shall have duly
executed and delivered to the Bank the Third Amendment to the Master
Credit Agreement in form and content satisfactory to the Bank.
(e) All proceedings required to be taken by the Borrower
in connection with the transactions contemplated by this Amendment
Agreement shall be satisfactory in form and substance to the Bank and
its counsel, and the Bank shall have received all such counterpart
originals or certified or other copies of such documents as the Bank
may reasonably request.
(f) The Borrower shall have executed and delivered to the
Bank such other documents, instruments and agreements as the Bank may
reasonably request, including:
(1) Certification from each Borrower's secretary
that the bylaws and certificate of incorporation delivered to Bank in
connection with this Amendment Agreement, or if applicable, in
connection with the May 22, 1996 closing, remain in full force and
effect without modification, amendment, or addition.
(2) Certificate from each Borrower's secretary
certifying that the resolutions of the Borrower's Board of Directors
authorizing the Borrower to enter into and perform its obligations
under the Loan Documents, as amended, and if applicable, to assume
all existing obligations thereunder, have been duly adopted by such
Board of Directors and are in full force and effect without
modification, amendment or addition.
(3) Opinion of counsel satisfactory to the Bank
from each Borrower's counsel in form and substance satisfactory to
the Bank covering such issues of law as the Bank believes necessary
or desirable.
(4) Current Good Standing Certificate for each
Borrower from the Secretary of State of the state of its organization
and each state in which the conduct of such Borrower's business or
the property that it owns requires that it be registered to do
business.
5. Representations and Warranties. In order to induce the
Bank to enter into this Amendment Agreement, the Borrower, and each
of them, hereby represents and warrants to the Bank as follows:
(a) The representations and warranties contained in the
Loan Documents are true and correct on and as of the date of this
Amendment Agreement.
(b) After giving effect to this Amendment Agreement, no
Event of Default will be in existence or will occur as a result of
giving effect hereto. No event has occurred which, with the passage
of time or the giving of notice, or both, will become an Event of
Default.
(c) The execution, delivery and performance of this
Amendment Agreement will not violate any provision of any law or
regulation or of any write or decree of any court or governmental
instrumentality, or Borrower's certificate or articles of
incorporation, by-laws, partnership agreement, or other similar
organizational documents.
(d) The Borrower has the power to execute, deliver and
perform this Amendment Agreement and each of the documents,
instruments and agreements to be executed and/or delivered in
connection herewith and has taken all necessary action to authorize
the execution, delivery and performance of this Amendment Agreement
and each of the documents, instruments and agreements executed and/or
delivered in connection herewith and the performance of the Loan
Documents as amended hereby.
(e) The execution, delivery and performance of this
Amendment Agreement and each of the documents, instruments and
agreements to be executed and/or delivered in connection herewith
does not require the consent of any other party, and the Loan
Documents, this Amendment Agreement and each of the documents,
instruments and agreements executed and/or delivered in connection
herewith constitute legal, valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms,
subject to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditor's rights and
except as enforcement may be subject to general equitable principles.
6. Miscellaneous. Except as amended hereby, all of the terms,
covenants and conditions of the Loan Agreement, the Note, the Master
Credit Agreement, the L/C Related Documents and each of the other
Loan Documents are ratified, reaffirmed and confirmed and shall
continue in full force and effect as therein written and are not
intended to be re-enacted as of the above date, but rather to be
effective as of the original date of such documents. This Amendment
Agreement shall be binding upon the Borrower, the Bank and their
respective heirs, executors, administrators, successors and assigns,
and shall inure to the benefit of the Borrower, the Bank, and their
respective heirs, administrators, executors, successors and assigns.
The Amendment Agreement may be executed in any number of counterparts
and by the different parties on separate counterparts. Each such
counterpart shall be deemed to be an original, but all such
counterparts shall together constitute one and the same agreement.
This Amendment Agreement shall be deemed to have been executed and
delivered when the Bank has received counterparts hereof executed by
all parties listed on the signature page(s) hereto. No amendment of
this Amendment Agreement, and no waiver of nay one or more of the
provisions hereof shall be effective unless set forth in a writing
and signed by the parties hereto. This Amendment Agreement shall be
governed by and construed in accordance with the laws governing
construction and interpretation of the Loan Agreement. Nothing
contained herein or in any of the Loan Documents, nor any course of
dealings among the parties shall obligate the Bank to agree to extend
for any additional period of time the date upon which all amounts
under the Loan Documents shall be due and payable.
