<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 9, 1998.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
COVENANT TRANSPORT, INC.
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C>
NEVADA 88-0320154
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
--------------------------
400 BIRMINGHAM HIGHWAY
CHATTANOOGA, TENNESSEE 37419
(423) 821-1212
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
DAVID R. PARKER
CHAIRMAN, PRESIDENT, AND CHIEF EXECUTIVE OFFICER
400 BIRMINGHAM HIGHWAY
CHATTANOOGA, TENNESSEE 37419
(423) 821-1212
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
MARK A. SCUDDER, ESQ. STEPHEN A. RIDDICK, ESQ.
SCUDDER LAW FIRM, P.C. PIPER & MARBURY L.L.P.
411 South 13th Street, Suite 200 36 South Charles Street
Lincoln, Nebraska 68508 Baltimore, Maryland 21201
(402) 435-3223 (410) 539-2530
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: as soon as
practicable after the effective date of the registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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(c)
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. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
<S> <C> <C>
Class A Common Stock, $.01 par value $100,648,000 $29,692
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee. In
accordance with Rule 457(o) under the Securities Act of 1933, as amended,
the number of shares being registered and the Proposed Maximum Offering
Price per share are not included in this table.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
APRIL 9, 1998
4,000,000 SHARES
[Logo]
C O V E N A N T T R A N S P O R T
CLASS A COMMON STOCK
---------
Of the 4,000,000 shares of Class A Common Stock of Covenant Transport, Inc.
offered hereby, 2,080,000 shares are being sold by the Company and 1,920,000
shares are being sold by certain stockholders of the Company (the "Selling
Stockholders"). See "Selling Stockholders." The Company will not receive any of
the proceeds from the sale of the shares of Class A Common Stock by the Selling
Stockholders. The Company's Class A Common Stock is traded on the Nasdaq
National Market under the symbol "CVTI." On April 8, 1998, the last reported
sale price of the Class A Common Stock was $21.88 per share.
The Company's authorized capital stock includes Class A Common Stock and
Class B Common Stock. The Class A Common Stock is substantially identical to the
Class B Common Stock, except with respect to voting rights. The Class A Common
Stock is entitled to one vote per share and the Class B Common Stock is entitled
to two votes per share so long as it is beneficially owned by David R. Parker,
Jacqueline F. Parker, or their children, Jonathan Parker and Rachel Parker. The
Class A and Class B Common Stock are together referred to as the "Common Stock."
--------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS FOR CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A
COMMON STOCK OFFERED HEREBY.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS
TO DISCOUNTS AND TO TO
PUBLIC COMMISSIONS COMPANY(1) SELLING STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share..................... $ $ $ $
Total(2)...................... $ $ $ $
</TABLE>
(1) Before deducting expenses of the offering estimated at $200,000 payable by
the Company.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
600,000 additional shares of Class A Common Stock solely to cover
over-allotments, if any. To the extent that the option is exercised, the
Underwriters will offer the additional shares at the Price to Public shown
above. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions, and Proceeds to Company will be
$ , $ , and $ , respectively. See "Underwriting."
--------------
The shares of Class A Common Stock are offered by the several Underwriters,
subject to prior sale, when, as, and if delivered to and accepted by them, and
subject to the right of the Underwriters to reject any order in whole or in
part. It is expected that delivery of the shares will be made at the offices of
BT Alex. Brown Incorporated, Baltimore, Maryland, on or about , 1998.
BT Alex. Brown
Salomon Smith Barney
Stephens Inc.
ABN AMRO Incorporated
--------------
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended (the "Securities Act"), with the Securities
and Exchange Commission (the "Commission") with respect to the shares offered by
this Prospectus. This Prospectus constitutes a part of the Registration
Statement and does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. Statements
contained herein concerning the provisions of any documents are not necessarily
complete and, in each instance, reference is made to the copy of such documents
filed as an exhibit to the Registration Statement, and each such statement shall
be deemed qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements, and other information with the
Commission. This Prospectus does not contain all the information set forth in
the Registration Statement and exhibits thereto which the Company has filed with
the Commission under the Securities Act and information incorporated by
reference herein. Copies of such information and the reports, proxy statements,
and other information filed by the Company under the Exchange Act may be
examined without charge at the Public Reference Section of the Commission
located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC
20549, at the regional offices of the Commission located 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, and at the Web site
maintained by the Commission at http://www.sec.gov. Copies of such material can
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington D.C. 20549 at rates prescribed by the Commission
or from the Commission's web site. The Class A Common Stock of the Company is
quoted on the Nasdaq National Market. Reports, proxy statements, and other
information concerning the Company can be inspected at the offices of The Nasdaq
Stock Market, 1735 K Street, Washington D.C. 20006.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated herein by reference: the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997, the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1998, and the description of the Company's
Class A Common Stock contained in the Company's Form 8-A filed under the
Exchange Act. All other documents filed by the Company pursuant to Sections
13(a), 13(c), 14, or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering made hereby shall be
deemed to be incorporated by reference in, and made a part of, this Prospectus
from the date of filing of such documents. See "Available Information." Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein, or in any other
subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein, modifies or supersedes such statement. The
Company will furnish without charge upon written or oral request to each person
to whom this Prospectus is delivered a copy of any or all of the documents
incorporated by reference herein other than exhibits to such documents not
specifically incorporated by reference thereto. Such request should be directed
to Covenant Transport, Inc., 400 Birmingham Highway, Chattanooga, Tennessee
37419, telephone no. (423) 821-1212, Attn: Joey B. Hogan, Chief Financial
Officer.
IN CONNECTION WITH THIS OFFERING, CERTAIN PERSONS PARTICIPATING IN THIS
OFFERING MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE CLASS A COMMON
STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 UNDER REGULATION
M. SEE "UNDERWRITING."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE
CLASS A COMMON STOCK OFFERING AND MAY BID FOR AND PURCHASE SHARES OF THE CLASS A
COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND INCORPORATED BY REFERENCE
HEREIN. UNLESS OTHERWISE INDICATED, (I) ALL INFORMATION IN THIS PROSPECTUS
ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED AND (II)
REFERENCES TO "COVENANT" OR THE "COMPANY" INCLUDE COVENANT TRANSPORT, INC. AND
ITS CONSOLIDATED SUBSIDIARIES. POTENTIAL INVESTORS SHOULD CONSIDER CAREFULLY THE
FACTORS SET FORTH HEREIN UNDER THE CAPTION "RISK FACTORS" AND ARE URGED TO READ
THIS PROSPECTUS IN ITS ENTIRETY.
THE COMPANY
Covenant is one of the largest truckload carriers in the United States and
operates the industry's largest fleet of team-driven tractors. Covenant offers
just-in-time and other premium transportation services, focusing on longer
lengths of haul and selected traffic lanes to enhance equipment utilization,
improve operating efficiency, and deliver the equipment availability demanded by
major shippers. The Company's major customers include manufacturers and
retailers, as well as a substantial and rapidly growing number of air freight,
logistics, and trucking companies that demand on-time service to meet the
expedited, long-haul needs of their customers.
Over the past five years, Covenant's revenue has grown at a compounded
annual growth rate of over 38%, from $81.9 million in 1993 to $297.9 million in
1997. During the same period, net income grew at a compounded annual growth rate
of 37%, from $3.9 million in 1993 to $13.7 million in 1997. The Company has
expanded through a combination of internal growth and external growth through
four acquisitions completed between 1995 and 1997. The most recent of these
acquisitions, $45 million annual revenue Bud Meyer Truck Lines, Inc.,
established an additional growth platform for the Company in transporting
service-sensitive, temperature-controlled freight. Management believes that
Covenant is positioned to capitalize on industry trends toward rapid
distribution of freight and consolidation, as well as to take advantage of
growth of business from other transportation companies.
BUSINESS STRATEGY
Covenant's objective is to obtain long-term, profitable growth. The key
elements of the Company's strategy for achieving profitable growth include the
following:
OFFER PREMIUM SERVICE. Covenant offers just-in-time, transcontinental
express, and other premium services to shippers with exacting transportation
requirements. The Company's service standards include transporting loads
coast-to-coast in 50 to 72 hours, meeting schedules with delivery windows as
narrow as 15 minutes, and delivering 99% of all loads on-time. Covenant targets
such premium service freight to obtain higher rates, build longer-term,
service-based customer relationships, and avoid competition from rail,
intermodal, and trucking companies that compete primarily on the basis of price.
OPERATE IN TARGET MARKETS. Covenant operates in target markets where its
service can provide a competitive advantage. The Company's primary market has
been expedited long-haul freight transportation predominantly using two-person
driver teams. The use of two-person driver teams allows expedited handling of
long-haul loads because the drivers can alternate driving and sleeping and
thereby keep freight moving 24-hours a day while operating within safety
guidelines. The Company's industry-leading 1,200 driver teams can provide
significantly faster, more predictable service than rail, intermodal, or
single-driver service over long lengths of haul. The Company's average length of
haul in 1997 was approximately 1,650 miles, the longest of any publicly traded
truckload carrier. In 1997, the Company expanded into the service-sensitive,
temperature-controlled market niche by acquiring Bud Meyer Truck Lines.
Management believes that Covenant's service standards, modern fleet, and
technology can offer a competitive advantage in serving the large frozen food
and consumer products companies targeted by Bud Meyer Truck Lines. Covenant
intends to expand both of its existing niches and will evaluate selective
expansion into other niches.
3
<PAGE>
FOCUS ON EQUIPMENT UTILIZATION. Covenant focuses intently on maintaining
and improving lane density and equipment utilization to enhance its average
revenue generated per tractor. Covenant's primary traffic lanes are between the
West Coast and the Northeast and Southeast United States. The Company maintains
disciplined operating lanes to optimize the amount of equipment on selected
routes. This level of operational discipline creates more predictable movements,
reduces empty miles, shortens turn times between loads, and permits the Company
to more consistently predict home visits by drivers. These factors and the use
of driver teams, which generate more miles per tractor than single drivers,
contributed to averages of over 149,000 miles per tractor per year and $3,000 in
revenue per tractor per week during 1997.
SERVE OTHER TRANSPORTATION COMPANIES. Five of Covenant's top 10 and
approximately one-third of its top 100 customers are air freight, logistics,
trucking, and other transportation companies. These transportation companies
seek Covenant's service to fulfill their customers' expedited long-haul needs.
With near air freight, logistics, and just-in-time transportation expected to
continue to grow rapidly, management believes Covenant can grow by serving as a
partner, rather than competitor, with customers such as Eagle USA Air Freight,
J.B. Hunt Transport Services, and Menlo Logistics.
USE TECHNOLOGY TO ENHANCE OPERATING EFFICIENCY. Covenant has made
significant investments in technologies that reduce costs and afford a
competitive advantage with service-sensitive customers. Management believes that
technologies employed by the Company promote economies of scale by accomodating
expanding revenue without a proportionate growth in non-driver employees. The
Company improved its number of tractors per non-driver employee to 4.0 in 1997
from 3.5 in 1996. Technologies employed by the Company include:
- Qualcomm-TM- satellite-based tracking and communication systems, which
permit continuous updating of load positions and delivery times and
instantaneous communication with drivers, installed in 100% of tractors.
- Document-imaging technology that reduces paperwork and streamlines
employee access to important information.
- Fuel routing software that calculates optimal fueling locations.
- Out-of-route warning system to reduce unproductive miles.
- Sabre-TM- operating system that provides real-time, integrated operating
and financial information.
- Internet electronic data interchange to permit customers to access their
load information and electronically transmit shipping instructions.
MAINTAIN A UNIFORM, LATE-MODEL FLEET. Covenant operates a virtually
uniform, late-model fleet: (i) to minimize breakdowns, repairs, and maintenance
time that could interfere with delivery schedules and decrease utilization; (ii)
to reduce parts inventory and ensure that most repairs are covered by
manufacturers' warranties; and (iii) to promote driver comfort and a positive
image with customers and drivers. At December 31, 1997, the average age of the
Company's tractor fleet was 21 months and the average age of its trailer fleet
was 33 months.
RECRUIT, RETAIN, AND REWARD DRIVERS AND OWNER-OPERATORS. Management
believes driver retention is primarily a pay issue and raised the Company's
driver wages approximately two cents per mile in 1997. The Company has announced
an additional increase of two and one-half cents per mile effective April 20,
1998. Both wage increases have been more than covered by increases in freight
rates. The Company intends to continue to raise driver compensation to the
extent permitted by freight rates. Covenant also employs many driver
satisfaction efforts, including operating late-model conventional tractors,
assigning drivers to a single dispatcher to promote solid relationships, and
addressing individual driver concerns with driver relations personnel. The
Company commenced contracting with owner-operators of tractors in 1997, and
owner-operators currently comprise approximately 6.0% of its fleet. Covenant
intends to increase the number of owner-operators in its fleet gradually over
time.
