<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1998
REGISTRATION NO. 333--59377
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
U.S. XPRESS ENTERPRISES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 4213 62-1378182
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OF INCORPORATION) INDUSTRIAL IDENTIFICATION NUMBER)
CLASSIFICATION CODE
NUMBERS)
2931 SOUTH MARKET STREET
CHATTANOOGA, TENNESSEE 37410
(423) 697-7377
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RAY M. HARLIN
CHIEF FINANCIAL OFFICER
U.S. XPRESS ENTERPRISES, INC.
2931 SOUTH MARKET STREET
CHATTANOOGA, TENNESSEE 37410
(423) 697-7377
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
HUGH F. SHARBER, ESQ. RICHARD G. BROWN, ESQ.
MILLER & MARTIN LLP PARR WADDOUPS BROWN GEE & LOVELESS,
1000 VOLUNTEER BUILDING P.C.
832 GEORGIA AVENUE 185 S. STATE STREET
CHATTANOOGA, TN 37402 SUITE 1300
(423) 785-8212 SALT LAKE CITY, UT 84147
(801) 532-7840
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As promptly as practicable after the effective date of this
Registration Statement, which relates to the merger of PST Vans, Inc. with and
into a subsidiary of U.S. Xpress Enterprises, Inc.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
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<PAGE>
PST VANS, INC.
1901 WEST 2100 SOUTH
SALT LAKE CITY, UTAH 84119
(801) 975-2500
July 30, 1998
Dear PST Stockholder:
As most of you are aware, PST Vans, Inc. ("PST") has entered into an
Agreement and Plan of Merger dated as of July 7, 1998, (the "Merger
Agreement"), among U.S. Xpress Enterprises, Inc. ("Enterprises"), PST
Acquisition Corp., a wholly owned subsidiary of Enterprises ("Merger Sub"),
and PST, pursuant to which PST will be merged with and into Merger Sub upon
the terms and subject to the conditions of the Merger Agreement (the
"Merger"). Merger Sub will be the surviving corporation in the Merger (the
"Surviving Corporation") and, following the Merger, will succeed to and assume
all the rights and obligations of PST.
As described in the enclosed Proxy Statement/Prospectus, at an Annual
Meeting of Stockholders to be held on August 28, 1998, you will be asked to
consider and vote upon the approval and adoption of the Merger Agreement.
Pursuant to the Merger Agreement, each share of PST's common stock, $0.001 par
value (the "PST Common Stock"), issued and outstanding shall be converted into
the right to receive (i) 0.2381 shares of Enterprises Class A Common Stock,
$0.01 par value per share (the "Enterprises Common Stock) plus (ii) $2.71 in
cash.
Your Board has received an opinion of Morgan Keegan & Company, Inc., PST's
financial advisor, that, as of the date of such opinion, the merger
consideration to be received by holders of PST Common Stock pursuant to the
Merger Agreement was fair to such holders. Such opinion was provided for the
information and assistance of the PST Board in connection with the transaction
contemplated by the Merger Agreement and does not constitute a recommendation
as to how any holder of shares of PST Common Stock should vote with respect to
such transaction. The full text of the written opinion of Morgan Keegan, which
sets forth assumptions made, matters considered and limitations on the review
undertaken in connection with the opinion, is attached as Annex III to the
enclosed Proxy Statement/Prospectus. Holders of shares of PST Common Stock are
urged to read such opinion in its entirety.
The approval and adoption of the Merger Agreement requires the affirmative
vote of holders of at least two- thirds of the outstanding shares of PST
Common Stock. AFTER CAREFUL CONSIDERATION, YOUR BOARD HAS UNANIMOUSLY APPROVED
THE MERGER AND THE MERGER AGREEMENT, HAS UNANIMOUSLY DETERMINED THAT THE
MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, PST AND ITS STOCKHOLDERS, AND
UNANIMOUSLY RECOMMENDS THAT HOLDERS OF SHARES OF PST COMMON STOCK VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. Pursuant to voting agreements
with Enterprises, the two largest stockholders of PST (who have the right to
vote approximately 51% of the outstanding shares of PST Common Stock and one
of whom is also a PST director and officer) have agreed, among other things,
to vote (or cause to be voted) their shares of PST Common Stock in favor of
approval and adoption of the Merger Agreement. Enterprises presently holds
approximately 4.8% of the outstanding shares of PST Common Stock.
Stockholders are urged to review carefully the information contained in the
enclosed Proxy Statement/ Prospectus prior to deciding how to vote their
shares at the Annual Meeting. Because the information in the attached Proxy
Statement/Prospectus includes the information to be furnished in an annual
report, a separate annual report has not been furnished.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, whether or not you plan to attend the Annual Meeting, please
complete, sign and date the accompanying proxy card and return it promptly in
the enclosed postage-prepaid envelope. Failure to return a properly executed
proxy card or to vote at the Annual Meeting would have the same effect as a
vote against the Merger Agreement and the Merger.
Sincerely,
/s/ Kenneth R. Norton
KENNETH R. NORTON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
<PAGE>
PST VANS, INC.
1901 WEST 2100 SOUTH
SALT LAKE CITY, UTAH 84119
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 28, 1998
The annual meeting of Stockholders (the "Annual Meeting") of PST Vans, Inc.,
a Utah corporation ("PST"), will be held at Little America Hotel & Towers,
Uintah Room, 500 South Main Street, Salt Lake City, Utah 84101 on Friday,
August 28, 1998 at 9:00 a.m., local time, to consider and act upon the
following matters:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of July 7, 1998 (the "Merger Agreement"),
among U.S. Xpress Enterprises, Inc., a Nevada Corporation
("Enterprises"), PST Acquisition Corp., a Nevada corporation and wholly-
owned subsidiary of Enterprises ("Merger Sub"), and PST, providing among
other things for the merger of PST with and into Merger Sub, which will
be the surviving corporation and, following the Merger, will succeed to
and assume all of the rights and obligations of PST (the "Merger").
Pursuant to the Merger, as explained more fully in the accompanying
Proxy Statement/Prospectus, each outstanding share of PST common stock
will be converted into the right to receive 0.2381 shares of Enterprises
Class A Common Stock, $.01 par value per share (the "Enterprises Common
Stock") plus $2.71 in cash. The number of whole shares of Enterprises
Common Stock to be received by each PST stockholder will depend on the
number of shares of PST Common Stock held by the stockholder. No
fractional shares of Enterprises Common Stock will be issued and cash
will be paid in lieu of fractional shares;
A copy of the Merger Agreement is attached as Annex I to the
accompanying Proxy Statement/ Prospectus. PST Stockholders will be
entitled to assert dissenters' rights in respect of the Merger in
accordance with Section 16-10a-1301, et seq. of the Utah Revised
Business Corporation Act, a copy of which section is attached as Annex
IV to the accompanying Proxy Statement/Prospectus;
2. To elect two members of the PST Board of Directors to serve until
consummation of the Merger (or, if the Merger is not consummated, for a
three-year term expiring at PST's 2001 annual meeting of stockholders or
until their successors have been elected and qualified);
3. To ratify the appointment of Arthur Andersen LLP as independent public
accountants for the year ending December 31, 1998 (or until consummation
of the Merger); and
4. To vote upon such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Stockholders of record at the close of business on July 29, 1998, will be
entitled to notice of and to vote at the Annual Meeting or any adjournment or
postponement thereof.
By Order of the Board of Directors
Salt Lake City, Utah
July 30, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN
ORDER TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION....................................................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................. 1
SUMMARY..................................................................... 3
ANNUAL MEETING............................................................ 3
VOTE REQUIRED............................................................. 3
THE MERGER................................................................ 4
MARKET PRICE DATA......................................................... 9
SUMMARY FINANCIAL AND OPERATING DATA...................................... 9
THE ANNUAL MEETING.......................................................... 18
ANNUAL MEETING............................................................ 18
RECORD DATE; SHARES ENTITLED TO VOTE; VOTE REQUIRED....................... 18
PROXIES; PROXY SOLICITATION............................................... 19
THE MERGER.................................................................. 21
BACKGROUND OF THE MERGER.................................................. 21
RECOMMENDATION OF THE PST BOARD AND REASONS FOR THE MERGER................ 22
OPINION OF FINANCIAL ADVISOR.............................................. 24
EFFECTIVE TIME............................................................ 27
MERGER CONSIDERATION...................................................... 27
EXCHANGE PROCEDURES....................................................... 28
NASDAQ NATIONAL MARKET SYSTEM LISTING..................................... 29
EXPENSES; TERMINATION FEE................................................. 29
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS................................. 30
REGULATORY APPROVALS REQUIRED............................................. 32
INTERESTS OF CERTAIN PERSONS IN THE MERGER................................ 32
DISSENTERS' RIGHTS........................................................ 33
ACCOUNTING TREATMENT...................................................... 35
RESALE OF ENTERPRISES COMMON STOCK........................................ 36
THE MERGER AGREEMENT........................................................ 36
THE MERGER................................................................ 36
REPRESENTATIONS AND WARRANTIES............................................ 36
BUSINESS OF PST PENDING THE EFFECTIVE TIME OF THE MERGER.................. 38
ADDITIONAL AGREEMENTS..................................................... 39
CONDITIONS TO THE CONSUMMATION OF THE MERGER.............................. 41
NO SOLICITATION........................................................... 42
TERMINATION, AMENDMENT AND WAIVER......................................... 42
THE VOTING AGREEMENTS..................................................... 43
NONCOMPETITION AND CONSULTING AGREEMENT................................... 45
MANAGEMENT AND OPERATIONS AFTER THE MERGER.................................. 45
DIRECTORS AND OFFICERS.................................................... 45
COMPARATIVE STOCK PRICES AND DIVIDENDS...................................... 45
BUSINESS OF U.S.XPRESS ENTERPRISES, INC..................................... 46
BUSINESS OF PST VANS, INC................................................... 46
BUSINESS.................................................................. 46
PROPERTIES................................................................ 52
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
LEGAL PROCEEDINGS........................................................ 52
SELECTED FINANCIAL AND OPERATING DATA.................................... 54
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS........................................................... 55
LEGAL MATTERS.............................................................. 83
EXPERTS.................................................................... 84
INDEX TO FINANCIAL STATEMENTS.............................................. F-1
ANNEXES
ANNEX I, AGREEMENT AND PLAN OF MERGER
ANNEX II, VOTING AGREEMENTS
ANNEX III, OPINION OF MORGAN KEEGAN & COMPANY, INC.
ANNEX IV, PART 13 OF THE UTAH REVISED BUSINESS CORPORATION ACT
ANNEX V, TAX OPINION OF PARR WADDOUPS BROWN GEE & LOVELESS, P.C.
</TABLE>
ii
<PAGE>
PST VANS, INC.
1901 WEST 2100 SOUTH
SALT LAKE CITY, UTAH 84119
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
JULY 30, 1998
U.S. XPRESS ENTERPRISES, INC.
PROSPECTUS
UP TO 1,100,000 SHARES OF COMMON STOCK
This combined Proxy Statement and Prospectus ("Proxy Statement/Prospectus")
is being furnished to the stockholders of PST Vans, Inc. ("PST" or the
"Company") in connection with the solicitation of proxies by the Board of
Directors of PST (the "PST Board") for use at the annual meeting of
stockholders of PST to be held on August 28, 1998 at 9:00 a.m., local time, at
Little America Hotel & Towers, Uintah Room, 500 South Main Street, Salt Lake
City, Utah 84101, including any adjournments or postponements thereof (the
"Annual Meeting").
The primary purpose of the Annual Meeting is for holders of common stock of
PST, par value $0.001 per share ("PST Common Stock"), to consider and vote
upon the approval and adoption of the Agreement and Plan of Merger dated as of
July 7, 1998, (the "Merger Agreement"), among U.S. Xpress Enterprises, Inc.
("Enterprises"), PST Acquisition Corp., a wholly owned subsidiary of
Enterprises ("Merger Sub"), and PST providing for the merger of PST with and
into Merger Sub upon the terms and subject to the conditions of the Merger
Agreement (the "Merger"). Merger Sub will be the surviving corporation in the
Merger (the "Surviving Corporation") and, following the Merger, will succeed
to and assume all the rights and obligations of PST. At the Annual Meeting,
stockholders of PST also will consider and vote upon: (i) the election of two
directors to serve until consummation of the Merger (or, if the Merger is not
consummated, for a three-year term expiring at PST's 2001 annual meeting of
stockholders or until their successors have been elected and qualified), and
(ii) the ratification of the appointment of Arthur Andersen LLP as independent
public accountants for the year ending December 31, 1998 (or until
consummation of the Merger).
Pursuant to the Merger Agreement, each share of PST Common Stock, issued and
outstanding shall be converted into the right to receive (i) 0.2381 shares of
Enterprises Class A Common Stock, $0.01 par value per share (the "Enterprises
Common Stock") plus (ii) $2.71 in cash. The number of whole shares of
Enterprises Common Stock to be received by each PST stockholder as part of the
Merger Consideration will depend on the number of shares of PST Common Stock
held by the stockholder. No fractional shares of Enterprises Class A Common
Stock will be issued and cash will be paid in lieu of fractional shares. See
"SUMMARY--The Merger--Certain Considerations". There will be tax consequences
to holders of PST Common Stock and each such holder is urged to consult his or
her tax advisors for explanation of the tax consequences resulting from the
Merger. See "Summary--The Merger--Certain Federal Income Tax Considerations."
THE PST BOARD HAS UNANIMOUSLY APPROVED THE MERGER AND THE MERGER AGREEMENT,
HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, PST AND ITS STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT
HOLDERS OF SHARES OF PST COMMON STOCK VOTE FOR APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT.
This Proxy Statement/Prospectus also serves as a prospectus of Enterprises
under the Securities Act of 1933, as amended (the "Securities Act"), relating
to up to 1,100,000 shares of Enterprises Common Stock issuable in connection
with the Merger.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to stockholders of PST on or about July 31, 1998.
---------------
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED IN CONNECTION WITH THE ACQUISITION OF ENTERPRISES
COMMON STOCK PURSUANT TO THE MERGER.
THE SECURITIES TO BE ISSUED IN THE MERGER HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS,
IN CONNECTION WITH THE SOLICITATION AND THE OFFERING MADE BY THIS PROXY
STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PST, ENTERPRISES OR ANY
OTHER PERSON. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE THE
SOLICITATION OF A PROXY OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
PURCHASE, ANY SECURITIES IN ANY JURISDICTION IN WHICH SUCH SOLICITATION OR
OFFERING MAY NOT LAWFULLY BE MADE.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION
OF SECURITIES MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF ENTERPRISES OR PST SINCE THE
DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
---------------
The date of this Proxy Statement/Prospectus is July 30, 1998.
<PAGE>
AVAILABLE INFORMATION
Enterprises and PST are each subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In
accordance with the Exchange Act, Enterprises and PST file proxy statements,
reports and other information with the Securities and Exchange Commission (the
"SEC"). This filed material can be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, NW,
Washington, D.C. 20549, and at the Commission's Regional Offices at 7 World
Trade Center, Suite 1300, New York, New York 10048 and CitiCorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. The filed
material also is available to the public from commercial document retrieval
services and at the web site maintained by the SEC at "http://www.sec.gov."
Copies of such material also can be obtained by mail from the Public Reference
Section of the SEC, 450 Fifth Street, NW, Washington, D.C. 20549, at
prescribed rates. In addition, such material can be inspected at the offices
of the National Association of Securities Dealers, Inc. (the "NASD"), 1735 K
Street, NW Washington, D.C. 20006.
Enterprises has filed a Registration Statement on Form S-4 (the
"Registration Statement") with the SEC under the Securities Act of 1933, as
amended (the "Securities Act") with respect to the Enterprises Common Stock to
be issued upon consummation of the Merger. This Proxy Statement/Prospectus
does not contain all the information set forth in the Registration Statement
and the exhibits thereto, certain portions of which have been omitted as
permitted by the rules and regulations of the SEC. Copies of the Registration
Statement are available from the SEC, upon payment of prescribed rates. For
further information, reference is made to the Registration Statement and the
exhibits filed therewith. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated by reference in this
Proxy Statement/Prospectus relating to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or such other document, each
such statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Enterprises with the SEC are incorporated
by reference in this Proxy Statement/Prospectus: (i) Enterprises' Transition
Report on Form 10-K for the nine month period ended December 31, 1997, (ii)
Enterprises' Quarterly Report on Form 10-Q for the quarter ended March 31,
1998, (iii) Enterprises' Current Reports on (a) Form 8-K dated January 29,
1998 (filed February 13, 1998) and (b) Form 8-K/A dated April 14, 1998 (filed
April 14, 1998) and (iv) the description of Enterprises Common Stock set forth
in Enterprises' registration statement filed pursuant to Section 12 of the
Exchange Act, and any amendment or report filed for the purpose of updating
any such description.
A COPY OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE (EXCLUDING EXHIBITS
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO THE
INFORMATION INCORPORATED HEREIN) THAT ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH WILL BE PROVIDED BY FIRST-CLASS MAIL WITHOUT CHARGE TO EACH PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS
DELIVERED, UPON ORAL OR WRITTEN REQUEST OF ANY SUCH PERSON. WITH RESPECT TO
ENTERPRISES DOCUMENTS, REQUESTS SHOULD BE DIRECTED TO MR. RAY M. HARLIN,
U.S.XPRESS ENTERPRISES, INC., CHIEF FINANCIAL OFFICER, 2931 SOUTH MARKET
STREET, CHATTANOOGA, TENNESSEE 37410 (TELEPHONE (423) 697-7377).
All reports filed by Enterprises and all definitive proxy or information
statements filed by Enterprises pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Proxy
Statement/Prospectus and prior to the date of the Annual Meeting shall be
deemed to be incorporated by reference into this Proxy Statement/Prospectus
from the dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated in this Proxy
Statement/Prospectus shall be deemed to be modified or superseded for purposes
of this Proxy Statement/Prospectus to the extent that a
1
<PAGE>
statement contained herein or in any other subsequently filed document that
also is or is deemed to be incorporated by reference modifies or supersedes
such statement.
All information contained in this Proxy Statement/Prospectus relating to
Enterprises has been supplied by Enterprises, and all information relating to
PST has been supplied by PST.
FORWARD-LOOKING STATEMENTS
This Proxy Statement/Prospectus, including the information incorporated by
reference herein, information included in, or incorporated by reference from,
future filings by Enterprises with the Commission, as well as information
contained in written material, press releases and oral statements issued by or
on behalf of Enterprises or PST, contains, or may contain, certain statements
that may be deemed to be "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Such
"forward looking statements" include information relating to, among other
matters, analysis, including the opinion from the independent financial
advisor to PST's Board of Directors as to the fairness from a financial point
of view of the Merger Consideration to the PST Stockholders, based on
forecasts of future results and estimates of amounts not yet determinable, and
other items. Such forward-looking statements also relate to Enterprises' and
PST's future prospects, developments and business strategies for their
operations and synergies that are possible from the Merger. These forward-
looking statements are identified by their use of terms and phrases, such as
"expect", "estimate", "project", "believe", and similar terms and phrases.
Such forward-looking statements are contained in various sections of this
Proxy Statement/Prospectus and in the documents incorporated herein by
reference. These statements are based on certain assumptions and analyses made
by Enterprises or PST in light of their experience and perception of
historical trends, current conditions, expected future developments and other
factors they believe are appropriate under the circumstances, and involve
risks and uncertainties that may cause actual future activities and results of
operations to be materially different from that suggested or described in this
Proxy Statement/Prospectus. These risks include, but are not limited to, the
risks described in the section entitled "Risk Factors". Investors are
cautioned that any such statements are not guarantees of future performance.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary from those
expected, estimated or projected.
2
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in this
Proxy Statement/Prospectus. reference is made to, and this summary is qualified
in its entirety by, the more detailed information contained elsewhere in this
Proxy Statement/Prospectus, in the attached annexes and in the documents
incorporated herein by reference. PST stockholders are urged to read carefully
this Proxy Statement/Prospectus and the attached annexes in their entirety.
ANNUAL MEETING
This Proxy Statement/Prospectus is being furnished to PST stockholders in
connection with the solicitation of proxies by the PST Board for use at the
Annual Meeting to be held on August 28, 1998 at 9:00 a.m., local time, at
Little America Hotel & Towers, Uintah Room, 500 South Main Street, Salt Lake
City, Utah 84101. Only holders of record of PST Common Stock at the close of
business on July 29, 1998 (the "Record Date"), will be entitled to notice of,
and to vote at, the Annual Meeting. At the Annual Meeting, holders of PST
Common Stock will be asked to consider and vote upon the approval and adoption
of the Merger Agreement, a copy of which is attached as Annex I to this Proxy
Statement/Prospectus, pursuant to which PST will be merged with and into Merger
Sub. Merger Sub will be the Surviving Corporation in the Merger and, following
the Merger, will succeed to and assume all the rights and obligations of PST.
At the Annual Meeting, stockholders of PST also will consider and vote upon:
(i) the election of two directors to serve until consummation of the Merger
(or, if the Merger is not consummated, for a three-year term expiring at PST's
2001 annual meeting of stockholders or until their successors have been elected
and qualified) and (ii) the ratification of the appointment of Arthur Andersen
LLP as independent public accountants for the year ending December 31, 1998 (or
until consummation of the Merger). See "THE ANNUAL MEETING--Annual Meeting."
VOTE REQUIRED
The close of business on July 29, 1998 has been fixed as the Record Date for
determining the holders of PST Common Stock who are entitled to receive notice
of and to vote at the Annual Meeting. As of the Record Date, there were
4,269,482 shares of PST Common Stock outstanding, of which 2,258,379 shares
(approximately 53% of the outstanding shares of PST Common Stock) were
beneficially owned by directors and executive officers of PST and their
affiliates. The holders of record of shares of PST Common Stock on the Record
Date are entitled to one vote per share of PST Common Stock on each matter
submitted to a vote at the Annual Meeting. However, Kenneth R. Norton, Chairman
and Chief Executive Officer of PST, currently owns 42,700 shares of PST Common
Stock which are "control shares" under the Utah Revised Business Corporation
Act ("URBCA") and are not currently entitled to vote. The presence in person or
by proxy of the holders of shares representing a majority of the shares of PST
Common Stock issued and outstanding and entitled to vote is necessary to
constitute a quorum for the transaction of business at the Annual Meeting. The
bylaws of PST require the affirmative vote of the holders of two-thirds (2/3)
of the outstanding shares of PST Common Stock for approval and adoption of the
Merger Agreement ("Stockholder Approval"). An abstention from voting or a
broker non-vote (an indication by a broker that it does not have discretionary
authority to vote on a particular matter), while counting for purposes of
determining the presence of a quorum, will have the practical effect of a vote
against approval and adoption of the Merger Agreement, since a vote to abstain
or a broker non-vote represents one fewer vote in favor of such approval and
adoption. Directors are elected by a plurality of the votes cast (e.g., the two
(2) director nominees receiving the highest number of votes cast by holders of
PST Common Stock at the Annual Meeting will be elected). Accordingly,
abstentions and broker non-votes will not affect the outcome of the election of
directors. The ratification of the selection of an independent public
accountant and any other matter presented for approval by the stockholders will
be approved, in accordance with the URBCA, if the votes cast in favor of a
matter exceed the votes cast opposing such matter. As a result, abstentions and
broker non-votes will not affect the outcome of these matters. See "THE ANNUAL
MEETING--Record Date; Shares Entitled to Vote; Vote Required."
3
<PAGE>
Pursuant to the terms of Voting Agreements dated as of July 7, 1998 (the
"Voting Agreements") between Enterprises and Kenneth R. Norton (who is a PST
director and officer and the largest holder of PST Common Stock), and between
Enterprises and The Bank of New York, Mr. Norton and the Bank of New York have
agreed (in their capacities as stockholders), among other things, to vote (or
cause to be voted) the shares of PST Common Stock which they are entitled to
vote at the Annual Meeting, without limiting any such stockholders' right to
vote such shares on other matters that may be submitted to a stockholder vote,
(i) in favor of approval and adoption of the Merger Agreement, approval of the
Merger and the approval of the other transactions contemplated by the Merger
Agreement and (ii) against any transaction that would frustrate the Merger
Agreement, the Merger or any of the other transactions contemplated by the
Merger Agreement. On the Record Date, Mr. Norton was entitled to vote 1,404,073
shares (approximately 33% of the outstanding shares) of PST Common Stock
entitled to be voted and the Bank of New York was entitled to vote 774,000
shares (approximately 18% of the outstanding shares) of PST Common Stock. The
general effect of the Voting Agreements is to increase the likelihood that
Stockholder Approval will be obtained. Enterprises held on the Record Date
206,800 shares (approximately 4.8% of the outstanding shares) of PST Common
Stock and intends to vote these shares in favor of the approval and adoption of
the Merger Agreement. Enterprises, Mr. Kenneth R. Norton and the Bank of New
York were entitled to vote in the aggregate on the Record Date approximately
55.8% of the outstanding shares of PST Common Stock. Consequently, it is
anticipated that Stockholder Approval will be obtained if holders of additional
shares of PST Common Stock representing approximately 11% of the outstanding
shares of PST Common Stock vote in favor of approval and adoption of the Merger
Agreement. Additionally, subject to the requirements of the HSR Act discussed
herein under "THE MERGER--Regulatory Approvals Required," Enterprises may elect
to purchase additional shares of PST Common Stock in open market transactions
from time to time between the date of this Proxy Statement/Prospectus and the
Record Date for the Annual Meeting. See "THE MERGER--Interests of Certain
Persons in the Merger" and "THE MERGER AGREEMENT--The Voting Agreements."
No approval by stockholders of Enterprises is required to effect the Merger.
THE MERGER
The Parties. Enterprises, a Nevada corporation, provides transportation and
logistics services in the United States, Canada and Mexico. Enterprises is one
of the ten largest truck load carriers in the United States. It is a leader in
the adoption of proven new technologies as a means of reducing costs and
providing better service to its customers.
The principal executive offices of Enterprises are located at 2931 South
Market Street, Chattanooga, Tennessee 37410. The telephone number is (423) 697-
7377.
Merger Sub, a Nevada corporation, is a wholly owned subsidiary of Enterprises
formed solely for the purposes of the Merger.
PST Vans, Inc., a Utah corporation, is a truck load carrier focused on
serving three markets in the United States: transcontinental, intrawest and
midwest-southeast. The Company operates a fleet of standardized, modern
tractors and 53-foot dry van trailers and focuses its marketing efforts on
serving as a core carrier for high volume, service-sensitive customers.
PST's principal executive office is located at 1901 West 2100 South, Salt
Lake City, Utah 84119, and its telephone number is (801) 975-2500.
Merger Consideration. At the Effective Time (as defined in the Merger
Agreement), each share of PST's Common Stock, $.001 par value (the "PST Common
Stock"), issued and outstanding immediately prior to the Effective Time (other
than any shares of such stock held by Enterprises or PST (or by subsidiaries of
either), which shall be canceled, and other than Dissenting Shares, if any, as
defined in the Merger Agreement) will be converted into the right to receive
(i) 0.2381 shares of Enterprises Class A Common Stock, $0.01 par value per
share (the "Enterprises Common Stock") plus (ii) $2.71 in cash.
4
<PAGE>
No fraction of a share of Enterprises Common Stock will be issued. Each
holder of PST Common Stock who would otherwise be entitled to receive a
fractional share of Enterprises Common Stock will instead receive cash in an
amount equal to the fractional part of a share multiplied by the average
Closing Price of Enterprises Common Stock on the Nasdaq National Market for the
twenty (20) trading day period ending on the day prior to the Closing Date (the
"20-Day Average Price"). All cash payments will be rounded to the nearest cent.
The exchange agent for the payment of the Merger Consideration in connection
with the Merger (the "Exchange Agent") will be BankBoston, N.A. SEE "THE
MERGER--EXCHANGE PROCEDURES" AND "THE MERGER--MERGER CONSIDERATION."
Certain Considerations. In considering whether to vote in favor of the
adoption of the Merger Agreement, PST stockholders should consider that under
the terms of the Merger Agreement, each share of PST Common Stock will be
exchanged for Merger Consideration consisting of 0.2381 shares of Enterprises
Common Stock and $2.71 in cash. On July 7, 1998, the date on which the Merger
Agreement was signed and the ratio fixing the Merger Consideration was
determined, the Closing Price per share of the Enterprises Common Stock on the
Nasdaq National Market was $16.875. Because the exchange ratio determining the
Merger Consideration is fixed, the interest of PST stockholders in Enterprises
will not change even though the price of the Enterprises Common Stock at the
time of the Merger may differ from the price of the Enterprises Common Stock on
July 7, 1998. In particular, PST stockholders will not receive a greater
interest in Enterprises if Enterprises Common Stock at the time of the Merger
is less than $16.875. The price of the Enterprises Common Stock could be
different at the time of the Merger from the price of the Enterprises Common
Stock on July 7, 1998 as a result of changes in the business, operations or
prospects of Enterprises, regulatory considerations, general market and
economic considerations and other factors. PST stockholders are urged to obtain
current market quotations for shares of the Enterprises Common Stock and PST
Common Stock.
Subject to the satisfaction of the conditions to the obligations of each
party to consummate the Merger set forth in the Merger Agreement, Enterprises
and PST intend to consummate the Merger as soon as practicable following the
Annual Meeting. Although Enterprises and PST have no reason to believe that the
Effective Time will not occur promptly after the Annual Meeting, there can be
no assurance as to when the Merger will be consummated. If, for example, PST
and/or Enterprises receive requests for additional information from the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") (see "OTHER MATTERS--Regulatory Approvals Required"),
the consummation of the Merger could be delayed. Because the Effective Time may
occur at a later date than the date of the Annual Meeting, there can be no
assurance that the price of the Enterprises Common Stock on the date of the
Annual Meeting will be indicative of the price of the Enterprises Common Stock
at the Effective Time.
Certain Federal Income Tax Considerations. A stockholder of PST generally
will recognize capital gain on the cash portion of the Merger Consideration
equal to the lesser of (i) the amount of cash received, or (ii) the excess of
the total value of the Merger Consideration received over the stockholder's tax
basis in the shares of PST Common Stock surrendered. See "THE MERGER--Certain
Federal Income Tax Considerations" for a more detailed description of the above
matters and information with respect to the applicability of the foregoing to
certain taxpayers subject to special treatment. ALL STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS.
Recommendation of the PST Board and Reasons for the Merger. THE PST BOARD HAS
UNANIMOUSLY DETERMINED THAT THE TERMS OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST INTERESTS OF,
PST STOCKHOLDERS. ACCORDINGLY, THE PST BOARD HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF PST VOTE
FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. In reaching its decision to
5
<PAGE>
approve the Merger Agreement and recommend the Merger, the PST Board considered
a number of factors. See "THE MERGER--Background of the Merger" and "THE
MERGER--Recommendation of the PST Board and Reasons for the Merger." For a
discussion of the interests that certain directors and executive officers of
PST have with respect to the Merger that are different from, or in addition to,
the interests of stockholders of PST generally, see "THE MERGER--Interests of
Certain Persons in the Merger." Such interests, together with other relevant
factors, were considered by the PST Board in making its recommendation and
approving the Merger Agreement. See "THE MERGER--Background of the Merger" and
"THE MERGER--Recommendation of the PST Board and Reasons for the Merger." Under
the Merger Agreement, Enterprises has the right to terminate the Merger
Agreement should the PST Board withdraw (or modify in any manner adverse to
Enterprises) its approval or recommendation of the Merger and the Merger
Agreement at any time prior to Closing. Additionally, the Merger Agreement
provides that the PST Board shall not approve, accept or recommend any offer
from any Third Party with respect to any other merger, consolidation or sale of
substantially all of the assets of PST that will treat Enterprises or shares of
PST Common Stock owned by Enterprises any less favorably than the other
stockholders of PST and the shares of PST Common Stock held by such
stockholders. See "THE MERGER AGREEMENT--Business of PST Pending the Effective
Time of the Merger" and "THE MERGER AGREEMENT--Termination, Amendment and
Waiver."
Opinion of Financial Advisor. On June 16, 1998, Morgan Keegan & Company, Inc.
("Morgan Keegan") delivered its oral opinion to the PST Board that, as of such
date, the Merger Consideration to be received by holders of PST Common Stock
pursuant to the Merger Agreement was fair to such stockholders. Morgan Keegan
subsequently confirmed its oral opinion by delivery of a written opinion dated
July 27, 1998.
The full text of the written opinion of Morgan Keegan dated as of the date of
this Proxy Statement/Prospectus, which sets forth assumptions made, matters
considered and limitations on the review undertaken in connection with the
opinion, is attached hereto as Annex III and is incorporated herein by
reference. HOLDERS OF SHARES OF PST COMMON STOCK ARE URGED TO READ SUCH OPINION
IN ITS ENTIRETY. See "THE MERGER--Opinion of Financial Advisor."
Interests of Certain Persons in the Merger. As of the Record Date, directors
and executive officers of PST and their affiliated entities owned (i) 2,258,379
shares of PST Common Stock, for which they will receive the same consideration
as other PST stockholders and (ii) unexercised options to acquire 196,500
shares of PST Common Stock, which they will be permitted to exercise in full
(should they elect to do so) simultaneously with the Merger, reflecting
accelerated vesting of any presently unvested installments of such options as
described below under "PST STOCK OPTIONS." See "THE MERGER--Interests of
Certain Persons in the Merger." Pursuant to the terms of the Voting Agreements
between Enterprises and Kenneth R. Norton (who is a PST Director and Officer
and the largest holder of PST Common Stock), and between Enterprises and The
Bank of New York, Mr. Norton and The Bank of New York have agreed to vote their
shares of PST Common Stock in favor of approval and adoption of the Merger
Agreement, approval of the Merger and the approval of other transactions
contemplated by the Merger Agreement and against any transaction that would
frustrate the Merger Agreement, the Merger or any of the other transactions
contemplated by the Merger Agreement. See "THE MERGER AGREEMENT--The Voting
Agreements." Pursuant to the terms of a noncompetition and consulting agreement
between Mr. Norton and Enterprises (the "Noncompetition and Consulting
Agreement"), Mr. Norton will provide certain consulting services for
Enterprises and agree not to compete with Enterprises for a period of five (5)
years after the Closing Date. See "THE MERGER AGREEMENT--The Noncompetition and
Consulting Agreement."
PST Stock Options. Under the terms of the Merger Agreement, all options to
purchase PST Common Stock outstanding as of the date of the Merger Agreement,
whether vested or unvested, will be deemed immediately vested and exercisable
in full at the Effective Time of the Merger. Upon the exercise of any option to
purchase PST Common Stock, the holder thereof will receive the Merger
Consideration. The transmittal
6
<PAGE>
materials to be forwarded by the Exchange Agent to holders of PST Common Stock
and/or options to purchase such stock following the Effective Time will contain
instructions with respect to the exercise of such options in exchange for the
Merger Consideration in accordance with all of the other original terms of such
options. Any option to purchase PST Common Stock which is not exercised within
six (6) months of the Effective Time of the Merger will be deemed null and void
and will not thereafter be exercisable.
Dissenters' Rights. Holders of record of PST Common Stock who comply with the
applicable statutory procedures summarized in "THE MERGER--Dissenters' Rights"
may be entitled to appraisal rights under Section 16-10a-1302 of the URBCA. PST
and Enterprises reserve the right to challenge any assertion by any stockholder
of PST that appraisal rights under Section 16-10a-1302 are applicable to the
Merger. A holder of PST Common Stock electing to demand such an appraisal must
deliver to PST, before the date of the Annual Meeting and in accordance with
the procedures described herein, a written demand for appraisal of such
holder's shares of PST Common Stock. See "THE MERGER--Dissenters' Rights."
Regulatory Approvals Required. Consummation of the Merger is subject to the
expiration or termination of the relevant waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Both
Enterprises and PST filed notification and report forms under the HSR Act by
July 17, 1998. Unless extended by a request for additional information or
unless early termination is granted, the waiting period under the HSR Act will
expire at 11:59 P.M. Eastern Time on August 16, 1998. See "THE MERGER--
Regulatory Approvals Required."
Conditions To The Merger. The obligations of Enterprises and PST to
consummate the Merger are subject to various conditions, including, without
limitation, obtaining Stockholder Approval and regulatory approvals, receipt of
written confirmation (as of the Closing) of Morgan Keegan's opinion that the
Merger Consideration to be received by holders of PST Common Stock pursuant to
the Merger Agreement is fair to such stockholders, and the absence of any
injunction or other legal restraint preventing the consummation of the Merger.
See "THE MERGER AGREEMENT--Conditions to the Consummation of the Merger."
No Solicitation. Under the Merger Agreement, PST has agreed that it will not
initiate, solicit or encourage any proposal or offer to acquire all or any
substantial part of the business and properties or capital stock of PST.
However, PST may furnish information to a corporation, person or other entity
(a "Third Party") which expresses interest in making an offer or proposal to
acquire PST and which, in the opinion of PST, has the financial ability to
consummate such an acquisition, as long as PST has not initiated the offer or
proposal and has not solicited or encouraged the Third Party to make such an
offer. After receiving such an expression of interest, PST may negotiate with
and enter into an appropriate agreement with the Third Party if the PST Board
believes in good faith, after consultation with its financial advisor, that the
actions may result in a superior financial transaction for the PST stockholders
and if outside counsel to PST provides a written opinion to the PST Board to
the effect that the failure to furnish such information, or to negotiate or
enter into appropriate agreements with the Third Party could subject PST's
directors to a substantial risk of liability for breach of their fiduciary
duties or for failure to conform to the requirements of the securities laws.
See "THE MERGER AGREEMENT--No Solicitation."
Termination. The Merger Agreement may be terminated, and the Merger
contemplated thereby may be abandoned, at any time prior to the Effective Time,
whether before or after receipt of Stockholder Approval, (i) by mutual written
consent of Enterprises and PST; (ii) by either Enterprises or PST, (a) if the
Merger is not consummated by October 31, 1998 (the "Termination Date"), (b) if
Stockholder Approval is not obtained at the Annual Meeting, or (c) if certain
legal restraints or prohibitions are in effect resulting from any suit, action
or proceeding by any court of competent jurisdiction; (iii) by Enterprises, if
(a) the PST Board withdraws or modifies in a manner adverse to Enterprises its
approval or recommendation of the Merger or the Merger Agreement, (b) there are
certain breaches of, or inaccuracies contained in, the representations,
warranties, covenants or agreements of PST and such breaches or inaccuracies
(in the case of a covenant or agreement) are
7
<PAGE>
not cured within fifteen (15) business days following receipt of a notice of
such breach or (in the case of a representation or warranty) by their nature
cannot be cured prior to the Termination Date (unless such breaches or
inaccuracies have not had or would not reasonably be expected to have a "PST
Material Adverse Effect" as defined in the Merger Agreement); or (c) a PST
Material Adverse Effect has occurred; or (iv) by PST if (a) there are certain
breaches of, or inaccuracies contained in, the representations, warranties,
covenants or agreements of Enterprises and such breaches or inaccuracies (in
the case of a covenant or agreement) are not cured within fifteen (15) business
days following receipt of a notice of such breach or (in the case of a
representation or warranty) by their nature cannot be cured prior to the
Termination Date (unless such breaches or inaccuracies have not had or would
not reasonably be expected to have a material adverse effect on the business of
Enterprises taken as a whole) or (b) in accordance with certain provisions, the
PST Board authorizes PST to enter into an agreement with a Third Party with
respect to a merger of PST or the sale of substantially all of the assets of
PST or recommends approval of a tender offer or other form of business
combination. See "THE MERGER AGREEMENT--Termination, Amendment and Waiver."
Expenses; Termination Fee. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with the Merger Agreement and the
Merger will be paid by the party incurring such expenses. However, if the
Merger Agreement is terminated pursuant to the approval by the PST Board of a
competing transaction under the circumstances described above pertaining to a
Third Party offer, then PST must pay to Enterprises a termination fee of
$3,000,000 (the "Termination Fee") plus Enterprises' actual out of pocket
expenses relating to the Merger and the Merger Agreement (including, but not
limited to fees and expenses of counsel and accountants and financial
advisors), subject to a limit on such expenses of $500,000. Additionally, PST
may become obligated to pay Enterprises' actual out-of-pocket expenses (up to
$500,000) if the Merger Agreement is terminated due to other prescribed
circumstances involving the withdrawal or modification of the PST Board's
approval of the Merger Agreement or certain breaches of the covenants,
agreements, representations and warranties of PST contained in the Merger
Agreement, and Enterprises may become obligated to pay PST's actual out-of-
pocket expenses (up to $500,000) if Enterprises wrongfully refuses to close the
transactions contemplated by the Merger Agreement (excluding any refusal to
close due to the failure of any condition to Enterprises' obligations to
close). See "THE MERGER--Expenses; Termination Fee."
Accounting Treatment. The Merger will be treated as a "purchase" for
financial reporting and accounting purposes, in accordance with generally
accepted accounting principles. After the Merger, the results of operations of
PST will be included in the consolidated financial statements of Enterprises.
The purchase price (i.e., the aggregate Merger Consideration) will be allocated
based on the fair values of the assets acquired and the liabilities assumed.
Any excess of cost over fair value of the net tangible assets of PST acquired
will be recorded as goodwill and other intangible assets. Such allocations will
be made based upon valuations and other studies that have not yet been
finalized.
8
<PAGE>
MARKET PRICE DATA
Enterprises Common Stock (symbol: XPRSA) and PST Common Stock (symbol: PSTV)
are both quoted on the Nasdaq National Market.
The following table sets forth the last reported sales prices per share of
PST Common Stock and Enterprises Common Stock on the Nasdaq National Market on
July 6, 1998, the last trading day before announcement of the Merger Agreement,
and on July 29, 1998, the last trading day prior to the date of this Proxy
Statement/Prospectus:
<TABLE>
<CAPTION>
PST COMMON STOCK ENTERPRISES COMMON STOCK
---------------- ------------------------
<S> <C> <C>
July 6 , 1998...................... $6.125 $16.75
July 29, 1998...................... 6.063 15.50
</TABLE>
SUMMARY FINANCIAL AND OPERATING DATA
The following summary financial and operating data is being provided to
assist in analyzing the financial aspects of the Merger. The summary financial
data for Enterprises as of March 31, 1995, 1996 and 1997 and December 31, 1997
and for the periods then ended have been derived from Enterprises' audited
consolidated financial statements. The summary financial and operating data for
Enterprises as of December 31, 1996 and March 31, 1997 and 1998 and for the
periods then ended are unaudited. The results of the three months ended March
31, 1998 are not necessarily indicative of the results expected for the full
year. The summary financial data for PST has been derived from PST's audited
financial statements as of December 31, 1995, 1996 and 1997 and the years then
ended. The summary financial and operating data for PST as of March 31, 1997
and 1998 and for the three-month periods then ended are unaudited. The results
of the three months ended March 31, 1998 are not necessarily indicative of the
results expected for the full year. The information is only a summary. The
information should be read in conjunction with the historical financial
statements and accompanying notes contained in the annual, quarterly and other
reports filed by Enterprises and PST with the SEC and those included elsewhere
in this Proxy Statement/Prospectus.
9
<PAGE>
U.S. XPRESS ENTERPRISES, INC.
SUMMARY FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31, MARCH 31,
---------------------------- ------------------ --------------------
1995 1996 1997 1996 1997 (4) 1997 1998
-------- -------- -------- -------- -------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
(1)
Operating revenue:
U.S. Xpress........... $236,552 $261,533 $307,928 $228,484 $290,800 $ 79,447 $ 109,563
CSI/Crown............. 23,915 47,817 65,845 51,158 57,645 14,685 15,760
Intercompany.......... (6,136) (9,653) (10,954) (8,386) (6,173) (2,569) (1,414)
-------- -------- -------- -------- -------- --------- ---------
Consolidated.......... $254,331 $299,697 $362,819 $271,256 $342,272 $ 91,563 $ 123,909
======== ======== ======== ======== ======== ========= =========
Income from
operations............ $ 18,159 $ 5,251 $ 19,716 $ 14,736 $ 26,126 $ 4,980 $ 7,229
Income before taxes.... $ 13,557 $ 75 $ 14,236 $ 10,627 $ 21,983 $ 3,606 $ 5,475
Net income............. $ 8,263 $ 94 $ 7,878 $ 5,708 $ 13,191 $ 2,167 $ 3,282
Earnings per share--
basic................. $ 0.77 $ 0.01 $ 0.65 $ 0.47 $ 0.98 $ 0.18 $ 0.22
Weighted average number
of shares
outstanding--basic.... 10,705 12,003 12,082 12,081 13,467 12,085 15,037
Earnings per share--
diluted............... $ 0.76 $ 0.01 $ 0.65 $ 0.47 $ 0.97 $ 0.18 $ 0.22
Weighted average number
of shares
outstanding--
diluted............... 10,806 12,076 12,168 12,151 13,582 12,204 15,159
TRUCKLOAD OPERATING DATA (2)
Total revenue miles
(in thousands)........ 204,804 222,496 261,596 194,324 241,541 67,272 90,523
Tractors at end of
period................ 1,721 1,975 2,246 2,214 2,839 2,246 3,276
Average number of
tractors.............. 1,613 1,848 2,111 2,091 2,615 2,218 3,186
Trailers at end of
period................ 3,643 4,396 5,520 5,331 5,875 5,520 7,067
Average revenue per
mile.................. $ 1.14 $ 1.14 $ 1.15 $ 1.16 $ 1.16 $ 1.14 $ 1.17
Average revenue per
tractor per week...... $ 2,807 $ 2,646 $ 2,761 $ 2,794 $ 2,734 $ 2,664 $ 2,560
BALANCE SHEET DATA
Working capital........ $ 10,786 $ 19,606 $ 33,829 $ 23,097 $ 44,813 $ 33,829 $ 66,035
Total assets........... $146,070 $177,821 $178,084 $183,479 $233,777 $ 178,084 $ 315,680
Long-term debt, net of
current maturities.... $ 46,157 $ 61,789 $ 59,318 $ 65,509 $ 52,120 $ 59,318 $ 125,079
Stockholders' equity
(3)................... $ 54,082 $ 55,086 $ 63,162 $ 60,990 $128,493 $ 63,162 $ 132,114
</TABLE>
- --------
(1) Includes the results of operations of the following acquired businesses
from dates of acquisition: Victory Express, Inc. from February 1998; JTI,
Inc. from May 1997; acquired operations of Rosedale Transport, Inc. from
April 1997; the air freight service operations of Michael Lima
Transportation from July 1996; and CSI/Reeves, Inc. from August 1995. The
Company's 50% acquisition of Hall Systems in March 1994 was accounted for
under the equity method until the remaining 50% of Hall Systems was
acquired in October 1995.
(2) Average revenue per mile is net of fuel surcharges. Tractor and trailer
data includes owned and leased equipment.
(3) Reflects the sale by Enterprises of 2,500,000 shares of Class A Common
Stock in fiscal 1995 and 2,885,000 shares of Class A Common Stock in the
1997 transition period.
(4) Effective December 31, 1997, Enterprises changed its year-end to December
31 from March 31. As a result, the transition period ended December 31,
1997 is a nine-month period.
10
<PAGE>
PST VANS, INC.
SUMMARY FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------- --------------------
1995 (1) 1996 1997 1997 1998
-------- -------- -------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND
OPERATING DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenues.................. $164,794 $147,419 $143,737 $ 34,523 $ 35,706
-------- -------- -------- --------- ---------
Costs and expenses:
Salaries, wages and ben-
efits.................. 45,208 43,848 44,360 10,866 10,062
Purchased transporta-
tion................... 41,281 32,393 25,578 6,833 8,488
Fuel and fuel taxes..... 21,245 20,555 22,533 5,374 4,577
Revenue equipment lease
expense................ 12,224 8,022 7,576 1,843 935
Maintenance............. 8,822 7,491 8,663 1,827 2,554
Insurance and claims.... 9,315 11,942 11,384 2,871 2,167
General supplies and ex-
penses................. 5,996 5,558 5,930 1,261 1,519
Taxes and licenses...... 3,445 3,309 2,776 719 711
Communications and util-
ities.................. 3,562 3,430 2,802 895 491
Depreciation and amorti-
zation................. 8,804 13,175 11,911 3,032 2,847
(Gain) loss on sale of
equipment.............. (151) (1,614) 13 (54) (53)
Amortization of good-
will................... 272 272 272 68 68
-------- -------- -------- --------- ---------
Total costs and ex-
penses............... 160,023 148,381 143,798 35,535 34,366
-------- -------- -------- --------- ---------
Operating income (loss)... 4,771 (962) (61) (1,012) 1,340
Other income (expense):
Interest expense........ (4,283) (5,080) (4,360) (1,126) (1,134)
Other, net.............. 147 182 105 29 18
-------- -------- -------- --------- ---------
Income (loss) before pro-
vision for income taxes.. 635 (5,860) (4,316) (2,109) 224
Provision for income tax-
es....................... 251 -- -- -- --
-------- -------- -------- --------- ---------
Net income (loss)......... $ 384 $ (5,860) $ (4,316) $ (2,109) $ 224
======== ======== ======== ========= =========
Net income (loss) per
common share--basic and
diluted.................. $ .10 $ (1.39) $ (1.02) $ (0.50) $ 0.05
======== ======== ======== ========= =========
Weighted average shares
outstanding--basic....... 3,950 4,212 4,233 4,227 4,253
======== ======== ======== ========= =========
Weighted average shares
outstanding--diluted..... 3,950 4,212 4,233 4,227 4,340
======== ======== ======== ========= =========
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------- --------------------
1995(1) 1996 1997 1997 1998
-------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Average revenue per
tractor per week....... $ 2,363 $ 2,297 $ 2,408 $ 2,339 $ 2,550
Average miles per trip.. 1,133 1,204 1,181 1,197 1,308
Average revenue per to-
tal mile............... $ 1.062 $ 1.053 $ 1.065 $ 1.057 $ 1.071
Empty miles percentage.. 9.0% 9.2% 8.8% 8.85% 8.97%
Average number of trac-
tors during the year:
Company-operated...... 911 915 888 887 746
Independent contrac-
tor.................. 430 322 257 284 364
Total tractors...... 1,341 1,237 1,145 1,171 1,111
Average number of trail-
ers during the year.... 2,713 2,931 2,501 2,678 2,557
Pre-tax margin (loss)... 0.4% (4.0)% (3.0)% 0.6% (6.1)%
BALANCE SHEET DATA:
Working capital (defi-
cit)................... $ 2,935 $(9,157) $(23,431) $ (23,430) $ (21,095)
Total assets............ $108,882 $90,260 $ 79,476 $ 85,681 $ 83,371
Long-term and
capitalized lease
obligations, net of
current portion........ $ 55,687 $34,894 $ 14,739 $ 32,465 $ 22,137
Stockholders' equity.... $ 27,605 $21,772 $ 17,511 $ 19,691 $ 17,770
</TABLE>
- --------
(1) From 1989 through 1993, PST incurred substantial net losses (before
extraordinary gains). In June 1993, after PST was unsuccessful in
voluntarily restructuring its existing indebtedness, PST filed for
protection under Chapter 11 of the United States Bankruptcy Code in order
to improve its capital structure and reduce its debt service requirements
and overall indebtedness. PST's Plan of Reorganization was confirmed in
February 1994 and significantly improved PST's capital structure by
reducing the Company's debt and lowering lease and interest payments. In
March 1995, PST paid the remaining balance owing to its unsecured creditors
under the Plan of Reorganization with the exception of a few contested
unsecured claims. PST is still making payment on its priority tax claims in
accordance with its Plan of Reorganization.
12
<PAGE>
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited summary pro forma Income Statement and Other
Financial Data give effect to the Merger as it if had been consummated on
January 1, 1997. The Pro Forma Balance Sheet Data gives effect to the Merger as
if it had been consummated on March 31, 1998. The Pro Forma Financial
Information does not purport to represent what Enterprises' results of
operations or financial position actually would have been had the Merger
described herein in fact been consummated on the dates indicated or to project
the results of operations of financial positions for any future period or date.
The Pro Forma Financial Information is based upon currently available
information and certain assumptions that Enterprises' management believes are
reasonable and should be read in conjunction with the section of this Proxy
Statement/Prospectus entitled "Unaudited Pro Forma Financial Information" and
financial statements and the notes thereto included elsewhere in this document
or incorporated herein by reference.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1998
----------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Operating Revenue........................ $642,823 $159,615
Income from operations................... $ 35,922 $ 8,537
Net income............................... $ 12,819 $ 3,423
OTHER FINANCIAL DATA:
Earnings per share--basic................ $ 0.90 $ 0.21
Weighted average number of shares
outstanding--basic...................... 14,226 16,137
Earnings per share--diluted.............. $ 0.89 $ 0.21
Weighted average number of shares
outstanding--diluted.................... 14,336 16,259
<CAPTION>
MARCH 31, 1998
------------------
<S> <C> <C>
BALANCE SHEET DATA:
Total assets............................................... $407,650
Long-term debt, net of current maturities.................. $191,807
Stockholders' equity....................................... $150,682
</TABLE>
13
<PAGE>
RISK FACTORS
In addition to the other information contained in this Proxy
Statement/Prospectus, the following factors with respect to Enterprises should
be carefully considered by PST Stockholders in evaluating whether to approve
the Merger Agreement and the Merger.
UNCERTAINTIES IN INTEGRATING BUSINESS OPERATIONS AND ACHIEVING COST REDUCTIONS
The consolidation of the functions and the integration of departments,
systems and procedures of PST and Enterprises resulting from the Merger
present significant management challenges. There can be no assurance that such
actions will be successfully accomplished as rapidly as currently expected.
Moreover, although the primary purpose of such actions will be to realize cost
reductions and other operational efficiencies, there can be no assurance of
the extent to which cost reductions and efficiencies will be achieved.
Additionally, there can be no assurance that after the Merger, the Company
will retain all of its customers, drivers or owner/operators.
ECONOMIC FACTORS
The trucking industry has historically been highly cyclical as a result of
various economic factors, such as excess capacity in the industry, the
availability of qualified drivers, changes in fuel prices and the supply of
fuel, increases in fuel or energy taxes, interest rate fluctuations, insurance
costs, fluctuations in the resale value of revenue equipment, economic
recessions and downturns in customers' business cycles and shipping
requirements. Enterprises has little or no control over these economic
factors. Significant increases or rapid fluctuations in fuel or other
operating costs and interest rates, to the extent not offset by increases in
freight rates, would reduce Enterprises' profitability. Economic recessions or
downturns in customers' business cycles also could have a materially adverse
effect on the operating results of Enterprises.
AVAILABILITY OF DRIVERS
Competition for drivers is intense within the trucking industry, and
Enterprises periodically experiences difficulties in attracting and retaining
qualified drivers. There can be no assurance that Enterprises' operations will
not be affected by a shortage of qualified drivers in the future which could
result in temporary under-utilization of revenue equipment, difficulty in
meeting shipper demands and increased compensation levels for drivers.
Difficulty in attracting or retaining qualified drivers could require
Enterprises to limit its growth and could have a materially adverse effect on
Enterprises' operations.
OWNER/OPERATORS
During the last several years, PST has utilized owner/operators who, through
a contract with PST, supply one or more tractors and drivers for PST use.
Owner/operators are compensated on the basis of a fixed rate per mile and are
responsible for all expenses of operating a tractor, including wages,
benefits, fuel, maintenance, highway use taxes and debt service. The contract
between the owner/operators and PST generally is terminable by either party
upon short notice. PST's use of tractors supplied by owner/operators was
approximately 21% at December 31, 1997, approximately 36% at March 31, 1998
and approximately 30% at June 30, 1998. PST expects the number of tractors
provided by owner/operators to increase relative to the number of PST-operated
tractors during 1998. There can be no assurance that PST will retain any or
all of its owner/operators after the Merger.
COMPETITION
The trucking industry is highly competitive and fragmented and includes
numerous regional, interregional and national truckload carriers, none of
which dominates the market. Enterprises also competes with logistics providers
and alternative forms of surface transportation, such as intermodal
transportation, railroads and air freight carriers, particularly in the longer
haul segments of its business. Historically, this competition has created
downward pressure on the truckload industry's pricing structure. Competition
for the freight transported by
14
<PAGE>
Enterprises is based on service, efficiency, the ability to meet shipping
deadlines and freight rates. Prolonged weakness in the freight markets or
downward pressure on freight rates could adversely affect Enterprises' results
of operations or financial condition. Some truckload carriers and many
railroad companies have greater financial resources, operate more equipment
and transport more freight than Enterprises.
RISKS RELATED TO ENTERPRISES' GROWTH STRATEGY
Enterprises' growth strategy includes the acquisition and deployment of
additional revenue equipment and the expansion and development of its national
operations and of its regional operations beyond the Midwestern, Western and
Southeastern United States. These expanded operations will require the
commitment of additional revenue equipment and personnel, as well as
management resources, for future development.
Enterprises' strategy for continued growth also includes the continued
acquisition of small and medium-sized transportation companies. Enterprises
will face competition from various transportation companies or other third
parties for future acquisition opportunities. There can be no assurance that
Enterprises can successfully acquire additional companies in the future. Any
future acquisitions by Enterprises are likely to result in additional debt and
amortization of goodwill and intangible assets, which could adversely affect
Enterprises' profitability, or could involve the potentially dilutive issuance
of additional equity securities. In addition, acquisitions involve numerous
risks, including difficulties in assimilating the acquired company's
operations, the diversion of management's attention from other business
concerns, risks of entering markets in which Enterprises has little or no
direct experience and the potential loss of customers, key employees and
drivers of the acquired company, any of which could have a materially adverse
effect on Enterprises' business and operating results. Enterprises does not
have any commitments with respect to any other acquisitions as of the date of
this Proxy Statement/Prospectus.
SEASONALITY
In the trucking industry, revenue generally shows a seasonal pattern as
customers reduce shipments during and after the winter holiday season and its
inherent weather variations. While Enterprises has reduced the seasonality of
its business by obtaining new customers with more balanced shipping patterns,
Enterprises' operating expenses have historically been higher in the winter
months, due primarily to decreased fuel efficiency and increased maintenance
costs for revenue equipment in colder weather.
ACQUISITION OF REVENUE EQUIPMENT
Enterprises' growth is dependent, in part, on its ability to acquire and
deploy additional revenue equipment on a timely basis. Delays in the
availability of equipment could occur due to a number of factors beyond
Enterprises' control, including equipment and supply shortages and work
stoppages at the equipment supplier. Any delay or interruption in the
availability of equipment in the future could have a materially adverse effect
on Enterprises' operations and could force it to curtail its plans for growth.