7. Judicial Proceedings. Each party to this Amendment
Agreement agrees that any suit, action or proceeding, whether claim
or counterclaim, brought or instituted by any party hereto or any
successor or assign of any party, on or with respect to this
Amendment Agreement, the documents, instruments and agreements
executed in connection herewith, the Loan Documents or the dealings
of the parties with respect hereto and thereto, shall be tried only
by a court and not by a jury. EACH PARTY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRAIL BY JURY IN
ANY SUCH SUIT, ACTION OR PROCEEDING. Further, each party waives any
right it may have to claim or recover, in any such suit, action or
proceeding, any special, exemplary, punitive or consequential damages
or damages other than, or in addition to, actual damages. THE
BORROWER ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A SPECIFIC AND
MATERIAL ASPECT OF THIS AMENDMENT AGREEMENT AND THAT THE BANK WOULD
NOT ENTER INTO THIS AMENDMENT AGREEMENT IF THE WAIVERS SET FORTH IN
THIS SECTION WERE NOT A PART OF THIS AMENDMENT AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment Agreement to be duly executed and delivered as of the day
and year first above written.
Matlack DE, Inc.
By:/s/ G. J. Trippitelli
Matlack, Inc.
By:/s/ G. J. Trippitelli
Safeway Chemical Transportation, Inc.
By:/s/ G. J. Trippitelli
Brite-Sol Services, Inc.
By:/s/ G. J. Trippitelli
Matlack Leasing Corporation
By:/s/ G. J. Trippitelli
First Union National Bank
By: /s/
<PAGE>
AMENDED AND RESTATED
REVOLVING CREDIT NOTE
$16,000,000.00 August 29, 1997
FOR VALUE RECEIVED, MATLACK DE, INC., MATLACK, INC., SAFEWAY CHEMICAL
TRANSPORTATION, INC., BRITE-SOL SERVICES, INC. (the "original
Borrower") and MATLACK LEASING CORPORATION (collectively, the
Original Borrower and Matlack Leasing Corporation shall be referred
to as the "Borrower"), hereby promise to pay to the order of FIRST
UNION NATIONAL BANK, a national banking association (the "Bank") on
March 31, 1998 the principal amount of SIXTEEN MILLION DOLLARS
($16,000,000.00) or, if less, the aggregate outstanding principal
amount of Revolving Loans extended under the Credit Agreement, dated
May 22, 1996 (together with all amendments and modifications thereto,
including, without limitation, the 1997 Letter and the First
Amendment to Credit Agreement dated the date hereof, the "Credit
Agreement"). This Revolving Credit Note is issued pursuant to the
terms of the Credit Agreement. Terms capitalized but not defined
herein shall have the meanings given to them respectively in the
Credit Agreement. Reference is made to the Credit Agreement for a
statement of the terms and conditions under which the Loan evidenced
hereby has been made, is secured, and may be prepaid or accelerated.
Until maturity (whether by acceleration or otherwise) interest
shall accrue on the outstanding principal balance hereof at the
applicable rate of interest plus the Applicable Margin, as selected
by the Borrower in accordance with the procedures and terms of the
Credit Agreement. Accrued interest shall be payable on each Interest
Payment Date as set forth in the Credit Agreement. The Applicable
Margin and/or interest rate may be increased while an Event of
Default exists or after acceleration in accordance with Section
2.09(c) of the Credit Agreement.
All amounts payable by the Borrower to the Bank hereunder shall
be paid to the Bank in accordance with the terms of the Credit
Agreement in immediately available funds.
The Borrower hereby waives the requirements of demand,
presentment, protest, notice of protest and dishonor and all other
demands or notices of any kind in connection with the delivery,
acceptance, performance, default, dishonor or enforcement of this
Note.
This Amended and Restated Revolving Credit Note (together with
all amendments and modifications thereto the "Revolving Credit Note")
amends and restates that certain Revolving Credit Note dated May 22,
1996 (the "Original Note"), and except as expressly set forth herein,
all of the terms, covenants, and conditions of the Original Note
remain in full force and effect. This Revolving Credit Note is given
as a modification of the obligations under the Original Note and is
not given in substitution therefore or extinguishment thereof and is
not intended to be a novation. To induce the Bank to permit the
addition of Matlack Leasing Corporation as a Borrower, each Borrower
confirms that it is jointly and severally liable hereunder as a
primary obligor and not as an accommodation party and represents and
warrants to the Bank that on the date hereof there are no defenses,
claims, set offs or counterclaims to payment of this Revolving Credit
Note.