4
<PAGE>
INDUSTRY GROWTH OPPORTUNITIES
Management believes that growth trends among shippers and in the truckload
industry present expansion opportunities for carriers such as Covenant. Several
of the fastest growing segments of the truckload freight market include deferred
air freight movements, just-in-time manufacturing and inventory control, and
line haul substitution for consolidated less-than-truckload traffic, which can
help shippers lower costs, increase inventory turns, and respond quickly to
changes in demand. Covenant already has a significant presence in these markets,
and management anticipates that Covenant's large number of driver teams,
reputation for premium service, and relationships with other transportation
companies as a long-haul, expedited carrier of choice will support continued
growth with customers in these markets.
Consolidation in the truckload industry is being driven by several factors,
including the use of core carriers by major shippers, outsourcing of private
fleet traffic to for-hire carriers, and economies of scale enjoyed by larger
carriers. Many major shippers continue to reduce the number of carriers they
regularly use in favor of service-based, ongoing relationships with a group of
core carriers. Core carriers gain market share by committing to high quality
service, technological advances, and equipment availability in return for
greater equipment utilization and more predictable revenue. Other shippers that
own tractor-trailer fleets are outsourcing their transportation fleets to
truckload carriers in "private fleet conversions" to lower operating expenses
and conserve capital for core corporate purposes. Only carriers such as Covenant
that can meet the stringent service requirements of private fleets can take
advantage of these opportunities. Finally, deregulation and economies of scale
also promote consolidation. Many truckload carriers have grown rapidly since
deregulation in 1980 and have achieved the size to negotiate lifetime equipment
warranties and obtain equipment, fuel, insurance, financing, and other items at
significantly lower costs than smaller or more leveraged competitors. All of
these trends favor large, well-managed, financially stable carriers. Management
believes that Covenant is well-positioned to take advantage of further industry
consolidation, while many smaller, less successful carriers are likely to be
forced from the market or acquired.
COVENANT'S GROWTH STRATEGY
Management believes that the Company's growth strategy has positioned the
Company to capitalize on industry trends and continue Covenant's profitable
growth. Covenant has achieved a 40% compounded annual growth rate in revenue
since its first year of operation in 1986 and over 38% over the past five years.
Covenant's growth has been achieved through expansion of business with new and
existing customers and four acquisitions between 1995 and 1997.
Covenant's strategy for continuing its profitable growth includes:
- CONTINUING INTERNAL GROWTH. Covenant intends to seek additional business
from new and existing customers in its expedited long-haul and
temperature-controlled markets to increase equipment utilization, limit
empty miles, and reap other benefits of greater lane density. The Company
will continue to seek core carrier, dedicated fleet, and private fleet
conversion opportunities to support its internal growth.
- SERVING OTHER TRANSPORTATION COMPANIES. Covenant will continue to provide
specialized service for other transportation companies in areas where it
has a competitive advantage, particularly in the area of expedited
long-haul service using driver teams.
- SEEKING SELECTIVE ACQUISITIONS. Covenant is pursuing acquisitions in three
primary areas:
- Acquiring and integrating small companies to obtain customer
relationships in existing markets. The Company's first three
acquisitions followed this strategy and produced several of the
Company's large customers, including one of its top five.
5
<PAGE>
- Acquiring companies in existing markets to obtain drivers, increase
lane density, and achieve economies of scale.
- Expanding into niche markets where the target companies meet Covenant's
service and operating standards, and management perceives the
opportunity for additional growth, such as with Bud Meyer Truck Lines.
Covenant has completed and successfully integrated four acquisitions
since 1995. The first three added customers and lane density to Covenant's
long-haul operations, and Covenant significantly expanded those carriers'
customer relationships following the acquisitions. In October 1997, Covenant
branched into a new market by acquiring the stock of Bud Meyer Truck Lines,
Inc., a $45 million annual revenue temperature-controlled carrier based in
Lake City, Minnesota. Since the acquisition, Covenant has improved Bud
Meyer's profitability and expanded the Bud Meyer fleet beyond its pre-
acquisition size.
Covenant Transport, Inc., a Nevada corporation, is a holding company for the
Tennessee operating corporation also named Covenant Transport, Inc., Bud Meyer
Truck Lines, Inc., and its other consolidated subsidiaries. The Company's
headquarters are located at 400 Birmingham Highway, Chattanooga, Tennessee
37419, and its telephone number is (423) 821-1212.
THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock offered by the
Company.................................... 2,080,000 shares
Class A Common Stock offered by the Selling
Stockholders(1)............................ 1,920,000 shares
Common Stock to be outstanding after this
offering:
Class A Common Stock....................... 13,093,500 shares(2)
Class B Common Stock....................... 2,350,000 shares(1)
Total................................ 15,443,500 shares(1)(2)
Use of Proceeds.............................. To reduce indebtedness and fund general
corporate and working capital requirements.
Nasdaq National Market symbol................ CVTI
</TABLE>
- ------------------------
(1) David R. and Jacqueline F. Parker (the "Parkers") are selling 920,000 shares
of Class A Common Stock and Mr. Fuller is selling 1,000,000 shares of Class
A Common Stock. The Class A Common Stock is entitled to one vote per share.
The Class B Common Stock is entitled to two votes per share and
automatically converts into Class A Common Stock if beneficially owned by
persons other than the Parkers or their children. The Class A and Class B
Common Stock vote together as a single class except as required by law and
are substantially identical, except with respect to voting rights.
(2) Excludes approximately 656,500 shares of Class A Common Stock reserved for
issuance to key employees under the Company's Incentive Stock Plan. Options
to purchase approximately 494,500 of such shares are currently outstanding.
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA AMOUNTS)
The following table sets forth summary historical financial data of the
Company for the five years ended December 31, 1997, and for the three months
ended March 31, 1997 and 1998. The summary financial data for the years ended
December 31, 1995, 1996, and 1997 were derived from the audited consolidated
financial statements of the Company incorporated by reference in this
Prospectus. The summary financial data for years ended December 31, 1993 and
1994 are derived from audited consolidated historical financial statements of
the Company not included herein. The information presented for the three months
ended March 31, 1997 and 1998 has been derived from the unaudited consolidated
financial statements of the Company, which have been prepared on the same basis
as the audited consolidated financial statements and, in the opinion of
management, include all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the information set forth herein. Results for the
three months ended March 31, 1998 are not necessarily indicative of the results
to be expected for the year ended December 31, 1998.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
STATEMENTS OF OPERATIONS DATA:
Revenue......................................... $ 81,911 $ 131,926 $ 180,346 $ 236,267 $ 297,861 $ 62,588 $ 79,824
Operating income................................ 9,373 15,950 18,719 20,067 28,124 4,282 5,781
Net income...................................... 3,886(1) 7,263(1) 9,283 8,978 13,702 1,838 2,675
Basic and diluted earnings per share............ 0.39 0.69 0.70 0.67 1.03 0.14 0.20
Weighted average common shares outstanding...... 10,000 10,496 13,350 13,350 13,360 13,350 13,361
Adjusted weighted average common shares and
assumed conversions outstanding............... 10,000 10,497 13,350 13,353 13,360 13,350 13,387
SELECTED OPERATING DATA:
Pretax margin................................... 6.8% 8.5% 8.1% 6.0% 7.3% 4.7% 5.4%
Average revenue per loaded mile(2).............. $ 1.05 $ 1.09 $ 1.09 $ 1.10 $ 1.13 $ 1.11 $ 1.15
Average revenue per total mile(2)............... $ 0.99 $ 1.03 $ 1.03 $ 1.04 $ 1.07 $ 1.05 $ 1.08
Average length of haul in miles................. 1,821 1,840 1,811 1,780 1,653 1,710 1,531
Average miles per tractor per period............ 157,756 159,921 148,669 150,778 149,117 34,389 34,828
Average revenue per tractor per week............ $ 3,008 $ 3,165 $ 2,942 $ 2,994 $ 3,059 $ 2,811 $ 2,922
Weighted average tractors for period............ 518 796 1,179 1,509 1,866 1,732 2,125
Total tractors at end of period................. 621 1,001 1,343 1,629 2,136 1,800 2,238
Total trailers at end of period................. 966 1,651 2,554 3,048 3,948 3,142 4,045
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998
---------------------------
<S> <C> <C>
BALANCE SHEET DATA: ACTUAL AS ADJUSTED(3)
----------- --------------
Net property and equipment.......................................................... $ 174,967 $ 174,967
Total assets........................................................................ 238,891 238,891
Long-term debt, including current maturities........................................ 100,011 57,011
Stockholders' equity................................................................ 98,322 141,322
</TABLE>
- ------------------------
(1) Includes the results of a related-party leasing company that operated as an
S corporation and was not subject to federal and state corporate income
taxes. If the leasing company had been subject to corporate income taxes for
the periods presented, the Company's consolidated pro forma net income would
have been $3.6 million in 1993 and $7.0 million in 1994. The 1993 and 1994
results of operations present the pro forma effect of these adjustments.
However because the Company acquired substantially all of the leasing
company's assets effective in 1994, the operating results of the leasing
company were not combined in subsequent periods.
(2) Includes fuel surcharges in all periods.
(3) Adjusted to reflect the issuance and sale of 2,080,000 shares of Class A
Common Stock offered by the Company and the application of the estimated net
proceeds as described in "Use of Proceeds."
7
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMPANY'S CLASS A COMMON STOCK INVOLVES A SIGNIFICANT
DEGREE OF RISK. IN DETERMINING WHETHER TO MAKE AN INVESTMENT, POTENTIAL
INVESTORS SHOULD CONSIDER CAREFULLY ALL OF THE INFORMATION SET FORTH IN AND
INCORPORATED INTO THIS PROSPECTUS AND, IN PARTICULAR, THE FOLLOWING FACTORS.
ECONOMIC FACTORS
Fuel prices, insurance costs, liability claims, interest rates, the
availability of qualified drivers, fluctuations in the resale value of revenue
equipment, and customers' business cycles and shipping demands are economic
factors over which the Company has little or no control. Significant increases
or rapid fluctuations in fuel prices, interest rates, or increases in insurance
costs, or liability claims, to the extent not offset by increases in freight
rates, would reduce the Company's profitability. A downturn in customers'
business cycles or shipping demands also could have a materially adverse effect
on the growth and profitability of the Company. If the resale value of the
Company's revenue equipment were to decline, the Company could be forced to
dispose of its equipment at lower prices or retain some of its equipment longer,
with a resulting increase in operating expenses for maintenance and repairs. At
this time a significant portion of the Company's business is concentrated in the
California market, and a general economic decline or a natural disaster in this
market could have a materially adverse effect on the growth and profitability of
the Company.
RECRUITMENT, RETENTION, AND COMPENSATION OF QUALIFIED DRIVERS
There is, and historically has been, an industry-wide shortage of truck
drivers. Accordingly, competition for drivers is intense. The Company
experiences difficulty attracting and retaining a sufficient number of qualified
drivers, which results in the temporary idling of revenue equipment. The
Company's use of two-person driver teams to operate a majority of its tractors
increases the number of drivers it needs compared to competitors who primarily
use single drivers. Prolonged difficulty in attracting and retaining qualified
drivers could force the Company to substantially increase the compensation it
pays to drivers or curtail the Company's growth, either of which could have a
materially adverse effect on the Company's operations and profitability.
CAPITAL REQUIREMENTS
The trucking industry is capital intensive. The Company 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 the Company 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 the Company's operating results.
COMPETITION
The trucking industry is highly competitive and fragmented and includes
numerous regional, inter-regional, and national truckload carriers, none of
which dominates the market. The Company also competes with private fleets
operated by existing and potential customers, logistics providers, and
alternative forms of transportation, such as railroads and air-freight carriers.
This competition historically has created downward pressure on the truckload
industry's pricing structure. Competition for the freight transported by the
Company is based on service, efficiency, and freight rates. Many competitors
offer transportation service at lower rates than the Company. Prolonged weakness
in the freight markets or downward pressure on freight rates could adversely
affect the Company's results of operations or financial condition. The Company
has competitors that have greater financial resources, operate more equipment,
and transport more freight than the Company.
8
<PAGE>
GROWTH STRATEGY; ACQUISITIONS
The Company's growth strategy includes the acquisition and deployment of
additional revenue equipment and the expansion and development of its
operations. There can be no assurance that the Company will successfully adapt
its management, administrative, and operational systems to respond to any future
growth, or that the Company's operating margins, leverage, and net earnings will
not be adversely affected by future changes in or expansion of the business or
by changes in economic conditions. A significant portion of the Company's growth
since June 1995 has resulted from acquisitions, and acquisitions are an
important component of the Company's growth strategy. The Company will face
competition from various transportation companies or other third parties for
future acquisition opportunities. There can be no assurance that the Company can
successfully negotiate and conclude acquisitions in the future or that the
Company will be able to integrate successfully the operations of any acquired
business.