Currently, Freightliner and Wabash supply all of Enterprises' requirements for
tractors and trailers, respectively.
CAPITAL REQUIREMENTS
The trucking industry is capital intensive. Enterprises depends on operating
leases, lines of credit, secured equipment financing and cash flows from
operations to finance the expansion and maintenance of its modern and cost-
efficient revenue equipment and facilities. If Enterprises were unable in the
future to enter into acceptable operating or capital lease arrangements, raise
additional equity or borrow sufficient funds, it would be forced to limit its
growth and operate its revenue equipment for longer periods, which could
adversely affect Enterprises' operating results.
FUEL
Fuel is one of Enterprises' largest operating expenses. Fuel prices tend to
fluctuate, and Enterprises hedges against such fluctuations only on a limited
basis. Any increase in fuel taxes or in fuel prices, to the extent not
15
<PAGE>
offset by freight rate increases or fuel surcharges to customers, or any
interruption in the supply of fuel, could have a materially adverse effect on
Enterprises' operating results because Enterprises bears the risk of changes
in operating costs. Generally, Enterprises has historically been able to
offset significant increases in fuel prices through fuel surcharges to its
customers, but there can be no assurance that Enterprises will be able to do
so in the future. More than half of Enterprises' business volume provides for
fuel surcharges at negotiated levels.
REGULATION
Enterprises is regulated by the United States Department of Transportation
("DOT") and by various state agencies. These regulatory authorities exercise
broad powers, generally governing activities such as authorization to engage
in motor carrier operations, safety, financial reporting, and certain mergers,
consolidations and acquisitions. The trucking industry is subject to possible
regulatory and legislative changes (such as increasingly stringent
environmental regulations or limits on vehicle weight and size) that may
affect the economics of the industry by requiring changes in operating
practices or by affecting the cost of providing truckload services. In
addition, Enterprises' operations are subject to various environmental laws
and regulations dealing with underground fuel storage tanks, the
transportation and handling of hazardous materials and discharge of
stormwater. If Enterprises were to be involved in a spill or accident
involving hazardous substances or if Enterprises were found to be in violation
of applicable laws or regulations, Enterprises' business and operating results
could be materially adversely affected.
DEPENDENCE ON CERTAIN CUSTOMERS
For the nine-months ended December, 1997, Enterprises' 25, 10 and 5 largest
customers accounted for 34.7%, 21.9% and 15.1% of revenues, respectively.
Enterprises does not have long-term contractual relationships with its
customers, and there can be no assurance that Enterprises' relationships with
its largest customers will continue. A reduction in or termination of services
provided by Enterprises to one or more large customers could have a materially
adverse effect on Enterprises' business and operating results.
CLAIMS EXPOSURE; INSURANCE
Prior to December 31, 1996, Enterprises was self-insured for personal injury
and property damage in the amount of $500,000 per occurrence and could become
subject to one or more as yet unasserted claims as a result of accidents which
occurred prior to that date, which, if decided adversely to Enterprises, could
have a materially adverse effect on Enterprises' operating results.
Enterprises' effective insurance costs also could increase significantly as a
result of adverse claims experience or as a result of general increases in
insurance premiums.
Prior to July 1, 1995, PST was self-insured for personal injury and property
damage in an amount of up to $500,000 per occurrence and for the twelve month
period ended July 1, 1996, PST was self-insured for personal injury and
property damage in the amount of $50,000 per occurrence. If a claim is
asserted as a result of an accident that is decided adversely to PST, it could
have a materially adverse effect on PST's operating results. PST's effective
insurance costs also could increase significantly as a result of adverse
claims experience or as a result of general increases in insurance premiums.
RELIANCE ON AGENTS AND INDEPENDENT CONTRACTORS
PST relies upon the services of independent commissioned agents to market
its transportation services, to act as intermediaries with its customers, and
to recruit independent contractors. Contracts with agents and independent
contractors are, in most cases, terminable upon short notice by either party.
Although PST believes its relationships with agents and independent
contractors are good, there can be no assurance that the post-merger company
will continue to be successful in retaining its agents and independent
contractors or that agents and independent contractors who terminate their
contracts can be replaced by equally qualified persons. Furthermore, since the
agents have the primary relationship with customers and the day-to-day
relationship with the independent contractors, it can be expected that some
customers and independent contractors will terminate their relationship with
PST whenever an agent terminates his relationship with PST.
16
<PAGE>
DEPENDENCE ON MANAGEMENT
The success of Enterprises is highly dependent on the continued services of
Enterprises' senior management team, particularly Max L. Fuller and Patrick E.
Quinn, Enterprises' Co-Chairmen of the Board, neither of whom has an
employment agreement with Enterprises. The loss of either or both of their
services could have a materially adverse effect on Enterprises. In addition,
Enterprises' continued growth depends on its ability to attract and retain
skilled management and other employees. There can be no assurance that
Enterprises will be able to attract and retain additional qualified management
or other employees in the future.
VOTING RIGHTS OF CLASS A AND CLASS B COMMON STOCK; VOTING CONTROL BY PRINCIPAL
STOCKHOLDERS
The voting rights of the Enterprises Common Stock (which is its Class A
Common Stock) are limited by Enterprises' Amended and Restated Articles of
Incorporation ("Restated Articles"). On all matters with respect to which
Enterprises' stockholders have a right to vote, including the election of
directors, each share of Enterprises Common Stock is entitled to one vote,
while each share of Class B Common Stock is entitled to two votes. Except as
otherwise required by law or expressly provided in the Restated Articles, the
Enterprises Common Stock and Class B Common Stock vote together as a single
class. Class B Common Stock can be converted into shares of Enterprises Common
Stock on a share-for-share basis at the election of the holder and will be
automatically converted to shares of Enterprises Common Stock upon transfer,
except certain transfers among existing holders of Class B Common Stock and
their respective immediate family members.
As of the date of the Proxy Statement/Prospectus, Messrs. Fuller and Quinn
own approximately 38.4% of the outstanding shares of Enterprises' Common Stock
and all of the outstanding shares of Enterprises' Class B Common Stock, which
together represent approximately 59.1% of the total voting power of both
classes of Common Stock. It is anticipated that, following consummation of the
Merger (assuming the issuance of an additional 1,000,000 shares of Enterprises
Common Stock), Messrs. Fuller and Quinn will continue to own approximately
35.5% of the outstanding shares of Enterprises Common Stock and all of the
outstanding shares of Enterprises' Class B Common Stock, representing
approximately 56.0% of the total voting power of both classes of such stock.
As long as Messrs. Fuller and Quinn control a majority of the voting stock of
Enterprises, they will be able, acting together, to elect the entire Board of
Directors of Enterprises and to determine the outcome of all matters involving
a stockholder vote.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement/Prospectus including the information incorporated by
reference herein, information included in, or incorporated by reference from,
future filings by Enterprises or PST with the Commission, as well as
information contained in written material, press releases and oral statements
issued by or on behalf of Enterprises or PST, contains, or may contain,
certain statements that may be deemed to be "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Such "forward-looking statements" include information relating
to, among other matters, analysis, including opinions from independent
financial advisers to PST's Board of Directors as to the fairness from a
financial point of view of the Merger Consideration to the PST Stockholders,
based on forecasts of future results and estimates of amounts not yet
determinable, and other items. Such forward-looking statements also relate to
Enterprises' and PST's future prospects, developments and business strategies
for their operations and synergies that are possible from the Merger. These
forward-looking statements are identified by their use of terms and phrases,
such as "expect", "estimate", "project", "believe", and similar terms and
phrases. Such forward-looking statements are contained in various sections of
this Proxy Statement/Prospectus and in the documents incorporated herein by
reference. These statements are based on certain assumptions and analyses made
by Enterprises or PST in light of their experience and perception of
historical trends, current conditions, expected future developments and other
factors they believe are appropriate under the circumstances, and involve
risks and uncertainties that may cause actual future activities and results of
operations to be materially different from that suggested or described in this
Proxy Statement/Prospectus. These risks include, but are not limited to, the
risks described in the section entitled "Risk Factors". Investors are
cautioned that any such statements are not guarantees of future performance.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary from those
expected, estimated or projected.
17
<PAGE>
THE ANNUAL MEETING
ANNUAL MEETING
This Proxy Statement/Prospectus is being furnished to PST stockholders in
connection with the solicitation of proxies by the PST Board for use at the
Annual Meeting to be held on August 28, 1998 at 9:00 a.m., local time, at
Little America Hotel & Towers, Uintah Room, 500 South Main Street, Salt Lake
City, Utah 84101. Only holders of record of PST Common Stock at the close of
business on the Record Date will be entitled to notice of, and to vote at, the
Annual Meeting. At the Annual Meeting, holders of PST Common Stock will be
asked to consider and vote upon the approval and adoption of the Merger
Agreement, a copy of which is attached as Annex I to this Proxy
Statement/Prospectus, pursuant to which PST will be merged with and into
Merger Sub. Merger Sub will be the Surviving Corporation in the Merger and,
following the Merger, will succeed to and assume all the rights and
obligations of PST. Holders of PST Common Stock also will consider and vote
upon: (i) the election of two directors to serve until consummation of the
Merger (or, if the Merger is not consummated, for a three-year term expiring
at PST's 2001 annual meeting of stockholders or until their successors have
been elected and qualified), and (ii) the ratification of the appointment of
Arthur Andersen LLP as independent public accountants for the year ending
December 31, 1998 (or until consummation of the Merger), and will transact
such other business as may properly come before the Annual Meeting.
THE PST BOARD HAS UNANIMOUSLY APPROVED THE MERGER AND THE MERGER AGREEMENT,
HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, PST AND ITS STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT
HOLDERS OF SHARES OF PST COMMON STOCK VOTE FOR APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT.
The Enterprises Board of Directors (the "Enterprises Board") has approved
the Merger and the issuance of Enterprises Common Stock in the Merger.
Enterprises, as the sole stockholder of Merger Sub, and the Board of Directors
of Merger Sub have each approved the Merger Agreement. No approval by
stockholders of Enterprises is required to effect the Merger.
RECORD DATE; SHARES ENTITLED TO VOTE; VOTE REQUIRED
The close of business on July 29, 1998 has been fixed as the Record Date for
determining the holders of PST Common Stock who are entitled to notice of and
to vote at the Annual Meeting. As of the Record Date, there were 4,269,482
shares of PST Common Stock outstanding, of which 2,258,379 shares
(approximately 53% of the outstanding shares of PST Common Stock) were
beneficially owned by directors and executive officers of PST and their
affiliates. The holders of record of shares of PST Common Stock on the Record
Date are entitled to one vote per share of PST Common Stock on each matter
submitted to a vote at the Annual Meeting. However, Mr. Norton currently owns
42,700 shares of PST Common Stock which are "control shares" under the URBCA
and are not currently entitled to vote. Consequently, directors and officers
of PST and their affiliates effectively may exercise voting rights with
respect to approximately 52% of the outstanding shares of PST Common Stock at
the Annual Meeting. The presence in person or by proxy of the holders of
shares representing a majority of the shares of PST Common Stock issued and
outstanding and entitled to vote is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. Under the PST bylaws, the
affirmative vote of holders of two-thirds of the outstanding shares of PST
Common Stock is required for Stockholder Approval. An abstention from voting
or a broker non-vote, while counting for purposes of determining the presence
of a quorum, will have the practical effect of a vote against approval and
adoption of the Merger Agreement, since a vote to abstain or a broker non-vote
represents one fewer vote in favor of such approval and adoption. A "broker
non-vote" occurs when brokers who hold shares in street name for customers who
are the beneficial owners of such shares do not vote such customers' shares
because the customers have failed to give the broker specific instructions
concerning the voting of the customers' shares with respect to a matter on
which the broker is not permitted to exercise voting discretion under
applicable SEC and National Association of Securities Dealers ("NASD") rules.
18
<PAGE>
Directors are elected by a plurality of the votes cast (e.g., the two (2)
director nominees receiving the highest number of votes cast by holders of PST
Common Stock at the Annual Meeting will be elected). Accordingly, abstentions
and broker non-votes will not affect the outcome of the election of directors.
The ratification of the selection of an independent public accountant and any
other matter presented for approval by the stockholders will be approved, in
accordance with the URBCA, if the votes cast in favor of a matter exceed the
votes cast opposing such matter. As a result, abstentions and broker non-votes
will not affect the outcome of these matters.
Pursuant to the terms of the Voting Agreement between Enterprises and Mr.
Kenneth R. Norton (who is a PST director and officer and who is the largest
holder of PST Common Stock) and the Voting Agreement between Enterprises and
the Bank of New York, Mr. Norton and the Bank of New York have agreed (in
their capacities as stockholders), among other things, to vote (or cause to be
voted) their shares of PST Common Stock, without limiting such stockholders'
right to vote such shares on other matters that may be submitted to a
stockholder vote, (i) in favor of approval and adoption of the Merger
Agreement, approval of the Merger and the approval of the other transactions
contemplated by the Merger Agreement and (ii) against any transaction that
would frustrate the Merger Agreement, the Merger or any of the other
transactions contemplated by the Merger Agreement. See "THE MERGER--Interests
of Certain Persons in the Merger" and "THE MERGER AGREEMENT--The Voting
Agreements."
On the Record Date, Mr. Norton held 1,446,773 shares (approximately 34% of
the outstanding shares) of PST Common Stock, including the 42,700 shares which
Mr. Norton will not be able to vote on the approval of the Merger Agreement
because they are deemed "control shares" under the URBCA as described above.
Excluding such shares, on the Record Date, Mr. Norton held 1,404,073 shares
(approximately 33% of the outstanding shares) of PST Common Stock entitled to
be voted at the Annual Meeting. The Bank of New York held 774,000 shares of
PST Common Stock (approximately 18% of the outstanding shares) on the Record
Date. The general effect of the Voting Agreements is to increase the
likelihood that Stockholder Approval will be obtained at the Annual Meeting.
Enterprises held on the Record Date 206,800 shares of PST Common Stock
(approximately 4.8% of the outstanding shares), which Enterprises intends to
vote in favor of the approval and adoption of the Merger Agreement.
Enterprises, Mr. Kenneth R. Norton and the Bank of New York held in the
aggregate on the Record Date approximately 55.8% of the outstanding shares of
PST Common Stock entitled to vote on the approval and adoption of the Merger
Agreement (excluding the 42,700 shares which Mr. Norton owns but will be
unable to vote as discussed above.) Consequently, it is anticipated that
Stockholder Approval will be obtained if holders of additional shares of PST
Common Stock representing approximately 11% of the outstanding shares of such
stock vote in favor of the approval and adoption of the Merger Agreement.
Additionally, subject to the requirements of the HSR Act discussed herein
under "THE MERGER--Regulatory Approvals Required," Enterprises may elect to
purchase additional shares of PST Common Stock in open market transactions
from time to time between the date of this Proxy Statement and the Record Date
for the Annual Meeting. To the extent that Enterprises elects to purchase any
such additional shares, the number of shares which must be voted in favor of
the approval and adoption of the Merger Agreement by shareholders other than
Enterprises, Kenneth R. Norton and the Bank of New York in order for the
Merger to be approved will be reduced.
PROXIES; PROXY SOLICITATION
Shares of PST Common Stock represented by properly executed proxies received
at or prior to the Annual Meeting that have not been revoked will be voted at
the Annual Meeting in accordance with the instructions contained therein.
Shares of PST Common Stock represented by properly executed proxies for which
no instruction is given will be voted FOR approval and adoption of the Merger
Agreement, FOR the election of the Board of Directors' two director nominees
and FOR the ratification of the appointment by the Board of Directors of
Arthur Andersen LLP to serve as independent public accountants of the Company
for the year ending December 31, 1998 (or until consummation of the Merger).
PST stockholders are requested to complete, sign and return promptly the
enclosed proxy card in the enclosed postage-prepaid envelope to ensure that
their shares are voted at the Annual Meeting. A PST stockholder who has
executed and returned a proxy may revoke it at any time prior to its exercise
at the Annual Meeting by executing and returning a proxy bearing a later date
with
19
<PAGE>
respect to the same shares, by delivering to the Secretary of PST a written
notice of revocation bearing a later date than the proxy being revoked, or by
attending the Annual Meeting and voting such shares in person. Mere attendance
at the Annual Meeting will not in and of itself revoke a proxy. If a PST
stockholder is not the registered direct holder of his or her shares, such
stockholder must obtain appropriate documentation from the registered holder
in order to be able to vote the shares in person.
If the Annual Meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the Annual Meeting all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the meeting (except for any proxies which have theretofore effectively been
revoked or withdrawn), notwithstanding that they may have been effectively
voted on the same or any other manner at a previous meeting.
In addition to solicitation by mail, directors, officers and employees of
PST may solicit proxies by telephone, telegram or otherwise. Such directors,
officers and employees of PST will not be additionally compensated for such
solicitation but may be reimbursed for out-of-pocket expenses incurred in
connection therewith. Brokerage firms, fiduciaries and other custodians who
forward soliciting material to the beneficial owners of shares of PST Common
Stock held of record by them will be reimbursed for their reasonable expenses
incurred in forwarding such material.
20
<PAGE>
PROPOSAL TO APPROVE THE MERGER
(PROPOSAL NO. 1)
THE MERGER
BACKGROUND OF THE MERGER
During 1997 PST received inquiries from time to time from trucking companies
interested in business or strategic combinations, none of which were pursued
because of the PST Board's belief that the expressions of interest were
unsatisfactory from a financial standpoint.
On January 12, 1998, Kenneth R. Norton, Chairman and Chief Executive Officer
of PST, spoke by telephone with David R. Parker, President of JTI, a division
of Enterprises, and inquired into whether PST might have an interest in
considering a transaction with Enterprises. A meeting to pursue the inquiry
was scheduled for February 18, 1998 in Salt Lake City, Utah.
On February 18, 1998, Messrs. Norton and Parker met in Salt Lake City and
discussed strategic benefits of a combination of PST and Enterprises,
including geographic and equipment synergies, consolidation opportunities and
customer expansion and service opportunities. Mr. Parker toured PST's
facilities in Salt Lake City and was given verbal information concerning PST's
operating plans. At the request of Mr. Parker, Mr. Norton agreed to compile
preliminary written information relating to PST, which was subsequently
furnished to Mr. Parker.
At a truckload carrier conference in March 1998 Mr. Norton and Robert D.
Hill, President and Chief Operating Officer of PST, met with Messrs. Patrick
E. Quinn, Co-Chairman and President of Enterprises, Parker, Max L. Fuller, Co-
Chairman and Vice-President of Enterprises, and Ray M. Harlin, Vice President
and Chief Financial Officer of Enterprises. In advance of the meeting, Mr.
Norton had sent to Enterprises some preliminary information regarding PST.
There was a general discussion about a possible transaction but terms and
structure were not formally addressed.
In late April 1998 Messrs. Norton and Hill met with Messrs. Quinn, Fuller
and Harlin at a transportation industry analysts conference. The discussions,
although informal and preliminary, turned more to specific terms, including a
range for the proposed purchase price and the form of the consideration. The
representatives for Enterprises agreed to visit with PST representatives at
PST's offices to learn more about PST.
In mid-May 1998 Mr. Harlin and E. William Lusk, Jr., Executive Vice
President of Marketing of Enterprises, and William K. Farris, Executive Vice
President of Operations of Enterprises, met at the corporate offices of PST
with Messrs. Norton and Hill of PST to discuss PST and its business
operations. At this time the discussions began to focus on specific terms,
such as the price and structure of the transaction. Following this meeting
there were telephone conferences among many of the same representatives in
which the price and other proposed terms of the transaction were discussed.
Mr. Norton of PST and Messrs. Quinn, Fuller and Harlin of Enterprises had a
subsequent telephone conference in which the purchase price and form of the
consideration were discussed. In a telephone conference on May 26, 1998,
representatives of PST and Enterprises expressed approval of certain terms of
the transaction and agreed to set forth these terms in an agreement in
principle. At separate meetings of the Board of Directors of Enterprises and
PST on May 29, 1998 and May 30, 1998, respectively, an Agreement in Principle
for the Merger was approved. The Agreement in Principle was executed on behalf
of PST and Enterprises on June 1, 1998 and a press release was issued by each
of PST and Enterprises announcing the execution of the Agreement in Principle.
After the execution of the Agreement in Principle representatives of
Enterprises conducted additional due diligence investigations of PST and
counsel for both parties worked to prepare the Merger Agreement. During June
1998 the Board of PST met on several occasions to discuss the status of
negotiations and to respond to
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issues. The Board of Directors of both PST and Enterprises were informed of
the status of the negotiations and were provided with and reviewed drafts of
the definitive Merger Agreement during the weeks of June 9 and June 26, 1998.
At the PST Board Meeting held June 16, 1998, Morgan Keegan reviewed its
preliminary valuation analysis, and orally indicated that the Merger
Consideration was fair from a financial point of view to the PST stockholders.
During the week of June 22, 1998, Enterprises proposed alternatives to the
Merger Consideration including a $7.00 per share minimum offer payable in
cash, at the option of Enterprises, if the average price of Enterprises Common
Stock, based on the twenty trading days prior to the Closing Date was less
than $19.00 per share, or, alternatively, an all cash offer of $7.28 per share
with elimination of any minimum trading price for Enterprises Common Stock. At
a meeting of the PST Board on June 26, 1998, the Board determined that the tax
benefit of a stock exchange and the opportunity for PST's stockholders to
acquire ownership of Enterprises Common Stock were of greater value than an
all cash offer. The PST Board authorized execution and delivery of the
definitive Merger Agreement at the June 26, 1998 meeting.
On July 1, 1998 Enterprises informed PST that, after substantially
completing due diligence with respect to the Merger, it desired to fix the
Merger Consideration at 1,100,000 shares of Enterprises Common Stock and
$12,500,000 in cash because the fixed valuation better represented the
relative value of the two companies.
After considering all of the reasons discussed in "Recommendation of the PST
Board of Directors and Reasons for the Merger," the PST Board concluded that
the Merger was in the best interests of the stockholders of PST and
unanimously approved entering into the Merger Agreement with the changes
proposed by Enterprises on July 1, 1998. As a result, PST and Enterprises
entered into the Merger Agreement on July 7, 1998.
RECOMMENDATION OF THE PST BOARD AND REASONS FOR THE MERGER
THE PST BOARD HAS UNANIMOUSLY APPROVED THE MERGER AND THE MERGER AGREEMENT,
HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, PST AND ITS STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT
HOLDERS OF SHARES OF PST COMMON STOCK VOTE FOR APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT.
The terms of the Merger Agreement are the result of arms-length negotiations
between representatives of PST and Enterprises. The PST Board's decision to
approve the Merger and the Merger Agreement was based in significant part upon
the PST Board's view that a business combination with Enterprises offered the
best alternative to its stockholders. In reaching this conclusion, the PST
Board of Directors gave significant attention to the detailed financial
analysis contained in the fairness opinion which it received from Morgan
Keegan, financial advisor to PST, and to Morgan Keegan's conclusion presented
therein that, as of the date of such opinion, the Merger Consideration to be
received by PST's stockholders pursuant to the Merger Agreement was fair to
such stockholders from a financial point of view. (See "THE MERGER--Opinion of
Financial Advisor" below for a discussion of the financial analyses and
methods applied by Morgan Keegan in rendering its fairness opinion.)
In considering the Merger with Enterprises the Board of Directors focused on
the rapid growth of Enterprises, including through successful acquisitions,
and the market share growth of Enterprises in its markets. The Board
concluded, among other things, that a business combination with Enterprises
should broaden PST's customer base, enhance driver recruitment and loyalty and
permit consolidation of equipment, facilities and technologies.
The Board also considered that because of PST's limited financial resources
and operating losses in recent periods, PST has greater exposure to industry
downturns and, in particular, does not presently have access to needed capital
on acceptable terms which would be required to replace an aging fleet which,
if not replaced, will result in prohibitively high maintenance expense in the
future.
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Finally, the Board noted significant benefits to be realized by PST's
stockholders, customers and drivers as a result of a combination with
Enterprises. Specifically, the Board noted the opportunity for the
stockholders to participate in ownership of Enterprises Common Stock on a
partially tax deferred basis, the potential for improved and enhanced service
to customers, the opportunity to reduce costs through consolidation, the
potential improvement in driver retention and the opportunity to upgrade
equipment.
In addition to the foregoing, the PST Board identified several other
potential strategic benefits of the Merger that the PST Board believes will
contribute to the success of the Merger. The PST Board believes that many of
these benefits are unique to a combination with Enterprises. These potential
benefits include:
(i) the opportunity for PST to leverage Enterprises' significantly
greater financial resources;
(ii) the potential to provide broader and more complete transportation
services;
(iii) the potential realization of synergies and cost savings associated
with combining facilities and the underlying technologies of PST and
Enterprises; and
(iv) the opportunity to market PST's and Enterprises' services to a
larger base of customers.
PST further evaluated the merits of a transaction which offers its
stockholders a combination of cash and shares of Enterprises Common Stock in a
partially tax-free reorganization and the opportunity to participate in the
potential growth in the value of the combined companies. With respect to
Enterprises' Common Stock, PST also concluded that it represents a more liquid
investment than PST Common Stock and is followed by a much greater number of
stock analysts.
In the course of its deliberations, the PST Board reviewed a number of other
factors relevant to the Merger. In particular, the PST Board considered, among
other things: (i) the proposed terms of the Merger and the Merger Agreement,
(ii) the likelihood of realizing superior benefits through alternative
business strategies; (iii) the likelihood of consummating a business
combination with a third party that would yield value to PST's stockholders in
excess of the value that PST's stockholders would receive in the Merger; (iv)
PST's right under the Merger Agreement to terminate the Merger Agreement in
the event that it receives a takeover proposal superior to the Merger; (v)
information concerning Enterprises' and PST's respective businesses,
historical financial performances, operations and products, including public
SEC and analysts' reports and the due diligence reports from PST's management;
(vi) an analysis of trading prices for PST Common Stock as compared to certain
other transportation and logistics companies; and (vii) the compatibility of
the management and businesses of PST and Enterprises.
The PST Board also considered certain risks arising in connection with the
Merger, including (i) the potential disruption of PST's business that might
result from employee and customer uncertainty and lack of focus following
announcement of the Merger and in connection with integrating the operations
of PST and Enterprises; (ii) the possibility that the Merger might not be
consummated; (iii) the effects of the public announcement of the Merger on
PST's sales and operating results and its ability to attract and retain key
management, marketing and driver personnel; (iv) the risk that the
announcement of the Merger could result in decisions by customers to cancel or
delay use of PST's services; and (v) the risk that the other benefits sought
to be achieved by the Merger will not be achieved. In the view of the PST
Board, these considerations were not sufficient, either individually or in the
aggregate, to outweigh the advantages of the Merger.
The foregoing discussion of the information and factors considered by the
PST Board is not intended to be exhaustive but is believed to include all
material factors considered by the PST Board. In view of the wide variety of
factors, both positive and negative, considered by the PST Board, the PST
Board did not find it practical to, and did not, quantify or otherwise assign
relative weights to the specific factors considered. After taking into
consideration all of the factors set forth above, the PST Board continues to
believe that the Merger is in the best interests of PST and its stockholders
and continues to recommend approval and adoption of the Merger Agreement and
approval of the Merger.
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OPINION OF FINANCIAL ADVISOR
The Board of Directors retained Morgan Keegan to act as its financial
advisor and to render its opinion concerning the fairness to the PST
stockholders, from a financial point of view, of the transaction (the
"Transaction") whereby PST will be acquired for cash and stock by Enterprises
pursuant to the Merger Agreement.
At a meeting of the Board of Directors held on June 16, 1998, Morgan Keegan
made a presentation and gave its oral opinion to the Board of Directors that
the Purchase Price is fair, from a financial point of view, to the PST
stockholders. In addition, Morgan Keegan confirmed, in a written opinion dated
July 27, 1998 that, as of such date, the Merger Consideration is fair, from a
financial point of view, to the PST stockholders (the "Fairness Opinion"). The
Fairness Opinion addresses the Transaction to which it relates in the context
of the information available on that date. Events occurring after that date
may materially affect the assumptions used in preparing the Fairness Opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF MORGAN KEEGAN, WHICH SETS FORTH THE
ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED, THE MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN IN ARRIVING AT SUCH OPINION, AND THE
LIMITS OF ITS REVIEW, IS ATTACHED HERETO AS ANNEX III, AND IS INCORPORATED
HEREIN BY REFERENCE. PST STOCKHOLDERS ARE URGED TO READ SUCH OPINION IN ITS
ENTIRETY. MORGAN KEEGAN'S OPINION IS DIRECTED ONLY TO THE FAIRNESS TO THE PST
STOCKHOLDERS, FROM A FINANCIAL POINT OF VIEW, OF THE MERGER CONSIDERATION. THE
FAIRNESS OPINION DOES NOT ADDRESS ANY OTHER ASPECT OF THE TRANSACTION AND DOES
NOT CONSTITUTE A RECOMMENDATION TO ANY PST STOCKHOLDER AS TO HOW SUCH PST
STOCKHOLDER SHOULD VOTE. THE SUMMARY OF THE OPINION OF MORGAN KEEGAN SET FORTH
IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE FULL TEXT OF SUCH OPINION.
Experience Of Morgan Keegan
Morgan Keegan is a nationally recognized investment banking firm and is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, competitive biddings, secondary distributions
of listed and unlisted securities, private placements and valuations for
various purposes. The Board of Directors selected Morgan Keegan as its
financial advisor on the basis of such experience and expertise in such
transactions.
Summary Of Matters Considered
In arriving at its opinion, Morgan Keegan reviewed (i) an unexecuted draft
of the Merger Agreement (which, for purposes of its analysis, it assumed that
any further revisions, including the filling in of blank spaces and the
attachment of final exhibits and appendices, would not materially alter the
terms and provisions of such documents and that such documents would be
executed as finalized), and (ii) certain publicly-available financial
information and internal financial analyses concerning PST and held
discussions with members of senior management of PST regarding the business
and prospects of PST. Morgan Keegan also compared certain financial
information of PST with similar information for certain selected truckload
carriers whose securities are publicly traded, reviewed the financial terms of
selected recent business combinations and performed such other studies and
analyses as Morgan Keegan considered appropriate. Morgan Keegan was not asked
to consider or provide an opinion, and is not expressing any opinion, with
respect to (i) the fairness of the Transaction, other than the Merger
Consideration, (ii) the fairness of the Merger Consideration from any point of
view other than from a financial point of view, (iii) the fairness of any
other alternative transaction or structures available to PST, (iv) the effect
of federal, state or other tax laws, rules or regulations on PST or any other
party to the Transaction and related transactions, or (v) the price at which
the shares of Enterprises Common Stock will trade following consummation of
the Transaction.
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Scope Of Opinion
The scope of Morgan Keegan's opinion was limited to the fairness to the PST
stockholders, from a financial point of view, of the Merger Consideration.
Morgan Keegan did not undertake an analysis nor give an opinion with respect
to the fairness to the PST stockholders, from a financial point of view, of
other alternatives.
Assumptions
In connection with its review and analysis and in arriving at its opinion,
Morgan Keegan assumed the accuracy, completeness and fairness of any
information provided to or otherwise reviewed by Morgan Keegan, including,
without limitation, this Proxy Statement/Prospectus, and relied upon such
information being complete and accurate in all respects. Morgan Keegan did not
independently verify any of such information. Morgan Keegan also assumed the
correctness of and relied upon the representations and warranties of all
parties contained in the Merger Agreement. Morgan Keegan also relied upon the
judgment of the management of PST as to the reasonableness and achievability
of the financial and operating projections and the assumptions and bases
therefore provided to it, and assumed that such projections reflected the best
currently available estimates and judgment of the management of PST and that,
subject to reasonable discounts attributable to the likelihood of achieving
such results, such projections and forecasts would be realized in the amounts
and time periods then estimated by the management of PST. Morgan Keegan was
not engaged to assess the achievability of such projections or assumptions.
Morgan Keegan was not engaged to, and did not conduct a physical inspection or
appraisal of any of the assets, properties or facilities of either PST or
Enterprises, nor was it furnished with any such evaluation or appraisal.
Morgan Keegan assumed that the conditions to consummation of the Merger
Agreement would be satisfied.
Analysis And Conclusion
The following is a summary of the financial and comparative analyses
performed by Morgan Keegan in connection with the preparation of the Fairness
Opinion:
In performing its analysis, Morgan Keegan considered a variety of valuation
methodologies, including: (i) comparable company analysis, (ii) comparable
transaction analysis, and (iii) discounted cash flow analysis.
Comparable Company Analysis.
Morgan Keegan analyzed selected publicly-traded truckload carriers. Morgan
Keegan considered the following companies: Cannon Express, Celadon Group,
Covenant Transport, Heartland Express, J.B. Hunt, Knight Transportation,
Landair Services, MS Carriers, PAM Transportation, Swift Transportation,
Transport Corporation of America, US Xpress Enterprises, USA Truck and Werner
Enterprises. Morgan Keegan compared the market value of each, as determined by
the closing price recorded for each company's common stock, with each
company's net income and book value. In addition, Morgan Keegan determined the
adjusted market value of each comparable company and calculated trading
multiples based on revenues, EBITDA and EBIT. Based on the median multiples of
the comparable companies, this analysis resulted in a range of equity values
for PST of $23.9 million to $36.2 million.
Comparable Acquisitions.
Morgan Keegan also compared the Transaction with acquisitions by selected
public companies engaged primarily in the trucking business. Morgan Keegan
determined the multiples of market value to net income and tangible book value
and adjusted market value to revenue, EBITDA and EBIT for each of these
companies. Morgan Keegan then applied these multiples to EBITDA and tangible
book value of PST. Based on the median multiples of the comparable
acquisitions, this analysis resulted in a range of equity values for PST of
$15.8 million to $20.9 million.
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Discounted Cash Flow Analysis.
Morgan Keegan also used a discounted cash flow analysis to value the
projected free cash flow of PST. Morgan Keegan performed a discounted cash
flow analysis of the projected cash flow (unlevered net income) of PST for
fiscal years 1998 through 2002, based on operating projections provided by
PST. PST's operating projections indicated projected cash flow of PST for each
of the fiscal years 1998 through 2002, of approximately $10.7 million, $10.6
million, $11.5 million, $11.7 million and $12.3 million, respectively. Using
this information, Morgan Keegan calculated a range of equity values for PST
based on the sum of (i) the present value of the free cash flows of PST and
(ii) the present value of the estimated terminal value for PST assuming that
it was sold at the end of fiscal year 2002. In performing its discounted cash
flow analysis, Morgan Keegan assumed, among other things, discount rates
ranging from 15% to 25% and terminal multiples of EBIT of 10.0x to 13.0x.
Those discount rates and terminal multiples reflect Morgan Keegan's
qualitative judgments concerning the specific risk associated with such an
investment and the historical and projected operating performance of PST. This
analysis resulted in a range of equity values for PST of $12.0 million to
$53.4 million.
Based on the foregoing, Morgan Keegan concluded that, based on various
assumptions and considerations, the Merger Consideration is fair, from a
financial point of view, to the PST stockholders.
The summary set forth above does not purport to be a complete description of
the presentation by Morgan Keegan to the PST Board of Directors or of the
analyses performed by Morgan Keegan. The preparation of a fairness opinion is
not necessarily susceptible to partial analysis or summary description. Morgan
Keegan believes that its analyses and the summary set forth above must be
considered as a whole and that selecting portions of its analyses, without
considering all analyses, or of the above summary, without considering all
factors and analyses, would create an incomplete view of the process
underlying the analyses presented to the PST Board of Directors set forth in
Morgan Keegan's Fairness Opinion.
In performing its analyses, Morgan Keegan made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of PST. The analyses
performed by Morgan Keegan are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of
Morgan Keegan's analysis of the fairness, from a financial point of view, of
the Merger Consideration and were discussed with the PST Board of Directors.
The analyses do not purport to be appraisals or to reflect the prices at which
a company might actually be sold or the prices at which any securities may
trade at the present time or at any time in the future. In addition, as
described above, Morgan Keegan's presentation to PST Board of Directors and
its Fairness Opinion was one of many factors taken into consideration by the
PST Board of Directors in making its decision to approve the Merger
Consideration.
Compensation And Material Relationships.
The PST Board of Directors has engaged Morgan Keegan to provide investment
banking advice and services in connection with the PST Board of Director's
review and analysis of the Transaction. PST agreed to pay Morgan Keegan a fee
of $150,000 (the "Opinion Fee") upon delivery of the Fairness Opinion.
PST has also agreed to reimburse Morgan Keegan for reasonable out-of-pocket
expenses, including fees and disbursements of counsel, incurred by Morgan
Keegan in carrying out its duties under the engagement letter, and to
indemnify Morgan Keegan for certain liabilities to which it may be subjected
in connection with its engagement.
Morgan Keegan has in the past rendered, and may in the future render,
investment banking services for Enterprises. Morgan Keegan was a co-manager of
Enterprises' initial public offering in October 1994 and its follow-on
offering in August 1997.
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EFFECTIVE TIME
If the Merger is approved by the requisite vote of PST stockholders at the
Annual Meeting and the other conditions to the Merger are satisfied or waived
(where permitted by the Merger Agreement), the Merger will become effective
when a Certificate of Merger is duly filed with the Secretary of State of the
State of Nevada and the Utah Division of Corporation and Commercial Code, or
at such later time as is specified in such Certificate of Merger. The Merger
Agreement provides that Enterprises and PST will cause a Certificate of Merger
to be filed as soon as practicable on or after the Closing Date. See "THE
MERGER AGREEMENT--Conditions to the Consummation of the Merger."
MERGER CONSIDERATION
At the Effective Time (as defined in the Merger Agreement), each share of
PST Common Stock issued and outstanding immediately prior to the Effective
Time (other than any shares of such stock held by Enterprises or PST (or by
subsidiaries of either), which shall be canceled, and other than Dissenting
Shares, if any, as defined in the Merger Agreement) will be converted into the
right to receive (i) the right to receive 0.2381 shares of Enterprises Class A
Common Stock, $0.01 par value per share (the "Enterprises Common Stock) plus
(ii) $2.71 in cash.
The exchange agent for the payment of the Merger Consideration in connection
with the Merger (the "Exchange Agent") will be BankBoston, N.A. SEE "THE
MERGER--Exchange Procedures."
No Fractional Shares. No certificates representing fractional shares of
Enterprises Common Stock will be issued upon the surrender for exchange of
certificates representing the PST Common Stock ("Certificates"), and such
fractional share interests will not entitle the owner thereof to vote or to
any rights of a stockholder of Enterprises. Each holder of shares of PST
Common Stock exchanged pursuant to the Merger who would otherwise have been
entitled to receive a fraction of a share of Enterprises Common Stock (after
taking into account all Certificates delivered by such holder) will receive,
in lieu thereof, cash (without interest) in an amount equal to such fraction
of a share of Enterprises Common Stock multiplied by the 20-Day Average Price.
Dividends. Enterprises has never paid, and does not anticipate paying in the
foreseeable future, cash dividends on the Enterprises Common Stock. PST does
not currently pay dividends on the PST Common Stock and is not permitted under
the terms of the Merger Agreement to set aside or pay any dividend or other
distributions, whether in cash, stock or other property, in respect of the PST
Common Stock during the period from the date of the Merger Agreement until the
earlier of the termination of the Merger Agreement or the Effective Time.
If, at any time before the Effective Time, Enterprises issues any dividends
payable in shares of Enterprises Common Stock, combines the outstanding
Enterprises Common Stock into a smaller number of shares, subdivides the
outstanding Enterprises Common Stock, or reclassifies the Enterprises Common
Stock, the Merger Consideration will be adjusted so that each PST stockholder
will be entitled to receive the same Merger Consideration as such stockholder
would have received if the Effective Time had occurred prior to the record
date for payment of such stock dividend, increase, reduction or
reclassification of the Enterprises Common Stock.
No Further Ownership Rights In PST Common Stock. From and after the
Effective Time, and until surrendered and exchanged, each outstanding
certificate formerly representing shares of PST Common Stock will be deemed to
represent only the right to receive the Merger Consideration. No dividends or
other distributions declared or made after the Effective Time with respect to
shares of Enterprises Common Stock with a record date after the Effective Time
will be paid to the holder of an unsurrendered certificate formerly
representing shares of PST Common Stock with respect to the shares of
Enterprises Common Stock represented thereby, and no cash payment in lieu of
fractional shares will be paid to any such holder, until the surrender of the
certificate held by such holder. Subject to applicable laws, upon surrender
and exchange of each outstanding certificate representing shares of PST Common
Stock, the holder thereof will receive: (i) the cash portion of the Merger
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Consideration payable to such holder (without interest thereon); (ii)
certificates representing the shares of Enterprises Common Stock issued in
exchange therefore, plus the amount, without interest, of dividends and other
distributions, if any, declared and paid, subsequent to the Effective Time and
prior to the date such shares were surrendered, to stockholders of record with
respect to the number of whole shares of Enterprises Common Stock represented
thereby; and (iii) the cash (without interest or dividends thereon), payable
in lieu of any fractional shares of Enterprises Common Stock as described in
the Merger Agreement. From and after the Effective Time, the stock transfer
books of PST will be closed and no transfer of shares of PST Common Stock on
the books of PST will be made.
EXCHANGE PROCEDURES
As of the Effective Time, Enterprises will deposit with the Exchange Agent
for the benefit of the holders of shares of PST Common Stock, for exchange in
accordance with the Merger Agreement, through the Exchange Agent, the cash and
certificates representing the shares of Enterprises Common Stock constituting
the Merger Consideration issuable in exchange for outstanding shares of PST
Common Stock.
Following the Effective Time, the Exchange Agent will send transmittal
materials to each holder of PST Common Stock and/or options to purchase such
stock granted under PST's Stock Incentive Plan. The transmittal materials will
contain instructions with respect to the surrender of the Certificates (or the
exercise of stock options, as applicable) in exchange for the Merger
Consideration. PST STOCKHOLDERS SHOULD NOT FORWARD CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL MATERIALS. Each holder of
an outstanding Certificate or Certificates will, upon surrender to the
Exchange Agent of such Certificate or Certificates and acceptance thereof by
the Exchange Agent, be entitled to received Merger Consideration consisting of
a certificate or certificates representing the number of full shares of
Enterprises Common Stock and the amount of cash into which the aggregate
number of shares of PST Common Stock previously represented by such
Certificate or Certificates surrendered have been converted pursuant to the
Merger Agreement. The Exchange Agent will accept surrendered Certificates upon
compliance with such reasonable terms and conditions as the Exchange Agent may
impose in accordance with normal exchange practices. If any certificate for
Enterprises Common Stock is to be issued in a name other than that in which
the Certificate surrendered for exchange is registered, the Certificate so
surrendered must be properly endorsed, with signature guaranteed, or otherwise
in proper form for transfer and the person requesting such exchange must pay
to Enterprises or its transfer agent any transfer or other taxes required by
reason of the issuance of Certificates for Enterprises Common Stock in a name
other than that of the registered holder of the Certificate surrendered, or
establish to the satisfaction of Enterprises or the Exchange Agent that such
tax has been paid or is not applicable. Until surrendered, each Certificate
will be deemed at any time after the Effective Time to represent only the
right to receive the Merger Consideration upon effective surrender as
described above. Although the shares of Enterprises Common Stock issuable in
the Merger will be deemed to be outstanding on Enterprises' stock records
after consummation of the Merger, former PST stockholders will not be able to
vote such shares until they have surrendered their PST Common Stock
certificates in exchange for the Merger Consideration as described above.
Notwithstanding any delay in the surrender of such certificates by any PST
stockholder, no interest will be paid or will accrue on any cash payable as
Merger Consideration or in lieu of any fractional shares of Enterprises Common
Stock.
In addition to providing for the exchange of outstanding shares of PST
Common Stock for the Merger Consideration pursuant to the Merger, the Merger
Agreement provides that, as of the Effective Time, all options to purchase PST
Common Stock outstanding under PST's Stock Incentive Plan shall be deemed
immediately vested and exercisable in full. The transmittal materials
forwarded by the Exchange Agent will contain a description of, and
instructions with respect to, the procedures by which any holder of such
options who chooses to do so may exercise such options in exchange for the
Merger Consideration consisting of a certificate or certificates representing
the number of full shares of Enterprises Common Stock and the amount of cash
into which the aggregate number of shares of PST Common Stock with respect to
which such options are exercised would have been converted pursuant to the
Merger Agreement if such options had been exercised immediately prior to the
Effective Time, in accordance with all of the other original terms of such
options. In order to facilitate the processing by the Exchange Agent of
instructions for the exercise of such options, any individual choosing
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to do so will be required to include both a copy of his or her individual
Stock Option Agreement under the plan and payment of the applicable option
exercise price along with the other transmittal materials upon their return to
the Exchange Agent. More particularly, and in compliance with the provisions
of PST's Stock Incentive Plan and with such reasonable terms and conditions as
the Exchange Agent may impose in accordance with normal exchange practices,
the transmittal materials will provide for the payment of the exercise price
with respect to such options in cash or, if applicable under the terms of an
optionee's individual Stock Option Agreement, by means of: (i) surrender of
previously owned shares of PST Common Stock which have been held by the
optionee for more than six months; (ii) instructions for the sale by a broker
approved by PST, Enterprises and the Exchange Agent of other shares of
Enterprises Common Stock which the optionee may receive in exchange for
previously owned shares of PST Common Stock and delivery of all or part of the
proceeds of such sale in payment for the exercise price of the option and any
withholding taxes (a "brokered exercise"); (iii) an irrevocable pledge of
shares of Enterprises Common Stock received (or to be received) as Merger
Consideration in exchange for shares of PST Common Stock or upon exercise of
the option (as applicable) to a securities broker or lender approved by PST,
Enterprises and the Exchange Agent as security for a loan, followed by the
delivery of all or part of the proceeds of such loan in payment for the
exercise price of the option and any withholding taxes; or (iv) any other
payment mechanism which may be provided for in any individual Stock Option
Agreement under the PST Stock Incentive Plan. As provided in the PST Stock
Incentive Plan, any holder who elects to exercise an outstanding option in
connection with the Merger as described above shall be responsible for the
payment of any withholding or other tax obligations which may arise by reason
of such exercise under applicable Federal, state, local or foreign tax laws.
None of PST, Enterprises or the Exchange Agent shall be required to make any
distribution of Merger Consideration to such holder in respect of such
exercise until he or she has established to the satisfaction of Enterprises
and the Exchange Agent that such tax has been paid or is not applicable. To
the extent permitted by the terms of such holder's individual Stock Option
Agreement, all or a portion of any such tax obligation may be satisfied
through the withholding of a portion of the shares of Enterprises Common Stock
that would otherwise be issuable as a portion of the Merger Consideration with
respect to the exercise of such option. Any option granted under the PST Stock
Incentive Plan which is not exercised as described above within six (6) months
of the Effective Time of the Merger shall be deemed null and void and will not
thereafter be exercisable in exchange for Merger Consideration or otherwise.
NASDAQ NATIONAL MARKET SYSTEM LISTING
In accordance with NASD rules, Enterprises has filed a Nasdaq National
Market Notification and Report Form for the Listing of Additional Shares with
respect to the shares of Enterprises Common Stock issuable to PST stockholders
pursuant to the Merger Agreement.
EXPENSES; TERMINATION FEE
The Merger Agreement provides that all fees and expenses incurred in
connection with the Merger and the Merger Agreement and the transactions
contemplated by the Merger Agreement will be paid by the party incurring such
fees or expenses, whether or not the Merger is consummated; provided, however,
that if the Merger Agreement is terminated under certain conditions involving
the cancellation of the Merger by PST in favor of a competing transaction, PST
must pay Enterprises a termination fee of $3,000,000 (the "Termination Fee")
plus Enterprises' actual out-of-pocket expenses relating to the transactions
contemplated by the Merger Agreement up to $500,000.
The Termination Fee payable under certain circumstances by PST to
Enterprises is intended, among other things, to compensate Enterprises for its
costs, including lost opportunity costs, if the Merger is not consummated as a
result of certain actions or inactions by PST or its stockholders. The
Termination Fee may have the effect of increasing the likelihood that the
Merger will be consummated in accordance with the terms of the Merger
Agreement. The Termination Fee may also have the effect of discouraging
persons who might now or prior to the consummation of the Merger be interested
in acquiring all or a significant part in PST from considering or proposing
such an acquisition by increasing the costs of any such acquisition.
Additionally, the Merger Agreement provides that PST will pay Enterprises'
actual out-of-pocket expenses (up to $500,000) if the Merger Agreement is
terminated due to: (i) the PST Board having withdrawn its approval or
recommendation of the
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Merger Agreement (or modified it in a manner adverse to Enterprises); (ii) any
material breach of the covenants or agreements of PST contained in the Merger
Agreement which is not cured within fifteen (15) business days following
receipt of a notice of such breach; or (iii) any (A) breach of a
representation or warranty of PST which, by their nature, cannot be cured
prior to the Termination Date (unless such breaches or inaccuracies have not
had or would not reasonably be expected to have a "PST Material Adverse
Effect" as defined in the Merger Agreement) or (B) a PST Material Adverse
Effect has occurred (unless such breach or PST Material Adverse Effect, as the
case may be, occurs between the signing of the Merger Agreement and the
Closing Date as a result of the actions of one or more third parties).
Finally, the Merger Agreement also provides that, if Enterprises wrongfully
refuses to close the transactions contemplated thereby (expressly excluding
any refusal to close due to the failure of any condition to Enterprises'
obligations to close), then Enterprises will pay PST's actual out-of-pocket
expenses (up to $500,000). See "THE MERGER AGREEMENT--Additional Agreements--
Expenses; Termination Fee."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material U.S. Federal income tax
considerations of the Merger generally relevant to holders of PST Common Stock
assuming that the Merger is consummated as contemplated by this Proxy
Statement/Prospectus. This discussion is based upon interpretations of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
promulgated thereunder, judicial decisions and administrative rulings as of
the date hereof, all of which are subject to change or differing
interpretations, including changes and interpretations with retroactive
effect. The discussion below does not address all U.S. Federal income tax
consequences or any state, local or foreign tax consequences of the Merger.
The tax treatment of a stockholder may vary depending upon the stockholder's
particular situation, and certain stockholders (including dealers in
securities or foreign currency, holders who have acquired their PST Common
Stock pursuant to the exercise of employee stock options or otherwise as
compensation, tax-exempt entities, banks, thrifts, insurance companies,
persons that hold PST Common Stock as part of a "straddle", a "hedge", a
"constructive sale" transaction or a "conversion transaction", all as defined
by the Code, persons that have a "functional currency" other than the U.S.
dollar, investors in pass-through entities and persons who are neither
citizens or residents of the United States or that are foreign corporations,
foreign partnerships or foreign estates or trusts as to the United States) may
be subject to special rules not discussed below. This discussion also does not
address the U.S. Federal income tax consequences of the Merger to holders of
PST Common Stock that do not hold such common stock as a capital asset within
the meaning of Section 1221 of the Code.
EACH PST STOCKHOLDER IS URGED TO CONSULT HIS OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY
AND EFFECT OF ANY STATE, LOCAL OR FOREIGN LAWS AND CHANGES IN APPLICABLE TAX
LAWS.
Federal Income Tax Consequences of the Merger. Parr, Waddoups, Brown, Gee &
Loveless, P.C. counsel to PST, has rendered an opinion as to the qualification
of the Merger as a reorganization under Section 368(a) of the Code (See Annex
V). Such opinion is subject to various limitations and qualifications, and is
based in part on certain representations made by Enterprises and PST.
No rulings have been or will be requested from the Internal Revenue Service
(the "IRS") with respect to any of the matters discussed herein, and the
opinion of counsel described above is not binding on the IRS.
Exchange of PST Common Stock for a Combination of Enterprises Common Stock
and Cash. Except as discussed below, holders of PST Common Stock, who will
receive a combination of Enterprises Common Stock and cash in exchange for PST
Common Stock, generally will recognize any capital gain realized in the
transaction to the extent of any cash received but will not recognize any loss
realized in the transaction. The amount of capital gain that is recognized
will be calculated separately for each block of PST Common Stock surrendered,
in an amount equal to the lesser of (i) the amount of gain realized in respect
of such block (i.e., the
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excess of (a) the sum of the amount of cash and the fair market value of
Enterprises Common Stock received that is allocable to such block of PST
Common Stock over (b) the tax basis of such block) and (ii) the amount of cash
received that is allocable to such block. The tax basis of the Enterprises
Common Stock received in exchange for a block of PST Common Stock will be
equal to the tax basis of such surrendered block of PST Common Stock,
decreased by the amount of cash received in respect of such block and
increased by the amount of gain recognized in respect of such block. The
holding period of the Enterprises Common Stock will include the holding period
of the corresponding block of PST Common Stock surrendered.
Additional Considerations--Recharacterization of Gain as a Dividend. With
respect to the cash portion of the Merger Consideration received by a holder
of PST Common Stock, it is possible that some or all of the gain recognized by
such holder could be treated as a dividend if the receipt of such cash in
connection with the Merger has the effect of a dividend. In that case, the
amount of cash received by such holder in connection with the Merger will be
treated first, as a dividend to the extent of the such holder's allocable
portion of PST's accumulated earnings and profits; next, as a non-taxable
return of capital to the extent of the holder's tax basis in its shares; and
thereafter as capital gain. To the extent such amount is taxable as a
dividend, such dividend will be includable in the holder's gross income as
ordinary income in its entirety, without reduction for the tax basis of the
shares exchanged for cash, and no loss will be recognized. To the extent that
cash received in exchange for shares is treated as a dividend to a corporate
holder, (i) it may be eligible for a dividends-received deduction (subject to
applicable limitations) and (ii) it could be subject to the basis reduction
rules of the extraordinary dividend provisions of the Code. Corporate holders
should consult their tax advisors concerning the availability of the
dividends-received deduction and the application of the extraordinary dividend
provisions of the Code.
For purposes of determining whether the receipt of cash by a holder of PST
Common Stock in connection with the Merger has the effect of the distribution
of a dividend, such holder will be treated for U.S. Federal income tax
purposes as if he exchanged all his PST Common Stock solely for Enterprises
Common Stock and then Enterprises immediately redeemed (the "Deemed
Enterprises Redemption") a portion of such Enterprises Common Stock in
exchange for the cash such holder actually received in connection with the
Merger. Generally, under that analysis, the receipt of cash by a holder in
connection with the Deemed Enterprises Redemption will not be treated as a
dividend if such Deemed Enterprises Redemption, among other things, (i)
results in a "substantially disproportionate" redemption with respect to such
holder or (ii) is not essentially equivalent to a dividend with respect to
such holder. Section 302 applies attribution rules pursuant to which a holder
is deemed to own any stock (i) owned by certain family members (ii) owned
directly or indirectly by a partnership, estate or trust in proportion to such
holder's partnership or beneficial interest, (iii) owned directly or
indirectly by a corporation, if such holder owns, directly or indirectly, 50%
of the value of the stock of such corporation, in proportion to such ownership
and (iv) that the holder has the right to acquire by exercise of an option.
The Deemed Enterprises Redemption will result in a substantially
disproportionate redemption with respect to a holder if the percentage of the
then outstanding Enterprises Common Stock owned by such holder immediately
after the Deemed Enterprises Redemption is less than 80% of the percentage of
the Enterprises Common Stock deemed owned by such holder immediately before
the Deemed Enterprises Redemption.
If the Deemed Enterprises Redemption fails to satisfy the substantially
disproportionate test, the holder may nonetheless satisfy the not essentially
equivalent to a dividend test if it results in a meaningful reduction of the
holder's equity interest in Enterprises under the particular facts and
circumstances of the transaction. An exchange of Enterprises Common Stock for
cash pursuant to the Deemed Enterprises Redemption that results in a reduction
of the proportionate equity interest in Enterprises of a holder whose relative
equity interest in Enterprises is minimal (an interest of less than 1% should
satisfy this requirement) and who does not exercise any control over or
participate in the management of the corporation's corporate affairs should be
treated as not essentially equivalent to a dividend.
Because the application of the above-described tests depends upon each
stockholder's particular circumstances, stockholders are urged to consult
their own tax advisors regarding the tax consequences of the Deemed
Enterprises Redemption.
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Cash In Lieu Of Fractional Shares. A holder of PST Common Stock who receives
cash in lieu of fractional shares of Enterprises Common Stock will be treated
as having received such fractional shares pursuant to the Merger and then as
having exchanged such fractional shares for cash in a redemption by
Enterprises. Any gain or loss attributable to fractional shares generally will
be capital gain or loss. The amount of such gain or loss will be equal to the
difference between the ratable portion of the tax basis of the PST Common
Stock surrendered in the Merger that is allocated to such fractional shares
and the cash received in lieu thereof.
Capital Gain Or Loss. Any capital gain or loss recognized by a stockholder
in connection with the transfer of PST Common Stock pursuant to the Merger
generally will constitute long-term capital gain or loss if such PST Common
Stock has been held by such stockholder for more than 12 months as of the
Effective Time. Generally, long-term capital gain will be subject to U.S.
Federal income tax at a maximum 20% rate if the underlying PST Common Stock
has been held for more than 12 months as of the Effective Time.
Reporting Requirements. Each holder of PST Common Stock that receives
Enterprises Common Stock in the Merger will be required to retain records and
file with such holder's U.S. Federal income tax return a statement setting
forth certain facts relating to the Merger.
THIS FEDERAL INCOME TAX DISCUSSION IS FOR GENERAL INFORMATION ONLY AND MAY
NOT ADDRESS ALL TAX CONSIDERATIONS THAT MAY BE SIGNIFICANT TO A HOLDER OF PST
COMMON STOCK. ALL PST STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING ALL FOREIGN,
STATE AND LOCAL TAX CONSEQUENCES.