The construction, interpretation and enforcement of this Note
shall be governed by the internal laws of the Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, and intending to be legally bound hereby,
each of the Borrower has caused this Note to be executed by its duly
authorized officer as of the day and year first above written.
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT ("Amendment
Agreement"), dated as of this 14th day of November, 1997, is by and
among FIRST UNION NATIONAL BANK, a national banking association with
offices located at 123 South Broad Street, Philadelphia, Pennsylvania
19109 (the "Bank") and MATLACK DE, INC. (the "Company"), MATLACK,
INC. ("MI"), SAFEWAY CHEMICAL TRANSPORTATION, INC. ("SCI"), BRITE-SOL
SERVICES, INC. ("BSS") (hereinafter the Company, MI, SCI, BSS and MLC
shall be referred to herein, individually and collectively as the
context requires, as the "Borrower").
Background
A. The Bank and the Company, MI, SCI, and BSS entered into
that certain Credit Agreement, dated as of May 22, 1996 (together
with all amendments and modifications thereto, including, without
limitation, the 1997 Letter as hereinafter defined, the "Loan
Agreement") pursuant to which the Bank agreed to make available to
the Company, MI, SCI, and BSS jointly and severally a revolving
credit facility in the maximum amount of $12,000,000.00 to be
outstanding at any time in the form of direct advances or, for an
amount not to exceed $4,000,000.00 of the Revolving Commitment (as
defined in the Loan Agreement), letters of credit as more fully
provided in the Loan Agreement.
B. In connection with the Loan Agreement and in order to
evidence the Revolving Loan, the Company, MI, SCI, and BSS executed
and delivered to the Bank that certain Revolving Credit Note, dated
May 22, 1996 (together with all amendments and modifications thereto,
the "Note"), in favor of the Bank in the original principal amount of
$12,000,000.00 or so much thereof as from time to time shall have
been advanced by the Bank to the Original Borrower pursuant to the
Loan Agreement.
C. In connection with the Loan Agreement and the Note and in
order to provide for pari passu treatment of its obligations
thereunder with certain other of its obligations, the Company, MI,
SCI, and BSS, the Bank, and Bank of America Illinois, now through
succession by merger Bank of America National Trust and Savings
Association ("Bank of America") entered into that certain Master
Credit Agreement dated May 22, 1996 (together with all amendments and
modifications thereto, the "Master Credit Agreement").
D. On or about March 28, 1997, in a letter to Bank the
Company, MI, SCI, and BSS requested that the Bank extend the
Revolving Termination Date under the Loan Agreement to March 31, 1998
(the "1997 Letter"), and the Bank agreed to that request.
E. On or about August 29, 1997, pursuant to that certain First
Amendment to Credit Agreement (the "First Amendment"), the Company,
MI, SCI, and BSS requested, among things, increase the Revolving
Commitment to $16,000,000.00 and permit the MLC to be added as a
joint and several obligor with the right to borrow and otherwise
obtain credit under the Loan Agreement, the L/C Related Documents (as
defined in the Loan Agreement) and the other Loan Documents (as
defined below) and to assume, without the release of the Company, MI,
SCI, and BSS therefore, joint and several obligation of any
liabilities on the date thereof outstanding under the Loan Documents,
and the Bank agreed to such modifications.
F. The Loan Agreement, the Note, the Master Credit Agreement,
the L/C Related Documents and all of the documents, instruments,
agreements and amendments executed and delivered in connection
therewith, together with all amendments and modifications thereto,
shall be referred to hereinafter as the "Loan Documents".
G. The Borrower has now requested that the Bank temporarily
increase the Revolving Commitment by $3,000,000.00 from
$16,000,000.00 to $19,000,000.00 and the Bank is willing to do so the
terms and conditions hereinafter set forth.
NOW THEREFORE, incorporating the foregoing Background herein by
reference and for other good and valuable consideration, the receipt
and legal sufficiency of which is hereby acknowledged, and intending
to be legally bound hereby, the parties agree as follows:
1. Defined Terms. Terms used herein which are capitalized but
not defined shall have the meanings ascribed to such terms in the
Loan Agreement.