FUEL
Fuel is one of the Company's largest operating expenses. Fuel prices tend to
fluctuate, and the Company generally hedges against such fluctuations on a
limited basis. Fluctuations in fuel prices can affect the Company's
profitability more than many other truckload carriers because its long average
lengths of haul and high average miles per tractor result in greater fuel
expense as a percentage of revenue than for many carriers with shorter lengths
of haul. Any increase in fuel taxes or in fuel prices, to the extent not 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 the Company's
operating results.
DEPENDENCE UPON KEY PERSONNEL
The Company's success is highly dependent upon the continued services of the
Company's senior management team, particularly David R. Parker, the Company's
Chairman, President, and Chief Executive Officer, and Michael W. Miller, the
Company's Executive Vice President and Chief Operating Officer, neither of whom
has an employment agreement with the Company. The loss of one or more of these
executives could have a materially adverse effect upon the Company. The
Company's success also depends upon its ability to attract and retain other
skilled management employees. There is significant competition for qualified
personnel in the trucking industry. There can be no assurance that the Company
will attract and retain qualified management personnel in the future.
INFLUENCE OF PARKERS
Upon completion of this offering, the Parkers will beneficially own
approximately 27.8% of the outstanding shares of Class A Common Stock and all of
the outstanding shares of Class B Common Stock, which together will represent
approximately 38.8% of all of the outstanding shares of Common Stock and 46.8%
of the total voting power of the Company's outstanding shares (37.3% ownership
and 45.3% of the total voting power if the Underwriters' over-allotment option
is exercised in full). In addition, upon completion of this offering, Mr. Fuller
will own approximately 8.2% of the outstanding shares of Class A Common Stock,
representing 7.0% of all outstanding shares of Common Stock and 6.0% total
voting power of the Company's outstanding shares (6.7% ownership and 5.8% voting
power if the Underwriters' over-allotment option is exercised in full). The
shares and percentages in this paragraph exclude 133,750 shares of Class A
Common Stock underlying employee stock options held by Mr. Parker (options
covering 53,500 of which are vested or vest within 60 days of the date hereof)
and 25,000 shares of Class A Common Stock underlying a vested stock option held
by Mr. Fuller. After this offering, the Parkers will continue to possess
substantial influence over matters submitted to a vote of stockholders. Although
there is no agreement to do so, if the Parkers and Mr. Fuller acted together,
they could control a majority of the votes entitled to be cast of the Company's
Common Stock, elect the entire Board of Directors of the Company, determine the
outcome of all matters involving a stockholder vote, and take certain actions by
written
9
<PAGE>
consent with proper notice given to the other stockholders. Such control could
make it more difficult for a third party to acquire, or discourage a third party
from attempting to acquire, control of the Company.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus, including all documents incorporated herein by reference,
contains forward-looking statements. Additional written or oral forward-looking
statements may be made by the Company from time to time in filings with the
Securities and Exchange Commission or otherwise. The words "believe," "expect,"
"anticipate," and "project" and similar expressions identify forward-looking
statements, which speak only as of the date the statement is made. Such
forward-looking statements are within the meaning of that term in Section 27A of
the Securities Act and Section 21E of the Exchange Act. Such statements are
based on current knowledge and current judgments, but are subject to certain
risks and uncertainties that could cause the actual results to differ materially
from those projected. Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date hereof. Readers are
also urged to carefully review and consider the various disclosures made by the
Company that attempt to advise interested parties of the factors that affect the
Company's business, including the disclosures made under the heading "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, which is incorporated by reference herein.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
2,080,000 shares of Class A Common Stock offered by the Company are estimated to
be approximately $43.0 million (approximately $55.5 million if the Underwriters'
over-allotment option is exercised in full), based upon the $21.88 closing price
of the Class A Common Stock on April 8, 1998, and after deducting underwriting
discounts and commissions and estimated offering expenses. The Company intends
to use the estimated net proceeds of this offering primarily to reduce
indebtedness under the Company's revolving line of credit and also for general
corporate and working capital purposes. The indebtedness to be repaid was
incurred primarily to acquire revenue equipment, bears interest at a rate of
6.1875% and has an average remaining maturity of approximately one month.
Pending the use of proceeds as described above, the net proceeds will be
invested in short-term interest bearing securities. The Company will not receive
any proceeds from the sale of shares of Class A Common Stock by the Selling
Stockholders.
Subsequent to the application of the net proceeds of this offering as
described above, the Company will have approximately $73.0 million of borrowing
capacity under its $100 million line of credit.
10
<PAGE>
PRICE RANGE OF CLASS A COMMON STOCK
The Company's Class A Common Stock has been traded on the Nasdaq National
Market under the symbol CVTI since October 28, 1994. The following table sets
forth for the calendar periods indicated the range of high and low sales price
for the Company's Class A Common Stock as reported by Nasdaq.
<TABLE>
<CAPTION>
PERIOD HIGH LOW
- --------- --------- ---------
<S> <C> <C> <C>
1996
1st Quarter................................................................................ $ 17.75 $ 11.25
2nd Quarter................................................................................ 18.00 15.00
3rd Quarter................................................................................ 21.00 15.00
4th Quarter................................................................................ 19.25 13.00
1997
1st Quarter................................................................................ 16.25 11.25
2nd Quarter................................................................................ 19.13 13.75
3rd Quarter................................................................................ 20.25 16.25
4th Quarter................................................................................ 20.13 14.75
1998
1st Quarter................................................................................ 23.00 14.38
2nd Quarter (through April 8, 1998)........................................................ 23.31 21.63
</TABLE>
As of March 31, 1998, the Company had 40 stockholders of record of its Class
A Common Stock. However, the Company estimates that it has approximately 2,000
stockholders because a substantial number of the Company's shares are held of
record by brokers or dealers for their customers in street names.
DIVIDEND POLICY
The Company has never declared and paid a cash dividend on its Common Stock.
It is the current intention of the Company's Board of Directors to continue to
retain earnings to finance the growth of the Company's business rather than to
pay dividends. The payment of cash dividends is currently limited by agreements
relating to the Company's $100 million line of credit, $25 million in senior
notes due October 2005, and the operating lease covering the Company's
headquarters and terminal facility. Future payments of cash dividends will
depend upon the financial condition, results of operations and capital
commitments of the Company, restrictions under then-existing agreements, and
other factors deemed relevant by the Board of Directors.
11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA AMOUNTS)
The following table sets forth selected historical financial data of the
Company for the five years ended December 31, 1997, and for the three months
ended March 31, 1997 and 1998. The selected financial data for the years ended
December 31, 1995, 1996, and 1997 were derived from the audited consolidated
financial statements of the Company incorporated by reference in this
Prospectus. The selected financial data for years ended December 31, 1993 and
1994 are derived from audited consolidated historical financial statements of
the Company not included herein. The information presented for the three months
ended March 31, 1997 and 1998 has been derived from the unaudited consolidated
financial statements of the Company, which have been prepared on the same basis
as the audited consolidated financial statements and, in the opinion of
management, include all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the information set forth herein. Results for the
three months ended March 31, 1998 are not necessarily indicative of the results
to be expected for the year ended December 31, 1998.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue................................ $ 81,911 $ 131,926 $ 180,346 $ 236,267 $ 297,861 $ 62,588 $ 79,824
Operating expenses:
Salaries, wages, and related
expenses........................... 34,629 57,675 83,747 108,818 131,522 27,685 35,242
Fuel, oil, and road expenses......... 17,573 27,282 37,802 55,340 64,910 15,560 15,922
Revenue equipment rentals and
purchased transportation........... 1,703 2,785 1,230 605 8,492 427 5,002
Repairs.............................. 1,363 2,285 3,569 4,293 5,885 1,267 1,925
Operating taxes and licenses......... 2,125 3,479 4,679 6,065 7,514 1,534 2,317
Insurance............................ 3,374 4,510 4,907 6,115 8,655 1,786 2,424
General supplies and expenses........ 5,921 8,650 9,648 12,825 16,277 3,691 4,438
Depreciation and amortization........ 5,850 9,310 16,045 22,139 26,482 6,356 6,773
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses........... 72,538 115,976 161,627 216,200 269,737 58,306 74,042
--------- --------- --------- --------- --------- --------- ---------
Operating income....................... 9,373 15,950 18,719 20,067 28,124 4,282 5,781
Interest expense....................... 3,765 4,736 4,162 5,987 6,274 1,367 1,461
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes............. 5,608 11,214 14,557 14,080 21,850 2,914 4,320
Income tax expense..................... 1,722 3,951 5,274 5,102 8,148 1,076 1,645
Net income(2).......................... $ 3,886(1) $ 7,263(1) $ 9,283 $ 8,978 $ 13,702 $ 1,838 $ 2,675
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Basic and diluted earnings per share... $ 0.39 $ 0.69 $ 0.70 $ 0.67 $ 1.03 $ 0.14 $ 0.20
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average common shares
outstanding.......................... 10,000 10,496 13,350 13,350 13,360 13,350 13,361
Adjusted weighted average common shares
and assumed conversions
outstanding.......................... 10,000 10,497 13,350 13,353 13,360 13,350 13,387
BALANCE SHEET DATA:
Net property and equipment............. $ 46,975 $ 87,882 $ 127,408 $ 144,384 $ 161,621 $ 153,064 $ 174,967
Total assets........................... 61,628 112,552 169,381 187,148 215,256 202,406 $ 238,891
Long-term debt, including current
maturities........................... 47,392 37,495 80,200 83,160 82,377 94,160 100,011
Stockholders' equity................... 5,703 63,469 72,752 81,730 95,597 83,568 98,322
SELECTED OPERATING DATA:
Pretax margin.......................... 6.8% 8.5% 8.1% 6.0% 7.3% 4.7% 5.4%
Average revenue per loaded mile(2)..... $ 1.05 $ 1.09 $ 1.09 $ 1.10 $ 1.13 $ 1.11 $ 1.15
Average revenue per total mile(2)...... $ 0.99 $ 1.03 $ 1.03 $ 1.04 $ 1.07 $ 1.05 $ 1.08
Average length of haul in miles........ 1,821 1,840 1,811 1,780 1,653 1,710 1,531
Average miles per tractor per period... 157,756 159,921 148,669 150,778 149,117 34,389 34,828
Average revenue per tractor per week... $ 3,008 $ 3,165 $ 2,942 $ 2,994 $ 3,059 $ 2,811 $ 2,922
Weighted average tractors for period... 518 796 1,179 1,509 1,866 1,732 2,125
Total tractors at end of period........ 621 1,001 1,343 1,629 2,136 1,800 2,238
Total trailers at end of period........ 966 1,651 2,554 3,048 3,948 3,142 4,045
</TABLE>
- ------------------------------
(1) Includes the results of a related-party leasing company that operated as an
S corporation and was not subject to federal and state corporate income
taxes. If the leasing company had been subject to corporate income taxes for
the periods presented, the Company's consolidated pro forma net income would
have been $3.6 million in 1993 and $7.0 million in 1994. The 1993 and 1994
results of operations present the pro forma effect of these adjustments.
However because the Company acquired substantially all of the leasing
company's assets effective in 1994, the operating results of the leasing
company were not combined in subsequent periods.
(2) Includes fuel surcharges in all periods.
12
<PAGE>
The following table sets forth for the periods indicated certain statement
of earnings data as a percentage of revenue. Individual expense items as a
percentage of revenue may fluctuate depending upon the percentage of the
Company's revenue equipment that is owned, acquired under operating leases, or
obtained through agreements with owner-operators. Costs associated with revenue
equipment acquired under operating leases or through agreements with
owner-operators are expensed as "revenue equipment rentals and purchased
transportation." For these categories of equipment, the Company does not incur
costs such as interest and depreciation as it might with owned equipment. In
addition, for owner-operator tractors, driver compensation, fuel,
communications, and certain other expenses are borne by the owner-operator and
are not incurred by the Company.