REGULATORY APPROVALS REQUIRED
Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), certain acquisition transactions (including, for
purposes of the disclosures contained in this Proxy Statement/ Prospectus,
both the Merger and the acquisition by Enterprises of shares representing 15%
or more of the outstanding PST Common Stock in open market transactions) may
not be consummated unless notice has been given and certain information has
been furnished to the Antitrust Division and the FTC and specified waiting
period requirements have been satisfied. Both Enterprises and PST had filed
with the Antitrust Division and the FTC a Notification and Report Form with
respect to the Merger by July 17, 1998. Unless extended by a request for
additional information or unless early termination is granted, the waiting
period under the HSR Act will expire at 11:59 p.m. Eastern Time on August 16,
1998. At any time before or after the Effective Time, the FTC or the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the Merger or
seeking the divestiture of PST by Enterprises, in whole or in part, or the
divestiture of substantial assets of Enterprises, PST or their respective
subsidiaries. State Attorneys General and private parties may also bring legal
action under Federal or state antitrust laws in certain circumstances. Based
on an examination of information available to Enterprises and PST relating to
the businesses in which Enterprises, PST and their respective subsidiaries are
engaged, Enterprises and PST believe that the consummation of the Merger will
not violate the antitrust laws.
Enterprises and PST do not believe that any other material governmental
approvals or actions will be required for consummation of the Merger. See "THE
MERGER AGREEMENT--Conditions to the Consummation of the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the PST Board with respect to the
approval and adoption of the Merger Agreement and the transactions
contemplated thereby, stockholders of PST should be aware that certain members
of the management of PST and the PST Board may have certain interests in the
Merger that are different from, or in addition to, the interests of PST
stockholders generally.
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General. Merger Sub will be the Surviving Corporation in the Merger and,
following the Merger, will succeed to and assume all the rights and
obligations of PST. Following the Merger, the current officers of Merger Sub
will be the officers of the Surviving Corporation and the current directors of
Merger Sub will be directors of the Surviving Corporation. As of the Record
Date, directors and executive officers of PST and their affiliated entities
owned (i) 2,258,379 shares of PST Common Stock for which they will receive the
same consideration as other PST stockholders and (ii) unexercised stock
options to acquire 196,500 shares of PST Common Stock, which will be treated
as described below under "PST Stock Options."
PST Stock Options. Under the terms of the Merger Agreement, at the Effective
Time all options to purchase PST Common Stock under any stock incentive plan
shall be deemed immediately vested and exercisable in full. Upon the exercise
of any option to purchase PST Common Stock, the holder thereof will receive
the Merger Consideration. Any option to purchase PST Common Stock which is not
exercised within six (6) months of the Effective Time of the Merger will be
deemed null and void and will not thereafter be exercisable. See "THE MERGER--
Exchange Procedures."
Voting Agreements. Kenneth R. Norton and the Bank of New York, in their
capacities as stockholders, have entered into the Voting Agreements. The
general effect of the Voting Agreements is to increase the likelihood that
Stockholder Approval will be obtained. See "THE MERGER AGREEMENT--The Voting
Agreements."
Noncompetition and Consulting Agreement. Upon consummation of the Merger,
Kenneth R. Norton will enter into a Noncompetition and Consulting Agreement
with Enterprises, pursuant to which he will provide certain consulting
services for Enterprises and agree not to compete with Enterprises for a
period of five (5) years after the Closing Date. See "THE MERGER AGREEMENT--
The Noncompetition and Consulting Agreement."
Change in Control Agreement. PST has entered into an agreement with Robert
D. Hill, its President and Chief Operating Officer, which provides that PST
will pay Mr. Hill a severance payment equal to his current annual base salary
plus the amount of bonus paid to him in the previous year if Mr. Hill's
employment terminates following a change in control of PST. See "BUSINESS OF
PST VANS, INC.--Change in Control Agreement."
DISSENTERS' RIGHTS
Sections 1301-1331 of Part 13 of the URBCA ("Part 13") provide appraisal
rights (sometimes referred to as "dissenters' rights") to stockholders of Utah
corporations in certain situations. Holders of record of PST Common Stock who
comply with the applicable statutory procedures summarized herein may be
entitled to dissenters' rights under Part 13.
A person having a beneficial interest in shares of PST Common Stock held of
record in the name of another person, such as a broker or nominee, must act
promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect dissenters' rights.
The following discussion is not a complete statement of the law pertaining
to dissenters' rights under the Utah Code Annotated and is qualified in its
entirety by the full text of Part 13, which is reprinted in its entirety as
Annex IV to this Proxy Statement/Prospectus. All references in Part 13 and in
this summary to a "stockholder" or "holder" are to the record holder of the
shares of PST Common Stock as to which dissenters' rights may be asserted.
Under Part 13, where a proposed merger is to be submitted for approval at a
meeting of stockholders, the corporation must notify each of its stockholders
who was such on the record date for such meeting of the availability of
dissenters' rights with respect to his or her shares of PST Common Stock, and
must include in such notice a copy of Part 13 and the materials, if any, that
under Part 13 are required to be given to the stockholders entitled to vote on
the proposed merger at the meeting.
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This Proxy Statement/Prospectus constitutes such notice to the holders of
Dissenting Shares (as defined below) and the applicable statutory provisions
of the Utah Code Annotated are attached to this Proxy Statement/Prospectus as
Annex IV. Any stockholder who wishes to assert such dissenters' rights or who
wishes to preserve his right to do so should review the following discussion
and Annex IV carefully, because failure to timely and properly comply with the
procedures specified will result in the loss of dissenters' rights under the
URBCA.
If the Merger is approved by the required vote of PST's stockholders and is
not abandoned or terminated, each holder of shares of PST Common Stock who
does not vote in favor of the Merger and who follows the procedures set forth
in Part 13 will be entitled to have his shares of PST Common Stock purchased
by the Surviving Corporation for cash at their Fair Value (as defined below).
The "Fair Value" of shares of PST Common Stock will be determined as of the
day before the Merger is consummated, excluding any appreciation or
depreciation in anticipation of the proposed Merger. The shares of PST Common
Stock with respect to which holders have perfected their purchase demand in
accordance with Part 13 and have not effectively withdrawn or lost such rights
are referred to in this Proxy Statement/Prospectus as the "Dissenting Shares."
Under Part 13, a holder of Dissenting Shares wishing to exercise dissenters'
rights must deliver to PST, prior to the vote on the Merger Agreement at the
Annual Meeting to be held on August 28, 1998, a properly executed written
notice of his intent to demand payment for shares if the proposed Merger is
effectuated. The dissenting stockholder may not vote in favor of the Merger. A
holder of Dissenting Shares wishing to exercise such holder's dissenters'
rights must be the record holder of such Dissenting Shares on the date the
proposed corporate action creating dissenters' rights under Part 13 is
approved by the stockholders. Accordingly, a holder of Dissenting Shares who
is the record holder of Dissenting Shares on the date the written demand for
appraisal is made, but who thereafter transfers such Dissenting Shares prior
to the vote on the Merger, will lose any right to appraisal in respect of such
Dissenting Shares.
Only a holder of record of Dissenting Shares is entitled to assert
dissenters' rights for the Dissenting Shares registered in that holder's name.
A demand for payment should be executed by or on behalf of the holder of
record, fully and correctly, as such holder's name appears on such holder's
stock certificates. If the Dissenting Shares are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand should be made in that capacity, and if the Dissenting Shares are
owned of record by more than one person as in a joint tenancy or tenancy in
common, the demand should be executed by or on behalf of all joint owners. An
authorized agent, including one or more joint owners, may execute a demand for
payment on behalf of a holder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in executing the
demand, the agent is agent for such owner or owners. A record holder such as a
broker who holds Dissenting Shares as nominee for several beneficial owners
may exercise dissenters' rights with respect to the Dissenting Shares held for
one or more beneficial owners while not exercising such rights with respect to
the Dissenting Shares held for other beneficial owners only if the record
stockholder dissents with respect to all shares beneficially owned by any one
person; in such case, PST must receive written notice which states the dissent
and the name and address of each person on whose behalf dissenters' rights are
being asserted. If a stockholder holds Dissenting Shares through a broker who
in turn holds the shares through a central securities depositary nominee, a
demand for appraisal of shares must be made by or on behalf of the depositary
nominee and must identify the depositary nominee as record holder.
Stockholders who hold their Dissenting Shares in brokerage accounts or other
nominee forms and who wish to assert dissenters' rights are urged to consult
with their brokers to determine the appropriate procedures for the making of a
demand for appraisal by such a nominee.
All written demands for payment should be sent or delivered to PST Vans,
Inc., 1901 West 2100 South, Salt Lake City, Utah 84119, Attention: Secretary.
Under Part 13, a PST stockholder who wishes to assert dissenters' rights
must cause PST to receive written notice of his intent to demand payment for
shares if the proposed Merger is approved prior to the vote taken to
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approve the proposed Merger at the Annual Meeting. In the case of a beneficial
owner of Dissenting Shares held through a broker or nominee (or other record
holder), as discussed above, such holder's notice to PST also must certify to
PST that both such beneficial owner and the record holder(s) of all shares of
PST Common Stock owned beneficially by him have asserted, or will timely
assert, dissenters' rights as to all of such shares. Within ten days after
approval of the Merger by the PST Stockholders, PST (or the Surviving
Corporation, as applicable) must mail a notice of such approval (the "Approval
Notice") to all stockholders who are entitled to demand payment for their
shares under Part 13, together with a statement of the price determined by PST
(or the Surviving Corporation) to represent the Fair Value of the applicable
Dissenting Shares, a brief description of the procedures to be followed in
order for the stockholder to pursue his dissenters' rights, a copy of Part 13
and a form for demanding payment. The statement of price contained in the
Approval Notice will constitute an offer by PST (or the Surviving Corporation,
as applicable) to purchase all dissenting shares at the stated amount. Only a
holder of record of PST Common Stock as of the date the Merger is approved by
PST's stockholders (or the duly appointed representative of such holder), is
entitled to assert a purchase demand for the shares registered in that
holder's name.
Under Part 13, holders of shares of PST Common Stock who follow the
procedures set forth in Sections 1321 and 1323 thereof are entitled to receive
the Fair Value of the Dissenting Shares. Under Section 16-10a-1328, a
dissenting stockholder who has not accepted an offer under Section 16-10a-1327
may notify the corporation in writing of his own estimate of the Fair Value of
his shares and demand the difference, plus interest. Such notice must be
received by the corporation within 30 days after the corporation made or
offered payment for his shares.
A dissenter who has not accepted an offer in full satisfaction under Part 13
may notify the corporation in writing of his own estimate of the Fair Value of
his shares. Such notice must be received by the corporation within 30 days
after the corporation made its payment or offer. If the corporation refuses to
pay such demand, it has 60 days after it receives notice to commence a
proceeding in the district court of Salt Lake County. The holders of the
Dissenting Shares shall be named as parties to the suit and shall be served
with a copy of the petition. The court will then make a determination of fair
market value to which the dissenter will be entitled, plus interest. The
dissenting stockholder will be entitled to this amount less any payment
already received. Stockholders considering seeking payment should be aware
that the Fair Value of their Dissenting Shares as determined under Part 13
could be more than, the same as or less than the value of the consideration
they would receive pursuant to the Merger Agreement if they did not seek
payment for their Dissenting Shares and that investment banking opinions as to
fairness from a financial point of view are not necessarily opinions as to
Fair Value for purposes of Part 13.
The district court will determine all costs of the proceeding, including the
reasonable compensation and expenses of appraisers appointed by the court and
will assess the costs against the corporation unless the court finds that all
or some of the dissenters acted arbitrarily, vexatiously, or not in good
faith. The court may also make other allocations of attorney's fees among the
parties in accordance with various equitable criteria set forth in Section 16-
10a-1331 of Part 13.
Failure to follow the steps required by Part 13 as described above for
perfecting dissenters' rights may result in the loss of such rights. If, after
the Effective Time, a holder of Dissenting Shares has failed to perfect or has
effectively withdrawn or lost his right to payment, such holder's shares will
be deemed to have been converted into and to have become exchangeable for, at
the Effective Time, the right to receive for each such share the same Merger
Consideration, without interest, that a holder of a non-dissenting share of
PST Common Stock would have received with respect to such non-dissenting
share.
ACCOUNTING TREATMENT
The Merger will be treated as a "purchase" for financial reporting and
accounting purposes, in accordance with generally accepted accounting
principles. After the Merger, the results of operations of PST will be
included in the consolidated financial statements of Enterprises. The purchase
price (i.e., the aggregate Merger Consideration) will be allocated based on
the fair values of the assets acquired and the liabilities assumed. Any
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excess of cost over fair value of the net tangible assets of PST acquired will
be recorded as goodwill and other intangible assets.
RESALE OF ENTERPRISES COMMON STOCK
The Enterprises Common Stock issued pursuant to the Merger will be
transferable under the Securities Act except for shares issued to any PST
stockholder who may be deemed to be an affiliate of PST (an "Affiliate") for
purposes of Rule 145 under the Securities Act. An Affiliate is defined
generally as including, without limitation, directors, certain executive
officers and beneficial owners of 10% or more of a class of common stock of a
company. PST has agreed to use its commercially reasonable efforts to cause
each Affiliate to deliver to Enterprises on or prior to the Closing Date, a
written agreement providing, among other things, that such Affiliate will not
transfer any Enterprises Common Stock received in the Merger, except (i)
pursuant to an effective registration statement; (ii) in compliance with
Securities Act Rule 145; or (iii) if, in the opinion of counsel reasonably
acceptable to Enterprises or pursuant to a "no action" letter obtained by such
Affiliate from the staff of the Commission, such offer to sell, sale, transfer
or other disposition is otherwise exempt from registration under the
Securities Act. The Merger Agreement provides that Enterprises' obligation to
consummate the Merger is subject to Enterprises receiving such written
agreements from such Affiliates. This Proxy Statement/Prospectus does not
cover resales of shares of Enterprises Common Stock received by any person who
may be deemed to be an Affiliate.
THE MERGER AGREEMENT
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN PROVISIONS OF THE MERGER
AGREEMENT, WHICH IS ATTACHED AS ANNEX I TO THIS PROXY STATEMENT/PROSPECTUS AND
IS INCORPORATED HEREIN BY REFERENCE. SUCH SUMMARY IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE MERGER AGREEMENT.
THE MERGER
The Merger. The Merger Agreement provides that, following the approval and
adoption of the Merger Agreement by the stockholders of PST and the
satisfaction or waiver of the other conditions to the Merger, PST will be
merged with and into Merger Sub (with Merger Sub being the Surviving
Corporation). The Effective Time will occur upon the filing with the Secretary
of State of the State of Nevada and the Utah Division of Corporations and
Commercial Code of a duly executed Certificate of Merger, or at such later
time as is specified in such Certificate of Merger.
Articles Of Incorporation And By-laws. The Merger Agreement provides that
the Articles of Incorporation of Merger Sub, as in effect immediately prior to
the Effective Time, will be the Articles of Incorporation of the Surviving
Corporation. The Bylaws of Merger Sub as in effect immediately prior to the
Effective Time will be the Bylaws of the Surviving Corporation. The Board of
Directors and Officers of the Merger Sub shall be the Board of Directors and
Officers of the Surviving Corporation. See "THE MERGER--Interests of Certain
Persons in the Merger."
Conversion Of PST Common Stock In The Merger. At the Effective Time, each
issued and outstanding share of PST Common Stock, will be converted into the
right to receive Merger Consideration consisting of 0.2381 shares of
Enterprises Common Stock plus $2.71 in cash. Cash will be paid to PST
stockholders in lieu of fractional shares of Enterprises Common Stock. See
"THE MERGER--Exchange Procedures."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement includes various customary representations and
warranties of the parties thereto. The Merger Agreement includes
representations and warranties by PST as to, among other things, (i) the
organization, standing and corporate power of PST; (ii) the authorization,
execution, delivery, performance and enforceability of the Merger Agreement
and related matters, including the Merger Agreement's non-
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contravention of any agreement, law, or charter or bylaw provision of PST or
any of is subsidiaries and the absence of the need for governmental or third-
party filings, consents, approvals or actions with respect to any transaction
contemplated by the Merger Agreement (except for certain regulatory filings
specified in the Merger Agreement); (iii) the capital structure of PST and its
subsidiaries; (iv) the absence of liability or obligation to pay brokers' fees
or commissions with respect to the Merger; (v) good and valid title to, or
valid leasehold interests in, all material property and assets used or useful
in the conduct of PST business; (vi) the absence of subsidiaries of PST other
than as disclosed; (vii) compliance as to the form of, and the accuracy of
information contained in, documents filed by PST with the SEC; (viii) the
absence of certain material changes or events since December 31, 1997,
including the sale of any of PST's assets other than for fair consideration in
the ordinary course of business, termination of any agreements, contracts,
leases or licenses to which PST is a party, liens or other obligations,
certain capital expenditures or capital investment in or acquisition of
securities or assets of third parties, delayed or postponed payment of
accounts payable or other liabilities, the granting of licenses or other
rights with respect to the intellectual property of PST, waiver or release of
claims outside the ordinary course of business, changes in the charter or
bylaws, the sale or other disposition of PST Common Stock or the granting of
any options, warrants or other rights to purchase any of the PST Common Stock,
the declaration or payment of any dividend or distributions or the redemption
or other acquisition of any of the PST Common Stock, damage destruction or
loss of PST's property which would adversely affect its business, loans or
transactions with any of its directors, officers and employees other than in
the ordinary course of business consistent with past practices, certain
increases in compensation of and granting of any bonus, dividend or other
compensation to any of its directors, officers and employees outside the
ordinary course of business and the adoption, amendment, modification or
termination of bonus, profit-sharing, incentive, severance or other plans,
contracts or commitments for the benefit of any of its directors, officers or
employees, pledges to make charitable or other capital contributions, the
incurrence of any liability, except in the ordinary and usual course of
business and changes in any method or principle of accounting; (ix) the
absence of any undisclosed material liabilities or violations of law; (x) the
filing of tax returns and payment of taxes and the absence of certain audits,
examinations, liens, agreements and parachute payments with respect to tax
obligations; (xi) compliance with laws applicable to the business of PST and
its subsidiaries; (xii) the status of all of PST's ownership or leasehold
interests in real property utilized by PST in connection with its primary
business operations; (xiii) PST's ownership of the right to use, no
infringement of others' rights to, and the absence of any claim or licenses or
certain conflicts, violations or defaults, in each case with respect to any
intellectual property which is material to the conduct of PST's business;
(xiv) the condition of PST's rolling stock and other significant tangible
assets; (xv) disclosure of material contracts; (xvi) the absence of certain
changes in employee benefit plans or labor relations; (xvii) the compliance
with applicable laws relating to employee benefit plans and certain other
matters relating to the Employee Retirement Income Security Act of 1974, as
amended; (xvii) the status of PST's bank accounts, notes and accounts
receivable and insurance coverage; (xviii) the absence of any undisclosed
guaranties of third party obligations; (xix) absence of material litigation or
investigations; (xx) compliance with environmental laws and regulations; (xxi)
absence of certain payments; (xxii) compliance with antitrust laws; (xxiii)
PST's relationships with its major suppliers and customers; (xxiv) the
accuracy of information supplied by PST in connection with this Proxy
Statement/Prospectus and the Registration Statement; (xxv) the absence of the
applicability of certain provisions of the Utah Code Annotated and PST's
Articles of Incorporation; (xxvi) the vote required for the Merger and (xxvii)
the safety rating and revenue per loaded mile of PST.
The Merger Agreement also includes representations and warranties by
Enterprises and Merger Sub as to, among other things, (i) the corporate
organization, standing and power of Enterprises and Merger Sub; (ii) the
authorization, execution, delivery, performance and enforceability of the
Merger Agreement and related matters, the Merger Agreement's non-contravention
of any agreement, law, or charter or bylaw provision and the absence of the
need for governmental or third-party filings, consents, approvals or actions
with respect to any transaction contemplated by the Merger Agreement (except
for certain regulatory filings specified in the Merger Agreement); (iii) the
absence of liability or obligation to pay brokers fees or commissions with
respect to the Merger; (iv) compliance as to the form of, and the accuracy of
information contained in, documents filed by Enterprises with the SEC; and (v)
the accuracy of information supplied by Enterprises in connection with this
Proxy Statement/Prospectus and the Registration Statement.
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BUSINESS OF PST PENDING THE EFFECTIVE TIME OF THE MERGER
PST has agreed that, after the date of the Merger Agreement and prior to the
Effective Time, unless Enterprises agrees otherwise in writing, PST will:
(a) conduct its businesses in the ordinary and usual course of business
and consistent with past practice;
(b) not (i) amend or propose to amend its charter or bylaws; or (ii)
split, combine or reclassify the outstanding PST Common Stock or declare,
set aside or pay any dividend or distribution payable in cash, stock,
property or otherwise;
(c) not (i) authorize the issuance of, or issue, sell, grant, pledge or
dispose of, or agree to issue, sell, grant, pledge or dispose of, any
additional shares of, or any options, warrants or rights of any kind to
acquire any shares of, its capital stock or any class of any debt or equity
securities convertible into or exchangeable into its stock except issuances
of shares of PST Common Stock pursuant to the exercise of stock options
outstanding on the date of the Merger Agreement and prior to the Closing
Date; amend or agree to amend any stock option plans or agreements; sell
(including, without limitation, by sale-leaseback), pledge, dispose of or
encumber any material assets or interests therein, other than in the
ordinary course of business and consistent with past practice; (iii)
redeem, purchase, acquire or offer to purchase or acquire any shares of its
capital stock; (iv) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing;
(d) use commercially reasonable efforts to preserve intact its business
organizations and goodwill, keep available the services of its present
officers, employees, and independent contractors, and preserve the goodwill
and business relationships with suppliers, distributors, customers, and
others having business relationships with PST;
(e) use commercially reasonable efforts to ensure compliance with all
applicable statutes and regulations, and preserve and foster good
relationships with governmental agencies having jurisdiction over PST;
(f) confer on a regular basis as requested by Enterprises with one or
more representatives of Enterprises to discuss material operational and
business matters and the general status of ongoing operations and business;
(g) promptly notify Enterprises of any significant changes in the
business, properties, assets, condition (financial or other), results of
operations or prospects of PST, including but not limited to any pending or
threatened claims, suits, actions or other potential liabilities;
(h) not acquire, or publicly propose to acquire, all or any substantial
part of the business and properties or capital stock of any person not a
party to this Agreement, whether by merger, purchase of assets, tender
offer or otherwise;
(i) not initiate, solicit, or encourage, and not directly through any
officer, director or employee, investment banker, attorney, accountant or
other agent employed or retained by PST or any of its subsidiaries
initiate, solicit or encourage, any proposal or offer to acquire all or any
substantial part of the business and properties or capital stock of PST or
any of its subsidiaries, whether by merger, purchase of assets, tender
offer or otherwise; provided, however, that PST may furnish information
concerning its business, properties or assets to a corporation,
partnership, person or other entity or group (a "Third Party") which has
expressed an interest in making a bona fide offer or proposal to PST to
acquire PST and which in the opinion of PST has the financial capability to
consummate such an acquisition subject to receipt of appropriate
information regarding PST (and when PST has not initiated the offer or
proposal and has not solicited or encouraged such third party to express
such offer or proposal) and, following receipt of such expression of
interest, may negotiate, enter into appropriate agreements with such Third
Party if the PST Board believes in good faith, after consultations with its
financial advisor, that such actions may result in a superior financial
transaction for stockholders and if outside counsel to PST provides a
written opinion to the PST Board to the effect that the failure to furnish
such information, or to negotiate or enter into appropriate agreements with
such Third Party could subject PST's directors to a substantial risk of
liability for breach of their fiduciary duties or for failure to conform to
the requirements of the securities laws. In
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the event PST receives an expression of interest or offer of the type
referred to above, it shall promptly inform Enterprises as to (and provide
Enterprises with copies of) any such inquiry, offer or proposal;
(j) not approve, accept or recommend any offer from a Third Party with
respect to any merger, consolidation, or sale of substantially all of its
assets that will treat Enterprises or shares of PST Common Stock owned by
Enterprises any less favorably than other stockholders of PST or their
shares of PST Common Stock;
(k) not commence litigation, adopt any stockholder rights plan or
comparable arrangement, or take any other action that is intended to
prevent Enterprises from acquiring the PST Common Stock other than
enforcing the terms of the Merger Agreement;
(l) not enter into or amend any employment, severance, bonus, special pay
arrangement with respect to hiring, termination of employment or other
similar arrangements or agreements with any directors, officers or key
employees;
(m) with certain exceptions for routine compensation adjustments, not
adopt, enter into or amend any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, health care, employment
or other employee benefit plan, agreement, trust, fund or arrangement for
the benefit or welfare of any employee, retiree, or terminated employee,
except as required to comply with changes in applicable law;
(n) other than in the ordinary course of business and consistent with
past practice, not incur any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities or make any
loans or advances;
(o) not agree in writing, or otherwise, to take any of the foregoing
actions or any other action which would make any representation or warranty
contained in the Merger Agreement untrue or incorrect in any material
respect as of the Closing Date; and
(p) not authorize or resolve to adopt any plan or proposal that would
grant any right to PST's stockholders to dissent from and obtain an
appraisal of their shares as a consequence of the Merger or the Merger
Agreement and the transaction contemplated thereby other than in accordance
with Part 13 of the URBCA.
ADDITIONAL AGREEMENTS
The Merger Agreement provides for the following additional agreements:
Access to Information. PST will afford to Enterprises and its accountants,
counsel, lenders and other representatives reasonable access during normal
business hours and upon reasonable notice throughout the period prior to the
Effective Time to all of PST's properties, books, contracts, commitments and
records (including, but not limited to, tax returns) and, during such period,
will furnish to Enterprises (i) a copy of each report, schedule and other
document filed or received by PST pursuant to the requirements of federal or
state tax or securities laws or the HSR Act or filed with or received by PST
from the SEC, Federal Trade Commission, Department of Justice or any Federal
or state tax authority and (ii) all other information and documents concerning
its businesses, properties and personnel as Enterprises may reasonably
request.
Proxy Statement; Registration Statement; Other Filings.
(a) PST will cooperate with Enterprises and its counsel in the preparation
and filing with the Commission as promptly as practicable and will use all
reasonable efforts to have cleared by the Commission, a Proxy
Statement/Prospectus with respect to the PST Annual Stockholders' Meeting and
the issuance of the Enterprises Common Stock pursuant to the Merger.
(b) Enterprises shall prepare and shall file with the Commission a
Registration Statement on Form S-4 (the "Registration Statement") under the
Securities Act covering the Enterprises Common Stock to be issued in the
Merger and shall use all reasonable efforts to have the Registration Statement
declared effective by the Commission as promptly as practicable.
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(c) PST and Enterprises agree to prepare and file any other filings required
under the Exchange Act, the Securities Act or any other federal or state
securities laws relating to the Merger and the Merger Agreement, including
without limitation all filings required under the HSR Act ("Other Filings").
See "THE MERGER--Regulatory Approvals Required."
Stockholders' Approval. PST will submit the Merger Agreement and the
transactions contemplated thereby for the approval of PST's stockholders at
PST's 1998 Annual Meeting of Stockholders, to be held as soon as practicable
after the Registration Statement is declared effective by the Commission and,
subject to the fiduciary duties of the Board of Directors of PST under
applicable law and as otherwise provided herein, shall use its best efforts to
obtain stockholder approval of the Merger Agreement and the transactions
contemplated hereby.
Expenses; Termination Fee. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with the Merger Agreement and the
Merger will be paid by the party incurring such expenses. However, if the
Merger Agreement is terminated pursuant to the approval by the PST Board of a
competing transaction under the circumstances described above pertaining to a
Third Party offer, then PST must pay to Enterprises a termination fee of
$3,000,000 plus Enterprises' actual out-of-pocket expenses relating to the
Merger and the Merger Agreement (including, but not limited to fees and
expenses of counsel and accountant and financial advisors), subject to a limit
on such expenses of $500,000. Additionally, PST may become obligated to pay
Enterprises' actual out-of-pocket expenses (up to $500,000) if the Merger
Agreement is terminated due to other prescribed circumstances involving the
withdrawal or modification of the PST Board's approval of the Merger
Agreement, the occurrence of a PST Material Adverse Effect (as defined in the
Merger Agreement) or certain breaches of the covenants, agreements,
representations and warranties of PST contained in the Merger Agreement, and
Enterprises may become obligated to pay PST's actual out-of-pocket expenses
(up to $500,000) if Enterprises wrongfully refuses to close the transactions
contemplated by the Merger Agreement (excluding any refusal to close due to
the failure of any condition to Enterprises' obligations to close). See "THE
MERGER--Expenses; Termination Fee."
Agreement to Cooperate. PST and Enterprises will use all commercially
reasonable efforts to take all action to do all things necessary, proper or
advisable to close the Merger, and shall consult with each other prior to
issuing any public announcement or other statement with respect to the Merger
and the Merger Agreement.
Accountants' Letters. Enterprises and PST each agree to use their
commercially reasonable efforts to cause to be delivered to the other letters
of Arthur Andersen LLP, independent public accountants for PST and
Enterprises, respectively, dated the date of the Proxy Statement/Prospectus,
the effective date of the Registration Statement and the Closing Date (or such
other dates reasonably acceptable to the parties) with respect to certain
financial statements and other financial information included in the
Registration Statement.
Stock Options. As of the Effective Time, all options to purchase PST Common
Stock outstanding under any employee benefit plan of PST as of the date of the
Merger Agreement, whether vested or unvested, shall be deemed immediately
vested and exercisable in full. The letter of transmittal for use by PST
stockholders in obtaining the Merger Consideration shall provide a mechanism
for allowing holders of such options to exercise their options in accordance
with all of the other terms thereof and thereby obtain the Merger
Consideration issuable with respect to the number of shares of PST Common
Stock for which the option is exercised. Any such options to purchase shares
of PST Common Stock which are not so exercised by the holders thereof in
accordance with the procedures set forth in the letter of transmittal within
six (6) months of the Effective Time of the Merger shall thereafter be deemed
null and void. See "THE MERGER--Exchange Procedures."
Dissenting Stockholders. PST will give Enterprises prompt notice of any
demands received by PST for appraisal of shares pursuant to Section 16-l0a-
1302 of the URBCA, and Enterprises will have the right to direct all
negotiations and proceedings with respect to such demands. See "THE MERGER--
Dissenters' Rights."
Director's And Officer's Insurance. Enterprises will maintain, for not less
than six (6) years after the Closing Date, director's and officer's insurance
and indemnification policies substantially similar to such policies maintained
by PST as of the date of the Merger Agreement, to the extent such policies
provide for coverage for
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events occurring prior to the Closing Date, for all directors and officers of
PST as of the date of the Merger Agreement.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Conditions To Each Party's Obligation To Effect The Merger. The respective
obligations of each party to effect the Merger are subject to the fulfillment
at or prior to the Effective Time of the following conditions:
(a) The Merger and the Merger Agreement must be approved and adopted by
the requisite vote of the stockholders of PST under applicable law;
(b) Each of Enterprises, Merger Sub, and PST must deliver to the other
resolutions of their respective Boards of Directors duly adopted by
unanimous vote or consent, certified by the Secretary of such party as of
the Closing Date, authorizing and approving the execution and delivery of
the Merger Agreement on behalf of such party and the consummation of the
Merger and authorizing and approving all other necessary and desirable
corporate actions with respect to the Merger;
(c) The waiting period under the HSR Act must have expired or been
terminated;
(d) The Registration Statement must be effective in accordance with the
provisions of the Securities Act;
(e) There must be no preliminary or permanent injunction or other court
order or decree which prevents the consummation of the Merger; and
(f) There must be no legal proceeding or restraint (i) preventing or
seeking to prevent consummation of the Merger, (ii) prohibiting or seeking
to prohibit or limiting or seeking to limit, Enterprises from exercising
all material rights and privileges pertaining to its ownership of the
Surviving Corporation or the ownership or operation by Enterprises or any
of its subsidiaries of all or a material portion of the business assets of
Enterprises or any of its subsidiaries, or (iii) compelling or seeking to
compel Enterprises or any of its subsidiaries to dispose or hold separate
all or any material portion of the business or assets of Enterprises or any
of its subsidiaries, as a result of the Merger or the transactions
contemplated by this Agreement.
Conditions To Obligation Of PST To Effect The Merger. The obligation of PST
to effect the Merger is subject to the fulfillment at or prior to the
Effective Time of the following additional conditions:
(a) Enterprises must have performed its agreements contained in the
Merger Agreement required to be performed at or prior to the Effective Time
and the representations and warranties of Enterprises must be true and
correct in all material respects;
(b) PST must have received a legal opinion addressed to PST from Witt,
Gaither & Whitaker, P.C., counsel to Enterprises, as prescribed in the
Merger Agreement;
(c) PST shall have received the letter of Arthur Andersen LLP described
in the Merger Agreement;
(d) Morgan Keegan must have advised the PST Board that the Merger
Consideration is fair from a financial standpoint to PST's stockholders and
consented to the inclusion of its opinion with respect thereto in this
Proxy Statement/Prospectus; and
(e) there must not have occurred any material adverse effect on the
business, assets, financial condition, results of operations or
stockholders' equity of Enterprises taken as a whole.
Conditions To Obligation Of Enterprises To Effect The Merger. The obligation
of Enterprises and Merger Sub to effect the Merger are subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) PST must have performed in all material respects its agreements
contained in the Merger Agreement and the representations and warranties of
PST contained in the Merger Agreement must be true and correct in all
material respects;
(b) Enterprises must have received an opinion from Parr, Waddoups, Brown,
Gee & Loveless, counsel to PST, as prescribed in the Merger Agreement;
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(c) Enterprises must have received the landlords' estoppel letters with
respect to PST's leased real estate and the letter of Arthur Andersen LLP
described in the Merger Agreement;
(d) There must not have occurred any material adverse effect on the
business or operations of PST;
(e) As of the Effective Time there must be no default or condition which,
with the passage of time, would constitute a default under any loan
agreement to which PST or any subsidiary is a party which would permit the
acceleration of any amounts due thereunder;
(f) The PST Board must have unanimously approved and recommended to PST's
stockholders the Merger Agreement and the Merger, and the number of shares
of PST Common Stock with respect to which stockholders have perfected their
right to dissent from the Merger and receive payment for their shares under
Section 16-l0a-1302 of the URBCA must not exceed ten percent (10%) of the
outstanding shares of such stock as of the Effective Time.
(g) Each of the officers and directors of PST must have delivered a
prescribed release to Enterprises by the Closing Date;
(h) By the Closing Date, Kenneth R. Norton ("Norton") and Enterprises
must have entered into a noncompetition agreement; and
(i) The Agreement for Outsourcing Services between PST and The Sabre
Group Inc. will be discussed among the parties prior to closing and if such
service is to be terminated it shall be done at a cost to PST of not more
than $1,137,000; and
(j) Prior to the Closing Date, all persons or entities who, at the time
of the Annual Meeting, were or might be deemed to be "affiliates" of PST
for purposes of Securities Act Rule 145 (the "Affiliates") shall have
executed written agreements in a form acceptable to Enterprises stating
that each such Affiliate will not offer to sell, sell, transfer, or
otherwise dispose of any shares of Enterprises Common Stock received in the
Merger except: (i) pursuant to an effective registration statement; (ii) in
compliance with Securities Act Rule 145; or (iii) if, in the opinion of
counsel reasonably acceptable to Enterprises or pursuant to a "no action"
letter obtained by such Affiliate from the staff of the Commission, such
offer to sell, sale, transfer or other disposition is otherwise exempt from
registration under the Act.
No Solicitation.
Under the Merger Agreement, PST has agreed that it will not initiate,
solicit or encourage any proposal or offer to acquire all or any substantial
part of the business and properties or capital stock of PST. However, PST may
furnish information to a corporation, person or other entity (a "Third Party")
which expresses interest in making a bona fide offer or proposal to acquire
PST and which, in the opinion of PST, has the financial ability to consummate
such an acquisition subject to the receipt of appropriate information
regarding PST, as long as PST has not initiated the offer or proposal and has
not solicited or encouraged the Third Party to make such an offer. After
receiving such an expression of interest, PST may negotiate with and enter
into an appropriate agreement with the Third Party if the PST Board believes
in good faith, after consultation with its financial advisor, that the actions
may result in a superior financial transaction for the PST stockholders and if
outside counsel to PST provides a written opinion to the PST Board to the
effect that the failure to furnish such information, or to negotiate or enter
into appropriate agreements with the Third Party could subject PST's directors
to a substantial risk of liability for breach of their fiduciary duties or for
failure to conform to the requirements of the securities laws.
TERMINATION, AMENDMENT AND WAIVER
The Merger Agreement may be terminated and the Merger contemplated thereby
may be abandoned at any time prior to the Effective Time, whether before or
after approval by the stockholders of PST:
(a) by mutual consent of Enterprises and PST; or
(b) by either Enterprises or PST if (i) the Merger has not closed by
October 31, 1998, (ii) the requisite vote of PST's stockholders to approve
the Merger and the Merger Agreement has not been obtained, or (iii) any
court has issued an order, judgment or decree (other than a temporary
restraining order) restraining,
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enjoining or otherwise prohibiting the Merger and such order, judgment or
decree becomes final and nonappealable; or
(c) by Enterprises if (i) the PST Board withdraws or modifies in a manner
adverse to Enterprises its approval or recommendation of the Merger, the
Merger Agreement or the transactions contemplated thereby, or (ii) there
has been (x) a material breach of any covenant or agreement in the Merger
Agreement by PST which has not been cured or adequate assurance (acceptable
to Enterprises in its sole discretion) of cure given, in either case within
15 business days following receipt of notice of such breach, or (y) a
breach of a representation or warranty of PST in the Merger Agreement which
by its nature cannot be cured prior to the Termination Date, other than a
breach that has not had or would not reasonably be expected to have a PST
Material Adverse Effect (as defined in the Merger Agreement) or (z) a PST
Material Adverse Effect has occurred; or
(d) by PST if (i) there has been (x) a material breach of any covenant or
agreement herein by Enterprises which has not been cured or adequate
assurance (acceptable to PST in its reasonable discretion) of cure given,
in either case within fifteen (15) business days following receipt of
notice of such breach, or (y) a breach of a representation or warranty of
Enterprises which by its nature cannot be cured prior to the Termination
Date, other than a breach that has not had or would not reasonably be
expected to have a material adverse effect on the business of Enterprises
taken as a whole, or (ii) the PST Board, subject to the conditions
described above under "THE MERGER AGREEMENT--No Solicitation," authorizes
PST to enter into an agreement with any Third Party with respect to a
merger of PST or the sale of all or substantially all of the assets of PST
or recommends approval of a tender offer or any other form of business
combination.
The Merger Agreement defines "PST Material Adverse Effect" to mean any
change, event or circumstance that individually or when taken together with
all such other changes, events or circumstances (including such changes,
events or circumstances that are reasonably likely to occur), shall have or
may reasonably be anticipated to have a materially adverse effect on the
business, assets, financial condition, results of operations or stockholders'
equity of PST.
In the event of termination of the Merger Agreement, the Merger Agreement
will become void and neither PST, Enterprises nor their respective officers or
directors will have any further liability or obligation under the Merger
Agreement except for payment of the Termination Fee and expenses, if
applicable.
The Merger Agreement may be amended at any time before or after approval of
the PST stockholders, but, after such approval, no amendment may be made which
reduces the Merger Consideration or alters the form of the Merger
Consideration or in any way materially adversely affects the rights of the PST
stockholders without their further approval, but the parties may agree to
increase the Merger Consideration without the approval of the PST
stockholders. The Merger Agreement may not be amended except by an instrument
in writing signed by all of the parties to the Merger Agreement. At any time
prior to the Effective Time, the parties to the Merger Agreement may (a)
extend the time for the performance of any of the obligations or other acts of
the parties to the Merger Agreement, (b) waive any inaccuracies in the
representations and warranties of any other party contained in the Merger
Agreement or in any document delivered in connection with the Merger Agreement
and (c) waive compliance by any other party with any of the agreements or
conditions contained in the Merger Agreement; provided, however, the waiver or
compliance with any agreements or conditions in the Merger Agreement will not
limit the parties' obligations to comply with all other agreements or
conditions contained therein. Any agreement with respect to an extension or
waiver will be valid only if it is in writing, signed on behalf of the party
agreeing to such extension or waiver.
THE VOTING AGREEMENTS
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN PROVISIONS OF THE VOTING
AGREEMENTS, WHICH ARE ATTACHED HERETO AS ANNEX II AND INCORPORATED HEREIN BY
REFERENCE; SUCH SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
VOTING AGREEMENTS.
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On July 7, 1998, Enterprises entered into the Voting Agreements with Kenneth
R. Norton, a director, officer and the largest stockholder of PST and the Bank
of New York. At the Record Date, Mr. Norton held 1,446,773 shares
(approximately 34% of the outstanding shares) of PST Common Stock and the Bank
of New York held 774,000 shares (approximately 18% of the outstanding shares)
of PST Common Stock. However, 42,700 of the shares owned by Mr. Norton are
"control shares" under applicable provisions of the URBCA and, consequently,
Mr. Norton currently will not be entitled to vote such shares at the Annual
Meeting. The general effect of the Voting Agreements is to increase the
likelihood that Stockholder Approval will be obtained. Enterprises held on the
Record Date 206,800 shares (approximately 4.8% of the outstanding shares) of
PST Common Stock. Enterprises, Mr. Norton and the Bank of New York were
entitled to vote in the aggregate on the Record Date approximately 55.8% of
the outstanding shares of PST Common Stock. Consequently, it is anticipated
that Stockholder Approval will be obtained if holders of additional shares of
PST Common Stock representing approximately 11% of the outstanding shares of
PST Common Stock vote in favor of approval and adoption of the Merger
Agreement. Additionally, subject to the requirements of the HSR Act discussed
herein under "THE MERGER--Regulatory Approvals Required," Enterprises may
elect to purchase additional shares of PST Common Stock in open market
transactions from time to time between the date of this Proxy Statement and
the Record Date for the Annual Meeting. To the extent that Enterprises elects
to purchase any such additional shares, the number of shares which must be
voted in favor of the approval and adoption of the Merger Agreement by
shareholders other than Enterprises, Kenneth R. Norton and the Bank of New
York in order for the Merger to be approved will be reduced.
Pursuant to the terms of the Voting Agreements, Mr. Norton and the Bank of
New York have agreed, among other things, to vote all of the PST Common Stock
owned by them (to the extent that such shares are entitled to vote at the
Annual Meeting) in favor of the Merger or any other business combination
agreed upon between PST and Enterprises and, if requested by Enterprises, to
grant Enterprises an irrevocable proxy so as to enable Enterprises (or such
person as designated by Enterprises) to vote the PST Common Stock owned by Mr.
Norton and the Bank of New York in favor of the Merger or any other business
combination and any other matter relating thereto which may be presented to
the stockholders of PST.
In addition to their agreement pursuant to the Voting Agreements to vote
their shares of PST Common Stock in favor of the Merger, Mr. Norton and the
Bank of New York have agreed under the Voting Agreements to cooperate with
Enterprises in making any and all filings required by the Securities Exchange
Act of 1934, as amended, or the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, which may be required to be filed as a result of the
Merger. They also agreed that neither of them nor any of their affiliates or
agents will take any action to seek, encourage or support, or participate in
any way in discussion or negotiations with, or provide any information, data
or assistance to any party other than Enterprises concerning any acquisition
of the PST Common Stock and other securities of PST or any right, option or
warrant to purchase any of the PST Common Stock or any significant portion of
the assets of PST. However, Mr. Norton's Voting Agreement provides that, as a
member of the Board of Directors of PST, Mr. Norton will not be prevented from
obtaining from any person which makes an unsolicited offer to PST with respect
to any such acquisition or similar transaction, any information which he in
good faith believes is relevant to his analysis of such an offer or from
considering the offer if, in the opinion of his counsel or the counsel of PST,
the exercise of his fiduciaries duties requires him to do so.
The Voting Agreements provide that neither Mr. Norton, the Bank of New York
nor any of their affiliates or agents will grant any proxy with respect to any
of their shares of PST Common Stock to any corporation, person or other entity
other than Enterprises or its designees, vote any of such shares in favor of a
proposal for the dissolution of, or a share exchange, consolidation, sale of
assets or other similar transactions involving PST (subject to certain
exceptions), provide to any corporation, partnership or other entity other
than Enterprises any information other than that which is publicly available
or required to be disclosed by law, concerning PST, its business, operations
or assets, or take any other action which is intended to frustrate the Merger
(subject to certain exceptions). Mr. Norton and the Bank of New York also
waived their right under Part 13 of the URBCA to dissent from and obtain
payment of the fair value of their PST Common Stock as a result of the Merger.
44
<PAGE>
NONCOMPETITION AND CONSULTING AGREEMENT
As a condition to the Closing, Enterprises will enter into a noncompetition
and consulting agreement (the "Noncompetition and Consulting Agreement") with
Mr. Kenneth R. Norton. Pursuant to the terms of the Noncompetition and
Consulting Agreement, the Surviving Corporation (which after the Merger will
be called PST Vans, Inc. and is referred to in this section as "PST") will
retain Mr. Norton as a consultant on all matters pertaining to the business of
PST. Pursuant to the Noncompetition and Consulting Agreement, PST may request
Mr. Norton to examine and study particular problems or matters that may arise
with respect to the business of PST and to meet with employees and customers
of PST as and when such services may be required for a term of five years
beginning on the Closing Date. PST will pay Mr. Norton $200,000 a year during
the term of the Noncompetition and Consulting Agreement.
As part of the Noncompetition and Consulting Agreement and as a material
inducement to Enterprises for entering into the Noncompetition and Consulting
Agreement, Mr. Norton agreed that during the term of the Noncompetition and
Consulting Agreement he will not compete in any manner with the business
conducted by Enterprises and PST or any of Enterprises' other subsidiaries or
enter into the employment of, render any service to, provide financing for or
assist any person, firm or other entity in any manner which competes with
Enterprises or its subsidiaries. However, Mr. Norton is not prohibited from
owning stock in any publicly traded company which competes with Enterprises or
any of its subsidiaries as long as his ownership in any such company does not
exceed five percent (5%) of the capital stock of such company and he is not
involved in the day-to-day affairs of such company.
MANAGEMENT AFTER THE MERGER
The directors of Merger Sub immediately prior to the Effective Time will
become the directors of the Surviving Corporation until their respective
successors have been duly elected and qualified or until their earlier
resignation or removal. As a result, the current directors of PST will not be
directors of the Surviving Corporation. The officers of Merger Sub at the
Effective Time will be the officers of the Surviving Corporation until their
respective successors have been duly appointed and qualified or until their
earlier resignation or removal.
COMPARATIVE STOCK PRICES AND DIVIDENDS
PST Common Stock (symbol: PSTV) and Enterprises Common Stock (symbol: XPRSA)
are both listed for trading on the Nasdaq National Market. The following table
sets forth, for the periods indicated, the high and low sale prices per share
of PST Common Stock and Enterprises Common Stock on the Nasdaq National
Market. Neither Enterprises nor PST has ever declared or paid any cash
dividends on its common stock. Enterprises does not anticipate or have any
plans to declare or pay cash dividends on the Enterprises Common Stock in the
foreseeable future.
<TABLE>
<CAPTION>
PST ENTERPRISES
COMMON STOCK COMMON STOCK
------------- -------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
QUARTER ENDING
June 30, 1996....................................... 4.625 3.75 8.50 6.625
September 30, 1996.................................. 4.25 2.875 9.75 5.75
December 31, 1996................................... 3.75 2.375 16.125 8.50
March 31, 1997...................................... 3.375 2.438 17.75 12.25
June 30, 1997....................................... 3.75 1.875 20.50 17.125
September 30, 1997.................................. 4.00 3.00 20.75 19.00
December 31, 1997................................... 4.938 3.00 24.625 21.00
March 31, 1998...................................... 6.938 3.938 24.875 18.375
June 30, 1998....................................... 8.00 4.25 21.125 15.50
</TABLE>
45
<PAGE>
The following table sets forth the last reported sales prices per share of
PST Common Stock and Enterprises Common Stock on the Nasdaq National Market on
July 6, 1998, the last trading day before announcement of the Merger
Agreement, and on July 29, 1998, the last trading day prior to the date of
this Proxy Statement/Prospectus:
<TABLE>
<CAPTION>
DATE PST COMMON STOCK ENTERPRISES COMMON STOCK
---- ---------------- ------------------------
<S> <C> <C>
July 6, 1998....................... $6.125 $16.75
July 29, 1998...................... 6.063 15.50
</TABLE>
PST STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
ENTERPRISES COMMON STOCK AND PST COMMON STOCK.
BUSINESS OF U.S. XPRESS ENTERPRISES, INC.
Enterprises, a Nevada corporation, provides transportation and logistics
services in the United States, Canada and Mexico. Enterprises is one of the
ten largest truckload carriers in the United States. The company is a leader
in the adoption of proven new technologies as a means of reducing costs and
providing better service to its customers. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Following the Effective Time of the Merger, Enterprises intends to operate
PST as a wholly owned subsidiary of Enterprises.
The principal executive offices of Enterprises are located at 2931 South
Market Street, Chattanooga, Tennessee 37401. The telephone number is (423)
697-7377.
BUSINESS OF PST VANS, INC.
BUSINESS
General
PST Vans, Inc. is a truckload carrier focused on serving three markets in
the United States: transcontinental, intrawest and midwest-southeast. PST
management believes its three primary operating areas complement each other to
create a network which enhances equipment utilization and marketing of PST's
truckload carrier services. Approximately 63% of PST's revenues during 1997
were from transcontinental traffic lanes with an average length of haul of
approximately 1,600 miles. The balance of revenues was generated in the
intrawest and midwest-southeast traffic lanes with an average length of haul
of approximately 750 miles. PST transports a wide variety of freight, much of
which is time-sensitive, including paper products, retail products, non-
perishable food products, tires and electronic equipment. PST was incorporated
in Utah in 1984 and its executive offices are located at 1901 West 2100 South,
Salt Lake City, Utah 84119.
PST operates exclusively a fleet of standardized, modern tractors and 53-
foot dry van trailers and focuses its marketing efforts on serving as a core
carrier for high volume, service-sensitive customers. Major shippers continue
to reduce the number of authorized carriers they utilize and are deciding to
establish service-based, long-term relationships with a small group of
preferred partners or "core carriers" who can meet the service demands
required by these shippers, including quick response times, meeting of just-
in-time inventory scheduling needs, on-time pick up and delivery and real-time
load monitoring. PST attempts to meet these needs by providing a high level of
service to its customers including on-time pick up and appointment deliveries,
a modern fleet of equipment that enhances on-time deliveries, a fleet of 53-
foot dry van trailers capable of handling high volumes and high weight
shipments and advanced information capabilities that provide customers with
access to information concerning the location and status of shipments.
46
<PAGE>
PST maintained its fleet size during 1997 at an average of approximately
1,150 tractors (including independent contractors). In December 1997, PST
reduced its fleet size by approximately 6% to 1,077 tractors due to the
maturity of operating leases on certain tractors. During January 1998, PST
further reduced its fleet size to approximately 977 tractors with the maturity
of other operating leases. At June 30, 1998 the fleet size was approximately
1,062. PST has replaced the tractors that were under operating leases with
independent contractors and believes the fleet can be increased by
approximately 10% during the remainder of 1998 with additional independent
contractors, as market conditions support. PST management believes that
utilizing independent contractors instead of PST-owned tractors allows PST to
expand without using PST capital resources. Using independent contractors also
gives PST greater flexibility to reduce fleet size should business demand
decrease in the future.
OPERATIONS
General
PST operates a standardized, modern fleet of tractors and 53-foot dry van
trailers in its primary operating areas. PST operates its fleet with driver
managers, logistics managers, and customer service representatives who work
from PST's operations center in Salt Lake City, Utah.
Customer service representatives are assigned to a particular geographic
area and work closely with customers and marketing personnel. PST's customer
service representatives are responsible for soliciting and accepting shipments
from customers in accordance with prioritized traffic lanes established by
management. Logistics planners coordinate with the customer service
representatives to match customer needs with PST capacity and location of
revenue equipment. Once a load has been accepted by a customer service
representative, the logistics planner for the geographic area where the load
originates coordinates the assignment of the load to a truck with a driver
manager who is responsible for its proper and timely delivery. The driver
manager tracks the status and location of that load while in transit. In order
to enhance productivity among its operations group, PST has an incentive plan
for its non-driver employees, under which a bonus is distributed monthly to
those employees that meet established performance criteria.
Technology
PST's management information system provides real-time, on-line management
information, such as daily operating reports and costing and location of
loads, which assists management in tracking shipments and performing long-
range planning and trend analysis. Information concerning the status and
location of shipments in transit, together with information concerning
unassigned loads, is constantly updated on the system. Computer-generated
reports are used to meet delivery schedules, respond to customer inquiries
concerning loads in transit and match available equipment with loads. The
system has EDI capability to allow customers access to the PST's computer data
from which transit and delivery information can be obtained. EDI also offers
customers the ability to place orders for their transportation needs directly
into the computer system and allows PST to bill customers electronically.
In February 1998, PST entered into a five-year agreement with The Sabre
Group to out-source the majority of its information technology functions,
including computer and telephone systems. PST completed the transition to new
hardware and software for its financial, accounting, operations and other
management information systems during the second quarter of 1998. PST
encountered difficulties implementing these new systems, which resulted in
higher driver and independent contractor turnover. PST believes the
difficulties have been substantially resolved.
PST installed the QUALCOMM on-board communications system on all of its
tractors during the fourth quarter of 1997. This system assists PST in
tracking loads, servicing customers, and communicating with drivers. QUALCOMM
utilizes satellite technology service to link PST's drivers to its operations
center. PST formerly used a cellular-based on-board communications system from
June 1994 to June 1997.
47
<PAGE>
The Company also uses an optical disk imaging system that scans documents
such as bills of lading, driver logs and fuel receipts on to optical disks.
PST management believes that this system substantially reduces clerical time
required to enter and retrieve documents, while enhancing the utilization of
data.
Fuel
PST has established a nationwide fuel purchase program which enables PST's
drivers to purchase fuel at specified fuel stops throughout the United States
at volume discounts. In order to reduce PST's vulnerability to rapid price
increases, PST enters into purchase contracts with fuel suppliers from time to
time for a portion of its estimated fuel requirements at a guaranteed price.
As of March 31, 1997, PST had entered into agreements with fuel suppliers
under which PST may purchase approximately 12% of its estimated fuel needs
through March 31, 1998, at a guaranteed price.
These agreements include an arrangement with a national truck stop operator
to store and pump this fuel at truck stops located throughout the United
States. PST also has bulk fuel storage capacity at one of its terminals and
its Salt Lake City operations center. PST attempts to offset rapid increases
in fuel prices with fuel surcharges to its customers which are standard in the
industry.
Marketing
PST concentrates its marketing efforts on serving as a core carrier for high
volume, service-sensitive customers with "driver friendly" freight for
transportation in PST's targeted traffic lanes.
PST has targeted the service-sensitive segment of the truckload market
rather than the segment which uses price as its primary consideration. PST
transports a wide variety of freight, much of which is time sensitive,
including paper products, non-perishable food products, retail products, tires
and electronic products. PST's largest 20 customers accounted for
approximately 49% of revenues in 1997 and for the three months ended March 31,
1998, with the largest customer accounting for approximately 8% of revenues.
PST maintains marketing offices at its headquarters in Salt Lake City. PST
senior management is directly involved in marketing and maintaining
relationships with customers. PST fosters the concept of maintaining a
"transportation partnership" with each customer to respond to individual
customer requirements and become a core carrier for service-sensitive
customers. Once a customer relationship is established, the Company's customer
service representatives, working from PST's operations center in Salt Lake
City, regularly contact that customer to solicit additional business on a
load-by-load basis, particularly when equipment will be available nearby
following a completed haul. In addition, a customer representative meets at
least annually with each customer at the customer's place of business. Each
customer service representative is assigned a particular geographic area and
works with a driver manager to monitor the overall transportation and service
requirements of shippers in the assigned area as well as movements of the
shippers' freight within that area. This personal and continuing customer
contact is designed to ensure a high level of customer satisfaction and
enhance utilization of PST's equipment.
Drivers
The truckload segment of the industry continues to experience an acute
shortage of employee drivers and independent contractors, particularly in the
longer haul segments. As a result of the driver shortage, some truckload
carriers, including PST, have been forced to idle tractors from time to time.
Management has designed a driver recruitment and retention program which
features: (i) maintaining a close working relationship with various
independent driver training schools, (ii) providing a positive training
experience to all new drivers, and (iii) providing a competitive, incentive-
based compensation package and other driver amenities. PST believes that this
program is effectively meeting its driver requirements. However, because of
the acute shortage of drivers in the industry, PST believes it is necessary to
constantly evaluate its driver retention and recruitment program and to make
changes as necessary in order to improve driver recruitment and retention, and
it may be forced to idle tractors from time to time.
48
<PAGE>
Recruiting
PST employs full-time recruiters located throughout the United States who
make recruiting presentations at truck stops, PST-sponsored job fairs and
other locations frequented by drivers. PST also advertises for drivers on
television, radio and in print media. PST carefully screens all new driver
applicants on the basis of prior driving and safety records. PST also works
closely with independent driver training schools and community colleges to
recruit and train prospective drivers. Two of the independent driver training
schools are conducted in PST's facilities, one in Salt Lake City and the other
in Atlanta. PST provides the facilities and equipment while the schools
provide the instructors.
Training
All newly-hired drivers with limited over-the-road experience must complete
PST's training program. PST's training program, which was recently modified,
is intended to provide the trainee with a positive training experience, ease
the driver's transition from driving school to full-time driving and improve
safety. During the training, each new driver is teamed up with an experienced
driver trainer to gain over-the-road experience. Upon meeting certain
criteria, the driver may upgrade to a team or solo driver. For a period of
time, the driver is monitored as a trainee by the safety department for
service and safety performance.
All newly-hired drivers, regardless of experience, are required to pass an
examination and attend a two day orientation program which includes both
classroom and over-the-road training, emphasizing safety and proper operation
of PST tractors and trailers. The orientation program also trains drivers in
all aspects of PST's operations, particularly customer service requirements,
fuel conservation and equipment maintenance. In addition, PST utilizes a
training program for all of its drivers dealing with, among other safety
measures, maintaining a "space cushion" around their vehicle.
Compensation And Benefits
PST compensates its drivers based on miles driven, including an incentive
program based on monthly miles production, with base pay increasing with the
driver's length of employment. Drivers also participate in PST's 401(k)
program, in PST-sponsored health, life and dental plans and the employee stock
purchase plan.