2. Amendments to the Loan Agreement.
(a) The definition of "Revolving Commitment" as set forth
in Article I of the Loan Agreement shall be amended in its entirety
as follows:
"Revolving Commitment" means $19,000,000.00, provided, however,
that the aggregate outstandings to both Banks under the Master Credit
Agreement shall not at any time exceed availability under Borrowing
Base, and further provided that the increase in the Commitment by
$3,000,000.00 from $16,000,000.00 to $19,000,000.00 ("the Temporary
Revolving Commitment") shall be temporary and shall expire on March
31, 1998, at which time the Revolving Commitment shall again be
$16,000,000.00. The Temporary Revolving Commitment shall not be part
of the Term Commitment.
(b) The definition of "Revolving Credit Note" as set forth
in Article I shall be amended in its entirety as follows:
"Revolving Credit Note" means that certain Revolving Credit Note
described in Section 2.01 (a) hereof as now evidenced by that certain
Amended and Restated Revolving Credit Note dated August 29, 1997, as
further amended pursuant to Allonge to Amended and Restated Revolving
Credit Note dated the date of the Second Amendment to Credit
Agreement.
(c) Section 2.01 Amounts and Terms of Commitment., Subpart
(b) shall be deleted and amended in its entirety as
follows:
(b) The Term Credit. On the Revolving Termination Date, if
such date occurs as a result of subpart (a) of the definition of
Revolving Termination Date, the Bank agrees, on the terms and
conditions set forth herein, to convert the amount of Revolving Loans
to a Term Loan (a "Term Loan", the "Term Commitment") which shall
then amortize in equal monthly principal payments from the Revolving
Termination Date to the Termination Date. Amounts borrowed as Term
Loans which are repaid or prepaid by the Borrower may not be
reborrowed. The obligations of the Borrower to repay the outstanding
principal of the Term Loan and to pay accrued interest thereon shall
be evidenced by a promissory note, to be executed and delivered to
the Bank on or before the date of conversion in substantially the
form of the Term Note attached hereto as Exhibit E (the "Term Note").
Provided, however, in the event the Revolving Termination Date occurs
on or prior to March 31, 1998, the date the Temporary Revolving
Commitment expires, any Revolving Loans outstanding in excess of
$16,000,000.00 shall not be a part of this Term Commitment, but shall
be repaid in full on the Revolving Termination Date, without further
notice or demand.
4. Conditions Precedent. The effectiveness of this Amendment
Agreement and the Bank's obligations hereunder are conditioned upon
the satisfaction of the following conditions precedent to the
satisfaction of the Bank and its counsel:
(a) The Borrower shall have paid to the Bank the costs,
fees and expenses incurred by the Bank in the preparation of this
Amendment Agreement and the documents instruments and agreements
executed in connection herewith and incidental hereto.
(b) The Borrower shall have duly executed and delivered to
the Bank this Amendment Agreement.
(c) The Borrower shall have duly executed and delivered to
the Bank the Allonge to Amended and Restated Revolving Credit Note
attached hereto as Exhibit A.
(d) The Borrower and Bank of America shall have duly
executed and delivered to the Bank any Amendment to the Master Credit
Agreement as deemed necessary by Bank in form and content
satisfactory to the Bank.
(e) All proceedings required to be taken by the Borrower
in connection with the transactions contemplated by this Amendment
Agreement shall be satisfactory in form and substance to the Bank and
its counsel, and the Bank shall have received all such counterpart
originals or certified or other copies of such documents as the Bank
may reasonably request.
(f) The Borrower shall have executed and delivered to the
Bank such other documents, instruments and agreements as the Bank may
reasonably request, including:
(1) Certification from each Borrower's secretary
that the bylaws and certificate of incorporation delivered to Bank in
connection with this Amendment Agreement, or if applicable, in
connection with the May 22, 1996 closing, remain in full force and
effect without modification, amendment, or addition.
(2) Certificate from each Borrower's secretary
certifying that the resolutions of the Borrower's Board of Directors
authorizing the Borrower to enter into and perform its obligations
under the Loan Documents, as amended, and if applicable, to assume
all existing obligations thereunder, have been duly adopted by such
Board of Directors and are in full force and effect without
modification, amendment or addition.
(3) Opinion of counsel satisfactory to the Bank
from each Borrower's counsel in form and substance satisfactory to
the Bank covering such issues of law as the Bank believes necessary
or desirable.