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- ---------
1993 1994 1995 1996 1997 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue..................................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries, wages, and related expenses..................... 42.3 43.7 46.4 46.1 44.2 44.2
Fuel, oil, and road expenses.............................. 21.5 20.7 21.0 23.4 21.8 24.9
Revenue equipment rentals and purchased transportation.... 2.1 2.1 0.7 0.2 2.9 0.7
Repairs................................................... 1.7 1.7 2.0 1.8 2.0 2.0
Operating taxes and licenses.............................. 2.6 2.6 2.6 2.6 2.5 2.5
Insurance................................................. 4.1 3.4 2.7 2.6 2.9 2.8
General supplies and expenses............................. 7.2 6.6 5.3 5.4 5.5 5.9
Depreciation and amortization............................. 7.1 7.1 8.9 9.4 8.9 10.2
--------- --------- --------- --------- --------- ---------
Total operating expenses................................ 88.6 87.9 89.6 91.5 90.6 93.2
--------- --------- --------- --------- --------- ---------
Operating income............................................ 11.4 12.1 10.4 8.5 9.4 6.8
Interest expense............................................ (4.6) (3.6) (2.3) (2.5) (2.1) (2.2)
--------- --------- --------- --------- --------- ---------
Income before income taxes.................................. 6.8 8.5 8.1 6.0 7.3 4.7
Income tax expense.......................................... (2.1) (3.0) (2.9) (2.2) (2.7) (1.7)
--------- --------- --------- --------- --------- ---------
Net income.................................................. 4.7% 5.5% 5.2% 3.8% 4.6% 2.9%
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
<CAPTION>
1998
---------
<S> <C>
Revenue..................................................... 100.0%
Operating expenses:
Salaries, wages, and related expenses..................... 44.1
Fuel, oil, and road expenses.............................. 20.0
Revenue equipment rentals and purchased transportation.... 6.3
Repairs................................................... 2.4
Operating taxes and licenses.............................. 2.9
Insurance................................................. 3.0
General supplies and expenses............................. 5.6
Depreciation and amortization............................. 8.5
---------
Total operating expenses................................ 92.8
---------
Operating income............................................ 7.2
Interest expense............................................ (1.8)
---------
Income before income taxes.................................. 5.4
Income tax expense.......................................... (2.1)
---------
Net income.................................................. 3.4%
---------
---------
</TABLE>
SELLING STOCKHOLDERS
The following table sets forth information with respect to the ownership of
Class A and Class B Common Stock by the Selling Stockholders.
<TABLE>
<CAPTION>
SHARES OWNED SHARES OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING
----------------------------------- -----------------------------------
CLASS A CLASS B SHARES CLASS A CLASS B
COMMON COMMON BEING COMMON COMMON
OWNER STOCK STOCK PERCENT(1) OFFERED STOCK STOCK PERCENT(1)
- ----------------------------------- --------- --------- ------------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
David R. Parker and
Jacqueline F. Parker(2)............ 4,555,225 2,350,000 51.7% 920,000 3,635,225 2,350,000 38.8%
Clyde M. Fuller(3)................. 2,075,000 -- 15.5% 1,000,000 1,075,000 -- 7.0%
</TABLE>
- ------------------------------
(1) Ownership percentages reflect the total number of outstanding shares of both
Class A and Class B Common Stock, assuming the Underwriters' over-allotment
option is not exercised. If the over-allotment option is exercised in full,
the Parkers and Mr. Fuller will own 37.3% and 6.7% of the total outstanding
shares of the Common Stock, respectively.
(2) Mr. Parker is Chairman, President, and Chief Executive Officer of the
Company and Mrs. Parker is an employee of the Company. All shares are owned
as joint tenants with rights of survivorship, except 200,000 shares of Class
A Common Stock held by the Parker Family Limited Partnership, of which the
Parkers are the general partners. Because the Class B Common Stock has two
votes per share, the shares owned by the Parkers before the Offering
represent 58.9% of the total voting power of the Common Stock. After the
Offering, the shares owned by the Parkers will represent 46.8% of the total
voting power of the Common Stock (45.3% if the Underwriters' over-allotment
option is exercised in full). The shares and percentages exclude 133,750
shares of Class A Common Stock underlying employee stock options held by Mr.
Parker, options to purchase 53,500 shares of which are vested or will vest
within 60 days hereof.
(3) Mr. Fuller is an employee of the Company and the step-father of David R.
Parker. Shares reflected exclude 25,000 shares of Class A Common Stock
underlying a vested stock option.
13
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), have severally agreed to purchase
from the Company and the Selling Stockholders the following respective number of
shares of Class A Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
BT Alex. Brown Incorporated................................................
Smith Barney Inc...........................................................
Stephens Inc...............................................................
ABN AMRO Incorporated......................................................
-----------------
Total................................................................ 4,000,000
-----------------
-----------------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all of the shares of Class A Common Stock offered hereby if any such
shares are purchased.
The Company and the Selling Stockholders have been advised that the
Underwriters propose to offer the shares of Class A Common Stock to the public
at the public offering price set forth on the cover page of this Prospectus and
to certain dealers at such price less a concession not in excess of $
per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After
commencement of this offering, the public offering price and other selling terms
may be changed by the Underwriters.
The Company has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 600,000
additional shares of Class A Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Class A Common Stock to be
purchased by it shown in the above table bears to the total number of shares
offered hereby, and the Company will be obligated, pursuant to the option, to
sell such shares to the Underwriters. The Underwriters may exercise such option
only to cover over-allotments made in connection with the sale of the Class A
Common Stock offered hereby. If purchased, the Underwriters will offer such
additional shares on the same terms as those on which the 4,000,000 shares are
being offered.
The Underwriting Agreement contains covenants of indemnity and contribution
between the Underwriters, the Company, and the Selling Stockholders regarding
certain liabilities, including liabilities under the Securities Act.
The Company, its officers and directors, and the Selling Stockholders,
holding in the aggregate 9,149,081 shares of Class A Common Stock, have agreed
that until 90 days after the date of this Prospectus, they will not, without the
prior written consent of BT Alex. Brown Incorporated, directly or indirectly,
offer, sell, or otherwise dispose of any shares of Class A Common Stock or any
options, rights, or warrants with respect to any Class A Common Stock, except
for (i) securities issued by the Company under the Company's Incentive Stock
Plan or any similar stock option plan; (ii) shares issued by the Company in
connection with any future acquisitions; and (iii) shares donated by such
holders to charitable organizations; provided, that any such charitable
organization must agree in writing not to sell such donated securities for a
like period.
In connection with this offering, certain Underwriters may engage in passive
market making transactions in the Class A Common Stock on The Nasdaq National
Market immediately prior to the commencement of sales in this offering in
accordance with Rule 103 of Regulation M. Passive market making consists
14
<PAGE>
of displaying bids on The Nasdaq National Market limited by the bid prices of
independent market makers and making purchases limited by such prices and
effected in response to order flow. Net purchases by a passive market maker on
each day are limited to a specified percentage of the passive market maker's
average daily trading volume in the Class A Common Stock during a specified
period and must be discontinued when such limit is reached. Passive market
making may stabilize the market price of the Class A Common Stock at a level
above that which might otherwise prevail and, if commenced, may be discontinued
at any time.
Subject to applicable limitations, the Underwriters, in connection with this
offering, may place bids for or make purchases of the Class A Common Stock in
the open market or otherwise, for long or short account, or cover short
positions incurred, to stabilize, maintain, or otherwise affect the price of the
Class A Common Stock, which may be higher than the price that might otherwise
prevail in the open market. There can be no assurance that the price of the
Class A Common Stock will be stabilized, or that stabilizing, if commenced, will
not be discontinued at any time. Subject to applicable limitations, the
Underwriters may also place bids or make purchases on behalf of the underwriting
syndicate to reduce a short position created in connection with this offering.
The Underwriters are not required to engage in these activities and may end
these activities at any time.
ABN AMRO Bank N.V., an affiliate of ABN AMRO Incorporated, one of the
Underwriters, served as the Agent for a syndicate of financial institutions in
establishing the Company's line of credit in January 1995 and has continued in
such role since that date.
LEGAL MATTERS
The validity of the shares of Class A Common Stock offered hereby will be
passed upon for the Company by Scudder Law Firm, P.C., Lincoln, Nebraska. A
member of Scudder Law Firm, P.C., Mark A. Scudder, has served as a director of
the Company since October 1994. Certain legal matters relating to the offering
will be passed upon for the Underwriters by Piper & Marbury L.L.P., Baltimore,
Maryland.
EXPERTS
The consolidated financial statements of Covenant Transport, Inc.
incorporated by reference herein in this Prospectus and elsewhere in this
Registration Statement, have been audited by the independent public accountants
Coopers & Lybrand L.L.P. for 1995, 1996, and 1997 and are included herein in
reliance upon the authority of said firms as experts in accounting and auditing.
15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR SINCE
THE DATES AS OF WHICH INFORMATION IS SET FORTH HEREIN.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.......................... 2
Information Incorporated by Reference.......... 2
Prospectus Summary............................. 3
Risk Factors................................... 8
Use of Proceeds................................ 10
Price Range of Class A Common Stock............ 11
Dividend Policy................................ 11
Selected Consolidated Financial Data........... 12
Selling Stockholders........................... 13
Underwriting................................... 14
Legal Matters.................................. 15
Experts........................................ 15
</TABLE>
--------------
4,000,000 SHARES
[LOGO]
COVENANT TRANSPORT, INC.
CLASS A COMMON STOCK
--------------
PROSPECTUS
--------------
BT Alex. Brown
Salomon Smith Barney
Stephens Inc.
ABN AMRO Incorporated
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an itemized statement of expenses to be incurred in
connection with the sale and distribution of the securities being registered by
this Registration Statement, other than the underwriting discounts and
commissions. All amounts are estimated except the SEC registration fee, the NASD
filing fee, and the Nasdaq national market fee. The Company will bear all
expenses of the offering other than the Underwriting discounts and commissions
applicable to shares sold by the Selling Stockholders, which shall be borne by
them.
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 29,692
NASD filing fee................................................... 10,565
Nasdaq national market fee........................................ 17,500
Accounting fees and expenses...................................... 25,000
Legal fees and expenses........................................... 50,000
Printing and engraving............................................ 35,000
Miscellaneous..................................................... 32,243
---------
Total............................................................. $ 200,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article VII of the Registrant's Articles of Incorporation ("Articles") and
Article X of the Registrant's Bylaws provide that the Registrant's directors and
officers shall be indemnified against liabilities they may incur while serving
in such capacities to the fullest extent allowed by the Nevada General
Corporation Law. Under these indemnification provisions, the Registrant is
required to indemnify its directors and officers against any reasonable expenses
(including attorneys' fees) incurred by them in the defense of any action, suit,
or proceeding, whether civil, criminal, administrative, or investigative, to
which they were made a party, or in defense of any claim, issue, or matter
therein, by reason of the fact that they are or were a director or officer of
the Registrant or while a director or officer of the Registrant are or were
serving at the Registrant's request as a director, officer, partner, trustee,
employee, or agent of another corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise unless it is ultimately determined by
a court of competent jurisdiction that they failed to act in a manner they
believed in good faith to be in, or not opposed to, the best interests of the
Registrant, and with respect to any criminal proceeding, had reasonable cause to
believe their conduct was lawful. The Registrant will advance expenses incurred
by directors or officers in defending any such action, suit, or proceeding upon
receipt of written confirmation from such officers or directors that they have
met certain standards of conduct and an undertaking by or on behalf of such
officers or directors to repay such advances if it is ultimately determined that
they are not entitled to indemnification by the Registrant. The Articles provide
that the Registrant may, through indemnification agreements, insurance, or
otherwise, provide additional indemnification. The Company has entered into
indemnification agreements with its directors and officers, pursuant to which
the Company agrees to indemnify such persons to the maximum extent against
expense or loss arising from any action, suit, or proceeding brought by reason
of the fact that any person is a director or officer of the Company.
Article VI of the Registrant's Articles eliminates, to the fullest extent
permitted by law, the liability of directors and officers for monetary or other
damages for breach of fiduciary duties to the Registrant and its stockholders as
a director or officer.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1 + Form of Underwriting Agreement
3.1++ Restated Articles of Incorporation
3.2++ Amended By-Laws dated September 27, 1994
4.1++ Restated Articles of Incorporation
4.2++ Amended By-Laws dated September 27, 1994
5 + Opinion, including consent of Scudder Law Firm, P.C., counsel to Covenant
Transport, Inc. as to legality of the securities being registered
23.1+ Consent of Scudder Law Firm, P.C. (included in their opinion filed as Exhibit 5
to this Registration Statement)
23.2+ Consent of Coopers & Lybrand L.L.P., independent accountants
24 + Power of Attorney (included on signature page of this Registration Statement)
</TABLE>
- ------------------------
+ Filed herewith.
++ Filed as an exhibit to the Registrant's Registration Statement on Form S-1,
Registration No. 33-82978, effective October 28, 1994, and incorporated
herein by reference.
ITEM 17. UNDERTAKINGS
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 provisions set forth in Item 15, or otherwise, the
Registrant has been advised in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act, and the Registrant will be governed by the final adjudication of such
issue.