Driver Retention
PST management believes that its competitive compensation package, its
policy to have each driver home at least once every 14 days or to accrue time
off at the rate of one day for each week on the road and its focus on "driver
friendly" freight have enhanced PST's ability to retain drivers. PST also
provides drivers with various amenities, including modern, spacious
conventional tractors that are designed for driver comfort and safety, the
QUALCOMM communication system that allows drivers to communicate with their
families and PST's contract with truck stop operators that allow drivers to
use those facilities. In addition, all drivers are assigned to a driver
assistant who monitors up to 50 drivers from PST's operations center and is
responsible for assisting assigned drivers in resolving administrative or
work-related problems. Management also believes that PST's career advancement
opportunities for drivers, such as becoming a driver trainer or an independent
contractor, are important to driver retention.
Owner/Operators
During the last several years, PST has utilized owner/operators who, through
a contract with PST, supply one or more tractors and drivers for PST use.
Owner/operators are compensated on the basis of a fixed rate per mile and are
responsible for all expenses of operating a tractor, including wages,
benefits, fuel, maintenance, highway use taxes and debt service. The contract
between the owner/operators and PST generally is terminable by either party
upon short notice. PST's use of tractors supplied by owner/operators was
approximately 21% at December 31, 1997, approximately 36% at March 31, 1998
and approximately 30% at June 30, 1998. PST expects the number of tractors
provided by owner/operators to increase relative to the number of company-
operated tractors during 1998. PST management believes that any PST-owned
tractors that are retired during 1998 may be replaced with owner/operators as
future market conditions dictate.
49
<PAGE>
PST believes that carefully selected owner/operators allow PST to expand its
fleet while minimizing its capital investment and fixed costs, improving its
return on invested capital and reducing the cost of financing revenue
equipment. Utilizing owner/operators also allows PST to size its fleet
according to the demand for freight services. In addition, owner/operators
generally have a lower turnover rate than company drivers for the industry as
a whole because of their ownership of their equipment. The ratio of
owner/operators to PST-operated equipment varies from time to time based on
such factors as the demand for freight, the cost of obtaining and operating
new revenue equipment, the availability of qualified owner/operators and the
rates being charged by them. By using owner/operators, PST seeks to improve
its return on invested capital and reduce the financing costs associated with
owning its own fleet.
Revenue Equipment
PST's equipment strategy is to (i) purchase both tractors and trailers with
uniform specifications to reduce parts and maintenance costs, (ii) keep
equipment covered by manufacturers' warranties (to the extent offered by
manufacturers), and (iii) operate a fleet of only modern, comfortable driver-
preferred tractors and 53-foot dry van trailers. The average age of PST's
tractors was 3.2 years at June 30, 1998. PST's current policy is to replace
its tractors approximately every four years and its trailers approximately
every seven years, and to maintain an approximate 2.2 to one trailer-to-
tractor ratio.
At June 30, 1998, PST owned or held directly under lease 747 tractors and
2,546 trailers, all of which were 53-foot long x 102-inch wide dry vans,
capable of handling high volume and high weight shipments. PST's trailers are
of sheet and post construction and can be used to haul full loads of heavy
freight, such as carpet and tires. The following table shows the model years
of PST's tractors and trailers in service as of June 30, 1998.
<TABLE>
<CAPTION>
MODEL YEAR TRACTORS TRAILERS
---------- -------- --------
<S> <C> <C>
1998....................................................... 76 200
1997....................................................... 0 0
1996....................................................... 290 500
1995....................................................... 378 500
1994....................................................... 0 100
1993....................................................... 0 448
1992....................................................... 0 148
1991....................................................... 1 586
1990 and prior............................................. 2 64
----- -----
Total PST-owned............................................ 747 2,546
Total owner/operator....................................... 328 --
----- -----
Total.................................................... 1,075 2,546
===== =====
</TABLE>
The PST fleet consists of 100% conventional tractors all equipped with
Detroit Diesel electronic engines, which management believes provides
increased fuel efficiency, performance improvements and reduced maintenance
over conventional engines. All of the tractors are equipped with air-ride
suspension and other modern features designed to enhance performance and
driver comfort. PST currently has no tractor and 300 trailer production slots
reserved for the balance of 1998.
PST has a comprehensive preventative maintenance program for its PST-
operated tractors and trailers to improve safety, minimize equipment downtime
and enhance resale value. Inspections, repairs and maintenance are performed
on a regular basis at PST facilities. Additional maintenance and repair can be
performed at independent contract maintenance facilities in PST's service
territories when circumstances require. PST also obtains manufacturer extended
warranties, including full engine and power train coverage.
Safety And Risk Management
PST is committed to the safe operation of its revenue equipment. PST
regularly evaluates its safety program and makes changes in order to improve
the safe operation of its equipment. In order to help emphasize safe
50
<PAGE>
driving, PST performs on-the-road observations of drivers and distributes
safety recognition awards to drivers with exemplary driving and productivity
records. Driver assistants and dispatchers regularly communicate with PST
drivers to promote safety and safe work habits. In addition, PST's 1998
tractors are equipped with optional safety features such as speed governors,
daytime running lights, mirrors on each fender that provide improved views and
turning horns that activate when the turn signal on a tractor is engaged. PST
is continuing the following safety programs: 1) pass/fail testing criteria for
all newly-hired drivers; and 2) prompt accident counseling and training for
all drivers involved in preventable accidents. PST implemented a new safety
program in 1997 wherein approximately 10% of PST-owned tractors are equipped
with fuel optimizer engines that govern speed between 57 and 64 miles per
hour. All other PST-owned tractors are governed at 64 miles per hour.
PST has an accident review committee that meets on a regular basis to review
accidents, examine trends and implement changes in procedures or
communications to address safety issues. The committee also works closely with
drivers who have been involved in accidents to improve their driving
performance.
PST requires prospective drivers to meet higher qualifications than those
required by the Department of Transportation (the "DOT"). The DOT requires
PST's drivers to obtain commercial drivers' licenses and also requires that
the employer implement a drug testing program in accordance with the DOT
regulations. PST's program includes pre-employment, random, post-accident and
post-injury drug testing.
The primary insurance risks associated with PST's business are bodily injury
and property damage, workers' compensation claims and cargo loss and damage.
PST maintains insurance against these risks and is subject to liability as a
self insurer to the extent of its deductible. PST currently maintains
liability insurance coverage for bodily injury and property damage with a
deductible of $2,500 per incident and carries cargo insurance coverage with a
$25,000 deductible per incident. PST also has a $100,000 deductible for
workers' compensation claims in those states that allow a deductible. PST
currently maintains a $2,500 deductible per incident for physical damage to
PST-owned tractors and is effectively self insured for physical damage to its
trailers.
Employees
As of June 30, 1998, PST employed 1,597 persons, 1,340 of whom were drivers,
28 were mechanics and maintenance personnel and 229 were support personnel,
including management and administration. None of PST's employees is
represented by a collective bargaining unit, and PST considers relations with
its employees to be good.
Competition
The entire trucking industry is highly competitive and fragmented. PST
competes primarily with other truckload carriers and shippers' private fleets,
and, particularly in the longer haul segments with intermodal transportation,
railroads and providers of second day air freight service. Intermodal
transportation has increased in recent years as reductions in train crew sizes
and the development of new rail technologies have reduced the cost and
improved dependability of intermodal shipping.
Competition for the type of freight transported by PST is based, in the long
term, primarily on service and efficiency and, to a lesser degree, on freight
rates. PST believes that its principal competitive strength is its ability to
consistently provide reliable service to its customers, including on-time pick
ups and deliveries. However, several truckload carriers that compete with PST
have substantially greater financial resources, own more equipment and carry a
larger volume of freight than PST.
Regulation
PST is a motor common and contract carrier and was previously regulated by
the Interstate Commerce Commission ("ICC") and various state agencies.
Effective as of December 31, 1995, the ICC was closed and its remaining
responsibilities were transferred to the DOT. PST has not realized any adverse
impact as a result of this action. The DOT and state agencies have broad
powers, generally governing matters such as authority to engage in motor
carrier operations, rates and charges, accounting systems, certain mergers,
consolidations and
51
<PAGE>
acquisitions and periodic financial reporting. The Motor Carrier Act of 1980
substantially increased competition among motor carriers and reduced the level
of regulation in the industry.
Motor carrier operations are also subject to safety requirements governing
interstate operations prescribed by the DOT. Such matters as weight and
dimension of equipment are also subject to federal and state regulations. The
failure of PST to comply with the rules and regulations of the DOT or state
agencies could result in substantial fines or revocation of PST's operating
licenses. The trucking industry is also subject to regulatory and legislative
changes which can affect the economics of the industry by requiring changes in
operating practices or influencing the demand for, and the cost of providing
services to shippers.
PST currently has authority to carry freight on an intrastate basis in 48
states. The Federal Aviation Administration Authorization Act of 1994 (the
"FAAA Act") amended sections of the Interstate Commerce Act to prevent states
from regulating rates, routes or service of motor carriers after January 1,
1995. The FAAA Act did not address state oversight of motor carrier safety and
financial responsibility, or state taxation of transportation.
PST has underground storage tanks for diesel fuel at its facility in Salt
Lake City, Utah. As a result, PST is subject to regulations promulgated by the
EPA in 1988 governing the design, construction and operation of underground
fuel storage tanks from installation to closure. PST believes all of its tanks
are in substantial compliance with EPA regulations. The Company's truckload
carrier operations are also subject to other environmental laws and
regulations, including laws and regulations dealing with the transportation of
hazardous materials. PST believes that it is in compliance with all material
applicable environmental laws and regulations. In the event PST should fail to
comply with applicable environmental laws and regulations, PST could be
subject to substantial fines and/or penalties and to civil and criminal
liability.
Seasonality
In the trucking industry, revenues generally show a seasonal pattern as
customers reduce shipments during and after the winter holiday season and its
attendant weather variations. Operating expenses also tend to be higher during
the cold weather months, primarily due to poorer fuel economy and increased
maintenance costs.
PROPERTIES
PST owns its executive offices and operations center located in Salt Lake
City, Utah. The property has full maintenance and shop capabilities with four
maintenance bays for tractors and four maintenance bays for trailers. The
property also has approximately 15 acres for tractor and trailer parking and
contains an office building of approximately 36,000 square feet for PST's
executive offices and operations center. PST management believes that this
facility is suitable for PST's present and future needs.
PST also operates terminals in Atlanta, Georgia; Bowling Green, Kentucky;
Fontana, California; Mt. Vernon, Texas; Knoxville, Tennessee; and Valdosta,
Georgia. The Atlanta terminal includes tractor and trailer maintenance
facilities, office space and driver lounges. All of the terminals are used for
driver recruiting. The Atlanta facility is located on approximately 17 acres.
The Bowling Green terminal is located on approximately two acres. These
properties are leased for terms ranging from month-to-month to five years,
with renewal options. PST bears the costs of insurance, maintenance and
repairs, taxes, special assessments and utilities on most of its leased
facilities. PST does not anticipate any difficulties renewing or continuing
these leases or obtaining leases on replacement or additional properties, if
necessary. PST management estimates that its Salt Lake facility and its other
terminals are being utilized to approximately 60% to 75% of their capacity.
LEGAL PROCEEDINGS
PST is a party to routine litigation incidental to its business, primarily
involving claims for personal injury and property damage incurred in the
transport of freight. Management does not believe that any pending litigation
will have a materially adverse effect on PST's financial condition or results
of operations.
52
<PAGE>
MARKET FOR PST'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
PST's Common Stock is listed and traded on The Nasdaq Stock Market (National
Market System) under the symbol "PSTV." The following table sets forth, for
the periods indicated, the high and low sale prices for PST's Common Stock, as
reported on The Nasdaq Stock Market for the years ended December 31, 1998,
1997 and 1996.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Year Ended December 31, 1998:
First Quarter.................................................. $6.750 $4.000
Second Quarter................................................. 7.375 4.750
Third Quarter (through July 29, 1998).......................... 6.750 6.000
Year Ended December 31, 1997:
First Quarter.................................................. $3.375 $2.438
Second Quarter................................................. 3.750 1.875
Third Quarter.................................................. 4.000 3.000
Fourth Quarter................................................. 4.938 3.000
Year Ended December 31, 1996:
First Quarter.................................................. $4.625 $3.125
Second Quarter................................................. 4.625 3.750
Third Quarter.................................................. 4.250 2.875
Fourth Quarter................................................. 3.750 2.375
</TABLE>
PST has never paid or declared dividends on its Common Stock. PST currently
anticipates that it will retain all available funds to finance its operations.
PST does not presently intend to pay cash dividends in the foreseeable future.
PST's revolving loan agreements with The Bank of New York and Congress
Financial Corporation (Northwest) prohibit PST from paying dividends without
the consent of The Bank of New York and Congress Financial Corporation
(Northwest).
As of July 29, 1998, PST had 4,269,482 shares of its Common Stock
outstanding, held by 15 stockholders of record, which does not include
stockholders whose shares are held in securities position listings.
53
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The following selected financial data of PST as of and for the years ended
December 31, 1993, 1994, 1995, 1996 and 1997, have been derived from PST's
audited financial statements audited by Arthur Andersen LLP, independent
public accountants. The selected financial and operating data for PST as of
March 31, 1997 and 1998 and for the three-month periods then ended are
unaudited. The results of the three months ended March 31, 1998 are not
necessarily indicative of the results expected for the full year. This
selected financial data should be read in conjunction with the historical
financial statements and accompanying notes included elsewhere in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------------- ------------------
1993(3) 1994(3) 1995(3) 1996 1997 1997 1998
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Revenues............... $125,591 $136,541 $164,794 $147,419 $143,737 $34,523 $35,706
Costs and expenses:
Salaries, wages and
benefits.............. 40,693 35,935 45,208 43,848 44,360 10,866 10,062
Purchased transporta-
tion.................. 20,273 33,842 41,281 32,393 25,578 6,833 8,488
Fuel and fuel taxes.... 20,556 17,615 21,245 20,555 22,533 5,374 4,577
Resource equipment
lease expense......... 17,991 14,904 12,224 8,022 7,576 1,843 935
Maintenance............ 7,078 8,584 8,822 7,491 8,663 1,827 2,554
Insurance and claims... 6,662 6,854 9,315 11,942 11,384 2,871 2,167
General supplies and
expenses.............. 5,909 4,364 5,996 5,558 5,930 1,261 1,519
Taxes and licenses..... 3,360 2,677 3,445 3,309 2,776 719 711
Communications and
utilities............. 2,021 1,870 3,562 3,430 2,802 895 491
Depreciation and amor-
tization.............. 1,772 2,078 8,804 13,175 11,911 3,032 2,847
(Gain) loss on sale of
equipment............. 595 302 (151) (1,614) 13 (54) (53)
Amortization of good-
will.................. 272 272 272 272 272 68 68
Total costs and ex-
penses............... 127,182 129,297 160,023 148,381 143,798 35,535 34,366
Operating income
(loss)................. (1,591) 7,244 4,771 (962) (61) (1,012) 1,340
Other income expense:
Interest expense....... (2,069) (2,595) (4,283) (5,080) (4,360) (1,126) (1,134)
Reorganization expense
items................. (2,928) (338) -- -- -- -- --
Other, net............. 116 119 147 182 105 29 18
Income (loss) before
provision for income
taxes and extraordinary
gains.................. (6,472) 4,430 635 (5,860) (4,316) (2,109) 224
Provision for income
taxes.................. 36 120 251 -- -- -- --
Income (loss) before ex-
traordinary gains...... (6,508) 4,310 384 (5,860) (4,316) (2,109) 224
Extraordinary gains from
debt restructuring(1).. -- 6,206 -- -- -- -- --
Net income (loss)....... $ (6,508) $ 10,516 $ 384 $ (5,860) $ (4,316) $ (2,109) $ 224
Net income per common
share:
Income (loss) before
extraordinary gain--
basic and diluted..... N/A $ 1.66(2) $ 0.10 $ (1.39) $ (1.02) $ (0.50) $ 0.05
Extraordinary gain from
debt restructuring--
basic and diluted..... N/A 2.38(2) -- -- -- -- --
Net income (loss) per
common share--basic and
diluted................ N/A $ 4.04(2) $ 0.10 $ (1.39) $ (1.02) $ (0.50) $ 0.05
Weighted average shares
outstanding--basic..... N/A 2,600(2) 3,950 4,212 4,233 4,227 4,253
Weighted average shares
outstanding--diluted... N/A 2,600(2) 3,950 4,212 4,233 4,227 4,340
Balance Sheet Data:
Working capital (defi-
cit).................. $ (5,071) $ (8,377) $ 2,935 $ (9,157) $(23,431) $(12,371) $(21,095)
Total assets........... 37,341 48,664 108,882 90,260 79,476 85,681 83,371
Long-term and
capitalized lease
obligations, net of
current portion....... 4,181 17,124 55,687 34,894 14,739 32,465 22,137
Stockholders' equity
(deficit)............. (12,816) 5,473 27,605 21,772 17,511 19,691 17,770
</TABLE>
- -------
(1) PST recognized an extraordinary gain of $6.2 million in 1994 from
reduction of indebtedness accomplished through PST's plan of
reorganization.
(2) Pro forma per share amounts in 1994 reflect cancellation of all previously
outstanding shares of PST Common Stock and the issuance of shares to the
current stockholders of PST pursuant to the Plan of Reorganization as if
these transactions had occurred on January 1, 1994. The per share amounts
for the three month periods ended March 31, 1998 and 1997 and for the
years ended December 31, 1997, 1996 and 1995 reflect the actual weighted
average shares and earnings per share.
(3) From 1989 through 1993, PST incurred substantial net losses (before
extraordinary gains). In June 1993, after PST was unsuccessful in
voluntarily restructuring its existing indebtedness, PST filed for
protection under Chapter 11 of the United States Bankruptcy Code in order
to improve its capital structure and reduce its debt service requirements
and overall indebtedness. PSTs Plan of Reorganization was confirmed in
February 1994 and significantly improved PST's capital structure by
reducing PST's debt and lowering lease and interest payments. In March
1995, PST paid the remaining balance owing to its unsecured creditors
under the Plan of Reorganization with the exception of a few contested
unsecured claims. PST is still making payment on its priority tax claims
in accordance with its Plan of Reorganization.
54
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
The trucking industry experienced significant overcapacity in 1995 as a
result of carriers expanding fleets based on very strong customer demand in
1994 coupled with an economic slowdown in the second half of 1995. This
overcapacity resulted in significant downward pressure on pricing in the
industry during 1995, 1996, and the first nine months of 1997, and adversely
affected PST's operations which resulted in a lower average rate per mile and
lower equipment utilization in 1995, 1996 and 1997 compared to 1994, and an
operating loss in 1996 and 1997.
During the fourth quarter of 1997, the profitability of PST improved
significantly. While PST traditionally experiences a stronger demand for
freight services in the fourth quarter of each year, the increased demand in
the fourth quarter of 1997 combined with better systems for managing revenue
equipment produced an approximate 8% improvement in utilization of PST's
revenue equipment (as measured by miles per tractor per day) in the three
months ended December 31, 1997 as compared to the nine months ended September
30, 1997. In addition, insurance and claims expense reduced from 8.5% of
revenue for the nine month ended September 30, 1997 to 6.3% of revenue for the
three months ended December 31, 1997. The fourth quarter net income of
approximately $511,000 was PST's first significantly profitable quarter in
over two years. During the three months ended March 31, 1998, these factors
resulting in net income of $223,800 compared to a loss of $2,109,100 for the
first three months of 1997. The decline in net income during the most recent
quarter reflected the impact of seasonality.
PST finances the acquisition of some of its revenue equipment through
operating leases. Under generally accepted accounting principles, the interest
component of an operating lease is not treated as interest expense. Because of
PST's use of operating leases, PST's operating ratio (operating costs and
expenses as a percentage of revenues) is higher than it would be if it
utilized only debt and/or capital leases. As a result, PST believes that its
pre-tax margin (earnings before income taxes and extraordinary gains as a
percentage of revenues) is a more appropriate measure of its operating
efficiency than its operating ratio.
For the quarter ended March 31, 1998, PST operated a revenue equipment fleet
comprised of an average of 1,111 tractors, including 364 operated by
independent contractors, and 2,369 trailers. Because of the current increased
demand for freight services, PST intends to increase the number of independent
contractors to approximately 450 and maintain PST tractors at approximately
750 during 1998.
In February 1998, PST entered into a five-year agreement with The Sabre
Group to out-source the majority of its information technology functions,
including computer and telephone systems. PST completed the transition to new
hardware and software for its financial, accounting, operations and other
management information systems during the second quarter of 1998. Problems
with installation and initial operation of the new systems resulted in an
increase in driver and independent contractor turnover which will adversely
impact results of operations in the record quarter. PST believes that these
difficulties have been substantially resolved.
PST is in the process of identifying anticipated costs, problems and
uncertainties associated with making PST's software applications Year 2000
compliant. The Sabre Group has certified that the software they will be
providing to PST is Year 2000 ready. PST expects to resolve Year 2000 issues
with other internal-use software through planned replacement or upgrades.
Although management does not anticipate Year 2000 issues to have a material
affect on its business or future results of operations, there can be no
assurance that there will not be interruptions of operations or other
limitations of system functionality or that PST will not incur significant
costs to avoid such interruptions or limitations.
55
<PAGE>
The following table sets forth the percentage relationship of expense items
to revenues for the years indicated.
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
--------------------------------------
YEAR ENDED QUARTER ENDED
DECEMBER 31, MARCH 31,
-------------------- ---------------
1995 1996 1997 1997 1998
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Revenues: 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ------ ------
Costs and Expenses:
Salaries, wages and benefits........ 27.4 29.7 30.9 31.4 28.2
Purchased transportation............ 25.0 22.0 17.8 19.8 23.8
Fuel and fuel taxes................. 12.9 13.9 15.7 15.6 12.8
Revenue equipment lease expense..... 7.4 5.4 5.3 5.3 2.6
Maintenance......................... 5.4 5.1 6.0 5.3 7.1
Insurance and claims................ 5.7 8.1 7.9 8.3 6.1
General supplies and expenses....... 3.6 4.0 4.1 3.7 4.3
Taxes and licenses.................. 2.1 2.2 1.9 2.1 2.0
Communications and utilities........ 2.2 2.3 1.9 2.6 1.4
(Gain) loss on sale of equipment.... (0.1) (1.1) * (0.2) (0.2)
Depreciation and amortization....... 5.3 8.9 8.3 8.8 8.0
Amortization of goodwill............ 0.2 0.2 0.2 0.2 0.2
----- ----- ----- ------ ------
Total operating costs and ex-
penses........................... 97.1 100.7 100.0 102.9 96.3
----- ----- ----- ------ ------
Operating income (loss)............... 2.9 (0.7) 0.0 (2.9) 3.7
Other income (expense):
Interest expense.................... (2.6) (3.4) (3.0) (3.3) (3.2)
Other, net.......................... 0.1 0.1 * 0.1 0.1
----- ----- ----- ------ ------
Income (loss) before income taxes and
extraordinary gain................... 0.4% (4.0)% (3.0)% (6.1)% 0.6%
===== ===== ===== ====== ======
</TABLE>
- --------
* Less than 0.1%.
Quarter Ended March 31, 1998 Compared to Quarter Ended March 31, 1997
Revenues increased by 3.4% to $35.7 million for the three months ended March
31, 1998 compared to $34.5 million for the three months ended March 31, 1997.
This revenue increase resulted primarily from a 7.7% improvement in equipment
utilization as measured in miles per truck per day, offset by a 5.1% decrease
in revenue equipment as the average number of tractors decreased to 1,111 for
the three months ended March 31, 1998 compared to 1,171 for the three months
ended March 31, 1997. PST management believes that reducing revenue equipment
in the quarter ended March 31, 1998 was prudent because the company
experienced an overcapacity of equipment during portions of 1997. Revenues for
the three months ended March 31, 1998 were also positively affected by a 1.3%
increase in earnings per mile. PST management believes the increased
utilization was a result of greater demand for freight services created by a
decrease in equipment overcapacity in the transportation industry in the
quarter ended March 31, 1998, and PST's ability to better manage revenue
equipment with new communication systems.
Operating costs and expenses were 96.3% of revenues for the three months
ended March 31, 1998, compared to 102.9% of revenues for the three months
ended March 31, 1997. Operating costs and expenses in the first quarter of
1998, as a percent of revenue, were positively affected primarily by increased
revenue equipment utilization, a reduction in communication and utilities
expense as a result of discontinued use of a cellular mobile communications
system, decreased fuel and fuel tax expense, reduced revenue equipment costs
as a result of refinancing certain equipment, and decreased insurance and
claims expense. Operating costs and expenses, as a percent of revenue were
adversely affected primarily by increased maintenance expenses related to an
increased average age of the Company's fleet of equipment.
56
<PAGE>
Salaries, wages and benefits decreased to 28.2% of revenues for the three
months ended March 31, 1998 as compared to 31.4% of revenues for the three
months ended March 31, 1997, due primarily to a decrease in the percent of
total miles driven by PST drivers compared to independent contractors during
the two periods. Purchased transportation expense increased to 23.8% of
revenues for the three months ended March 31, 1998 as compared to 19.8% of
revenues for the three months ended March 31, 1997 for the same reason.
Independent contractors are under contract with PST and are responsible for
their own salaries, wages and benefits, fuel, maintenance and depreciation.
Independent contractor costs are classified as purchased transportation
expenses. Fuel and fuel taxes decreased to 12.8% of revenues for the three
months ended March 31, 1998 compared to 15.6% of revenues for the three months
ended March 31, 1997, as a result of a higher percentage of miles driven by
independent contractors and decreased fuel prices. In order to reduce PST's
vulnerability to rapid increases in the price of fuel, PST has historically
entered into purchase contracts with fuel suppliers from time to time for a
portion of its estimated fuel requirements at guaranteed prices (see Liquidity
and Capital Resources). PST has also implemented fuel surcharges to many of
its customers. PST management anticipates that the purchase contracts and fuel
surcharges will lessen the impact of any increase in the cost of fuel.
Supplies and maintenance expense increased to 7.1% of revenues for the first
quarter of 1998 as compared to 5.3% of revenues for the first quarter of 1997,
primarily due to costs related to an older fleet of equipment. The average age
of PST's tractors at March 31, 1998 was 2.70 years as compared to 1.97 years
at March 31, 1997.
Revenue equipment lease expense decreased to 2.6% of revenues for the three
months ended March 31, 1998 from 5.3% of revenues for the three months ended
March 31, 1997, primarily due to the retirement of 196 leased tractors during
December 1997, January 1998 and February 1998.
Insurance and claims decreased to 6.1% of revenues for the three months
ended March 31, 1998 from 8.3% of revenues for the three months ended March
31, 1998, as a result of a 50% decrease in the number of claims during the
three months ended March 31, 1998 compared to the three months ended March 31,
1997, and a decrease in the first quarter of 1998 in the amount of adjustments
to claims from prior periods. PST implemented several changes to its insurance
program in the third and fourth quarters of 1997 that have reduced overall
insurance costs. These changes include significantly lower deductibles on
liability and worker's compensation coverage, and low deductible physical
damage coverage on PST-owned tractors. PST management continues to review each
accident to determine what actions may be taken to reduce future claims costs.
As a consequence of the items discussed above, PST realized income before
provision for income taxes for the three months ended March 31, 1998 of
$223,783 compared to a loss before provision for income taxes of $2,109,076
for the three months ended March 31, 1997.
PST's effective tax rate (income tax expense divided by income before income
taxes) was zero for the three months ended March 31, 1998 as a result of the
benefit of loss carry-forwards from prior years. The effective tax rate was
zero for the three months ended March 31, 1997, as a result of the Company not
recording any benefit on its pre-tax loss.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues decreased by 2.5% in 1997 to $143.7 million compared to $147.4
million in 1996. Revenues decreased primarily as a result of a 7.4% decrease
in revenue equipment as the average number of tractors decreased to 1,145
compared to 1,237 in 1996. The decrease in revenue equipment was offset by a
3.7% increase in equipment utilization (as measured by average miles per
tractor) and a 1.1% increase in average revenue per total mile. Management
believes the increased utilization is a result of a greater demand for the
freight services created by a decrease in equipment overcapacity in the
transportation industry in 1997 and PST's ability to better manage revenue
equipment with new communication systems. PST management expects the demand
for freight services to increase modestly in 1998 and plans to increase fleet
size by up to approximately 10% with additional
57
<PAGE>
independent contractors, depending on economic conditions and operating
results, while continuing to emphasize increased productivity and utilization
of equipment.
Operating costs and expenses were 100.0% of revenues in 1997 compared to
100.7% in 1996. Operating costs and expenses, as a percent of revenue, were
positively affected primarily by increased utilization, and a reduction in
communication and utilities expense as a result of discontinued use of a
cellular mobile communications system. Operating costs and expenses, as a
percent of revenue were adversely affected primarily by increased fuel and
fuel tax expenses, increased maintenance expenses related to an older fleet of
equipment, and a reduction in gain realized from the sale of equipment, as
further described below. While a smaller percentage of revenues in 1997 as
compared to 1996, adverse developments in insurance claims continued to have a
negative affect on operating costs and expenses in 1997.
Salaries, wages and benefits increased to 30.9% of revenues in 1997 compared
to 29.7% in 1996, and purchased transportation decreased to 17.8% of revenues
in 1997 compared to 22.0% of revenues in 1996 primarily as a result of a 20%
reduction in independent contractor tractors in 1997 and a pay increase given
to PST drivers in August 1997. PST also implemented a mileage incentive
program for PST drivers in October 1997, the cost of which was more than
offset by increased utilization of equipment realized as a result of this
program. Independent contractors are under contract with PST and are
responsible for their own salaries, wages and benefits, fuel, maintenance and
depreciation. Independent contractor costs are classified as purchased
transportation expenses.
Fuel and fuel taxes increased to 15.7% of revenues for the year ended
December 31, 1997, compared to 13.9% of revenues for the year ended December
31, 1996, as a result of a higher percentage of miles driven with PST
tractors, higher fuel prices, and PST having no fuel secured under guaranteed
price contracts during the last six months of 1997. In order to reduce the
vulnerability of PST to rapid increases in the price of fuel, PST has
historically entered into purchase contracts with fuel suppliers from time to
time for a portion of its estimated fuel requirements at guaranteed prices.
During 1996, future fuel prices were at levels too high to make guaranteed
price contracts for 1997 fuel viable. As of December 31, 1997, PST had entered
into various agreements with fuel suppliers to purchase approximately 18% of
its estimated fuel needs through December 31, 1998 at a guaranteed price. PST
has also implemented fuel surcharges to many of its customers. Although this
arrangement helps reduce PST's vulnerability to rapid increases in the price
of fuel, PST will not benefit from a decrease in the price of fuel to the
extent of its commitment to purchase fuel under these contracts.
Depreciation and amortization decreased to 8.3% of revenue in 1997 compared
to 8.9% in 1996, revenue equipment lease expense decreased to 5.3% of revenues
in 1997 compared to 5.4% in 1996, and interest expense decreased to 3.0% of
revenue in 1997 compared to 3.4% in 1996 as a result of PST refinancing
tractors at the end of their initial lease term onto financing contracts that
reduce the monthly financing cost of a tractor by approximately $600.
In 1997, maintenance expense increased to 6.0% of revenues, compared to 5.1%
of revenues in 1996 as a result of increased maintenance costs associated with
an older fleet (tractor age 2.7 years at December 31, 1997 compared to 1.8
years at December 31, 1996) and the expiration of certain manufacturer's
warranties.
Insurance and claims expense decreased to 7.9% of revenues in 1997 compared
to 8.1% of revenues in 1996. Insurance and claims expense continues to be
higher than industry standards due to adverse developments in 1997 in
insurance claims incurred when PST carried deductibles ranging from $300,000
to $500,000. A significant number of these older claims were settled in 1997.
PST implemented several changes to its insurance program in 1997 that
management believes will reduce overall insurance costs. These changes include
significantly lower deductibles on liability and workers' compensation
coverage, and low deductible physical damage coverage on PST-owned tractors.
While the premiums on these insurance policies are increased, based on recent
claims experience, managements expects that the overall cost of insurance and
claims should decrease.
Communications and utilities decreased to 1.9% of revenues in 1997 compared
to 2.3% of revenues in 1996 as a result of PST discontinuing use of a
cellular-based on-board communications system in June 1997. PST installed the
QUALCOMM on-board communications system on all of its tractors during the
fourth quarter of 1997. This system assists PST in tracking loads, servicing
customers, and communicating with drivers.
58
<PAGE>
QUALCOMM utilizes satellite technology service to link PST's drivers to its
operations center. Management believes that the QUALCOMM system will not
significantly increase expenses in 1998.
(Gain) loss on sale of equipment decreased to 0.0% of revenue from (1.1)% as
a result of PST's decision to dispose of fewer of its older trailers in 1997
than in 1996.
During 1997, PST's effective tax rate was 0.0% because of its pre-tax losses
that exceeded any available carrybacks and an increase in the valuation for
the net operating loss generated in 1997.
As a consequence of the items discussed above, loss before extraordinary
gain in 1997 was $4,316,000 compared to $5,860,000 in 1996.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenues decreased by 11% in 1996 to $147.4 million compared to $164.8
million in 1995. This revenue reduction resulted primarily from a decrease in
revenue equipment as the average number of tractors decreased to 1,237 in 1996
compared to 1,341 in 1995. Revenues in 1996 were also adversely affected by a
1% decrease in the average revenue per total mile. This decrease resulted from
a combination of an increase in empty miles percentage and a decrease in
revenue per loaded mile. In addition, equipment utilization (as measured by
average miles per tractor) decreased 2% between the two periods. PST
management believes the decrease in average revenue per total mile and
equipment utilization was a result of slower than anticipated economic
conditions and overcapacity in the trucking industry in 1996.
Operating costs and expenses were 100.7% of revenues in 1996 compared to
97.1% in 1995. Operating costs and expenses, as a percent of revenue, were
adversely affected primarily by a 1% reduction in average revenue per total
mile as well as a 2% decrease in utilization between the two periods, an acute
shortage of drivers in the first half of 1996, and adverse developments in a
number of insurance claims.
Salaries, wages and benefits increased to 29.7% of revenues in 1996 compared
to 27.4% in 1995. This increase resulted primarily from driver pay increases
in October, 1995 and January 1996, and a decrease in independent contractor
tractors in 1996. In addition, non-driver payroll increased 0.5% of revenue as
a result of an increase in other support and marketing personnel, which was
partially offset by a reduction in maintenance personnel. Purchased
transportation decreased to 22.0% of revenue in 1996 compared to 25.0% in
1995. This decrease was a result of a reduction in the mileage incentive pay
for independent contractors and a 25% reduction in independent contractor
tractors in 1996 from 1995.
Fuel and fuel taxes increased to 13.9% of revenue in 1996 compared to 12.9%
in 1995. Diesel fuel prices at the pump increased by approximately 12.8% from
December 31, 1995, to December 31, 1996 (according to the Department of
Energy), while PST's fuel expense increased by approximately 7.8%. This
smaller increase was because of PST's utilization of guaranteed price purchase
contracts with fuel suppliers, in addition to surcharges to customers.
Depreciation and amortization increased to 8.9% of revenue in 1996 compared
to 5.3% in 1995, and revenue equipment lease expense decreased to 5.4% of
revenues in 1996 compared to 7.4% in 1995, as a result of PST's new revenue
equipment being financed through capitalized leases versus operating leases.
Also, interest expense increased to 3.4% of revenue in 1996 compared to 2.6%
in 1995 as a result of the majority of PST's new revenue equipment being
financed through capitalized leases and notes payable.
In 1996, maintenance expense decreased to 5.1% of revenues, compared to 5.4%
of revenues in 1995 as a result of reduced maintenance costs associated with a
newer fleet.
Insurance and claims increased to 8.1% of revenues in 1996 compared to 5.7%
in 1995 as a result of an increase in insurance claims and losses in 1996
mainly involving new, less experienced drivers and increases in insurance
claims reserves of approximately $2.2 million following adverse developments
in a number of claims.
59
<PAGE>
During 1996, PST's effective tax rate was 0.0% because of its pre-tax losses
that exceeded any available carrybacks and an increase in the valuation for
the net operating loss generated in 1996.
As a consequence of the items discussed above, income (loss) before
extraordinary gain in 1996 was $(5,860,000) compared to $384,000 in 1995.
Liquidity and Capital Resources
PST's sources of liquidity have been funds provided by operations, leases on
revenue equipment and revolving lines of credit.
The Company has a $11.5 million working capital line of credit with Congress
Financial Corporation (Northwest) which expires August 1999. The Company
anticipates that use of the line will be primarily for insurance related
letters of credit as well as providing any short term cash requirements. As of
March 31, 1998, the Company has utilized $10.8 million of this line of credit,
$5.6 million for insurance related letters of credit, and $5.2 million of
short term cash borrowings. The Congress Agreement restricts the payment of
dividends.
PST also has a credit facility with the Bank of New York for issuance of
letters of credit up to $4.8 million which expires May 15, 1998. As of March
31, 1998, PST had used all of this facility for letters of credit in favor of
PST's insurance carrier. As outstanding letters of credit issued under this
credit facility are not renewed, the maximum commitment available under this
credit facility will be reduced by the amount of the expiring letters of
credit. Management believes that following the expiration of the credit
facility with The Bank of New York, PST will be able to satisfy its
anticipated insurance related letter of credit requirements, including the
insurance related letter of credit requirements which are currently being met
with letters of credit under the credit facility with The Bank of New York,
under its working capital line of credit with Congress Financial Corporation
(Northwest) or new credit facilities. There can be no assurance, however, that
the Congress Financial Corporation (Northwest) credit facility will be
sufficient to satisfy PST's insurance related letter of credit requirements or
that PST will be able to obtain additional or new credit facilities on terms
favorable to PST, if at all.
PST's credit facility with the Bank of New York expired on May 15, 1998 and
PST is thus in default under its credit facility; however, the Bank of New
York has allowed the letters of credit to remain outstanding while PST
continues negotiations with third parties to reduce or eliminate the
outstanding balances.
Net cash provided by operating activities totaled approximately $3.2 million
for the three months ended March 31, 1998. Net cash used for investing
activities (primarily purchasing of equipment) amounted to $2.2 million for
the three months ended March 31, 1998. Net cash used in financing activities
was $620,000 for the three months ended March 31, 1998, primarily for
principal payments on debt and capitalized lease obligations.
PST expects capital expenditures for the remainder of 1998 to be
approximately $8.0 million, primarily for additional trailers. For the first
three months of 1998, PST acquired $2.4 million of equipment, primarily
additions to an on-board communications system. Future expansion of the fleet
will be made as future economic conditions dictate.
Management believes that it will be able to obtain adequate financing for
its planned capital expenditures through 1998. PST's business is capital
intensive and will require PST to seek additional debt and possibly equity
capital to enable PST to maintain a modern fleet. Whether such capital will be
available on favorable terms, or at all, will depend on PST's future operating
results, prevailing economic and industry conditions and other factors over
which PST has little or no control.
Fuel is one of the PST's most substantial operating expenses. In order to
reduce PST's vulnerability to rapid increases in the price of fuel, PST enters
into purchase contracts with fuel suppliers from time to time for a portion of
its estimated fuel requirements at guaranteed prices. As of March 31, 1998 PST
had entered into various agreements with fuel suppliers to purchase
approximately 12% of its estimated fuel needs through
60
<PAGE>
December 31, 1998 at a guaranteed price. Although this arrangement helps
reduce PST's vulnerability to rapid increases in the price of fuel, PST will
not benefit from a decrease in the price of fuel to the extent of its
commitment to purchase fuel under these contracts.
Seasonality
In the trucking industry, revenues generally show a seasonal pattern as
customers reduce shipments during and shortly after the winter holiday season
and its attendant weather variations. Operating expenses also tend to be
higher during the cold weather months, primarily due to poorer fuel economy
and increased maintenance costs.
Inflation
Inflation can be expected to have an impact on PST's operations. The effect
of inflation has been minimal over the past three years.
61
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed financial statements (the "Pro
Forma Financial Statements") include the unaudited pro forma condensed balance
sheet as of March 31, 1998 (the "Pro Forma Balance Sheet"), and the unaudited
pro forma condensed statements of operations for the year ended December 31,
1997 and the three months ended March 31, 1998 (the "Pro Forma Statements of
Operations").
The Pro Forma Statements of Operations give effect to the Merger as it if
had been consummated on January 1, 1997. The Pro Forma Balance Sheet gives
effect to the Merger as if it had been consummated on March 31, 1998.
The Merger will be accounted for using the purchase method of accounting.
The aggregate purchase price for the Merger will be allocated to the tangible
and intangible assets and liabilities acquired based upon their respective
fair values.
The Pro Forma Financial Statements are based on the historical financial
statements of U.S. Xpress Enterprises, Inc. and PST Vans, Inc. and the
assumptions and adjustments described in the accompanying notes. The Pro Forma
Statement of Operations for the year ended December 31, 1997 has also been
adjusted to include the results of Victory Express, Inc. ("Victory"), which
was acquired by Enterprises in January 1998, as if that acquisition had
occurred on January 1, 1997. The Pro Forma Statement of Operations for the
three months ended March 31, 1998 has not been adjusted to reflect the Victory
acquisition as the results of Victory prior to its acquisition are not
material to the pro forma results of operations for that period. The
historical financial statements of Victory are included in Amendment No. 1 on
Form 8-K/A (dated April 14, 1998) to Enterprises' Form 8-K dated January 29,
1998 and are incorporated herein by reference.
The Pro Forma Financial Statements do not purport to represent what the
company's results of operations or financial position actually would have been
had the Merger described herein in fact been consummated on the dates
indicated or to project the results of operations of financial positions for
any future period or date. The Pro Forma Financial Statements are based upon
currently available information and certain assumptions that Enterprises'
management believes to be reasonable and should be read in conjunction with
the historical financial statements and the accompanying notes thereto
contained in the annual, quarterly and other reports filed by Enterprises and
PST with the SEC and those included elsewhere in this Proxy
Statement/Prospectus or incorporated herein by reference.
62
<PAGE>
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
PRO FORMA
ENTERPRISES PST (A) ADJUSTMENTS PRO FORMA
----------- ------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...... $ 6,032 $ 1,492 $ (2,000)(b) $ 7,040
1,516 (d)
Customer receivables, net of
allowance..................... 65,982 16,234 82,216
Other receivables.............. 11,688 11,688
Prepaid insurance and li-
censes........................ 6,216 2,717 8,933
Operating supplies............. 4,903 563 5,466
Deferred income taxes.......... 3,092 1,400 (c) 4,492
Other current assets........... 1,175 344 1,519
-------- ------- -------- --------
Total current assets.......... 99,088 21,350 916 121,354
-------- ------- -------- --------
PROPERTY AND EQUIPMENT, net..... 172,043 53,431 225,474
-------- ------- -------- --------
OTHER ASSETS:
Goodwill, net.................. 38,584 8,272 (8,272)(f) 54,539
15,955 (h)
Other.......................... 5,965 318 6,283
-------- ------- -------- --------
Total other assets............ 44,549 8,590 7,683 60,822
-------- ------- -------- --------
TOTAL ASSETS.................... $315,680 $83,371 $ 8,599 $407,650
======== ======= ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable............... $ 10,085 $ 4,287 $ $ 14,372
Accrued wages and benefits..... 7,708 7,708
Claims and insurance accruals.. 6,549 3,686 10,235
Other accrued liabilities...... 4,371 2,381 6,752
Current maturities of long-term
debt.......................... 4,340 32,091 (32,091)(g) 4,340
-------- ------- -------- --------
Total current liabilities..... 33,053 42,445 (32,091) 43,407
-------- ------- -------- --------
LONG-TERM DEBT, net of current
maturities..................... 125,079 22,137 12,500 (b) 191,807
32,091 (g)
-------- ------- -------- --------
DEFERRED INCOME TAXES........... 23,559 (4,700)(c) 18,859
-------- ------- -------- --------
OTHER LONG-TERM LIABILITIES..... 1,875 1,020 2,895
-------- ------- -------- --------
STOCKHOLDERS' EQUITY:
Common stock................... 150 4 11 (b) 161
(4)(e)
Additional paid-in capital..... 86,281 49,847 18,557 (b) 104,838
1,516 (d)
(51,363)(e)
Retained earnings.............. 45,916 (32,082) 32,082 (e) 45,916
Notes receivable from stock-
holders....................... (233) (233)
-------- ------- -------- --------
Total stockholders' equity.... 132,114 17,769 799 150,682
-------- ------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY........... $315,680 $83,371 $ 8,599 $407,650
======== ======= ======== ========
</TABLE>
63
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(a) Certain historical balances for PST have been reclassified or condensed
for purposes of this pro forma presentation.
(b) Reflects common stock issued and cash paid to acquire PST:
<TABLE>
<S> <C> <C>
Common stock to be issued (1,100,000 shares at $16.88 per
share, the market price of Enterprises Class A Common
Stock at July 7, 1998).................................... $18,568
Cash to be paid:
Cash portion of purchase price (financed through Enter-
prises' long-term credit facility)...................... 12,500
Estimated acquisition and transaction expenses........... 2,000
--- -------
$33,068
=======
</TABLE>
(c) To reverse PST's valuation allowance on deferred tax assets of
approximately $6,100, which are anticipated to be realized.
(d) Represents the expected proceeds of $1,516 from the exercise of the PST
stock options at the average price per share of $4.32 simultaneous with
change of control.
(e) Reflects the elimination of PST's equity balances, including the expected
proceeds from the stock options described in (d).
(f) To write off PST's historical goodwill.
(g) To reflect the refinancing of PST's debt through Enterprises' long-term
credit facility.
(h) The excess of cost over fair value of the net tangible assets acquired is
computed as follows:
<TABLE>
<S> <C>
Purchase price from (b) above................................. $33,068
-------
Historical net book value of PST.............................. 17,769
Adjustments to historical value:
Write off of goodwill....................................... (8,272)
Reversal of PST valuation allowance on deferred tax assets,
which are expected to be realized.......................... 6,100
Expected proceeds from stock options described in (d)....... 1,516
-------
17,113
-------
Excess of cost over fair value of net assets acquired......... $15,955
=======
</TABLE>
64
<PAGE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ENTERPRISES(9) VICTORY(1) ADJUSTMENTS PRO FORMA PST ADJUSTMENTS PRO FORMA
-------------- ---------- ----------- --------- -------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUE $433,835 $65,251 $ $499,086 $143,737 $ $642,823
-------- ------- ------- -------- -------- ------ --------
OPERATING EXPENSES:
Salaries, Wages and
Benefits............. 177,055 28,015 (588)(4) 204,482 44,360 248,842
Fuel and Fuel Taxes... 68,740 9,482 78,222 22,533 100,755
Vehicle Rents......... 28,031 3,060 31,091 7,576 38,667
Depreciation &
Amortization......... 11,584 7,592 725 (2) 19,901 12,183 127(6) 32,211
Purchased Transporta-
tion................. 34,351 -- 34,351 25,578 59,929
Operating Expense &
Supplies............. 27,872 4,633 32,505 8,663 41,168
Insurance Premiums &
Claims............... 14,395 2,467 16,862 11,384 28,246
Operating Taxes and
Licenses............. 6,734 1,324 8,058 2,776 10,834
Communications &
Utilities............ 7,192 888 8,080 2,802 10,882
General & Other
Operating............ 26,772 2,652 29,424 5,943 35,367
-------- ------- ------- -------- -------- ------ --------
Total Operating
Expenses........... 402,726 60,113 137 462,976 143,798 127 606,901
-------- ------- ------- -------- -------- ------ --------
INCOME (LOSS) FROM
OPERATIONS 31,109 5,138 (137) 36,110 (61) (127) 35,922
-------- ------- ------- -------- -------- ------ --------
OTHER INCOME AND
(EXPENSES):
Interest Expense...... (5,552) (787) (3,640)(3) (9,979) (4,360) 215(7) (14,124)
Other Income (Ex-
pense)............... 35 6 41 105 146
-------- ------- ------- -------- -------- ------ --------
(5,517) (781) (3,640) (9,938) (4,255) 215 (13,978)
Income (Loss) Before
Provision For Income
Taxes.................. 25,592 4,357 (3,777) 26,172 (4,316) 88 21,944
(Provision) Benefit for
Income Taxes........... (10,230) (1,854) 1,401 (5) (10,683) 1,558(8) (9,125)
-------- ------- ------- -------- -------- ------ --------
NET INCOME (LOSS)....... $ 15,362 $ 2,503 $(2,376) $ 15,489 $ (4,316) $1,646 $ 12,819
======== ======= ======= ======== ======== ====== ========
Other financial data:
Earnings per share--
basic................ $ 1.17 $ 0.90
Weighted average
number of shares
outstanding--basic... 13,126 14,226
Earnings per share--
diluted.............. $ 1.16 $ 0.89
Weighted average
number of shares
outstanding--
diluted.............. 13,236 14,336
</TABLE>
65
<PAGE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
PRO FORMA
ENTERPRISES PST ADJUSTMENTS PRO FORMA
----------- ------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
OPERATING REVENUE................... $123,909 $35,706 $ $159,615
-------- ------- ---- --------
OPERATING EXPENSES:
Salaries, Wages and Benefits...... 51,725 10,062 61,787
Fuel and Fuel Taxes............... 18,463 4,577 23,040
Vehicle Rents..................... 7,886 935 8,821
Depreciation & Amortization....... 5,466 2,915 32(6) 8,413
Purchased Transportation.......... 10,629 8,488 19,117
Operating Expense & Supplies...... 7,621 2,554 10,175
Insurance Premiums & Claims....... 4,219 2,167 6,386
Operating Taxes and Licenses...... 2,155 711 2,866
Communications & Utilities........ 2,014 491 2,505
General & Other Operating......... 6,502 1,466 7,968
-------- ------- ---- --------
Total Operating Expenses........ 116,680 34,366 32 151,078
-------- ------- ---- --------
INCOME FROM OPERATIONS.............. 7,229 1,340 (32) 8,537
-------- ------- ---- --------
OTHER INCOME AND (EXPENSES):
Interest Expense.................. (1,771) (1,134) 54(7) (2,851)
Other Income (Expense)............ 17 18 35
-------- ------- ---- --------
(1,754) (1,116) 54 (2,816)
-------- ------- ---- --------
Income Before Provision For Income
Taxes.............................. 5,475 224 22 5,721
Provision for Income Taxes.......... (2,193) (105)(8) (2,298)
-------- ------- ---- --------
NET INCOME.......................... $ 3,282 $ 224 $(83) $ 3,423
======== ======= ==== ========
Other financial data:
Earnings per share--basic......... $ 0.22 $ 0.21
Weighted average number of shares
outstanding--basic............... 15,037 16,137
Earnings per share--diluted....... $ 0.22 $ 0.21
Weighted average number of shares
outstanding--diluted............. 15,159 16,259
</TABLE>
66
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
VICTORY
(1) Reflects the results of operations of Victory Express for the year ended
December 31, 1997.
(2) To record the amortization of goodwill related to the acquisition and
adjust depreciation.
(3) To record the interest expense related to the debt incurred to finance
the acquisition.
(4) To record reduction in salary of majority shareholder of Victory Express
to $200.
(5) To record tax effect of Pro Forma Adjustments, (2) through (4) above.
PST
(6) Reflects the incremental amortization of goodwill related to the Merger
(7) Reflects the following:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
12/31/97 ENDED 3/31/98
---------- -------------
<S> <C> <C>
Savings from refinancing of PST debt at Enter-
prises' borrowing rates....................... $(1,073) $(269)
Additional incremental interest resulting from
borrowing of $12,500 to purchase PST.......... 858 215
------- -----
$ (215) $ (54)
======= =====
</TABLE>
(8) Reflects the net additional tax expense (benefit) as the result of the
Merger at an effective tax rate of 38% for the year ended December 31,
1997 and the three months ended March 31, 1998.
ENTERPRISES
(9) Effective December 31, 1997, Enterprises changed its year-end to
December 31 from March 31. As a result, its period-ending December 31,
1997 was a nine month period. For purposes of the Pro Forma Statement of
Operations for the year ended December 31, 1997, Enterprises has used
the results of operations for the twelve month period ended December 31,
1997.
67
<PAGE>
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS OF ENTERPRISES AND PST
The rights of Enterprises stockholders are governed by the Enterprises'
Restated Articles of Incorporation (the "Enterprises Articles of
Incorporation"), its Bylaws (the "Enterprises Bylaws") and the Nevada General
Corporation Law (the "NGCL"). The rights of PST stockholders are governed by
the PST Revised Articles of Incorporation (the "PST Articles of
Incorporation"), the PST Amended and Restated Bylaws (the "PST Bylaws"), and
the Utah Revised Business Corporations Act (the "URBCA"). After the Effective
Time, the rights of PST stockholders who become Enterprises stockholders will
be governed by the Enterprises Articles of Incorporation, the Enterprises
Bylaws, and the NGCL.
The following is a summary of the material differences between the rights of
Enterprises stockholders and rights of PST stockholders. This summary is not
intended to be complete and is qualified in its entirety by reference to
applicable provisions of the NGCL and URBCA and to the Articles of
Incorporation and Bylaws of each of Enterprises and PST.
SIZE OF ENTERPRISES AND PST BOARDS
Enterprises. The Enterprises Restated Articles of Incorporation provide that
the number of directors shall be designated in the Enterprises Bylaws. The
Enterprises Bylaws currently provide that the total number of directors shall
not be less than two nor more than nine. Enterprises currently has nine (9)
directors. Directors are elected at each annual meeting of stockholders for a
term of one year. The Enterprises Board is not classified.
PST. The PST Revised Articles of Incorporation provide that the total number
of directors shall not be less than three nor more than nine, except that
(pursuant to the URBCA) less than three directors may be permitted if the
number of stockholders is less than three. The maximum number of directors may
be increased upon the vote of two-thirds of the stock entitled to vote
thereon. PST currently has five directors. Directors are elected at annual
meetings of the stockholders for a term of three years. The directors are
divided into three classes as nearly equal in number as possible.
CAPITAL STOCK
Enterprises. Enterprises is authorized to issue up to 30,000,000 shares of
Class A Common Stock, par value $0.01 per share (which is referred to herein
as the Enterprises Common Stock), 7,500,000 shares of Class B Common Stock,
par value $0.01 per share and up to 2,000,000 shares of preferred stock, par
value $0.01 per share.
Holders of Class A Common Stock are entitled to one vote per share. Holders
of Class B Common Stock are entitled to two votes per share. All actions
submitted to a vote of stockholders of Enterprises are voted on by holders of
Class A and Class B Common Stock voting together as a single class, except as
otherwise set forth below or provided by law.
Class A Common Stock has no conversion rights. Class B Common Stock may be
converted into Class A Common Stock, in whole or in part, at any time and from
time to time on the basis of one share of Class A Common Stock for each share
of Class B Common Stock. If at any time any shares of Class B Common Stock are
beneficially owned by any person other than Max L. Fuller and Patrick E. Quinn
(or certain immediate family members), such shares shall automatically be
converted into an equal number of shares of Class A Common Stock.
Holders of Class A Common Stock are entitled to receive cash dividends on
the same basis as Class B Common Stock if and when such dividends are declared
by the Board of Directors of Enterprises from funds legally available
therefor. In the case of any dividend paid in stock, holders of Class A Common
Stock are entitled to receive the same percentage dividend (payable in shares
of Class A Common Stock) as the holders of Class B Common Stock receive
(payable in shares of Class B Common Stock).
Holders of Class A and Class B Common Stock share with each other on a
ratable basis as a single class in the net assets of the Company available for
distribution in respect of Class A and Class B Common Stock in the event of
liquidation.
68
<PAGE>
Neither the Class A nor the Class B Common Stock may be subdivided,
consolidated, reclassified or otherwise changed unless contemporaneously
therewith the other class of shares is subdivided, consolidated, reclassified
or otherwise changed in the same proportion and in the same manner.
In any merger, consolidation or business combination, the consideration to
be received per share by holders of either Class A or Class B Common Stock
must be identical to that received by holders of the other class of Common
Stock, except that in any such transaction in which shares of capital stock
are distributed, such shares may differ as to voting rights only to the extent
that voting rights now differ between Class A and Class B Common Stock.
The rights, preferences and privileges of holders of both classes of Common
Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future.
The Board of Directors of Enterprises is authorized, without further action
of the stockholders of Enterprises, to issue up to 2,000,000 shares of
preferred stock in classes or series and to fix the voting powers,
designations, preferences or other rights of the shares of each such class or
series and the qualifications, limitations and restrictions thereon. Such
preferred stock may rank prior to the Class A or Class B Common Stock as to
dividend rights, liquidation preferences or both, may have full or limited
voting rights and may be convertible into shares of either class of the
Company's Class A or Class B Common Stock.
PST. The authorized capital stock of PST consists of 20,000,000 shares of
common stock, par value $0.001 per share (which is referred to herein as the
PST Common Stock), and 5,000,000 shares of preferred stock, no par value.
Each outstanding share of PST Common Stock is entitled to participate
equally in dividends as and when declared by the PST Board of Directors and is
entitled to participate equally in any distribution of net assets made to the
stockholders upon liquidation of PST. There are no redemption, sinking fund,
conversion or preemptive rights with respect to the shares of PST Common
Stock. All shares of PST Common Stock have equal rights and preferences. The
holders of PST Common Stock are entitled to one vote for each share held of
record on all matters voted upon by shareholders and may not cumulate votes
for the election of directors. Thus, the owners of a majority of the shares of
Common Stock outstanding may elect all of the directors, if they choose to do
so, and the owners of the balance of such shares would not be able to elect
any directors.
PST is authorized to issue up to 5,000,000 shares of preferred stock from
time to time in one or more series without stockholder approval. No shares of
preferred stock are presently outstanding. The PST Board of Directors is
authorized, without any further action by the stockholders of PST, to
determine the designation, powers, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions of any series of preferred stock and the number of shares
constituting any such series. Holders of preferred stock, if issued, will be
entitled to such voting rights as the PST Board of Directors, in its sole
discretion, shall determine. Thus, the PST Board of Directors, without
stockholder approval, could authorize the issuance of preferred stock with
rights which could adversely affect the rights of the holders of PST Common
Stock. Any future issuance of preferred stock may have the effect of delaying
or preventing a change in control of PST without further action by the
stockholders and may adversely affect the voting and other rights of the
holders of PST Common Stock.