5. Representations and Warranties. In order to induce the
Bank to enter into this Amendment Agreement, the Borrower, and each
of them, hereby represents and warrants to the Bank as follows:
(a) The representations and warranties contained in the
Loan Documents are true and correct on and as of the date of this
Amendment Agreement.
(b) After giving effect to this Amendment Agreement, no
Event of Default will be in existence or will occur as a result of
giving effect hereto. No event has occurred which, with the passage
of time or the giving of notice, or both, will become an Event of
Default.
(c) The execution, delivery and performance of this
Amendment Agreement will not violate any provision of any law or
regulation or of any write or decree of any court or governmental
instrumentality, or Borrower's certificate or articles of
incorporation, by-laws, partnership agreement, or other similar
organizational documents.
(d) The Borrower has the power to execute, deliver and
perform this Amendment Agreement and each of the documents,
instruments and agreements to be executed and/or delivered in
connection herewith and has taken all necessary action to authorize
the execution, delivery and performance of this Amendment Agreement
and each of the documents, instruments and agreements executed and/or
delivered in connection herewith and the performance of the Loan
Documents as amended hereby.
(e) The execution, delivery and performance of this
Amendment Agreement and each of the documents, instruments and
agreements to be executed and/or delivered in connection herewith
does not require the consent of any other party, and the Loan
Documents, this Amendment Agreement and each of the documents,
instruments and agreements executed and/or delivered in connection
herewith constitute legal, valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms,
subject to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and
except as enforcement may be subject to general equitable principles.
6. Miscellaneous. Except as amended hereby, all of the terms,
covenants and conditions of the Loan Agreement, the Note, the Master
Credit Agreement, the L/C Related Documents and each of the other
Loan Documents are ratified, reaffirmed and confirmed and shall
continue in full force and effect as therein written and are not
intended to be re-enacted as of the above date, but rather to be
effective as of the original date of such documents. This Amendment
Agreement shall be binding upon the Borrower, the Bank and their
respective heirs, executors, administrators, successors and assigns,
and shall inure to the benefit of the Borrower, the Bank, and their
respective heirs, administrators, executors, successors and assigns.
The Amendment Agreement may be executed in any number of counterparts
and by the different parties on separate counterparts. Each such
counterpart shall be deemed to be an original, but all such
counterparts shall together constitute one and the same agreement.
This Amendment Agreement shall be deemed to have been executed and
delivered when the Bank has received counterparts hereof executed by
all parties listed on the signature page(s) hereto. No amendment of
this Amendment Agreement, and no waiver of nay one or more of the
provisions hereof shall be effective unless set forth in a writing
and signed by the parties hereto. This Amendment Agreement shall be
governed by and construed in accordance with the laws governing
construction and interpretation of the Loan Agreement. Nothing
contained herein or in any of the Loan Documents, nor any course of
dealings among the parties shall obligate the Bank to agree to extend
for any additional period of time the date upon which all amounts
under the Loan Documents shall be due and payable.
7. Judicial Proceedings. Each party to this Amendment
Agreement agrees that any suit, action or proceeding, whether claim
or counterclaim, brought or instituted by any party hereto or any
successor or assign of any party, on or with respect to this
Amendment Agreement, the documents, instruments and agreements
executed in connection herewith, the Loan Documents or the dealings
of the parties with respect hereto and thereto, shall be tried only
by a court and not by a jury. EACH PARTY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRAIL BY JURY IN
ANY SUCH SUIT, ACTION OR PROCEEDING. Further, each party waives any
right it may have to claim or recover, in any such suit, action or
proceeding, any special, exemplary, punitive or consequential damages
or damages other than, or in addition to, actual damages. THE
BORROWER ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A SPECIFIC AND
MATERIAL ASPECT OF THIS AMENDMENT AGREEMENT AND THAT THE BANK WOULD
NOT ENTER INTO THIS AMENDMENT AGREEMENT IF THE WAIVERS SET FORTH IN
THIS SECTION WERE NOT A PART OF THIS AMENDMENT AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment Agreement to be duly executed and delivered as of the day
and year first above written.
Matlack DE, Inc.
By:/s/ G. J. Trippitelli
Matlack, Inc.
By:/s/ G. J. Trippitelli
Safeway Chemical Transportation, Inc.
By:/s/ G. J. Trippitelli
Brite-Sol Services, Inc.
By:/s/ G. J. Trippitelli
Matlack Leasing Corporation
By:/s/ G. J. Trippitelli
First Union National Bank
By: /s/