The Registrant hereby undertakes to provide the Underwriters at the closing
specified in the Underwriting Agreement, certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
The Registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-2
<PAGE>
(c) For purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it meets all of the requirements for filing on Form S-3 and has
duly caused this Registration Statement on Form S-3 to be signed on its behalf
by the undersigned thereunto duly authorized, in the City of Chattanooga, State
of Tennessee, on the 9th day of April, 1998.
COVENANT TRANSPORT, INC.
BY: /S/ DAVID R. PARKER
-----------------------------------------
David R. Parker, Chairman, President,
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints David R. Parker,
Joey B. Hogan, and Mark A. Scudder, and each of them, as attorneys-in-fact with
full power of substitution, to execute in their respective names, individually
and in each capacity stated below, any and all amendments (including post-
effective amendments) to this Registration Statement as the attorney-in-fact and
to file any such amendment to the Registration Statement, exhibits thereto and
documents required in connection therewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and their substitutes, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
their substitutes may lawfully do or cause to be done by virtue hereof. Pursuant
to the requirements of the Securities Act of 1933, as amended, this Registration
Statement has been signed by the following persons or their duly authorized
attorney-in-fact in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman of the Board,
/s/ DAVID R. PARKER President, and Chief
- ------------------------------ Executive Officer April 9, 1998
David R. Parker (principal executive
officer)
Treasurer and Chief
/s/ JOEY B. HOGAN Financial Officer
- ------------------------------ (principal financial and April 9, 1998
Joey B. Hogan accounting officer)
/s/ R. H. LOVIN, JR. Director
- ------------------------------ April 9, 1998
R. H. Lovin, Jr.
/s/ MICHAEL W. MILLER Director
- ------------------------------ April 9, 1998
Michael W. Miller
/s/ WILLIAM T. ALT Director
- ------------------------------ April 9, 1998
William T. Alt
/s/ HUGH O. MACLELLAN, JR. Director
- ------------------------------ April 9, 1998
Hugh O. Maclellan, Jr.
/s/ MARK A. SCUDDER Director
- ------------------------------ April 9, 1998
Mark A. Scudder
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1 + Form of Underwriting Agreement
3.1++ Restated Articles of Incorporation
3.2++ Amended By-Laws dated September 27, 1994
4.1++ Restated Articles of Incorporation
4.2++ Amended By-Laws dated September 27, 1994
5 + Opinion, including consent of Scudder Law Firm, P.C., counsel to Covenant
Transport, Inc. as to legality of the securities being registered
23.1+ Consent of Scudder Law Firm, P.C. (included in their opinion filed as Exhibit 5
to this Registration Statement)
23.2+ Consent of Coopers & Lybrand L.L.P., independent accountants
24 + Power of Attorney (included on signature page of this Registration Statement)
</TABLE>
- ------------------------
+ Filed herewith.
++ Filed as an exhibit to the Registrant's Registration Statement on Form S-1,
Registration No. 33-82978, effective October 28, 1994, and incorporated
herein by reference.
<PAGE>
4,000,000 Shares
COVENANT TRANSPORT, INC.
Class A Common Stock
($0.01 Par Value)
UNDERWRITING AGREEMENT
April ____, 1998
BT Alex. Brown Incorporated
Smith Barney Inc.
Stephens Inc.
ABN AMRO Incorporated
As Representatives of the
Several Underwriters
c/o BT Alex. Brown Incorporated
One South Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
Covenant Transport, Inc., a Nevada corporation (the "Company"), and
certain shareholders of the Company (the "Selling Shareholders") propose to sell
to the several underwriters (the "Underwriters") named in Schedule I hereto for
whom you are acting as representatives (the "Representatives") an aggregate of
4,000,000 shares of the Company's Class A Common Stock, $0.01 par value (the
"Firm Shares"), of which 2,080,000 shares will be sold by the Company and
1,920,000 shares will be sold by the Selling Shareholders. To the extent there
are no additional Underwriters listed on Schedule I other than you, the term
Representatives as used herein shall mean you, as Underwriters, and the terms
Representatives and Underwriters shall mean either the singular or plural as the
context requires. The respective amounts of the Firm Shares to be so purchased
by the several Underwriters are set forth opposite their names in Schedule I
hereto, and the respective amounts to be sold by the Selling Shareholders are
set forth opposite their names in Schedule II hereto. The Company and the
Selling Shareholders are sometimes referred to herein collectively as the
"Sellers." The
1
<PAGE>
Company also proposes to sell at the Underwriters' option an aggregate of up to
600,000 additional shares of the Company's Class A Common Stock (the "Option
Shares") as set forth below.
As the Representatives, you have advised the Company and the Selling
Shareholders (a) that you are authorized to enter into this Agreement on behalf
of the several Underwriters and (b) that the several Underwriters are willing,
acting severally and not jointly, to purchase the numbers of Firm Shares set
forth opposite their respective names in Schedule I, plus their pro rata portion
of the Option Shares if you elect to exercise the over-allotment option in whole
or in part for the accounts of the several Underwriters. The Firm Shares and the
Option Shares (to the extent the aforementioned option is exercised) are herein
collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING SHAREHOLDERS
(a) The Company represents and warrants to each of the Underwriters as
follows:
(i) A registration statement on Form S-3 (File No. 333-______) with
respect to the Shares has been carefully prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended (the "Act"), and
the Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. The Company has complied with the conditions for the use of Form
S-3. Copies of such registration statement, including any amendments thereto,
the preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462(b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of the
date of this Agreement. "Prospectus" means (a) the form of prospectus first
filed with the Commission pursuant to Rule 424(b) or (b) the last preliminary
prospectus included in the Registration Statement filed prior to the time it
becomes effective or filed pursuant to Rule 424(a) under the Act that is
delivered by the Company to the Underwriters for delivery to purchasers of the
Shares, together with the term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary prospectus
included in the Registration Statement prior to the time it becomes effective is
herein referred to as a "Preliminary Prospectus." Any reference herein to the
Registration Statement, any Preliminary Prospectus or to the Prospectus shall be
deemed to refer to and include any documents incorporated by reference therein,
and, in the case of any reference herein to any
2
<PAGE>
Prospectus, also shall be deemed to include any documents incorporated by
reference therein, and any supplements or amendments thereto, filed with the
Commission after the date of filing of the Prospectus under Rules 424(b) or
430A, and prior to the termination of the offering of the Shares by the
Underwriters.
(ii) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Nevada, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. Each of the subsidiaries of
the Company as listed in Exhibit 21 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 (collectively, the "Subsidiaries") has been
duly organized and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, with corporate power and
authority to own or lease its properties and conduct its business as described
in the Registration Statement. The Subsidiaries are the only subsidiaries,
direct or indirect, of the Company. The Company and each of the Subsidiaries are
duly qualified to transact business in all jurisdictions in which the conduct of
their business requires such qualification and the failure to so qualify would
materially affect the rights or business of the Company or the Subsidiaries. The
outstanding shares of capital stock of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and non-assessable and are owned
by the Company or another Subsidiary free and clear of all liens, encumbrances
and equities and claims, except with respect to the pledge of such shares of
each of certain of the Subsidiaries to the Noteholders under the Note Purchase
Agreement and the Bank Creditors under the Credit Agreement; and no options,
warrants or other rights to purchase, agreements or other obligations to issue
or other rights to convert any obligations into shares of capital stock or
ownership interests in the Subsidiaries are outstanding.
(iii) The outstanding shares of Class A Common Stock of the Company,
including all shares to be sold by the Selling Shareholders, and Class B Common
Stock have been duly authorized and validly issued and are fully paid and
non-assessable; the portion of the Shares to be issued and sold by the Company
have been duly authorized and, when issued and paid for as contemplated herein
will be validly issued, fully paid and non-assessable; and no preemptive rights
of stockholders exist with respect to any of the Shares or the issue and sale
thereof. Neither the filing of the Registration Statement nor the offering or
sale of the Shares as contemplated by this Agreement gives rise to any rights,
other than those which have been waived or satisfied, for or relating to the
registration of any shares of Class A Common Stock or Class B Common Stock.
(iv) All of the Shares conform to the description thereof contained or
incorporated by reference in the Registration Statement. The form of
certificates for the Shares conforms to the corporate law of the jurisdiction of
the Company's incorporation.
(v) The Commission has not issued an order preventing or suspending the
use of any Prospectus relating to the proposed offering of the Shares nor
instituted proceedings for that
3
<PAGE>
purpose. The Registration Statement contains, and the Prospectus and any
amendments or supplements thereto will contain, all statements which are
required to be stated therein by, and will conform to, the requirements of the
Act and the Rules and Regulations. The documents incorporated by reference in
the Prospectus, at the time filed with the Commission, conformed in all respects
to the requirements of the Securities Exchange Act of 1934 (the "Exchange Act")
or the Act, as applicable, and the rules and regulations of the Commission
thereunder. The Registration Statement and any amendment thereto do not contain,
and will not contain, any untrue statement of a material fact and do not omit,
and will not omit, to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus and any
amendments and supplements thereto do not contain, and will not contain, any
untrue statement of material fact; and do not omit, and will not omit, to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from the
Registration Statement or the Prospectus, or any such amendment or supplement,
in reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of any Underwriter through the Representatives,
specifically for use in the preparation thereof.
(vi) The consolidated financial statements of the Company and the
Subsidiaries, together with related notes and schedules as set forth or
incorporated by reference in the Registration Statement, present fairly in all
material respects the financial position and the results of operations and cash
flows of the Company and the consolidated Subsidiaries, at the indicated dates
and for the indicated periods. Such financial statements and related schedules
have been prepared in accordance with generally accepted principles of
accounting, consistently applied throughout the periods involved, except as
disclosed therein, and all adjustments necessary for a fair presentation of
results for such periods have been made. The summary consolidated financial and
operating data included or incorporated by reference in the Registration
Statement present fairly the information shown therein and such data has been
compiled on a basis consistent with the financial statements presented therein
and the books and records of the Company.
(vii) Coopers & Lybrand, L.L.P., who have certified certain of the
financial statements filed with the Commission as part of, or incorporated by
reference in, the Registration Statement, are independent public accountants as
required by the Act and the Rules and Regulations.
(viii) There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of the
Subsidiaries before any court or administrative agency or otherwise which, if
determined adversely to the Company or any of its Subsidiaries, might result in
any material adverse change in the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and of the Subsidiaries taken as a whole or to prevent the
consummation of the transactions contemplated hereby, except as set forth in the
Registration Statement.
4
<PAGE>
(ix) The Company and the Subsidiaries have good and marketable title to
all of the properties and assets as owned by them reflected in the financial
statements (or as described in the Registration Statement) hereinabove
described, subject to no lien, mortgage, pledge, charge or encumbrance of any
kind except those reflected in such financial statements (or as described in the
Registration Statement) or which are not material in amount or represent amounts
not yet due and payable. The Company and the Subsidiaries occupy their leased
properties under valid and binding leases conforming in all material respects to
the description thereof incorporated by reference in the Registration Statement.
(x) The Company and the Subsidiaries have filed all Federal, State,
local and foreign income tax returns which have been required to be filed and
have paid all taxes indicated by said returns and all assessments received by
them or any of them to the extent that such taxes have become due and are not
being contested in good faith. All known tax liabilities have been adequately
provided for in the financial statements of the Company.
(xi) Since the respective dates as of which information is given in the
Registration Statement, as it may be amended or supplemented, there has not been
any material adverse change or any development involving a prospective material
adverse change in or affecting the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and its Subsidiaries taken as a whole, whether or not occurring in
the ordinary course of business, and there has not been any material transaction
entered into or any material transaction that is probable of being entered into
by the Company or the Subsidiaries, other than transactions in the ordinary
course of business and changes and transactions described in the Registration
Statement, as it may be amended or supplemented. The Company and the
Subsidiaries have no material contingent obligations which are not disclosed in
the Company's financial statements which are included in the Registration
Statement.
(xii) Neither the Company nor any of the Subsidiaries is or with the
giving of notice or lapse of time or both, will be, in violation of or in
default under its Charter or By-Laws or under any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by which
it, or any of its properties, is bound and which default is of material
significance in respect of the condition (financial or otherwise) of the Company
and its Subsidiaries taken as a whole or the business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and the Subsidiaries taken as a whole. The execution and delivery of
this Agreement and the consummation of the transactions herein contemplated and
the fulfillment of the terms hereof will not conflict with or result in a breach
of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company or any Subsidiary is a party, or of the Charter or By-Laws of the
Company or any order, rule or regulation applicable to the Company or any
Subsidiary of any court or of any regulatory body or administrative agency or
other governmental body having jurisdiction.
5
<PAGE>
(xiii) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission
or the National Association of Securities Dealers, Inc. (the "NASD") has been
obtained or made and is in full force and effect.