CUMULATIVE VOTING
Enterprises. Neither the Enterprises Restated Articles of Incorporation nor
the Enterprises Bylaws provide for cumulative voting with respect to the
election of directors.
69
<PAGE>
PST. The PST Revised Articles of Incorporation prohibit cumulative voting
with respect to the election of directors.
REMOVAL OF DIRECTORS
Enterprises. Under the NGCL, any director may be removed from office by vote
of stockholders representing two-thirds of the voting power of the outstanding
stock entitled to vote. The Enterprises Bylaws provide that one or more
directors may be removed with or without cause by vote of the stockholders,
but only at a meeting called for the purpose of removing the director(s).
PST. Pursuant to the PST Articles of Incorporation and Bylaws, a director
may be removed without cause upon the vote of two-thirds of the outstanding
capital stock entitled to vote thereon. A director may be removed for cause by
the majority of the outstanding capital stock entitled to vote thereon if the
director engaged in fraudulent, dishonest, or grossly abusive conduct with
respect to the corporation, and removal is in the corporation's best
interests. The URBCA also permits a corporation or stockholder holding at
least ten percent of the outstanding shares to bring a judicial proceeding to
remove a director, and the director may be removed if the court finds that the
director acted in a fraudulent, dishonest, or grossly abusive manner with
respect to the corporation and removal is in the best interest of the
corporation.
SPECIAL MEETING OF STOCKHOLDERS; ACTION BY WRITTEN CONSENT
Enterprises. Under the Enterprises Bylaws, a special meeting of stockholders
may be called by the Board of Directors or by the President. Also, a special
meeting of the stockholders may be called if the holders of at least ten
percent of all votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting sign, date, and deliver to
Enterprises' secretary one or more written demands for the meeting describing
the purpose for which it is to be held. The NGCL also permits stockholders to
hold a meeting other than one regularly called upon the consent of all
stockholders entitled to vote. Pursuant to the Enterprises Bylaws, any action
requiring or permitting the vote of stockholders may be taken without a
meeting by written consent setting forth the action and signed in one or more
counterparts by a majority of stockholders entitled to vote with respect to
the subject matter of the action.
PST. Under the PST Bylaws and the URBCA, a special meeting of stockholders
may be called at any time by the President, Board of Directors, or the holders
of one-tenth of all shares entitled to vote on any issue proposed to be
considered at the proposed special meeting. Pursuant to the URBCA and the PST
Bylaws, except as otherwise provided in the Articles of Incorporation or the
URBCA, any action which may be taken at any annual or special meeting of
stockholders generally may be taken without a meeting and without prior
notice, if one or more consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take the
action at a meeting at which all shares entitled to vote thereon were present
and voted.
STOCKHOLDER INSPECTION RIGHTS; STOCKHOLDER LISTS
Enterprises. With respect to governing documents and stockholder lists, the
NGCL provides a right of inspection on at least five days demand to any person
who shall have been a stockholder for at least six months immediately
preceding his demand or any persons holding or authorized in writing by, at
least five percent of all outstanding shares. The NGCL also permits inspection
of a corporation's financial records by a stockholder either owning at least
fifteen percent of all outstanding shares of the corporation and or by a
stockholder authorized in writing by holders of at least fifteen percent of
issued and outstanding shares. Pursuant to the Enterprises Bylaws, a list of
stockholders entitled to vote at any meeting of stockholders may be examined
by any such stockholder for any purpose germane to the meeting during ordinary
business hours, beginning two business days after notice of the meeting is
given, either at the registered office of the corporation, its principal place
of business, or the office of the transfer agent of the registrar. A list of
stockholders may also be examined at the meeting by any stockholder who is
present.
70
<PAGE>
PST. Pursuant to the URBCA and the PST Bylaws, a list of all stockholders
entitled to be given notice of a meeting shall be prepared by the officers and
made available for inspection by any stockholder within a specified time
period before the meeting for which the list was prepared. The stockholder
list must also remain available for inspection during the meeting for any
purpose germane to the meeting. Under the URBCA and the PST Bylaws, a
stockholder may inspect and copy other corporate records after giving notice
of demand at least five business days in advance.
AMENDMENT OF GOVERNING DOCUMENTS
Enterprises. Under the NGCL, Enterprises may amend its Articles of
Incorporation if such amendment contains only such provisions as might be
lawfully contained in the original Articles of Incorporation if the original
articles were executed, acknowledged, and filed at the time of the making of
the amendment. The board of directors must adopt a resolution setting forth
the proposed amendment, declare its advisability, and call a meeting of
stockholders entitled to vote thereon. An amendment must be approved by a
majority of stockholders entitled to vote, except that if any proposed
amendment would alter any preference or right of a class or series of shares,
the approval of a majority of the voting power of the holders of shares of
each class or series of shares affected by the amendment is also required.
Under the Enterprises Bylaws, the provisions of the Bylaws may be amended or
repealed by the Board of Directors, subject to the NGCL, or by the
stockholders.
PST. Under the URBCA, PST may amend its Articles of Incorporation at any
time to add or change a provision that is required or permitted in the
articles of incorporation or to delete a provision not required in the
Articles of Incorporation. Whether a provision is required or permitted in the
Articles of Incorporation is determined as of the effective date of the
amendment. The PST Articles of Incorporation permit amendment of certain
provisions of the Articles of Incorporation only by a vote of the holders of
two-thirds of the outstanding capital stock entitled to vote thereon.
Pursuant to the URBCA, the Board of Directors may adopt, without stockholder
action, one or more amendments to the Articles of Incorporation to make
certain technical changes, to change each issued and unissued authorized share
of a class into a greater number of whole shares if the corporation has only
shares of that class outstanding, or to make any other change expressly
permitted under the URBCA to be made without stockholder action. Other
amendments to the Articles of Incorporation may be made upon the
recommendation of the board of directors and by a vote of a majority of the
outstanding capital stock entitled to vote thereon or by a majority of a
quorum present at a meeting of shareholders.
Under the URBCA, the stockholders may amend the corporation's bylaws at any
time; the directors may amend the bylaws except to the extent the URBCA, the
Articles of Incorporation, and the bylaws reserve this power to the
stockholders. The PST Articles of Incorporation and Bylaws permit the
amendment of certain of the Bylaws by a majority vote of the board of
directors or by the holders of at least two-thirds of the outstanding capital
stock entitled to vote thereon. Other amendments may be made by the Board of
Directors or shareholders at any meeting thereof.
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS
Enterprises. Under the NGCL, the board of directors must recommend to the
stockholders the consummation of a merger or exchange of interest, unless the
board of directors determines that because of a conflict of interest or other
special circumstances it should make no recommendation and it communicates the
basis for its determination to the stockholders with the plan. The plan of
merger or exchange to be authorized must be approved by a majority of the
voting power of the stockholders unless stockholders of a class of shares are
entitled to vote thereon as a class under the NGCL. If stockholders of a class
of shares are so entitled, the plan must be approved by a majority of all
votes entitled to be cast on the plan by each class and representing a
majority of all votes entitled to be voted.
71
<PAGE>
The approval of stockholders of a surviving domestic corporation on a plan
of merger is not required if: (a) the articles of incorporation will not
differ from its articles before the merger; (b) each stockholder whose shares
were outstanding immediately before the effective date of the merger will hold
the same number of shares, with identical designations, preferences,
limitations and relative rights immediately after the merger; (c) the number
of voting shares outstanding immediately after the merger, plus the number of
voting shares issued as a result of the merger, either by the conversion of
securities issued pursuant to the merger or the exercise of rights and
warrants issued pursuant to the merger, will not exceed by more than twenty
percent the total number of voting shares outstanding immediately before the
merger; and (d) the number of participating shares outstanding immediately
after the merger, plus the number of participating shares issuable as a result
of the merger, either by the conversion of securities issued pursuant to the
merger or the exercise of rights and warrants issued pursuant to the merger,
will not exceed by more than twenty percent the total number of participating
shares outstanding immediately before the merger.
Under the NGCL, a corporation may, by action taken at any meeting of its
board of directors, sell all of its assets when authorized by the affirmative
vote of stockholders holding stock in the corporation entitling them to
exercise at least a majority of the voting power given at a stockholders'
meeting called for that purpose. A voluntary dissolution of a Nevada
corporation that has issued stock requires the adoption and recommendation to
the stockholders of a resolution for dissolution by the board of directors and
the approval of the stockholders entitled to vote thereon.
PST. Under the URBCA, the consummation of a plan of merger or share exchange
requires the recommendation of the board of directors of a Utah corporation
and approval by each voting group entitled to vote separately on the plan by a
majority of all votes entitled to be cast on the plan by that voting group. In
a plan of merger, approval by the stockholders of a surviving corporation is
not required if: (a) the articles of incorporation of the surviving
corporation will not differ from its articles of incorporation before the
merger, except for certain amendments permitted by the URBCA, (b) each
stockholder of the surviving corporation whose shares were outstanding
immediately before the merger will hold the same number of shares, with
identical designations, preferences, limitations, and relative rights,
immediately after the merger; (c) the number of voting shares outstanding
immediately after the merger, plus the number of voting shares issuable as a
result of the merger either by the conversion of securities issued pursuant to
the merger or the exercise of rights and warrants issued pursuant to the
merger, will not exceed by more than twenty percent the total number of voting
shares of the surviving corporation outstanding immediately before the merger;
and (d) the number of participating shares outstanding immediately after the
merger, plus the number of participating shares issuable as a result of the
merger either by the conversion of securities issued pursuant to the merger or
the exercise of rights and warrants issued pursuant to the merger, will not
exceed by more than twenty percent the total number of participating shares
outstanding immediately before the merger.
Pursuant to the URBCA, a corporation may sell all or substantially all its
assets upon the recommendation of the board of directors and approval by each
voting group entitled to vote on the transaction. After the recommendation of
a board of directors, a Utah corporation may complete a voluntary dissolution
by the approval of each voting group entitled to vote separately on the
proposal by a majority of all votes entitled to be cast on the proposal by
that voting group unless a greater vote is required by the governing documents
or the board of directors. Pursuant to the PST bylaws, PST may merge with
another corporation or sell substantially all of its assets only if two-thirds
( 2/3) of the common stock entitled to vote thereon approve the transaction.
BUSINESS COMBINATIONS
Enterprises. Except as otherwise provided, the NGCL prohibits a resident
domestic corporation from engaging in any combination with any interested
stockholder of the resident domestic corporation for three years after the
interested stockholder's date of acquiring shares unless the combination or
the purchase of shares made by the interested stockholder on the interested
stockholder's date of acquiring shares is approved by the board of
72
<PAGE>
directors of the resident domestic corporation before that date. After the
expiration of three years, a corporation may not engage in any combination
with an interested stockholder other than a combination meeting all of the
requirements of the articles of incorporation and either the requirements
specified in the NGCL or by approval of the board of directors or a majority
of the outstanding voting power not beneficially owned by the interested
stockholder, affiliate, or associate. An "interested stockholder" is any
person who is an affiliate or associate of the corporation or the beneficial
owner, directly or indirectly, of ten percent or more of the outstanding
voting shares of the corporation.
PST. The URBCA has no comparable provision.
CONTROL SHARE ACQUISITIONS
Enterprises. The provisions of Section 78.378 et seq of the Nevada General
Corporation Law regarding the acquisition of controlling interests is not
applicable to Enterprises because it is not an issuing corporation within the
meaning of such act.
PST. The Utah Control Shares Acquisition Act (the "Control Shares Act")
provides that any person or entity which acquires 20% or more of the
outstanding voting shares of a publicly-held Utah corporation is denied voting
rights with respect to the acquired shares, unless a majority of the
disinterested stockholders of the corporation elects to restore such voting
rights. The Control Shares Act provides that a person or entity acquires
"control shares" whenever it acquires shares that, but for the operation of
the Control Shares Act, would bring its voting power within any of the
following three ranges: (i) 20 to 33 1/3%, (ii) 33 1/3 to 50%, or (iii) 50% or
more. A "control share acquisition" is generally defined as the direct or
indirect acquisition of either ownership or voting power associated with
issued and outstanding control shares. The stockholders of a corporation may
elect to exempt the stock of the corporation from the provisions of the
Control Shares Act through adoption of a provision to that effect in the
articles of incorporation or bylaws of the corporation. PST's Revised Articles
of Incorporation and Amended and Restated Bylaws do not exempt PST's Common
Stock from the Control Shares Act.
Under the Control Shares Act, a person or entity that acquires control
shares pursuant to a control share acquisition acquires voting rights with
respect to those shares only to the extent granted by a majority of
disinterested stockholders of each class of capital stock outstanding prior to
the acquisition. The stockholders of the corporation must consider the status
of those voting rights at the next annual or special meeting of stockholders.
The acquiror may accelerate the decision and require the corporation to hold a
special meeting of stockholders for the purpose of considering the status of
those rights if the acquiror (i) files an "acquiring person statement" with
the corporation, and (ii) agrees to pay all expenses of the meeting. If the
stockholders do not vote to restore voting rights to the control shares, the
corporation may, if its articles of incorporation or bylaws so provide, redeem
the control shares from the acquiror at fair market value. If the acquiror
fails to file an acquiring person statement, the corporation may, if its
articles of incorporation or bylaws so provide, redeem the control shares at
any time within 60 days of the acquiror's last acquisition of control shares,
regardless of the decision of the shareholders to restore voting rights. PST's
Revised Articles of Incorporation and Amended and Restated Bylaws do not
provide for such redemption. Unless otherwise provided in the articles of
incorporation or bylaws of a corporation, stockholders are entitled to
dissenters' rights if the control shares are accorded fill voting rights and
the acquiror has obtained a majority or more control shares. PST's Revised
Articles of Incorporation and Amended and Restated Bylaws do not deny such
dissenters' rights to PST's stockholders.
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<PAGE>
PROPOSAL TO ELECT TWO DIRECTORS
(PROPOSAL NO. 2)
PST's Board of Directors currently consists of five (5) directors, divided
into three classes serving staggered three-year terms. Two directors will be
elected at the Annual Meeting to serve until consummation of the Merger (or,
if the Merger is not consummated, for a three-year term expiring at PST's 2001
annual meeting of stockholders or until their successors have been elected and
qualified). Directors of the remaining two classes will continue to hold
office until consummation of the Merger (or, if the Merger is not consummated,
until the expiration of their respective terms as indicated below or until
their successors have been elected and qualified). Stockholders do not have
cumulative voting rights in the election of directors (each stockholder is
entitled to vote one vote for each share held for each director). Unless
authority is withheld, it is the intention of the persons named in the
enclosed form of proxy to vote "FOR" the election as a director of the two
individuals identified as nominees for director below. If the candidacy of any
one or more of such nominees should, for any reason, be withdrawn, the proxies
will be voted "FOR" such other person or persons, if any, as may be designated
by PST's Board of Directors. The PST Board of Directors has no reason to
believe that any nominee herein named will be unable or unwilling to serve.
NOMINEES FOR ELECTION AS DIRECTORS
There are no family relationships among the executive officers and directors
of PST, and there are no arrangements or understandings pursuant to which any
of them were elected as executive officers and/or directors or are being
nominated to serve as directors. The following sets forth information about
each nominee for election as a director and information about each other
person presently serving as a director:
NOMINEES
KENNETH R. NORTON, 56, has been Chairman of the Board and Chief Executive
Officer of PST since January 1990. Mr. Norton has nearly 30 years of
experience in the trucking industry. From 1975 to 1984, Mr. Norton was
Chairman and Chief Executive Officer of Western Express, a truckload carrier.
Mr. Norton formed Interstate Contract Carrier Corporation and served as its
Chairman and Chief Executive Officer until 1975. In 1965, Mr. Norton formed
Crete Carrier Corporation and served as its President and Chief Executive
Officer until 1971.
CHARLES A. LYNCH, 70, has been a director of PST since March 1995. Mr. Lynch
has been the Chairman of Fresh Choice, Inc., a casual, upscale restaurant
chain, since March 1995. In March 1998, Mr. Lynch also became the Chairman and
Chief Executive Officer of Arrowhead Mills, Inc., a manufacturer and supplier
of natural and organic food products. From 1989 to March, 1995, Mr. Lynch
served as the Chairman of Market Value Partners Company, a company that
invests equity and management into underperforming and emerging businesses.
Mr. Lynch has also previously served as Chairman and Chief Executive Officer
of DHL Airways, Inc., an express courier, and as a director of Southern
Pacific Transportation Company, Greyhound Lines, Inc. and Consolidated
Freightways. Mr. Lynch is currently a director of Nordstrom, Inc., a retail
department store chain, Fresh Choice, Inc., Madge Networks, N.V., a supplier
of end-to-end switched networking solutions, and Authentic Specialty Foods,
Inc., a manufacturer and distributer of authentic-style Mexican food products.
DIRECTORS
ROBERT D. HILL, 47, has been President and Chief Operating Officer of PST
since August 1991. From 1989 to 1991, Mr. Hill served as President of Cherokee
Transportation Inc., a truckload carrier. From 1987 to 1989, Mr. Hill served
as Vice President/General Manager of Builders Transport, Inc., a truckload
carrier. From 1983 to 1987, Mr. Hill was Vice President of Operations and Vice
President of National Accounts, Sales and Marketing of Ryder Systems, a
truckload carrier. From 1974 to 1983, Mr. Hill was a Regional Vice President
of Interstate Contract Carrier Corporation, a truckload carrier which was
acquired by Ryder Systems in 1983. Mr. Hill has served as a director of PST
since September 1991 and his current term ends in 1999.
74
<PAGE>
JAMES F. REDFERN, 53, has been a litigation consultant to Sullivan &
Cromwell, a law firm, since August 1993. From 1990 to August 1993, Mr. Redfern
served as an independent consultant to various banks and corporations. From
1983 to 1990, Mr. Redfern served as Executive Vice President, Senior Credit
Officer and Chairman of the Credit Committee at Carteret Savings Bank, F.A.
Mr. Redfern has served as a director of PST since March 1995 and his current
term ends in 1999.
JAMES E. OTTO, 64, has been a director of PST since October 1997 and his
current term ends in 2000. From 1960 to 1982, Mr. Otto was President and Chief
Executive Officer of Catered Living, Inc., a chain of nursing homes which he
owned and sold in 1982. Since 1982, Mr Otto has been actively managing his
personal investment portfolio.
MEETINGS AND COMMITTEES
During the year ended December 31, 1997 ("1997"), the PST Board of Directors
held nine meetings. All members attended 100% of the board meetings. The Board
of Directors has a Compensation Committee that administer's PST's Incentive
Plan and establishes and approves the compensation of PST's officers. The
members of the Compensation Committee are Charles A. Lynch, James F. Redfern
and James E. Otto. The Compensation Committee met four times during 1997. The
Board has an Audit Committee that reviews the auditor reports and
recommendations and interviews and makes recommendations to the Board for the
selection of PST's independent auditors. The members of the Audit Committee
are Charles A. Lynch, James F. Redfern and James E. Otto. The Audit Committee
met three times during 1997. The Company does not have a Nominating Committee.
Committee meetings were attended by all members of the respective committees
in 1997.
EXECUTIVE OFFICERS
Information regarding two of the executive officers of PST, Kenneth R.
Norton and Robert D. Hill, is furnished above. The following sets forth
information about the other executive officer:
NEIL R. VOS, 53, has been Chief Financial Officer, Secretary and Treasurer
of PST since December, 1996, having previously served as Vice President of
Fuel and Maintenance from September 1995. From 1993 to 1995, Mr. Vos served as
an accounting manager for a large federal government agency. From 1989 to
1993, Mr. Vos operated his own accounting firm. From 1986 to 1989, Mr. Vos
served as Executive Vice President and Chief Operating Officer of Monchec,
Inc. a company operating a chain of retail financial services outlets. From
1978 to 1986, Mr. Vos served as Chief Financial Officer for Intermountain
Laboratories, Inc., a publicly-owned clinical laboratory company. Mr. Vos is a
certified public accountant.
75
<PAGE>
EXECUTIVE COMPENSATION INFORMATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning the
compensation paid or accrued by PST to or on behalf of PST's Chief Executive
Officer and each of the other executive officers whose salary and bonus
exceeded $100,000 (collectively, the "Named Executive Officers") for the years
ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------ ------------------------
OPTIONS ALL OTHER
NAME AND POSITION YEAR SALARY BONUS(1) GRANTED COMPENSATION
- ----------------- ---- ---------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Kenneth R. Norton 1997 $ 281,600 $ 40,000 50,000 0
Chairman and Chief Ex-
ecutive 1996 281,500 0 0 0
Officer 1995 280,400 24,375 0 0
Robert D. Hill 1997 211,215 40,000 32,500 0
President and Chief Op-
erating 1996 206,050 29,615 0 0
Officer 1995 204,231 24,375 67,500(2) 0
Neil R. Vos 1997 80,461 20,000 32,500 0
Chief Financial Offi-
cer, 1996 63,933 0 0 0
Secretary and Treasurer 1995 22,208(3) 0 0 0
</TABLE>
- --------
(1) PST maintains an incentive bonus program for its executive officers. Under
this program, executive officers earn quarterly bonuses based on the
operating performance of PST.
(2) Includes 42,500 Options granted March 7, 1995 and repriced on October 30,
1995.
(3) Mr. Vos became employed by PST in September 1995.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to individual grants
of stock options made by PST to the Named Executive Officers during the year
ended December 31, 1997. PST did not grant any stock appreciation rights
during the year ended December 31, 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
PERCENT OF TOTAL STOCK PRICE APPRECIATION FOR
OPTIONS GRANTED OPTION TERM
OPTIONS TO EMPLOYEES IN EXERCISE ------------------------------
NAME GRANTED(1) FISCAL YEAR PRICE EXPIRATION DATE 5% 10%
---- ---------- ---------------- -------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth R. Norton....... 50,000 21.5% $3.50 07/21/07 $ 110,000 $ 279,000
Robert D. Hill.......... 32,500 14.0 3.50 07/21/07 71,500 181,350
Neil R. Vos............. 32,500 14.0 3.50 07/21/07 71,500 181,350
</TABLE>
- --------
(1) All options granted qualify as incentive stock options, under the Internal
Revenue Code. All options become exercisable in five equal annual
installments beginning one year from the date of grant. In addition, all
options become exercisable upon a change in control.
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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table sets forth information with respect to the aggregate
value of unexercised options to acquire shares of the Common Stock held by the
Named Executive Officers on December 31, 1997. No options were exercised by
the Named Executive Officers during the year ended December 31, 1997.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS AT
OPTIONS AT FY-END(#) FY-END($)(2)
--------------------- --------------------
EXERCISABLE(1)/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ---- --------------------- --------------------
<S> <C> <C>
Kenneth R. Norton.................... 0/50,000 $0/$29,700
Robert D. Hill....................... 13,500/86,500 $0/$19,305
Neil R. Vos.......................... 0/32,500 $0/$19,305
</TABLE>
- --------
(1) Includes options exercisable within 60 days of the end of PST's fiscal
year.
(2) Calculated based on the difference between the exercise price and the
price of a share of PST Common Stock on December 31, 1997. The closing
sale price of the PST Common Stock on December 31, 1997 was $4.094 per
share as reported on the Nasdaq Stock Market.
CHANGE IN CONTROL AGREEMENTS
PST has entered into an agreement with Robert D. Hill, its President and
Chief Operating Officer, which provides that PST will pay Mr. Hill a severance
payment equal to his current annual base salary plus the amount of bonus paid
to him in the previous year if Mr. Hill's employment terminates following a
change in control of PST. See "THE MERGER--Interests of Certain Persons in the
Merger."
DIRECTORS' COMPENSATION
Each non-employee member of the PST Board of Directors initially elected to
the PST Board prior to 1997 receives an annual fee of $25,000 and each non-
employee member of the PST Board initially elected in or after 1997 receives
an annual fee of $10,000. Each non-employee director also receives $1,000 per
Board meeting attended, as compensation for his services. PST's Stock
Incentive Plan provides for the annual grant of options to non-employee
members of the PST Board of 2,000 options each. No separate compensation is
paid for attendance at committee meetings. All directors are also reimbursed
for certain expenses in connection with attendance at PST Board and committee
meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the PST Board in 1997 were
Charles Lynch, James Otto and James Redfern, three non-employee directors, and
there were no interlocking compensation committee relationships.
REPORT OF THE COMPENSATION COMMITTEE
The Securities and Exchange Commission's ("SEC") rules addressing disclosure
of executive compensation in proxy statements require a report from the
Compensation Committee addressing, with respect to the most recently completed
fiscal year, (a) PST's policies regarding executive compensation generally,
(b) the factors and criteria considered in setting the compensation of PST's
Chief Executive Officer, Kenneth R. Norton, and (c) any relationship between
such compensation and PST's performance.
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<PAGE>
COMPENSATION COMMITTEE
The Compensation Committee, which is currently composed of PST's three
outside directors, is responsible for evaluating and establishing the amount
of compensation for each of PST's executive officers, and is also responsible
for administering the Incentive Plan as discussed below. The Compensation
Committee evaluates and establishes the compensation of the executive officers
based on the policies set forth below, and will continue to review, evaluate
and develop the policies governing PST's compensation program.
RESTRICTIONS ON INCREASE IN COMPENSATION LEVELS
Pursuant to the terms of a Revolving Loan Agreement With Letter of Credit
Facility dated March 7, 1994 between The Bank of New York and PST, any
increase in the compensation and benefits of executive management requires the
approval of The Bank of New York.
EXECUTIVE COMPENSATION POLICIES
PST's executive compensation package has historically been based on the
following principles:
. Providing compensation to management personnel which is competitive with
the compensation paid by other companies in the trucking industry in
order to attract and retain qualified management personnel;
. Linking a portion of executive compensation with PST's financial
performance so that a portion of the executive officers' compensation is
at risk, based on the financial performance of PST; and
. Providing executive officers with an opportunity to own PST's Common
Stock so that its executives will have a personal interest in the
increase in share value and, as a result, have common interests with
PST's stockholders.
Because of a shortage of qualified management personnel in the trucking
industry, the Board of Directors and the Compensation Committee believes it is
important for PST to provide a competitive compensation package to its
executive officers and key employees in order to enable PST to attract and
retain qualified management personnel. The Board of Directors and the
Compensation Committee, however, also believe that a significant portion of
the total compensation package should be tied to the financial performance of
PST and the achievement of pre-established performance goals.
Accordingly, PST's executive compensation package in 1997 consisted of both
cash compensation in the form of salary and cash bonuses, and equity
compensation in the form of stock options.
SALARIES AND EXECUTIVE INCENTIVE PROGRAM.
The Compensation Committee has historically established and adjusted base
salaries based on its review of industry surveys of salaries and compensation
in the trucking industry. The Compensation Committee has attempted to provide
base salaries to its executive officers which are competitive with the base
salaries offered by other companies in the trucking industry in order to
attract and retain qualified management personnel. The base salary levels are
also established and adjusted based on a subjective review of factors such as:
competitive trends, the overall financial performance of PST, and the
individual performance of the executives.
The Compensation Committee has also adopted an Executive Incentive Program
for the Named Executive Officers which links a portion of the Named Executive
Officers' compensation with the financial performance of PST. In 1997, the
Executive Incentive Program provided for pre-determined quarterly bonuses
based on PST meeting certain financial performance levels (as measured by
income before taxes, as a percentage of revenues) during each quarter.
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<PAGE>
STOCK PLANS
The Incentive Plan provides for a variety of awards intended to provide
executive officers and key employees with an equity interest in PST and to
link the interests of executive officers and key employees with the interests
of the stockholders of PST. The Incentive Plan provides for the grant of
options ("Options") to purchase shares of Common Stock and corresponding stock
appreciation rights ("SARS"), restricted shares of Common Stock ("Restricted
Shares") and stock units ("Stock Units") commonly referred to as "phantom
stock" (Options, Restricted Shares, Stock Units and SARS are collectively
referred to as "Awards"). Awards under the Incentive Plan are granted by the
Compensation Committee. The maximum number of shares of Common Stock available
for issuance as Awards under the Incentive Plan is currently 370,000.
Directors, managers, key employees and others who hold positions of
significant responsibility or whose performance or potential contribution, in
the judgment of the Compensation Committee, would benefit PST, are eligible to
receive Awards under the Incentive Plan.
The Compensation Committee has complete authority to determine the persons
to whom and the time or times at which grants of Awards will be made and
whether such Awards will be Options, SARS, Restricted Shares or Stock Units.
PST's executive officers are also eligible to participate in PST's Employee
Stock Purchase Plan.
CHIEF EXECUTIVE OFFICER COMPENSATION FOR FISCAL YEAR 1997.
The Compensation Committee elected to maintain the same salary and the same
level of bonus awards that could be earned by Kenneth R. Norton under the
Executive Incentive Program in 1997 as were in place in 1996. Based on the
financial performance of PST in 1997, (as measured by income before taxes as a
percentage of revenues) Kenneth R. Norton's bonus in 1997 was $40,000 compared
to $-0- in 1996.
The Compensation Committee granted options to purchase 50,000 shares to
Kenneth R. Norton in 1997.
The Board Of Directors Compensation
Committee
Charles A. Lynch
James F. Redfern
James E. Otto
79
<PAGE>
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative stockholder return on
the PST Common Stock during 1995, 1996 and 1997 (PST's Common Stock first
began trading on March 7, 1995) against the cumulative total return on the
CRSP Index for Nasdaq Stock Market (US Companies) and the CRSP Index for
Nasdaq Stocks (SIC 4210-4219 US Companies) (an index composed of Nasdaq
companies engaged in trucking and courier services, except air) for the same
period. The graph assumes an initial investment of $100 on March 7, 1995 with
dividends reinvested over the periods indicated.
LOGO
[Comparison of 34 Month Cumulative Total Return Chart Appears Here]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURNS
-------------------------
3/07/95 12/95 12/96 12/97
------- ----- ----- -----
<S> <C> <C> <C> <C>
PST VANS, INC...................................... 100 28 17 25
PEER GROUP......................................... 100 79 86 116
NASDAQ STOCK MARKET (U.S.)......................... 100 134 165 202
</TABLE>
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<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires PST's executive officers and
directors to file initial reports of ownership and reports of changes in
ownership with the SEC. Executive officers and directors are required by SEC
regulations to furnish PST with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to PST and
written representations from PST's executive officers and directors, there was
one late filing of a Form 3 by James E. Otto at the time he was elected to the
Board of Directors in October 1997.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of July 29, 1998, information with respect
to the PST Common Stock owned beneficially by each director, by each Named
Executive Officer, by all directors and executive officers as a group and by
each person known by PST to be a beneficial owner of more than 5% of the
outstanding shares of PST Common Stock. Unless otherwise noted, each person
named has sole voting and investment power with respect to the shares
indicated.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNERS BENEFICIAL OWNERSHIP CLASS(1)
- ------------------------------------- -------------------- -------------
<S> <C> <C>
Kenneth R. Norton(2)........................ 1,496,773(3) 34.7%
1901 West 2100 South
Salt Lake City, Utah 84119
The Bank of New York........................ 774,000 18.1%
One Wall Street
New York, New York 10286
Robert D. Hill(2)........................... 119,886(4) 2.7%
Neil R. Vos................................. 35,120(5) *
Charles A. Lynch(2)......................... 11,000(6) *
James F. Redfern(2)......................... 13,000(7) *
James E. Otto(2)............................ 11,100(8) *
All directors and Executive Officers as a
group (6 persons).......................... 1,686,879(9) 37.7%
</TABLE>
- --------
* Less than 1%.
(1) Based on total outstanding shares of 4,269,482 as of July 29, 1998.
(2) Director.
(3) Includes 7,450 shares held as custodian for Mr. Norton's grandson, 10,000
shares owned by Mr. Norton's spouse, 200,000 shares held by a limited
partnership of which Mr. Norton is the sole general partner, 10,000 shares
issuable upon exercise of presently exercisable options and 40,000 shares
issuable upon exercise of options which will become exercisable upon
approval of the Merger.
(4) Includes 47,000 shares issuable upon exercise of presently exercisable
options and 53,000 shares issuable upon exercise of options which will
become exercisable upon approval of the Merger.
(5) Includes 6,500 shares issuable upon exercise of presently exercisable
options and 26,000 shares issuable upon exercise of options which will
become exercisable upon approval of the Merger.
(6) Includes 2,000 shares owned by Mr. Lynch's spouse, 2,668 shares issuable
upon exercise of presently exercisable options and 5,332 shares issuable
upon exercise of options which will become exercisable upon approval of
the Merger.
(7) Includes 2,668 shares issuable upon exercise of presently exercisable
options and 5,332 shares issuable upon exercise of options which will
become exercisable upon approval of the Merger.
(8) Includes 4,000 shares issuable upon exercise of options which will become
exercisable upon approval of the Merger.
(9) Includes 45,836 shares issuable upon exercise of presently exercisable
options and 156,664 shares issuable upon exercise of options which will
become exercisable upon approval of the Merger.
81
<PAGE>
RELATED PARTY TRANSACTIONS
The information set forth herein briefly describes transactions between PST
and certain related parties. PST believes that the terms of the following
transactions are comparable to the terms that could be obtained from an
unaffiliated third party for similar transactions.
In connection with PST's Plan of Reorganization, PST entered into a
Revolving Loan Agreement (the "Loan Agreement") with The Bank of New York, an
18% stockholder of PST, on March 7, 1994, pursuant to which The Bank of New
York agreed to extend credit to PST by issuing letters of credit for the
account of PST up to the maximum aggregate principal amount of $8.75 million.
As of December 31, 1997, letters of credit totaling $4.83 million were
outstanding under the Loan Agreement. Under the terms of the Loan Agreement,
PST must pay a 1% annual fee on the undrawn letters of credit. During 1997,
PST paid approximately $73,821 in fees under the Loan Agreement. The Loan
Agreement expired on May 15, 1998 and PST is thus in default under the Loan
Agreement.
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<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL NO. 3)
Ratification of the appointment by the PST Board of Directors of the
independent public accountants for PST to serve until consummation of the
Merger (or, if the Merger is not consummated, for the fiscal year ending
December 31, 1998) is to be voted upon at the Annual Meeting. The PST Board of
Directors recommends stockholder ratification of the appointment of Arthur
Andersen LLP, whose appointment has been approved, subject to stockholder
approval, by the PST Board of Directors. Representatives of Arthur Andersen
LLP are expected to be present at the Annual Meeting to answer any questions
stockholders may have and will be given the opportunity to make a statement if
they desire to do so.
The affirmative vote of a majority of the votes cast on this proposal shall
constitute ratification of the appointment of Arthur Andersen LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS TO SERVE
UNTIL CONSUMMATION OF THE MERGER (OR, IF THE MERGER IS NOT CONSUMMATED, FOR
THE FISCAL YEAR ENDING DECEMBER 31, 1998).
OTHER MATTERS
OTHER BUSINESS
The PST Board of Directors is not aware of any matter to be presented at the
Annual Meeting or any adjournments or postponements thereof that is not listed
in the Notice of Annual Meeting and discussed above. If other matters should
come before the Annual Meeting, however, the proxyholders will vote in
accordance with their best judgment.
PROPOSALS OF SECURITY HOLDERS FOR PST'S 1999 ANNUAL MEETING
Stockholders desiring to submit proposals for inclusion in the Proxy
Statement for PST's 1999 Annual Meeting of Stockholders (in the event that the
Merger is not consummated) will be required to submit them to PST in writing
on or before December 31, 1998. In order to be included in such Proxy
Statement, any stockholder proposal also must be proper in form and substance,
as determined in accordance with the Exchange Act and the rules and
regulations promulgated thereunder.
LEGAL MATTERS
The validity of the shares of Enterprises Common Stock offered hereby will
be passed upon for Enterprises by Miller & Martin LLP, securities counsel for
Enterprises.
Parr, Waddoups, Brown, Gee & Loveless, counsel for PST, has delivered an
opinion concerning certain Federal income tax consequences of the Merger. See
"THE MERGER--Certain Federal Income Tax Considerations" and "THE MERGER
AGREEMENT--Conditions to the Consummation of the Merger."
83
<PAGE>
EXPERTS
The consolidated balance sheets of Enterprises and its subsidiaries as of
December 31, 1997 and March 31, 1997 and the related consolidated statements
of operations, stockholders' equity and cash flows for the nine months ended
December 31, 1997 and the years ended March 31, 1997 and 1996, incorporated by
reference in this Proxy Statement/Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
with respect thereto, and are incorporated by reference in reliance upon the
authority of said firm as experts in giving said reports.
The audited financial statements of PST included in this Proxy
Statement/Prospectus have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE PAID
ENVELOPE.
84
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants................................. F-2
Balance Sheets at March 31, 1998 and December 31, 1997 and 1996.......... F-3
Statements of Operations for the Three Month Periods Ended March 31, 1998
and 1997 and the Years Ended December 31, 1997, 1996 and 1995 ......... F-4
Statements of Stockholders' Equity for the Three Month Period Ended March
31, 1998 and the Years Ended December 31, 1997, 1996 and 1995 .......... F-5
Statements of Cash Flows for the Three Month Periods Ended March 31, 1998
and 1997 and the Years Ended December 31, 1997, 1996 and 1995........... F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To PST Vans, Inc.:
We have audited the accompanying balance sheets of PST Vans, Inc., (a Utah
corporation) as of December 31, 1997 and 1996, and the related statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PST Vans, Inc. as of
December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Salt Lake City, Utah
February 11, 1998 (except with respect to matters discussed in Note 11 and the
first paragraph of Note 4 as to which the date is July 13, 1998.)
F-2
<PAGE>
PST VANS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -------------------------
1998 1997 1996
------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash........................... $ 1,491,757 $ 1,282,255 $ 4,098,361
Receivables, net of allowance
for doubtful accounts of
$798,000, $908,000 and
$806,000, respectively........ 16,234,347 17,087,038 14,607,292
Deposits....................... 343,867 343,867 353,437
Prepaid expenses and other..... 2,717,136 3,097,538 3,258,669
Inventories and operating
supplies...................... 562,869 726,853 689,875
------------ ------------ -----------
TOTAL CURRENT ASSETS......... 21,349,976 22,537,551 23,007,634
------------ ------------ -----------
PROPERTY AND EQUIPMENT, at cost,
net of accumulated depreciation
and amortization of $27,365,000,
$26,399,259 and $23,282,064,
respectively.................... 53,430,878 48,265,324 58,116,763
------------ ------------ -----------
GOODWILL, net of accumulated
amortization of $3,636,287,
$3,568,297 and $3,296,334,
respectively.................... 8,272,196 8,340,187 8,612,150
------------ ------------ -----------
OTHER ASSETS, net................ 317,615 332,632 523,539
------------ ------------ -----------
TOTAL ASSETS................. $ 83,370,665 $ 79,475,694 $90,260,086
============ ============ ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Revolving line of credit....... $ 5,267,301 $ 4,762,493 $ --
Current portion of long-term
obligations................... 4,938,373 3,037,018 1,388,581
Current portion of capitalized
lease obligations............. 21,885,399 23,599,973 18,708,614
Accounts payable............... 4,287,229 7,306,459 4,140,985
Current portion of accrued
claims payable................ 3,686,143 3,990,958 5,456,316
Accrued liabilities............ 2,380,757 3,271,718 2,469,915
------------ ------------ -----------
TOTAL CURRENT LIABILITIES.... 42,445,202 45,968,619 32,164,411
------------ ------------ -----------
LONG-TERM ACCRUED CLAIMS PAYABLE,
net of current portion.......... 1,019,123 1,257,429 1,429,227
------------ ------------ -----------
LONG-TERM OBLIGATIONS, net of
current portion................. 7,605,590 3,985,909 1,986,214
------------ ------------ -----------
CAPITALIZED LEASE OBLIGATIONS,
net of current portion.......... 14,531,197 10,752,721 32,907,995
------------ ------------ -----------
COMMITMENTS AND CONTINGENCIES
(Notes 1 and 7)
STOCKHOLDERS' EQUITY:
Preferred stock, no par value,
5,000,000 shares authorized,
none issued................... -- -- --
Common stock, $.001 par value,
20,000,000 shares authorized,
4,253,527, 4,239,945 and
4,217,157 shares issued,
respectively.................. 4,254 4,240 4,217
Additional paid-in capital..... 49,847,278 49,812,539 49,759,238
Accumulated deficit............ (32,081,979) (32,305,763) (27,991,216)
------------ ------------ -----------
TOTAL STOCKHOLDERS' EQUITY... 17,769,553 17,511,016 21,772,239
------------ ------------ -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY........ $ 83,370,665 $ 79,475,694 $90,260,086
============ ============ ===========
</TABLE>
F-3
<PAGE>
PST VANS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31, FOR THE YEARS ENDED DECEMBER 31,
------------------------ ----------------------------------------
1998 1997 1997 1996 1995
----------- ----------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES................ $35,706,408 $34,522,609 $143,737,430 $147,418,904 $164,794,366
----------- ----------- ------------ ------------ ------------
COSTS AND EXPENSES:
Salaries, wages and
benefits............. 10,062,033 10,865,745 44,360,224 43,847,942 45,208,090
Purchased transporta-
tion................. 8,488,483 6,832,845 25,578,176 32,393,331 41,280,895
Fuel and fuel taxes... 4,576,587 5,373,628 22,532,582 20,555,431 21,245,011
Revenue equipment
lease expense........ 934,591 1,842,548 7,576,456 8,021,676 12,224,340
Maintenance........... 2,553,827 1,826,916 8,662,947 7,491,155 8,822,454
Insurance and claims.. 2,166,619 2,871,458 11,384,315 11,942,008 9,315,173
General supplies and
expenses............. 1,519,380 1,261,423 5,930,058 5,558,052 5,995,821
Taxes and licenses.... 710,701 719,259 2,775,614 3,309,478 3,445,040
Communications and
utilities............ 491,871 895,038 2,801,757 3,429,699 3,561,698
Depreciation and amor-
tization............. 2,846,738 3,032,285 11,910,563 13,174,606 8,803,585
(Gain) loss on sale of
equipment............ (52,673) (54,187) 12,875 (1,613,842) (150,940)
Amortization of good-
will................. 67,991 67,991 271,963 271,963 271,963
----------- ----------- ------------ ------------ ------------
Total Operating Ex-
penses............. 34,366,148 35,534,949 143,797,530 148,381,499 160,023,130
----------- ----------- ------------ ------------ ------------
OPERATING INCOME
(LOSS)................. 1,340,260 (1,012,340) (60,100) (962,595) 4,771,236
----------- ----------- ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense...... (1,134,145) (1,126,224) (4,359,888) (5,080,202) (4,283,463)
Other, net............ 17,669 29,488 105,441 182,032 147,408
----------- ----------- ------------ ------------ ------------
(1,116,476) (1,096,736) (4,254,447) (4,898,170) (4,136,055)
----------- ----------- ------------ ------------ ------------
INCOME (LOSS) BEFORE
PROVISION FOR INCOME
TAXES.................. 223,784 (2,109,076) (4,314,547) (5,860,765) 635,181
PROVISION FOR INCOME
TAXES.................. -- -- -- -- 251,532
----------- ----------- ------------ ------------ ------------
NET INCOME (LOSS)....... $ 223,784 $(2,109,076) $ (4,314,547) $ (5,860,765) $ 383,649
=========== =========== ============ ============ ============
NET INCOME (LOSS) PER
COMMON SHARE--BASIC AND
DILUTED................ $ 0.05 $ (0.50) $ (1.02) $ (1.39) $ 0.10
=========== =========== ============ ============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING--
BASIC.................. 4,252,772 4,226,544 4,233,467 4,212,211 3,877,528
=========== =========== ============ ============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING--
DILUTED................ 4,340,143 4,226,544 4,233,467 4,212,211 3,949,526
=========== =========== ============ ============ ============
</TABLE>
F-4
<PAGE>
PST VANS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT EQUITY
------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1994.... $2,600 $27,984,629 $(22,514,100) $ 5,473,129
Sale of 1,600,000 shares of
common stock in connection
with initial public offer-
ing, net.................... 1,600 21,633,753 -- 21,635,353
Issuance of 9,409 shares of
common stock as satisfaction
of $112,903 general
unsecured claims............ 9 112,894 -- 112,903
Net income................... -- -- 383,649 383,649
------ ----------- ------------ -----------
BALANCE, December 31, 1995.... 4,209 49,731,276 (22,130,451) 27,605,034
Sale of 7,748 shares of com-
mon stock to employees...... 8 27,962 -- 27,970
Net loss..................... -- -- (5,860,765) (5,860,765)
------ ----------- ------------ -----------
BALANCE, December 31, 1996.... 4,217 49,759,238 (27,991,216) 21,772,239
Sale of 22,788 shares of com-
mon stock to employees...... 23 53,301 -- 53,324
Net loss..................... -- -- (4,314,547) (4,314,547)
------ ----------- ------------ -----------
BALANCE, December 31, 1997.... 4,240 49,812,539 (32,305,763) 17,511,016
Sale of 13,582 shares of com-
mon stock to employees (un-
audited).................... 14 34,739 -- 34,753
Net income (unaudited)....... -- -- 223,784 223,784
------ ----------- ------------ -----------
BALANCE, March 31, 1998
(unaudited).................. $4,254 $49,847,278 $(32,081,979) $17,769,553
====== =========== ============ ===========
</TABLE>
F-5
<PAGE>
PST VANS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31, FOR THE YEARS ENDED DECEMBER 31,
------------------------ ---------------------------------------
1998 1997 1997 1996 1995
----------- ----------- ------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net (loss) income...... $ 223,784 $(2,109,076) $ (4,314,547) $ (5,860,765) $ 383,649
----------- ----------- ------------ ------------ -----------
Adjustments to recon-
cile net (loss) income
to net cash provided
by operating activi-
ties--
Depreciation and
amortization.......... 2,846,738 3,032,285 11,910,563 13,174,605 8,803,585
Provision for losses on
accounts receivable... (280,087) (2,915) 936,697 1,280,634 1,097,890
Amortization of
goodwill.............. 67,991 67,991 271,963 271,963 271,963
(Gain) loss on sale of
equipment............. (52,673) (54,187) 12,875 (1,613,842) (150,940)
Non cash expense
related to issuance of
common stock.......... -- 4,124 -- -- --
(Increase) decrease in
receivables........... 1,132,777 863,859 (3,416,443) 347,648 (1,722,103)
Decrease in deposits... -- 25,902 9,570 632,515 2,876,942
(Increase) decrease in
prepaid expenses and
other................. 335,119 596,738 161,132 830,326 (1,361,156)
(Increase) decrease in
inventories and
operating supplies.... 163,984 67,782 (36,978) (47,145) (77,773)
Decrease in other
assets, net........... 13,615 220,733 190,907 17,823 2,265,931
Increase (decrease) in
accounts payable...... 29,545 237,252 3,165,474 (368,849) (285,119)
Increase (decrease) in
accrued claims
payable............... (953,771) 150,887 (1,637,156) 1,148,468 717,283
Increase (decrease) in
accrued liabilities... (479,211) 529,752 801,808 (786,981) (1,525,566)
----------- ----------- ------------ ------------ -----------
Total adjustments..... 2,824,027 5,740,203 12,370,412 14,887,165 10,910,937
----------- ----------- ------------ ------------ -----------
Net cash flows
provided by operating
activities........... 3,047,811 3,631,127 8,055,865 9,026,400 11,294,586
----------- ----------- ------------ ------------ -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Proceeds from sale of
equipment............. 203,388 288,698 3,194,556 4,323,495 1,163,436
Acquisition of property
and equipment......... (2,422,116) (2,128,685) (5,349,216) (988,590) (9,480,079)
----------- ----------- ------------ ------------ -----------
Net cash flows
provided by (used in)
investing
activities........... (2,218,728) (1,839,987) (2,154,660) 3,334,905 (8,316,643)
----------- ----------- ------------ ------------ -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from revolving
line of credit, net... 504,808 396,022 4,762,493 -- --
Principal payments on
capitalized lease
obligations........... (2,231,813) (2,803,775) (11,568,432) (10,774,663) (6,478,232)
Principal payments on
long-term
obligations........... (931,965) (1,060,240) (2,039,296) (1,766,232) (2,234,107)
Proceeds from sale of
common stock to
employees............. -- -- 53,324 27,970 --
Proceeds from sale of
common stock, net..... 34,753 23,536 -- -- 21,635,353
Purchase of accounts
receivable from
factor................ -- -- -- -- (9,063,711)
Decrease in advanced
from factor........... -- -- -- -- (5,336,289)
Proceeds from long-term
obligations........... 2,004,636 54,602 74,600 -- 1,983,824
----------- ----------- ------------ ------------ -----------
Net cash flows (used
in) provided by
financing
activities........... (619,581) (3,389,855) (8,717,311) (12,512,925) 506,838
----------- ----------- ------------ ------------ -----------
NET INCREASE (DECREASE)
IN CASH................ 209,502 (1,598,715) (2,816,106) (151,620) 3,484,781
----------- ----------- ------------ ------------ -----------
CASH AT BEGINNING OF
PERIOD................. 1,282,255 4,098,361 4,098,361 4,249,981 765,200
----------- ----------- ------------ ------------ -----------
CASH AT END OF PERIOD... $ 1,491,757 $ 2,499,646 $ 1,282,255 $ 4,098,361 $ 4,249,981
=========== =========== ============ ============ ===========
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW
INFORMATION:
Cash paid for --
Interest............... $ 1,135,922 $ 1,162,766 $ 4,438,378 $ 5,115,442 $ 4,106,793
=========== =========== ============ ============ ===========
Income taxes........... $ 17,840 $ -- $ 31,040 $ 90,659 $ 1,691,615
=========== =========== ============ ============ ===========
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES:
Equipment acquired
through capitalized
lease obligations..... $ -- $ -- $ -- $ -- $51,475,706
=========== =========== ============ ============ ===========
</TABLE>
F-6
<PAGE>
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
(1) NATURE OF BUSINESS
PST Vans, Inc. ("PST") is a nationwide common motor carrier with 48-state
general commodity and contract operating authorities. PST provides dry van
truckload services focused on serving three markets in the United States;
transcontinental, intrawest and midwest-southeast. PST transports a wide
variety of freight, much of which is time sensitive, including paper products,
retail products, non-perishable food products, tires and electronic equipment.
Reorganization Under Chapter 11
On June 2, 1993, PST filed a voluntary petition in the United States
Bankruptcy Court for the District of Utah to reorganize under Chapter 11 of
the United States Bankruptcy Code. During the period from June 2, 1993 to
March 7, 1994, the Company operated as a debtor-in-possession under the
supervision of the Bankruptcy Court. As of December 31, 1997 and 1996,
approximately $198,000 and $334,000, respectively, of the estimated
liabilities subject to compromise remain outstanding and are included in long-
term obligations. All other amounts subject to compromise have been converted
to equity, paid or forgiven.
The Plan of Reorganization (the "Plan") required the Company to pay any
remaining portion of general unsecured claims in the event of an initial
public offering (IPO) within the five year period subsequent to January 1,
1994. The Plan allowed for each unsecured creditor to elect to: 1) receive
cash equal to the amount of the unpaid balance of its unsecured claim from the
proceeds of the IPO, or 2) use the unpaid balance of its unsecured claim to
subscribe to stock to be issued pursuant to the IPO, which stock was to be
issued at a 20 percent discount from the initial offering price. In connection
with the IPO, the Company paid approximately $1,150,000 to general unsecured
creditors and issued 9,409 shares of common stock to its Chief Executive
Officer and significant stockholder.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenue is recognized as services are performed. The Company allocates
revenue between reporting periods based on relative transit time in each
reporting period and recognizes direct expenses as incurred.
Receivables and Advances from Factor
Prior to the IPO of the Company's common stock in March 1995, PST sold and
factored a significant portion of its trade accounts receivable with a finance
company. The terms of the factoring agreement allowed for the sale of accounts
both with and without recourse depending upon the customer. Until March 31,
1995, substantially all of the Company's receivables were sold to the finance
company. The finance company also provided advances to the Company against
freight bills for which documentation was incomplete. As the Company supplied
all required documentation to the finance company, the completed freight bills
were sold.
Deposits and Other Assets, net
PST is required to keep certain amounts on deposit with various companies
related to insurance, fuel purchases and certain leasing agreements. The
Company had approximately $344,000 and $303,000 in deposits with insurance
carriers at December 31, 1997 and 1996, respectively and $50,000 with lessors
and fuel vendors at December 31, 1996.
Inventories and Operating Supplies
Inventories consist primarily of tires, fuel and maintenance parts for
revenue equipment. Inventories are stated at the lower of first-in, first-out
(FIFO) cost or market value.
F-7
<PAGE>
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
Property and Equipment
Property and equipment are recorded at cost and depreciated or amortized
based on the straight-line method over their estimated useful economic lives,
taking into consideration salvage values for purchased property and residual
values for equipment held under capital leases. Leasehold improvements are
amortized over the terms of the respective leases or the estimated economic
useful lives of the assets, whichever is shorter.
Expenditures for routine maintenance and repairs are charged to operating
expense as incurred. Major overhauls and betterments are capitalized and
depreciated over their estimated economic useful lives. Tires purchased as
part of revenue equipment are capitalized as a cost of equipment. Replacement
tires are expensed when placed in service. Upon the disposal of property and
equipment, the cost and accumulated depreciation are removed from the accounts
and any gain or loss is included in the determination of income or loss.
Property and equipment consists of the following:
<TABLE>
<CAPTION>
EST. USEFUL
LIVES (YEARS) 1997 1996
------------- ------------ ------------
<S> <C> <C> <C>
Land............................. $ 1,182,421 $ 1,182,421
Revenue equipment................ 2-10 66,443,716 73,453,974
Buildings and improvements....... 5-30 3,546,529 3,477,645
Furniture and fixtures........... 5-10 2,160,823 1,953,389
Other Equipment.................. 3-5 1,331,094 1,331,398
------------ ------------
74,664,583 81,398,827
Less Accumulated depreciation and
amortization.................... (26,399,259) (23,282,064)
------------ ------------
$ 48,265,324 $ 58,116,763
============ ============
</TABLE>
Goodwill
Goodwill is being amortized on a straight line basis over forty years. The
Company continually evaluates whether events and circumstances have occurred
that indicate the remaining balance may not be recoverable. When factors
indicate goodwill should be evaluated for possible impairment, the Company
uses an estimate of the discounted future cash flows over the life of the
goodwill and comparable market information in measuring whether the amount is
recoverable.
Income Taxes
The Company recognizes a liability or asset for the deferred tax
consequences of all temporary differences between the tax bases of assets or
liabilities and their reported amounts in the financial statements. These
temporary differences will result in taxable or deductible amounts in future
years when the reported amounts of the assets or liabilities are recovered or
settled. The deferred tax assets are reviewed for recoverability and valuation
allowances are provided as necessary.
Insurance Coverage and Accrued Claims Payable
The Company maintains insurance for losses related to public liability,
property damage, cargo and worker's compensation claims in amounts it
considers sufficient. Nevertheless, the Company could be adversely affected if
it incurred a liability as a result of claims in excess of its policy limits
or a significant volume of claims below its deductible limits. The Company
maintains loss prevention programs in an effort to minimize this risk. The
Company estimates and accrues a liability for its share of ultimate
settlements using all available information including the services of a third
party insurance risk claims administrator to assist in establishing reserve
levels
F-8
<PAGE>
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDED NOTES RELATED TO UNAUDITED PERIODS)
for each occurrence based on the facts and circumstances of the occurrence
coupled with the Company's past history of such claims. The Company accrues
for worker's compensation and automobile liabilities when reported, typically
the same day as the occurrence. Additionally, the Company accrues an estimated
liability for incurred but not reported claims. Expense depends upon actual
loss experience and changes in estimates of settlement amounts for open claims
which have not been fully resolved. The Company provides for adverse loss
developments in the period when new information so dictates. The amounts the
Company will ultimately pay on its claims outstanding as of December 31, 1997
could differ materially in the near term from amounts accrued in the
accompanying December 31, 1997 balance sheet.
Based upon historical and projected trends in claims payments, the Company
has classified the claims payable in current and long term components in the
accompanying balance sheets.
Net Income (Loss) Per Common Share
Basic net income (loss) per common share ("Basic EPS") excludes dilution and
is computed by dividing net income (loss) by the weighted average number of
common shares outstanding during the year. Diluted net income (loss) per
common share ("Diluted EPS") reflects the potential dilution that could occur
if stock options or other common stock equivalents were exercised or converted
into common stock. The computation of Diluted EPS does not assume exercise or
conversion of securities that would have an anti-dilutive effect on net income
(loss) per common share. In periods where losses are recorded, common stock
equivalents would decrease the net loss per common share and are therefore not
considered in the calculation of weighted average common shares outstanding
for Diluted EPS. Net income (loss) per common share amounts and share data
have been restated for all years presented in the accompanying financial
statements to reflect Basic and Diluted EPS.
The following is a reconciliation of the numerator and denominator of Basic
EPS to the numerator and denominator of Diluted EPS for all years presented in
the accompanying financial statements
<TABLE>
<CAPTION>
NET INCOME (LOSS) SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------------ ------------- ----------
<S> <C> <C> <C>
Three Months Ended March 31, 1998
Basic EPS........................ $ 223,784 4,252,772 $ 0.05
Effect of Stock Options.......... -- 87,371 --
------------ --------- ------
Diluted EPS...................... $ 223,784 4,340,143 $ 0.05
============ ========= ======
Three Months Ended March 31, 1997
Basic EPS........................ $(2,109,076) 4,226,544 $(0.50)
Effect of Stock Options.......... -- -- --
------------ --------- ------
Diluted EPS...................... $(2,109,076) 4,226,544 $(0.50)
============ ========= ======
Year Ended December 31, 1997
Basic EPS........................ $ (4,314,547) 4,233,467 $(1.02)
Effect of Stock Options.......... -- -- --
------------ --------- ------
Diluted EPS...................... $ (4,314,547) 4,233,467 $(1.02)
============ ========= ======
Year Ended December 31, 1996
Basic EPS........................ $ (5,860,765) 4,212,211 $(1.39)
Effect of Stock Options.......... -- -- --
------------ --------- ------
Diluted EPS...................... $ (5,860,765) 4,212,211 $(1.39)
============ ========= ======
Year Ended December 31, 1995
Balance EPS...................... $ 383,649 3,887,528 $ 0.10
Effect of Stock Options.......... -- 61,998 --
------------ --------- ------
Diluted EPS...................... $ 383,649 3,949,526 $ 0.10
============ ========= ======
</TABLE>
F-9
<PAGE>
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
As of March 31, 1998 and 1997 and December 31, 1997, 1996, and 1995, there
were outstanding options to purchase 351,000, 110,000, 340,000, 111,000 and
99,002 shares of common stock, respectively, that were not included in the
computation of Diluted EPS because the options' exercise prices were greater
than the average market price of the common shares or because their inclusion
would have been anti-dilutive.
Pervasiveness 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.
Recent Accounting Pronouncement
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments for an
Enterprise and Related Information." This statement establishes new standards
for public companies to report information about operating segments, products
and services, geographic areas and major customers. This statement is
effective for periods beginning after December 15, 1997.
(4) REVOLVING LOAN AGREEMENTS
The Bank of New York
On March 7, 1994, the Company signed a $9,500,000 Revolving Loan Agreement
(the "Agreement") with The Bank of New York. The Agreement contains a letter
of credit facility. The maximum principal amount of outstanding advances under
the Agreement cannot exceed the lesser of (1) $9,500,000 less the aggregate
amount outstanding with respect to letters of credit (whether drawn or
undrawn), or (2) $1,000,000. On March 21, 1997, the Agreement was amended such
that certain financial covenants were deleted. Additionally, the amendment
changed the expiration date to December 31, 1997, and required that all
remaining letters of credit be terminated according to a stipulated schedule,
but no later than the expiration of the Agreement. On March 31, 1998, the
agreement was extended effective December 31, 1997, to May 15, 1998. As of
December 31, 1997, letters of credit totaling $4,830,000 were outstanding
under the Agreement. As outstanding letters of credit issued under this credit
facility expire, the maximum commitment available under this credit facility
will be reduced by the amount of the expiring letters of credit. The amended
Agreement requires the Company to maintain specified levels of tangible net
worth through the expiration of the Agreement. As of July 13, 1998, the
Company is in default under the Agreement; however, the bank has allowed the
letters of credit to remain outstanding while the Company continues
negotiations with third parties to replace the facility.
Congress Financial Corporation (Northwest)
The Company has an $11,500,000 Loan and Security Agreement (the "Congress
Agreement") with Congress Financial Corporation (Northwest). The Congress
Agreement contains a letter of credit facility supporting letters of credit up
to $7,000,000 and a revolving loan facility that is secured by eligible
accounts receivable. The letter of credit facility requires the Company to
maintain a pledged certificate of deposit of $1,000,000 for letters of credit
outstanding up to $3,500,000, unless the Company allows its cash receipts to
flow through a bank account designated by the Congress Agreement. The Congress
Agreement expires August 6, 1999. As of December 31, 1997, the balance under
the line of credit was $4,762,493 and letters of credit totaling $5,616,000
were outstanding, leaving a balance available to the Company of $1,121,507
under the Congress Agreement. Additionally, the Congress Agreement restricts
the payment of dividends.
F-10
<PAGE>
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
(5) LONG-TERM OBLIGATIONS
Long-term obligations consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Notes payable to finance companies, interest at the
"1-month" commercial paper rate plus 3.80 percent
(9.29 percent at December 31, 1997), payable in
monthly installments of $134,220 through November
1999, secured by revenue equipment................. $ 2,899,950 $ --
Notes payable to a finance company, interest at 9.50
percent payable in monthly installments of $249,849
through January 2000, secured by revenue
equipment.......................................... 2,250,781 --
Notes payable to finance companies, interest rates
ranging from 8.00 to 8.05 percent, payable in
monthly installments ranging from $10,285 to
$51,218 through December 2003, secured by revenue
equipment.......................................... 1,357,767 1,844,230
Payables to tax creditors, interest at applicable
statutory rates, due in monthly installments of
$11,576 through 2000............................... 197,916 258,910
Notes payable to a bank, interest at 9 percent,
payable in monthly installments of $3,473 through
March 2000, secured by revenue equipment........... 42,296 --
Mortgage payable to a bank, paid in full in January
1997............................................... -- 829,073
Other............................................... 274,217 442,582
----------- -----------
7,022,927 3,374,795
Less Current portion................................ (3,037,018) (1,388,581)
----------- -----------
$ 3,985,909 $ 1,986,214
=========== ===========
</TABLE>
As of December 31, 1997, maturities of long-term obligations are as follows:
<TABLE>
<S> <C>
Year Ending December 31:
1998................................................ $3,037,018
1999................................................ 2,793,133
2000................................................ 217,594
2001................................................ 202,303
2002................................................ 219,204
Thereafter.......................................... 553,675
----------
$7,022,927
==========
</TABLE>
F-11
<PAGE>
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
(6) INCOME TAXES
The components of deferred taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts................. $ 412,279 $ 319,359
Accrued claims payable.......................... 1,828,806 1,889,956
General business credit carry forward........... 574,147 574,147
Workers compensation accrual.................... 290,153 204,359
Alternative minimum tax credit carry forward.... 456,984 456,984
Depreciation and leases......................... -- 422,001
Net operating loss carry forward................ 3,385,750 654,967
Other........................................... 256,999 291,808
----------- -----------
Total deferred tax assets..................... 7,205,118 4,813,581
Valuation allowance............................... (6,218,822) (4,689,624)
----------- -----------
Deferred assets, net of valuation allowance....... 986,296 123,957
Deferred tax liability:
Depreciation and leases......................... (862,339) --
----------- -----------
Net deferred tax assets....................... $ 123,957 $ 123,957
=========== ===========
</TABLE>
Management believes that, based upon the lack of cumulative profits in the
previous three years, sufficient uncertainty exists regarding the
realizability of the deferred tax asset such that a valuation allowance has
been recorded. Accordingly, the deferred tax assets have been reduced by an
approximately $6,219,000 valuation allowance at December 31, 1997. Realization
of the net deferred tax asset is dependent on generating sufficient taxable
income in future years to support the ability to use these deductions.
Although the realization of the net deferred tax assets are not assured,
management believes that it is more likely than not that all of the net
deferred tax assets will be realized. The amount of the net deferred tax
assets considered realizable, however, could be reduced in the near term based
upon changing conditions.
The provision (benefit) for income taxes for the years ended December 31,
1997, 1996, and 1995 consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- --------
<S> <C> <C> <C>
Current:
Federal................................. $ -- $ (590,588) $379,203
State................................... (16,021) (86,582) 110,182
---------- ---------- --------
(16,021) (677,170) 489,385
---------- ---------- --------
Deferred:
Federal................................. (1,319,704) (1,292,515) (43,609)
State................................... (193,473) (189,487) (12,671)
Change in valuation allowance........... 1,529,198 2,159,172 (181,573)
---------- ---------- --------
16,021 677,170 (237,853)
---------- ---------- --------
$ -- $ -- $251,532
========== ========== ========
</TABLE>
F-12
<PAGE>
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
The Company's effective income tax rate for the years ended December 31,
1997, 1996, and 1995 was different from the statutory federal income tax rate
for the following reasons:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Statutory federal income tax rate..................... (35.0)% (35.0)% 35.0%
State income taxes, net of federal benefit............ (4.6) (4.6) 4.6
Nondeductible items:
Amortization of goodwill............................ 2.5 1.8 17.0
Other............................................... 1.7 1.0 11.6
Change in valuation allowance......................... 35.4 36.8 (28.6)
----- ----- -----
Effective income tax rate............................. --% --% 39.6%
===== ===== =====
</TABLE>
The Company has general business credit and alternative minimum tax credit
carryforwards at December 31, 1997, of $574,147 and $456,984, respectively.
For income tax purposes, the Company had approximately $3,385,750 of net
operating loss carryforward at December 31, 1997. The net operating loss
carryforward expires in 2012.
(7) Commitments and Contingencies
Capitalized Lease Obligation
Certain revenue equipment is leased under capital lease agreements. The
following is a summary of assets held under capital lease agreements:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Revenue equipment................................ $ 53,015,303 $ 67,438,725
Other............................................ 1,325,504 1,325,504
------------ ------------
54,340,807 68,764,229
Less Accumulated amortization.................... (21,486,148) (18,910,825)
------------ ------------
$ 32,854,659 $ 49,853,404
============ ============
</TABLE>
The following is a schedule by year of future minimum lease payments under
the capital leases together with the value of the net minimum lease payments
at December 31, 1997:
<TABLE>
<S> <C>
Year Ending December 31:
1998............................................................ $ 25,488,538
1999............................................................ 2,823,867
2000............................................................ 2,638,099
2001............................................................ 2,638,099
2002............................................................ 4,827,606
------------
Total net minimum lease payments.............................. 38,416,209
Less amount representing interest................................. (4,063,515)
------------
Present value of net premium lease payments....................... 34,352,694
Less current portion.............................................. (23,599,973)
------------
$ 10,752,721
============
</TABLE>
Operating Leases
The Company is committed under noncancellable operating leases involving
revenue equipment and facilities. Rent expense for all operating leases was
approximately $7,548,000, $8,022,000 and $12,224,000 for
F-13
<PAGE>
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
the years ended December 31, 1997, 1996, and 1995, respectively. The following
is a schedule of future lease commitments under noncancellable operating
leases at December 31,1997:
<TABLE>
<S> <C>
Year Ending December 31:
1998............................................................ $4,208,548
1999............................................................ 2,883,724
2000............................................................ 1,779,521
2001............................................................ 992,944
----------
$9,864,737
==========
</TABLE>
The Company's operating lease payments are made in arrears. At December 31,
1997 and 1996, the Company classified approximately $436,000 and $461,000 of
accrued operating lease payments in "Accrued Liabilities" in the accompanying
balance sheets.
Letters of Credit
The Company had outstanding letters of credit related to insurance coverage
and certain lease agreements totaling approximately $10,446,000 at December
31, 1997. These letters of credit mature at various times through June 30,
1998.
Fuel Purchase Commitments
As of December 31, 1997, the Company had entered into various fuel purchase
contracts totaling approximately $3,600,000. These contracts expire at various
times through December 31, 1998. These arrangements are intended to reduce the
Company's vulnerability to rapid increases in the price of fuel. In the event
fuel prices decline, the Company will not benefit from such reduced pricing to
the extent of its commitment to purchase fuel under these contracts. If fuel
prices decline materially below contracted prices, the Company records the
loss in the period of decline. As of December 31, 1997, contracted fuel prices
were lower than market fuel prices.
Registration Rights
Pursuant to a Registration Rights Agreement, the Company's two largest
stockholders each have the right, subject to certain terms and conditions, to
require the Company to register their shares under the Securities Act of 1933
for offer to sell to the public (including by way of an underwritten
offering). These stockholders each also have the right to join in any
registration of securities of the Company (subject to certain exceptions). The
Company is obligated to pay all expenses (except the stockholders' legal
counsel, underwriting discounts, commissions, and transfer taxes, if any)
related to successful offerings requested by a stockholder under this
agreement.
Other
The Company is the subject of various legal actions which it considers
routine to its transportation business activities. Management believes, after
discussion with legal counsel, that the ultimate liability of the Company
under these actions will not materially affect the accompanying financial
statements.
The Company is subject to various restrictive covenants related to certain
outstanding debt and lease agreements. Certain lenders have reserved the right
to demand payment if, for any reason, they deem themselves insecure.
Management does not believe that these obligations will be called in advance
of their scheduled maturities. If they were to be called, management believes
that these amounts could be refinanced with other commercial lenders without
adversely impacting the Company's results of operations or liquidity.
F-14
<PAGE>
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
(8) STOCKHOLDERS' EQUITY
Initial Public Offering of Common Stock
In connection with its initial public offering, the Company sold 1,600,000
shares of common stock. The proceeds received from the offering, net of
underwriting commissions and offering costs, totaled approximately
$21,635,000.
Employee Stock Purchase Plan
During December 1995, the Company implemented an Employee Stock Purchase
Plan ("ESPP") entitling eligible employees of the Company to purchase 80,000
shares of the Company's common stock through payroll deductions in an amount
not to exceed 15 percent of an employee's base pay. The purchase price of the
common stock is the lesser of 85 percent of the market value of the common
stock at the beginning or end of each of the one year offering periods.
Employees can terminate their participation in an offering under the ESPP at
any time prior to the end of the offering period. The ESPP allows for up to
26,666 shares of common stock (plus unissued shares from prior years) to be
offered in each of the years ending December 31, 1996, 1997 and 1998. During
the year ended December 31, 1997 and December 31, 1996, employees purchased
22,788 and 7,748 shares, respectively, of common stock under the ESPP.
Stock Incentive Plan
During December 1994, the Company adopted the PST Vans, Inc., Stock
Incentive Plan ("SIP") with 170,000 shares of common stock reserved for
issuance thereunder. The number of shares reserved under the plan was
subsequently revised to 370,000 during 1996. The Compensation Committee of the
Board of Directors administers the SIP and has the discretion to determine the
employees and officers who receive awards (incentive stock options, non-
qualified stock options, stock appreciation rights or phantom stock awards) to
be granted and the term, vesting and exercise prices.
The Company accounts for this plan under APB Opinion No. 25, under which no
compensation cost has been recognized. Had compensation cost for the SIP been
determined consistent with FASB Statement No. 123, however, the Company's net
income and earnings per share would have been reduced to the following pro
forma amounts:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- ---------
<S> <C> <C> <C> <C>
Net Income.................. As reported $(4,314,547) $(5,860,765) $ 383,649
Pro forma (4,519,433) (6,009,888) (286,372)
Basic EPS................... As reported $ (1.02) $ (1.39) $ 0.10
Pro forma (1.07) (1.43) (0.07)
Diluted EPS................. As reported $ (1.02) $ (1.39) $ 0.10
Pro forma (1.07) (1.43) (0.07)
</TABLE>
F-15
<PAGE>
PST VANS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING NOTES RELATED TO UNAUDITED PERIODS)
A summary of the Company's SIP at December 31, 1997, 1996 and 1995 and
changes during the years then ended is presented in the table and narrative
below.
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ------------------ -----------------
WTD. AVG WTD. AVG WTD. AVG
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 111,000 $5.89 161,000 $6.19 -- $ --
Granted................. 233,000 3.50 14,000 3.63 161,000 6.19
Forfeited............... (4,000) 6.19 (64,000) 6.16 -- --
------- ------- -------
Outstanding at end of
year................... 340,000 4.25 111,000 5.89 161,000 6.19
======= ======= =======
Exercisable at end of
year................... 40,000 6.03 33,950 6.06 21,783 6.08
======= ======= =======
Weighted average fair
value of options
granted................ $ 2.59 $4.43 $4.69
</TABLE>
The 340,000 outstanding shares at the end of 1997 have exercise prices
ranging between $3.38 and $7.38 per share, with a weighted average exercise
price of $4.25. The grants have a pro rata vesting period of five years from
the grant date and an expiration date of ten years from grant date. At
December 31, 1997, 40,000 options are exercisable at a weighted average
exercise price of $6.03.
The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-
average assumptions used for grants in 1997, 1996 and 1995 respectively: risk-
free interest rates of 6.18%, 6.82% and 6.53%; 0% expected dividend yields;
expected lives of 8.5 years for 1997, 1996 and 1995; expected volatility of
65.00%, 56.02% and 55.70%.
(9) RELATED PARTY TRANSACTIONS
In March 1995, the Company issued 8,473 shares of common stock in
satisfaction of outstanding indebtedness in the amount of $101,680 to its
Chief Executive Officer and significant stockholder. This individual was an
unsecured creditor under the Plan and elected to take shares of common stock
as payment of such indebtedness as provided for under the Plan.
(10) PROFIT SHARING PLAN
The Company adopted a Profit Sharing Plan (the "PSP") for the benefit of
their employees. Under the PSP, all employees who have reached the age 20 1/2
and who have completed at least six months of service with the Company are
eligible to participate. The PSP allows participants to make contributions to
the PSP from their compensation. The Company, at its option, may make
additional contributions to the PSP on behalf of the participants. Under the
PSP, participants are fully vested in their own contributions. Participants
become 100 percent vested in any contributions made by the Company after seven
years of service or upon reaching age 65. The Company did not make or accrue
any contributions to the PSP during 1997, 1996, and 1995.
(11) SUBSEQUENT EVENT
On July 7, 1998 PST entered into an Agreement and Plan of Merger with U.S.
Xpress Enterprises, Inc. ("Enterprises") pursuant to which PST will be merged
with and into a wholly owned subsidiary of Enterprises. Subject to stockholder
approval, each outstanding share of PST common stock will be converted into
the right to receive 0.2381 shares of Enterprises Class A common stock plus
$2.71 in cash.
F-16
<PAGE>
ANNEX I
AGREEMENT AND PLAN OF MERGER
<PAGE>
ANNEX I
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "AGREEMENT"), dated as of July 7,
1998, by and among U.S. Xpress Enterprises, Inc., a Nevada corporation
("ENTERPRISES"), PST Acquisition Corp., a Nevada Corporation and wholly-owned
subsidiary of Enterprises ("MERGER SUB") and PST Vans, Inc., a Utah
corporation ("PST"):
Witnesseth:
Whereas, the Boards of Directors of Enterprises and Merger Sub and the Board
of Directors of PST have determined that the merger of PST with and into
Merger Sub (the "MERGER"), upon the terms and subject to the conditions set
forth in this Agreement is advisable and in the best interests of their
shareholders and PST's Board of Directors has recommended, or will recommend,
to PST5's shareholders that they approve of the Merger pursuant to the terms
and conditions of this Agreement;
Whereas, it is intended that for federal income tax purposes the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of
the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder; and
Whereas, the parties hereto desire to make this Agreement for the purpose of
setting forth certain representations, warranties, covenants and agreements in
connection with the Merger.
Now, Therefore, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
legal sufficiency of such consideration being hereby acknowledged, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
The Merger
1.1 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.2 hereof), in
accordance with the applicable provisions of the General Corporation Law of
Nevada and the Utah Revised Business Corporation Act (the "URBCA"), PST shall
be merged with and into Merger Sub in accordance with this Agreement, Articles
of Merger substantially in the form attached hereto as Exhibit 1.1(a) and
Exhibit 1.1(b) (the "ARTICLES OF MERGER") shall be filed with the Nevada
Secretary of State and the Utah Division of Corporations and Commercial Code,
respectively, and the separate existence of PST shall thereupon cease. The
Merger Sub shall be the surviving corporation in the Merger (hereinafter
sometimes referred to as the "SURVIVING CORPORATION").
1.2 Effective Time of the Merger. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VII hereof the
parties shall cause the Merger to be consummated. The Merger shall become
effective at such time (the "EFFECTIVE TIME") as copies of the duly completed
Articles of Merger are delivered to the Nevada Secretary of State and the Utah
Division of Corporations and Commercial Code for filing and the filing thereof
is completed by such authorities, or at such later time as the parties may
agree to specify in the Articles of Merger.
1.3 Effects of the Merger. The Merger shall have the effects set forth in
Nevada Revised Statutes Section 92A.250. The parties hereto intend that the
Merger qualify as a reorganization under Code Section 368(a) and agree to
treat the Merger as such for federal income tax purposes. This Agreement shall
constitute a plan of reorganization pursuant to which the Code Section 368(a)
reorganization shall occur.
1.4 Articles of Incorporation, Bylaws and Directors and Officers. From and
after the Effective Time: (i) the Articles of Incorporation of Merger Sub as
in effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation, except that Article First thereof
shall be promptly amended to read as follows: "First: The name of the
corporation is PST Vans, Inc.,"; (ii) the Bylaws of Merger
I-1
<PAGE>
Sub as in effect immediately prior to the Effective Time shall be the Bylaws
of the Surviving Corporation; and (iii) the Board of Directors and officers of
the Merger Sub shall be the Board of Directors and officers of the Surviving
Corporation.
ARTICLE II
Conversion Of Shares At Effective Time
2.1 Conversion of Shares of PST Common Stock.
(a) Subject to Section 2.1(b) below, each share of PST's Common Stock, $.001
par value (the "PST COMMON STOCK"), issued and outstanding immediately prior
to the Effective Time (other than any shares of such stock held by Enterprises
or PST (or by subsidiaries of either), which shall be canceled, and other than
Dissenting Shares, if any, as defined in Section 6.9 hereof) shall, as of the
Effective Time, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into the right to receive consideration
consisting of (i) a fraction of a share of Enterprises Class A common stock,
$.01 par value per share (the "ENTERPRISES COMMON STOCK") determined by
dividing One Million, One Hundred Thousand (1,100,000) by a number consisting
of (A) the number of issued and outstanding shares of PST Common Stock as of
the date hereof PLUS (B) the number of shares subject to outstanding options
to acquire PST Common Stock as of the date hereof (assuming the conversion of
all options to acquire PST Common Stock) and (ii) cash in the amount
determined by dividing Twelve Million, Five Hundred Thousand Dollars
($12,500,000.00) by a number consisting of (A) the number of issued and
outstanding shares of PST Common Stock as of the date hereof PLUS (B) the
number of shares subject to outstanding options to acquire PST Common Stock as
of the date hereof (assuming the conversion of all options to acquire PST
Common Stock). The Common Stock and cash to be received upon the conversion of
the PST Common Stock pursuant to the Merger are collectively referred to
herein as the "MERGER CONSIDERATION." No fraction of a share of Enterprises
Common Stock shall be issued. Each holder of PST Common Stock who would
otherwise be entitled to receive a fractional share of Enterprises Common
Stock shall receive, in lieu thereof, cash in an amount equal to such
fractional part of a share multiplied by the average Closing Price of
Enterprises Common Stock for the twenty (20) trading day period ending on the
day prior to the Closing Date (the "20-DAY AVERAGE PRICE"). "CLOSING PRICE"
shall mean, on any day, the last reported sale price of one share of
Enterprises Common Stock on the NASDAQ National Market. All cash payments
shall be rounded to the nearest cent. Each share of PST Common Stock, if any,
held by Enterprises or held by PST in its treasury immediately prior to the
Effective Time shall be canceled, and no Merger Consideration shall be payable
in respect thereof.
(b) No later than the Effective Time, Enterprises shall make available to
BankBoston, NA (the "EXCHANGE AGENT") certificates evidencing sufficient
shares of Enterprises Common Stock and a sufficient amount of cash to pay the
Merger Consideration determined pursuant to Section 2.1(a) hereof (such
amounts being hereinafter referred to as the "EXCHANGE FUND"). The Exchange
Agent shall, pursuant to irrevocable instructions from Enterprises, pay the
Merger Consideration out of the Exchange Fund. The Exchange Agent shall invest
the cash portion of the Exchange Fund as Enterprises directs. Any portion of
the Exchange Fund (including the proceeds of any investments thereof) that
remains unclaimed by the shareholders of PST for six (6) months after the
Effective Time shall be returned to Enterprises. Subject to the effects of any
applicable unclaimed property, escheat or other applicable laws, PST
Shareholders shall thereafter look only to Enterprises for payment of their
claim for the Merger Consideration and shall not be entitled to any interest
thereon.
2.2 Status of Securities After Effective Time.
(a) From and after the Effective Time, and until surrendered and exchanged,
each outstanding certificate formerly representing shares of PST Common Stock
shall be deemed for all purposes to represent only the right conferred upon
the holders of such shares in accordance with Section 2.1 above to receive the
Merger Consideration. No dividends or other distributions declared or made
after the Effective Time with respect to shares of Enterprises Common Stock
with a record date after the Effective Time shall be paid to the holder of an
unsurrendered certificate formerly representing shares of PST Common Stock
with respect to the shares of
I-2
<PAGE>
Enterprises Common Stock represented thereby, and no cash payment in lieu of
fractional shares shall be paid to any such holder, until the surrender of
such certificate by such holder. Subject to the effects of any applicable
unclaimed property, escheat or other applicable laws, upon surrender and
exchange of each outstanding certificate theretofore representing shares of
PST Common Stock, there shall be paid to the record holders thereof the
certificate or certificates of Enterprises Common Stock issued in exchange
therefor plus the amount, without interest thereon, of dividends and other
distributions, if any, declared and paid, subsequent to the Effective Time and
prior to the date such shares are surrendered, to shareholders of record with
respect to the number of whole shares of Enterprises Common Stock represented
thereby, together with the cash (without interest or dividends thereon)
payable in lieu of any fractional shares of Enterprises Common Stock in
accordance with Section 2.1(a).
(b) As promptly as practicable after the Effective Time, Enterprises shall
send or cause to be sent to each former shareholder of record of PST (as well
as to each holder of PST Options as provided in Section 2.4 below) transmittal
materials for use in exchanging his or her certificates formerly representing
shares of PST Common Stock for the Merger Consideration. The letter of
transmittal will contain instructions with respect to the surrender of
certificates formerly representing shares of PST Common Stock (and PST
Options, as applicable) and the distribution of the certificates representing
Enterprises Common Stock as well as the cash portion of the Merger
Consideration.
(c) If any certificate evidencing shares of Enterprises Common Stock is to
be registered in any name other than that in which the certificate formerly
representing shares of PST Common Stock surrendered in exchange therefor is
registered, it shall be a condition of such registration that the certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer, as determined by the Exchange Agent or Enterprises, that any
applicable securities laws are complied with, and that the person requesting
such exchange either shall pay to the Exchange Agent or to Enterprises, as the
case may be, any transfer or other taxes required by reason of the issuance of
a certificate for shares of Enterprises Common Stock in any name other than
that of the registered holder of the certificate surrendered or shall
establish to the satisfaction of such Exchange Agent or of Enterprises, as the
case may be, that such tax has been paid or is not payable.
(d) From and after the Effective Time, the stock transfer books of PST shall
be closed, and no transfer of shares of PST Common Stock on the books of PST
shall be made.
(e) Neither Enterprises, Merger Sub, nor PST shall be liable to any holder
of PST Common Stock for any Merger Consideration delivered to a public
official pursuant to any applicable abandoned property, escheat, execution,
garnishment or similar law.
(f) The Exchange Agent shall be entitled to deduct and withhold from the
Merger Consideration otherwise payable pursuant to this Agreement such amounts
as the Exchange Agent is required to deduct and withhold with respect to the
making of such payments under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes of this Agreement as having been
paid to the holder of the shares in respect of which such deduction and
withholding was made.
2.3 Stock Dividends, etc. If Enterprises shall, at any time before the
Effective Time, (i) issue a dividend in shares of Enterprises Common Stock,
(ii) combine the outstanding Enterprises Common Stock into a smaller number of
shares, (iii) subdivide the outstanding Enterprises Common Stock, or (iv)
reclassify the Enterprises Common Stock, then, in such event, the Merger
Consideration shall be adjusted, so that each PST shareholder shall be
entitled to receive such Merger Consideration as such shareholder would have
been entitled to receive if the Effective Time had occurred prior to the
happening of such event (or, if applicable, the record date in respect
thereof), and appropriate and proportionate adjustment shall be made to the
calculation of the Merger Consideration.
2.4 Treatment of PST Stock Options. As of the date of this Agreement,
directors, officers, and certain key employees of PST hold outstanding options
(both vested and unvested) to acquire a total of 347,000 shares
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of PST Common Stock, as reflected on Schedule 4.4 hereof (the "PST OPTIONS").
As of the Effective Time, all of the PST Options (whether vested or unvested
prior to the Merger) shall become immediately vested and exercisable in full.
The transmittal materials described in Section 2.2(b) above shall include a
means for allowing the holders of the PST Options to exercise such options in
accordance with their original terms (including, to the extent applicable,
payment of the option exercise price either in cash or through the surrender
(or deemed surrender, as applicable) of shares of PST Common Stock already
owned by the option holder or subject to the option, or any combination of the
foregoing). To the extent that holders of the PST Options elect to exercise
such options pursuant to the mechanism provided in the letter of transmittal,
they thereby shall become entitled to receive the Merger Consideration in lieu
of the shares of PST Common Stock which would have been issuable upon exercise
of the PST Options prior to the Merger, with the same effect as if such
options had been exercised immediately prior to the Effective Time and such
shares tendered in accordance with Section 2.2(a) hereof. Any PST Options not
exercised in accordance with this Section 2.4 within six (6) months of the
Effective Time, as well as any outstanding options or warrants to acquire PST
Common Stock other than the PST Options, shall be deemed null and void and
shall not be exercisable or exchangeable in any manner for the Merger
Consideration and, except as otherwise expressly provided in this Section 2.4,
from and after the Effective Time, neither Enterprises nor the Surviving
Corporation shall have any obligation or liability of any kind with respect to
any such securities.
2.5 Closing. Unless this Agreement shall have been terminated and the
transactions contemplated herein shall have been abandoned pursuant to Article
VIII and subject to satisfaction or waiver of the conditions to closing set
forth in Article VII, the closing (the "CLOSING") of the transactions
contemplated by this Agreement shall take place at the offices of Witt,
Gaither & Whitaker, P.C., 1100 SunTrust Bank Building, Chattanooga, Tennessee,
at 10:00 a.m., E.D.T., as promptly as practicable, (and in any event on the
second business day immediately following the meeting of the shareholders of
PST to be held to consider the Merger), or at such other time and place as
Enterprises and PST shall agree. The date on which the Closing occurs is
referred to herein as the "CLOSING DATE."
ARTICLE III
Representations and Warranties of Enterprises and Merger Sub
In order to induce PST to enter into this Agreement and consummate the
transactions contemplated hereby, Enterprises and Merger Sub represent and
warrant that as of the date hereof and as of the Closing Date, the following
representations and warranties are true, complete and accurate.
3.1 Organization of Enterprises and Merger Sub. Enterprises and Merger Sub
are corporations duly organized, validly existing, and in good standing under
the laws of the State of Nevada and have full power and authority, corporate
and other, to conduct the business in which they are engaged.
3.2 Authorization of Transaction. Enterprises and Merger Sub have full power
and authority to execute and deliver this Agreement and to perform their
respective obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of Enterprises and Merger Sub, enforceable in
accordance with its terms and conditions, except that (i) such enforcement may
be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and (ii)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. Except as set forth on
Schedule 3.2 and compliance with the provisions of the Hart-Scott-Rodino
Antitrust Improvements Act and except for filing the Registration Statement
required by Section 6.2(b) below, and except for filing the Articles of Merger
as provided herein, Enterprises and Merger Sub need not give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
3.3 Noncontravention. Except as set forth on Schedule 3.3, neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (a) violate any constitution,
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statute, regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government, governmental agency, or court
to which Enterprises or Merger Sub is subject or any provision of its charter
or bylaws or (b) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Enterprises or Merger Sub is a party or by which it or any of its assets is
bound.
3.4 Brokers' Fees. Enterprises and Merger Sub have no liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which PST could
become liable or obligated, and no broker, finder, agent or other party had
any involvement with this transaction on behalf of Enterprises or Merger Sub
that could entitle such party to any commission or other form of remuneration
for bringing about the negotiation and execution of this Agreement.
3.5 Financial Statements and SEC Reports. Except as disclosed on Schedule
3.5, Enterprises has timely filed all required forms, reports, statements and
documents with the Securities and Exchange Commission (the "COMMISSION") since
May 31, 1997, all of which have complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act.
Enterprises heretofore has delivered to PST true and complete copies of: (i)
its Annual Reports on Form 10-K (including all amendments thereto) for the
fiscal years ended March 31, 1996 and March 31, 1997, and for the nine (9)
month transition period ended December 31, 1997; (ii) its Quarterly Reports on
Form 10-Q (including all amendments thereto) for the fiscal quarters ended
June 30, 1996, September 30, 1996, December 31, 1996, June 30, 1997, September
30, 1997 and March 31, 1998; (iii) its definitive proxy statements relating to
all meetings of its shareholders (whether annual or special) held since March
31, 1996; and (iv) all other reports, statements and registration statements
filed or required to be filed by it with the Commission since March 31, 1996
(the documents referred to in clauses (i), (ii), (iii), and (iv) being
hereinafter referred to as the "ENTERPRISES SEC REPORTS"). As of their
respective dates, the Enterprises SEC Reports were prepared in all material
respects in accordance with the requirements of the Securities Act and the
Exchange Act, as the case may be, and did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements
(including any related notes) of Enterprises included in the Enterprises SEC
Reports were prepared in conformity with generally accepted accounting
principles applied on a consistent basis (except as otherwise stated in such
financial statements or, in the case of audited statements, the related report
of Arthur Andersen LLP, independent public accountants for Enterprises), and
present fairly in all material respects the consolidated financial position,
results of operations and cash flows of Enterprises as of the dates and for
the periods indicated, subject, in the case of unaudited interim consolidated
financial statements, to condensation, the absence of notes not required for
quarterly financial statements thereto and normal year-end audit adjustments.
3.6 Registration Statement; Proxy Statement; Other Filings. None of the
information supplied or to be supplied by Enterprises expressly for inclusion
in (i) the Registration Statement (as defined in Section 6.2(b)), (ii) the
Proxy Statement (as defined in Section 6.2(a)), or (iii) any other documents
to be filed with the Commission or any regulatory agency in connection with
the transactions contemplated hereby, will, at the respective times such
documents are filed, and, in the case of the Registration Statement, when it
becomes effective and at all times necessary for the issuance of the shares of
Enterprises Common Stock in the Merger, fail to comply with the Securities
Act, or, with respect to the Proxy Statement, when mailed and at all times
through the date of the Shareholders' Meeting (as defined in Section 6.3),
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or necessary to correct any statement in any earlier communication
with respect to the Shareholders' Meeting which has become false or
misleading. All documents which Enterprises files with the Commission and any
regulatory agency in connection with the Merger will comply in all material
respects with the applicable provisions of the Securities Act, the Exchange
Act and state securities laws and the rules and regulations thereunder. The
monthly and quarterly consolidated financial statements for January 1998
through April 1998 furnished by Enterprises to PST were
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prepared in a manner consistent with the consolidated financial statements
contained in the Enterprises SEC Reports, and present fairly in all material
respects the consolidated results of its operations for the period indicated,
except that such statements are subject to normal and recurring quarterly
year-end adjustments, which were not or are not expected to be material in
amount.
ARTICLE IV
Representations and Warranties of PST
In order to induce Enterprises and Merger Sub to enter into this Agreement
and consummate the transactions contemplated hereby, PST represents and
warrants that as of the date hereof and as of the Closing Date, the following
representations and warranties are true, complete and accurate, unless the
context of the representation or warranty provides that it is made as of some
other date, and except as set forth in the Disclosure Schedules attached
hereto and made a part hereof.
4.1 Corporate Organization and Good Standing. PST is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Utah, with all requisite corporate power and authority to own, operate and
lease its properties and to carry on its business as it is now being
conducted, and is qualified or licensed to do business and is in good standing
in each jurisdiction in which the ownership or leasing of property by it or
the conduct of its business requires such licensing or qualification and where
the failure to be so qualified or licensed individually, or in the aggregate,
would have a PST Material Adverse Effect. For the purposes of this Agreement,
"PST MATERIAL ADVERSE EFFECT" shall mean any change, effect or circumstance
that individually or when taken together with all such other changes, effects
or circumstances (including such changes, events or circumstances that are
reasonably likely to occur), shall have or may reasonably be anticipated to
have a materially adverse effect on the business, assets, financial condition,
results of operations or stockholders' equity of PST.
4.2 Authorization; Binding Agreement.
(a) Subject only to obtaining the approval of its shareholders as described
below, PST has all requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. The
execution, delivery and performance of this Agreement by PST, and the
consummation by PST of the transactions contemplated hereby, have been
unanimously approved and duly authorized by PST's Board of Directors and no
other corporate action or proceeding on the part of PST is necessary for the
execution, delivery and performance of this Agreement by PST and the
consummation of the transactions contemplated hereby, except for obtaining the
requisite approval of this Agreement by the holders of at least two-thirds
(2/3) of the issued and outstanding shares of PST in accordance with the URBCA
and PST's charter documents and by-laws. PST's Board of Directors has
unanimously determined that the Merger is advisable and that it is in the best
interests of PST's shareholders for PST to enter into this Agreement and to
consummate this Agreement, and shall recommend to the shareholders of PST that
they approve the Merger in accordance with this Agreement. This Agreement has
been duly and validly executed and delivered by PST and is a legal, valid and
binding obligation of PST, enforceable against it in accordance with its terms
and conditions, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(b) Except as set forth in Schedule 4.2(b), PST is not in default and there
exists no event, condition or occurrence that, with notice, lapse of time or
both, would constitute a default, under any agreement to which PST is a party
where such default or defaults would, individually or in the aggregate,
constitute a PST Material Adverse Effect.
4.3 No Conflict. Except as set forth on Schedule 4.3, neither the execution
and the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will violate any constitution, statute,
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regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other restriction of any government, governmental agency, or court to which
PST is subject or any provision of the charter, bylaws or other organizational
document of PST. Except as set forth on Schedule 4.3 (or where none of the
following events, individually or in the aggregate, would constitute or be
expected to result in a PST Material Adverse Effect), neither the execution
and the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify, cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
PST is a party or by which it is bound or to which any of PST's assets are
subject or (ii) result in the imposition of any lien, charge, encumbrance or
other security interest upon any of PST's assets. PST is not required to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the parties to
consummate the transactions contemplated by this Agreement, other than
compliance with the provisions of the Hart-Scott-Rodino Antitrust Improvements
Act, the filing of the Proxy Statement required by Section 6.2(a) with the
Commission and the filing of the Articles of Merger.
4.4 Capital Stock and Stockholder Relations. The authorized Capital Stock of
PST consists solely of Twenty Million (20,000,000) shares of common stock,
$.001 par value per share, of which Four Million, Two Hundred Sixty-Nine
Thousand, Four Hundred Eighty-Two (4,269,482) shares of PST Common Stock are
issued and outstanding and no shares of PST Common Stock are held in treasury,
and Five Million (5,000,000) shares of preferred stock no par value, of which
no shares have been issued. All issued and outstanding PST Common Stock has
been duly authorized, validly issued, fully paid, and is nonassessable. The
PST Common Stock constitutes all of the issued and outstanding shares of PST
equity securities. Except as set forth on Schedule 4.4: (i) there are no
outstanding options, warrants, contracts, preemptive or subscription rights,
proxies, calls, commitments, demands or understandings of any character
obligating PST to issue any PST Common Stock, any options, warrants or rights
with respect to PST Common Stock, or any other securities, and there are no
existing or outstanding securities of any kind convertible into or
exchangeable for PST Common Stock; (ii) there are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights
with respect to PST; (iii) there are no outstanding obligations of PST to
repurchase, redeem or otherwise acquire any PST Common Stock; and (iv) there
are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of the capital stock of PST. Except as set forth on
Schedule 4.4: (a) there are no pending or threatened claims or causes of
action whatsoever against PST brought by any current or former stockholder of
PST or of any corporation heretofore merged with or into PST arising out of or
in any way connected with any occurrence or state of facts in existence prior
to the Closing Date and (b) no director or officer of PST has any knowledge of
any events having occurred which would be reasonably expected to cause any
such present or former stockholder to come to have any such claim or cause of
action against PST, or any officer, director or stockholder of PST, by virtue
of, or in any way connected with, the transactions contemplated by this
Agreement or otherwise.
4.5 Organizational Documents. PST has delivered to Enterprises correct,
complete and certified copies of the charter documents and bylaws of PST (as
amended and in effect as of the date hereof), the minute books (containing
complete, correct and true records of meetings of the stockholders, the Board
of Directors, and any committees of the Board of Directors). Schedule 4.5
contains a true and complete list of all of the current officers and directors
of PST.
4.6 Brokers' Fees. PST has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Enterprises or Merger Sub could
become liable or obligated, and no broker, finder, agent or other party had
any involvement with this transaction on behalf of PST that could entitle such
party to any commission or other form of remuneration for bringing about the
negotiation and execution of this Agreement.
4.7 Title to Assets. Except as set forth on Schedule 4.7, PST has good and
marketable title to, or a valid leasehold interest in, the properties and
assets used by it, wherever located, including those shown on the audited
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financial statements listed in PST's annual report on Form 10-K for the fiscal
year ended December 31, 1997 (the "MOST RECENT FINANCIAL STATEMENTS"), or
acquired after the date thereof, free and clear of all security interests,
except for properties and assets disposed of in the ordinary course of
business since the date of the aforesaid Most Recent Financial Statements.
4.8 Subsidiaries and Affiliates. Except as set forth on Schedule 4.8, PST
does not have any subsidiaries or affiliated businesses or operations, and
there are no other material assets, operations, personnel, know-how or the
like owned, employed or used by PST in the operation of PST's business that
would not inure to the benefit of PST as a wholly-owned subsidiary of
Enterprises upon consummation of the transactions contemplated by this
Agreement on the same basis as owned, employed or used by PST prior to the
Merger.
4.9 Financial Statements and SEC Reports. Except as disclosed on Schedule
4.9, PST has timely filed all required forms, reports, statements and
documents with the Commission since May 31, 1997, all of which have complied
in all material respects with all applicable requirements of the Securities
Act and the Exchange Act. PST heretofore has delivered to Enterprises true and
complete copies of: (i) its Annual Reports on Form 10-K (including all
amendments thereto) for the fiscal years ended December 31, 1995, December 31,
1996 and December 31, 1997; (ii) its Quarterly Reports on Form 10-Q (including
all amendments thereto) for the fiscal quarters ended March 31, 1995, June 30,
1995, September 30, 1995, March 31, 1996, June 30, 1996, September 30, 1996,
March 31, 1997, June 30, 1997, September 30, 1997 and March 31, 1998; (iii)
its definitive proxy statements relating to all meetings of its shareholders
(whether annual or special) held since December 31, 1994; and (iv) all other
reports, statements and registration statements filed or required to be filed
by it with the Commission since December 31, 1994 (the documents referred to
in clauses (i), (ii), (iii), and (iv) being hereinafter referred to as the
"PST SEC REPORTS"). As of their respective dates, the PST SEC Reports were
prepared in all material respects in accordance with the requirements of the
Securities Act and the Exchange Act, as the case may be, and did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements (including any related notes) of PST included in the PST
SEC Reports were prepared in conformity with generally accepted accounting
principles applied on a consistent basis (except as otherwise stated in such
financial statements or, in the case of audited statements, the related report
of Arthur Andersen LLP, independent public accountants for PST), and present
fairly in all material respects the financial position, results of operations
and cash flows of PST as of the dates and for the periods indicated, subject,
in the case of unaudited interim financial statements, to condensation, the
absence of notes not required for quarterly financial statements thereto and
normal year-end audit adjustments.
4.10 Events Subsequent to Most Recent Fiscal Year End. Since December 31,
1997, and other than as set forth in Schedule 4.10, PST has conducted its
business in the ordinary course, and there has not been any change in the
business, financial condition, operations, results of operations,
relationships with any suppliers or customers or future prospects of PST which
would constitute or be expected to result in a PST Material Adverse Effect.
Without limiting the generality of the foregoing, since that date and except
as set forth on Schedule 4.10:
(a) PST has not sold, leased, transferred, or assigned any of its assets,
tangible or intangible, other than for a fair consideration in the ordinary
course of business;
(b) PST has not entered into any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) outside the
ordinary course of business;
(c) no party (including PST) has accelerated, terminated, modified, or
canceled any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses), outside the ordinary course of
business, to which PST is a party or by which PST is bound;
(d) Except as disclosed on Schedule 4.7 or Schedule 4.10 hereto, PST has not
granted or allowed to be imposed any lien, claim, charge, security interest or
other encumbrance upon any of its assets, other than equipment operating
leases entered into in the ordinary course of business, nor has PST issued any
note, bond,
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or other debt instrument or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation;
(e) PST has not made any capital expenditure (or series of related capital
expenditures) outside the ordinary course of business;
(f) PST has not made any capital investment in, or any acquisition of the
securities or assets of, any third party;
(g) PST has not materially delayed or postponed the payment of accounts
payable or other liabilities beyond the payment terms applicable to said
accounts payable or liabilities, other than in the ordinary course of business
consistent with past practice;
(h) PST has not canceled, compromised, waived, or released any right or
claim (or series of related rights and claims) outside the ordinary course of
business;
(i) PST has not granted any license or sublicense of any rights under or
with respect to any of its intellectual property;
(j) there has been no change made or authorized in the charter or bylaws of
PST;
(k) PST has not issued, sold, or otherwise disposed of any of the PST Common
Stock, or granted any options, warrants, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of the PST Common
Stock, other than the exercise in the ordinary course of business of any
previously outstanding stock options in accordance with their terms;
(l) PST has not declared, set aside, nor paid any dividend or made any
distribution with respect to the PST Common Stock (whether in cash or in kind)
or redeemed, purchased, or otherwise acquired any of the PST Common Stock;
(m) PST has not experienced any damage, destruction, or loss (whether or not
covered by insurance) materially adversely affecting its properties or
business, taken as a whole;
(n) PST has not made any loan to, or entered into any other transaction with
or on behalf of (including but not limited to guarantees of debt), any of its
directors, officers, and employees other than normal salary, bonuses and
employee benefits paid or granted in the ordinary course of business
consistent with past practice;
(o) PST has not granted any increase in the base compensation of, and has
not granted any bonus, dividend, or other form of compensation to, any of its
directors, officers, and employees outside the ordinary course of business,
and has not adopted, amended, modified, or terminated any bonus, profit-
sharing, incentive, severance, or other plan, contract, or commitment for the
benefit of any of its directors, officers, and employees (or taken any such
action with respect to any other Employee Benefit Plan);
(p) PST has not made any other change in employment terms for any of its
directors, officers, and key employees;
(q) PST has not made or pledged to make any charitable or other capital
contribution;
(r) there has not been any other occurrence, event, incident, action,
failure to act, or transaction outside the ordinary course of business
involving PST (except where any such events, individually or in the aggregate,
would not constitute or be expected to result in a PST Material Adverse
Effect), and PST has conducted its business in the ordinary and usual course
and in a reasonable business manner;
(s) PST has not incurred any liability, contingent or otherwise, except in
the ordinary and usual course of business;
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(t) PST has not made any change in any method of accounting or principle of
accounting; and
(u) PST has not committed to take any action that would result (or would
reasonably be expected to result) in any of the foregoing.
4.11 Undisclosed Liabilities. Except as set forth on Schedule 4.11, PST does
not have any material liability or obligation, whether accrued, absolute,
contingent or otherwise (and, to the knowledge of PST, there is no basis for
any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against it giving rise to any liability),
except for (i) liabilities set forth and adequately reserved against in the
Most Recent Financial Statements (or disclosed in any notes thereto) and (ii)
liabilities which have arisen after the Most Recent Financial Statements in
the ordinary course of business and all of which are disclosed on Schedule
4.11. When used in this Agreement, "TO THE KNOWLEDGE OF PST" or "TO THE
KNOWLEDGE OF PST'S OFFICERS AND DIRECTORS" means knowledge of a particular
fact or matter to the extent that either (i) any of PST's officers or
directors possess actual knowledge thereof or (ii) a prudent individual in the
position of any of PST's officers and directors could be expected to discover
or otherwise become aware of such fact or other matter in the ordinary course
of their duties as an officer or director of PST.
4.12 Legal Compliance. Except as set forth on Schedule 4.12, PST has
complied in all material respects with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local, and foreign governments (and
all agencies thereof), except where the failure to so comply would not have a
PST Material Adverse Affect, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed,
commenced or threatened against it alleging any failure so to comply.
4.13 Tax Matters. For purposes of this Agreement, "TAX" or "TAXES" shall
mean taxes, fees, levies, duties, tariffs, imposts, and governmental
impositions or charges of any kind in the nature of (or similar to) taxes,
payable to any federal, state, local or foreign taxing authority, including
without limitation (i) income, franchise, profits, gross receipts, ad valorem,
net worth, value added, sales, use, service, real or personal property,
special assessments, capital stock, license, payroll, withholding, employment,
social security, workers' compensation, unemployment compensation, utility,
severance, production, excise, stamp, occupation, premiums, windfall profits,
transfer and gains taxes and additions to tax imposed with respect thereto;
and "TAX RETURNS" shall mean returns, reports, and information statements with
respect to Taxes required to be filed with the IRS or any other taxing
authority, domestic or foreign, including, without limitation, consolidated,
combined and unitary tax returns. Except as disclosed in any exceptions listed
on Schedule 4.13:
(a) PST has filed all Tax Returns and reports that it was required to file.
All such Tax Returns and reports were correct and complete in all material
respects. All Taxes owed by PST (whether or not shown on any Tax Return) have
been paid or accrued on the Most Recent Financial Statements. PST currently is
not the beneficiary of any extension of time within which to file any Tax
Return or report or to make any Tax payment. No claim has ever been made by an
authority in a jurisdiction where PST does not file Tax Returns or reports
that PST is or may be subject to taxation by that jurisdiction.
(b) PST has withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid to any employee, independent contractor,
creditor, stockholder, or other third party.
(c) No director or officer (or employee responsible for Tax matters) of PST
expects any authority to assess any additional Taxes for any period for which
tax returns have been filed. There is no dispute or claim concerning any Tax
liability of PST either (i) claimed or raised by any authority in writing or
(ii) as to which any of the officers and employees of PST responsible for Tax
matters has been notified or has knowledge based upon personal contact with
any agent of such authority. As concerns income tax, Schedule 4.13(c) sets
forth all federal, state and local Tax Returns filed with respect to PST for
taxable periods ended on or after March 31, 1995, indicates those Tax Returns
that have been audited, and indicates those Tax Returns that currently are the
subject of audit, investigation or other inquiry.
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(d) PST has not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or
deficiency.
(e) PST has not filed a consent under Code (S)341(f) concerning collapsible
corporations. PST has not made any payments, is not obligated to make any
payments, nor is a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under Code
(S)280G. PST has not been a United States real property holding corporation
within the meaning of Code (S)897(c)(2) during the applicable period specified
in Code (S)897(c)(1)(A)(ii). PST is not a party to any tax allocation or
sharing agreement. PST (A) has not been a member of an affiliated group filing
a consolidated federal income Tax Return and (B) has no liability for the
Taxes of any person or entity (other than PST) under Reg. (S)1.1502-6 (or any
similar provision of state or local law), as a transferee or successor, by
contract, or otherwise.
(f) Schedule 4.13(f) sets forth the following information with respect to
PST as of the most recent practicable date: (i) the basis of PST in its
assets; and (ii) the amount of any net operating loss, net capital loss,
unused investment or other credit, unused foreign tax, or excess charitable
contribution allocable to PST (with such amounts being estimated for purposes
of preparing PST's 1997 federal tax return).
(g) The unpaid Taxes of PST (i) did not, as of the Most Recent Financial
Statements, exceed the reserve for tax liability set forth on the face of the
Most Recent Financial Statements (rather than in any notes thereto) and (ii)
do not exceed that reserve as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of PST in filing
Tax Returns.
4.14 Real Property. Schedule 4.14 lists all real property that PST leases or
owns for the operation of its terminal, general offices and drop yards (the
"REAL ESTATE"). For all leased Real Estate, Schedule 4.14 sets forth (i) the
address of the property, (ii) the name of the landlord, to whom the rent is
payable and their address, (iii) the amount of the rent per payment period,
(iv) the remaining current term of the lease, (v) any renewal options, (vi)
any notice windows or other deadlines within or by which notice of applicable
renewals must be given, and (vii) a description of any sub-leases of any
portion of the property to a third party. A true and correct copy of each such
lease is also attached as part of Schedule 4.14, together with either (A) an
estoppel letter from the landlord in the form attached hereto as Exhibit 4.14
or (B) a full description of the current status of negotiations and any other
relevant facts with respect to any landlord which has failed or refused to
execute such estoppel letter. For all owned Real Estate, Schedule 4.14 sets
forth (i) the address of the property, (ii) a description of any leases of any
portion of the property to another and (iii) the amount of any liens or
encumbrances on the property.
(a) General. Except for the Real Estate, there is no real property owned,
leased or occupied by PST.
(b) Codes, Ordinances, Use and Notice of Condemnation. There are no
existing, pending, or to the knowledge of PST proposed material violations of
any fire or health codes, building ordinances, or rules of the Board of Fire
Underwriters (or organization exercising functions similar thereto), with
respect to the Real Estate, nor to the knowledge of PST is there, any defect
in the Real Estate which would render all or any part thereof unsuitable for
its continued use by PST in the manner historically used by PST. PST has not
received any notice and has no knowledge of any condemnation, zoning or land
use proceedings or deliberations in process or proposed that would affect the
Real Estate. PST shall advise Enterprises forthwith of any notice concerning
violations, condemnation proceeding, and tax or utility rate increases that
may affect the Real Estate.
(c) Licenses and Permits. PST holds all licenses, certificates, permits,
franchises and rights from all appropriate federal, state, local, foreign and
other public authorities necessary for the conduct of its current operations,
which licenses, certificates, permits, franchises and rights are specified on
Schedule 4.14(c), except where the failure to obtain any such license,
certificate, permit, franchise or right would not constitute or be expected to
result in a PST Material Adverse Effect.
(d) No Notice of Violations. PST is in material compliance with all
applicable laws, rules and regulations relating to its occupancy and use of
the Real Estate. PST has not received any notice of violations of any federal,
state, local, or foreign laws, ordinances, rules, regulations or orders
relating to its occupancy and use of the Real Estate.
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(e) Utility Connections. All public utility connections located on or
serving the Real Estate have been completed, installed, activated, paid for
and are in operational condition and to the knowledge of PST are in compliance
with all appropriate codes, rules and regulations.
(f) Taxes and Utilities. PST is not aware of, nor has it received, any
notice or information of any condition which would result in an increase in
the assessments covering the Real Estate or utility rates affecting the Real
Estate.
(g) Access. PST presently has the right to use all accesses from the Real
Estate to and from public thoroughfares, as such accesses are presently
configured and utilized, except as disclosed on Schedule 4.14 or where any
such encumbrance would not constitute or be expected to result in a PST
Material Adverse Effect.
(h) Right to Operate. PST has the legal right to operate all parts of the
Real Estate in the manner in which it is currently being operated.
(i) Good Title. Except as set forth on Schedule 4.14(i), PST has good and
marketable title to each parcel of Real Estate, free and clear of any liens,
mortgages, deeds to secure debt, security interests, easement, covenant, or
other restriction, except for recorded easements, covenants, and other
restrictions which do not materially impair the current use, occupancy, or
value, or the marketability of title, of the property subject thereto.
(j) No Other Leases. Except as set forth on Schedule 4.14(j), there are no
leases, subleases, licenses, concessions, or other agreements, written or
oral, granting to any party or parties, other than PST, the right of use or
occupancy of any portion of the Real Estate.
4.15 Intellectual Property. Set forth on Schedule 4.15 is a complete and
accurate list of all intellectual property rights owned by or licensed to PST,
including but not limited to all rights in and to servicemarks, trademarks,
tradenames (including the name "PST Vans" and all variations thereof),
copyrights, patents and the like whether or not subject to registration, but
excluding any licenses pertaining to the use of computer software applications
(other than any such applications, or any customized variations thereof, which
have been specifically designed for and licensed to PST for use in its
business) (collectively the "PST INTELLECTUAL PROPERTY").
(a) There are no other forms of intellectual property rights necessary for
the operation of the businesses of PST as presently conducted other than PST
Intellectual Property. Except as set forth on Schedule 4.15(a) each item of
PST Intellectual Property owned or used by PST immediately prior to the
Closing hereunder will be owned or available for use by the surviving
corporation on identical terms and conditions immediately subsequent to the
Closing hereunder.
(b) Except as set forth on Schedule 4.15(b), to the knowledge of PST, PST
has never interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any intellectual property rights of third parties, and PST
has not received any charge, complaint, claim, demand, or notice alleging any
such interference, infringement, misappropriation, or violation (including any
claim that PST must license or refrain from using any intellectual property
rights of any third party). To the knowledge of PST, no third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any of the PST Intellectual Property. To the knowledge of PST,
PST and the surviving corporation after giving effect to the transactions
contemplated by this Agreement, will not interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any intellectual
property rights of third parties as a result of the continued operation of its
businesses as presently conducted.
(c) With regard to each item of the PST Intellectual Property:
(i) to the knowledge of PST, PST possesses all right, title, and interest
in and to the item, free and clear of any security interest, license, or
other restriction other than the licensee restrictions contained in those
items of PST Intellectual Property licensed to PST;
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(ii) to the knowledge of PST, the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(iii) to the knowledge of PST, no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or threatened
which challenges the legality, validity, enforceability, use, or ownership
of the item; and
(iv) PST has never agreed to indemnify any third party for or against any
interference, infringement, misappropriation, or other conflict with
respect to the item.
4.16 Rolling Stock and Other Tangible Assets. Other than property subject to
equipment leases (which leases are in good standing, valid and effective in
accordance with their terms, and as to which there is not existing any
material default or event of default or, to the knowledge of PST, event which
with notice or lapse of time would constitute a default), except as set forth
on Schedule 4.16, PST has good, valid and marketable title to all personal and
mixed, tangible and intangible properties and assets, all machinery,
equipment, and other tangible assets (including but not limited to the Rolling
Stock (as defined below)) used in its business as presently conducted or which
it otherwise purports to own, free and clear of all liens, claims, charges and
encumbrances whatsoever. The tangible assets, as a group have been maintained
in accordance with PST's normal practice, in the ordinary course, as a group
are in good operating condition and repair (subject to normal wear and tear
and normal maintenance requirements), are suitable for the purposes for which
they are presently being used and, to the knowledge of PST, are free from
material defects other than defects which, in the aggregate, would not have a
PST Material Adverse Effect. Schedule 4.16(a) sets forth a list (by make,
model, year, license plate/registration number and vehicle identification
number) of all power units and trailers owned or leased by PST (the "ROLLING
STOCK"). Except as set forth on Schedule 4.16(a), the Rolling Stock is in
material compliance with all applicable safety requirements (either by
regulatory requirement or industry practice) and is materially road-worthy,
except for any individual units of the Rolling Stock which are temporarily out
of service due to customary repair and maintenance requirements or major
repairs, as needed (which units do not constitute more than 3% of the total
Rolling Stock as of the date hereof). Except as set forth on Schedule 4.16(a),
all items of Rolling Stock are under manufacturer's warranty. Schedule 4.16(b)
sets forth a list (by make, model, year, license plate/registration number and
vehicle identification number) of all other motor vehicles and equipment
(other than Rolling Stock) owned or leased by PST. Schedule 4.16(c) sets forth
a list all other material items of personal property owned by PST. The
location of all the Rolling Stock and other personal property located on
Schedule 4.16(a), Schedule 4.16(b) and Schedule 4.16(c) is known to PST except
to the extent noted on such schedules.