(xiv) The Company and each of the Subsidiaries hold all material
licenses, certificates and permits from governmental authorities which are
necessary to the conduct of their businesses; and neither the Company nor any of
the Subsidiaries has infringed any patents, patent rights, trade names,
trademarks or copyrights, which infringement is material to the business of the
Company and the Subsidiaries taken as a whole. The Company knows of no material
infringement by others of patents, patent rights, trade names, trademarks or
copyrights owned by or licensed to the Company.
(xv) Neither the Company, nor to the Company's best knowledge, any of
its affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Class A Common Stock to facilitate the sale or resale of
the Shares. The Company acknowledges that the Underwriters may engage in passive
market making transactions in the Shares on The Nasdaq National Market in
accordance with Rule 103 under Regulation M of the Exchange Act.
(xvi) Neither the Company nor any Subsidiary is an "investment company"
within the meaning of such term under the Investment Company Act of 1940, as
amended (the "1940 Act") and the rules and regulations of the Commission
thereunder.
(xvii) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xviii) The Company and each of its Subsidiaries carry, or are covered
by, insurance in such amounts and covering such risks as is adequate for the
conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar industries.
6
<PAGE>
(xix) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the loss of
such qualification.
(b) Each of the Selling Shareholders severally represents and warrants
as follows:
(i) Such Selling Shareholder now has and at the Closing Date will be
the holder of record of the Firm Shares and to be sold by such Selling
Shareholder, free of any adverse claims, with full right, power and authority to
effect the sale and delivery of such Firm Shares; and, assuming that the
Underwriters are bona fide purchasers as defined in Section 8-203 of the Uniform
Commercial Code, such Underwriters upon the delivery of, against payment for,
such Firm Shares pursuant to this Agreement shall be the holders of record of
such shares, free of any adverse claims.
(ii) Such Selling Shareholder has full right, power and authority to
execute and deliver this Agreement, the Power of Attorney and the Custodian
Agreement referred to below and to perform its obligations under such
Agreements. The execution and delivery of this Agreement and the consummation by
such Selling Shareholder of the transactions herein contemplated and the
fulfillment by such Selling Shareholder of the terms hereof will not require any
consent, approval, authorization, or other order of any court, regulatory body,
administrative agency or other governmental body (except as may be required
under the Act) and will not result in a breach of any of the terms and
provisions of, or constitute a default under, organizational documents of such
Selling Shareholder, if not an individual, or any indenture, mortgage, deed of
trust or other agreement or instrument to which such Selling Shareholder is a
party, or of any order, rule or regulation applicable to such Selling
Shareholder of any court or of any regulatory body or administrative agency or
other governmental body having jurisdiction.
(iii) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to, or which has constituted, or
which might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Class A Common Stock of the Company and, other
than as permitted by the Act, the Selling Shareholder will not distribute any
prospectus or other offering material in connection with the offering of the
Shares.
7
<PAGE>
(iv) Without having undertaken to determine independently the accuracy
or completeness of either the representations and warranties of the Company
contained herein or the information contained in the Registration Statement,
such Selling Shareholder has no reason to believe that the representations and
warranties of the Company contained in this Section 1 are not true and correct,
is familiar with the Registration Statement and has no knowledge of any material
fact, condition or information not disclosed in the Registration Statement which
has adversely affected or may adversely affect the business of the Company or
any of the Subsidiaries; and the sale of the Firm Shares by such Selling
Shareholder pursuant hereto is not prompted by any information concerning the
Company or any of the Subsidiaries which is not set forth in the Registration
Statement or the documents incorporated by reference therein. The information
pertaining to such Selling Shareholder under the caption "Selling Shareholders"
in the Prospectus is complete and accurate in all material respects.
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Sellers
agree to sell to the Underwriters and each Underwriter agrees, severally and not
jointly, to purchase, at a price of $_____ per share, the number of Firm Shares
set forth opposite the name of each Underwriter in Schedule I hereof, subject to
adjustments in accordance with Section 9 hereof. The number of Firm Shares to be
purchased by each Underwriter from each Seller shall be as nearly as practicable
in the same proportion to the total number of Firm Shares being sold by each
Seller as the number of Firm Shares being purchased by each Underwriter bears to
the total number of Firm Shares to be sold hereunder. The obligations of the
Company and of each of the Selling Shareholders shall be several and not joint.
(b) Certificates in negotiable form for the total number of the Firm
Shares to be sold hereunder by the Selling Shareholders have been placed in
custody with Scudder Law Firm, P.C. as custodian (the "Custodian") pursuant to
the Custodian Agreement executed by each Selling Shareholder for delivery of all
Firm Shares to be sold hereunder by the Selling Shareholders. Each of the
Selling Shareholders specifically agrees that the Firm Shares represented by the
certificates held in custody for the Selling Shareholders under the Custodian
Agreement are subject to the interests of the Underwriters hereunder, that the
arrangements made by the Selling Shareholders for such custody are to that
extent irrevocable, and that the obligations of the Selling Shareholders
hereunder shall not be terminable by any act or deed of the Selling Shareholders
(or by any other person, firm or corporation including the Company, the
Custodian or the Underwriters) or by operation of law (including the death of an
individual Selling Shareholder or the dissolution of a corporate Selling
Shareholder) or by the occurrence of any other event or events, except as set
forth in the Custodian Agreement. If any such event should occur prior to the
delivery to the Underwriters of the Firm Shares hereunder, certificates for the
Firm Shares shall be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such event has not occurred. The Custodian is
authorized to receive and
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acknowledge receipt of the proceeds of sale of the Shares held by it against
delivery of such Shares.
(c) Payment for the Firm Shares to be sold hereunder is to be made in
same day funds via wire transfer to the order of the Company for the shares to
be sold by it and to the order of Scudder Law Firm, P.C., "as Custodian" for the
shares to be sold by the Selling Shareholders, in each case against delivery of
certificates therefor to the Representatives for the several accounts of the
Underwriters. Such payment and delivery are to be made at the offices of BT
Alex. Brown Incorporated, 1 South Street, Baltimore, Maryland, at 10:00 a.m.,
Baltimore time, on the third business day after the date of this Agreement or at
such other time and date not later than five business days thereafter as you and
the Company shall agree upon, such time and date being herein referred to as the
"Closing Date." (As used herein, "business day" means a day on which the New
York Stock Exchange is open for trading and on which banks in New York are open
for business and not permitted by law or executive order to be closed.) The
certificates for the Firm Shares will be delivered in such denominations and in
such registrations as the Representatives request in writing not later than the
second full business day prior to the Closing Date, and will be made available
for inspection by the Representatives at least one (1) business day prior to the
Closing Date.
(d) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase the
Option Shares at the price per share as set forth in the first paragraph of this
Section 2. The option granted hereby may be exercised in whole or in part by
giving written notice (i) at any time before the Closing Date and (ii) only once
thereafter within 30 days after the date of this Agreement, by you, as
Representatives of the several Underwriters, to the Company, setting forth the
number of Option Shares as to which the several Underwriters are exercising the
option, the names and denominations in which the Option Shares are to be
registered and the time and date at which such certificates are to be delivered.
The time and date at which certificates for Option Shares are to be delivered
shall be determined by the Representatives but shall not be earlier than three
(3) nor later than 10 full business days after the exercise of such option, nor
in any event prior to the Closing Date (such time and date being herein referred
to as the "Option Closing Date"). If the date of exercise of the option is three
(3) or more days before the Closing Date, the notice of exercise shall set the
Closing Date as the Option Closing Date. The number of Option Shares to be
purchased by each Underwriter shall be in the same proportion to the total
number of Option Shares being purchased as the number of Firm Shares being
purchased by such Underwriter bears to the total number of Firm Shares, adjusted
by you in such manner as to avoid fractional shares. The option with respect to
the Option Shares granted hereunder may be exercised only to cover
over-allotments in the sale of the Firm Shares by the Underwriters. You, as
Representatives of the several Underwriters, may cancel such option at any time
prior to its expiration by giving written notice of such cancellation to the
Company. To the extent, if any, that the option is exercised, payment for the
Option
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Shares shall be made on the Option Closing Date in same day funds via wire
transfer to the order of the Company against delivery of certificates therefor
at the offices of BT Alex. Brown Incorporated, 1 South Street, Baltimore,
Maryland.
(e) If on the Closing Date any Selling Shareholder fails to sell the
Firm Shares which such Selling Shareholder has agreed to sell on such date as
set forth in Schedule II hereto, the Company agrees that it will sell or arrange
for the sale of that number of shares of Class A Common Stock to the
Underwriters which represents Firm Shares which such Selling Shareholder has
failed to so sell, as set forth in Schedule II hereto, or such lesser number as
may be requested by the Representatives.
3. OFFERING BY THE UNDERWRITERS.
It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so. The Firm Shares are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representatives may from
time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Underwriters will offer them to the public on the
foregoing terms.
It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with a
Master Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. COVENANTS OF THE COMPANY AND THE SELLING SHAREHOLDERS.
(a) The Company and the Selling Shareholders covenant and agree with
the several Underwriters that:
(i) The Company will (A) use its best efforts to cause the Registration
Statement to become effective or, if the procedure in Rule 430A of the Rules and
Regulations is followed, to prepare and timely file with the Commission under
Rule 424(b) of the Rules and Regulations a Prospectus in a form approved by the
Representatives containing information previously omitted at the time of
effectiveness of the Registration Statement in reliance on Rule 430A of the
Rules and Regulations, (B) not file any amendment to the Registration Statement
or supplement to the Prospectus or document incorporated by reference therein of
which the Representatives shall not previously have been advised and furnished
with a copy or to which the Representatives shall have reasonably objected in
writing or which is not in compliance with the Rules and Regulations and (C)
file on a timely basis all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission subsequent to
the date of the Prospectus and prior to the termination of the offering of the
Shares by the Underwriters.
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(ii) The Company will advise the Representatives promptly (A) when the
Registration Statement or any post-effective amendment thereto shall have become
effective, (B) of receipt of any comments from the Commission, (C) of any
request of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, and (D) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its best efforts to prevent
the issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(iii) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports, and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
(iv) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representatives may
reasonably request. The Company will deliver to the Representatives at or before
the Closing Date, four signed copies of the Registration Statement and all
amendments thereto including all exhibits filed therewith, and will deliver to
the Representatives such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that may
reasonably be requested), including documents incorporated by reference therein,
and of all amendments thereto, as the Representatives may reasonably request.
(v) The Company will comply with the Act and the Rules and Regulations,
and the Exchange Act, and the rules and regulations of the Commission
thereunder, so as to permit the completion of the distribution of the Shares as
contemplated in this Agreement and the Prospectus. If during the period in which
a prospectus is required by law to be delivered by an Underwriter or dealer, any
event shall occur as a result of which, in the judgment of the Company or in the
reasonable opinion of the Underwriters, it becomes necessary to amend or
supplement the Prospectus in order to make the statements therein, in the light
of the circumstances existing at the time the Prospectus is delivered to a
purchaser, not misleading, or, if it is necessary at any time to amend or
supplement the Prospectus to comply with any law, the Company promptly will
either (i) prepare and file with the Commission an appropriate
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amendment to the Registration Statement or supplement to the Prospectus or (ii)
prepare and file with the Commission an appropriate filing under the Exchange
Act which shall be incorporated by reference in the Prospectus so that the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when it is so delivered, be misleading, or so that the Prospectus
will comply with the law.
(vi) The Company will make generally available to its security holders,
as soon as it is practicable to do so, but in any event not later than 15 months
after the effective date of the Registration Statement, an earning statement
(which need not be audited) in reasonable detail, covering a period of at least
12 consecutive months beginning after the effective date of the Registration
Statement, which earning statement shall satisfy the requirements of Section
11(a) of the Act and Rule 158 of the Rules and Regulations and will advise you
in writing when such statement has been so made available.
(vii) The Company will, for a period of five (5) years from the Closing
Date, deliver to the Representatives copies of annual reports and copies of all
other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Exchange Act.
The Company will deliver to the Representatives similar reports with respect to
significant subsidiaries, as that term is defined in the Rules and Regulations,
which are not consolidated in the Company's financial statements.
(viii) No offering, sale, short sale or other disposition of any shares
of Class A Common Stock of the Company, the Class B Common Stock of the Company
or other securities convertible into or exchangeable or exercisable for shares
of Class A Common Stock or Class B Common Stock of the Company or derivative of
Class A Common Stock, the Class B Common Stock of the Company (or agreement for
such) will be made for a period of 90 days after the date of this Agreement,
directly or indirectly, by the Company except for shares issued by the company
under its Incentive Stock Plan, in connection with acquisitions or with the
prior written consent of BT Alex. Brown Incorporated.
(ix) The Company will use its best efforts to list, subject to notice
of issuance, the Shares on the Nasdaq National Market.