4.17 Contracts. Schedule 4.17 sets forth all material oral or written
contracts and other agreements to which PST is a party, including but not
limited to:
(a) any agreement (or group of related agreements) for the lease of personal
property providing for lease payments in excess of Fifty Thousand Dollars
($50,000) per annum;
(b) any agreement (or group of related agreements) for the purchase or sale
of supplies, products, or other personal property, or for the furnishing or
receipt of services, the performance of which will involve consideration in
excess of Fifty Thousand Dollars ($50,000);
(c) any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements) under which PST has
created, incurred, assumed, or guaranteed any indebtedness for borrowed money,
or any capitalized lease obligation, in excess of Fifty Thousand Dollars
($50,000) or under which it has imposed a lien on any of its assets, tangible
or intangible;
(e) any agreement concerning confidentiality or noncompetition;
(f) any agreement for the employment of any individual on a full-time, part-
time, consulting, or other basis providing annual compensation in excess of
Fifty Thousand Dollars ($50,000) or providing severance benefits or other
post-employment benefits of any amounts;
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(g) any agreement under which it has advanced or loaned any amount to any of
its directors, officers, and employees;
(h) any other agreement (or group of related agreements) the performance of
which involves consideration in excess of Fifty Thousand Dollars ($50,000); or
(i) any trucking, carrier, shipper, dedicated service, broker and transport
contracts.
PST has delivered to Enterprises a correct and complete copy of each written
agreement set forth on Schedule 4.17 (as amended to date) and a written
summary setting forth the terms and conditions of each oral agreement referred
to in Schedule 4.17. Except as set forth on Schedule 4.17, with respect to
each such agreement: (i) the agreement is legal, valid, binding, enforceable,
(except that (1) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditor's rights and (2) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought) and in full force and effect; (ii) the agreement will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (iii) PST is not, and to the knowledge of PST no party
thereto is, in material breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; (iv) PST has
not, and to the knowledge of PST no party thereto has, repudiated any
provision of the agreement; and (v) PST is not, and to the knowledge of PST no
party thereto is, the subject of bankruptcy proceedings, has had a trustee
appointed on its behalf or is insolvent.
4.18 Employee Arrangements, Union Agreements and Benefit Plans and
Government Compliance.
(a) Schedule 4.18(a) sets forth a complete and accurate list and description
of all oral or written employment, consulting or collective bargaining
contracts, deferred compensation, change in control agreements, golden
parachute agreements, profit-sharing, bonus, option, share purchase or other
benefit or compensation commitments, plans, arrangements or policies,
including all welfare plans of or pertaining to the present or former
employees, directors or consultants of PST or of any other entity which is a
member of a controlled group including PST or which is under common control
with PST. Except as set forth on Schedule 4.18(a), PST has complied in all
material respects with all of its respective obligations, including the
payment of all contributions, the filing of all reports, and the payment or
accrual of all expenses for the period between the end of the previous plan
year and the Closing Date, with respect to such contracts, commitments,
arrangements and plans. The plans have been maintained in compliance with all
applicable laws and regulations. The levels of insurance reserves and accrued
liabilities with regard to all such plans are reasonable and are sufficient to
provide for all incurred but unreported claims and any retroactive premium
adjustments.
(b) Schedule 4.18(b) sets forth the name of each salaried employee of PST
and such employee's annual salary, position and hire date.
(c) Except as disclosed on Schedule 4.18(c), PST is in material compliance
with all worker compensation laws and requirements of all applicable states.
(d) Except to the extent set forth in Schedule 4.18(d):
(i) To PST's knowledge, PST is in material compliance with all applicable
laws and collective bargaining agreements respecting employment (if any)
and terms and conditions of employment and wages and hours and occupational
safety and health;
(ii) There is no unfair labor practice, charge or complaint or any other
matter against or involving PST or pending or, to the knowledge of PST,
threatened before the National Labor Relations Board or any court of law;
(iii) There is no labor strike, dispute, slowdown or stoppage actually
pending or, to the knowledge of PST, threatened against PST;
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(iv) To the knowledge of PST, no certification or decertification
question or organizational drive exists or has existed within the past
twenty-four (24) months respecting the employees of PST;
(v) No grievance proceeding or arbitration proceeding arising out of or
under any collective bargaining agreement is pending against PST, or, to
the knowledge of PST, threatened; and, to the knowledge of PST, no basis
for any claim therefor exists;
(vi) Except for general labor relation laws, no agreement (including any
collective bargaining agreement), arbitration or court decision or
governmental order which is binding on PST in any way limits or restricts
PST from relocating or closing any of its operations;
(vii) PST has not experienced any organized work stoppage or other labor
difficulty since December 31, 1997; and
(viii) There are no charges, or known administrative proceedings or
formal complaints of discrimination (including discrimination based upon
sex, age, marital status, race, national origin, sexual preference,
handicap or veteran status) pending or, to the knowledge of PST, threatened
before the Equal Employment Opportunity Commission or any federal, state or
local agency or court against PST. Except as disclosed in Schedule 4.18(d),
there have been no governmental audits of the equal employment opportunity
practices of PST.
4.19 Employee Benefit Plans. Except as set forth on Schedule 4.19:
(a) The only employee pension benefit plan as defined in Section 3(2) of
Employee Retirement Income Security Act of 1974 ("ERISA") and including all
trusts executed in connection therewith, adopted or sponsored or maintained or
contributed to by PST with respect to which or as the result of which PST has
or may have had or may have any liability (specifically including, but not
limited to, any liability for a partial or complete withdrawal from a "MULTI-
EMPLOYER PLAN" as defined in Sections 3(37) and 4001(a)(3) of ERISA and any
other liability arising under Title IV of ERISA) during the last five (5)
years is the "PST 401(k) Plan" (the "RETIREMENT PLAN"). The term "PST"
specifically includes for the purposes of this Section 4.19 PST and any member
of a controlled group with PST under Section 414(b),(c),(m) or (o) of the
Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder (the "CODE") or any organization to which PST is a successor or
parent corporation within the meaning of Section 4069(b) of ERISA. Except as
set forth on Schedule 4.19(a), PST has never been required to make nor has it
made any contribution to any Multi-employer Plan.
(b) The Retirement Plan is a qualified plan under Section 401(a) of the
Code, the trust with respect to such plan is exempt from taxation under
Section 501(a) of the Code and is subject to a favorable determination letter
which will be in effect at the Closing Date; and all amendments made to the
Retirement Plan prior to the Closing Date have been considered in the
determination letter. No action has been taken (or failure to take action has
occurred) which would cause such determination letter to be revoked. The
Retirement Plan has been administered and operated in accordance with its
terms and in a manner so as to preserve such qualification, including those
provisions required by all subsequent laws (including the Uniformed Services
Employment and Re-employment Rights Act of 1994) whose effective date is prior
to the Closing Date. All Notices of Reportable Events required to be filed
with the Pension Benefit Guaranty Corporation have been timely filed. The
Retirement Plan will be fully funded on a termination basis as of Closing so
that if the Retirement Plan were terminated as of Closing there would be
sufficient assets to pay for all liabilities accrued as of that date (assuming
that all participants would be fully vested).
(c) Schedule 4.19(c) lists any employee welfare benefit plan within the
meaning of Section 3(1) of ERISA maintained or contributed to by PST during
the last five (5) years and with respect to any group health plan subject to
COBRA, maintained or contributed to by PST during the last five (5) years.
"COBRA" means the provisions for the continuation of health care enacted by
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, as set
forth in Section 4080B of the Code (and any amendments or predecessor or
successor provisions) and Sections 601 through 608 of ERISA (and any
amendments or predecessor or successor provisions), including any regulations
promulgated under the applicable provisions of the Code and ERISA. As
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of the Closing Date, each of the employee benefit plans set forth in Schedule
4.19(c) and the Retirement Plan (collectively, the "EMPLOYEE BENEFIT PLANS")
are in material compliance with, and have been administered in material
compliance with, the provisions of ERISA and the Code.
(d) In connection with each Employee Benefit Plan:
(i) PST has provided to the Buyer true, complete and correct copies of
(A) each Employee Benefit Plan (or, in the case of any unwritten Employee
Benefit Plan, a description thereof), (B) each trust agreement, group
annuity contract, and any other contract relating to any Employee Benefit
Plan, (C) the three (3) most recent Forms 990 and the three (3) most recent
Annual Reports, including all schedules, exhibits, and audits (Form 5500)
filed for each Employee Benefit Plan for which such a filing is required;
and there has been no material change or amendment to any of such documents
or filings relating to the Employee Benefit Plans as of the Closing Date;
(D) the most recent Summary Plan Descriptions and all Summary of Material
Modifications prepared subsequent to such Summary Plan Descriptions, (E)
the three (3) most recent Summary Annual Reports prepared and distributed
for each Employee Benefit Plan for which such document is required, (F) all
Notices of Reportable Events filed with the Pension Benefit Guaranty
Corporation.
(ii) Neither PST nor any fiduciary as defined in Section 3(21) of ERISA
has taken any action or failed to take any action which would result in any
liability to PST after the Closing Date for matters prior to the Closing
Date with respect to any Employee Benefit Plan, other than the payment of
the specified benefits.
(iii) There is not any contract, plan or commitment or legal requirement
(other than the funding requirement of ERISA with respect to the Retirement
Plan), that would require PST to create any additional employee benefit
plan to provide or designed to provide benefits for any its employees or
their dependents or beneficiaries or that would require PST to make any
additional contribution to or to pay any expense of the Retirement Plan or
to any Employee Benefit Plan for matters occurring prior to the Closing
Date.
(iv) There is no action, suit, grievance, arbitration or other manner of
litigation, or claim with respect to the assets of any Employee Benefit
Plan (other than routine claims for benefits made in the ordinary course of
Employee Benefit Plan administration for which administrative review
procedures have not been exhausted) pending, threatened or imminent against
or with respect to the Employee Benefit Plan, PST or any other fiduciary
(as defined in Section 3(21) of ERISA) of any Employee Benefit Plan
(including any action, suit, grievance, arbitration or other manner of
litigation, or claim regarding conduct which allegedly interferes with the
attainment of rights under any Employee Benefit Plan).
(v) Neither PST nor any other fiduciary (as defined in Section 3(21) of
ERISA) has any knowledge of any facts which would give rise to or could
give rise to any action, suit, grievance, arbitration or other manner of
litigation, or claim with respect to any Employee Benefit Plan.
(e) Except to the extent that the names of individual claimants or employees
have been excised in order to avoid breaching any obligation of PST to protect
the confidentiality of such information under any applicable legal or
contractual requirement, Schedule 4.19(e) sets forth the names of claimants,
the relationship to the employee and amount of all claims made under any
policy or plan of health benefits sponsored by PST, whether or not insured,
during the last five (5) years that aggregate Thirty-Five Thousand Dollars
($35,000) or more with respect to any claimant.
4.20 Notes and Accounts Receivable. All notes and accounts receivable of PST
are reflected properly on its books and records, subject only to the reserve
for bad debts set forth on the face of the Most Recent Financial Statements as
adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of PST. More particularly, and without limiting
the preceding statement, as of the Closing Date the total of (i) the amount of
such reserve for bad debts plus (ii) all notes and accounts receivable of PST
which do not satisfy the definition of "Eligible Accounts" as set forth in
Section 1.6 of that certain Loan and Security Agreement by and between
Congress Financial Corporation (Northwest) as Lender and PST as Borrower dated
August 6, 1996 (as amended), shall not exceed Three Million, Five Hundred
Thousand Dollars ($3,500,000).
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4.21 Powers of Attorney. All outstanding powers of attorney executed on
behalf of PST (including copies thereof) are set forth on Schedule 4.21.
4.22 Insurance. Schedule 4.22 sets forth the following information with
respect to each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) to which PST has been a party, a named insured, or otherwise the
beneficiary of coverage at any time within the past five (5) years:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and the name of
each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage was on a
claims made, occurrence, or other basis) and amount (including a description
of deductibles and ceilings); and
(e) a description of any retroactive premium adjustments or other loss-
sharing arrangements.
With respect to each such insurance policy, except as otherwise set forth on
Schedule 4.22: (i) the policy is (or was) legal, valid, binding, enforceable,
and in full force and effect during the periods indicated; (ii) the current
policies in force will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation of the
transactions contemplated hereby (subject to (A) the terms of the policy, (B)
the payment of premiums and (C) no notice of cancellation by PST subsequent to
the Closing); (iii) neither PST nor, to the knowledge of PST, any other party
to the policy is in breach or default (including with respect to the payment
of premiums or the giving of notices), and no event has occurred which, with
notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy; and (iv)
no party to the policy has repudiated any provision thereof. PST has been
covered during the past five (5) years by insurance in scope and amount which
PST's officers and directors believe to be adequate for the businesses in
which it has engaged during the aforementioned period, based upon PST's
business experience. Schedule 4.22 describes any self-insurance arrangements
affecting PST.
4.23 Litigation and Claims. Schedule 4.23(a) sets forth each instance in
which PST (i) is subject to any outstanding injunction, judgment, order,
decree, ruling, asserted claim or charge, or (ii) is a party or is threatened
to be made a party to any action, claim, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. Set forth on Schedule 4.23(b) are copies of all accident registers
and loss runs relating to all open matters not totally resolved and closed.
Set forth on Schedule 4.23(c) are copies of the cargo loss log relating to all
open matters not totally resolved and closed. Schedule 4.23(d) sets out in
reasonable detail, the facts of which PST is aware involving any bodily
injury, property, vehicular or cargo incident between PST and a third party
occurring since January 1, 1998, where no claim has yet been made or
threatened and which is not reflected on either Schedule 4.23(a), Schedule
4.23(b) or Schedule 4.23(c). Schedule 4.23(a), Schedule 4.23(b) and Schedule
4.23(c) each set forth in individual detail all liabilities recorded in the
financial statements, including booked reserves and accruals relating to each
entry.
4.24 Guaranties. PST is not a guarantor or otherwise is liable for any
liability or obligation (including indebtedness) of any other person or
entity.
4.25 Environmental, Health, and Safety Matters; Environmental
Protection. PST has obtained all material permits, licenses and other
authorizations and filed all notices and reports which are required to be
obtained or filed by it for the operation of its business under federal,
state, local and foreign laws relating to environmental matters, health and
safety, pollution, or protection of the environment (the "HSE LAWS"). A list
and copies of the foregoing, including the location of all underground storage
tanks ("USTS") and all environmental surveys related to all properties, if
any, are attached hereto as Exhibit 4.25. Except as disclosed
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on Schedule 4.25, PST is in compliance in all material respects with all terms
and conditions of such required permits, licenses and authorizations. Except
as disclosed on Schedule 4.25, PST is in compliance in all material respects
with all other applicable limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
the HSE Laws or contained in any law, regulation, code, plan, order, decree,
judgment, notice or demand letter issued, entered, promulgated or approved
thereunder. In addition to the foregoing, PST specifically warrants that all
underground storage tanks presently or previously located on the Real Estate
which were used by PST or which were located on the Real Estate while it was
owned by PST at all times were in compliance in all material respects with the
HSE Laws while used or owned by PST or that any violations have been properly
corrected to the satisfaction of the appropriate governmental authority, and
further represents that all USTs presently on the Real Estate are in
compliance with the UST upgrade requirements through December 31, 1998. Except
as disclosed on Schedule 4.25, to the knowledge of PST, there are no past or
present events, conditions, circumstances, activities, practices, incidents,
actions or plans which may interfere with or prevent continued compliance in
all material respects with, or which may give rise to any material common law
or statutory liability, or otherwise form the basis of any material claim,
action, suit, notice of violation, proceeding, or hearing pursuant to the HSE
Laws, nor has there been any distribution, use, treatment, storage, disposal,
transport, handling, emission, discharge, release or threatened release into
the environment of any pollutant, contaminant, or hazardous or toxic material
or waste with respect to PST or its business. Except as disclosed on Schedule
4.25, PST has received no notice of violation or the like or any complaint or
other threat of any actions by any party related in any way to the HSE laws.
To the knowledge of PST, the Real Estate does not contain any asbestos, urea-
formaldehyde, lead-based paint, or PCBs in any form.
4.26 Absence of Certain Payments. Other than for services legitimately and
openly performed under applicable law, business discounts customarily granted
in the ordinary course of business and nominal non-cash gifts (with a total
per donee retail value of less than One Hundred Dollars ($100) in any year),
neither PST nor any agent, employee or representative of PST has made or
offered to make to any customer, supplier, government official, insurance
carrier, referral source, employee or agent or any other person or entity, any
payment, gratuity, gift, service or thing of material value. For purposes of
this Section, "material" shall mean a fair market value of One Hundred Dollars
($100.00) or more.
4.27 Antitrust Matters. PST is and throughout any applicable statutory
period of limitation has been in compliance with all laws, regulations and/or
ordinances, whether federal, state or municipal, pertaining or relating in any
way to the regulation of competition or trade among or between business
entities, including but not limited to, Sections 1 and 2 of the Sherman Act,
Section 3 of the Clayton Act, the Robinson-Patman Act, the Lanham Act, Section
5 of the Federal Trade Commission Act and applicable state or municipal
antitrust and trade laws, regulations and/or ordinances. The business and
operations of PST, or, to PST's knowledge, any predecessor, affiliate, parent
or subsidiary thereof, have been conducted in full and complete compliance
with any and all such laws, regulations and/or ordinances.
4.28 Safety Rating. Except as noted in Schedule 4.28, PST holds a
Satisfactory safety rating from the United States Department of Transportation
and has always held same since such ratings were first issued.
4.29 Organizations and Clubs. Set forth on Schedule 4.29 is a listing of all
organizations, clubs, sporting activities and facilities, events or other
perquisites or personal benefits of which PST is a member or to which it pays
dues or fees on behalf of itself or otherwise provides to any person, which
person shall be identified in the schedule.
4.30 Bank Accounts. Schedule 4.30 sets forth a complete and accurate list of
each bank or financial institution at which PST has an account or safe deposit
box (giving the address and account numbers) and the names of the persons
authorized to draw thereon or to have access thereto.
4.31 Major Suppliers and Customers. Schedule 4.31 sets forth a list of PST's
fifty (50) largest suppliers and fifty (50) largest customers for the year
ended December 31, 1997, together with in each case the amount paid or billed
during such period. To the knowledge of PST, PST is not engaged in any dispute
with any of such
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suppliers or customers. None of the officers or directors of PST, or any
lineal ancestor or descendant of any officer or director of PST, or any
company or other organization in which any officer or director of PST (or any
lineal ancestor or descendant thereof) has a direct or indirect financial
interest, has any material financial interest in any supplier or customer of
PST.
4.32 Disclosure. The representations and warranties contained in this
Article IV do not contain any untrue statement of a material fact nor omit to
state any material fact necessary in order to make the statements and
information contained in this Article IV not misleading.
4.33 Registration Statement; Proxy Statement; Other Filings. None of the
information related to PST whether included directly therein or incorporated
by reference in (i) the Registration Statement (as defined in Section 6.2(b)),
(ii) the Proxy Statement (as defined in Section 6.2(b)), or (iii) any other
documents to be filed with the Commission or any regulatory agency in
connection with the transactions contemplated hereby, will, at the respective
times such documents are filed, and, in the case of the Registration
Statement, when it becomes effective and at all times necessary for the
issuance of the shares of Enterprises Common Stock in the Merger, fail to
comply with the Securities Act, or, with respect to the Proxy Statement, when
mailed and at all times through the date of the Shareholders' Meeting (as
defined in Section 6.3), contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, or necessary to correct any statement in any
earlier communication with respect to the Shareholders' Meeting which has
become false or misleading. All documents which PST files with the Commission
and any regulatory agency in connection with the Merger will comply in all
material respects with the applicable provisions of the Securities Act, the
Exchange Act and state securities laws and the rules and regulations
thereunder. The monthly and quarterly consolidated financial statements for
January 1998 through April 1998 furnished by PST to Enterprises were prepared
in a manner consistent with the consolidated financial statements contained in
the PST SEC Reports, and present fairly in all material respects the
consolidated results of its operations for the period indicated, except that
such statements are subject to normal and recurring quarterly year-end
adjustments, which were not or are not expected to be material in amount.
4.34 Statutory Provisions; Articles of Incorporation. Except for Part 13 of
the URBCA and Article 2 of PST's Amended and Restated Bylaws, there are no
other provisions of applicable law or of PST's corporate governance documents
which apply to this Agreement, the Articles of Merger, the Merger or to the
transactions contemplated hereby, to require any vote of PST's Shareholders
other than as set forth in Section 4.35 below, or to require any consideration
to be paid to PST's Shareholders other than the Merger Consideration as
defined herein.
4.35 Vote. The affirmative vote of two-thirds (2/3) of the votes that
holders of the outstanding shares of PST Common Stock are entitled to cast, is
the only vote or approval of the holders of PST's capital stock necessary to
approve this Agreement and the Articles of Merger and the transactions
contemplated hereby and thereby.
4.36 Revenue Per Loaded Mile. PST has provided to Enterprises data
reasonably requested by Enterprises necessary to verify the revenue per loaded
mile representations heretofore provided to Enterprises, and such data is
accurate in all material respects as of the date provided to Enterprises.
ARTICLE V
Conduct of Business Pending the Merger
Except as otherwise contemplated hereby or as set forth on Schedule 5, after
the date hereof and prior to the Effective Time or earlier termination of this
Agreement, unless Enterprises shall otherwise agree in writing or as otherwise
expressly contemplated by this Agreement (it being agreed, however, that PST
shall be solely responsible for its operations in accordance with the
provisions of this Agreement), PST shall:
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(a) conduct its businesses in the ordinary and usual course of business and
consistent with past practice;
(b) not (i) amend or propose to amend its charter or by-laws, or (ii) split,
combine or reclassify its outstanding capital stock or declare, set aside or
pay any dividend or distribution payable in cash, stock, property or
otherwise;
(c) not (i) authorize the issuance of, or issue, sell, grant, pledge or
dispose of, or agree to issue, sell, grant, pledge or dispose of, any
additional shares of, or any options, warrants or rights of any kind to
acquire any shares of, its capital stock of any class or any debt or equity
securities convertible into or exchangeable for such capital stock, except
issuances of shares of PST Common Stock pursuant to the exercise of stock
options outstanding on the date hereof; amend or agree to amend any stock
option plans or agreements; sell (including, without limitation, by sale-
leaseback), pledge, dispose of or encumber any material assets or interests
therein, other than in the ordinary course of business and consistent with
past practice; (iii) redeem, purchase, acquire or offer to purchase or acquire
any shares of its capital stock; or (iv) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(d) use its commercially reasonable efforts to preserve intact its business
organizations and goodwill, keep available the services of its present
officers, employees, and independent contractors, and preserve the goodwill
and business relationships with suppliers, distributors, customers, and others
having business relationships with PST;
(e) use its commercially reasonable efforts to insure compliance with all
applicable statutes and regulations, and preserve and foster good
relationships with governmental agencies having jurisdiction over PST;
(f) confer on a regular basis as requested by Enterprises with one or more
representatives of Enterprises to discuss operational and business matters of
materiality and the general status of ongoing operations and business;
(g) promptly notify Enterprises of any significant changes in the business,
properties, assets, condition (financial or other), results of operations or
prospects of PST, including but not limited to any pending or threatened
claims, suits, actions or other potential liabilities;
(h) not acquire, or publicly propose to acquire, all or any substantial part
of the business and properties or capital stock of any person not a party to
this Agreement, whether by Merger, purchase of assets, tender offer or
otherwise;
(i) not initiate, solicit, or encourage, and will not directly through any
officer, director or employee, investment banker, attorney, accountant or
other agent employed or retained by PST or any of its subsidiaries initiate,
solicit or encourage, any proposal or offer to acquire all or any substantial
part of the business and properties or capital stock of PST or any of its
subsidiaries, whether by Merger, purchase of assets, tender offer or
otherwise; provided, however, that PST may furnish information concerning its
business, properties or assets to a corporation, partnership, person or other
entity or group (a "THIRD PARTY") which has expressed an interest in making a
bona fide offer or proposal to PST to acquire PST and which in the opinion of
PST has the financial capability to consummate such an acquisition subject to
receipt of appropriate information regarding PST (and when PST has not
initiated the offer or proposal and has not solicited or encouraged such third
party to express such offer or proposal in breach of this subsection (i) and,
following receipt of such expression of interest, may negotiate and take any
of the actions otherwise prohibited by this subsection (i), including without
limitation, entering into appropriate agreements with such Third Party if the
Board of Directors believes in good faith, after consultations with its
financial advisor, that such actions may result in a superior financial
transaction for shareholders and if outside counsel to PST provides a written
opinion to the Board of Directors of PST to the effect that the failure to
furnish such information, or to negotiate or enter into appropriate agreements
with such Third Party could subject PST's directors to a substantial risk of
liability for breach of their fiduciary duties or for failure to conform to
the requirements of the securities laws. In the event PST shall receive an
expression of interest or offer of the type referred to in this subsection
(i), it shall promptly inform Enterprises as to (and provide Enterprises with
copies of) any such inquiry, offer or proposal;
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(j) not approve, accept or recommend any offer from a Third Party with
respect to any Merger, consolidation, or sale of substantially all of its
assets that will treat Enterprises or shares of PST Common Stock owned by
Enterprises any less favorably than other shareholders of PST or their shares
of common stock of PST;
(k) not commence litigation, adopt any shareholder rights plan or comparable
arrangement, or take any other action that is intended to prevent Enterprises
from acquiring the PST Common Stock other than enforcing the terms of this
Agreement;
(l) not enter into or amend any employment, severance, bonus, special pay
arrangement with respect to hiring, termination of employment or other similar
arrangements or agreements with any directors, officers or key employees;
(m) with the exception of routine employee raises granted in the ordinary
course of business and consistent with past practice, not adopt, enter into or
amend any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, health care, employment or other employee
benefit plan, agreement, trust, fund or arrangement for the benefit or welfare
of any employee, retiree, or terminated employee, except as required to comply
with changes in applicable law;
(n) other than in the ordinary course of business and consistent with past
practice, not incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or make any loans or
advances;
(o) not agree in writing, or otherwise, to take any of the foregoing actions
or any other action which would make any representation or warranty contained
in Article IV untrue or incorrect in any material respect as of the Closing
Date; and
(p) not authorize or resolve to adopt any plan or proposal that would grant
any right to PST's shareholders to dissent from and obtain an appraisal of
their shares as a consequence of the Merger or this Agreement and the
transaction contemplated thereby apart from, or in addition to, the statutory
rights of PST shareholders prescribed by Part 13 of the URBCA.
ARTICLE VI
Additional Agreements
6.1 Access to Information. PST shall afford to Enterprises and its
accountants, counsel, lenders and other representatives reasonable access
during normal business hours and upon reasonable notice throughout the period
prior to the Effective Time to all of their respective properties, books,
contracts, commitments and records (including, but not limited to, tax
returns) and, during such period, shall furnish promptly to Enterprises (i) a
copy of each report, schedule and other document filed or received by any of
them pursuant to the requirements of federal or state tax or securities laws
or the HSR Act or filed with or received by any of them from the SEC, Federal
Trade Commission, Department of Justice or any Federal or state tax authority
and (ii) all other information and documents concerning its businesses,
properties and personnel as Enterprises may reasonably request; provided that
no investigation pursuant to this Section 6.1 or otherwise shall affect any
representations or warranties made herein or the conditions to the obligations
of the respective parties to consummate the Merger. PST shall promptly advise
Enterprises in writing of any change or occurrence of any event after the date
of this Agreement having, or which, insofar as can reasonably be foreseen, in
the future may have, a PST Material Adverse Effect.
6.2 Proxy Statement; Registration Statement; Other Filings.
(a) PST shall cooperate with Enterprises and its counsel in the preparation
and filing with the Commission as promptly as practicable, and shall use all
reasonable efforts to have cleared and declared effective by the Commission, a
proxy statement/prospectus with respect to the Shareholders' Meeting referred
to in Section 6.3
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and the issuance of the Enterprises Common Stock described in Article II. The
term "PROXY STATEMENT" shall mean such proxy statement/prospectus at the time
it initially is mailed to PST's shareholders and all amendments or supplements
thereto duly filed and similarly mailed. PST agrees to correct promptly (but
in no event later than the date of the Shareholders' Meeting referred to in
Section 6.3) any information related to PST whether included directly therein
or incorporated by reference, in the Proxy Statement which contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
shall be used in the prospectus of Enterprises to be included in the
Registration Statement described in Subsection (b) below. Enterprises and PST
shall cooperate with each other in the preparation of such Proxy Statement and
Registration Statement. The Proxy Statement shall include the recommendations
of the Board of Directors of PST in favor of the Merger, unless an offer as
described on Article V hereof shall have been made (and not been withdrawn)
prior to such mailing.
(b) Enterprises (with the cooperation and assistance of PST) shall prepare
and shall file with the Commission, as promptly as practicable after the
furnishing by PST of all information regarding PST required to be contained
therein, a Registration Statement on Form S-4 under the Securities Act
covering the Enterprises Common Stock to be issued in the Merger, which
Registration Statement shall include the Proxy Statement referenced in Section
6.2(a) above and shall use all reasonable efforts to have the Registration
Statement declared effective by the Commission as promptly as practicable.
Enterprises shall also take such action as is reasonably required to be taken
with respect to the issuance of Enterprises Common Stock in the Merger under
state blue sky or securities laws. The term "REGISTRATION STATEMENT" shall
mean such Registration Statement at the time it becomes effective and all
amendments or supplements thereto duly filed. Enterprises agrees to correct
promptly (but in no event later than the date of the Shareholders' Meetings
referred to in Section 6.3) any information provided by it for use in the
Registration Statement which contains any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(c) As soon as practicable after the date hereof, PST and Enterprises shall
promptly prepare and file any other filings required under the Exchange Act,
the Securities Act or any other federal or state securities laws relating to
the Merger and the transactions contemplated herein ("OTHER FILINGS").
6.3 Shareholders' Approval. PST, in accordance with applicable law and the
terms of this Agreement, shall promptly submit this Agreement and the
transactions contemplated hereby for the approval of PST's shareholders at a
special meeting of shareholders (the "SHAREHOLDERS' MEETING") to be held as
soon as practicable after the Registration Statement is declared effective by
the Commission and, subject to the fiduciary duties of the Board of Directors
of PST under applicable law and as otherwise provided herein, shall use its
commercially reasonable efforts to obtain shareholder approval of this
Agreement and the transactions contemplated hereby; subject to the provisions
of Article V hereof.
6.4 Expenses; Termination Fee. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses; provided, however, if this Agreement is terminated pursuant to
Section 8.1(d)(ii) hereof, or if a tender or exchange offer for any shares of
capital stock of PST or any business combination shall have been made or
publicly proposed to be made by any person, entity or group (as that term is
used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended),
other than Enterprises, and the Board of Directors of PST shall have announced
a position in favor of such tender or exchange offer or business combination,
then PST shall pay to Enterprises a termination fee of Three Million Dollars
($3,000,000) plus Enterprises' actual out-of-pocket expenses relating to the
transactions contemplated by this Agreement (including, but not limited to
fees and expenses of counsel and accountant and financial advisors), subject
to a limit on such expenses of Five Hundred Thousand Dollars ($500,000). Such
payment is intended by the parties to constitute liquidated damages and not a
penalty. If this Agreement is terminated pursuant to Section 8.1(c) (except
for a termination under Section 8.1(c)(ii)(y) or (z) due to a breach or event,
as the case may be, which occurs after the signing of this Agreement but prior
to the Closing Date as a result of the actions of one or more third parties),
then PST shall
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pay Enterprises' actual out-of-pocket expenses relating to the transactions
contemplated by this Agreement (including, but not limited to fees and
expenses of counsel and accountant and financial advisors), subject to a limit
on such expenses of Five Hundred Thousand Dollars ($500,000). Notwithstanding
any other provision of this Section, PST shall not become obligated for
payment to Enterprises of any termination fee or out-of-pocket expenses if
this Agreement is terminated under Section 7.2(e) or Section 8.1(d)(i) hereof.
If Enterprises wrongfully refuses to close the transactions contemplated by
this Agreement (which expressly shall not include any refusal pursuant to the
exercise of Enterprises' rights under Sections 7.1 or 7.3 hereof), then
Enterprises shall pay PST's actual out-of-pocket expenses relating to the
transactions contemplated by this Agreement (including, but not limited to,
fees and expenses of counsel, accountants, and financial advisors), subject to
a limit on such expenses of Five Hundred Thousand Dollars ($500,000).
6.5 Agreement to Cooperate. Subject to the terms and conditions herein
provided, each of the parties hereto shall use all commercially reasonable
efforts to take, or cause to be taken, all action to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including using its commercially reasonable efforts to obtain
all necessary or appropriate waivers, consents and approvals, to effect all
necessary registrations and filings (including, but not limited to, filings
under the Hart-Scott-Rodino Antitrust Improvements Act and the Other Filings),
to enter into negotiations, provide information or propose settlements
reasonably calculated to avoid or eliminate any impediment under any antitrust
law that may be asserted by any governmental authority and to prevent the
commencement of proceedings to enjoin or delay consummation of the Merger by
such governmental authority or, if such proceedings are commenced, to
thereafter prevent the entry of any injunction or other order delaying or
preventing the Merger, and to lift any injunction or other legal bar to the
Merger (and, in such case, to proceed with the Merger as expeditiously as
possible), subject, however, to receiving the requisite vote of the
shareholders of PST. Each party hereto agrees to allow the other to review
each regulatory filing, including the Other Filings made by such party prior
to the filing thereof during the term of this Agreement.
6.6 Public Statements. The parties shall consult with each other prior to
issuing any public announcement or statement with respect to this Agreement or
the transactions contemplated hereby and shall not issue any such public
announcement or statement prior to such consultation, except as may be
required by law or either party's listing agreement with the NASDAQ/NMS.
6.7 Accountants' Letters. Each of Enterprises and PST agrees to use its
commercially reasonable efforts to cause to be delivered to the other letters
of Arthur Andersen LLP, independent auditors for PST and Arthur Andersen LLP,
independent auditors for Enterprises, respectively, dated the date of the
Proxy Statement/Prospectus, the effective date of the Registration Statement
and the Closing Date (or such other dates reasonably acceptable to the
parties) with respect to certain financial statements and other financial
information included in the Registration Statement, which letters shall be in
form and substance reasonably satisfactory to the addressee.
6.8 Stock Options. As of the Effective Time, all options to purchase PST
Common Stock outstanding as of the date hereof under any employee benefit plan
of PST, whether vested or unvested, shall be deemed immediately vested and
exercisable in full. The letter of transmittal for use by PST shareholders in
obtaining the Merger Consideration shall provide a mechanism for allowing
holders of such options to exercise their options and thereby obtain the
Merger Consideration issuable with respect to the number of shares of PST
Common Stock for which the option is exercised. Any such options to purchase
shares of PST Common Stock which are not so exercised by the holders thereof
in accordance with the procedures set forth in the letter of transmittal shall
thereafter be deemed null and void.
6.9 Dissenting Shareholders. PST shall give Enterprises prompt notice of any
demands received by PST for appraisal of shares pursuant to Section 16-10a-
1302 of the Utah Code Annotated, and Enterprises shall have the right to
direct all negotiations and proceedings with respect to such demands.
6.10 Directors' and Officers' Insurance. Enterprises shall cause to be
maintained, for a period of not less than six (6) years after the Closing
Date, directors' and officers' insurance and indemnification policies in
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such coverage and amounts as is substantially equivalent to the coverage
maintained by PST as of the date hereof, to the extent that such policies
provide coverage for events occurring prior to the Closing Date (collectively,
the "D & O INSURANCE") for all persons who are directors of or officers of PST
on the date hereof. To the extent that the D & O Insurance provides such
coverage subject to deductible amounts, Enterprises shall indemnify such
directors and officers for the amount of any such deductible with respect to
liability incurred by them for events occurring prior to the Closing Date
otherwise covered by such insurance.
ARTICLE VII
Conditions
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have been
approved and adopted by the requisite vote of the shareholders of PST under
applicable law;
(b) Each of Enterprises, Merger Sub, and PST shall have delivered or caused
to be delivered to the other resolutions of their respective Boards of
Directors duly adopted by unanimous vote or consent, certified by the
Secretary of such party as of the Closing Date, authorizing and approving the
execution and delivery of this Agreement on behalf of such party and the
consummation of the transactions contemplated herein and authorizing and
approving all other necessary and desirable corporate actions to enable the
parties to comply with the terms hereof;
(c) The waiting period applicable to the consummation of the Merger under
the Hart-Scott-Rodino Antitrust Improvements Act shall have expired or been
terminated;
(d) The Registration Statement shall have become effective in accordance
with the provisions of the Securities Act, and no stop order suspending such
effectiveness shall have been issued and remain in effect and no proceedings
for that purpose in respect of the Registration Statement shall have been
initiated or threatened;
(e) No preliminary or permanent injunction or other order or decree by any
federal or state court which prevents the consummation of the Merger shall
have been issued and remain in effect (each party agreeing to use all
commercially reasonable efforts to have any such injunction, order or decree
lifted); and
(f) There shall not have been instituted, pending or threatened any action
or proceeding (or any investigation or other inquiry that might result in such
an action or proceeding) by any governmental authority or administrative
agency before any governmental authority, administrative agency or court of
competent jurisdiction, domestic or foreign, nor shall there be in effect any
judgment, decree or order of any governmental authority, administrative agency
or court of competent jurisdiction, or any other legal restraint (i)
preventing or seeking to prevent consummation of the Merger, (ii) prohibiting
or seeking to prohibit or limiting or seeking to limit, Enterprises from
exercising all material rights and privileges pertaining to its ownership of
the Surviving Corporation or ownership or operation by Enterprises or any of
its subsidiaries of all or a material portion of the business assets of
Enterprises or any of its subsidiaries, or (iii) compelling or seeking to
compel Enterprises or any of its subsidiaries to dispose or hold separate all
or any material portion of the business or assets of Enterprises or any of its
subsidiaries, as a result of the Merger or the transactions contemplated by
this Agreement.
7.2 Conditions to Obligation of PST to Effect the Merger. The obligation of
PST to effect the Merger shall be subject to the fulfillment at or prior to
the Effective Time of the following additional conditions:
(a) Enterprises shall have performed in all material respects its agreements
contained in this Agreement required to be performed at or prior to the
Effective Time and the representations and warranties of Enterprises
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contained in this Agreement shall be true and correct in all material respects
on and as of the date of this Agreement and at and as of the Effective Time as
if made on and as of such date or time, except as otherwise contemplated or
permitted by this Agreement, and PST shall have received a certificate of the
President or any Executive Vice-President of Enterprises to that effect;
(b) PST shall have received an opinion addressed to PST from Witt, Gaither &
Whitaker, P.C., counsel to Enterprises, dated the date on which the Effective
Time shall occur, substantially to the effect set forth in Exhibit 7.2(b)
hereto;
(c) PST shall have received the letter of Arthur Andersen LLP contemplated
by Section 6.7 hereof;
(d) The Board of Directors of PST on or prior to the date hereof has been
advised by Morgan Keegan to the effect that the Merger Consideration is fair
from a financial standpoint to PST's shareholders. Morgan Keegan has consented
to the inclusion of their opinion in the Proxy Statement. Morgan Keegan's
fairness opinion shall be confirmed in writing prior to the mailing of the
Proxy Statement to PST's Shareholders and shall be further confirmed in
writing immediately prior to the Closing.
(e) Since the date hereof, no change, effect, or circumstance that
individually or when taken together with all other changes, effects or
circumstances has occurred (including such changes, events, or circumstances
that are reasonably likely to occur), which has or may be reasonably expected
to have a material adverse effect on the business, assets, financial
condition, results of operations or stockholders equity of Enterprises taken
as a whole.
7.3 Conditions to Obligation of Enterprises to Effect the Merger. The
obligation of Enterprises and Merger Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the additional
following conditions:
(a) PST shall have performed in all material respects its agreements
contained in this Agreement required to be performed at or prior to the
Effective Time and the representations and warranties of PST contained in this
Agreement shall be true and correct in all material respects on and as of the
date of this Agreement and at and as of the Effective Time as if made on and
as of such date or time, except as otherwise contemplated or permitted by this
Agreement and Enterprises shall have received a Certificate of the Chairman of
the Board and Chief Executive Officer, or President and Chief Operating
Officer of PST to that effect;
(b) Enterprises shall have received an opinion from Parr, Waddoups, Brown,
Gee & Loveless, counsel to PST, dated as of the date on which the Effective
Time shall occur, substantially to the effect set forth in Exhibit 7.3(b)
hereto;
(c) Enterprises shall have received the estoppel letters specified in
Section 4.14 hereof and the letter of Arthur Andersen LLP contemplated by
Section 6.7 hereof;
(d) Since the date hereof, no PST Material Adverse Effect shall have
occurred;
(e) As of the date hereof, and as of the Effective Time there shall have
occurred no default or condition which, with the passage of time, would
constitute a default under any loan agreement to which PST or any subsidiary
is a party which would permit the acceleration of any amounts due thereunder;
(f) PST's Board of Directors shall have unanimously approved and recommended
to PST's shareholders, the Merger and the transactions contemplated thereby
(in addition to the approval of shareholders required by Section 7.1(a)
hereof) and persons holding more than ten percent (10%) of the outstanding PST
Common Stock as of the Effective Time shall not have perfected their right to
dissent from the Merger and receive payment for their shares under Section 16-
10a-1302 of the Utah Code Annotated;
(g) Each of the officers and directors of PST as set forth on Schedule 4.5
shall have delivered to Enterprises by the Closing Date a release in the form
attached hereto as Exhibit 7.3(g);
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<PAGE>
(h) By the Closing Date, Kenneth R. Norton ("NORTON") and Enterprises shall
have entered into an agreement of non-competition in a form substantially
equivalent to that attached hereto as Exhibit 7.3(h);
(i) The Agreement for Outsourcing Services between PST Vans, Inc. and The
Sabre Group Inc. will be discussed among the parties prior to closing and if
such service is to be terminated it shall be done at a cost to PST of not more
than One Million One Hundred Thirty-Seven Thousand Dollars ($1,137,000). If
the cost of such termination exceeds, or would exceed such amount,
notwithstanding PST's efforts to negotiate a lower amount, then this condition
will be deemed not to have been met, and Enterprises and Merger Sub will not
be obligated to effect the Merger. PST will use commercially reasonable
efforts to negotiate and execute a definitive termination agreement with the
Sabre Group, Inc. prior to closing; and
(j) Prior to the Closing Date, PST shall identify all persons or entities
who were, at the time of the PST Shareholders' Meeting held in accordance with
Section 6.3 hereof, "affiliates" of PST for purposes of Rule 145 under the
Securities Act (the "Affiliates"). PST shall use its commercially reasonable
efforts to cause each person or entity identified as an Affiliate to deliver
to Enterprises, on or prior to the Closing Date, a written agreement
(substantially in the form attached hereto as Exhibit 7.3(j)) stating that
such affiliate will not offer to sell, sell, transfer, or otherwise dispose of
any shares of Enterprises Common Stock received in the Merger except: (i)
pursuant to an effective registration statement; (ii) in compliance with
Securities Act Rule 145; or (iii) if, in the opinion of counsel reasonably
acceptable to Enterprises or pursuant to a "no action" letter obtained by the
undersigned from the staff of the Commission, such offer to sell, sale,
transfer or other disposition is otherwise exempt from registration under the
Act. Receipt of such signed agreements from each such potential Affiliate
shall be a condition precedent to the obligations of Enterprises and Merger
Sub to effect the Merger.
ARTICLE VIII
Termination, Amendment and Waiver
8.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
whether before or after approval by the shareholders of PST:
(a) by mutual consent of Enterprises and PST; or
(b) by either Enterprises or PST if (i) the Merger shall not have been
consummated on or before October 31, 1998 (the "TERMINATION DATE"), (ii) the
requisite vote of the shareholders of PST to approve this Agreement and the
transactions contemplated hereby shall not be obtained at the Shareholders'
Meeting, or any adjournment thereof, called therefor, or (iii) any court of
competent jurisdiction in the United States or any State shall have issued an
order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the Merger and such order,
judgment or decree shall have become final and nonappealable; provided that
the right to terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before the Termination Date; or
(c) by Enterprises (i) if the Board of Directors of PST shall have withdrawn
or modified in a manner adverse to Enterprises its approval or recommendation
of the Merger, this Agreement or the transactions contemplated hereby, or
shall have resolved to do any of the foregoing, or (ii) there has been (x) a
material breach of any covenant or agreement herein on the part of PST which
has not been cured or adequate assurance (acceptable to Enterprises in its
sole discretion) of cure given, in either case within fifteen (15) business
days following receipt of notice of such breach, or (y) a breach of a
representation or warranty of PST herein which by its nature cannot be cured
prior to the Termination Date other than such breach that has not had or would
not reasonably be expected to have a PST Material Adverse Effect; or (z) a PST
Material Adverse Effect has occurred; or
(d) by PST if (i) there has been (x) a material breach of any covenant or
agreement herein on the part of Enterprises which has not been cured or
adequate assurance (acceptable to PST in its reasonable discretion) of
I-26
<PAGE>
cure given, in either case within fifteen (15) business days following receipt
of notice of such breach, or (y) a breach of a representation or warranty of
Enterprises herein which by its nature cannot be cured prior to the
Termination Date other than such breach that has not had or would not
reasonably be expected to have a material adverse effect on the business of
Enterprises taken as a whole, or (ii) the Board of Directors of PST, pursuant
to the actions permitted by the proviso of Article V subsection (i), shall
have authorized PST to enter into an agreement with any Third Party with
respect to a Merger of PST or the sale of all or substantially all of the
assets of PST or recommended approval of a tender offer or any other form of
business combination.
8.2 Effect of Termination. In the event of termination of this Agreement by
either Enterprises or PST, as provided in Section 8.1, this Agreement shall
forthwith become void and there shall be no liability or obligation on the
part of either PST or Enterprises or their respective officers or directors,
except as set forth in Section 6.4 which shall survive the termination and
except for the confidentiality provisions incorporated in Section 11.3, which
shall survive termination. Nothing in this Section 8.2 shall relieve any party
from liability for any breach of this Agreement.
8.3 Amendment. This Agreement may be amended by the parties hereto, at any
time before or after approval hereof by the shareholders of PST, but, after
any such approval, no amendment shall be made which reduces the Merger
Consideration or alters the form thereof or in any way materially adversely
affects the rights of the shareholders of PST without the further approval of
such shareholders, but the parties may agree to increase the Merger
Consideration without the approval of the PST shareholders. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
8.4 Waiver. At any time prior to the Effective Time, the parties hereto may
(a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto (made by the other parties hereto) and (c) waive compliance
with any of the agreements or conditions contained herein (required of the
other parties hereto); provided, however, that waiver of compliance with any
agreements or conditions herein shall not limit the parties' obligations to
comply with all other agreements or conditions herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid if set
forth in an instrument in writing signed on behalf of such party.
ARTICLE IX
Survival
All representations, warranties and agreements in this Agreement shall
expire as of the Effective Time.
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<PAGE>
ARTICLE X
Definitions, Schedules, and Exhibits
10.1 Definitions.
<TABLE>
<CAPTION>
DEFINED TERM SECTION WHERE DEFINED
------------ ---------------------
<S> <C>
20-Day Average Price.............................. Section 2.1(a)
Agreement......................................... Preamble
Articles of Merger................................ Section 1.1
Closing........................................... Section 2.5
Closing Date...................................... Section 2.5
Closing Price..................................... Section 2.1(a)
COBRA............................................. Section 4.19(c)
Commission........................................ Section 3.5
Code.............................................. Section 4.19(a)
D&O Insurance..................................... Section 6.10
Effective Time.................................... Section 1.2
Employee Benefits Plans........................... Section 4.19(c)
Enterprises....................................... Preamble
Enterprises Common Stock.......................... Section 2.1(a)
Enterprises SEC Reports........................... Section 3.5
ERISA............................................. Section 4.19(a)
Exchange Agent.................................... Section 2.1(c)
Exchange Fund..................................... Section 2.1(c)
HSE Laws.......................................... Section 4.25
Merger............................................ Preamble
Merger Consideration.............................. Section 2.1(a)
Merger Sub........................................ Preamble
Most Recent Financial Statements.................. Section 4.7
Multi-employer Plan............................... Section 4.19(a)
Norton............................................ Section 7.3(h)
Other Filings..................................... Section 6.2(c)
Proxy Statement................................... Section 6.2(a)
PST............................................... Preamble
PST Common Stock.................................. Section 2.1(a)
PST Intellectual Property......................... Section 4.15
PST Material Adverse Effect....................... Section 4.1
PST Options....................................... Section 2.4
PST SEC Reports................................... Section 4.9
Real Estate....................................... Section 4.14
Registration Statement............................ Section 6.2(b)
Retirement Plan................................... Section 4.19(a)
Rolling Stock..................................... Section 4.16
Shareholders' Meeting............................. Section 6.3
Surviving Corporation............................. Section 1.1
Tax, Taxes........................................ Section 4.13
Tax Returns....................................... Section 4.13
Termination Date.................................. Section 8.1(b)
Third Party....................................... Section 5(i)
To the knowledge of PST, to the knowledge of PST's
officers and directors........................... Section 4.11
URBCA............................................. Section 1.1
USTs.............................................. Section 4.25
</TABLE>
I-28
<PAGE>
10.2 List of Schedules and Exhibits.
<TABLE>
<CAPTION>
SCHEDULES DESCRIPTION
--------- -----------
<C> <S>
Schedule 3.2............ Authorization of Transaction
Schedule 3.3............ Noncontravention
Schedule 3.5............ Enterprises Financial Statements and SEC Reports
Schedule 4.2(b)......... Defaults
Schedule 4.3............ No Conflict
Schedule 4.4............ Capital Stock and Stockholder Relations
Schedule 4.5............ Officers and Directors
Schedule 4.7............ Title to Assets
Schedule 4.8............ Subsidiaries and Affiliates
Schedule 4.9............ PST Financial Statements and SEC Reports
Schedule 4.10........... Events Subsequent to Most Recent Fiscal Year End
Schedule 4.11........... Undisclosed Liabilities
Schedule 4.12........... Legal Compliance
Schedule 4.13........... Tax Matters--Exceptions
Schedule 4.13(c)........ Filed Tax Returns
Schedule 4.13(f)........ Asset Basis, etc.
Schedule 4.14........... Real Property
Schedule 4.14(c)........ Licenses & Permits
Schedule 4.14(i)........ Good Title
Schedule 4.14(j)........ Other Leases
Schedule 4.15........... Intellectual Property
Availability of Intellectual Property to Surviving
Schedule 4.15(a)........ Corporation
Schedule 4.15(b)........ Infringement of Intellectual Property Rights
Schedule 4.16........... Rolling Stock and other Tangible Assets
Schedule 4.16(a)........ List of Tractors and Trailers
Schedule 4.16(b)........ Other Motor Vehicles and Equipment
Schedule 4.16(c)........ Other Personal Property
Schedule 4.17........... Contracts
Schedule 4.18(a)........ Employment Agreements
Schedule 4.18(b)........ List of Salaried Employees
Schedule 4.18(c)........ Worker Compensation
Schedule 4.18(d)........ Labor Compliance
Schedule 4.19........... Employee Benefit Plans
Schedule 4.19(a)........ Multi-employer Plan Contribution
Schedule 4.19(c)........ Welfare Benefit Plans
Schedule 4.19(e)........ Health Benefit Claimants
Schedule 4.21........... Outstanding Powers of Attorney
Schedule 4.22........... Insurance Policies
Schedule 4.23(a)........ List of Litigation Matters
Schedule 4.23(b)........ Accident Registers and Loss Runs
Schedule 4.23(c)........ Cargo Loss
Schedule 4.23(d)........ Personal and Property Damage
Schedule 4.25........... Environmental, Health, and Safety Matters
Schedule 4.28........... Safety Rating
Schedule 4.29........... Organizations and Clubs
Schedule 4.30........... Bank Accounts
Schedule 4.31........... Major Suppliers and Customers
Schedule 5.............. Conduct of Business Pending Merger
</TABLE>
I-29
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
-------- -----------
<C> <S>
Exhibit 1.1(a), (b)..... Articles of Merger
Exhibit 4.14............ Form of Landlord Estoppel Letter
Exhibit 4.25............ Environmental, Health, and Safety Matters
Exhibit 7.2(b).......... Opinion of Witt, Gaither & Whitaker, P.C.
Exhibit 7.3(b).......... Opinion of PST Counsel
Exhibit 7.3(g).......... Form of Resignation
Exhibit 7.3(h).......... Form of Agreement of Non-Competition
Exhibit 7.3(j).......... Affiliates
</TABLE>
ARTICLE XI
General Provisions
11.1 Notices. Any notice, demand, request, consent, approval or other
communications required or permitted to be given hereunder shall be in writing
and shall be delivered personally or sent either by facsimile transmission, or
nationally recognized overnight courier (utilizing guaranteed next business
morning or day delivery), addressed to the party to be notified at the
following address, or to such other address as such party shall specify by
like notice:
(a) If to Enterprises, to:
U.S. Xpress Enterprises, Inc.
2931 South Market Street
Chattanooga, TN 37410
Fax: (423)265-5715
Attention: Patrick E. Quinn and Max L. Fuller
with copies to:
Witt, Gaither & Whitaker, P.C.
1100 SunTrust Bank Building
Chattanooga, TN 37402
Fax: (423)266-4138
Attention: Carter J. Lynch, III, Esq.
(b) If to Merger Sub, to:
PST Acquisition Corporation
2931 South Market Street
Chattanooga, TN 37410
Fax: (423)265-5715
Attention: Patrick E. Quinn and Max L. Fuller
with copies to:
Witt, Gaither & Whitaker, P.C.
1100 SunTrust Bank Building
Chattanooga, TN 37402
Fax: (423)266-4138
Attention: Carter J. Lynch, III, Esq.
I-30
<PAGE>
(c) If to PST, to:
PST Vans, Inc.
1901 West 2100 South
Salt Lake City, UT 84119
Fax: (801) 975-2515
Attention: Kenneth R. Norton
with a copy to:
Parr, Waddoups, Brown, Gee & Loveless, P.C.
185 South State Street, Suite 1300
Salt Lake City, UT 84147
Fax: (801) 532-7750
Attention: Richard G. Brown, Esq.
11.2 Interpretation. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules
and regulations promulgated thereunder, unless the context requires otherwise.
The word "including" shall mean including without limitation. The parties
intend that each representation, warranty, and covenant contained herein shall
have independent significance. If any party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant. Any
matter disclosed in a Schedule shall not be deemed disclosed in any other
Schedule absent a specific cross-reference.
11.3 Miscellaneous. This Agreement (including the documents and instruments
referred to herein) (a) constitutes the entire agreement and supersedes all
other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof (other than
the confidentiality provisions of Paragraph 9 of that certain Letter of Intent
among the parties hereto dated June 1, 1998, which provisions are hereby
deemed incorporated into this Agreement as of the date hereof); (b) is not
intended to confer upon any other person any rights or remedies hereunder; (c)
shall not be assigned by operation of law or otherwise; and (d) shall be
governed in all respects, including validity, interpretation and effect, by
the laws of the State of Tennessee (without giving effect to the provisions
thereof relating to conflicts of law).
11.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement. This Agreement may be
executed by delivery of faxed signature pages, promptly followed by exchange
of originals.
11.5 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party.
11.6 Partial Invalidity and Severability. All rights and restrictions
contained herein may be exercised and shall be applicable and binding only to
the extent that they do not violate any applicable laws and are intended to be
limited to the extent necessary to render this Agreement legal, valid and
enforceable. If any term of this Agreement, or a part thereof, not essential
to the commercial purpose of this Agreement shall be held to be illegal,
invalid or unenforceable by a court of competent jurisdiction, it is the
intention of the parties that the remaining terms hereof, or a part thereof,
shall remain in full force and effect. To the extent legally permissible, any
illegal, invalid or unenforceable provision of this Agreement shall be
replaced by a valid provision which will implement the commercial purpose of
the illegal, invalid or unenforceable provision so that the parties will each
enjoy the benefit of their bargain hereunder.
I-31
<PAGE>
In Witness Whereof, Enterprises, Merger Sub and PST have caused this
Agreement to be signed by their respective officers thereunto duly authorized
as of the date first written above.
U.S. Xpress Enterprises, Inc.
/s/ Patrick E. Quinn
By___________________________________
Patrick E. Quinn, President
_____________________________________
/s/ Ray M. Harlin
Attest:______________________________
Ray M. Harlin, Assistant Secretary
PST Acquisition Corporation
/s/ Patrick E. Quinn
By___________________________________
Patrick E. Quinn, President
_____________________________________
/s/ Ray M. Harlin
Attest:______________________________
Ray M. Harlin, Assistant Secretary
PST Vans, Inc.
/s/ Kenneth R. Norton
By___________________________________
CEO
/s/ Neil R. Vos
Attest:______________________________
Neil R. Vos, Secretary
I-32
<PAGE>
ANNEX II
VOTING AGREEMENTS
<PAGE>
ANNEX II
VOTING AGREEMENT
This Voting Agreement (this "Agreement"), is made and entered into as of
this 7th day of July, 1998, by and among U.S. XPRESS ENTERPRISES, INC., a
Nevada corporation ("Enterprises"), and Kenneth R. Norton, a Nevada resident
with his principal residence at (the "Shareholder"), a shareholder
of PST VANS, INC., a Utah corporation (the "Company"), pursuant to the
provisions of Section 16-10a-731 of the Utah Revised Business Corporation Act.
Whereas, Enterprises and the Company intend to enter into an agreement and
plan of merger, substantially in the form attached hereto as Exhibit A (such
agreement and plan of merger and any amendments thereto being hereinafter
referred to as the "Merger Agreement"), pursuant to which PST will be merged
with and into a wholly-owned subsidiary of Enterprises (the "Merger");
Whereas, Enterprises and Shareholder desire to make certain agreements with
respect to voting the Common Stock owned by Shareholder.