(x) The Company has caused each officer and director and specific
shareholders of the Company to furnish to you, on or prior to the date of this
agreement, a letter or letters, in form and substance satisfactory to the
Underwriters, pursuant to which each such person shall agree not to offer, sell,
sell short or otherwise dispose of any shares of Class A or Class B Common Stock
of the Company or other capital stock of the Company, or any other securities
convertible, exchangeable or exercisable for Class A or Class B Common Stock or
derivative of Class A or Class B Common Stock owned by such person or request
the registration for the offer or sale of any of the foregoing (or as to which
such person has the right to direct the disposition of) for a
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<PAGE>
period of 90 days after the date of this Agreement, directly or indirectly,
except for donations to charitable organizations, provided, that any such
charitable organization must agree in writing not to sell such donated
securities for a like period and except with the prior written consent of BT
Alex. Brown Incorporated ("Lockup Agreements").
(xi) The Company shall apply the net proceeds of its sale of the Shares
as set forth in the Prospectus.
(xii) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as would
require the Company or any of the Subsidiaries to register as an investment
company under the 1940 Act.
(xiii) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for the
Class A Common Stock.
(xiv) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.
(b) Each of the Selling Shareholders covenants and agrees with the
several Underwriters that:
(i) No offering, sale, short sale or other disposition of any shares of
Class A or Class B Common Stock of the Company or other capital stock of the
Company or other securities convertible, exchangeable or exercisable for Class A
or Class B Common Stock or derivative of Class A or Class B Common Stock owned
by the Selling Shareholder or request the registration for the offer or sale of
any of the foregoing (or as to which the Selling Shareholder has the right to
direct the disposition of) will be made for a period of 90 days after the date
of this Agreement, directly or indirectly, by such Selling Shareholder otherwise
than for donations to charitable organizations, provided, that any such
charitable organization must agree in writing not to sell such donated
securities for a like period or with the prior written consent of BT Alex. Brown
Incorporated.
(ii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal Responsibility
Act of 1982 and the Interest and Dividend Tax Compliance Act of 1983 with
respect to the transactions herein contemplated, each of the Selling
Shareholders agrees to deliver to you prior to or at the Closing Date a properly
completed and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations in
lieu thereof).
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<PAGE>
(iii) Such Selling Shareholder will not take, directly or indirectly,
any action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company .
5. COSTS AND EXPENSES.
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Sellers under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting fees
of the Company; the fees and disbursements of counsel for the Company and the
Selling Shareholders; the cost of printing and delivering to, or as requested
by, the Underwriters copies of the Registration Statement, Preliminary
Prospectuses, the Prospectus and this Agreement; the filing fees of the
Commission; the filing fee of the NASD and the Listing Fee of the Nasdaq
National Market. To the extent, if at all, that any of the Selling Shareholders
engage special legal counsel to represent them in connection with this offering,
the fees and expenses of such counsel shall be borne by such Selling
Shareholder. Any transfer taxes imposed on the sale of the Shares to the several
Underwriters will be paid by the Sellers pro rata. The Sellers shall not,
however, be required to pay for any of the Underwriters' expenses (other than
those related to qualification under NASD regulation) except that, if this
Agreement shall not be consummated because the conditions in Section 6 hereof
are not satisfied, or because this Agreement is terminated by the
Representatives pursuant to Section 11 hereof, or by reason of any failure,
refusal or inability on the part of the Company or the Selling Shareholders to
perform any undertaking or satisfy any condition of this Agreement or to comply
with any of the terms hereof on their part to be performed, unless such failure
to satisfy said condition or to comply with said terms be due to the default or
omission of any Underwriter, then the Company shall reimburse the several
Underwriters for reasonable out-of-pocket expenses, including fees and
disbursements of counsel, reasonably incurred in connection with investigating,
marketing and proposing to market the Shares or in contemplation of performing
their obligations hereunder; but the Company and the Selling Shareholders shall
not in any event be liable to any of the several Underwriters for damages on
account of loss of anticipated profits from the sale by them of the Shares.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
The several obligations of the Underwriters to purchase the Firm Shares
on the Closing Date and the Option Shares, if any, on the Option Closing Date
are subject to the accuracy, as of the Closing Date or the Option Closing Date,
as the case may be, of the representations and warranties of the Company and the
Selling Shareholders contained herein, and to the performance by the Company and
the Selling Shareholders of their covenants and obligations hereunder and to the
following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and
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Regulations shall have been made, and any request of the Commission for
additional information (to be included in the Registration Statement or
otherwise) shall have been disclosed to the Representatives and complied with to
their reasonable satisfaction. No stop order suspending the effectiveness of the
Registration Statement, as amended from time to time, shall have been issued and
no proceedings for that purpose shall have been taken or, to the knowledge of
the Company or the Selling Shareholders, shall be contemplated by the Commission
and no injunction, restraining order, or order of any nature by a Federal or
state court of competent jurisdiction shall have been issued as of the Closing
Date which would prevent the issuance of the Shares.
(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Scudder Law Firm, P.C.,
counsel for the Company and the Selling Shareholders, dated the Closing Date or
the Option Closing Date, as the case may be, addressed to the Underwriters (and
stating that it may be relied upon by counsel to the Underwriters) to the effect
that:
(i) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Nevada, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement; each of the Subsidiaries
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, with corporate
power and authority to own or lease its properties and conduct its business as
described in the Registration Statement; (based on certificates of officers of
the Company) the Company and each of the Subsidiaries are duly qualified to
transact business in all jurisdictions in which the conduct of their business
requires such qualification, or in which the failure to qualify would have a
materially adverse effect upon the business of the Company and the Subsidiaries
taken as a whole; and the outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable and are owned by the Company or a Subsidiary; and, to the best of
such counsel's actual knowledge, the outstanding shares of capital stock of each
of the Subsidiaries is owned free and clear of all liens, encumbrances and
equities and claims, and no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert any
obligations into any shares of capital stock or of ownership interests in the
Subsidiaries are outstanding.
(ii) The Company has authorized and outstanding capital stock as set
forth or incorporated by reference in the Prospectus; the authorized shares of
the Company's Class A and Class B Common Stock have been duly authorized; the
outstanding shares of the Company's Class A Common Stock, including the Shares
to be sold by the Selling Shareholders, and Class B Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable; all of the
Shares conform to the description thereof contained in the Prospectus; the
certificates for the Shares, assuming they are in the form filed with the
Commission, are in due and proper form; the shares of Class A Common Stock,
including the Option Shares, if any, to be sold by the Company pursuant to this
Agreement have been duly authorized and will be validly
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<PAGE>
issued, fully paid and non-assessable when issued and paid for as contemplated
by this Agreement; and no preemptive rights of stockholders exist with respect
to any of the Shares or the issue or sale thereof.
(iii) Except as described in or contemplated by the Prospectus, to the
knowledge of such counsel, there are no outstanding securities of the Company
convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of any character
obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any of the
Shares or the right to have any shares of Class A or Class B Common Stock or
other securities of the Company included in the Registration Statement or the
right, as a result of the filing of the Registration Statement, to require
registration under the Act of any shares of Class A or Class B Common Stock or
other securities of the Company.
(iv) The Registration Statement has become effective under the Act and,
to such counsel's actual knowledge, no stop order proceedings with respect
thereto have been instituted or are pending or threatened under the Act.
(v) The Registration Statement, the Prospectus and each amendment or
supplement thereto and document incorporated by reference therein comply as to
form in all material respects with the requirements of the Act or the Exchange
Act, as applicable and the applicable rules and regulations thereunder (except
that such counsel need express no opinion as to the operating statistics,
financial statements and related schedules included or incorporated by reference
therein). The conditions for the use of Form S-3, set forth in the General
Instructions thereto, have been satisfied.
(vi) To such counsel's actual knowledge, there are no documents
required to be filed as exhibits to or incorporated by reference in the
Registration Statement or described in the Registration Statement or the
Prospectus which are no so filed, incorporated by reference or described as
required, and such contracts and documents as are summarized in the Registration
Statement or the Prospectus are fairly summarized in all material respects.
(vii) To such counsel's actual knowledge, there are no material legal
or governmental proceedings pending or threatened against the Company or any of
the Subsidiaries except as set forth in the Prospectus.
(viii) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of
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the terms or provisions of, or constitute a default under, the Charter or
By-Laws of the Company, or to such counsel's actual knowledge any agreement or
instrument to which the Company or any of the Subsidiaries is a party or by
which the Company or any of the Subsidiaries may be bound.
(ix) This Agreement has been duly authorized, executed and delivered by
the Company.
(x) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the NASD as to which such counsel need express
no opinion) except such as have been obtained or made, specifying the same.
(xi) The Company is not, and will not become, as a result of the
consummation of the transactions contemplated by this Agreement, and application
of the net proceeds therefrom as described in the Prospectus, required to
register as an investment company under the 1940 Act.
(xii) The Custodian Agreements and Powers of Attorney have been duly
authorized, executed and delivered on behalf of the Selling Shareholders and
represent valid and binding obligations of the Selling Shareholders.
(xiii) Each Selling Shareholder has full legal right, power and
authority, and any approval required by law, to sell, assign, transfer and
deliver the portion of the Shares to be sold by such Selling Shareholder.
(xiv) The Underwriters (assuming that they are bona fide purchasers
within the meaning of the Uniform Commercial Code) have acquired good and
marketable title to the Shares being sold by each Selling Shareholder on the
Closing Date, free and clear of all liens, encumbrances, equities and claims.
(xv) This Agreement has been duly authorized, executed and delivered on
behalf of the Selling Shareholders and represents a valid and binding obligation
of each of the Selling Shareholders.
In rendering such opinion Scudder Law Firm, P.C. may rely as to matters
governed by the laws of states other than Nevada or Federal laws on local
counsel in such jurisdictions and as to the matters set forth in subparagraphs
(xii), (xiii), (xiv) and (xv) on opinions of other counsel representing the
respective Selling Shareholders, if any, provided that in each case Scudder Law
Firm, P.C. shall state that they believe that they and the Underwriters are
justified in relying on such other counsel. In addition to the matters set forth
above, such opinion shall also include a statement to the effect that nothing
has come to the attention of such counsel which leads them to believe that (i)
the Registration Statement, at the time it became effective under the Act (but
after giving effect to any modifications incorporated therein pursuant to Rule
430A under the Act) and
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as of the Closing Date or the Option Closing Date, as the case may be, contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (ii) the Prospectus, or any supplement thereto, on the date it
was filed pursuant to the Rules and Regulations and as of the Closing Date or
the Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they are made, not
misleading (except that such counsel need express no view as to operating
statistics, financial statements, schedules and statistical information included
or incorporated by reference therein). With respect to such statement, Scudder
Law Firm, P.C. may state that their belief is based upon the procedures set
forth therein, but is without independent check and verification.
(c) The Representatives shall have received from Piper & Marbury
L.L.P., counsel for the Underwriters, an opinion dated the Closing Date or the
Option Closing Date, as the case may be, substantially to the effect specified
in subparagraphs (ii), (iii), (iv) and (ix) of Paragraph (b) of this Section 6,
and that the Company is a duly organized and validly existing corporation under
the laws of the State of Nevada. In rendering such opinion, Piper & Marbury
L.L.P. may rely as to all matters governed other than by the laws of the State
of Maryland or Federal laws on the opinion of counsel referred to in Paragraph
(b) of this Section 6. In addition to the matters set forth above, such opinion
shall also include a statement to the effect that nothing has come to the
attention of such counsel which leads them to believe that (i) the Registration
Statement, or any amendment thereto, as of the time it became effective under
the Act (but after giving effect to any modifications incorporated therein
pursuant to Rule 430A under the Act) as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (ii) the Prospectus,
or any supplement thereto, on the date it was filed pursuant to the Rules and
Regulations and as of the Closing Date or the Option Closing Date, as the case
may be, contained an untrue statement of a material fact or omitted to state a
material fact, necessary in order to make the statements, in the light of the
circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules and
statistical information therein). With respect to such statement, Piper &
Marbury L.L.P. may state that their belief is based upon the procedures set
forth therein, but is without independent check and verification.
(d) You shall have received, on each of the dates hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the date
hereof, the Closing Date or the Option Closing Date, as the case may be, in form
and substance satisfactory to you, of Coopers & Lybrand, L.L.P. confirming that
they are independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating that in their
opinion the financial statements and schedules examined by them and included in
the Registration Statement comply in form in all material respects with the
applicable accounting
18
<PAGE>
requirements of the Act and the related published Rules and Regulations; and
containing such other statements and information as is ordinarily included in
accountants' "comfort letters" to Underwriters with respect to the financial
statements and certain financial and statistical information contained in the
Registration Statement and Prospectus.