Now, Therefore, in consideration of the premises and the mutual
representations, warranties and agreements herein contained, and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
The Voting Agreement
1.1 Voting Agreement and Grant of Proxy. Shareholder agrees that during the
term of this Agreement: (a) all of the Shares shall be voted by Shareholder in
favor of the Merger or any other business combination agreed upon between the
Company and Enterprises; and (b) if so requested by Enterprises, Shareholder
shall grant an irrevocable proxy in favor of such individuals as Enterprises
may designate so as to enable such designees to vote in favor of the Merger or
such other business combination and upon any other matter relating thereto
which may be presented to shareholders of the Company and, at such time,
Shareholder shall execute the form of proxy set forth in Exhibit B hereto.
1.2 Independent Contract Consideration. Upon the execution of this Agreement
by the parties hereto, Enterprises will deliver to Shareholder the amount of
One Hundred and No/100 Dollars ($100.00) (the "Independent Contract
Consideration") which amount has been bargained for and agreed to as
consideration for Shareholder's execution of this Agreement. The Independent
Contract Consideration is in addition to and independent of all other
consideration provided in this Agreement, and is nonrefundable in all events.
1.3 Term of Agreement. The term of this Agreement shall be from the
effective date hereof until October 31, 1999 or the date of termination of the
Merger Agreement, whichever occurs later.
ARTICLE II
Representations and Warranties
2.1 Representations and Warranties of Shareholder. Shareholder, hereby
represents and warrants to, and agrees with, Enterprises that:
(a) Shareholder owns, of record and beneficially, good and valid title to
the shares of common stock of the Company as set forth on Exhibit C (the
"Shares") and has full right, power and authority to grant an option upon, and
grant a proxy with respect to, the Shares;
(b) The Shares are now, and will be at all times during the term of this
Agreement, held by Shareholder free and clear of all liens, pledges, security
interests, claims or other encumbrances and will not be sold, transferred,
pledged or assigned, except pursuant to the Merger Agreement;
II-1
<PAGE>
(d) This Agreement constitutes a legal, valid and binding agreement of
Shareholder and neither the execution of this Agreement nor the consummation
by Shareholder of the transactions contemplated hereby will constitute a
violation of or default under, or conflict with, any judgment, decree, statute
or regulation of any governmental authority applicable to Shareholder or any
contract, commitment, agreement, or restriction of any kind to which any
Shareholder is a party or by which Shareholder is bound.
ARTICLE III
Additional Covenants and Agreements
3.1 Filings. Shareholder and Enterprises each agree to cooperate with one
another in assisting the Company to make, any and all filings required by the
Securities Exchange Act of 1934, as amended, or the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, in respect of this Agreement
and the transactions contemplated hereby.
3.2 No Negotiations. During the term of this Agreement, neither Shareholder
nor any affiliates or agents of Shareholder shall, directly or indirectly,
take any action to seek, encourage or support, or participate in any way in
discussions or negotiations with, or provide any information, data or
assistance to any party (other than Enterprises) concerning any acquisition of
(a) the Shares, and (b) other securities of the Company or any right, option
or warrant to purchase any such securities or all or any significant portion
of the assets of the Company or its Subsidiaries; provided, however, that the
foregoing clause (b) shall not be construed to prohibit Shareholder acting in
his capacity as a member of the Board of Directors of the Company from
obtaining from any person which makes an unsolicited offer to the Company with
respect to any such acquisition or similar transaction, any information which
he in good faith believes is relevant to his analysis of such offer or from
considering such offer if, in the opinion of his or the Company's counsel, the
exercise of his fiduciary duties requires him to do so.
3.3 Negative Covenants. During the term of this Agreement, neither
Shareholder nor any affiliates or agents of Shareholder shall (a) grant any
proxy with respect to any of the Shares to any corporation, partnership,
person or other entity or group (other than to Enterprises or its designees),
(b) vote any of the Shares in favor of a proposal for the dissolution of, or a
merger, consolidation, sale of assets or other similar transaction involving,
the Company other than as contemplated by Section 1.1 above, (c) provide to
any corporation, partnership, person or other entity or group (other than
Enterprises or its designees) any information (other than publicly available
information or information required to be disclosed by law) concerning the
Company, its business, operations or assets, or (d) take any other action
which is intended to frustrate the Merger.
3.4 Waiver of Dissenters' Rights. Shareholder hereby waives any right to
dissent from and obtain payment of the fair value of the Shares as a result of
the Merger.
ARTICLE IV
General Agreements
4.1 Agreement as Shareholder. Notwithstanding anything in this Agreement to
the contrary, the parties hereto acknowledge and agree that none of the
provisions herein set forth shall be deemed to restrict or limit any fiduciary
duty the Shareholder may have as a member of the Board of Directors of the
Company, provided that no such duty shall excuse the Shareholder from his
obligation as a shareholder of the Company to vote the Shares as herein
provided and to otherwise comply with each of the terms and conditions of this
Agreement.
4.2 Amendment. No amendment, modification or alteration of the terms or
provisions of this Agreement shall be binding unless the same shall be in
writing and duly executed by the parties hereto.
4.3 Remedy for Breach. Shareholder and Enterprises each acknowledge and
agree that any remedy at law would be inadequate compensation for any breach
or threatened breach of the provisions of this Agreement,
II-2
<PAGE>
including without limitation the provisions of Sections 1.1. Accordingly, the
parties specifically agree that the non-breaching party shall be entitled to
specific performance of all of the other party's obligations hereunder. This
provision shall not be interpreted to diminish or limit the right of either
party to claim all other available remedies.
4.4 Benefit. The authority conferred or agreed to be conferred by
Shareholder in this Agreement shall not be terminated by operation of law and
shall survive the death or incapacity of Shareholder. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and his
successors, personal representatives, heirs and assigns. This Agreement may
not be assigned, except by Enterprises to an entity controlling, controlled by
or under common control with Enterprises.
4.5 Further Assurance. Shareholder shall take such actions, furnish such
information, and prepare, cooperate in preparing, and execute and deliver to
Enterprises such additional documents, instruments or certificates as
Enterprises may reasonably request to enable Enterprises to obtain all rights
and benefits provided it hereunder.
4.6 Notices. Any notice, request, instruction or other document to be given
hereunder by any party hereto to the other shall be in writing and delivered
personally or sent by registered or certified mail (including by overnight
courier or express mail service), postage or fees prepaid, or sent by
facsimile with original sent by overnight courier to the address set forth
below the signatures of the undersigned or such other address as shall be
specified in writing. Any notice that is delivered personally in the manner
provided herein shall be deemed to have been duly given to the party to whom
it is directed upon actual receipt by such party or the office of such party.
Any notice which is addressed and mailed in the manner herein provided shall
be conclusively presumed to have been duly given to the party to which it is
addressed at the close of business on the third business day after the day it
is so placed in the mail, or if earlier, the time of actual receipt.
4.7 Expenses. Each party shall pay its expenses in connection with the
execution and performance of this Agreement.
4.8 Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
4.9 Counterparts. This Agreement may be executed in multiple counterparts,
each of which for all purposes shall be deemed an original, and which shall
constitute the same instrument.
4.10 Governing Law. This Agreement is executed by the parties hereto in and
shall be construed in accordance with and governed by the laws of the State of
Nevada, without giving effect to the principles of conflicts of laws thereof.
4.11 Entire Agreement. This Agreement (including the Exhibits hereto)
constitutes the entire agreement and understanding and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
[SIGNATURES APPEAR ON NEXT PAGE]
II-3
<PAGE>
In witness Whereof, Enterprises and Shareholder have caused this Voting
Agreement to be executed, all as of the date first above written.
Address:
"SHAREHOLDER"
Kenneth R. Norton
- ---------------------
/s/ Kenneth R. Norton
- --------------------- _____________________________________
Kenneth R. Norton
"ENTERPRISES"
U.S. Xpress Enterprises, Inc. U.S. Xpress Enterprises, Inc.
2931 S. Market Street
Chattanooga, TN 37410
/s/ Ray M. Harlin
By:__________________________________
Chief Financial Officer
II-4
<PAGE>
VOTING AGREEMENT
This Voting Agreement (this "Agreement"), is made and entered into as of
this 7th day of July, 1998, by and among U.S. XPRESS ENTERPRISES, INC., a
Nevada corporation ("Enterprises"), and The Bank of New York (the
"Shareholder"), a shareholder of PST VANS, INC., a Utah corporation ("PST" or
the "Company"), pursuant to the provisions of Section 16-10a-731 of the Utah
Revised Business Corporation Act.
Whereas, Enterprises and the Company intend to enter into an agreement and
plan of merger, substantially in the form attached hereto as Exhibit A (such
agreement and plan of merger and any amendments thereto being hereinafter
referred to as the "Merger Agreement"), pursuant to which PST will be merged
with and into a wholly-owned subsidiary of Enterprises (the "Merger");
Whereas, Shareholder owns 774,000 shares of the issued and outstanding
shares of PST's common stock, $.001 par value; and
Whereas, Enterprises and Shareholder desire to make certain agreements with
respect to voting the common stock of PST owned by Shareholder.
Now, Therefore, in consideration of the premises and the mutual
representations, warranties and agreements herein contained, and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
The Voting Agreement
1.1 Voting Agreement and Grant of Proxy. Shareholder agrees that during the
term of this Agreement: (a) all of the Shares shall be voted by Shareholder in
favor of the Merger or any other business combination agreed upon between the
Company and Enterprises; and (b) if so requested by Enterprises, Shareholder
shall grant an irrevocable proxy in favor of such individuals as Enterprises
may designate so as to enable such designees to vote in favor of the Merger or
such other business combination and upon any other matter relating thereto
which may be presented to shareholders of PST and, at such time, Shareholder
shall execute the form of proxy set forth in Exhibit B hereto.
1.2 Independent Contract Consideration. Upon the execution of this Agreement
by the parties hereto, Enterprises will deliver to Shareholder the amount of
One Hundred and No/100 Dollars ($100.00) (the "Independent Contract
Consideration") which amount has been bargained for and agreed to as
consideration for Shareholder's execution of this Agreement. The Independent
Contract Consideration is in addition to and independent of all other
consideration provided in this Agreement, and is nonrefundable in all events.
1.3 Term of Agreement. The term of this Agreement shall be from the
effective date hereof until October 31, 1999 or the date of termination of the
Merger Agreement, whichever occurs later.
ARTICLE II
Representations and Warranties
2.1 Representations and Warranties of Shareholder. Shareholder hereby
represents and warrants to, and agrees with, Enterprises that:
(a) Shareholder owns, of record and beneficially, good and valid title to
the shares of common stock of the Company as set forth on Exhibit C (the
"Shares") and has full right, power and authority to grant an option upon, and
grant a proxy with respect to, the Shares;
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<PAGE>
(b) The Shares are now, and will be at all times during the term of this
Agreement, held by Shareholder free and clear of all liens, pledges, security
interests, claims or other encumbrances and will not be sold, transferred,
pledged or assigned, except pursuant to the Merger Agreement; and
(d) This Agreement constitutes a legal, valid and binding agreement of
Shareholder and neither the execution of this Agreement nor the consummation
by Shareholder of the transactions contemplated hereby will constitute a
violation of or default under, or conflict with, any judgment, decree, statute
or regulation of any governmental authority applicable to Shareholder or any
contract, commitment, agreement, or restriction of any kind to which any
Shareholder is a party or by which Shareholder is bound.
ARTICLE III
Additional Covenants and Agreements
3.1 Filings. Shareholder and Enterprises each agree to cooperate with one
another in assisting the Company to make any and all filings required by the
Securities Exchange Act of 1934, as amended, or the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, in respect of this Agreement
and the transactions contemplated hereby.
3.2 No Negotiations. During the term of this Agreement, neither Shareholder
nor any affiliates or agents of Shareholder shall, directly or indirectly,
take any action to seek, encourage or support, or participate in any way in
discussions or negotiations with, or provide any information, data or
assistance to any party (other than Enterprises or a wholly owned subsidiary
thereof) concerning any acquisition of (a) the Shares, and (b) other
securities of the Company or any right, option or warrant to purchase any such
securities or all or any significant portion of the assets of the Company or
its Subsidiaries.
3.3 Negative Covenants. During the term of this Agreement, neither
Shareholder nor any affiliates or agents of Shareholder shall (a) grant any
proxy with respect to any of the Shares to any corporation, partnership,
person or other entity or group (other than to Enterprises or its designees),
(b) vote any of the Shares in favor of a proposal for the dissolution of, or a
Merger, consolidation, sale of assets or other similar transaction involving,
the Company other than as contemplated by Section 1.1 above, (c) provide to
any corporation, partnership, person or other entity or group (other than
Enterprises or its designees) any information (other than publicly available
information or information required to be disclosed by law) concerning the
Company, its business, operations or assets, or (d) take any other action
which is intended to frustrate the Merger.
3.4 Waiver of Dissenters' Rights. Shareholder hereby waives any right to
dissent from and obtain payment of the fair value of the Shares as a result of
the Merger.
ARTICLE IV
General Agreements
4.1 Amendment. No amendment, modification or alteration of the terms or
provisions of this Agreement shall be binding unless the same shall be in
writing and duly executed by the parties hereto.
4.2 Remedy for Breach. Shareholder and Enterprises each acknowledge and
agree that any remedy at law would be inadequate compensation for any breach
or threatened breach of the provisions of this Agreement, including without
limitation the provisions of Sections 1.1. Accordingly, the parties
specifically agree that the non-breaching party shall be entitled to specific
performance of all of the other party's obligations hereunder. This provision
shall not be interpreted to diminish or limit the right of either party to
claim all other available remedies.
4.3 Benefit. The authority conferred or agreed to be conferred by
Shareholder in this Agreement shall not be terminated by operation of law and
shall survive the death or incapacity of Shareholder. This Agreement
II-6
<PAGE>
shall be binding upon and inure to the benefit of the parties hereto and their
successors, personal representatives, heirs and assigns. This Agreement may
not be assigned, except by Enterprises to an entity controlling, controlled by
or under common control with Enterprises.
4.4 Further Assurance. Shareholder shall take such actions, furnish such
information, and prepare, cooperate in preparing, and execute and deliver to
Enterprises such additional documents, instruments or certificates as
Enterprises may reasonably request to enable Enterprises to obtain all rights
and benefits provided it hereunder.
4.5 Notices. Any notice, request, instruction or other document to be given
hereunder by any party hereto to the other shall be in writing and delivered
personally or sent by registered or certified mail (including by overnight
courier or express mail service), postage or fees prepaid, or sent by
facsimile with original sent by overnight courier to the address set forth
below the signatures of the undersigned or such other address as shall be
specified in writing. Any notice that is delivered personally in the manner
provided herein shall be deemed to have been duly given to the party to whom
it is directed upon actual receipt by such party or the office of such party.
Any notice which is addressed and mailed in the manner herein provided shall
be conclusively presumed to have been duly given to the party to which it is
addressed at the close of business on the third business day after the day it
is so placed in the mail, or if earlier, the time of actual receipt.
4.6 Expenses. Each party shall pay its expenses in connection with the
execution and performance of this Agreement.
4.7 Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
4.8 Counterparts. This Agreement may be executed in multiple counterparts,
each of which for all purposes shall be deemed an original, and which shall
constitute the same instrument.
4.9 Governing Law. This Agreement is executed by the parties hereto in and
shall be construed in accordance with and governed by the laws of the State of
Nevada, without giving effect to the principles of conflicts of laws thereof.
4.10 Entire Agreement. This Agreement (including the Exhibits hereto)
constitutes the entire agreement and understanding and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
[SIGNATURES APPEAR ON NEXT PAGE]
II-7
<PAGE>
In Witness Whereof, Enterprises and Shareholder have caused this Voting
Agreement to be executed, all as of the date first above written.
"SHAREHOLDER"
Address:
The Bank of New York
The Bank of New York
One Wall Street
/s/ Richard C. Pouch
New York, NY By:__________________________________
Vice President
"ENTERPRISES"
U.S. Xpress Enterprises, Inc. U.S. Xpress Enterprises, Inc.
2931 S. Market Street
Chattanooga, TN 37410
/s/ Ray M. Harlin
By:__________________________________
Chief Financial Officer
II-8
<PAGE>
ANNEX III
OPINION OF MORGAN KEEGAN & COMPANY, INC.
<PAGE>
MORGAN KEEGAN
- -------------------------------------------------------------------------------
Morgan Keegan & Company, Inc.
Morgan Keegan Tower
Fifty Front Street
Memphis, Tennessee 38103
901/524-4100 Telex 69-74324
WATS 800/366-7426
Members New York Stock Exchange, Inc.
July 27, 1998
Board of Directors
PST Vans, Inc.
1901 West 2100 South
Salt Lake City, UT 84119
Gentlemen:
We have acted as financial advisor to the Board of Directors of PST Vans,
Inc. (the "Company") in connection with the proposed acquisition by US Xpress
Enterprises, Inc. (the "Transaction"). The Transaction is described more fully
in the Agreement and Plan of Merger. You have requested our opinion as to
whether the consideration to be received by the Company's shareholders in
connection with the Transaction is fair to such shareholders from a financial
point of view. We are not expressing any opinion as to the price at which the
US Xpress Enterprises, Inc. Common Stock will trade subsequent to the
Transaction. Further, our opinion does not address the relative merits of the
Transaction and the other business strategies being considered by the
Company's Board of Directors, nor does it address the Board's decision to
proceed with the Transaction.
In connection with our review of the Transaction, and in arriving at our
opinion, we have, among other things:
(1) reviewed certain publicly available consolidated financial statements
of the Company and US Xpress Enterprises, Inc. and certain other
relevant financial and operating data of the Company made available to
us from published sources and by officers of the Company;
(2) reviewed certain internal financial and operating information,
including certain projections, relating to the Company prepared by the
management of the Company;
(3) discussed the business, financial condition and prospects of the
Company with certain officers of the Company;
(4) reviewed the financial terms of the Transaction;
(5) reviewed the financial terms, to the extent publicly available, of
certain similar transactions we deemed relevant;
(6) reviewed certain publicly available information relating to certain
companies we deemed appropriate in analyzing the Company;
(7) reviewed the trading history of the Company's Common Stock;
(8) reviewed a draft of the Agreement and Plan of Merger;
(9) performed such other analyses and examinations and considered such
other information, financial studies, analysis and investigations and
financial, economic and market data as we deemed relevant.
<PAGE>
BOARD OF DIRECTORS, PST VANS, INC.
JULY 27, 1998
PAGE 2
We have not independently verified any of the information concerning the
Company or US Xpress Enterprises, Inc. considered by us in connection with our
review of the Transaction and, for purposes of the opinion set forth herein,
we have assumed and relied upon the accuracy and completeness of all such
information. With respect to the financial forecasts and projections made
available to us and used in our analysis, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the management of the Company as to the expected future
financial performance of the Company. We have not been engaged to assess the
achievability of such projections or assumptions. In addition, we have not
conducted a physical inspection or appraisal of any of the assets, properties,
or facilities of either the Company or US Xpress Enterprises, Inc. nor have we
been furnished with any such evaluation or appraisal. Our opinion is
necessarily based upon market, economic, financial and other conditions as
they exist on, and can be evaluated as of, the date of this letter. Any change
in such conditions would require a reevaluation of this opinion.
In connection with our opinion, we have assumed that the Transaction will be
consummated on the terms and subject to the conditions described in the
Agreement and Plan of Merger. We also have assumed that all necessary
governmental and regulatory approvals and third-party consents will be
obtained on terms and conditions that will not have a material adverse effect
on the Company or US Xpress Enterprises, Inc.
Morgan Keegan & Company, Inc., as part of its investment banking services,
is regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, corporate restructurings, strategic
alliances, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. We have acted as financial advisor to the Board of Directors of the
Company in connection with the Transaction and will receive a fee for our
services. In addition, the Company has agreed to indemnify us for certain
liabilities arising out of the rendering of this opinion. In the ordinary
course of our business, we may trade in the debt and equity securities of the
Company and US Xpress Enterprises, Inc. for our own account or for the
accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities. Moreover, we have in the past rendered, and
may in the future render, investment banking services for US Xpress
Enterprises, Inc.
This letter and the opinion stated herein are solely for the use of the
Company's Board of Directors and may not be reproduced, summarized, excerpted
from or otherwise publicly referred to in any manner without our prior written
consent.
Based upon and subject to the foregoing and such other matters as we deem
relevant, we are of the opinion that as of the date hereof, the purchase price
as set forth in the Agreement and Plan of Merger is fair to the Company's
shareholders from a financial point of view.
We hereby consent to the inclusion of the full text of our opinion and
summary thereof in any disclosure document or proxy statement relating to the
Transaction that the Company must file under the federal securities laws and
distribute to its shareholders. This opinion is not intended to be and does
not constitute a recommendation to any shareholder of the Company as to how
such shareholder should vote with respect to the Transaction.
Sincerely,
/s/ MORGAN KEEGAN & COMPANY, INC.
<PAGE>
ANNEX IV
PART 13
UTAH REVISED BUSINESS CORPORATION ACT
DISSENTERS' RIGHTS
<PAGE>
16-10A-1301. DEFINITIONS. For purposes of Part 13:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 16-10A-1302 and who exercises that right when
and in the manner required by Sections 16-10A-1320 through 16-10A-1328.
(4) "Fair value" with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the statutory rate set forth in Section
15-1-1, compounded annually.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent the beneficial
owner is recognized by the corporation as the shareholder as provided in
Section 16-10A-723.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
16-10A-1302. RIGHT TO DISSENT. (1) A shareholder, whether or not entitled to
vote, is entitled to dissent from, and obtain payment of the fair value of
shares held by him in the event of, any of the following corporate actions:
(a) consummation of a plan of merger to which the corporation is a party
if:
(i) shareholder approval is required for the merger by Section 16-
10A-1103 or the articles of incorporation; or
(ii) the corporation is a subsidiary that is merged with its parent
under Section 16-10A-1104;
(b) consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired;
(c) consummation of a sale, lease, exchange, or other disposition of all,
or substantially all, of the property of the corporation for which a
shareholder vote is required under Subsection 16-10A-1202(1), but not
including a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale; and
(d) consummation of a sale, lease, exchange, or other disposition of all,
or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote
upon the consent of the corporation to the disposition pursuant to
Subsection 16-10A-1202(2).
(2) A shareholder is entitled to dissent and obtain payment of the fair
value of his shares in the event of any other corporate action to the extent
the articles of incorporation, bylaws, or a resolution of the board of
directors so provides.
(3) Notwithstanding the other provisions of this part, except to the extent
otherwise provided in the articles of incorporation, bylaws, or a resolution
of the board of directors, and subject to the limitations set forth in
Subsection (4), a shareholder is not entitled to dissent and obtain payment
under Subsection (1) of the fair value of the shares of any class or series of
shares which either were listed on a national securities exchange registered
under the federal Securities Exchange Act of 1934, as amended, or on the
National Market System of the National Association of Securities Dealers
Automated Quotation System, or were held of record by more than 2,000
shareholders, at the time of:
<PAGE>
(a) the record date fixed under Section 16-10A-707 to determine the
shareholders entitled to receive notice of the shareholders' meeting at
which the corporate action is submitted to a vote;
(b) the record date fixed under Section 16-10A-704 to determine
shareholders entitled to sign writings consenting to the proposed corporate
action; or
(c) the effective date of the corporate action if the corporate action is
authorized other than by a vote of shareholders.
(4) The limitation set forth in Subsection (3) does not apply if the
shareholder will receive for his shares, pursuant to the corporate action,
anything except:
(a) shares of the corporation surviving the consummation of the plan of
merger or share exchange;
(b) shares of a corporation which at the effective date of the plan of
merger or share exchange either will be listed on a national securities
exchange registered under the federal Securities Exchange Act of 1934, as
amended, or on the National Market System of the National Association of
Securities Dealers Automated Quotation System, or will be held of record by
more than 2,000 shareholders;
(c) cash in lieu of fractional shares; or
(d) any combination of the shares described in Subsection (4), or cash in
lieu of fractional shares.
(5) A shareholder entitled to dissent and obtain payment for his shares
under this part may not challenge the corporate action creating the
entitlement unless the action is unlawful or fraudulent with respect to him or
to the corporation.
16-10A-1320. NOTICE OF DISSENTERS' RIGHTS. (1) If a proposed corporate action
creating dissenters' rights under Section 16-10A-1302 is submitted to a vote
at a shareholders' meeting, the meeting notice must be sent to all
shareholders of the corporation as of the applicable record date, whether or
not they are entitled to vote at the meeting. The notice shall state that
shareholders are or may be entitled to assert dissenters' rights under this
part. The notice must be accompanied by a copy of this part and the materials,
if any, that under this chapter are required to be given the shareholders
entitled to vote on the proposed action at the meeting. Failure to give notice
as required by this subsection does not affect any action taken at the
shareholders' meeting for which the notice was to have been given.
(2) If a proposed corporate action creating dissenters' rights under Section
16-10A-1302 is authorized without a meeting of shareholders pursuant to
Section 16-10A-704, any written or oral solicitation of a shareholder to
execute a written consent to the action contemplated by Section 16-10A-704
must be accompanied or preceded by a written notice stating that shareholders
are or may be entitled to assert dissenters' rights under this part, by a copy
of this part, and by the materials, if any, that under this chapter would have
been required to be given to shareholders entitled to vote on the proposed
action if the proposed action were submitted to a vote at a shareholders'
meeting. Failure to give written notice as provided by this subsection does
not affect any action taken pursuant to Section 16-10A-704 for which the
notice was to have been given.
16-10A-1321. DEMAND FOR PAYMENT--ELIGIBILITY AND NOTICE OF INTENT. (1) If a
proposed corporate action creating dissenters' rights under Section 16-10A-
1302 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(a) must cause the corporation to receive, before the vote is taken,
written notice of his intent to demand payment for shares if the proposed
action is effectuated; and
(b) may not vote any of his shares in favor of the proposed action.
(2) If a proposed corporate action creating dissenters' rights under Section
16-10A-1302 is authorized without a meeting of shareholders pursuant to
Section 16-10A-704, a shareholder who wishes to assert dissenters' rights may
not execute a writing consenting to the proposed corporate action.
<PAGE>
(3) In order to be entitled to payment for shares under this part, unless
otherwise provided in the articles of incorporation, bylaws, or a resolution
adopted by the board of directors, a shareholder must have been a shareholder
with respect to the shares for which payment is demanded as of the date the
proposed corporate action creating dissenters' rights under Section 16-10A-
1302 is approved by the shareholders, if shareholder approval is required, or
as of the effective date of the corporate action if the corporate action is
authorized other than by a vote of shareholders.
(4) A shareholder who does not satisfy the requirements of Subsections (1)
through (3) is not entitled to payment for shares under this part.
16-10A-1322. DISSENTERS' NOTICE. (1) If proposed corporate action creating
dissenters' rights under Section 16-10A-1302 is authorized, the corporation
shall give a written dissenters' notice to all shareholders who are entitled
to demand payment for their shares under this part.
(2) The dissenters' notice required by Subsection (1) must be sent no later
than ten days after the effective date of the corporate action creating
dissenters' rights under Section 16-10A-1302, and shall:
(a) state that the corporate action was authorized and the effective date
or proposed effective date of the corporate action;
(b) state an address at which the corporation will receive payment
demands and an address at which certificates for certificated shares must
be deposited;
(c) inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(d) supply a form for demanding payment, which form requests a dissenter
to state an address to which payment is to be made;
(e) set a date by which the corporation must receive the payment demand
and by which certificates for certificated shares must be deposited at the
address indicated in the dissenters' notice, which dates may not be fewer
than 30 nor more than 70 days after the date the dissenters' notice
required by Subsection (1) is given;
(f) state the requirement contemplated by Subsection 16-10A-1303(3), if
the requirement is imposed; and
(g) be accompanied by a copy of this part.
16-10A-1323. PROCEDURE TO DEMAND PAYMENT. (1) A shareholder who is given a
dissenters' notice described in Section 16-10A-1322, who meets the
requirements of Section 16-10A-1321, and wishes to assert dissenters' rights
must, in accordance with the terms of the dissenters' notice:
(a) cause the corporation to receive a payment demand, which may be the
payment demand form contemplated in Subsection 16-10A-1322(2)(d), duly
completed, or may be stated in another writing;
(b) deposit certificates for his certificated shares in accordance with
the terms of the dissenters' notice; and
(c) if required by the corporation in the dissenters' notice described in
Section 16-10A-1322, as contemplated by Section 16-10A-1327, certify in
writing, in or with the payment demand, whether or not he or the person on
whose behalf he asserts dissenters' rights acquired beneficial ownership of
the shares before the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action creating
dissenters' rights under Section 16-10A-1302.
(2) A shareholder who demands payment in accordance with Subsection (1)
retains all rights of a shareholder except the right to transfer the shares
until the effective date of the proposed corporate action giving rise to the
exercise of dissenters' rights and has only the right to receive payment for
the shares after the effective date of the corporate action.
<PAGE>
(3) A shareholder who does not demand payment and deposit share certificates
as required, by the date or dates set in the dissenters' notice, is not
entitled to payment for shares under this part.
16-10A-1324. UNCERTIFICATED SHARES. (1) Upon receipt of a demand for payment
under Section 16-10A-1323 from a shareholder holding uncertificated shares,
and in lieu of the deposit of certificates representing the shares, the
corporation may restrict the transfer of the shares until the proposed
corporate action is taken or the restrictions are released under Section 16-
10A-1326.
(2) In all other respects, the provisions of Section 16-10A-1323 apply to
shareholders who own uncertificated shares.
16-10A-1325. PAYMENT. (1) Except as provided in Section 16-10A-1327, upon the
later of the effective date of the corporate action creating dissenters'
rights under Section 16-10A-1302, and receipt by the corporation of each
payment demand pursuant to Section 16-10A-1323, the corporation shall pay the
amount the corporation estimates to be the fair value of the dissenter's
shares, plus interest to each dissenter who has complied with Section 16-10A-
1323, and who meets the requirements of Section 16-10A-1321, and who has not
yet received payment.
(2) Each payment made pursuant to Subsection (1) must be accompanied by:
(a)(i)(A) the corporation's balance sheet as of the end of its most
recent fiscal year, or if not available, a fiscal year ending not more than
16 months before the date of payment;
(B) an income statement for that year;
(C) a statement of changes in shareholders' equity for that year and a
statement of cash flow for that year, if the corporation customarily
provides such statements to shareholders; and
(D) the latest available interim financial statements, if any;
(ii) the balance sheet and statements referred to in Subsection (i) must
be audited if the corporation customarily provides audited financial
statements to shareholders;
(b) a statement of the corporation's estimate of the fair value of the
shares and the amount of interest payable with respect to the shares;
(c) a statement of the dissenter's right to demand payment under Section
16-10A-1328; and
(d) a copy of this part.
16-10A-1326. FAILURE TO TAKE ACTION. (1) If the effective date of the
corporate action creating dissenters' rights under Section 16-10A-1302 does
not occur within 60 days after the date set by the corporation as the date by
which the corporation must receive payment demands as provided in Section 16-
10A-1322, the corporation shall return all deposited certificates and release
the transfer restrictions imposed on uncertificated shares, and all
shareholders who submitted a demand for payment pursuant to Section 16-10A-
1323 shall thereafter have all rights of a shareholder as if no demand for
payment had been made.
(2) If the effective date of the corporate action creating dissenters'
rights under Section 16-10A-1302 occurs more than 60 days after the date set
by the corporation as the date by which the corporation must receive payment
demands as provided in Section 16-10A-1322, then the corporation shall send a
new dissenters' notice, as provided in Section 16-10A-1322, and the provisions
of Sections 16-10A-1323 through 16-10A-1328 shall again be applicable.
16-10A-1327. SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER ANNOUNCEMENT
OF PROPOSED CORPORATE ACTION. (1) A corporation may, with the dissenters'
notice given pursuant to Section 16-10A-1322, state the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action creating dissenters' rights under Section 16-10A-1302 and
state that a shareholder who asserts dissenters' rights must certify in
writing, in or with the payment demand, whether or not he or the person on
whose behalf he
<PAGE>
asserts dissenters' rights acquired beneficial ownership of the shares before
that date. With respect to any dissenter who does not certify in writing, in
or with the payment demand that he or the person on whose behalf the
dissenters' rights are being asserted, acquired beneficial ownership of the
shares before that date, the corporation may, in lieu of making the payment
provided in Section 16-10A-1325, offer to make payment if the dissenter agrees
to accept it in full satisfaction of his demand.
(2) An offer to make payment under Subsection (1) shall include or be
accompanied by the information required by Subsection 16-10A-1325(2).
16-10A-1328. PROCEDURE FOR SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER. (1) A dissenter who has not accepted an offer made by a corporation
under Section 16-10A-1327 may notify the corporation in writing of his own
estimate of the fair value of his shares and demand payment of the estimated
amount, plus interest, less any payment made under Section 16-10A-1325, if:
(a) the dissenter believes that the amount paid under Section 16-10A-1325
or offered under Section 16-10A-1327 is less than the fair value of the
shares;
(b) the corporation fails to make payment under Section 16-10A-1325
within 60 days after the date set by the corporation as the date by which
it must receive the payment demand; or
(c) the corporation, having failed to take the proposed corporate action
creating dissenters' rights, does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as
required by Section 16-10A-1326.
(2) A dissenter waives the right to demand payment under this section unless
he causes the corporation to receive the notice required by Subsection (1)
within 30 days after the corporation made or offered payment for his shares.
16-10A-1330. JUDICIAL APPRAISAL OF SHARES--COURT ACTION. (1) If a demand for
payment under Section 16-10A-1328 remains unresolved, the corporation shall
commence a proceeding within 60 days after receiving the payment demand
contemplated by Section 16-10A-1328, and petition the court to determine the
fair value of the shares and the amount of interest. If the corporation does
not commence the proceeding within the 60-day period, it shall pay each
dissenter whose demand remains unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in Subsection
(1) in the district court of the county in this state where the corporation's
principal office, or if it has no principal office in this state, the county
where its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered office of the
domestic corporation merged with, or whose shares were acquired by, the
foreign corporation was located.
(3) The corporation shall make all dissenters who have satisfied the
requirements of Sections 16-10A-1321, 16-10A-1323, and 16-10A-1328, whether or
not they are residents of this state whose demands remain unresolved, parties
to the proceeding commenced under Subsection (2) as an action against their
shares. All such dissenters who are named as parties must be served with a
copy of the petition. Service on each dissenter may be by registered or
certified mail to the address stated in his payment demand made pursuant to
Section 16-10A-1328. If no address is stated in the payment demand, service
may be made at the address stated in the payment demand given pursuant to
Section 16-10A-1323. If no address is stated in the payment demand, service
may be made at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares.
Service may also be made otherwise as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced under
Subsection (2) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
<PAGE>
(5) Each dissenter made a party to the proceeding commenced under Subsection
(2) is entitled to judgment:
(a) for the amount, if any, by which the court finds that the fair value
of his shares, plus interest, exceeds the amount paid by the corporation
pursuant to Section 16-10A-1325; or
(b) for the fair value, plus interest, of the dissenter's after-acquired
shares for which the corporation elected to withhold payment under Section
16-10A-1327.
16-10A-1331. COURT COSTS AND COUNSEL FEES. (1) The court in an appraisal
proceeding commenced under Section 16-10A-1330 shall determine all costs of
the proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court. The court shall assess the costs against
the corporation, except that the court may assess costs against all or some of
the dissenters, in amounts the court finds equitable, to the extent the court
finds that the dissenters acted arbitrarily, vexatiously, or not in good faith
in demanding payment under Section 16-10A-1328.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of Sections 16-10A-1320 through 16-10A-1328; or
(b) against either the corporation or one or more dissenters, in favor of
any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this part.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to those counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefitted.
<PAGE>
ANNEX V
TAX OPINION OF PARR, WADDOUPS, BROWN,
GEE & LOVELESS, P.C.
<PAGE>
ANNEX V
PARR WADDOUPS BROWN GEE & LOVELESS, P.C.
185 S. STATE STREET
SUITE 1300
SALT LAKE CITY , UT 84147
July 17, 1998
PST Vans, Inc.
1901 West 2100 S.
Salt Lake City, UT 84119
Re: Agreement and Plan of Merger by and among U.S.Xpress Enterprises, Inc.,
PST Acquisition Corp., and PST Vans, Inc.
Ladies and Gentlemen:
We have acted as counsel to PST Vans, Inc., a Utah corporation ("PST"), in
connection with the proposed merger (the "Merger") of PST with and into PST
Acquisition Corp., a Nevada corporation ("Merger Sub"), pursuant to the terms
of the Agreement and Plan of Merger dated as of July 7, 1998 (the "Merger
Agreement") by and among U.S.Xpress, Enterprises, Inc., a Nevada corporation
("Enterprises"), Merger Sub, and PST as described in the Registration
Statement on Form S-4 to be filed by Enterprises with the Securities and
Exchange Commission today (the "Registration Statement"). All capitalized
terms, unless otherwise specified, have the meanings assigned to them in the
Registration Statement.
You have requested our opinion as to whether the Merger should constitute a
reorganization within the meaning of section 368(a)/1/ and as to the material
Federal income tax consequences of the Merger applicable to holders of PST
Common Stock. This opinion is being rendered pursuant to the requirements of
Item 21(a) of Form S-4 under the Securities Act of 1933, as amended.
ASSUMPTIONS AND RELIANCE
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the Merger Agreement, (ii) the Registration Statement, and (iii) such
other documents as we have deemed necessary or appropriate in order to enable
us to render the opinion below. In our examination, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified, conformed,
or photostatic copies, and the authenticity of the originals of such copies.
In rendering the opinion set forth below, we have relied upon certain
representations of PST and Enterprises, which are made in letters to us dated
July 17, 1998 from PST and Enterprises, respectively.
In rendering our opinion, we have considered the applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, pertinent judicial authorities, interpretive rulings of the
Internal Revenue Service, and such other authorities as we have considered
relevant.
SUMMARY OF FACTS
The terms of the proposed Merger are contained in the Merger Agreement and
in the Registration Statement. The following factual summary is derived from
our examination of those documents.
U.S.Xpress Enterprises, Inc. ("Enterprises") is a Nevada corporation that is
the parent corporation of Merger Sub as well as other subsidiaries.
Enterprises and its subsidiaries provide transportation and logistics
- --------
/1Unless/otherwise specifically indicated, all section references are to the
Internal Revenue Code of 1986, as amended (the "Code").
<PAGE>
services in the United States, Canada, and Mexico. Merger Sub, a wholly owned
subsidiary of Enterprises, is a Nevada corporation that was incorporated
solely for the purpose of facilitating the Merger.
PST is a Utah corporation. PST is a truckload carrier engaged in the
business of operating exclusively a fleet of standardized, modern tractors and
53-foot dry van trailers for its customers throughout three United States
markets: transcontinental, intrawest, and midwest-southwest.
The Merger Agreement provides that PST will be merged with and into Merger
Sub in accordance with the applicable provisions of the General Corporation
Law of Nevada and the Utah Revised Business Corporation Act The Merger is
subject to the approval of PST's shareholders at a special meeting of
shareholders to be held as soon as practicable after the Registration
Statement is declared effective by the Securities and Exchange Commission.
Holders of PST stock may be entitled to exercise dissenters' rights with
respect to the Merger. If, however, persons holding more than ten percent of
the outstanding PST Common Stock as of the Effective Time shall have perfected
their right to dissent from the Merger and receive cash payment for their
shares, Enterprises and Merger Sub may elect to terminate the Merger.
At the Effective Time, all assets and liabilities of PST will be transferred
by operation of law to Merger Sub, the separate corporate existence of PST
will cease and the shares of PST Common Stock then outstanding (other than
shares of PST Common Stock held by Enterprises, PST, or subsidiaries of either
and other than shares for which dissenters rights are perfected) will be
converted into the right to receive, in the aggregate for all such shares and
for all shares that would have been issued upon the full exercise of all the
options described below, consideration consisting of (i) 1,100,000 shares of
Enterprises Class A common stock, $.01 par value per share (the "Enterprises
Common Stock"), and (ii) cash in the amount of $12,500,000 plus any cash paid
for fractional shares as described below, (collectively, the "Merger
Consideration") .
No shares of PST Common Stock are held in PST's treasury, but Enterprises
currently owns approximately 206,800 shares of PST Common Stock purchased in
contemplation of the Merger, representing about 4.8% of the shares
outstanding. Each such share of PST Common Stock held by Enterprises or held
by PST in its treasury immediately prior to the Effective Time will be
canceled, and no Merger Consideration will be payable for those shares. Merger
Sub will be the surviving entity (sometimes referred to as the "Surviving
Corporation") following the Merger and its name will be changed to "PST Vans,
Inc."
No fractional shares of Enterprises Common Stock will be issued in the
Merger. Each holder of PST Common Stock who otherwise would be entitled to
receive a fraction of a share of Enterprises Common Stock will receive,
instead, cash in an amount equal to such fraction multiplied by the average
Closing Price as reported on the NASDAQ National Market of one share of
Enterprises Common Stock for the twenty trading days immediately prior to the
Closing Date.
Enterprises will transfer the Merger Consideration to BankBoston, NA (the
"Exchange Agent") no later than the Effective Time together with irrevocable
instructions to pay the Merger Consideration to the surrendering holders of
the outstanding certificates formerly representing the shares of PST Common
Stock. Enterprises will promptly after the Effective Time send written
instructions to all such certificate holders regarding the surrender of their
shares. Any portion of the Merger Consideration not claimed by such holders
after six months will be returned to Enterprises, who will thereafter disburse
such Merger Consideration, without interest, in exchange for such certificates
as and when presented.
No options to purchase PST Common Stock and no securities or other
instruments convertible into PST Common Stock will be outstanding at the
Effective Time except for options held by certain directors, officers, and key
employees of PST for approximately 351,000 shares of PST Common Stock (the
"PST Options"). As of the Effective Time, all the PST Options will become
immediately vested and exercisable in full. The rights to PST Common Stock
acquired by the exercise of the PST Options shall automatically be converted
into the right to receive the portion of the Merger Consideration that would
have been issued for such stock had the PST Options been exercised immediately
prior to the Effective Time. Any PST Options not exercised within six months
of the Effective Time will be null and void.
<PAGE>
OPINION
Based upon and subject to the foregoing, we are of the opinion that for
federal income tax purposes the Merger will, under current law, constitute a
"reorganization" within the meaning of section 368(a)(1)(A) (by virtue of
section 368(a)(2)(D)) and Enterprises, Merger Sub, and PST will each be a
party to the reorganization within the meaning of section 368(b).
As a reorganization under section 368(a), the Merger will have the following
Federal income tax consequences for PST shareholders, PST, and Enterprises:
1. No gain or loss will be recognized by holders of PST Common Stock as a
result of the exchange of such shares for the Merger Consideration pursuant to
the Merger, EXCEPT that:
a. Gain, but not loss, will be recognized on the receipt of the cash
portion of the Merger Consideration in an amount equal to the lesser of the
cash received or the gain realized on the exchange of the PST Common Stock;
b. Gain or loss will be recognized on the receipt of cash, if any,
received in lieu of fractional shares; and
c. Income may be recognized upon the exercise of the PST Options by
virtue of the tax consequences of exercising such options, but, except as
provided above with respect to the receipt of cash, not by reason of the
conversion pursuant to the merger of the PST Common Stock so acquired.
Please refer to the proxy statement/prospectus included as part of the
Registration Statement (the "Proxy Statement") for a more complete description
of the potential tax consequences to the holders of PST Common Stock that will
result from the above tax treatment, including the possibility for some such
shareholders that all or a part of the cash received may be treated as a
dividend.
2. The tax basis of the shares of Enterprises Common Stock received by each
shareholder of PST will equal the tax basis of such shareholder's shares of
PST Common Stock decreased by the amount of cash received for such shares and
increased by the amount of gain recognized in respect of such shares.
3. The holding period for the shares of Enterprises Common Stock received by
each shareholder of PST will include the holding period for the shares of PST
Common Stock of such shareholder exchanged in the Merger.
4. Enterprises will not recognize gain or loss as a result of the Merger.
5. PST will not recognize gain or loss as a result of the Merger.
Based upon and subject to the foregoing, the discussion contained in the
Proxy Statement under the caption "Certain Federal Income Tax Considerations"
expresses our opinion as to the material Federal income tax consequences
applicable to holders of PST Common Stock, subject to the qualifications
included in that discussion.
Our opinion is limited to the foregoing federal income tax consequence of
the Merger, which is the only matter as to which you have requested our
opinion. We do not address any other federal income tax consequences of the
Merger or of any transaction related to the Merger or contemplated by the
Merger Agreement or the Registration Statement or other matters of federal law
and have not considered matters (including state or local tax consequence)
arising under the laws of any jurisdiction other than matters of federal law
arising under the laws of the United States.
Our opinion is based on the understanding that the relevant facts are, and
will be at the Effective Time, as set forth or referred to in this letter and
the supporting representation letters from PST and Enterprises. If this
understanding is incorrect or incomplete in any respect, our opinion could be
affected.
<PAGE>
Our opinion is also based on the Code, Treasury Regulations, case law, and
Internal Revenue Service rulings as they now exist. These authorities are all
subject to change and such change may be made with retroactive effect. We can
give no assurance that after any such change, our opinion would not be
different. Moreover, our opinion will not be binding on the IRS or the courts.
We undertake no responsibility to update or supplement our opinion except
that we will reaffirm our opinion as of the Effective Time and as of the time
of the Merger if no charge in law or circumstance renders us unable to do so.
This opinion is being furnished to you in connection with the Merger and
solely for your use in connection therewith, including for use in connection
with the Registration Statement, and may not be used or relied upon for any
other purpose. We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement. We also consent to the references to Parr,
Waddoups, Brown, Gee & Loveless, P.C. under the heading "Certain Federal
Income Tax Considerations" in the Registration Statement and the Proxy
Statement.
Very truly yours,
/s/ Parr Waddoups Brown Gee & Loveless, P.C.
Parr Waddoups Brown Gee & Loveless, P.C.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The bylaws of the Registrant, in Article Eleven, provide the following:
Any director or officer, or the executor or administrator of any director
of officer, is entitled to indemnification to the fullest extent permitted
under the laws of this state.
The Restated Articles of Incorporation of the Registrant, in Article Twelve,
provides the following:
To the fullest extent permitted by the Nevada General Corporation Law, as
the same exists or may hereafter be amended, a director or officer of this
corporation shall not be personably liable to the corporation or its
stockholders for monetary damages for breach of his or her fiduciary duty
as a director of officer.
To the fullest extent permitted by the Nevada General Corporation Law, as
the same exists or may hereafter be amended, the corporation shall
indemnify any person who is made or threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, whether formal or informal, by
reason of the fact that such person is or was a director or officer of the
corporation or of any of its subsidiaries, or is or was serving at the
direction of the corporation in any such capacity with any other entity
whatsoever.
The requirement that the corporation shall provide indemnification
pursuant to this Article Twelve shall not preclude any other or additional
provision of indemnification, provided by law, by insurance, by agreement
between this corporation and the parties to be indemnified or otherwise. In
addition to the rights of indemnification granted herein, this corporation
shall, to the fullest extent now or hereafter permitted by the Nevada
General Corporation Law, provide for the advancement of expenses as they
are incurred by any director or officer of the corporation in the defense
of any proceeding of the type described above, in advance of the final
disposition of such proceeding.
With certain limitations, Section 78.7502 of the Nevada General Corporation
Law permit a corporation to indemnify a director or officer who is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation, by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses, including
attorneys fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with the action, suit or proceeding
if he acted in good faith and in a manner which he reasonably believed to be
in or not opposed to the interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
In addition, the Registrant maintains directors' and officers' liability
insurance policies.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
---------------- -------------------------------------------------------------
<C> <S>
*3.1 Restated Articles of Incorporation of Enterprises.
*3.2 By-Laws of Enterprises.
*4.1 Restated Articles of Incorporation of Enterprises filed as
Exhibit 3.1 and incorporated herein by reference.
*4.2 By-Laws of Enterprises filed as Exhibit 3.2 and incorporated
herein by reference.
*4.3 Stock Purchase Agreement dated June 10, 1993 by and among Max
L. Fuller, Patrick E. Quinn and Enterprises.
*4.4 Agreement of Right of First Refusal with regard to Class B
Shares of Enterprises dated May 11, 1994 by and between Max
L. Fuller and Patrick E. Quinn.
************5.1 Opinion of Miller & Martin LLP re: legality.
8.1 Opinion of Parr, Waddoups, Brown, Gee & Loveless re: certain
tax matters (included as Annex V to the Proxy
Statement/Prospectus).
*10.1 Accounts Financing Agreement (Security Agreement) dated
February 2, 1988, as amended, between Congress Financial
Corp. (Southern) and Southwest Motor Freight, Inc
*10.2 Security Agreement dated December 18, 1985, as amended, by
and between Exchange National Bank of Chicago and U.S.
Xpress, Inc.
*10.3 Security Agreement dated September 17, 1987, as amended, by
and between Exchange National Bank of Chicago and Crown
Transport Systems, Inc.
*10.4 1993 Incentive Stock Plan of Enterprises.
*10.5 Stock Option Agreement Under 1993 Incentive Stock Plan.
*10.6 Stock Rights and Restrictions Agreement for Restricted Stock
Award Under 1993 Incentive Stock Plan.
*10.7 Self-Funded Employee Benefits Plan Document of Enterprises.
*10.8 Service Agreement dated May 2, 1994 by and between TTC,
Illinois, Inc. and PST for the provision of leased personnel
to Enterprises.
*10.9 Salary Continuation Agreement dated June 10, 1993 by and
between Enterprises and Max L. Fuller.
*10.10 Salary Continuation Agreement dated June 10, 1993 by and
between Enterprises and Patrick E. Quinn.
*10.11 Stock Purchase Agreement dated November 28, 1990 by and
between Enterprises and Clyde Fuller for the acquisition by
Enterprises of the capital stock of Southwest Motor Freight,
Inc. held by Mr. Fuller, such stock constituting all of the
issued and outstanding capital stock of Southwest Motor
Freight, Inc.
*10.12 Stock Purchase Agreement dated September 30, 1992 by and
between Enterprises and Clyde Fuller for the acquisition by
Enterprises of the capital stock of Chattanooga Leasing, Inc.
held by Mr. Fuller, such stock constituting all of the issued
and outstanding capital stock of Chattanooga Leasing, Inc.
*10.13 Articles of Merger and Plan of Merger filed February 24,
1993, pursuant to which Chattanooga Leasing, Inc. was merged
with and into Southwest Motor Freight, Inc.
*10.14 Stock Purchase Agreement dated January 1, 1993 by and among
Max L. Fuller, Patrick E. Quinn and Enterprises for the
acquisition by Enterprises of the capital stock of U.S.
Xpress, Inc. held by Messrs. Fuller and Quinn, such stock
constituting all of the issued and outstanding capital stock
of U.S. Xpress, Inc.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
---------------- -------------------------------------------------------------
<C> <S>
*10.15 Stock Purchase Agreement dated January 1, 1993 by and among
Max L. Fuller, Patrick E. Quinn and Enterprises for the
acquisition by Enterprises of the capital stock of U.S.
Xpress Leasing, Inc. held by Messrs. Fuller and Quinn, such
stock constituting all of the issued and outstanding capital
stock of U.S. Xpress Leasing, Inc.
*10.16 Stock Purchase Agreement dated March 10, 1994 by and between
Enterprises and L. D. Miller, III for the acquisition by
Enterprises of the capital stock of Crown Transport Systems,
Inc. held by Mr. Miller, such stock constituting 40% of the
issued and outstanding capital stock of Crown Transport
Systems, Inc.
*10.17 Stock Purchase Agreement dated March 17, 1994 by and between
Enterprises, Patrick E. Quinn and Max L. Fuller for the
acquisition by Enterprises of the capital stock of Crown
Transport Systems, Inc. held by Messrs. Quinn and Fuller,
such stock constituting 60% of the issued and outstanding
capital stock of Crown Transport Systems, Inc.
*10.18 Stock Purchase Agreement dated March 18, 1994 by and between
Enterprises and Ken Adams for the acquisition by Enterprises
of 50% of the capital stock of Hall Systems, Inc. held by Mr.
Adams and the grant of an option to Enterprises to purchase
the remaining 50% of the capital stock of Hal I Systems, Inc.
from Mr. Adams, exercisable beginning April 1, 1997.
***10.19 Software Acquisition Agreement dated September 15, 1994 by
and among Qualcomm Incorporated, Xpress Data Services, Inc.,
U.S. Xpress Enterprises, Inc., Patrick E. Quinn, Max L.
Fuller, Information anagement Solutions, Inc. and James
Coppinger.
****10.20 Stock Purchase Agreement dated October 31, 1994 by and
between Enterprises and Ken Frohlich for the acquisition by
Enterprises of the capital stock of National Freight Systems,
Inc. held by Mr. Frohlich, such stock constituting all of the
issued and outstanding capital stock of National Freight
Systems, Inc.
*****10.21 Asset Purchase Agreement with respect to acquisition of
CSI/Reeves, Inc.
******10.22 Stock Purchase Agreement with respect to Hall Systems, Inc.
******10.23 Credit Agreement with NationsBank.
*******10.24 Amendment No. 1 to Credit Agreement with NationsBank.
********10.25 Asset Purchase Agreement dated June 18, 1996 with respect to
acquisition of Michael Lima Transportation, Inc.
********10.26 Asset Purchase Agreement dated April 1, 1997 with respect to
acquisition of assets from Rosedale Transport, Inc. and
Rosedale Transport, Ltd.
********10.27 Asset Purchase Agreement dated April 25, 1997 with respect to
acquisition of JTI, Inc.
*********10.28 Loan and Security Agreement dated June 24, 1997 by and
between Wachovia Bank, N.A. and U.S. Xpress Leasing.
**********10.29 Stock Purchase Agreement dated as of December 24, 1997 by and
between U.S. Xpress Enterprises, Inc. and Richard H.
Schaffer, Richard H. Schaffer Irrevocable Trust dated
December 24, 1991 and Richard H. Schaffer Irrevocable Non-
Withdrawal Trust dated December 24, 1991.
**********10.30 Credit Agreement dated as of January 15, 1998 among U.S.
Xpress Enterprises, Inc., Wachovia Bank, N.A., NationsBank,
N.A., BankBoston, N.A., SunTrust Bank, Chattanooga, N.A. and
the banks listed therein.
***********10.31 Investment and Participation Agreement dated as of March ,
1998 among U.S. Xpress Enterprises, Inc., Wachovia Capital
Markets, Inc. and the lease participants listed therein.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------------- ------------------------------------------------------------
<C> <S>
***********10.32 Acquisition, Agency, Indemnity and Support Agreement dated
as of February 29, 1998 by and between U.S. Xpress
Enterprises, Inc. and Wachovia Capital Markets, Inc.
***********10.33 Lease Agreement dated as of February 29, 1998 by and between
Wachovia Capital Markets, Inc. and U.S. Xpress Enterprises,
Inc.
23.1 Consent of Arthur Andersen LLP--Chattanooga, Tennessee.
23.2 Consent of Arthur Andersen LLP--Salt Lake City, Utah.
************23.3 Consent of Miller & Martin LLP (contained in legal opinion
at Exhibit 5.1).
************23.4 Consent of Parr, Waddoups, Brown, Gee & Loveless, P.C.
(contained in legal opinion at Exhibit 8.1).
************99.1 Form of Proxy for Annual Meeting of Stockholders of PST
Vans, Inc.
</TABLE>
- --------
* Filed in Registration Statement on Form S-1 dated May 20, 1994. (SEC
File No. 33-79208)
*** Filed in Pre-Effective Amendment No. 2 to Registration Statement on
Form S-1 dated October 4, 1994. (SEC File No.33-79208)
**** Filed in Form 10-Q dated November 17, 1994
***** Filed in Form 10-Q dated November 10, 1995
****** Filed in Form 10-Q dated February 13, 1996
******* Filed in Form 10-Q dated November 14, 1996
******** Filed in Form 10-K dated March 31, 1997
********* Filed in Registration Statement Form S-1 dated August 19, 1997
********** Filed in Form 8-K dated January 29, 1998
*********** Filed in Form 10-Q for the Quarter Ended March 31, 1998
************Filed in Registration Statement on Form S-4 dated July 17, 1998
(SEC File No. 333-59377)
ITEM 22. UNDERTAKINGS
1. The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through the use
of a prospectus which is a part of this Registration Statement, by any person
or party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
2. The Registrant undertakes that every prospectus (i) that is filed
pursuant to Paragraph (1) immediately proceeding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as part of
an amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
3. The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one (1) business day of receipt
of such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
II-4
<PAGE>
4. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and PST
being acquired involved therein, that was not the subject of and included in
the Registration Statement when it became effective.
5. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
CHATTANOOGA, STATE OF TENNESSEE, ON THE 30TH DAY OF JULY, 1998.
U.S. XPress Enterprises, Inc.
(Registrant)
/s/ Patrick E. Quinn
By: _________________________________
PATRICK E. QUINN CO-CHAIRMAN OF
THE BOARD AND PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE
Co-Chairman of the Board; Vice
/s/ Max L. Fuller* President; Director (principal
- ------------------------------------- executive officer)
MAX L. FULLER
Co-Chairman of the Board; President;
/s/ Patrick E. Quinn* Director (principal executive
- ------------------------------------- officer)
PATRICK E. QUINN
Chief Financial Officer; Director
/s/ Ray M. Harlin (principal financial and accounting
- ------------------------------------- officer)
RAY M. HARLIN
Executive Vice President of Marketing;
/s/ E. William Lusk, Jr.* Director
- -------------------------------------
E. WILLIAM LUSK, JR.
Executive Vice President of
/s/ William K. Farris* Operations; Director
- -------------------------------------
WILLIAM K. FARRIS
Director
/s/ James B. Baker*
- -------------------------------------
JAMES B. BAKER
Director
/s/ A. Alexander Taylor, II*
- -------------------------------------
A. ALEXANDER TAYLOR, II
Director
/s/ Robert P. Corker*
- -------------------------------------
ROBERT P. CORKER, JR.
Director
/s/ Robert J. Sudderth*
- -------------------------------------
ROBERT J. SUDDERTH, JR.
Ray M. Harlin
*By: ___________________________
AS ATTORNEY-IN-FACT.
II-6
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 5, 1998
included in Enterprises' Form 10-K for the period ended December 31, 1997 and
to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Chattanooga, Tennessee
July 28, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Salt Lake City, Utah
July 28, 1998