(e) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of the
Chief Executive Officer and the Chief Financial Officer of the Company to the
effect that, as of the Closing Date or the Option Closing Date, as the case may
be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for such purpose have been taken or are, to
his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;
(iv) He has carefully examined the Registration Statement and
the Prospectus and, in his or her opinion, as of the effective date of the
Registration Statement, the statements contained in the Registration Statement
were true and correct, and such Registration Statement and Prospectus did not
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, and since the effective
date of the Registration Statement, no event has occurred which should have been
set forth in a supplement to or an amendment of the Prospectus which has not
been so set forth in such supplement or amendment; and
(v) Since the respective dates as of which information is
given or incorporated by reference in the Registration Statement and Prospectus,
there has not been any material adverse change or any development involving a
prospective material adverse change in or affecting the condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole or the earnings,
business, management, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company and the Subsidiaries taken
as a whole, whether or not arising in the ordinary course of business.
(f) The Company and the Selling Shareholders shall have furnished to
the Representatives such further certificates and documents confirming the
representations and warranties, covenants and conditions contained herein and
related matters as the Representatives may reasonably have requested.
19
<PAGE>
(g) The Firm Shares and Option Shares, if any, have been approved for
designation upon notice of issuance on The Nasdaq National Market.
(h) The Lockup Agreements described in Section 4 (a)(x) are in full
force and effect.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representatives and to Piper & Marbury
L.L.P., counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Company and the Selling Shareholders of
such termination in writing or by telegram at or prior to the Closing Date or
the Option Closing Date, as the case may be.
In such event, the Selling Shareholders, the Company and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 5 and 8 hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE SELLERS.
The obligations of the Sellers to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. INDEMNIFICATION.
(a) The Company and the Selling Shareholders, jointly and severally,
agree to indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of the Act, against any losses,
claims, damages or liabilities to which such Underwriter or any such controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto or
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
and will reimburse each Underwriter and each such controlling person upon demand
for any legal or other expenses reasonably incurred by such Underwriter or such
controlling person in connection with investigating or defending any such loss,
claim, damage or liability, action or proceeding or in responding to a subpoena
or governmental inquiry related to the offering of the Shares, whether or not
such Underwriter or controlling person is a party to any
20
<PAGE>
action or proceeding; provided, however, that the Company and the Selling
Shareholders will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. In no event, however, shall the
liability of any Selling Shareholder for indemnification under this Section 8(a)
exceed the proceeds received by such Selling Shareholder from the Underwriters
in the offering. This indemnity agreement will be in addition to any liability
which the Company or the Selling Shareholders may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, the Selling Shareholders, and each person, if
any, who controls the Company or the Selling Shareholders within the meaning of
the Act, against any losses, claims, damages or liabilities to which the Company
or any such director, officer, Selling Shareholder or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or (ii) the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made; and will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, Selling Shareholder or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from
21
<PAGE>
any liability which it or they may have to the indemnified party for
contribution or otherwise than on account of the provisions of Section 8(a) or
(b). In case any such proceeding shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party and shall pay as incurred the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel at its own expense.
Notwithstanding the foregoing, the indemnifying party shall pay as incurred (or
within 30 days of presentation) the fees and expenses of the counsel retained by
the indemnified party in the event (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel,
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them or (iii) the indemnifying party shall
have failed to assume the defense and employ counsel acceptable to the
indemnified party within a reasonable period of time after notice of
commencement of the action. It is understood that the indemnifying party shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm for all such indemnified parties. Such firm shall be designated in
writing by you in the case of parties indemnified pursuant to Section 8(a) and
by the Company and the Selling Shareholders in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if settled
with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company and the
Selling Shareholders on the one hand and the Underwriters on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding
22
<PAGE>
sentence is not permitted by applicable law then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company and the Selling Shareholders on the one hand
and the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Shareholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Shareholders bear to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Selling Shareholders on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this Section
8(d) were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 8(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to above in this Section 8(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter, (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation and (iii) no Selling Shareholder
shall be required to contribute any amount in excess of the proceeds received by
such Selling Shareholder from the Underwriters in the offering. The
Underwriters' obligations in this Section 8(d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process
23
<PAGE>
and agrees that any other contributing party may join him or it as an additional
defendant in any such proceeding in which such other contributing party is a
party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company and the Selling Shareholders set
forth in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers
or any persons controlling the Company, (ii) acceptance of any Shares and
payment therefor hereunder and (iii) any termination of this Agreement. A
successor to any Underwriter, or to the Company, its directors or officers, or
any person controlling the Company, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section
8.
9. DEFAULT BY UNDERWRITERS.
If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the Shares
which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company or a Selling
Shareholder), you, as Representatives of the Underwriters, shall use your
reasonable efforts to procure within 36 hours thereafter one or more of the
other Underwriters, or any others, to purchase from the Company and the Selling
Shareholders such amounts as may be agreed upon and upon the terms set forth
herein, the Firm Shares or Option Shares, as the case may be, which the
defaulting Underwriter or Underwriters failed to purchase. If during such 36
hours you, as such Representatives, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares or Option Shares, as
the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of shares with respect to which
such default shall occur does not exceed 10% of the Firm Shares or Option
Shares, as the case may be, covered hereby, the other Underwriters shall be
obligated, severally, in proportion to the respective numbers of Firm Shares or
Option Shares, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Shares or Option Shares, as the case may be,
which such defaulting Underwriter or Underwriters failed to purchase or (b) if
the aggregate number of shares of Firm Shares or Option Shares, as the case may
be, with respect to which such default shall occur exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company and the
Selling Shareholders or you as the Representatives of the Underwriters will have
the right, by written notice given within the next 36-hour period to the parties
to this Agreement, to terminate this Agreement without liability on the part of
the non-defaulting Underwriters or of the Company or of the Selling Shareholders
except to the extent provided in Section 8 hereof. In the event of a default by
any Underwriter or Underwriters, as set forth in this Section 9, the Closing
Date or Option Closing Date, as the case
24
<PAGE>
may be, may be postponed for such period, not exceeding seven (7) days, as you,
as Representatives, may determine in order that the required changes in the
Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriter" includes any person
substituted for a defaulting Underwriter. Any action taken under this Section 9
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
10. NOTICES.
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or telegraphed
and confirmed as follows: if to the Underwriters, to BT Alex. Brown
Incorporated, 1 South Street, Baltimore, Maryland 21202, Attention: William
Legg, Managing Director; with a copy to BT Alex. Brown Incorporated, 1 South
Street, Baltimore, Maryland 21202. Attention: General Counsel; if to the Company
or the Selling Shareholders, to Covenant Transport, Inc., P.O. Box 22997,
Chattanooga, Tennessee 37422, Attention: David R. Parker, President and Chief
Executive Officer, with a copy to Scudder Law Firm, P.C. 411 South 13th Street,
Suite 200, Lincoln, Nebraska 68508, Attention: Mark A. Scudder, Esquire.
11. TERMINATION.
This Agreement may be terminated by you by notice to the Sellers as
follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m. on
the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or affecting the
condition, financial or otherwise, of the Company and its Subsidiaries taken as
a whole or the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company and
its Subsidiaries taken as a whole, whether or not arising in the ordinary course
of business; (ii) any outbreak or escalation of hostilities or declaration of
war or national emergency or other national or international calamity or crisis
or change in economic or political conditions if the effect of such outbreak,
escalation, declaration, emergency, calamity, crisis or change on the financial
markets of the United States would, in your reasonable judgment, make it
impracticable to market the Shares or to enforce contracts for the sale of the
Shares; (iii) trading generally shall have been suspended or materially limited
on or by, as the case may be, any of the New York Stock Exchange, the American
Stock Exchange or The Nasdaq National Market; (iv) the enactment, publication,
decree or other promulgation of any statute, regulation, rule or order of any
court or
25
<PAGE>
other governmental authority which in your opinion materially and adversely
affects or may materially and adversely affect the business or operations of the
Company; (v) declaration of a banking moratorium by United States or New York
State authorities, (vi) any downgrading in the rating of the Company's debt
securities by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Exchange Act); (vii) the
suspension of trading of the Company's Class A Common Stock on The Nasdaq
National Market or (viii) the taking of any action by any governmental body or
agency in respect of its monetary or fiscal affairs which in your reasonable
opinion has a material adverse effect on the securities markets in the United
States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. SUCCESSORS.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company and the Selling Shareholders and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person will
have any right or obligation hereunder. No purchaser of any of the Shares from
any Underwriter shall be deemed a successor or assign merely because of such
purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS.
The Company, the Selling Shareholders and the Underwriters acknowledge
and agree that the only information furnished or to be furnished by any
Underwriter to the Company for inclusion in any Prospectus or the Registration
Statement consists of the information set forth in the last paragraph on the
front cover page (insofar as such information relates to the Underwriters),
legends required by Item 502(d) of Regulation S-K under the Act and the
information under the caption "Underwriting" in the Prospectus.
14. MISCELLANEOUS.
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Company or
its directors or officers and (c) delivery of and payment for the Shares under
this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware.
26
<PAGE>
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Selling Shareholders, the
Company and the several Underwriters in accordance with its terms.
27
<PAGE>
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Shareholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing
and binding Power of Attorney which authorizes such Attorney-in-Fact to take
such action.
Very truly yours,
COVENANT TRANSPORT, INC.
By
------------------------------
David R. Parker
President and Chief Executive Officer
Selling Shareholders listed on Schedule II
By
------------------------------
Attorney-in-Fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
BT ALEX. BROWN INCORPORATED
SMITH BARNEY INC.
STEPHENS INC.
ABN AMRO INCORPORATED
As Representatives of the several
Underwriters listed on Schedule I
By: BT Alex. Brown Incorporated
By:
---------------------------------
Authorized Officer
28
<PAGE>
SCHEDULE I
SCHEDULE OF UNDERWRITERS
<TABLE>
<CAPTION>
Number of Firm Shares
Underwriter to be Purchased
- ----------- ---------------------
<S> <C>
BT Alex. Brown Incorporated
Smith Barney Inc.
Stephens Inc.
ABM AMRO Incorporated
----------
Total 4,000,000
</TABLE>
29
<PAGE>
SCHEDULE II
SCHEDULE OF SELLING SHAREHOLDERS
<TABLE>
<CAPTION>
Number of Firm Shares
Selling Shareholder to be Sold
- ------------------- ---------------------
<S> <C>
David R. Parker and Jacqueline F. Parker 920,000
Clyde M. Fuller 1,000,000
----------
Total 1,920,000
</TABLE>
30
<PAGE>
Exhibit 5
April 9, 1998
Covenant Transport, Inc.
400 Birmingham Highway
Chattanooga, TN 37419
RE: Registration Statement on Form S-3
4,000,000 Shares of Class A Common Stock
Ladies and Gentlemen:
Scudder Law Firm, P.C. has served as legal counsel to Covenant
Transport, Inc., a Nevada corporation (the "Company"), in the preparation and
filing with the Securities and Exchange Commission of the Company's
Registration Statement on Form S-3 dated April 9, 1998. Such Registration
Statement was filed pursuant to the requirements of the Securities Act of
1933, as amended, and the General Rules and Regulations thereunder for the
registration of 4,000,000 shares of Class A Common Stock of the Company
(4,600,000 shares if the underwriters' over-allotment option is exercised in
full) to be sold as follows: 2,080,000 shares (plus the entire over-allotment
option) by the Company, 920,000 shares by David R. and Jacqueline F. Parker
and 1,000,000 shares by Clyde M. Fuller.
In connection with the following opinion, we have examined and have
relied upon such documents, records, certificates, statements, and
instruments as we have deemed necessary and appropriate.
Based upon the foregoing, it is our opinion that the Company's shares of
Class A Common Stock, when sold in the manner set forth in the Registration
Statement, will be legally and validly issued, fully paid, and nonassessable.
The undersigned hereby consents to the filing of this opinion as Exhibit
5 to the Registration Statement and the use of its name in the Registration
Statement under the caption of the prospectus entitled "Legal Matters" and
elsewhere it may appear.
Very truly yours,
SCUDDER LAW FIRM, P.C.
By: /s/ Mark A. Scudder
----------------------------
Mark A. Scudder, Principal
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTS
We consent to the incorporation by reference in the Registration Statement
of Covenant Transport, Inc. on Form S-3 (file no. 333- ) of our
report dated January 31, 1998, on our audits of the consolidated financial
statements of Covenant Transport, Inc. as of December 31, 1997 and 1996, and for
each of the three years ended December 31, 1997 which is included in Covenant
Transport, Inc.'s Form 10-K for the year ended December 31, 1997. We also
consent to the references to our firm under the caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
--------------------------------
COOPERS & LYBRAND L.L.P.
Knoxville, Tennessee
April __, 1998
